MICRO WAREHOUSE INC, S-4/A, 1995-12-22

MICRO WAREHOUSE INC
S-4/A, 1995-12-22
CATALOG & MAIL-ORDER HOUSES

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As filed with the Securities and Exchange Commission on December 22, 1995

Registration No. 33-65039

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

AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

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

MICRO WAREHOUSE, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 5961 06-1192793
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>

535 CONNECTICUT AVENUE
NORWALK, CONNECTICUT 06854
(203) 899-4000
(Address, including ZIP Code, and telephone number, including area code, of
registrant's principal executive offices)
BRUCE L. LEV, ESQ.
VICE PRESIDENT AND GENERAL COUNSEL
535 CONNECTICUT AVENUE
NORWALK, CONNECTICUT 06854
(203) 899-4000
(Name, address, including ZIP Code, and telephone number, including area code,
of agent for service)

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

Copies to:

<TABLE>
<S> <C>
RANDI L. STRUDLER, ESQ. BARRY E. TAYLOR, ESQ.
JONES, DAY, REAVIS & POGUE WILSON, SONSINI, GOODRICH & ROSATI
599 LEXINGTON AVENUE 650 PAGE MILL ROAD
NEW YORK, NEW YORK 10022 PALO ALTO, CA 94304
(212) 326-3939 (415) 493-9300
</TABLE>

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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement is declared effective and all
other conditions to the merger of a wholly owned subsidiary of Micro Warehouse,
Inc. ("MWHS") with and into Inmac Corp. ("Inmac") pursuant to the Agreement and
Plan of Merger filed as Exhibit 2.1 hereto (the "Merger Agreement") have been
satisfied or waived.

If any of the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /

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

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

<PAGE>
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501 OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
------------------------- ------------------------
A. INFORMATION ABOUT THE TRANSACTION
<S> <C> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus.................. Outside Front Cover Page of Proxy
Statement/Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus...................................... Inside Front Cover Page of Proxy
Statement/Prospectus; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information........................... "Summary"; "Risk Factors"
4. Terms of the Transaction........................ "Summary"; "The Merger"; "Comparison of
Stockholders' Rights"; "Description of MWHS
Capital Stock"
5. Pro Forma Financial Information................. "Summary"; "Unaudited Pro Forma Financial
Information"
6. Material Contacts with the Company Being
Acquired........................................ "The Merger--Background of the Merger"; "The
Merger--The Merger Agreement"; "The Stock
Agreement"
7. Additional Information Required for Reoffering
by Persons and Parties Deemed to Be
Underwriters.................................... Not Applicable
8. Interests of Named Experts and Counsel.......... Not Applicable
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities..................................... Not Applicable

B. INFORMATION ABOUT THE REGISTRANT

10. Information with Respect to S-3 Registrants..... Not Applicable
11. Incorporation of Certain Information by
Reference....................................... Not Applicable
12. Information with Respect to S-2 or S-3
Registrants..................................... Not Applicable
13. Incorporation of Certain Information by
Reference....................................... Not Applicable
14. Information With Respect to Registrants Other
Than S-3 or S-2 Registrants..................... "Available Information"; "Business of MWHS";
"Comparative Market Price and Dividend
Information"; "MWHS Financial Statements";
"Summary"; "MWHS Management's Discussion and
Analysis of Financial Condition and Results of
Operations"

C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED

15. Information with Respect to S-3 Companies....... Not Applicable
16. Information with Respect to S-2 or S-3
Companies....................................... Not Applicable
17. Information with Respect to Companies Other Than
S-3 or S-2 Companies............................ "Available Information"; "Business of Inmac";
"Comparative Market Price and Dividend
Information"; "Inmac Financial Statements";
"Summary"; "Inmac Management's Discussion and
Analysis of Financial Condition and Results of
Operations"

D. VOTING AND MANAGEMENT INFORMATION

18. Information if Proxies, Consents, or
Authorizations are to be Solicited.............. "Outside Front Cover Page of Proxy
Statement/Prospectus"; "Summary"; "The Special
Meeting"; "The Merger--Interests of Certain
Persons in the Merger"; "The Merger--Appraisal
Rights"; "MWHS Management"; "Security Ownership
of Certain Beneficial Owners and Management of
Inmac"; "Certain Relationships and Related
Transactions of MWHS"; "Future Stockholder
Proposals"
19. Information if Proxies, Consents, or
Authorizations are not to be Solicited, or in an
Exchange Offer.................................. Not Applicable
</TABLE>
<PAGE>

INMAC CORP.
2465 Augustine Drive
Santa Clara, California 95052

December 27, 1995

To the Stockholders:

You are invited to attend the Special Meeting of the Stockholders of Inmac
Corp. ("Inmac") to be held on Thursday, January 25, 1996, at 9:00 a.m., Pacific
Time, at Inmac's principal executive offices located at 2465 Augustine Drive,
Santa Clara, California 95052 (including any postponement or adjournment
thereof, the "Special Meeting").

At the Special Meeting, you will be asked to consider and vote upon a
proposal to adopt an Agreement and Plan of Merger, dated as of November 30, 1995
(the "Merger Agreement"), by and among Micro Warehouse, Inc. ("MWHS"), a wholly
owned subsidiary of MWHS ("Newco") and Inmac. Subject to the provisions of the
Merger Agreement, Newco will be merged with and into Inmac (the "Merger"), with
Inmac being the surviving corporation in the Merger (as such, the "Surviving
Corporation"). Following the Merger, the Surviving Corporation will be a
subsidiary of MWHS.

At the effective time of the Merger (the "Effective Time"), among other
things, each then-outstanding share of Common Stock of Inmac ("Inmac Common
Stock") not owned directly or indirectly by MWHS will be converted into the
right to receive a number of shares of Common Stock of MWHS ("MWHS Common
Stock") equal to a fraction (the "Conversion Rate") the numerator of which will
be 12 and the denominator of which will be the average closing price of a share
of MWHS's Common Stock as reported on the Nasdaq National Market for the twenty
trading days ending five business days before the close of the Merger (the
"Average Closing Price"). The Conversion Rate shall not be less than 0.225 or
greater than 0.276. Each share of Inmac Common Stock will thus be converted into
a fraction of a share of MWHS Common Stock with a value of $12.00, provided that
if the Average Closing Price is greater than $53.21, the value of such fraction
of MWHS Common Stock will be greater than $12.00, and if the Average Closing
Price is less than $43.54, the value of such fraction of MWHS Common Stock will
be less than $12.00.

Each warrant or option to purchase shares of Inmac Common Stock that is
outstanding immediately prior to the Effective Time will become a warrant or an
option, as the case may be, to purchase, at an aggregate purchase price equal to
the aggregate price that would have been payable upon the exercise thereof
immediately prior to the Effective Time, a number of shares of MWHS Common Stock
equal to the product of (a) the number of shares subject to such warrant or
option immediately prior to the Effective Time and (b) the Conversion Rate.

Please read carefully the accompanying Notice of Special Meeting of
Stockholders and Proxy Statement/Prospectus for additional information regarding
the Merger and related matters.

THE AFFIRMATIVE VOTE OF THE HOLDERS REPRESENTING A MAJORITY OF THE VOTING
POWER OF THE OUTSTANDING SHARES OF INMAC COMMON STOCK ENTITLED TO VOTE THEREON
IS REQUIRED TO ADOPT THE MERGER AGREEMENT. INMAC'S BOARD OF DIRECTORS BELIEVES
THAT THE MERGER IS IN THE BEST INTERESTS OF INMAC AND ITS STOCKHOLDERS AND
UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ADOPTION OF THE MERGER
AGREEMENT.
<PAGE>
Pursuant to the Stock Agreement described in the accompanying Proxy
Statement/Prospectus, Kenneth A. Eldred, Chairman of the Board and Secretary,
and his wife, trustees of certain trusts which are the beneficial owners of
approximately 26% of the voting power of the shares entitled to vote at the
Special Meeting, have agreed to vote such shares in favor of the adoption of the
Merger Agreement and have granted to MWHS an option, exercisable under certain
conditions, to purchase such shares.

Whether or not you plan to attend the Special Meeting, please complete,
sign, and date the enclosed proxy card and return it promptly in the enclosed
postage prepaid envelope. If you attend the Special Meeting, you may vote in
person if you wish, even though you have previously returned your proxy card.
Your prompt cooperation will be greatly appreciated.

Sincerely,

/s/ Kenneth A. Eldred
-----------------------------------
Kenneth A. Eldred
Chairman of the Board and Secretary

/s/ Jeffrey A. Heimbuck
-----------------------------------
Jeffrey A. Heimbuck
President and Chief Executive Officer

YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY

<PAGE>

INMAC CORP.
2465 AUGUSTINE DRIVE
SANTA CLARA, CALIFORNIA 95052
-------------------

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 25, 1996

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

To the Stockholders:

Notice is hereby given that a Special Meeting of the Stockholders of Inmac
Corp. ("Inmac") is to be held on Thursday, January 25, 1996, at 9:00 a.m.,
Pacific Time, at Inmac's principal executive offices located at 2465 Augustine
Drive, Santa Clara, California 95052 (including any postponement or adjournment
thereof, the "Special Meeting") for the following purposes:

i. To consider and vote upon the adoption of an Agreement and Plan of
Merger, dated as of November 30, 1995 (the "Merger Agreement"), among Micro
Warehouse, Inc. ("MWHS"), a wholly owned subsidiary of MWHS ("Newco") and
Inmac. The Merger Agreement and the terms of the merger of Newco with and
into Inmac provided for therein are described in detail in the accompanying
materials. (See "The Merger" in the accompanying Proxy
Statement/Prospectus.)

ii. To act upon such other matters as may properly come before the
Special Meeting.

Please read carefully the accompanying Proxy Statement/Prospectus. A copy of
the Merger Agreement is attached as Appendix A thereto. The Proxy
Statement/Prospectus and the Appendices thereto form a part of this Notice.

Only stockholders of record at the close of business on December 22, 1995
(the "Record Date") are entitled to notice of and to vote at the Special
Meeting.

Under Delaware law, appraisal rights are unavailable to holders of Common
Stock of Inmac. See "The Merger--Appraisal Rights" in the accompanying Proxy
Statement/Prospectus.

By Order of the Board of Directors

/s/ Kenneth A. Eldred
----------------------------------
Kenneth A. Eldred
Secretary

Santa Clara, California
December 27, 1995

<PAGE>

PROXY STATEMENT
OF
INMAC CORP.
AND
PROSPECTUS
OF
MICRO WAREHOUSE, INC.

This Proxy Statement/Prospectus is furnished in connection with the
solicitation, by and on behalf of the Board of Directors of Inmac Corp.
("Inmac") of proxies for use at the Special Meeting of Stockholders of Inmac to
be held at Inmac's principal executive offices located at 2465 Augustine Drive,
Santa Clara, California 95052 at 9:00 a.m., Pacific Time, on Thursday, January
25, 1996 (including any postponements or adjournments thereof, the "Special
Meeting"). This Proxy Statement/Prospectus, the Notice of Special Meeting of
Stockholders, and the accompanying proxy card are first being sent to holders of
shares of common stock, par value $.01 per share, of Inmac ("Inmac Common
Stock"), on or about December 27, 1995.

At the Special Meeting, holders of record of shares of Inmac Common Stock as
of the close of business on December 22, 1995 will consider and vote upon the
adoption of an Agreement and Plan of Merger, dated as of November 30, 1995 (the
"Merger Agreement"), by and among Micro Warehouse, Inc. ("MWHS"), Indigo Holding
Company, Inc., a wholly owned subsidiary of MWHS ("Newco") and Inmac. See "The
Merger" for a description of the Merger Agreement and the merger of Newco with
and into Inmac provided for therein (the "Merger").

This Proxy Statement/Prospectus also constitutes the Prospectus of MWHS
included in a Registration Statement on Form S-4 (together with any amendments
thereto, the "Registration Statement") filed with the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the common stock, par value $.01 per share,
of MWHS ("MWHS Common Stock") and the issuance of approximately 2,968,069 shares
of MWHS Common Stock in connection with the Merger. All information concerning
Inmac contained in this Proxy Statement/Prospectus has been furnished by Inmac
and all information concerning MWHS contained in this Proxy Statement/Prospectus
has been furnished by MWHS.

SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN RISKS OF
OWNERSHIP OF MWHS COMMON STOCK THAT YOU SHOULD CONSIDER IN DETERMINING WHETHER
TO VOTE TO ADOPT THE MERGER AGREEMENT.

THE SHARES OF MWHS COMMON STOCK HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

The date of this Proxy Statement/Prospectus is December 22, 1995.

<PAGE>
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IN
CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF SECURITIES MADE
HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY MWHS, INMAC, OR ANY OTHER PERSON. THIS
PROXY STATEMENT/ PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A PROXY,
IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH
OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF MWHS OR INMAC SINCE THE DATE HEREOF OR THAT THE INFORMATION
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

AVAILABLE INFORMATION

Each of MWHS and Inmac is subject to the information and reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files periodic reports, proxy statements, and
other information with the SEC. Such reports, proxy statements, and other
information may be inspected and copied at the public reference facilities
maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549; 7 World Trade Center, Suite 1300, New York, New York 10048; and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such reports, proxy statements, and other information also can be obtained by
mail from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Such reports, proxy statements, and
other information relating to MWHS and Inmac may also be inspected at the
offices of Nasdaq operations, 1735 K Street, N.W., Washington, D.C. 20006.

As permitted under the Securities Act and the Exchange Act, this Proxy
Statement/Prospectus does not contain all the information set forth in the
Registration Statement. Such additional information can be inspected and copied
or obtained from the SEC in the manner described above. Statements contained in
this Proxy Statement/Prospectus as to the contents of any other document
referred to herein are not necessarily complete, and each such statement is
qualified in all respects by reference to the copy of such other document filed
as an exhibit to the Registration Statement.

i
<PAGE>
TABLE OF CONTENTS

PAGE
----
AVAILABLE INFORMATION.................................................... i
SUMMARY.................................................................. 1
RISK FACTORS............................................................. 10
Integration of Certain Operations; Effect on MWHS Common Stock....... 10
Dependence on the Apple Microcomputer Market......................... 10
Risks Associated with Increased Hardware Sales....................... 10
Foreign Operations................................................... 10
Potential Quarterly Fluctuations..................................... 11
Competition.......................................................... 11
Rate of Growth....................................................... 11
Reliance on Vendors.................................................. 11
Risks Associated with Acquisitions................................... 11
Dividend Policies; Restrictions on Payment of Dividends.............. 12
Certain Provisions of MWHS's Certificate of Incorporation............ 12

THE SPECIAL MEETING...................................................... 12
General.............................................................. 12
Voting at the Special Meeting........................................ 12
Proxies.............................................................. 13

THE MERGER............................................................... 14
Background of the Merger............................................. 14
Inmac's Reasons for the Merger....................................... 16
Board Recommendation................................................. 17
MWHS's Reasons for the Merger........................................ 17
Opinion of William Blair & Company, Financial Advisor to Inmac....... 17
The Merger Agreement................................................. 21
General............................................................ 21
Manner and Basis of Converting Securities.......................... 21
Representations and Warranties..................................... 23
Covenants.......................................................... 24
Conditions......................................................... 28
Termination........................................................ 30
The Option......................................................... 32
Affiliate Letters.................................................. 33
Miscellaneous...................................................... 34
Certain Federal Income Tax Consequences.............................. 34
Interests of Certain Persons in the Merger........................... 36
Regulatory Approvals................................................. 37
Appraisal Rights..................................................... 38
Accounting Treatment................................................. 38

THE STOCK AGREEMENT...................................................... 38

COMPARATIVE MARKET PRICE AND DIVIDEND INFORMATION......................... 41
Principal Market...................................................... 41
Dividend Policy....................................................... 41
Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.............................................. 41

HISTORICAL AND PRO FORMA CAPITALIZATION................................... 42

ii
<PAGE>
PAGE
----
UNAUDITED PRO FORMA FINANCIAL INFORMATION................................. 43

COMPARISON OF STOCKHOLDERS' RIGHTS........................................ 50
Certain Differences in Rights of Holders of Inmac Common
Stock and MWHS Common Stock............................................... 50
Certain Differences in Rights of Holders of Inmac Preferred
Stock and MWHS Preferred Stock........................................... 51

BUSINESS OF MWHS.......................................................... 51
Catalog Publication................................................... 52
Marketing and Sales................................................... 52
Products and Merchandising............................................ 53
Purchasing............................................................ 54
Distribution Centers.................................................. 54
Management Information Systems........................................ 55
Competition........................................................... 55
Employees............................................................. 55
Sales or Use Tax...................................................... 55
Trademarks............................................................ 56
Properties............................................................ 56
Legal Proceedings..................................................... 56

MWHS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS..................................... 57
Overview.............................................................. 57
Results of Operations................................................. 58
Nine Months Ended September 30, 1995 Compared to Nine Months Ended
September 30, 1994.................................................. 58
Liquidity and Capital Resources as of September 30, 1995.............. 59
Year Ended December 31, 1994 Compared to Year Ended December 31, 1993. 59
Year Ended December 31, 1993 Compared to Year Ended December 31, 1992. 60
Liquidity and Capital Resources as of December 31, 1994............... 61
Impact of Inflation and Seasonality................................... 61
Outlook............................................................... 62

MWHS MANAGEMENT........................................................... 63
Directors............................................................. 63
Executive Officers.................................................... 64
Security Ownership of Certain Beneficial Owners and
Management of MWHS.................................................. 66
Compensation of MWHS Executive Officers............................... 67
Summary Compensation Table............................................ 68
Employment and Consulting Agreements.................................. 68
1992 and 1994 Stock Option Plans...................................... 69
Section 401(k) Savings Plan........................................... 70
Options Granted in Last Fiscal Year................................... 70
Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values............................................................. 71
Compensation and Stock Option Committee Interlocks and Insiders
Participation....................................................... 71

iii
<PAGE>
PAGE
----
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OF MWHS................... 72
Agreements........................................................... 72
Leases............................................................... 72
S Corporation Distributions and Related Party Indebtedness........... 72
Micro Warehouse International, Inc................................... 72
MacUser Magazine-United Kingdom...................................... 73
Future Policy........................................................ 73

DESCRIPTION OF MWHS CAPITAL STOCK........................................ 73
Authorized Capital Stock............................................. 73
Common Stock......................................................... 73
Preferred Stock...................................................... 74
Certain Corporate Governance Matters................................. 74

]BUSINESS OF INMAC....................................................... 74
General.............................................................. 74
Significant Business Developments during Fiscal Year 1995............ 74
Personal Computer Products Market and Computer Aftermarket Overview.. 75
Marketing, Sales and Customer Service................................ 75
Customers............................................................ 76
Distribution and Operational Locations............................... 76
Products............................................................. 76
Networking and Systems............................................. 76
Desktop Hardware and Software...................................... 77
Consumable and Complementary Products.............................. 77
Manufacturing and Suppliers.......................................... 77
Competition.......................................................... 78
Employees............................................................ 78
Properties........................................................... 78
Legal Proceedings.................................................... 78

INMAC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.................................... 79
Financial Condition for the Quarter Ended October 28, 1995........... 79
Results of Operations for the Quarter Ended October 28, 1995......... 79
Liquidity and Capital Resources as of October 28, 1995............... 80
Future Results....................................................... 80
Annual Results of Operations......................................... 81
Financial Condition as of July 29, 1995.............................. 83
Inflation for the Period Ended July 29, 1995......................... 84

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF INMAC.................................................... 85

LEGAL MATTERS............................................................ 86

EXPERTS.................................................................. 86

FUTURE STOCKHOLDER PROPOSALS............................................. 86

OTHER MATTERS............................................................ 87

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

APPENDIX A--Merger Agreement............................................. A-1

APPENDIX B--William Blair Opinion........................................ B-1

iv
<PAGE>
SUMMARY

The following is a summary of certain information contained in this Proxy
Statement/Prospectus. This summary is not intended to be complete and is
qualified in its entirety by the more detailed information contained elsewhere
in this Proxy Statement/Prospectus and the attached Appendices, all of which
should be reviewed carefully. As required by the context, references in this
Proxy Statement/Prospectus to "MWHS," "Inmac," "Newco" or the "Surviving
Corporation" should be construed as references to Micro Warehouse, Inc., Inmac
Corp., Indigo Holding Company, Inc. or Inmac Corp. as the Surviving Corporation,
as the case may be, together with their respective predecessors and
subsidiaries, and references to "fiscal" years are references to fiscal years of
Inmac or MWHS, as the case may be, which end (except as otherwise indicated),
for Inmac, on the last Saturday in July and, for MWHS and the Surviving
Corporation, on December 31 of the calendar year.

THE PARTIES

Inmac. Inmac is a leading international direct-response marketer of
multi-vendor products for the computer desktop and networking industries, with
consolidated net sales of $362.5 million for fiscal year 1995. Inmac operates in
the United States ("U.S."), United Kingdom ("U.K."), Canada, France, Germany,
the Netherlands and Sweden. See "Business of Inmac." The mailing address of
Inmac's principal executive office is 2465 Augustine Drive, Santa Clara,
California 95052, and its telephone number is (408) 727-1970.

MWHS. MWHS is a leading direct marketer of brand name Macintosh and IBM
compatible personal computers, software, accessories and peripherals, with
consolidated net sales of $776.4 million for fiscal year 1994. MWHS operates in
15 countries throughout North America, Europe, Scandinavia, Australia and Japan.
See "Business of MWHS." The mailing address of MWHS's principal executive office
is 535 Connecticut Avenue, Norwalk, Connecticut 06854, and its telephone number
is (203) 899-4000.

Newco. Newco is a wholly owned subsidiary of MWHS formed by MWHS solely for
the purpose of effecting the Merger. The mailing address of Newco's principal
executive office is 535 Connecticut Avenue, Norwalk, Connecticut 06854, and its
telephone number is (203) 899-4000.

THE SPECIAL MEETING

Time, Date, and Place. The Special Meeting will be held on Thursday, January
25, 1996, at 9:00 a.m., Pacific Time, at Inmac's principal executive offices
located at 2465 Augustine Drive, Santa Clara, California 95052.

Purpose. The purpose of the Special Meeting is for Inmac's stockholders to
consider and vote upon the adoption of the Merger Agreement and such other
matters as may properly come before the Special Meeting. See "The Special
Meeting--General."

Record Date; Shares Entitled to Vote. At the Special Meeting, Inmac's
stockholders will be entitled to one vote for each outstanding share of Inmac
Common Stock held of record as of the close of business on December 22, 1995
(the "Record Date"). As of the Record Date, there were 10,620,021 shares of
Inmac Common Stock outstanding and entitled to vote at the Special Meeting, and
as of December 21, 1995, there were approximately 170 holders of record of Inmac
Common Stock. See "The Special Meeting--Voting at the Special Meeting."

Required Vote. The affirmative vote of the holders of a majority of the
outstanding shares of Inmac Common Stock on the Record Date is required for the
adoption of the Merger Agreement. As of December 21, 1995, directors and
executive officers of Inmac and their affiliates owned beneficially, in the
aggregate, approximately 39.6% of the voting power of the outstanding shares of
Inmac Common

<PAGE>
Stock. Kenneth A. Eldred, Chairman of the Board and Secretary, and his wife,
trustees of certain trusts which are the beneficial owners of approximately 26%
of the shares of Inmac Common Stock entitled to vote at the Special Meeting (the
"Stockholders"), have entered into an agreement (the "Stock Agreement") with
MWHS pursuant to which the Stockholders agreed to vote such shares for the
adoption of the Merger Agreement and granted to MWHS the right, exercisable
under certain conditions, to purchase those shares at the Conversion Rate
provided in the Merger Agreement and determined as of the date of exercise of
such right. See "The Stock Agreement."

Proxies. Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before the proxy is voted at the Special Meeting. A
proxy may be revoked by filing with the Secretary of Inmac prior to the voting
of the proxy either a written instrument revoking the proxy or an executed later
dated proxy, or by voting in person at the Special Meeting. Attendance at the
Special Meeting will not, in itself, constitute the revocation of a proxy. See
"The Special Meeting--Proxies."

THE MERGER

General. On the terms and subject to the conditions set forth in the Merger
Agreement, Newco will be merged with and into Inmac, with Inmac being the
surviving corporation in the Merger (as such, the "Surviving Corporation"). At
the effective time of the Merger (the "Effective Time"): (a) each
then-outstanding share of Inmac Common Stock (other than any shares held in the
treasury of Inmac, by any of its subsidiaries, or directly or indirectly by
MWHS, which shares will be cancelled) will be converted into the right to
receive a number of shares of MWHS Common Stock equal to a fraction (the
"Conversion Rate") the numerator of which will be 12 and the denominator of
which will be the average closing price of a share of MWHS Common Stock as
reported on the Nasdaq National Market ("NASDAQ") for the 20 trading days ending
five business days before the date of the closing of the transactions
contemplated by the Merger Agreement (the "Closing Date"); provided, however,
that the Conversion Rate shall not be less than 0.225 or greater than 0.276 and
(b) each then-outstanding share of Common Stock of Newco will be converted into
one share of Common Stock of the Surviving Corporation ("Surviving Corporation
Common Stock"). For a description of the principal differences between the
rights of holders of Inmac Common Stock, on the one hand, and MWHS Common Stock,
on the other, see "Comparison of Stockholders' Rights." Following the Merger,
MWHS will own all of the outstanding shares of Surviving Corporation Common
Stock.

Each warrant or option to purchase shares of Inmac Common Stock that is
outstanding immediately prior to the Effective Time will become a warrant or an
option, as the case may be, to purchase, at an aggregate purchase price equal to
the aggregate price that would have been payable upon the exercise thereof
immediately prior to the Effective Time (rounded to the nearest cent), a number
of shares of MWHS Common Stock equal to the product of (a) the number of shares
of Inmac Common Stock subject to such warrant or option immediately prior to the
Effective Time and (b) the Conversion Rate.

Fractional Shares. No fractional shares of MWHS Common Stock will be issued
in the Merger. In lieu of any such fractional shares, each holder of Inmac
Common Stock who otherwise would be entitled to receive a fractional share of
MWHS Common Stock pursuant to the Merger will be paid an amount in cash (without
interest), rounded to the nearest cent, equal to the product of (a) the fraction
of a share of MWHS Common Stock to which such holder would otherwise be entitled
and (b) the per share closing price of MWHS Common Stock on NASDAQ at the
Effective Time. No fractional shares of MWHS Common Stock will be issued upon
the exercise of any warrants or options. No consideration will be paid on
account of fractional shares otherwise issuable upon the exercise of options.

Recommendation of Inmac's Board of Directors. Inmac's Board of Directors
unanimously approved the Merger Agreement. Inmac's Board of Directors believes
that the Merger is in the best

2
<PAGE>
interests of Inmac and its stockholders and unanimously recommends that
stockholders vote FOR the adoption of the Merger Agreement. The primary factors
considered and relied upon by the Inmac Board of Directors in reaching its
recommendation are referred to in "The Merger--Inmac's Reasons for the Merger."

Opinion of Inmac's Financial Advisor. William Blair & Company ("William
Blair") has delivered a written opinion, dated as of November 30, 1995, stating
that, as of the date of the Merger Agreement, the consideration to be received
by the stockholders of Inmac pursuant to the Merger Agreement was fair, from a
financial point of view, to such stockholders. A copy of this opinion, which
sets forth certain assumptions, qualifications, and limitations, is attached as
Appendix B hereto and should be read in its entirety. See "The Merger--Opinion
of William Blair & Company, Financial Advisor to Inmac."

Effective Time of the Merger. The Merger will become effective at the time
that a certificate of merger (the "Certificate of Merger") is filed with the
Secretary of State of the State of Delaware. Subject to the provisions of the
Merger Agreement, the parties will file the Certificate of Merger as soon as
practicable after the requisite vote of the stockholders of Inmac is obtained
and the various conditions to the Merger are satisfied or waived.

Conditions to the Merger. The obligations of MWHS and Inmac to consummate
the Merger are conditioned upon, among other things, (a) adoption of the Merger
Agreement by Inmac's stockholders; (b) the waiting period pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), having expired or been terminated; (c) the absence of any order or
injunction that prohibits the consummation of the transactions contemplated by
the Merger Agreement; (d) the Registration Statement having been declared
effective by the SEC and not being subject to any stop order or proceeding
seeking the same; (e) all consents, authorizations, orders, and approvals of any
governmental or regulatory authority required in connection with the Merger
Agreement having been obtained, other than any such consents, authorizations,
orders, or approvals which, if not obtained, would not have a material adverse
effect on the business, financial condition, or results of operations of the
Surviving Corporation; (f) the shares of MWHS Common Stock to be issued in
connection with the Merger having been authorized for listing on NASDAQ upon
official notice of issuance; (g) no material adverse change in the other party's
business or properties and no material breach of the other party's
representations, warranties and covenants; and (h) each party's reception of a
letter dated as of the Effective Time from an independent public accountant to
the effect that the Merger will qualify for "pooling of interests" accounting
treatment under Accounting Principles Board Opinion No. 16. See "The Merger--The
Merger Agreement--Conditions."

Governmental and Regulatory Matters. In connection with the transactions
contemplated by the Merger Agreement and the Stock Agreement, Inmac and MWHS
have made filings or applications with the Federal Trade Commission (the "FTC")
and the Antitrust Division of the Department of Justice (the "Antitrust
Division") pursuant to the HSR Act and The Office of Fair Trading in the United
Kingdom pursuant to the Fair Trading Act of 1973, as amended. The waiting
periods under the HSR Act were terminated early on December 19, 1995.
Consummation of the Merger is conditioned upon, among other things, the
concurrence of the appropriate agencies under United Kingdom laws. See "The
Merger--Regulatory Approvals" and "--The Merger Agreement--Conditions."

Termination. The Merger Agreement may be terminated under certain
circumstances, including (a) by the mutual consent of MWHS and Inmac, (b) by
either MWHS or Inmac if (i) the Merger shall not have been consummated by March
31, 1996 (which date will be automatically extended under certain
circumstances), (ii) the approval of Inmac's stockholders of the Merger
Agreement is not obtained at the Special Meeting, or (iii) an order, decree, or
ruling has been issued permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by the Merger Agreement, (c) by either
MWHS or Inmac if the other party is in breach of any representation, warranty or

3
<PAGE>
covenant contained in the Merger Agreement or a lien or an order for relief
under the United States Bankruptcy Code or similar law is commenced against or
entered with respect to the other party, (d) by MWHS if the Board of Directors
of Inmac withdraws or modifies in a manner materially adverse to MWHS its
approval or recommendation of the Merger Agreement or recommends an alternative
proposal or there has been a material breach by the Stockholders of the Stock
Agreement as further described in "The Merger--The Merger
Agreement--Termination." Each of MWHS and Inmac may be required to pay a fee to
and/or reimburse the other for certain expenses upon the occurrence of certain
events. See "The Merger--The Merger Agreement--Termination--Fees and Expenses."

Appraisal Rights. Under the Delaware General Corporation Law (the "DGCL"),
appraisal rights are unavailable to holders of Inmac Common Stock. See "The
Merger--Appraisal Rights."

Certain Federal Income Tax Consequences. It is anticipated that the Merger
will qualify as a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"). If the Merger so
qualifies, no gain or loss would be recognized by holders of Inmac Common Stock
upon the conversion of their shares of Inmac Common Stock into shares of MWHS
Common Stock pursuant to the Merger, except with respect to cash, if any,
received in lieu of fractional shares of MWHS Common Stock. If the Merger does
not so qualify, holders of Inmac Common Stock generally would recognize a gain
or loss in connection with the Merger. Special rules may apply to stockholders
who are dealers in securities, who are subject to the alternative minimum tax
provisions of the Code, who are tax exempt, who are foreign persons, who do not
hold their Inmac Common Stock as capital assets, or who acquired Inmac Common
Stock or options in connection with stock option or stock purchase plans or in
other compensatory transactions. No ruling from the Internal Revenue Service
(the "IRS") has been or will be sought concerning any of the federal income tax
consequences of the Merger. For a discussion of these and other federal income
tax considerations in connection with the Merger, see "The Merger--Certain
Federal Income Tax Consequences." Each holder of Inmac Common Stock should
consult his or her own tax advisor regarding the tax consequences of the Merger
in light of such holder's own situation, including the application and effect of
any state, local, or foreign income and other tax laws.

Accounting Treatment. The Merger is intended to be treated as a pooling of
interests in accordance with generally accepted accounting principles.
Consummation of the Merger is conditioned upon receipt by MWHS and Inmac of a
letter from an independent public accountant regarding its concurrence with MWHS
management's and Inmac management's conclusions, respectively, as to the
appropriateness of pooling of interests accounting for the Merger under
Accounting Principles Board Opinion No. 16, if closed and consummated in
accordance with the Merger Agreement. See "The Merger--Accounting Treatment."

THE STOCK AGREEMENT

As a condition to its willingness to enter into the Merger Agreement, MWHS
required that, simultaneously with the execution thereof, the Stockholders enter
into an agreement (the "Stock Agreement") pursuant to which, among other things,
the Stockholders agreed to vote all of the shares of Inmac Common Stock owned by
the Stockholders (the "Option Shares") in favor of the adoption of the Merger
Agreement and granted to MWHS the right, exercisable under certain conditions,
to purchase the Option Shares at the Conversion Rate provided in the Merger
Agreement (the "Option"). See "The Stock Agreement."

4
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA

The selected financial data presented below for MWHS as of December 31, 1993
and 1994 and for each of the years in the three year period ended December 31,
1994, and Inmac as of July 30, 1994 and July 29, 1995 and for the years ended
July 31, 1993, July 30, 1994 and July 29, 1995, have been derived from and are
qualified in their entirety by, and should be read in conjunction with, the
respective audited financial statements and notes thereto included elsewhere
within this Proxy Statement/Prospectus.

MWHS's statement of income data for each of the years in the two-year period
ended December 31, 1991 and the balance sheet data at December 31, 1990, 1991,
and 1992 are derived from audited MWHS consolidated financial statements that
are neither included nor incorporated by reference herein. Inmac's statement of
income data for each of the years in the two-year period ended July 25, 1992 and
the balance sheet data at July 27, 1991, July 25, 1992 and July 31, 1993 are
derived from audited Inmac financial statements that are neither included nor
incorporated by reference herein.

The unaudited financial data presented below for the interim periods ended
September 30, 1995 and 1994 and October 28, 1995 and October 29, 1994 are
derived from the unaudited financial statements of MWHS and Inmac, respectively,
that are included elsewhere in this Proxy Statement/Prospectus. See "Index to
Financial Statements." In the opinion of MWHS and Inmac, respectively, such
unaudited financial data have been prepared on the same basis as the audited
financial statements included elsewhere in this Proxy Statement/Prospectus and
include all adjustments (consisting only of normal recurring adjustments)
necessary to fairly state the information set forth herein. Operating results
for the interim periods ended September 30, 1995 and October 28, 1995 are not
necessarily indicative of the results that may be expected for MWHS for the year
ending December 31, 1995 and for Inmac for the year ending July 27, 1996, or for
any other interim period.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- -------------------
MWHS 1990 1991 1992 1993 1994 1994 1995
- ----------------------------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated
Statement of Income Data:
Net revenues............... $123,673 $163,603 $269,634 $450,385 $776,377 $525,136 $904,018
Operating income........... 2,120 5,047 4,760 25,497 45,352 31,152 51,151
Net income................. $ 1,397 $ 3,803 $ 6,945 $ 14,999 $ 28,017 $ 19,068 $ 31,365
Net income per share....... $ 0.22 $ 0.39 $ 0.64 $ 1.01 $ 0.71 $ 1.04
Weighted average number of
shares outstanding........... 17,565 17,854 23,533 27,618 26,910 30,233
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- -------------
1990 1991 1992 1993 1994 1995
-------- -------- -------- -------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated
Balance Sheet Data:
Working capital.......... $ 3,800 $ 6,411 $ 54,711 $ 84,417 $195,007 $ 204,623
Total assets............. 19,453 31,620 77,058 141,166 294,052 355,121
Long-term debt........... 3,186 6,754 1,362 -- 645 445
Stockholders' equity..... $ 2,644 $ 2,667 $ 59,846 $ 97,108 $239,646 $ 274,634
</TABLE>

5
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS ENDED
---------------------------------------------------- -------------------------
JULY 27, JULY 25, JULY 31, JULY 30, JULY 29, OCTOBER 29, OCTOBER 28,
INMAC 1991 1992 1993 1994 1995 1994 1995
----- -------- -------- -------- -------- -------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated
Statement of Income Data:
Net revenues............. $302,821 $312,887 $342,027 $349,449 $362,511 $ 83,875 $ 90,404
Operating income
(loss)..................... 12,663 6,300 (9,350) 5,762 11,058 2,542 2,476
Net income (loss)........ $ 6,775 $ 971 $(13,877) $ 1,816 $ 4,531 $ 1,051 $ 1,102
Net income (loss) per
share...................... $ 0.72 $ 0.10 $ (1.47) $ 0.17 $ 0.42 $ 0.10 $ 0.10
Weighted average number
of shares outstanding...... 9,458 9,453 9,464 10,831 10,750 10,671 11,143

JULY 27, JULY 25, JULY 31, JULY 30, JULY 29, OCTOBER 28,
1991 1992 1993 1994 1995 1995
-------- -------- -------- -------- -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated
Balance Sheet Data:
Working capital.......... $ 34,763 $ 37,281 $ 20,662 $ 23,003 $ 53,262 $ 54,357
Total assets............. 107,385 128,980 94,131 100,871 116,349 112,000
Long-term debt........... 852 1,011 1,803 1,127 20,883 20,520
Stockholders' equity..... $ 45,351 $ 49,250 $ 27,721 $ 33,553 $ 42,839 $ 43,425
</TABLE>

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<PAGE>
SELECTED PRO FORMA FINANCIAL DATA

The selected pro forma financial data shown below give effect to the Merger
as if the Merger had been in effect for the periods and on the dates indicated,
with the Merger accounted for on a pooling of interests basis. The pro forma
statement of income data reflects the combination of statement of income data of
MWHS for each of the years in the three-year period ended December 31, 1994 and
the nine-month period ended September 30, 1995 with statement of income data of
Inmac for each of the twelve-month periods ended January 23, 1993, January 29,
1994 and January 28, 1995, respectively, and the nine-month period ended October
28, 1995. The pro forma balance sheet data reflects the combination of balance
sheet data of MWHS at December 31, 1992, 1993 and 1994 and September 30, 1995
with balance sheet data of Inmac at January 23, 1993, January 29, 1994 and
January 28, 1995 and October 28, 1995. The selected pro forma financial data
should be read in conjunction with such pro forma financial statements and notes
thereto, which are included elsewhere in this Proxy Statement/Prospectus. See
"Index to Financial Statements." These pro forma data do not purport to be
indicative of the results that would have actually been obtained if the Merger
had been in effect for the above-mentioned periods and on the dates indicated or
that may be obtained in the future.
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED ENDED
-------------------------------------------- --------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1992 AND 1993 AND 1994 AND 1995 AND
JANUARY 23, JANUARY 29, JANUARY 28, OCTOBER 28,
1993 1994 1995 1995
------------ ------------ ------------ --------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
PRO FORMA STATEMENT OF
INCOME DATA:
Net sales................................ $597,677 $795,954 $1,131,362 $1,183,345
Income from operations................... 2,854 35,773 53,233 59,766
Net income (loss)........................ $ (7,881) $ 19,889 $ 30,557 $ 34,914
Net income (loss) per share.............. $ (0.39) $ 0.75 $ 1.00 $ 1.05
Weighted average number of shares
outstanding(2)............................ 20,463 26,421 30,532 33,265
<CAPTION>

YEARS ENDED
--------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1992 AND 1993 AND 1994 AND 1995 AND
JANUARY 23, JANUARY 29, JANUARY 28, OCTOBER 28,
1993 1994 1995 1995(1)
------------ ------------ ------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
PRO FORMA BALANCE SHEET DATA:
Total assets............................. $183,594 $252,956 $ 404,475 $ 467,121
Long-term debt........................... $ 2,083 $ 1,778 $ 1,622 $ 20,965
</TABLE>

(1) Estimated charges expected to be incurred by MWHS as a result of the
Merger comprise principally investment banking $3,700,000, legal $750,000,
transaction costs $350,000, accounting $100,000, and miscellaneous costs of
$100,000. In total, such charges are currently estimated to be approximately
$5,000,000.

(2) Assumes the issuance of 2,968,069 shares of MWHS Common Stock, the
maximum number of shares to be issued pursuant to the Merger in exchange for all
of the outstanding shares of Inmac Common Stock. Common and common equivalent
shares outstanding were calculated assuming a conversion rate of 0.276 shares of
MWHS Common Stock for each share of Inmac Common Stock provided for in the
Merger Agreement, the conversion rate resulting in the maximum number of shares
of MWHS Common Stock to be issued.

7
<PAGE>
COMPARATIVE PER SHARE DATA

The following table sets forth certain historical per share data of MWHS and
Inmac and combined per share data on an unaudited pro forma basis after giving
effect to the Merger on a pooling of interests basis, assuming that .276 shares
of MWHS Common Stock are issued in exchange for each share of outstanding Inmac
Common Stock. These data should be read in conjunction with the selected
historical financial data, the unaudited pro forma financial information and the
separate historical financial statements of MWHS and Inmac and notes thereto,
included elsewhere in this Proxy Statement/Prospectus. See "Index to Financial
Statements" and "Unaudited Pro Forma Financial Information." The unaudited pro
forma financial data are not necessarily indicative of the operating results
that would have been achieved had the transaction been in effect as of the
beginning of the periods presented and should not be construed as representative
of future operations.

<TABLE><CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------- --------------------------
1992 1993 1994 1994 1995
-------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Historical--MWHS
Net income per share....................... $ 0.39 $ 0.64 $ 1.01 $0.71 $1.04
Book value per share....................... $ 3.35 $ 4.13 $ 8.68 $5.84 $9.08
</TABLE>

<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS ENDED
-------------------------------- --------------------------
JULY 31, JULY 30, JULY 29, OCTOBER 29, OCTOBER 28,
1993 1994 1995 1994 1995
-------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Historical--Inmac
Net income (loss) per share................ $(1.47) $ 0.17 $ 0.42 $0.10 $0.10
Book value per share....................... $ 2.93 $ 3.10 $ 3.99 $3.41 $3.90
</TABLE>

<TABLE><CAPTION>
NINE MONTHS
YEARS ENDED ENDED
-------------------------------------------- -------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1992 AND 1993 AND 1994 AND 1995 AND
JANUARY 23, JANUARY 29, JANUARY 28, OCTOBER 28,
1993 1994 1995 1995(1)
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Pro Forma--MWHS/Inmac
Net income (loss) per share(2).......... $(0.39) $ 0.75 $ 1.00 $1.05
Book value per share(2)................. $ 4.27 $ 4.84 $ 9.05 $9.41
</TABLE>

(3) Neither MWHS nor Inmac has declared any dividend on its respective
capital stock during the periods indicated above. See "Risk Factors--Dividend
Policies; Restrictions on Payment of Dividends" and "Comparative Market Price
and Dividend Information--Dividend Policy."

8
<PAGE>
MARKET PRICE INFORMATION

Shares of MWHS Common Stock and Inmac Common Stock are listed and traded on
NASDAQ. On November 30, 1995, the last full trading day prior to the
announcement by MWHS and Inmac of the execution of the Merger Agreement, the
closing price per share of MWHS Common Stock as reported on the NASDAQ Composite
Tape was $46.75 and the closing price per share of Inmac Common Stock as so
reported was $9.75. Based upon that information, the Equivalent Per Share Price
(as defined below) of the Inmac Common Stock was $12.00 on November 30, 1995.
The "Equivalent Per Share Price" of the Inmac Common Stock as of a particular
date equals the closing price per share of the MWHS Common Stock on such date
multiplied by the Conversion Rate, which is the number of shares of MWHS Common
Stock into which each share of Inmac Common Stock will be converted in the
Merger.

On December 21, 1995, the last full trading day prior to the date of this
Proxy Statement/Prospectus, the closing price per share of MWHS Common Stock as
reported on NASDAQ was $40.50, and the closing price per share of Inmac Common
Stock as so reported was $10.125. Based upon those prices, the Equivalent Per
Share Price of the Inmac Common Stock was $11.18 on December 21, 1995. Inmac
stockholders are encouraged to obtain current market quotations.

RISK FACTORS

See "Risk Factors" for a discussion of certain risks of ownership of MWHS
Common Stock that should be considered in determining whether to vote to adopt
the Merger Agreement.

9
<PAGE>
RISK FACTORS

Set forth below is a discussion of certain material risks relating to
ownership of the MWHS Common Stock to be issued in connection with the Merger.
Prior to voting on the proposed adoption of the Merger Agreement, Inmac
stockholders should carefully consider the risk factors discussed below as well
as all of the information contained elsewhere in this Proxy
Statement/Prospectus, including the Appendices hereto.

INTEGRATION OF CERTAIN OPERATIONS; EFFECT ON MWHS COMMON STOCK

MWHS and Inmac have entered into the Merger Agreement with the expectation
that the Merger will result in meaningful benefits for the combined companies.
Achieving the anticipated benefits of the Merger will depend in part upon
whether the integration of the two companies' businesses is achieved in an
efficient and effective manner, and there can be no assurance that this will
occur. The combination of the two companies will require, among other things,
integration of the companies' respective product offerings and coordination of
their sales, marketing, MIS and distribution efforts. There can be no assurance
that integration will be successfully accomplished. The difficulties of such
integration may be increased by the necessity of coordinating geographically
separated organizations. The integration of certain operations following the
Merger will require the dedication of management resources which may temporarily
distract attention from the day-to-day business of the combined companies.
Failure to effectively accomplish the integration of the two companies'
operations could have an adverse effect on MWHS's results of operations and
financial condition.

DEPENDENCE ON THE APPLE MICROCOMPUTER MARKET

MWHS's products are sold to users of microcomputers. MWHS depends in large
part on sales of hardware and software products for users of Apple Macintosh
computers. These products represented approximately 63% of MWHS's net sales for
the three months ended September 30, 1995. While MWHS continues to diversify its
product offerings and the acquisition of Inmac will accelerate this
diversification, a decline in sales of Apple Macintosh computers or a decrease
in supply of or demand for software and peripheral products for such computers
could have a material adverse impact on MWHS's business.

RISKS ASSOCIATED WITH INCREASED HARDWARE SALES

MWHS continues to expand its offerings of hardware products, including
microcomputer systems, peripherals and components. Sales of hardware products
increased from approximately 46% of net sales in 1994 to approximately 70% of
net sales in the three months ended September 30, 1995. MWHS typically realizes
lower gross margins but higher average order sizes for hardware sales than
software sales. Accordingly, increased sales of hardware as a proportion of net
sales may result in a decline in gross margins. This decline may be offset,
however, by lower selling, general and administrative expenses as a percentage
of net sales associated with the higher average order sizes for hardware. In
addition, increased sales of hardware require that MWHS maintain higher
inventory levels of hardware, which increases MWHS's exposure to risks of
inventory obsolescence.

FOREIGN OPERATIONS

In addition to its activities in the United States, MWHS presently
distributes its catalogs in 14 foreign countries. Foreign operations are subject
to general risks attendant to the conduct of business in each foreign country,
including economic uncertainties and each foreign government's regulations. In
addition, MWHS's international business may be affected by changes in demand or
pricing resulting from fluctuations in currency exchange rates or other factors.
MWHS has a $50 million multi-currency

10
<PAGE>
borrowing facility (under which $16.5 million was outstanding as of September
30, 1995) and permits borrowing by its subsidiaries in local currencies and thus
does not engage in foreign currency hedging transactions.

International expansion has been and continues to be an integral part of
MWHS's strategy. International sales as a proportion of MWHS net sales increased
from 16% in 1994 to 25% for the three months ended September 30, 1995 and
international sales as a proportion of Inmac net sales were 73% in fiscal year
1995. Upon consummation of the Merger, international sales on a pro forma basis
should increase because of the amount of Inmac's sales generated from abroad.
MWHS's operations in certain countries are at an early stage of development and
MWHS continues to invest in the growth of these businesses. MWHS's international
operations as a whole have been significantly less profitable than its domestic
operations, and there can be no assurance that MWHS's international operations
will achieve substantial profitability or that Inmac's international operations
will maintain their existing level of profitability.

POTENTIAL QUARTERLY FLUCTUATIONS

MWHS may experience variability in its net sales and net income on a
quarterly basis as a result of many factors, including the condition of the
microcomputer industry in general, shifts in demand for hardware and software
products and industry announcements of new products or upgrades. MWHS's planned
operating expenditures are based on sales forecasts. If revenues do not meet
expectations in any given quarter, operating results may be materially adversely
affected.

COMPETITION

The computer products retail business is highly competitive. MWHS competes
with consumer electronic and computer retail stores, including superstores, and
other direct marketers of hardware and software and computer related products.
Certain hardware and software vendors are selling their products directly
through their own catalogs. Certain competitors of MWHS have financial and other
resources greater than those of MWHS. There can be no assurance that MWHS can
continue to compete effectively against existing competitors or new competitors
that may enter the market. In addition, price is an important competitive factor
in the personal computer hardware and software market and there can be no
assurance that MWHS will not be subject to increased price competition.

RATE OF GROWTH

MWHS's revenue has increased at a rate significantly exceeding the growth
rate of the microcomputer industry. No assurance can be given that MWHS will be
able to sustain this rate of growth.

RELIANCE ON VENDORS

Vendors provide MWHS with substantial incentives in the form of discounts,
advertising allowances and rebates. A reduction in or discontinuance of such
incentives could have a material adverse effect on MWHS.

RISKS ASSOCIATED WITH ACQUISITIONS

MWHS plans to continue to pursue acquisitions of complementary businesses.
There can be no assurance that MWHS will not incur difficulties in integrating
acquired businesses or that any acquired business will be profitable.

11
<PAGE>
DIVIDEND POLICIES; RESTRICTIONS ON PAYMENT OF DIVIDENDS

MWHS does not anticipate that it will pay any dividends on the MWHS Common
Stock in the foreseeable future.

CERTAIN PROVISIONS OF MWHS'S CERTIFICATE OF INCORPORATION

MWHS's certificate of incorporation contains provisions that may have the
effect of delaying, deferring, or preventing a change in control of the company.
The certificate of incorporation authorizes the issuance of up to 50,000,000
shares of MWHS Common Stock and 100,000 shares of preferred stock of MWHS ("MWHS
Preferred Stock"). The Board of Directors has the power to determine the price
and terms under which any additional capital stock may be issued and to fix the
terms of such MWHS Preferred Stock, and existing MWHS stockholders will not have
preemptive rights with respect thereto. See "Description of MWHS Capital Stock"
and "Comparison of Stockholders' Rights."

THE SPECIAL MEETING

GENERAL

This Proxy Statement/Prospectus is being furnished by Inmac to its
stockholders in connection with the solicitation of proxies, by and on behalf of
Inmac's Board of Directors, for use at the Special Meeting. The Special Meeting
will be held on Thursday, January 25, 1996 at 9:00 a.m., Pacific Time, at
Inmac's principal executive offices located at 2465 Augustine Drive, Santa
Clara, California 95052. The purpose of the Special Meeting is for Inmac
stockholders to consider and vote upon the adoption of the Merger Agreement and
such other matters as may properly come before the Special Meeting.

INMAC'S BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS FAIR TO AND IN THE
BEST INTERESTS OF INMAC AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE FOR THE ADOPTION OF THE MERGER AGREEMENT.

VOTING AT THE SPECIAL MEETING

The holders of record of shares of Inmac Common Stock as of the close of
business on the Record Date are entitled to vote such shares at the Special
Meeting. As of the Record Date, there were outstanding 10,620,021 shares of
Inmac Common Stock and, as of December 21, 1995, there were approximately 170
holders of record of Inmac Common Stock. Each outstanding share of Inmac Common
Stock is entitled to one vote at the Special Meeting. Shares of Inmac Common
Stock held in the treasury of Inmac or by any of its subsidiaries are not
considered to be outstanding.

The holders of shares representing a majority of the outstanding shares of
Inmac Common Stock outstanding as of the Record Date will constitute a quorum
for the transaction of business at the Special Meeting. If the persons present
or represented by proxy at the Special Meeting constitute the holders of shares
representing less than a majority of the outstanding shares, the Special Meeting
may be adjourned to a subsequent date for the purpose of obtaining a quorum.

Abstentions and broker non-votes will be included in determining the number
of shares held by persons present or represented by proxy at the Special Meeting
for purposes of determining whether a quorum exists. However, because approval
of the proposal to adopt the Merger Agreement will require the affirmative vote
of shares representing a majority of the outstanding shares of Inmac Common
Stock, abstentions and broker non-votes will have the effect of negative votes
thereon. With respect to the vote on any other matters brought before the
Special Meeting, which will require the affirmative vote of the holders of a
majority of the outstanding shares represented at the Special Meeting and

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entitled to vote thereon, abstentions and broker non-votes will also have the
effect of negative votes thereon.

Pursuant to the Merger Agreement, the consummation of the Merger is
conditioned upon, among other things, the adoption of the Merger Agreement by
the affirmative vote of the holders of a majority of the outstanding shares of
Inmac Common Stock. Pursuant to the Stock Agreement, the Stockholders which own
beneficially approximately 26% of the outstanding shares of Inmac Common Stock
as of December 21, 1995, have agreed to vote such shares in favor of the
adoption of the Merger Agreement and have granted to MWHS an option, exercisable
under certain conditions, to purchase such shares. See "The Stock Agreement." As
of December 21, 1995, directors and officers of Inmac as a group (including the
Stockholders) beneficially owned 4,385,248 shares of Inmac Common Stock, or
approximately 39.6% of those shares of Inmac Common Stock outstanding as of such
date.

PROXIES

All shares of Inmac Common Stock represented at the Special Meeting by
properly executed proxies received prior to or at the Special Meeting, unless
such proxies shall have been revoked, will be voted at the Special Meeting in
accordance with the instructions on the proxies. If no instructions are
indicated, such proxies will be voted for the adoption of the Merger Agreement.

If any other matters are properly presented for consideration at the Special
Meeting (or any adjournments or postponements thereof) including, among other
things, consideration of a motion to adjourn or postpone the Special Meeting to
another time and/or place (including, without limitation, for the purpose of
soliciting additional proxies), the persons named in the enclosed forms of proxy
and voting thereunder will have the discretion to vote on such matters in
accordance with their best judgment.

A proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before the proxy is voted at the Special Meeting. A proxy
may be revoked by filing with the Secretary of Inmac prior to the voting of the
proxy either a written instrument revoking the proxy or an executed later dated
proxy, or by voting in person at the Special Meeting. Attendance at the Special
Meeting will not, in itself, constitute the revocation of a proxy.

Inmac and MWHS will share the cost of the preparation of this Proxy
Statement/Prospectus and the solicitation of proxies for voting at the Special
Meeting. Inmac may solicit proxies otherwise than by the use of the mails, in
that certain officers and regular employees of Inmac, without additional
compensation, may use their personal efforts, by telephone or otherwise, to
obtain proxies. Inmac will also request persons and entities holding shares in
their names, or in the name of their nominees, that are beneficially owned by
others, to send proxy materials to and obtain proxies from such beneficial
owners and will reimburse such holders for their reasonable expenses in so
doing. In addition, Inmac has retained MacKenzie Partners, Inc. to assist in the
solicitation of proxies at an estimated fee of $3,000 plus reimbursement of
reasonable expenses.

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THE MERGER

BACKGROUND OF THE MERGER

In early 1994, the Board of Directors of Inmac conducted an overall review
of strategic financing alternatives available to Inmac to help it realize its
goal of increasing stockholder value. On February 25, 1994, Inmac engaged
William Blair as its financial advisor in connection with this review. On March
18, 1994, William Blair discussed its analysis of the strategic alternatives
with the Inmac Board of Directors. Following such discussion, the Inmac Board of
Directors determined that one of the best strategic alternatives available to
Inmac to enhance stockholder value was a business combination with a strategic
partner. On March 23, 1994, Inmac engaged William Blair to advise Inmac in
connection with Inmac's review of potential business combinations with strategic
partners. As part of this arrangement, from March 1994 through July 1994,
William Blair identified and contacted over 30 potential strategic partners,
including MWHS, to assess their level of interest in a possible combination with
Inmac. In September 1994, one of the potential partners contacted by William
Blair submitted a letter of interest to the Inmac Board of Directors offering to
discuss further the possible purchase of the outstanding shares of Inmac Common
Stock. However, Inmac and this party concluded that they were unlikely to reach
agreement on key terms of a potential combination, as the Inmac Board of
Directors judged the proposed terms to be too onerous.

As William Blair continued to advise Inmac on possible business combination
opportunities in the U.S., Inmac's Board of Directors also decided to expand the
search for a business combination to Europe, because of the strength of Inmac's
European operations. Toward this end, the Inmac Board of Directors in August
1994 retained KPMG Peat Marwick Corporate Finance ("KPMG") as its financial
advisor for the European search. KPMG identified and contacted over 40 potential
European parties and in November 1994 one of them entered into preliminary
negotiations with Inmac on a possible business combination. These negotiations
ceased in December 1994 as the parties were unable to resolve their differences.
During the period of the U.S. and European searches, Inmac's Common Stock was
trading in the public market generally in the range of $4.50 to $6.00 per share.

Due to existing market conditions, Inmac's Common Stock trading price and
Inmac's results of operations at such time, the Board decided to discontinue the
evaluation of potential business combinations and directed management to focus
solely on improving Inmac's business, financial condition and results of
operations. In February and March 1995, the Board advised KPMG and William
Blair, respectively, to discontinue pursuing additional interested parties for a
potential business combination.

Inmac's operating results improved in the fiscal quarters ended January 28,
April 29 and July 29, 1995 as compared with the same quarters in the prior
fiscal year. On June 1, 1995, John Mumford, a director of Inmac, received a
telephone call from one of the companies that had been approached by William
Blair the previous year. This company indicated that it was interested in
pursuing discussions regarding a potential business combination. During the rest
of the summer of 1995, Inmac's management received inquiries about acquisition
possibilities from, and had preliminary discussions with, several other parties
that had similarly been contacted the previous year. The Board of Directors was
updated on such inquiries and discussions at its meetings on August 29, 1995 and
September 12, 1995.

In early September 1995, Ken Eldred, Inmac's Chairman, raised the
possibility of a business combination between Inmac and MWHS during a telephone
call that he placed to Peter Godfrey, the President and Chief Executive Officer
of MWHS. On September 22, 1995, Mr. Godfrey, Frederick Fruitman, a director of
MWHS, and Steven Purcell, MWHS's Vice President and Chief Financial Officer, met
with Mr. Eldred, Mr. Mumford and Jeffrey Heimbuck, Inmac's President and Chief
Executive Officer, to explore the possibility of a strategic business
combination. During the meeting, the parties discussed, on a preliminary basis,
the benefits to both companies of such a potential combination

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and the possible consideration to be paid to the stockholders of Inmac. This
meeting did not yield any specific understandings between the parties.

On October 6, 1995, MWHS executed a Non-Disclosure Agreement to permit
review by MWHS of confidential Inmac business materials in contemplation of a
meeting with Inmac management. On October 9, 1995, at the request of Inmac, MWHS
delivered a preliminary, non-binding letter of interest indicating its interest
in acquiring Inmac's Common Stock at a price between $10.00 and $12.00 per
share. On October 24, November 7 and November 8, 1995, management
representatives of the two companies met to conduct due diligence related to
sales, marketing, operations and product development, as well as legal and
financial due diligence. On October 30, 1995, Inmac executed a modified
engagement letter with William Blair regarding its ongoing assistance and advice
concerning the various discussions being held.

On November 17, 1995, Mr. Godfrey, Mr. Purcell and Bruce L. Lev, MWHS's Vice
President and General Counsel, met with Mr. Eldred, Mr. Heimbuck, Mr. Mumford
and Inmac's outside legal counsel. Mr. Godfrey presented a preliminary proposal
for a merger between the two companies, at a price of $12.00 per share of Inmac
Common Stock, subject to the negotiation of a definitive agreement and
resolution of additional issues. The parties discussed the structure of the
proposed merger, the consideration to be paid to Inmac's stockholders and other
terms. The parties acknowledged that further discussions should be held on a
possible merger to be structured as a tax-free reorganization and that any such
merger should be structured with the objective of obtaining pooling of interests
accounting treatment. MWHS also indicated that any definitive proposal by it
with respect to such a merger would be conditioned upon certain insider
stockholders of Inmac, including Mr. Eldred, executing voting and option
agreements.

From November 20 through November 29, 1995, members of management of both
companies together with their respective legal and financial advisors negotiated
the terms of the proposed merger and the definitive documentation.

On November 22, 1995, the Inmac Board of Directors met to discuss the terms
of MWHS's preliminary proposal. The Board requested that the Chairman and the
President of Inmac respond to the preliminary proposal and continue discussions
with MWHS.

On November 27, 1995, the Board of Directors of Inmac met to consider a
draft of the proposed Merger Agreement and the transactions contemplated
thereby. At this meeting, members of Inmac's senior management, together with
Inmac's legal and financial advisors, reviewed with the Board, among other
things, the background of the proposed transaction, the potential benefits and
risks of the transaction, including the strategic and financial rationale,
analysis of the transaction, regulatory review, and the proposed terms of the
Merger Agreement. William Blair provided a detailed financial presentation and
advised the Board that it expected to be able to deliver a financial fairness
opinion in connection with the transaction based on the proposed terms of the
transaction at that time.

On November 29, 1995, the Board of Directors of MWHS conducted a special
meeting to consider the status of negotiations and to review various financial
analyses and data presented by Goldman Sachs & Co. and Montgomery Securities,
its financial advisors. At this meeting, the Board of Directors considered the
financial and strategic business implications of the Merger and the potential
risks and benefits of the transaction, and the results of MWHS's legal and
financial due diligence investigation of Inmac. The MWHS Board of Directors
authorized senior management and its outside advisors to continue negotiations.

On November 29, 1995, the Inmac Board met with members of Inmac's senior
management and Inmac's legal and financial advisors to review the status of
negotiations with MWHS and a revised draft of the proposed Merger Agreement. At
this meeting, the Board also received an updated financial

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presentation from William Blair and discussed the final terms to be negotiated.
William Blair delivered its oral opinion (to be confirmed in writing upon
finalization of the terms of the Merger Agreement) that the consideration to be
received by holders of shares of Inmac Common Stock pursuant to the Merger
Agreement was fair, from a financial point of view, to such holders. See
"--Opinion of William Blair & Company, Financial Advisor to Inmac." The Inmac
Board of Directors unanimously approved the Merger Agreement and the
transactions contemplated thereby and authorized the officers to complete the
negotiation and, subject to receipt of the written fairness opinion from William
Blair, to enter into and perform the Merger Agreement.

On November 30, 1995, the representatives of both MWHS and Inmac concluded
negotiations of mutually acceptable definitive documentation. The Board of
Directors of MWHS conducted a special meeting to consider the final terms of the
Merger and unanimously voted to authorize senior management to enter into and
perform the Merger Agreement.

The companies executed the Merger Agreement on November 30, 1995, and the
Merger Agreement was immediately announced by the issuance of a joint press
release.

INMAC'S REASONS FOR THE MERGER

At the time the Merger Agreement was executed, the Inmac Board of Directors
believed, and continues to believe, that the following are reasons for the
stockholders of Inmac to vote FOR approval of the Merger Agreement and the
Merger:

. Economies of Scale. The Inmac Board believes that there are significant
economies of scale in the direct-response computer product marketing
industry. A larger company has greater purchasing power and therefore
potentially lower product, catalog and mailing costs, more opportunity to
produce vendor-funded catalogs, and the ability to spread administrative
and other corporate overhead costs over a larger revenue base. The
combination of Inmac and MWHS will produce a company with annual revenues
more than three times as large as Inmac's were in fiscal year 1995, and
the Inmac Board believes that the combined company will be able to realize
improved results from the increased scale of its operations and thereby
provide the best opportunity to maximize stockholder value for the benefit
of the Inmac stockholders.

. Complementary Geographical Strengths. The Inmac Board believes that
Inmac's successful European operation is an excellent complement to MWHS's
successful U.S. business and growing European business and that combining
the two will produce a stronger and more competitive international
company. The Inmac Board also believes that the combined company will be
able to capitalize on the merger of Inmac's traditional strength in Europe
and MWHS's success in the U.S. and thereby provide the best opportunity to
maximize stockholder value for the benefit of Inmac stockholders, who will
be able to participate in such value by receiving MWHS Common Stock in the
Merger.

. MWHS Operational Expertise and Customer Relationships. The Inmac Board
believes that MWHS has developed expertise in several operational areas,
such as management information systems and catalog publishing and mailing,
that will provide Inmac with the opportunity to significantly improve its
operations in these areas. Furthermore, MWHS has a strong direct mail
presence with certain customer segments that Inmac has not successfully
penetrated, such as small to medium-sized businesses. The Inmac Board
believes that the Merger will provide Inmac with access to this expertise
and these customer relationships.

. Strengthen Balance Sheet. During the past year, the Inmac Board has worked
to improve Inmac's balance sheet. Toward this end, in June 1995 Inmac
issued notes for longer-term unsecured senior debt to replace some of its
short-term debt. In periods of high growth and rapid

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change, Inmac would be better off with less short-term debt and a stronger
cash position. The Inmac Board believes that the Merger will result in a
stronger balance sheet and the ability to access financial markets for
working capital on more favorable terms than those available to Inmac as a
separate company.

. Value of MWHS Common Stock. The Merger will provide Inmac stockholders
with MWHS Common Stock in an anticipated tax-free exchange at a
substantial premium over the market price for shares of Inmac Common
Stock. The Inmac Board believes that the equity securities of the combined
company should be less volatile than the securities of Inmac as a
stand-alone company based on the expectation that the combined company
will have larger scale and a broader product line with stronger financial
characteristics. In addition, the combined company will have a much larger
market capitalization and increased liquidity for Inmac stockholders. The
Inmac Board believes that the MWHS equity security offers a greater
possibility for long-term appreciation with equal or less risk than shares
of Inmac as a stand-alone entity.

BOARD RECOMMENDATION

MWHS'S REASONS FOR THE MERGER

MWHS believes that the Merger is in the best interests of it and its
stockholders. The Merger will enhance MWHS's continued expansion of its data
communications and networking product lines. The Merger will also permit MWHS to
expand its business operations in certain geographical areas (particularly
Europe and the United Kingdom) in which MWHS operates. As of the date of this
Proxy Statement/Prospectus, MWHS had not made any decision or entered into any
agreements providing for dispositions of assets.

OPINION OF WILLIAM BLAIR & COMPANY, FINANCIAL ADVISOR TO INMAC

William Blair has delivered its written opinion to the effect that, as of
November 30, 1995, the consideration to be received by holders of shares of
Inmac Common Stock pursuant to the Merger Agreement is fair from a financial
point of view to such holders. Such opinion confirmed the oral opinion given by
William Blair to the Inmac Board on November 29, 1995. The amount of such
consideration was determined pursuant to extensive negotiations between Inmac
and MWHS. No limitations were imposed by Inmac with respect to the
investigations made or the procedures followed by William Blair in rendering its
opinion.

THE FULL TEXT OF THE OPINION OF WILLIAM BLAIR, DATED NOVEMBER 30, 1995, IS
ATTACHED HERETO AS APPENDIX B. INMAC STOCKHOLDERS ARE URGED TO READ THE OPINION
IN ITS ENTIRETY FOR THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, OTHER MATTERS
CONSIDERED AND LIMITS OF THE REVIEW BY WILLIAM BLAIR. THE SUMMARY OF THE OPINION
OF WILLIAM BLAIR SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION. WILLIAM BLAIR'S
OPINION IS DIRECTED ONLY TO THE FAIRNESS FROM A FINANCIAL POINT OF VIEW OF THE
CONSIDERATION TO BE RECEIVED BY HOLDERS OF SHARES OF INMAC COMMON STOCK PURSUANT
TO THE MERGER AGREEMENT AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY INMAC
STOCKHOLDER AS TO HOW TO VOTE AT THE INMAC SPECIAL MEETING.

In arriving at its fairness opinion, William Blair (a) reviewed the terms
and conditions of the Merger Agreement and the financial terms of the Merger as
set forth in the Merger Agreement;

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(b) reviewed the terms and conditions of the Stock Agreement between MWHS and
the Stockholders; (c) analyzed certain publicly available financial statements
of Inmac and MWHS; (d) analyzed certain financial and other information relating
to the prospects of Inmac provided to William Blair by Inmac's management,
including financial projections; (e) discussed the past and current operations
and financial condition and the prospects of Inmac with senior executives of
Inmac; (f) analyzed certain internal financial statements and other data
concerning MWHS prepared by the management of MWHS; (g) discussed the past and
current operations and financial condition and prospects of MWHS with senior
executives of MWHS; (h) reviewed the historical prices and trading activity for
Inmac's Common Stock and that of MWHS, respectively; (i) reviewed the financial
terms, to the extent publicly available, of selected actual business
combinations William Blair believed to be relevant; and (j) performed such other
analyses as William Blair deemed appropriate.

In connection with its review, William Blair assumed and relied upon the
accuracy and completeness of all such information and did not attempt to verify
independently any of such information. In addition, William Blair did not make
or obtain an independent valuation, appraisal or physical inspection of any of
the assets, properties or liabilities of Inmac or MWHS. With respect to
financial projections, William Blair assumed that the projections had been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of Inmac's management as to the future financial performance of
Inmac, and that such projections provided a reasonable basis upon which William
Blair could form an opinion. William Blair assumed no responsibility for, and
expressed no view as to, such forecasts or the assumptions on which they were
based. William Blair's opinion is necessarily based solely upon information
available to William Blair and business, market, economic and other conditions
as they existed on, and could be evaluated as of, November 30, 1995. William
Blair's opinion did not address Inmac's underlying business decision to enter
into the Merger Agreement. William Blair also assumed that the Merger could be
consummated on the terms described in the Merger Agreement without any waiver of
any material terms or conditions by Inmac and that obtaining the necessary
regulatory approvals for the Merger would not have an adverse effect on Inmac or
MWHS.

The following presentation summarizes certain financial analyses performed
by William Blair in arriving at its opinion dated November 30, 1995, which
analyses William Blair discussed with the Board of Directors of Inmac.

Historical Financial Statement Analysis. William Blair examined the
historical financial statements of Inmac and MWHS for the last five years. For
Inmac, operating income was $12.7 million in fiscal year 1991, $6.3 million in
fiscal year 1992, a $9.3 million loss in fiscal year 1993, $5.8 million in
fiscal year 1994, $11.1 million in fiscal year 1995, and $2.5 million for the
three months ended October 28, 1995. For MWHS, operating income was $7.3 million
in fiscal year 1991 (ending December 31), $13.5 million in fiscal year 1992,
$25.5 million in fiscal year 1993, $45.4 million in fiscal year 1994, and $51.2
million in the nine months ended September 30, 1995.

Discounted Cash Flow Analysis. William Blair performed a discounted cash
flow analysis for Inmac. Two scenarios were run: a base case scenario based on
management assumptions and a more conservative shortfall scenario. This analysis
supported the fairness opinion because the base case
analysis yielded values ranging from $7.98 to $9.78 per share of Inmac Common
Stock while the shortfall scenario yielded values ranging from $4.46 to $5.58
per share, compared to the value implied by the MWHS offer as of November 30,
1995 of $12.00.

Comparable Company Analyses. William Blair compared selected historical and
projected operating information, stock market data and financial ratios for
Inmac (based on the financial terms of the Merger) to selected historical and
projected operating information, stock market data and financial ratios of MWHS
and of certain other publicly traded direct mail computer and office product
suppliers. Two groups of companies were included in the analysis: a set of
companies comparable in business

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activities and historical and expected growth and operating performance to Inmac
(Group 2) and a group of companies which competes in certain markets with Inmac,
but which exhibits more consistent historical growth and margins than Inmac and
has consensus earnings per share ("EPS") growth estimates of 22% to 30% (Group
1). Group 2, which exhibits financial and operating results more closely
comparable to those of Inmac, included Elek-tek, Inc., Gateway 2000, Inc.,
Intelligent Electronics, Inc., Merisel, Inc., New England Business Services,
Inc., and Tech Data Corporation. Group 1 included CDW Computer Centers, Inc.,
Creative Computers, Inc., Global Directmail Corporation, Micro Warehouse, Inc.,
Tessco Technologies, Inc., and Viking Office Products, Inc. William Blair
compared Inmac to Group 2 on a stand-alone basis and to Groups 1 and 2 together.
The primary focus of these analyses was on ratios of current stock price (as of
November 30, 1995) to earnings per share. For the set of close comparables
(Group 2), an analysis of current stock price to latest twelve months earnings
per share yielded a range of 10.8 to 23.3 times earnings with a median of 18.3
times earnings, compared to 28.6 times earnings for Inmac in this transaction.
An analysis of current stock price to projected calendar 1995 earnings per share
yielded a range of 10.8 to 35.6 times earnings with a median of 17.9 times
earnings, compared to 22.2 times earnings for Inmac in this transaction. An
analysis of current stock price to projected calendar 1996 earnings per share
yielded a range of 7.8 to 16.9 times earnings with a median of 9.3 times
earnings, compared to 16.9 times earnings for Inmac in this transaction. William
Blair indicated that the price to estimated calendar 1995 and estimated calendar
1996 earnings multiples calculated for Inmac based on the financial terms of the
Merger were within the range of multiples for Group 2 comparable companies
analyzed and above the range for multiples of latest twelve months earnings per
share. With regard to Groups 1 and 2 considered together, William Blair
concluded that the price/earnings multiples calculated for Inmac based on the
financial terms of the Merger were within the range of multiples, and below the
median for multiples of latest twelve months EPS, projected calendar 1996 EPS,
and projected calendar 1996 EPS.

Comparable Transaction Analysis. William Blair reviewed 29 mergers and
acquisitions involving office products, direct mail, and other distribution
companies during the period from November 1, 1992 to November 17, 1995. In
examining these transactions, William Blair analyzed certain income statement
and balance sheet parameters of the acquired companies relative to the
consideration paid. Multiples analyzed included total transaction value (defined
as transaction equity value adjusted by adding long-term debt and subtracting
cash and short-term investments) as a multiple of latest twelve months revenues,
operating income and cash flow as well as transaction equity value to latest
twelve months net income. In certain cases, complete financial data were not
publicly available for these transactions and only partial information was used
in such instances. An analysis of total transaction value to latest twelve
months revenues yielded a range of 0.18 times to 2.28 times revenues with a
median of 0.55 times revenues, compared to 0.41 times revenues for Inmac in this
transaction. An analysis of total transaction value to latest twelve months
operating income yielded a range of 7.0 times to 29.9 times operating income
with a median of 13.7 times, compared to 13.4 times operating income for Inmac
in this transaction. An analysis of total transaction value to latest twelve
months cash flow yielded a range of 5.3 times to 15.1 times cash flow with a
median of 8.7 times cash flow, compared to 9.7 times cash flow for Inmac in this
transaction. An analysis of market equity value to net income yielded a range of
14.0 to 49.5 times with a median of 21.9 times compared to 30.5 times for Inmac
for this transaction. William Blair indicated that the multiples calculated for
Inmac based on the financial terms of the Merger were within the range of
multiples of comparable transactions analyzed, above the median for multiples of
cash flow and net income and slightly below the median for multiples of revenue
and operating income.

Acquisitions Premiums Analysis. William Blair's analysis also indicated that
the average percentage premium of offer prices to trading prices one month prior
to the announcement date was 27.3% for the group of office product, direct mail
and other distribution company merger and acquisition transactions reviewed.
William Blair also looked at premiums paid in selected office product, direct
mail, and distribution company transactions where the consideration paid was in
the form of the

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acquiring company's stock. This analysis indicated an average percentage premium
of offer prices to trading prices one month prior to the date of announcement of
such transactions was 20.8%. MWHS's offer price for Inmac Common Stock based on
the Conversion Rate and MWHS's closing stock price as of November 30, 1995
represented a premium to Inmac's closing stock price as of October 30, 1995 (one
month prior to the date of announcement) of 60.0%.

Stock Price Analysis. William Blair also examined the history of the trading
prices and volume for Inmac Common Stock and MWHS Common Stock. An analysis of
Inmac's stock price performance reveals that the stock had not traded above
$9.50 during the last twelve months and had reached $12.00, the MWHS offer
price, during only one period over the past five years: October to November
1993. Since January 1, 1992, 84% of Inmac's share volume has been traded at less
than $8.50 per share and over 99% of Inmac's volume has been traded at less than
$11.50 per share. An analysis of MWHS's stock price performance reveals
significant, consistent appreciation both during the latest twelve months and
since MWHS's initial public offering in December 1992.

Combination Analysis. William Blair analyzed the potential impact of the
Merger (including transaction costs) on the future earnings per share of MWHS.
The analysis indicated, absent potential synergies, that the Merger is not
likely to have a dilutive impact on the earnings per share of MWHS Common Stock
which Inmac stockholders will be receiving as consideration in the Merger.

While the foregoing summary describes all analyses and examinations that
William Blair deems material to its opinion, it is not a comprehensive
description of all analyses and examinations actually performed by William Blair
in connection with its fairness opinion. The preparation of a fairness opinion
involves various subjective business determinations as to the most appropriate
and relevant methods of financial analysis and the application of those methods
to the particular circumstances, and therefore such an opinion is not readily
susceptible to partial analysis or summary description. Accordingly,
notwithstanding the separate factors summarized above, William Blair believes
that its analyses must be considered as a whole and that selecting portions of
its analyses and considering individual factors without considering all analyses
and factors could create an incomplete and misleading view of the evaluation
process underlying its opinion. With respect to comparable companies analyses
and comparable transaction analyses, a particular analysis performed by William
Blair is not necessarily indicative of actual values, which may be significantly
higher or lower than suggested by such analyses. The analyses are not appraisals
and do not necessarily reflect the prices for which businesses actually could be
sold or actual values or future results that might be achieved. In addition,
William Blair used in its analyses various projections as to the future
performance of Inmac. Such projections are based on numerous variables and
assumptions that are inherently unpredictable and must be considered not certain
of occurrence as projected. Accordingly, actual results could vary significantly
from those set forth in such projections. William Blair's analyses were prepared
solely as part of William Blair's review of the fairness of the consideration to
be received by Inmac's stockholders, from a financial point of view, in
connection with the delivery of William Blair's opinion. In addition, William
Blair's opinion and presentation to the Inmac Board was only one of the many
factors taken into consideration by the Inmac Board in making its determination
to approve the Merger Agreement.

Pursuant to the terms of the engagement by Inmac as its financial advisor in
connection with the Merger, upon consummation of the Merger, William Blair will
receive a fee based on a percentage of the aggregate value of the consideration
received by Inmac stockholders plus the fair market value of the options to
acquire Inmac Common Stock outstanding at the date of the Merger based on the
closing price of MWHS's Common Stock at the closing date of the transaction.
This fee is expected to be approximately $2.2 million. William Blair will be
reimbursed for out-of-pocket expenses in connection with the engagement. Inmac
has also agreed to indemnify and hold harmless William Blair and certain related
parties from and against certain liabilities, including liabilities under the
federal securities laws, in connection with its engagement.

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William Blair has from time to time provided various financial advisory and
investment banking services to Inmac for which it has received customary
compensation. William Blair is a market maker for Inmac Common Stock. William
Blair, as part of its investment banking business, is engaged in the valuation
of businesses and their securities in connection with mergers and acquisitions,
underwritings, private offerings of securities and valuations for corporate
reorganizations and other purposes. The Inmac Board selected William Blair to
act as financial advisor on the basis of William Blair's prior relationship with
Inmac and William Blair's corporate finance and research expertise in the direct
response industry.

THE MERGER AGREEMENT

The following discussion is a summary of the material provisions of the
Merger Agreement. This summary and all other discussions of the terms and
conditions of the Merger and the Merger Agreement included elsewhere in this
Proxy Statement/Prospectus are qualified in their entirety by reference to the
Merger Agreement, a copy of which is attached as Appendix A hereto and
incorporated by reference herein.

GENERAL

On the terms and subject to the conditions of the Merger Agreement, at the
Effective Time Newco will be merged with and into Inmac in accordance with the
applicable provisions of the DGCL and the separate corporate existence of Newco
will thereupon cease (with the Surviving Corporation being a subsidiary of
MWHS). The Merger will have the effects specified in the DGCL.

Effective Time. On the Closing Date, Newco and Inmac will cause a
certificate of merger to be filed with the Secretary of State of the State of
Delaware as provided in the DGCL. Upon completion of such filing, the Merger
will become effective in accordance with the DGCL.

Certificate of Incorporation and By-Laws of the Surviving Corporation. The
Merger Agreement provides that the certificate of incorporation and by-laws of
the Surviving Corporation to be in effect from and after the Effective Time
until amended in accordance with their terms and the DGCL will be the
certificate of incorporation and by-laws, respectively, of Inmac immediately
prior to the Effective Time, as amended and restated.

Directors and Officers of the Surviving Corporation. The Merger Agreement
provides that the initial directors of the Surviving Corporation will be the
members of the Board of Directors of Newco immediately prior to the Effective
Time and the officers of the Surviving Corporation will consist of the officers
of Newco immediately prior to the Effective Time. Such persons will continue as
directors or officers, as the case may be, of the Surviving Corporation until
their successors have been duly elected or appointed and qualified or until
their earlier death, resignation, or removal in accordance with the certificate
of incorporation and the by-laws of the Surviving Corporation.

MANNER AND BASIS OF CONVERTING SECURITIES

Conversion of Securities in the Merger. The Merger Agreement provides that,
at the Effective Time (a) each share of Inmac Common Stock issued and
outstanding will, by virtue of the Merger and without any action on the part of
the holder thereof, be converted into the right to receive a number of shares of
MWHS Common Stock equal to the Conversion Rate; provided, however, that the
Conversion Rate shall not be less than 0.225 and shall not be greater than
0.276, (b) each share of Inmac Common Stock issued and outstanding and owned by
MWHS or any of its direct or indirect wholly owned subsidiaries or by any of
Inmac's direct or indirect wholly owned subsidiaries will, by virtue of the
Merger and without any action on the part of the holder thereof, cease to be
outstanding, be cancelled and retired without payment of any consideration
therefor, and cease to exist, and (c) each share of

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Newco Common Stock will, by virtue of the Merger and without any action on the
part of Newco or the holder thereof, be converted into one share of Surviving
Corporation Common Stock.

Payment for Shares of Inmac Common Stock. Prior to the Effective Time, MWHS
will designate State Street Bank and Trust Company to act as exchange agent (the
"Exchange Agent") under the Merger Agreement. The Merger Agreement provides
that, at the Effective Time, MWHS will make available to the Exchange Agent, for
the benefit of the holders of shares of Inmac Common Stock, a sufficient number
of certificates representing shares of MWHS Common Stock required to effect the
delivery of the aggregate merger consideration for shares of Inmac Common Stock
as provided in the Merger Agreement.

Pursuant to the Merger Agreement, promptly after the Effective Time, the
Exchange Agent will mail to each holder of record (other than holders whose
shares are to be cancelled as described above) of a certificate or certificates
which immediately prior to the Effective Time represented outstanding shares of
Inmac Common Stock (the "Certificates") a form of letter of transmittal (which
will specify that delivery will be effected, and risk of loss and title to the
Certificates will pass, only upon proper delivery of the Certificates to the
Exchange Agent) and instructions for use in effecting the surrender of the
Certificates for payment therefor. The Merger Agreement provides that, upon
surrender of Certificates for cancellation to the Exchange Agent, together with
such letter of transmittal duly executed and any other required documents, the
holders of such Certificates will be entitled to receive for each share of Inmac
Common Stock represented by such Certificates the merger consideration therefor
and the Certificates so surrendered will promptly be cancelled. Until so
surrendered, Certificates will represent solely the right to receive the merger
consideration therefor.

The Merger Agreement provides that no dividends or other distributions that
are declared after the Effective Time on shares of MWHS Common Stock and payable
to the holders of record thereof after the Effective Time will be paid to
persons entitled by reason of the Merger to receive shares of MWHS Common Stock
until such persons surrender their Certificates. Under the Merger Agreement,
upon such surrender, there will be paid to the person in whose name the shares
of MWHS Common Stock are issued any dividends or distributions on such shares of
MWHS Common Stock which shall have a record date after the Effective Time and a
payment date prior to such surrender. For dividends which have a record date
after the Effective Time but a payment date after such surrender, such payment
will be made on such payment date. In no event will the persons entitled to
receive such dividends or other distributions be entitled to receive interest on
such dividends or other distributions. In addition, if any cash or shares of
MWHS Common Stock are to be paid to or issued in a name other than that in which
the Certificate so surrendered in exchange therefor is registered, it will be a
condition of such exchange that the Certificate so surrendered be properly
endorsed and otherwise in proper form for transfer and that the person
requesting such exchange pay to the Exchange Agent any transfer or other taxes
required by reason of the issuance of a certificate in a name other than that of
the registered holder of the Certificate surrendered or establish to the
satisfaction of the Exchange Agent that such taxes have been paid or are not
applicable.

No fractional shares of MWHS Common Stock will be issued in the Merger. The
Merger Agreement provides that, in lieu of any such fractional securities, each
holder of shares of Inmac Common Stock who would otherwise have been entitled to
a fraction of a share of MWHS Common Stock upon surrender of Certificates for
exchange pursuant to the Merger Agreement will be paid an amount in cash
(without interest), rounded to the nearest cent, determined by multiplying (a)
the per share closing price on NASDAQ of shares of MWHS Common Stock on the date
of the Effective Time (or, if such shares do not trade on NASDAQ on such date,
the first date of trading on NASDAQ after the Effective Time) by (b) the
fractional interest to which such holder otherwise would be entitled.

Treatment of Options. The Merger Agreement provides that at the Effective
Time each outstanding option, whether exercisable or unexercisable, to purchase
shares of Inmac Common Stock will be

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assumed by MWHS and will become an option to acquire, at an aggregate purchase
price equal to the aggregate price that would have been payable upon the
exercise thereof immediately prior to the Effective Time (rounded to the nearest
cent), a number of shares of MWHS Common Stock equal to the product of the
number of shares of Inmac Common Stock subject to such option immediately prior
to the Effective Time and the Conversion Rate, except that MWHS will not issue
any fractional share of MWHS Common Stock upon any exercise of any option and
any right in respect thereof will, without further action, be forfeited.
Notwithstanding the foregoing, in the case of any option to which Section 421 of
the Code applies by reason of its qualification under Section 422 or 423 of the
Code, the option price, the number of shares purchasable pursuant to such option
and the terms and conditions of exercise of such option will be determined in
order to comply with Section 424 of the Code. Under the Merger Agreement, after
the Effective Time, MWHS will promptly file and keep effective a Registration
Statement on Form S-8 for the shares of MWHS Common Stock issued upon exercise
of such options.

Treatment of Inmac Warrants. The Merger Agreement provides that at or
promptly following the Effective Time MWHS will, and will cause the Surviving
Corporation to, execute an agreement providing that any holder of a warrant to
purchase shares of Inmac Common Stock (an "Inmac Warrant") will have the right
until the expiration date thereof to exercise the Inmac Warrant (subject to the
terms and conditions of the warrant), at an aggregate purchase price equal to
the aggregate price that would have been payable upon the exercise thereof
immediately prior to the Effective Time, to purchase the number of shares of
MWHS Common Stock equal to the product of the number of shares of Inmac Common
Stock subject to such Inmac Warrant immediately prior to the Effective Time and
the Conversion Rate.

Closing of Stock Transfer Records. No transfers of shares of Inmac Common
Stock will be made on the stock transfer books of Inmac after the close of
business on the day prior to the date of the Effective Time.

REPRESENTATIONS AND WARRANTIES

The Merger Agreement contains various representations and warranties of the
parties thereto. These include representations and warranties by Inmac with
respect to corporate existence, good standing, corporate authority,
authorization, capitalization, subsidiaries and interests in other entities,
conflicts, required filings and consents, compliance with laws and contractual
obligations, filings with the SEC and the financial statements included therein,
absence of certain changes, litigation, employee benefit plans, employment
agreements, labor matters, information in SEC filings relating to the Merger,
properties, taxes, environmental matters, intellectual property, insurance,
product warranties and liabilities, accounts receivable, inventory, material
contracts, finder's fees and brokerage commissions, state takeover statutes, the
receipt of an opinion of financial advisor and ownership of MWHS Common Stock.
MWHS and Newco have also made certain representations and warranties with
respect to corporate existence, good standing, corporate authority,
authorization, capitalization, subsidiaries, conflicts, required filings and
consents, compliance with laws and contractual obligations, filings with the SEC
and financial statements included therein, absence of certain changes,
litigation, employee benefit plans, employment agreements, labor matters,
information in SEC filings related to the Merger, properties, taxes,
intellectual property, insurance, product warranties and liabilities, accounts
receivable, inventory, finder's fees and brokerage commissions, the issuance of
shares of MWHS Common Stock pursuant to the Merger Agreement, and the formation
of Newco.

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COVENANTS

Alternative Proposals. Pursuant to the Merger Agreement, Inmac has agreed
that prior to the Effective Time, neither it nor any of its subsidiaries will,
nor will it or any of its subsidiaries permit their respective officers,
directors, employees, agents, and representatives to, initiate, solicit, or
encourage, directly or indirectly, any Alternative Proposal (as defined below)
or, except as set forth below, 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 otherwise facilitate any effort
or attempt to make or implement an Alternative Proposal. The Merger Agreement
provides that an "Alternative Proposal" means the receipt by Inmac of 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 any purchase
of all or any significant portion of the assets of Inmac or any of its
subsidiaries or a 10% or more equity interest in Inmac by a person or entity
that takes a position detrimental to the Merger. Notwithstanding the foregoing,
the Merger Agreement provides that if Inmac receives an unsolicited written
proposal or written offer with respect to an Alternative Proposal, Inmac's Board
of Directors will be entitled, solely to the extent it has been advised (a) by
its outside counsel that a failure to do so would violate its fiduciary
obligations under applicable law and (b) by its financial advisor that the
Alternative Proposal is financially superior to the Merger and the transactions
contemplated thereby, to review and participate in negotiations concerning such
proposal and furnish relevant information concerning Inmac to the offeror;
provided that (i) Inmac has furnished, or concurrently with the provision of the
information to such offeror will furnish, MWHS with all such information
provided to such offeror and (ii) the offeror executes a confidentiality
agreement with Inmac on substantially the same terms as that entered into with
MWHS. Inmac will notify MWHS promptly of any such unsolicited Alternative
Proposal, or any inquiry or contact with any person with respect thereto. In
addition, Inmac will cease and terminate any existing activities, discussions or
negotiations with any parties conducted at the time of the execution of the
Merger Agreement. The Merger Agreement expressly provides that nothing in the
provisions of the Merger Agreement described above will (x) permit Inmac to
terminate the Merger Agreement, (y) permit Inmac to enter into any agreement
with respect to an Alternative Proposal for as long as the Merger Agreement
remains in effect (Inmac having agreed that for as long as the Merger Agreement
remains in effect, Inmac will not enter into any agreement with any person that
provides for, or in any way facilitates, an Alternative Proposal), or (z) affect
any other obligation of Inmac under the Merger Agreement.

Conduct of Business by Inmac. Pursuant to the Merger Agreement, Inmac has
agreed that, prior to the Effective Time, except as contemplated by any other
provision of the Merger Agreement, unless MWHS has previously consented in
writing thereto, Inmac (a) will, and will cause each of its subsidiaries to,
conduct its operations in the ordinary and normal course, consistent with past
practice; (b) will use its reasonable best efforts, and will cause each of its
subsidiaries to use its reasonable best efforts, to preserve intact their
business organizations and goodwill, keep available the services of their
respective officers and employees, and maintain satisfactory relationships with
those persons having business relationships with them; (c) will not amend its
certificate of incorporation or by-laws or comparable governing instruments; (d)
will, upon the occurrence of any event or change in circumstances as a result of
which any representation or warranty of Inmac contained in the Merger Agreement
would be untrue or incorrect if such representation or warranty were made
immediately following the occurrence of such event or change in circumstance,
promptly (and in any event within two business days of an executive officer of
Inmac obtaining knowledge thereof) notify MWHS thereof; (e) will promptly
deliver to MWHS true and correct copies of any report, statement, or schedule
filed by Inmac with the SEC (each an "SEC Report") subsequent to the date of the
Merger Agreement; (f) will not (i) except pursuant to the exercise of options,
warrants, conversion rights, and any other rights, contractual or otherwise,
existing on the date of the Merger Agreement and disclosed pursuant to the
Merger Agreement, issue any shares of its capital stock, effect any stock split,
or otherwise change its

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capitalization as it existed on the date of the Merger Agreement, (ii) grant,
confer, or award any option, warrant, conversion right, or any other right,
contractual or otherwise, not existing on the date of the Merger Agreement to
acquire any shares of its capital stock, (iii) grant, confer, or award any
bonuses or other forms of incentive compensation to any officer, director, or
employee, except for cash bonuses or incentives consistent with past practice or
under any existing agreement, (iv) increase any compensation under any
employment agreement with any of its present or future officers, directors, or
employees, except for normal increases for officers and employees consistent
with past practice or the terms of such employment agreement, (v) grant any
severance or termination pay to, or enter into any employment, severance or
termination agreement with any officer, director, or employee or amend any such
agreement in any material respect, other than severance arrangements consistent
with past practice with respect to officers and employees terminated by Inmac,
or (vi) adopt any new employee benefit plan or program (including any stock
option, stock benefit, or stock purchase plan) or amend any existing employee
benefit plan or program in any material respect; (g) will not (i) declare, set
aside, or pay any dividend or make any other distribution or payment with
respect to any shares of its capital stock or other ownership interests or (ii)
directly or indirectly redeem, purchase, or otherwise acquire any shares of its
capital stock or capital stock of any of its subsidiaries, or make any
commitment for any such action; (h) will not, and will not permit any of its
subsidiaries to, sell, lease, or otherwise dispose of any of its assets
(including capital stock of subsidiaries) or acquire any business or assets,
except for (i) any purchase of inventory undertaken in the ordinary course of
business, (ii) any printing services contracted for in the ordinary course of
business (provided that the term of any such contract in (i) or (ii) is no
longer than one year), or (iii) in the ordinary course of business for an amount
not exceeding $250,000; (i) will not incur any material amount of indebtedness
for borrowed money or make any loans, advances, or capital contributions to, or
investments (other than non-controlling investments in the ordinary course of
business) in, any other person other than a wholly owned subsidiary of Inmac, or
issue or sell any debt securities, other than borrowings under existing lines of
credit in the ordinary course of business; (j) will not, except pursuant to and
in accordance with the capital budget disclosed in writing to MWHS, authorize,
commit to, or make capital expenditures; (k) will not mortgage or otherwise
encumber or subject to any lien any properties or assets except for such of the
foregoing as are in the normal course of business and would not be reasonably
likely to have, individually or in the aggregate, a material adverse effect on
the business, results of operations, or financial condition of Inmac and its
subsidiaries taken as a whole (an "Inmac Material Adverse Effect"); (l) will not
enter into or agree to enter into any contract without the prior written consent
of MWHS unless such contract is entered into by Inmac for (i) any purchase of
inventory undertaken in the ordinary course of business, (ii) any printing
services contracted for in the ordinary course of business (provided that the
term of any such contract in (i) or (ii) is no longer than one year), or (iii)
any other contract in the ordinary course of business and the total payments by
Inmac contemplated thereby do not exceed $100,000 and have a term of no longer
than one year; (m) will not enter into a certain contract with a third party
unless such contract has a maximum termination liability of $250,000; (n) will
review with MWHS the terms and conditions of the proposed new contract with a
warehousing and delivery service; (o) will maintain insurance consistent with
past practices for its businesses and properties; (p) will not make any change
to its accounting (including tax accounting) methods, principles, or practices,
except as may be required by generally accepted accounting principles and
except, in the case of tax accounting methods, principles, or practices, in the
ordinary course of business of Inmac or any of its subsidiaries; (q) will not
knowingly take any action, or knowingly fail to take any action, that would (i)
jeopardize the treatment of the Merger as a "pooling of interests" for
accounting purposes or (ii) jeopardize qualification of the merger as a tax-free
reorganization within the meaning of Section 368(a) of the Code; and (r) will
not take or agree in writing or otherwise to take any action which would make
any of the representations or warranties of Inmac contained in the Merger
Agreement untrue or incorrect or prevent Inmac from performing or cause Inmac
not to perform its covenants under the Merger Agreement.

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Conduct of Business by MWHS. Pursuant to the Merger Agreement, MWHS has
agreed that, prior to the Effective Time, except as contemplated by any other
provision of the Merger Agreement, unless Inmac has previously consented in
writing thereto, MWHS (a) will, and will cause each of its subsidiaries to,
conduct its operations in the ordinary and normal course, consistent with past
practice; (b) will use its reasonable best efforts, and will cause each of its
subsidiaries to use its reasonable best efforts, to preserve intact their
business organizations and goodwill, keep available the services of their
respective officers and employees and maintain satisfactory relationships with
those persons having business relationships with them; (c) will not amend its
certificate of incorporation or by-laws or comparable governing instruments
(other than by-law amendments which are not material to MWHS or to the
consummation of the transactions contemplated by the Merger Agreement); (d)
will, upon the occurrence of any event or change in circumstances as a result of
which any representation or warranty of MWHS contained in the Merger Agreement
would be untrue or incorrect if such representation or warranty were made
immediately following the occurrence of such event or change in circumstance,
promptly (and in any event within two business days of an executive officer of
MWHS obtaining knowledge thereof) notify Inmac thereof; (e) will promptly
deliver to Inmac true and correct copies of any report, statement or schedule
filed with the SEC subsequent to the date of the Merger Agreement; (f) will not
declare, set aside or pay any extraordinary dividend or make any other
extraordinary distribution or payment with respect to any shares of its capital
stock; (g) will not knowingly take any action, or knowingly fail to take any
action, that would (i) jeopardize the treatment of the Merger as a "pooling of
interests" for accounting purposes or (ii) jeopardize qualification of the
merger as a tax-free reorganization within the meaning of Section 368(a) of the
Code; and (h) will not take or agree in writing or otherwise to take any action
which would make any of the representations or warranties of MWHS contained in
the Merger Agreement untrue or incorrect or prevent MWHS from performing or
cause MWHS not to perform its covenants under the Merger Agreement.

Certain Filings and Other Actions. MWHS, Newco, and Inmac have agreed,
subject to the terms and conditions provided in the Merger Agreement, that they
will (a) promptly make any required submissions under the HSR Act; (b) use all
reasonable efforts to cooperate with one another in (i) determining which
filings are required to be made prior to the Effective Time with, and which
consents, approvals, permits, or authorizations are required to be obtained
prior to the Effective Time from, governmental or regulatory authorities of the
United States, the several states, and foreign jurisdictions in connection with
the execution and delivery of the Merger Agreement and the consummation of the
transactions contemplated thereby and (ii) timely making all such filings and
timely seeking all such consents, approvals, permits, or authorizations; and (c)
use all reasonable efforts to take, or cause to be taken, all other action and
do, or cause to be done, all other things necessary, proper, or appropriate to
consummate and make effective the transactions contemplated by the Merger
Agreement.

Access to Information and Confidentiality. Pursuant to the Merger Agreement,
each of MWHS and Inmac has agreed that, from the date of the Merger Agreement to
the Effective Time, it will (a) allow all designated officers, attorneys,
accountants, and other representatives of the other reasonable access at all
reasonable times to the offices, records and files, correspondence, audits, and
properties, as well as to all information relating to commitments, contracts,
titles, and financial position, or otherwise pertaining to the business and
affairs, of it and its respective subsidiaries, as the case may be; (b) furnish
to the other, the other's counsel, financial advisors, auditors, and other
authorized representatives such financial and operating data and other
information as such persons may reasonably request; (c) instruct the employees,
counsel, and financial advisors of the parties, as the case may be, to cooperate
with the other in the other's investigation of the business of it and its
subsidiaries; and (d) keep the other fully apprised and informed of all
significant developments with respect to the assets, business activities,
financial condition, earnings and prospects of it and its subsidiaries. In
addition, under the Merger Agreement, each of MWHS and Inmac will be permitted
to make extracts from or to make copies of such books and records as may be
reasonably necessary and will keep such information

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confidential, subject to the requirements of any governmental or other
authorities, except with respect to information that is ascertainable from
public or published information or trade sources.

Director and Officer Indemnification and Insurance. The Merger Agreement
provides that, from and after the Effective Time, MWHS will cause the Surviving
Corporation to indemnify, defend, and hold harmless, to the fullest extent that
Inmac would be required under its certificate of incorporation, by-laws,
indemnification agreements with its officers and directors (the "Indemnification
Agreements"), and applicable law, each person who was on the date of the Merger
Agreement or six months prior to the date of the Merger Agreement, an officer or
director of Inmac (individually, an "Indemnified Party" and collectively, the
"Indemnified Parties"), against all losses, claims, damages, liabilities, costs
or expenses (including attorneys' fees), judgments, fines, penalties, and
amounts paid in settlement in connection with any claim, action, suit,
proceeding, or investigation arising out of or pertaining to acts or omissions,
or alleged acts or omissions, by them in their capacities as such occurring at
or prior to the Effective Time. Under the Merger Agreement, in the event of any
such claim, action, suit, proceeding, or investigation (an "Action"), any
Indemnified Party wishing to claim indemnification must promptly notify the
Surviving Corporation thereof (provided, however, that failure to so notify the
Surviving Corporation will not affect the obligations of the Surviving
Corporation to provide indemnification except to the extent that the Surviving
Corporation shall have been prejudiced as a result of such failure). The Merger
Agreement provides that, with respect to any Action for which indemnification is
requested, the Surviving Corporation will be entitled to participate therein at
its own expense and, except as otherwise described below, to the extent that it
may wish, the Surviving Corporation may assume the defense thereof, with counsel
reasonably satisfactory to the Indemnified Party. After notice from the
Surviving Corporation to the Indemnified Party of its election to assume the
defense of an Action, the Surviving Corporation will not be liable to the
Indemnified Party for any legal or other expenses subsequently incurred by the
Indemnified Party in connection with the defense thereof, other than as
described below. The Merger Agreement provides that the Surviving Corporation
will not settle any Actions without the Indemnified Party's written consent
where such settlement includes an admission of civil or criminal liability on
behalf of an officer or director or requires any payment to be made by the
Indemnified Party. Under the Merger Agreement, the Indemnified Party will have
the right to employ counsel in any Action, but the fees and expenses of such
counsel incurred after notice from the Surviving Corporation of its assumption
of the defense thereof will be at the expense of the Indemnified Party, unless
(a) the employment of counsel by the Indemnified Party has been authorized by
the Surviving Corporation; (b) the Indemnified Party shall have reasonably
concluded upon the advice of counsel that there may be a conflict of interest
between the Indemnified Party and the Surviving Corporation in the conduct of
the defense of an Action; or (c) the Surviving Corporation shall not in fact
have employed counsel to assume the defense of an Action, in each of which cases
the reasonable fees and expenses of counsel selected by the Indemnified Party
will be at the expense of the Surviving Corporation. Notwithstanding the
foregoing, under the Merger Agreement, the Surviving Corporation will not be
liable for any settlement effected without its written consent and the Surviving
Corporation will not be obligated pursuant to the Merger Agreement to pay the
fees and disbursements of more than one counsel for all Indemnified Parties in
any single Action, except to the extent two or more of such Indemnified Parties
have conflicting interests in the outcome of such Action. In the event of any
conflict between the provisions of the Indemnification Agreements and the Merger
Agreement, the Indemnification Agreement prevails.

The Merger Agreement further provides that, for a period of five years after
the Effective Time, MWHS will cause to be maintained officers' and directors'
liability insurance covering the Indemnified Parties who were covered on the
date of the Merger Agreement, in their capacities as officers and directors, by
Inmac's existing officers' and directors' liability insurance policies on terms
substantially no less advantageous to the Indemnified Parties than such existing
insurance, except that MWHS will not be required in order to maintain or procure
such coverage to pay premiums on an annualized basis in excess of 200% of the
current annual premium of $135,000 paid by Inmac for its existing coverage (the

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"Cap"); and except that if equivalent coverage cannot be obtained, or can be
obtained only by paying an annual premium in excess of the Cap, MWHS will only
be required to obtain as much coverage as can be obtained by paying premiums on
an annualized basis equal to the Cap.

Employee Benefits. The Merger Agreement provides that, notwithstanding
anything to the contrary contained therein, from and after the Effective Time,
the Surviving Corporation will have sole discretion over the hiring, promotion,
retention and firing of employees of the Surviving Corporation. Notwithstanding
the preceding sentence, the Merger Agreement provides that MWHS will (a)
satisfy, or cause the Surviving Corporation to satisfy, all obligations of Inmac
or any of its subsidiaries under any existing severance agreement between Inmac
or any of it subsidiaries and any of their officers or employees and (b) until
the expiration of one year after the Effective Time, satisfy, or cause the
Surviving Corporation to satisfy, all obligations of Inmac or its subsidiaries
under their current respective severance policies. Further, MWHS has agreed to
provide, or to cause the Surviving Corporation to provide, for the benefit of
employees of the Surviving Corporation who were employees of Inmac immediately
prior to the Effective Time, "employee benefit plans" within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974 ("ERISA")
(a) until the expiration of one year after the Effective Time that are, in the
aggregate, substantially comparable to the "employee benefit plans" provided to
such individuals by Inmac or any of its subsidiaries on the date of the Merger
Agreement and (b) thereafter that are, at the election of MWHS, either (i) in
the aggregate, substantially comparable to the "employee benefit plans" provided
to such individuals by Inmac or any of its subsidiaries on the date of the
Merger Agreement or (ii) in the aggregate, substantially comparable to the
"employee benefit plans" provided to similarly situated employees of MWHS or its
subsidiaries who were not employees of Inmac or any of its subsidiaries
immediately prior to the Effective Time; except that (x) nothing in the Merger
Agreement will be deemed to require MWHS to modify the benefit formulas under
any pension plan of Inmac or any of its subsidiaries in a manner that increases
the aggregate expenses thereof as of the date of the Merger Agreement in order
to comply with the requirements of ERISA or the Code; (y) employee stock
ownership, stock bonus, stock option, and similar equity-based plans, programs,
and arrangements of Inmac or any of its subsidiaries are not encompassed within
the meaning of the term "employee benefit plans" under such provisions of the
Merger Agreement; and (z) nothing in the Merger Agreement will obligate MWHS or
the Surviving Corporation to continue any particular employee benefit plan for
any period after the Effective Time.

Certain Other Covenants. Pursuant to the Merger Agreement, each of MWHS and
Inmac have agreed not to take any action that to their knowledge could
reasonably be expected to adversely affect MWHS's ability to treat the Merger as
a pooling of interests.

CONDITIONS

Conditions to Each Party's Obligation To Effect the Merger. Under the Merger
Agreement, the respective obligations of each party to effect the Merger will be
subject to the fulfillment of the following conditions: (a) the Merger Agreement
and the transactions contemplated thereby shall have been approved in the manner
required by applicable law by the holders of the issued and outstanding shares
of capital stock of Inmac; (b) the waiting period applicable to the consummation
of the Merger under the HSR Act shall have expired or been terminated; (c) none
of the parties to the Merger Agreement shall be subject to any order or
injunction of a court of competent jurisdiction which prohibits the consummation
of the transactions contemplated by the Merger Agreement (provided that in the
event any such order or injunction shall have been issued, each party has agreed
to use its reasonable best efforts to have any such injunction lifted); (d) the
Registration Statement shall have become effective and shall be effective at the
Effective Time, and no stop order suspending effectiveness of the Registration
Statement shall have been issued, no action, suit, proceeding, or investigation
by the SEC to suspend the effectiveness thereof shall have been initiated and be
continuing or, to the

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knowledge of MWHS or Inmac, be threatened in writing, and all necessary
approvals under state securities laws relating to the issuance or trading of
shares of MWHS Common Stock to be issued to Inmac stockholders in connection
with the Merger shall have been received; (e) all consents, authorizations,
orders, and approvals of (or filings or registrations with) any governmental or
regulatory authority required in connection with the execution, delivery, and
performance of the Merger Agreement shall have been obtained or made, except for
filings in connection with the Merger and any other documents required to be
filed after the Effective Time and except where the failure to have obtained or
made any such consent, authorization, order, approval, filing, or registration
would not have a material adverse effect on the business, financial condition,
or results of operations of the Surviving Corporation following the Effective
Time; (f) shares of MWHS Common Stock to be issued to Inmac stockholders in
connection with the Merger shall have been approved for listing on NASDAQ,
subject only to official notice of issuance; and (g) each of MWHS and Inmac
shall have received a letter dated as of the date of the Merger Agreement and
dated as of the Effective Time, from an independent public accountant to the
effect that the Merger will qualify for "pooling of interests" accounting
treatment under Accounting Principles Board Opinion No. 16 if consummated in
accordance with the Merger Agreement.

Conditions to Obligation of Inmac To Effect the Merger. Under the Merger
Agreement, the obligation of Inmac to effect the Merger will be subject to the
fulfillment of the following additional conditions: (a) the representations and
warranties of MWHS and Newco contained in the Merger Agreement shall have been
true and correct in all material respects as of the date of the Merger Agreement
and the representations and warranties of MWHS and Newco contained in the Merger
Agreement and in any document delivered in connection with the Merger Agreement
shall be true and correct in all material respects as of the Closing Date,
except (i) for changes specifically permitted by the Merger Agreement and (ii)
that those representations and warranties which address matters only as of a
particular date shall remain true and correct in all material respects as of
such date; (b) each of MWHS and Newco shall have performed or complied in all
material respects with all agreements and conditions contained in the Merger
Agreement required to be performed or complied with by it on or prior to the
Closing Date; (c) MWHS and Newco shall have delivered to Inmac a certificate,
dated the Closing Date, signed by the President or any Vice President of each of
MWHS and Newco, certifying as to the fulfillment of the conditions specified in
clauses (a) and (b) above; (d) from the date of the Merger Agreement through the
Effective Time, there shall not have occurred any material adverse change in the
business or properties of MWHS or its subsidiaries; (e) MWHS and Newco shall
have obtained all material consents, waivers, approvals, authorizations or
orders and made all filings in connection with the authorization, execution and
delivery of the Merger Agreement by MWHS and Newco and the consummation by each
of the transactions contemplated by the Merger Agreement; and (f) Inmac shall
have received an opinion of Wilson, Sonsini, Goodrich and Rosati, Professional
Corporation, satisfactory to Inmac, dated the Effective Time, to the effect that
the Merger will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code.

Conditions to Obligation of MWHS and Newco to Effect the Merger. Under the
Merger Agreement, the obligations of MWHS and Newco to effect the Merger will be
subject to the fulfillment of the following additional conditions: (a) the
representations and warranties of Inmac contained in the Merger Agreement shall
have been true and correct in all material respects as of the date of the Merger
Agreement and the representations and warranties of Inmac contained in the
Merger Agreement and in any document delivered in connection with the Merger
Agreement shall be true and correct in all material respects as of the Closing
Date, except (i) for changes specifically permitted by the Merger Agreement and
(ii) that those representations and warranties which address matters only as of
a particular date will remain true and correct in all material respects as of
such date; (b) Inmac shall have performed or complied in all material respects
with all agreements and conditions contained in the Merger Agreement required to
be performed or complied with by it on or prior to the Closing Date; (c) Inmac
shall have delivered to MWHS and Newco a certificate, dated the Closing Date,
signed by

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the President or any Vice President of Inmac, certifying as to the fulfillment
of the conditions specified in clauses (a) and (b) above; (d) from the date of
the Merger Agreement through the Effective Time, there shall not have occurred
any material adverse change in the business or properties of Inmac or any of its
subsidiaries in the United Kingdom, France or Germany; (e) Inmac shall have
obtained all consents, waivers, approvals, authorization or orders and made all
filings in connection with the authorization, execution and delivery of the
Merger Agreement by Inmac and the consummation of each of the transactions
contemplated by the Merger Agreement; (f) Inmac or the Board of Directors of
Inmac shall have taken certain specified actions with respect to the Inmac
Warrants, benefits under Inmac's compensation plans, options issued pursuant to
Inmac's stock plans and the bank accounts of Inmac's subsidiary in the United
Kingdom; (g) the Stock Agreement shall have remained in full force and effect
through the Effective Time; (h) Inmac shall have received an opinion of Wilson,
Sonsini, Goodrich and Rosati, Professional Corporation, satisfactory to MWHS,
dated the Effective Time, to the effect that the Merger will be treated for
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Code.

TERMINATION

Termination by Mutual Consent. The Merger Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the adoption of the Merger Agreement by the stockholders of Inmac, by the
mutual consent of MWHS and Inmac.

Termination by Either MWHS or Inmac. The Merger Agreement may be terminated
and the Merger may be abandoned by action of the Board of Directors of either
MWHS or Inmac if (a) the Merger shall not have been consummated by March 31,
1996, which date will be automatically extended by that amount of time that is
reasonably required by the SEC or other governmental entities (whether domestic
or foreign) to review filings, which date will be no later than April 30, 1996;
subject to further extension as necessary to allow 30 days to pass from the date
Inmac receives an Alternative Proposal (the "Outside Date"), (b) the approval of
Inmac's stockholders required by the Merger Agreement is not obtained at the
Special Meeting or at any adjournment thereof or by written consent, 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 issues an order, decree, or ruling or takes any other action
permanently restraining, enjoining, or otherwise prohibiting the transactions
contemplated by the Merger Agreement and such order, decree, ruling, or other
action becomes final and non-appealable; provided that the party seeking to
terminate the Merger Agreement has used all reasonable efforts to remove such
injunction, order, or decree; and provided, in the case of a termination
pursuant to the foregoing, that the terminating party has not breached the
Merger Agreement in any manner that proximately contributes to the failure to
consummate the Merger by the Outside Date.

Termination by Inmac. The Merger Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, before or after the
adoption of the Merger Agreement by the stockholders of Inmac, by action of the
Board of Directors of Inmac, if (a) there has been a breach by MWHS or Newco of
any representation or warranty contained in the Merger Agreement which is not
curable or, if curable, is not cured by the Outside Date and such breach had or
is reasonably likely to have a material adverse effect on the business, results
of operations, or financial condition of MWHS and its subsidiaries taken as a
whole, (b) there has been a material breach of any of the covenants set forth in
the Merger Agreement on the part of MWHS, which breach is not curable or, if
curable, is not cured within 30 calendar days after written notice of such
breach is given by Inmac to MWHS, provided, that such 30 day period shall be
extended for so long as MWHS shall be making all reasonable attempts to cure
such breach, (c) an involuntary case under the United States Bankruptcy Code or
any applicable bankruptcy, insolvency or other similar law is commenced against
MWHS or any of its subsidiaries, a decree or order of a court of competent
jurisdiction for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar

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powers of MWHS or any of its subsidiaries or over their respective assets shall
have been entered or the involuntary appointment of an interim receiver, trustee
or other custodian of MWHS or any of its subsidiaries shall have occurred and
any such event described in this clause (c) shall have continued for 30 days or
(d) MWHS or any of its subsidiaries has an order for relief entered with respect
to it or commenced a voluntary case under the United States Bankruptcy Code or
any applicable bankruptcy, insolvency or other similar law, or consents to the
entry of an order for relief in an involuntary case, to the conversion of an
involuntary case to a voluntary case or to the appointment of or taking
possession by a receiver, trustee or other custodian of any part of MWHS's
property, or makes any assignment for the benefit of creditors.

Termination by MWHS and Newco. The Merger Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the adoption of the Merger Agreement by the stockholders of Inmac, by
action of the Board of Directors of MWHS, if (a) the Board of Directors of Inmac
shall have withdrawn or modified in a manner materially adverse to MWHS or Newco
its approval or recommendation of the Merger Agreement or the Merger or shall
have recommended an Alternative Proposal to Inmac's stockholders, (b) there has
been a material breach by Inmac of any representation or warranty contained in
the Merger Agreement which is not curable or, if curable, is not cured by the
Outside Date and such breach had or is reasonably likely to have a Inmac
Material Adverse Effect, (c) there has been a material breach of any of the
covenants set forth in the Merger Agreement on the part of Inmac, which breach
is not curable or, if curable, is not cured within 30 days after written notice
of such breach is given by MWHS to Inmac, provided, that such 30 day period
shall be extended for so long as Inmac shall be making all reasonable attempts
to cure such breach, (d) there has been a material breach by the Stockholders of
the Stock Agreement, (e) an involuntary case under the United States Bankruptcy
Code or any applicable bankruptcy, insolvency, or other similar law is commenced
against Inmac or any of its subsidiaries, a decree or order of a court of
competent jurisdiction for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian, or other officer having similar powers of
Inmac or any of its subsidiaries or over their respective assets shall have been
entered or the involuntary appointment of an interim receiver, trustee, or other
custodian of Inmac or any of its subsidiaries shall have occurred and any such
event described in this clause (e) shall have continued for 30 days, or (f)
Inmac or any of its subsidiaries has an order for relief entered with respect to
it or commences a voluntary case under the United States Bankruptcy Code or any
applicable bankruptcy, insolvency, or other similar law, or consents to the
entry of an order for relief in an involuntary case, to the conversion of an
involuntary case to a voluntary case or to the appointment of or taking
possession by a receiver, trustee, or other custodian of any part of Inmac's
property, or makes any assignment for the benefit of creditors.

Effect of Termination and Abandonment. In the event of termination of the
Merger Agreement and the abandonment of the Merger, all obligations of the
parties will terminate, except the obligations of the parties with respect to
expenses and certain other specified matters. In the event of termination of the
Merger Agreement other than by mutual consent, nothing in the Merger Agreement
will prejudice the ability of the non-breaching party from seeking damages from
any other party for any willful breach of the Merger Agreement, including
without limitation attorneys' fees and the right to pursue any remedy at law or
in equity.

Fees and Expenses. The Merger Agreement provides that, whether or not the
Merger is consummated, all fees and expenses incurred in connection with the
Merger, the Merger Agreement, the Stock Agreement and the transactions
contemplated by the Merger Agreement and the Stock Agreement will be paid by the
party incurring such fees or expenses, except as otherwise expressly provided in
the Merger Agreement and except that (a) the filing fee in connection with the
HSR Act filing, (b) the filing fee in connection with the filing of the
Registration Statement or this Proxy Statement/Prospectus with the SEC, (c)
governmental filing fees, and (d) the expenses incurred in connection with
printing and mailing this Proxy Statement/Prospectus and the Registration
Statement will be shared equally by MWHS and Inmac.

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The Merger Agreement further provides that Inmac will pay to MWHS upon
demand a fee (a "Termination Fee") in an amount equal to $1,480,677, plus all
fees and expenses up to $2,000,000, reasonably incurred or paid by or on behalf
of MWHS or any of its affiliates in connection with the Merger or the
consummation of any of the transactions contemplated by the Merger Agreement or
the Stock Agreement ("MWHS Expenses"), promptly, but in no event later than two
business days, if (a) the conditions described under the caption
"--Conditions--Conditions to Obligation of MWHS and Newco to Effect the Merger"
are not satisfied (other than as a result of a willful and material breach of
the Merger Agreement by MWHS or Newco, which breach shall not have been cured
within five business days following MWHS's receipt of written notice of such
breach from Inmac), (b) Inmac breaches the Merger Agreement, or (c) the
requisite approval of Inmac's stockholders for the Merger is not obtained at the
Special Meeting, at any adjournment thereof or by written consent, and there is
no Alternative Proposal.

Under the Merger Agreement, MWHS or Newco will pay to Inmac upon demand a
Termination Fee in an amount equal to $1,480,677, plus all fees and expenses up
to $2,000,000 reasonably incurred by or on behalf of Inmac or any of its
affiliates in connection with the Merger or the consummation of any of the
transactions contemplated by the Merger Agreement or the Stock Agreement,
promptly, but in no event later than two business days, if (a) the conditions
described under the caption "--Conditions--Conditions to Obligation of Inmac to
Effect the Merger" are not satisfied (other than as a result of a willful and
material breach of the Merger Agreement by Inmac, which breach shall not have
been cured within five business days following Inmac's receipt of written notice
of such breach from MWHS or Newco) or (b) MWHS or Newco breaches the Merger
Agreement.

In addition, the Merger Agreement provides that Inmac will pay to MWHS upon
demand a Termination Fee in an amount equal to $4,442,032 plus all MWHS
Expenses, promptly, but in no event later than two business days, if (a) the
requisite approval of Inmac's stockholders for the Merger is not obtained at the
Special Meeting, at any adjournment thereof or by written consent and there is
any Alternative Proposal, (b) the Special Meeting does not occur prior to the
Outside Date and there is any Alternative Proposal, (c) Inmac's Board of
Directors shall have withdrawn or materially modified its approval or
recommendation of the Merger Agreement other than due to the occurrence of a
material adverse effect on the business, assets, results of operations or
financial condition of MWHS and its subsidiaries taken as a whole and MWHS or
Newco terminates the Merger Agreement, or (d) Inmac engages in a competing
transaction, defined as entering into a letter of intent or a definitive
agreement with respect to an Alternative Proposal or a tender or exchange offer
for 25% or more of the shares of any capital stock of Inmac, within six months
following the earlier of (i) termination of the Merger Agreement, (ii) the date,
if any, that the Stockholders of Inmac fail to approve the Merger and (iii) the
date, if any, that the Board of Directors of Inmac withdraws or materially
modifies its approval or recommendation of the Merger Agreement.

THE OPTION

Effect of Exercise of Option. The Merger Agreement provides that, in the
event that MWHS purchases shares of Inmac Common Stock upon exercise of the
Option, if requested by MWHS, Inmac will, promptly following the purchase of
shares of Inmac Common Stock upon exercise of the Option and from time to time
thereafter, take all action which can be taken by Inmac to cause a number of
directors of Inmac proportionate to the amount of Inmac Common Stock owned by
MWHS to be persons designated by MWHS (whether, at the request of MWHS, by
increasing the number of directors of Inmac, or by seeking the resignation of
directors and causing MWHS's designees to be elected to fill the vacancies so
created). See "The Stock Agreement." Under the Merger Agreement, Inmac has
agreed that, at such time, it will also take all action permitted by law to
cause persons designated by MWHS to constitute at least the same percentage as
is on Inmac's Board of Directors to be on each committee of Inmac's Board of
Directors. Under the Merger Agreement, notwithstanding

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the foregoing, until the Effective Time, Inmac will use all reasonable efforts
to assure that Inmac's Board of Directors has at least three directors who were
directors on the date of the Merger Agreement (the "Continuing Directors") and
to assure that the Continuing Directors represent a majority of Inmac's
directors and further, if the number of Continuing Directors is reduced below
three for any reason whatsoever, any remaining Continuing Directors (or
Continuing Director, if there is only one remaining) will be entitled to
designate three persons to fill such vacancies who will be deemed to be
Continuing Directors for purposes of the Merger Agreement or, if no Continuing
Director then remains, the other directors will designate three persons to fill
such vacancies who are not stockholders, affiliates, or associates of MWHS and
such persons will be deemed to be Continuing Directors for purposes of the
Merger Agreement. Inmac will use all reasonable efforts to cause the person(s)
so designated by the Continuing Directors to be elected to the Board of
Directors of Inmac.

The Merger Agreement further provides that, in the event that MWHS purchases
shares of Inmac Common Stock upon exercise of the Option: (a) notwithstanding
any other provision contained in the Merger Agreement to the contrary, from and
after the date of the closing of the exercise of the Option, the obligations of
MWHS and Newco to effect the Merger will be subject only to the fulfillment at
or prior to the Closing Date of the conditions described in clauses (a), (c),
and (d) under the caption "-- Conditions--Conditions to Each Party's Obligation
to Effect the Merger" and all other conditions to the obligations of MWHS and
Newco to effect the Merger on the terms and conditions of the Merger Agreement
as in effect immediately prior to the exercise of the Option will be deemed
satisfied or waived and the conditions to the obligations of Inmac to effect the
Merger in clause (g) under the caption "--Conditions--Conditions to Each Party's
Obligation to Effect the Merger" and clause (f) under the caption
"--Conditions--Conditions to Obligation of Inmac to Effect the Merger" will be
deemed waived; (b) notwithstanding any other provision contained in the Merger
Agreement to the contrary, from and after the date of the closing of such
purchase of shares of Inmac Common Stock, MWHS and Newco will not be entitled to
terminate the Merger Agreement or abandon the Merger unless a United States
federal or state court of competent jurisdiction or United States federal or
state governmental, regulatory, or administrative agency or commission issues an
order, decree, or ruling or takes any other action permanently restraining,
enjoining, or otherwise prohibiting the transactions contemplated by the Merger
Agreement and such order, decree, ruling, or other action becomes final and
non-appealable; and (c) any action by Inmac to waive or amend any provision of
the Merger Agreement will require the approval of a majority of the Continuing
Directors.

AFFILIATE LETTERS

The shares of MWHS Common Stock to be issued to Inmac stockholders in
connection with the Merger will be freely transferable under the Securities Act,
except for shares of MWHS Common Stock issued to any person deemed to be an
affiliate of Inmac for purposes of Rule 145 under the Securities Act at the
Record Date ("Affiliates"). Affiliates may not sell their shares of MWHS Common
Stock acquired in connection with the Merger except pursuant to an effective
registration statement under the Securities Act covering such shares, or in
compliance with Rule 145 promulgated under the Securities Act or another
applicable exemption from the registration requirements of the Securities Act.
Further, in connection with accounting for the Merger as a pooling transaction,
Affiliates may not make certain dispositions of Inmac or MWHS Common Stock.
Pursuant to the Merger Agreement, Inmac has agreed that promptly after it sets
the Record Date, Inmac will deliver to MWHS a list of names and addresses of
those persons who were, in Inmac's reasonable judgment, at the Record Date,
Affiliates of Inmac. Inmac has further agreed to use all reasonable efforts to
deliver or cause to be delivered to MWHS, prior to the Closing Date, from each
of the Affiliates of Inmac identified in the foregoing list, a letter which will
include, among other things, an agreement of such Affiliate to the effect that
(a) such Affiliate will not sell, transfer or otherwise dispose of any shares of
MWHS Common Stock received in the Merger in violation of the Securities Act; (b)
such Affiliate did not within 30 days prior to the Effective Time, sell,
transfer or otherwise dispose of any shares of the

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capital stock of Inmac or MWHS (as the case may be) held by the Affiliate,
except for (i) transfers or other dispositions of a number of securities of
Inmac less than 10% of the sum of (x) the number of securities of Inmac held by
such Affiliate and (y) the number of securities of Inmac subject to exercisable
options held by such Affiliate, (ii) transfers or other dispositions by
operation of law upon the death of such Affiliate or by his estate if necessary
to pay estate taxes or (iii) other transfers or dispositions that will not
prevent MWHS from accounting for the Merger as a pooling of interests, taking
into account the actions of other Affiliates; and (c) such Affiliate will not
sell, transfer or otherwise dispose of, or reduce his risk relative to any
shares of the capital stock of MWHS until after such time as results covering at
least 30 days of combined operations of MWHS and Inmac have been published by
MWHS within the meaning of Section 201.01 of the SEC's Codification of Financial
Reporting Policies.

Under the Merger Agreement, MWHS has agreed that promptly after Inmac sets
the Record Date for the Special Meeting, MWHS will deliver to Inmac a list of
names and addresses of those persons who were, in MWHS's reasonable judgment, at
the Record Date, Affiliates of MWHS. MWHS will use all reasonable efforts to
deliver or cause to be delivered to Inmac, prior to the Closing Date, from each
of the Affiliates of MWHS identified in the foregoing list a letter which will
include an agreement of such Affiliate to the effect of the agreement contained
in clause (b) of the preceding paragraph for purposes of the accounting
treatment of the Merger.

MISCELLANEOUS

Amendment. The Merger Agreement may be amended by the parties thereto, by
action taken by their respective Boards of Directors, at any time before or
after approval of the Merger Agreement by the stockholders of Inmac but, after
any such stockholder approval, no amendment will be made which by law requires
the further approval of such stockholders without obtaining such further
approval.

Delaware Law. The Board of Directors of Inmac has approved the Merger, the
Merger Agreement, the transactions contemplated by the Merger Agreement, and the
grant of the Option and the purchase of shares of Inmac Common Stock pursuant
thereto (collectively, the "Stock Agreement Transactions"), with the result that
the restrictions of Section 203 of the DGCL are inapplicable to the Merger, the
Merger Agreement, the transactions contemplated by the Merger Agreement, and the
Stock Agreement Transactions and to any subsequent transaction between MWHS and
Inmac.

Section 203 of the DGCL prevents an "interested stockholder" (generally, a
stockholder owning 15% or more of a corporation's outstanding voting stock or an
affiliate or associate thereof) from engaging in a "business combination"
(defined to include a merger and certain other transactions) with a Delaware
corporation for a period of three years following the date on which such
stockholder became an interested stockholder unless (a) prior to such date, the
corporation's board of directors approved either the business combination or the
transaction which resulted in such stockholder becoming an interested
stockholder, (b) upon consummation of the transaction which resulted in such
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the corporation's voting stock outstanding at the time the
transaction commenced (excluding shares owned by certain employee stock plans
and persons who are directors and also officers of the corporation), or (c) on
or subsequent to such date the business combination is approved by the
corporation's board of directors and authorized at an annual or special meeting
of stockholders by the affirmative vote of the holders of at least two-thirds of
the outstanding voting stock not owned by the interested stockholder.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following is a general summary of certain U.S. federal income tax
consequences of the Merger that are generally applicable to the holders of Inmac
Common Stock and is based upon current provisions of the Code, regulations
proposed and promulgated thereunder, and applicable rulings and

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decisions, as currently in effect, all of which are subject to change, possibly
with retroactive effect. This summary is based on the opinion of Wilson,
Sonsini, Goodrich & Rosati, Professional Corporation, counsel to Inmac, that the
Merger will be treated as a "reorganization" within the meaning of Section
368(a) of the Code. No ruling from the IRS has been or will be sought concerning
any federal income tax consequences of the Merger. An opinion of counsel is not
binding upon the IRS or any other taxing authority.

The tax discussion below is intended for general information only. It is not
intended to be, nor should it be construed to be, legal or tax advice to any
particular holder of Inmac Common Stock. It does not address any aspect of
state, local, or foreign taxation and does not discuss all of the tax
consequences that may be relevant to particular Inmac stockholders in light of
their personal investment circumstances, or to certain types of stockholders
that may be subject to special tax rules, such as financial institutions,
tax-exempt organizations, insurance companies, dealers in securities, foreign
persons, and individuals who acquired Inmac shares or options in connection with
stock option plans or in other compensatory transactions. HOLDERS OF INMAC
COMMON STOCK ARE ADVISED TO CONSULT WITH THEIR OWN LEGAL AND TAX ADVISORS
REGARDING THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER IN LIGHT OF
THEIR PARTICULAR CIRCUMSTANCES, AND ANY OTHER CONSEQUENCES TO THEM OF THE
MERGER UNDER STATE, LOCAL, AND FOREIGN TAX LAWS.

Qualification as a Reorganization. Although it is generally anticipated that
the Merger will qualify as a reorganization within the meaning of Section 368(a)
of the Code, whether or not it will so qualify will depend upon whether a number
of requirements are satisfied, including the following: (a) following the
Merger, the Surviving Corporation must hold substantially all of the assets held
by Newco and Inmac prior to the Merger; (b) the holders of Inmac capital stock
must maintain a substantial continuing ownership interest in the capital stock
they receive in the Merger; and (c) the Surviving Corporation must continue
Inmac's historic business or use a significant portion of Inmac's historic
business assets in a business following the Merger. If any of these requirements
is not satisfied, the Merger may fail to qualify as a reorganization within the
meaning of the Code.

Consequences to Holders of Inmac Common Stock. If the Merger qualifies as a
reorganization as described above, holders of Inmac Common Stock generally would
recognize no taxable gain or loss upon the Merger, except to the extent that
such holders receive cash payments in lieu of fractional shares of MWHS Common
Stock. Such cash payments generally would be treated as if the holders had
received such fractional shares and had them redeemed for the cash payments,
giving rise to recognized gain or loss for tax purposes. Such gain or loss
generally would be capital gain or loss, provided that the Inmac Common Stock
was held as a capital asset at the Effective Time, and would be long-term
capital gain or loss if the Inmac Common Stock had been held for more than one
year at the Effective Time. The aggregate tax basis of the MWHS Common Stock
(including fractional share interests) received by a holder of Inmac Common
Stock in the Merger would be the same as the aggregate tax basis of the holder's
Inmac Common Stock exchanged therefor. The holding period of the MWHS Common
Stock received by a holder of Inmac Common Stock in the Merger would include the
holding period of the Inmac Common Stock surrendered in exchange therefor,
provided that the Inmac Common Stock so surrendered was held as a capital asset
at the Effective Time.

If the Merger is determined not to qualify as a reorganization as described
above, holders of Inmac Common Stock would recognize gain or loss upon the
conversion of their Inmac Common Stock into MWHS Common Stock, equal to the
difference between the fair market value of the MWHS Common Stock and their
basis in the Inmac Common Stock at the Effective Time. As in the case of cash
received in lieu of fractional shares as described above, the gain or loss would
be capital gain or loss, and long-term capital gain or loss, if the Inmac Common
Stock were held as a capital asset, and had been held for more than one year at
the Effective Time. The basis of the MWHS Common Stock received in the Merger
would be its fair market value as of the Effective Time, and the holder's
holding period for the MWHS Common Stock would begin the day after the Merger.

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INTERESTS OF CERTAIN PERSONS IN THE MERGER

Inmac has entered into executive severance agreements with Jeffrey Heimbuck,
its President and Chief Executive Officer, Bennet Goldberg, its Executive Vice
President, Worldwide Marketing, and Margo Hart, its Vice President, Human
Resources, dated as of November 17, 1994, August 11, 1994 and September 9, 1994,
respectively, which provide that all options to purchase Inmac's Common Stock
held by such persons will automatically become fully vested upon a change of
control of Inmac. Consistent with these provisions, all options held by such
persons will become fully vested as a result of the Merger. As of the date of
the Merger Agreement (November 30, 1995), Mr. Heimbuck, Mr. Goldberg and Ms.
Hart held the following numbers of shares subject to unvested stock options at
the following weighted average exercise prices: 213,961 shares at a weighted
average exercise price of $3.53, 124,377 shares at a weighted average exercise
price of $5.74 and 43,125 shares at a weighted average exercise price of $5.37,
respectively. Pursuant to such executive severance agreements, each of these
persons will also receive certain payments upon termination of employment. If
Mr. Heimbuck's employment is terminated for any reason (including voluntary
resignation) other than cause, then Inmac will pay Mr. Heimbuck his monthly base
compensation for 24 months and all benefits for 36 months following the date of
termination of his employment. Inmac will also pay Mr. Heimbuck on the date of
the termination of his employment a prorated portion of his bonus under Inmac's
annual bonus plan based on Inmac's performance through the last quarter prior to
the date of termination. Furthermore, upon any change of control, this same
prorated portion of his bonus under Inmac's annual bonus plan will be paid upon
the change of control based on Inmac's performance through the last quarter
prior to the change of control. If Mr. Goldberg's employment is involuntarily
terminated without cause, Inmac will pay Mr. Goldberg his monthly base
compensation and all benefits until the earlier to occur of (a) his reemployment
in any position or (b) the expiration of 12 months following the date of
termination of his employment. If Ms. Hart's employment is involuntarily
terminated without cause, Inmac will pay Ms. Hart her monthly base compensation
and all benefits until the earlier to occur of (a) her reemployment in any
position or (b) the expiration of nine months following the date of termination
of her employment.

Inmac has entered into an executive severance agreement with Kenneth Eldred,
its Chairman of the Board of Directors, dated as of November 17, 1994, providing
that if Mr. Eldred's employment is terminated for any reason (including
voluntary resignation) other than cause, then Inmac will pay Mr. Eldred his
monthly base compensation for 12 months and all benefits for 24 months following
the date of termination of his employment. Inmac will also pay Mr. Eldred on the
date of the termination of his employment a prorated portion of his bonus under
Inmac's annual bonus plan based on Inmac's performance through the last quarter
prior to the date of termination. Furthermore, upon any change of control, this
same prorated portion of his bonus under Inmac's annual bonus plan will be paid
upon the change of control based on Inmac's performance through the last quarter
prior to the change of control.

Inmac has entered into an agreement with Raymond Nystrom, its Vice
President, Finance and Chief Financial Officer, which provides that upon a
change of control Inmac will pay Mr. Nystrom $60,000 and, if Mr. Nystrom's
employment is involuntarily terminated without cause, Inmac will pay Mr. Nystrom
his monthly base compensation and all benefits until the earlier to occur of (a)
his reemployment in any position or (b) the expiration of 12 months following
the date of termination of his employment. Inmac will also pay Mr. Nystrom on
the date of the termination of his employment a prorated portion of his bonus
under Inmac's annual bonus plan based on Inmac's performance through the last
quarter prior to the date of termination.

Pursuant to the Merger Agreement, MWHS agreed to cause the Surviving
Corporation to indemnify officers and directors of Inmac (and persons who were
officers and directors of Inmac for up to six months prior to the date of the
Merger Agreement) (collectively, the "Indemnified Parties") for acting in their
capacity as such to the full extent such persons are entitled to indemnification
pursuant to Inmac's certificate of incorporation, bylaws and indemnification
agreements with such persons, and

36
<PAGE>
applicable law. The Merger Agreement further provides that, for a period of five
years after the Effective Time, MWHS will cause to be maintained officers' and
directors' liability insurance covering the Indemnified Parties who were covered
on the date of the Merger Agreement, in their capacities as officers and
directors, by Inmac's existing officers' and directors' liability insurance
policies on terms substantially no less advantageous to the Indemnified Parties
than such existing insurance, except that MWHS will not be required in order to
maintain or procure such coverage to pay premiums on an annualized basis in
excess of 200% of the current annual premium of $135,000 paid by Inmac for its
existing coverage (the "Cap"); and except that if equivalent coverage cannot be
obtained, or can be obtained only by paying an annual premium in excess of the
Cap, MWHS will only be required to obtain as much coverage as can be obtained by
paying premiums on an annualized basis equal to the Cap. See "The Merger--The
Merger Agreement--Covenants--Director and Officer Indemnification and
Insurance."

As a condition to its willingness to enter into the Merger Agreement, MWHS
required that, simultaneously with the execution thereof, Mr. Eldred and his
wife, as trustees on behalf of the Stockholders, enter into the Stock Agreement,
pursuant to which, among other things, the Stockholders agreed to vote all of
the shares of Inmac Common Stock owned by the Stockholders in favor of the
adoption of the Merger Agreement and granted to MWHS the right to purchase such
shares at the Conversion Rate. See "The Stock Agreement."

REGULATORY APPROVALS

HSR Act. MWHS and Inmac must observe the notification and waiting period
requirements of the HSR Act before the Merger or the purchase of shares of Inmac
Common Stock pursuant to the Option may be consummated. The HSR Act provides for
an initial 30-calendar day waiting period following the filing with the FTC and
the Antitrust Division of certain Notification and Report Forms by the parties
to the Merger and certain other parties. The HSR Act further provides that if,
within the initial 30-calendar day waiting period, the FTC or the Antitrust
Division issues a request for additional information or documents, the waiting
period will be extended until 11:59 p.m. on the twentieth day after the date of
substantial compliance by the filing parties with such request. Only one such
extension of the initial waiting period is permitted under the HSR Act; however,
the filing parties may voluntarily extend the waiting period.

MWHS and Inmac have made the requisite initial filings under the HSR Act in
connection with the Merger and the Stock Agreement, and the initial waiting
periods with respect to such filings were terminated early on December 19, 1995.

The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the Merger. At any time before or
after the Effective Time, the FTC or the Antitrust Division could, among other
things, seek under the antitrust laws to enjoin the Merger or to cause MWHS to
divest itself, in whole or in part, of Inmac or of other business conducted by
MWHS. Under certain circumstances, private parties and state governmental
authorities may also bring legal action under the antitrust laws challenging the
Merger. See "The Merger--The Merger Agreement-- Conditions."

Foreign Filings. MWHS has advised the United Kingdom Office of Fair Trading
(the "OFT") of the proposed merger by means of an informal submission. Pursuant
to the Fair Trading Act of 1973, if the OFT concludes that the merger raises
significant competition or other public interest issues, it may refer the merger
to the United Kingdom Mergers and Monopolies Commission for further
investigation. Although there is no set timetable in which the OFT must respond
to the submission, a decision as to whether or not there will be a merger
reference can generally be expected within 45 business days from the time the
OFT receives the requisite information regarding the Merger. Any necessary
notifications

37
<PAGE>
subsequent to the Merger will be made to the appropriate regulatory authorities
in Germany, Sweden and Canada.

APPRAISAL RIGHTS

Under Delaware law, appraisal rights are unavailable to holders of Inmac
Common Stock because the Inmac Common Stock was, on the record date, listed on
NASDAQ, and will be converted into MWHS Common Stock, which on the effective
date of the Merger will be listed on NASDAQ.

ACCOUNTING TREATMENT

The Merger is intended to be treated as a pooling of interests in accordance
with generally accepted accounting principles. Consummation of the Merger is
conditioned upon receipt by MWHS and Inmac of a letter from an independent
accountant regarding its concurrence with MWHS management's and Inmac
management's conclusions, respectively, as to the appropriateness of pooling of
interests accounting for the Merger under Accounting Principles Board Opinion
No. 16, if closed and consummated in accordance with the Merger Agreement.

THE STOCK AGREEMENT

General. As a condition to its willingness to enter into the Merger
Agreement, MWHS required that, simultaneously with the execution thereof, the
Stockholders enter into the Stock Agreement.

The Option. Pursuant to the Stock Agreement, the Stockholders have granted
to MWHS the Option to purchase, on the terms and subject to the conditions set
forth therein, all of the 2,754,235 shares of Inmac Common Stock owned by the
Stockholders, on the date of the Stock Agreement (the "Owned Shares"), together
with (a) any additional shares of capital stock of Inmac which such Stockholder
is or becomes entitled to receive from Inmac by reason of being a record holder
of the Owned Shares, (b) any securities or other property into which any such
Owned Shares shall have been or shall be converted or changed (other than shares
of MWHS Common Stock), whether by amendment to the certificate of incorporation
of Inmac, merger, consolidation, reorganization, capital change, or otherwise,
(c) any additional shares of Inmac Common Stock acquired by such Stockholder as
the result of such Stockholder exercising an option, warrant, or other right to
acquire shares of capital stock from Inmac (all of the foregoing hereinafter
collectively referred to as the "Additional Owned Shares"), and (d) any shares
of capital stock referred to in clauses (a), (b), and (c) above that are issued
or issuable in respect of Additional Owned Shares (the Owned Shares, the
Additional Owned Shares, and any securities referred to in clause (d) above
hereinafter collectively referred to as the "Option Shares").

Under the Stock Agreement, subject to the conditions described below, the
Option may be exercised in whole but not in part by notice given by MWHS to each
Stockholder on or subsequent to the date of receipt of an Alternative Proposal
(as defined in the Merger Agreement) by Inmac or its stockholders and at any
time prior to the termination of the Stock Agreement as described below under
the caption "--Termination." Pursuant to the Merger Agreement, the total price
payable to a Stockholder upon exercise of the Option will be the number of
shares of MWHS Common Stock equal to the product of (a) the Conversion Rate and
(b) the number of Option Shares to be purchased upon such exercise; except that
if any additional shares of capital stock of Inmac or any of its subsidiaries
other than those described in the Merger Agreement are issued by Inmac or any of
its subsidiaries or any of their respective successors (the "Excess Shares"),
the total number of shares of MWHS Common Stock payable to such Stockholder for
all of the Option Shares, including any Excess Shares owned beneficially or of
record by such Stockholder, will be the number of shares of MWHS Common

38
<PAGE>
Stock equal to the product of (i) the Conversion Rate and (ii) the total number
of Option Shares, less the total number of Excess Shares, owned beneficially by
such Stockholder.

The Stock Agreement further provides that in the event that (a) the Option
has been exercised, (b) the Merger has not been consummated, (c) within one year
after the exercise of the Option MWHS sells the Option Shares to, or Inmac
enters into an agreement providing for a merger, consolidation or transaction
involving any purchase of all or any significant portion of the assets or equity
interests of Inmac (the events referred to in this clause (c) are hereinafter
referred to as a "Transaction"), with, a third party (other than an affiliate of
MWHS), and (d) the Transaction closes within one year thereafter, MWHS will
notify each Stockholder, within two business days of such event, of the receipt
of proceeds paid to MWHS in a Transaction with respect to the Option Shares, and
MWHS will pay to the Stockholders within five business days after its receipt of
such proceeds, an amount in cash or in kind (in accordance with the
consideration paid in the Transaction) equal to one-half of the excess (if any)
of (i) the total consideration received by MWHS or its affiliates with respect
to the Option Shares upon the closing of a Transaction over (ii) the total
consideration received by the Stockholders pursuant to the Stock Agreement upon
exercise of the Option. In addition, in the event that (a) the Option has been
exercised, (b) the Merger is consummated, and (c) MWHS has increased the price
per share reflected in the numerator of the Conversion Rate (the "New Conversion
Rate"), MWHS will issue to the Stockholders contemporaneously with the issuance
of shares pursuant to the Merger Agreement, a number of shares of MWHS Common
Stock equal to one-half of the excess of (i) shares of MWHS Common Stock
calculated using the New Conversation Rate over (ii) the shares of MWHS Common
Stock calculated using the Conversion Rate applicable to the Stockholders upon
exercise of the Option.

The obligations of MWHS and each of the Stockholders to consummate the
purchase and sale of the Option Shares pursuant to the Stock Agreement will be
subject to the fulfillment of the following conditions: (a) the expiration or
termination of the waiting period applicable to the consummation of such
transactions under the HSR Act and (b) none of the parties thereto being subject
to any order of injunction of a court of competent jurisdiction which prohibits
the consummation of such transactions.

Voting of Shares. Pursuant to the Stock Agreement, each of the Stockholders
has agreed that it will, with respect to (a) all Owned Shares and (b) any other
Option Shares that it owns beneficially on the Record Date, vote or cause to be
voted such Option Shares (i) in favor of the adoption of the Merger Agreement
and approval of the Merger and the other transactions contemplated by the Merger
Agreement, (ii) against any Alternative Proposal, and (iii) in favor of any
other matter necessary for the consummation of the transactions contemplated by
the Merger Agreement and considered and voted upon at the Special Meeting.

No Solicitation. Pursuant to the Stock Agreement, each of the Stockholders
has agreed that, prior to the Effective Time (a) neither of the Stockholders
will, and will cause its agents or representatives not to, initiate, solicit, or
encourage, directly or indirectly, any inquiries or the making or implementation
of any 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 otherwise facilitate any effort
or attempt to make or implement an Alternative Proposal, and (b) the
Stockholders will notify MWHS orally and in writing 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.

Agreement with Respect to Shares of MWHS Common Stock. The Stock Agreement
provides that, prior to the Effective Time or, if earlier, the termination of
the Merger Agreement in accordance with its terms, neither of the Stockholders
will directly or indirectly, through any affiliate or associate, sell, assign,
transfer, pledge, or otherwise dispose of or acquire, or enter into any put,
call, or other contract, option, or other arrangement or undertaking with
respect to the direct or indirect acquisition or sale, assignment, or other
disposition of any shares of MWHS Common Stock.

39
<PAGE>
Registration Rights. The Stock Agreement provides that as promptly as
practicable after the exercise of the Option, MWHS shall file, and thereafter
use its reasonable best efforts to cause to become and to remain effective, for
so long as either of the Stockholders may not resell free of restrictions
without registration under the Securities Act the shares of MWHS Common Stock,
if any, delivered to the Stockholders upon exercise of the Option (the
"Registrable Stock"), a registration statement (the "Stockholders Registration
Statement") registering the resale by each of the Stockholders of the
Registrable Stock; provided, however, that MWHS shall in no event be required to
cause such Stockholders Registration Statement to remain in effect beyond the
second anniversary of the date of exercise of the Option and the Stockholders
will promptly notify MWHS when all shares subject to such registration shall
have been earlier sold or otherwise disposed of by the Stockholders. MWHS has
further agreed that for so long as MWHS is required to cause such Stockholders
Registration Statement to remain in effect, MWHS shall use its reasonable best
efforts to cause the Registrable Stock to be (a) registered or qualified (to the
extent not exempt from such registration or qualification) for sale under the
blue sky laws of such states as the Stockholders may reasonably request and (b)
listed on NASDAQ or other nationally recognized exchange.

Blackout Periods. Under the Stock Agreement, for the first 90 days upon
effectiveness of the Stockholders Registration Statement, the Stockholders may
distribute Registrable Stock without any restrictions. Thereafter, if MWHS
determines in good faith that the distribution of Registrable Stock (a) would
materially impede, delay or interfere with any pending financing, acquisition,
corporate reorganization or other significant transaction involving MWHS or (b)
would require disclosure of non-public material information, the disclosure of
which would materially and adversely affect MWHS, and, in the case of clause
(b), MWHS is concurrently forbidding purchases or sales in the open market by
senior executives of MWHS, MWHS will promptly give the Stockholders written
notice of such determination and will be entitled to postpone the distribution
of Registrable Stock for a reasonable period of time not to exceed two periods
of 60 calendar days in any one year. Further, the Stockholders have agreed not
to engage in a distribution of Registrable Stock during any window period during
which MWHS is concurrently forbidding purchases or sales in the open market by
senior executives of MWHS in connection with its existing company policy in
connection with the preparation and filing of MWHS's Exchange Act reports
provided such forbidden window period may not exceed 45 days for each calendar
quarter.

Expenses. Under the Stock Agreement, all costs and expenses relating to the
Stockholders Registration Statement and the listing of the Registrable Stock on
NASDAQ or other nationally recognized exchange (excluding any related or
unrelated costs and expenses of each Stockholder) will be paid by MWHS.

Indemnification and Contribution. The Stock Agreement contains certain
customary indemnification provisions whereby MWHS is obligated to indemnify and
hold harmless each Stockholder and certain related parties, and each Stockholder
is obligated to indemnify and hold harmless MWHS and certain related parties, in
each case in connection with certain liabilities relating to the registration of
the Registrable Stock. The Stock Agreement also provides for certain rights of
contribution in the event that such indemnity is unavailable.

Termination. If MWHS has not purchased the Option Shares pursuant to the
Option or given prior notice of its desire to exercise the Option, the Stock
Agreement terminates automatically upon the termination of the Merger Agreement
as provided therein. Notwithstanding the foregoing, the Stock Agreement provides
that if Inmac receives an Alternative Proposal while the Merger Agreement is in
effect, the Stock Agreement will not terminate for at least 30 days from the
date of receipt of such Alternative Proposal.

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<PAGE>
COMPARATIVE MARKET PRICE AND DIVIDEND INFORMATION

PRINCIPAL MARKET

Each of the MWHS Common Stock and Inmac Common Stock is traded in the
over-the counter market and is quoted on NASDAQ under the symbols "MWHS" and
"INMC," respectively. As of December 21, 1995, there were approximately 150
holders of record of MWHS Common Stock and 170 holders of record of Inmac Common
Stock. The following table sets forth, for the periods indicated, the high and
low sale prices of each of the MWHS Common Stock and Inmac Common Stock,
respectively, as reported on NASDAQ. With regard to MWHS, the numbers are as
adjusted for the stock split effected in April 1994.

QUARTERLY STOCK PRICE RANGE OF MWHS COMMON STOCK

<TABLE><CAPTION>
HIGH LOW
------------------ -----------------
<S> <C> <C> <C> <C>
FISCAL YEAR ENDED DECEMBER 31, 1993
First Quarter.......................................................... $13 7/8 $ 9 5/8
Second Quarter......................................................... 12 1/2 9 3/4
Third Quarter.......................................................... 15 5/8 10
Fourth Quarter......................................................... 21 3/8 15 1/4
FISCAL YEAR ENDED DECEMBER 31, 1994
First Quarter.......................................................... $28 $19 1/4
Second Quarter......................................................... 27 1/2 18 1/4
Third Quarter.......................................................... 33 17 3/4
Fourth Quarter......................................................... 36 1/4 27
FISCAL YEAR ENDING DECEMBER 31, 1995
First Quarter.......................................................... $35 3/4 $26 3/4
Second Quarter......................................................... 48 1/4 30
Third Quarter.......................................................... 56 7/8 41 1/4
Fourth Quarter (through December 21, 1995)............................. 54 1/2 36 3/4

QUARTERLY STOCK PRICE RANGE OF INMAC COMMON STOCK

FISCAL YEAR ENDED JULY 30, 1994
First Quarter.......................................................... $12 1/2 $ 5 1/2
Second Quarter......................................................... 13 6 1/2
Third Quarter.......................................................... 9 3/4 5 3/8
Fourth Quarter......................................................... 6 1/2 3
FISCAL YEAR ENDED JULY 29, 1995
First Quarter.......................................................... $ 7 1/4 $ 4 1/4
Second Quarter......................................................... 6 1/4 4 5/8
Third Quarter.......................................................... 6 3/8 4 1/4
Fourth Quarter......................................................... 9 1/2 5 1/2
FISCAL YEAR ENDING JULY 27, 1996
First Quarter.......................................................... $ 9 3/8 $ 6

Second Quarter (through December 21, 1995)............................. 11 5/8 7 1/8
</TABLE>

DIVIDEND POLICY

MWHS has never paid and has no present plans to pay any cash dividends on
its capital stock. MWHS intends to retain its earnings to finance the growth and
development of its business. No dividends were declared in the last five years
on Inmac Common Stock and Inmac has no present plans to pay any cash dividends
on its capital stock.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

Neither MWHS nor Inmac had any changes in and/or disagreements with its
accountants on accounting and financial disclosure.

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<PAGE>
HISTORICAL AND PRO FORMA CAPITALIZATION

The following table sets forth the capitalization of each of MWHS and Inmac
as of September 30, 1995 and October 28, 1995, respectively, and the combined
pro forma capitalization as of September 30, 1995, giving effect to the
consummation of the Merger. The pro forma information set forth below is
presented for illustrative purposes only and is not necessarily indicative of
what the combined actual consolidated capitalization would have been had the
foregoing transactions been consummated, nor does it give effect to (a) any
transactions other than the foregoing transactions and those discussed in the
accompanying Notes to Unaudited Pro Forma Combined Financial Information or (b)
MWHS's results of operations since September 30, 1995 or Inmac's results of
operations since October 28, 1995. Accordingly, the pro forma information set
forth below does not purport to be indicative of the consolidated capitalization
as of the date hereof, the Effective Time, or any other future date.

The following table should be read in conjunction with the historical
financial statements of MWHS and Inmac, the unaudited pro forma financial
information, the related notes, and the other information contained elsewhere in
this Proxy Statement/Prospectus. See "Unaudited Pro Forma Financial Information"
and "Index to Financial Statements."

<TABLE>
<CAPTION>
(IN THOUSANDS)
(UNAUDITED)
HISTORICAL PRO FORMA
------------------- ---------------------------
MWHS INMAC ADJUSTMENTS COMBINED
-------- ------- ----------- --------
<S> <C> <C> <C> <C>
Short-term debt:
Loans payable, bank........................ $ 16,548 $ -- $ $ 16,548
Equipment obligations...................... 230 334 564
-------- ------- ----------- --------
Total short-term debt.................. 16,778 334 17,112
-------- ------- ----------- --------
Long-term debt:
Senior notes............................... -- 19,928 19,928
Equipment obligations...................... 445 592 1,037
-------- ------- ----------- --------
Total long-term debt................... 445 20,520 20,965
-------- ------- ----------- --------
Total debt............................. $ 17,223 $20,854 $ $ 38,077
-------- ------- ----------- --------
Stockholders' equity:
Common stock............................... $ 297 $16,669 $ (16,640) $ 326
Preferred stock............................ -- -- --
Additional paid-in capital................. 195,901 -- 16,640 212,541
Retained earnings.......................... 78,052 28,286 (5,000) 101,338
Cumulative translation adjustment.......... 743 (1,530) (787)
Valuation adjustment for marketable
securities................................... (359) -- (359)
-------- ------- ----------- --------
Total stockholders' equity............. 274,634 43,425 (5,000) 313,059
-------- ------- ----------- --------
Total capitalization................... $291,857 $64,279 $ (5,000) $351,136
-------- ------- ----------- --------
-------- ------- ----------- --------
Ratio of total debt to total
capitalization............................... 5.9% 32.4% 10.8%
-------- ------- --------
-------- ------- --------
</TABLE>

42
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma financial information is presented for
illustrative purposes only and is not necessarily indicative of what the
combined actual financial position or results of operations would have been had
the foregoing transaction been consummated on the dates set forth therein, nor
does it give effect to (a) any transaction other than those discussed above or
in the accompanying Notes to Unaudited Pro Forma Combined Financial Information,
(b) MWHS's results of operations since September 30, 1995 or Inmac's result of
operations since October 28, 1995, or (c) the synergies, cost savings, and
one-time charges expected to result from the Merger. Accordingly, the pro forma
financial information does not purport to be indicative of the financial
position or results of operations as of the date hereof or for any period ended
on the date hereof, as of the Effective Time, for any period ending at the
Effective Time, or as of or for any other future date or period.

The following unaudited pro forma financial information is based upon the
historical financial statements of MWHS and Inmac and should be read in
conjunction with such historical financial statements, the related notes, and
the other information contained elsewhere in this Proxy Statement/Prospectus.
See "Index to Financial Statements." Certain items derived from Inmac's
historical financial statements have been reclassified to conform to the pro
forma presentation.

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<PAGE>
MICRO WAREHOUSE, INC./INMAC CORP.
PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 30, 1995 (MWHS) AND OCTOBER 28, 1995 (INMAC)
(IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
MWHS INMAC ADJUSTMENTS COMBINED
-------- -------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 36,271 $ 10,548 $ $ 46,819
Marketable securities at market value............. 15,526 15,526
Accounts receivable, net.......................... 113,616 54,974 168,590
Inventories....................................... 94,927 28,321 123,248
Prepaid expenses and other current assets......... 20,500 8,569 29,069
Deferred taxes.................................... 3,825 3,825
-------- -------- ----------- ---------
TOTAL CURRENT ASSETS.......................... 284,665 102,412 387,077
-------- -------- ----------- ---------
Property, plant and equipment, net................ 23,839 7,791 31,630
Goodwill, net..................................... 44,667 44,667
Deposits and trademarks, net...................... 1,950 1,950
Other assets...................................... 1,797 1,797
-------- -------- ----------- ---------
TOTAL ASSETS.................................. $355,121 $112,000 $ -- $ 467,121
-------- -------- ----------- ---------
-------- -------- ----------- ---------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable--trade........................... $ 47,370 $ 24,379 $ $ 71,749
]Accrued expenses 3,930 20,464 5,000(1) ]29,394
Deferred revenue.................................. 6,894 6,894
Loans payable, bank............................... 16,548 16,548
Income taxes...................................... 5,070 2,878 7,948
Equipment obligations............................. 230 334 564
-------- -------- ----------- ---------
TOTAL CURRENT LIABILITIES..................... 80,042 48,055 5,000 133,097
Equipment obligations............................. 445 592 1,037
Long term debt and other liabilities.............. 19,928 19,928
-------- -------- ----------- ---------
TOTAL LIABILITIES............................. 80,487 68,575 5,000 154,062
-------- -------- ----------- ---------

Stockholders' equity:
Common stock (shares issued: MWHS--29,728; Inmac
10,560; combined 32,643)............................ 297 16,669 (16,640)(2) 326
Additional paid in capital........................ 195,901 16,640(2) 212,541
]Retained earnings................................ 78,052 28,286 (5,000)(1) 101,338
Cumulative translation adjustment................. 743 (1,530) (787)
Valuation adjustment for marketable securities.... (359) (359)
-------- -------- ----------- ---------
TOTAL STOCKHOLDERS' EQUITY.................... 274,634 43,425 (5,000) 313,059
-------- -------- ----------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.... $355,121 $112,000 $ -- $ 467,121
-------- -------- ----------- ---------
-------- -------- ----------- ---------
</TABLE>

See accompanying notes to unaudited pro forma combined financial information.

44
<PAGE>
MICRO WAREHOUSE, INC./INMAC CORP.
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 (MWHS) AND OCTOBER 28, 1995 (INMAC)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
MWHS INMAC ADJUSTMENT COMBINED
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales...................................... $904,018 $279,327 $ $1,183,345
Cost of goods sold............................. 738,715 189,214 6,960(3) 934,889
-------- -------- ---------- ----------
Gross profit................................. 165,303 90,113 (6,960) 248,456
Selling, general and administrative expense.... 114,152 81,498 (6,960)(3) 188,690
-------- -------- ---------- ----------
Income from operations before interest and
income taxes................................... 51,151 8,615 59,766
Interest income (expense)...................... 1,563 (1,247) 316
-------- -------- ----------
Income before taxes............................ 52,714 7,368 60,082
Provision for income taxes..................... 21,349 3,819 25,168
-------- -------- ----------
Net income................................... $ 31,365 $ 3,549 $ -- $ 34,914
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Net income per share........................... $ 1.04 $ 0.32 $ -- $ 1.05
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Weighted average number of shares
outstanding (2).............................. 30,233 10,985 33,265
-------- -------- ----------
-------- -------- ----------
</TABLE>

See accompanying notes to unaudited pro forma combined financial information.

45
<PAGE>
MICRO WAREHOUSE, INC./INMAC CORP.
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1994 (MWHS) AND JANUARY 28, 1995
(INMAC)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
MWHS INMAC ADJUSTMENT COMBINED
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales.................................... $776,377 $354,985 $ $1,131,362
Cost of goods sold........................... 626,684 235,863 8,607(3) 871,154
-------- -------- ---------- ----------
Gross profit............................. 149,693 119,122 (8,607) 260,208
Selling, general and administrative
expense...................................... 104,341 111,241 (8,607)(3) 206,975
-------- -------- ---------- ----------
Income from operations before interest and
income taxes................................. 45,352 7,881 53,233
Interest income (expense).................... 1,589 (1,752) (163)
-------- -------- ----------
Income before taxes.......................... 46,941 6,129 53,070
Provision for income taxes................... 18,924 3,589 22,513
-------- -------- ----------
Net income................................... $ 28,017 $ 2,540 $ -- $ 30,557
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Net income per share......................... $ 1.01 $ 0.24 $ -- $ 1.00
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Weighted average number of shares
outstanding(2)............................... 27,618 10,560 30,532
-------- -------- ----------
-------- -------- ----------
</TABLE>

See accompanying notes to unaudited pro forma combined financial information.

46
<PAGE>
MICRO WAREHOUSE, INC./INMAC CORP.
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1993 (MWHS) AND JANUARY 29, 1994
(INMAC)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
MWHS INMAC ADJUSTMENT COMBINED
-------- -------- ---------- ---------
<S> <C> <C> <C> <C>
Net sales...................................... $450,385 $345,569 $ $ 795,954
Cost of goods sold............................. 361,481 215,089 6,119(3) 582,689
-------- -------- ---------- ---------
Gross profit............................... 88,904 130,480 (6,119) 213,265
Selling, general and administrative expense.... 63,407 120,204 (6,119)(3) 177,492
-------- -------- ---------- ---------
Income from operations before interest and
income taxes................................... 25,497 10,276 35,773
Interest income (expense)...................... 456 (1,113) (657)
-------- -------- ---------
Income before taxes............................ 25,953 9,163 35,116
Provision for income taxes..................... 10,954 4,273 15,227
-------- -------- ---------
Net income..................................... $ 14,999 $ 4,890 $ -- $ 19,889
-------- -------- ---------- ---------
-------- -------- ---------- ---------
Net income per share........................... $ 0.64 $ 0.47 $ -- $ 0.75
-------- -------- ---------- ---------
-------- -------- ---------- ---------
Weighted average number of shares
outstanding(2)................................. 23,533 10,464 26,421
-------- -------- ---------
-------- -------- ---------
</TABLE>

See accompanying notes to unaudited pro forma combined financial information.

47
<PAGE>
MICRO WAREHOUSE, INC./INMAC CORP.
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1992 (MWHS) AND JANUARY 23, 1993
(INMAC)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
MWHS INMAC ADJUSTMENT COMBINED
-------- -------- ---------- ---------
<S> <C> <C> <C> <C>
Net sales...................................... $269,634 $327,943 $ $ 597,577
Cost of goods sold............................. 217,078 180,758 3,863(3) 401,699
-------- -------- ---------- ---------
Gross profit............................... 52,556 147,185 (3,863) 195,878
Selling, general and administrative expense.... 39,021 141,320 (3,863)(3) 176,478
Provision for Business restructuring........... 0 16,546 16,546
-------- -------- ---------- ---------
Income (loss) from operations before interest
and
income taxes (4)............................. 13,535 (10,681) 2,854
Interest expense............................... 1,264 1,971 3,235
-------- -------- ---------
Income (loss) before taxes..................... 12,271 (12,652) (381)
Provision for income taxes (4)................. 5,326 2,174 7,500
-------- -------- ---------
Net income (loss).............................. $ 6,945 $(14,826) $ -- $ (7,881)
-------- -------- ---------- ---------
-------- -------- ---------- ---------
Net income (loss) per share.................... $ 0.39 $ (1.57) $ -- $ (0.39)
-------- -------- ---------- ---------
-------- -------- ---------- ---------
Weighted average number of shares
outstanding (2).............................. 17,854 9,453 20,463
-------- -------- ---------
-------- -------- ---------
</TABLE>

See accompanying notes to unaudited pro forma combined financial information.

48
<PAGE>
MICRO WAREHOUSE, INC./INMAC CORP.
NOTES TO UNAUDITED PRO FORMA COMBINED
FINANCIAL INFORMATION

1. Estimated charges expected to be incurred as a result of the Merger comprise
principally investment banking $3,700,000, legal $750,000, transaction costs
$350,000, accounting $100,000 and miscellaneous costs of $100,000. In total,
such charges are currently estimated to be approximately $5,000,000.

2. Assumes the issuance of 2,968,069 shares of MWHS Common Stock, the
maximum number of shares to be issued pursuant to the Merger in exchange for all
of the outstanding shares of Inmac Common Stock. Common and common equivalent
shares outstanding were calculated assuming a conversion rate of 0.276 shares of
MWHS Common Stock for each share of Inmac Common Stock provided for in the
Merger Agreement, the conversion rate resulting in the maximum number of shares
of MWHS Common Stock to be issued.

3. In connection with the Merger, certain reclassifications have been made
to conform the presentations.

4. The following pro forma adjustments have been made to the MWHS historical
results of 1992 operations to make the presentations more meaningful in relation
to future periods:

(a) Elimination of amounts of special incentive compensation.

(b) Computation of income taxes which would have been recorded had MWHS
been a C Corporation for the entire year and after eliminating the
compensation in (a) above.

See note 15 of "MWHS's Notes to the Consolidated Financial Statements for
Years Ended December 31, 1994, 1993 and 1992."

49
<PAGE>
COMPARISON OF STOCKHOLDERS' RIGHTS

At the Effective Time, the holders of Inmac Common Stock will become holders
of MWHS Common Stock and their rights will be governed by MWHS's certificate of
incorporation and by laws and by the DGCL. The following summarizes certain
differences between the rights of holders of Inmac Common Stock and holders of
MWHS Common Stock. Because Inmac and MWHS are organized under the DGCL, any
differences in the rights of their stockholders arise solely from differences in
their respective certificates of incorporation and by-laws.

The following discussion is not intended to be complete and is qualified in
its entirety by reference to the DGCL, Inmac's certificate of incorporation and
by-laws and MWHS's certificate of incorporation and by laws, as appropriate.

CERTAIN DIFFERENCES IN RIGHTS OF HOLDERS OF INMAC COMMON STOCK AND MWHS COMMON
STOCK

Authorized Capital. The total number of authorized shares of capital stock
of Inmac is 32,000,000, consisting of 30,000,000 shares of Inmac Common Stock
and 2,000,000 shares of Inmac Preferred Stock, par value $0.01 per share. The
total number of authorized shares of capital stock of MWHS is 50,100,000,
consisting of 50,000,000 shares of MWHS Common Stock and 100,000 shares of MWHS
Preferred Stock, par value $0.01 per share.

Partly Paid Shares. Inmac's by-laws allow partly paid shares that are
subject to call for the remainder of the consideration to be paid therefor.
MWHS's certificate of incorporation requires MWHS Common Stock and MWHS
Preferred Stock to be fully paid and nonassessable.

Special Meetings of Stockholders. Inmac's by-laws provide that a special
meeting of the stockholders may be called by the Chairman of the Board, the
Board of Directors, the President, or by one or more stockholders holding shares
in the aggregate entitled to cast not less than 10% of the votes at such special
meeting. MWHS's by laws provide that its President may call a special meeting of
the stockholders, and its President or Secretary shall call a Special Meeting of
the stockholders at the written request of a majority of the Board of Directors
or the holders of a majority of MWHS's capital stock issued and outstanding and
entitled to vote.

Number, Election, and Term of Directors. Inmac's by-laws provide for a Board
of Directors consisting of six directors. Inmac's certificate of incorporation
and by-laws provide for the holders of Inmac Common Stock to be entitled to
cumulative voting in the election and removal of the Board of Directors. Such
cumulative voting allows a holder of Inmac shares to cast as many votes as
equals the number of votes which (absent the cumulative voting) the holder would
be entitled to cast for the election of directors with respect to the holder's
shares multiplied by the number of directors to be elected by the holder. A
holder of Inmac shares may cast all of such votes for a single director or may
distribute them among the number of directors to be voted for, or for any two or
more of them, as the holder sees fit. Regarding the removal of a director in a
cumulative voting situation, if less than the entire Board of Directors is going
to be removed, no director may be removed without cause if the votes cast
against the director's removal would be sufficient to elect the director if then
cumulatively voted at an election of the entire Board of Directors. MWHS's by
laws provide for a Board of Directors consisting of not less than two nor more
than five directors. MWHS's certificate of incorporation and by laws do not
allow cumulative voting.

Election of Directors By Ballot. Under Inmac's certificate of incorporation,
a holder of Inmac stock may demand an election by ballot in the voting for the
Board of Directors. MWHS's certificate of incorporation does not require the
vote for the Board of Directors to be taken by written ballot, and it gives the
holders of MWHS stock no right to demand an election by ballot.

50
<PAGE>
Filling Vacancies on Board of Directors. Under Inmac's by-laws, any class,
classes or series of securities with the right to elect one or more Directors to
the Board of Directors has the right to have any vacancy or newly created
Directorships to the Board of Directors of such class, classes or series filled
by a majority of Directors elected by such class, classes or series thereof then
in office, or by a sole remaining Director so elected. MWHS's certificate of
incorporation and by laws do not provide such a right.

CERTAIN DIFFERENCES IN RIGHTS OF HOLDERS OF INMAC PREFERRED STOCK AND MWHS
PREFERRED STOCK

Classes of Preferred Stock. Inmac's certificate of incorporation authorizes
only one class of Inmac Preferred Stock which may be issued in more than one
series. MWHS's certificate of incorporation authorizes multiple classes of MWHS
Preferred Stock. Neither Inmac nor MWHS has authorized any class of Preferred
Stock.

BUSINESS OF MWHS

MWHS is a leading direct marketer of brand name Macintosh and IBM compatible
personal computers, software, accessories and peripherals. MWHS markets its
products through frequent mailings of its distinctive full-color catalogs and
also has a dedicated outbound telemarketing sales force that focuses on
commercial, educational and governmental accounts. MWHS offers popular brand
name hardware and software from leading vendors such as Adobe, Apple, Hayes,
Hewlett-Packard, IBM, Iomega, Macromedia, Microsoft, Quark and Toshiba.

Through its two original catalogs, MacWAREHOUSE and MicroWAREHOUSE, MWHS
offers a broad selection of over 20,000 computer products at prices ranging from
30% to 60% below manufacturers' suggested retail prices. MWHS also publishes
catalogs to meet the particular needs of its growing customer base, including
Data CommWAREHOUSE for the network and data communications market, Micro
SystemsWAREHOUSE, offering microcomputer systems and peripherals to the
PC/Windows market, and its newest catalog, Mac SystemsWAREHOUSE, offering Apple
Macintosh computer systems and peripherals.

MWHS's catalogs are distinguished by detailed descriptions and full-color
pictures of many of the products. The catalogs are recognized as a leading
source for new hardware, software and other products. During the nine months
ended September 30, 1995, MWHS distributed approximately 53,260,000 catalogs,
and as of September 30, 1995, MWHS had approximately 3,231,000 customers,
including 1,667,000 customers who had purchased products within the last 12
months.

International expansion is an important part of MWHS's growth strategy. In
1991, MWHS established full-service, direct marketing operations in the United
Kingdom. In late 1992, MWHS began operations in France and Germany and, in 1993
and 1994, acquired companies or initiated operations in Sweden, Denmark, Norway,
Holland, Belgium, Finland, France, Japan, Canada and Mexico. In 1995, MWHS
acquired businesses in the United Kingdom, Germany, Australia and Switzerland.
MWHS now distributes its catalogs in 15 countries. MWHS distributed
approximately 3,370,000 catalogs internationally in the nine months ended
September 30, 1994 and 7,500,000 catalogs internationally in the nine months
ended September 30, 1995.

MWHS maintains a full-service distribution center in Wilmington, Ohio,
totaling approximately 307,200 square feet and telemarketing centers in Lakewood
and Gibbsboro, New Jersey totaling approximately 174,000 square feet. MWHS
operates 24 hours a day, seven days a week and ships approximately 90% of all
orders for commercially available products on the business day the order is
accepted. MWHS's international operations use the same distribution and
processing system and are able to exchange data with their U.S. operations. MWHS
presently operates distribution facilities in the

51
<PAGE>
United Kingdom, France, Germany, Denmark, Sweden, Norway, Finland, Belgium,
Holland, Japan, Australia, Mexico, Canada and Switzerland.

MWHS began operations in 1987 as a Connecticut corporation and was
reincorporated in Delaware on October 2, 1992.

CATALOG PUBLICATION

MWHS currently produces five distinctive catalogs. MWHS's two original
catalogs are MacWAREHOUSE for the Macintosh market and MicroWAREHOUSE for the PC
market. It also produces three additional catalogs: Data CommWAREHOUSE, directed
to the data communications and networking markets for use in micro and mainframe
computers, Micro SystemsWAREHOUSE, featuring PC brand name microcomputer systems
and peripherals, and Mac SystemsWAREHOUSE, offering Macintosh computer systems
and peripherals. MWHS published 12 editions of MacWAREHOUSE and six editions of
MicroWAREHOUSE in 1994. The additional catalogs are produced at various
intervals. Active customers receive a catalog at least monthly and all customers
receive a catalog with every order shipped. MWHS also mails targeted versions of
its catalogs to its business and educational customers.

Each catalog is printed with full-color photographs, detailed product
descriptions. The catalogs, which are printed in 10 languages, are created and
produced in-house by MWHS's designers and production artists on a computer-based
desktop publishing system. The in-house preparation of most portions of the
catalog streamlines the production process, provides for greater flexibility and
creativity in catalog production and results in significant cost savings.

MARKETING AND SALES

MWHS's various marketing programs are designed to attract new customers and
to stimulate additional purchases from existing customers. MWHS continuously
attracts new customers by selectively mailing catalogs to prospective customers
as well as through space advertising in major computer magazines and on-line
services. In addition, MWHS obtains the names of prospective customers through
the use of selected mailing lists obtained from various sources, including
manufacturers, suppliers, software publishers and computer magazine publishers.

The following table shows certain information with respect to MWHS's
customers as of the dates indicated below:

<TABLE><CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------- SEPTEMBER
1990 1991 1992 1993 1994 30, 1995
------- ------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Active Customers(1)................ 259,000 366,000 512,000 863,000 1,333,000 1,667,000
Others(2).......................... 187,000 323,000 500,000 660,000 1,092,000 1,564,000
------- ------- --------- --------- --------- ---------
TOTAL........................ 446,000 689,000 1,012,000 1,523,000 2,425,000 3,231,000
------- ------- --------- --------- --------- ---------
------- ------- --------- --------- --------- ---------
</TABLE>

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

(1) Represents customers that have purchased during the preceding 12 months.

(2) Represents customers that have not purchased during the preceding 12 months.

Inbound Telemarketing. MWHS employs telemarketing representatives who assist
customers in purchasing decisions, process product orders and respond to
customer inquiries on order status and product pricing and availability. MWHS
processes approximately 47,000 domestic calls per day. MWHS offers toll-free
numbers for all of its customers. In addition, it receives orders by fax, mail
and online. Through MWHS's sophisticated systems, a telemarketer can quickly
access a customer's record which details past purchases as well as billing
information.

52
<PAGE>
Outbound Business-to-Business Telemarketing. MWHS has established a
dedicated sales force which targets commercial, governmental and educational
accounts. MWHS's business sales program combines business-to-business outbound
telemarketing and catalog mailing to penetrate these accounts. MWHS's sales
staff seeks, through frequent contact, to build long-term relationships with
MWHS's business customers. MWHS has approximately 175,000 business accounts that
are managed by its outbound telemarketing operations.

Customer Service and Technical Support. MWHS believes that its ability to
provide prompt and efficient customer service has been critical to its success.
MWHS's representatives are trained to respond to frequently asked questions such
as the status of an order or MWHS's return policy. MWHS also has a technical
support staff to assist customers with the selection, installation and operation
of their products. MWHS offers a toll-free number for customer service and
technical support from 8:00 a.m. to midnight, eastern time, Monday through
Friday and from 10:00 a.m. to 6:00 p.m. on Saturday and Sunday.

Customer Return Policy. To ensure customer satisfaction, MWHS offers an
unconditional 30-day return policy on many of its products. MWHS works closely
with customers and vendors to assure that all vendor warranties and return
privileges are fully honored. Through September 30,1995, MWHS has had a return
rate of approximately 8% of total sales. Returns are received and processed as a
segregated activity to maintain control over the returned product, to initiate
the refund process and to obtain appropriate credit from suppliers. Return
experience is closely monitored at the stock-keeping-unit ("SKU") level to
identify trends in product offerings, enhance customer satisfaction and reduce
overall returns.

WAREHOUSE-On-Line. In 1993, MWHS began offering to its MacWAREHOUSE and
MicroWAREHOUSE customers WAREHOUSE-On-Line, a service which allows users to dial
the WAREHOUSE-On-Line bulletin board via a modem and download certain software
applications onto the user's computer on a free trial basis prior to purchase.

PRODUCTS AND MERCHANDISING

MWHS offers over 20,000 microcomputer hardware, software and peripheral
products to Macintosh and PC users. In 1994 and for the nine months ended
September 30, 1995, sales of products for Apple Macintosh computers represented
approximately 68% and 66%, respectively, of MWHS's net sales. MWHS's product
review committee screens new products weekly and selects products for inclusion
in its catalogs based on features, quality, sales trends, price, margins and
warranties. Through frequent mailings of its catalogs, MWHS is able to quickly
replace slower selling products with new products. In 1994 and for the nine
months ended September 30, 1995, no single product accounted for more than 1.5%
of MWHS's net sales.

Software. MWHS sells a wide variety of the latest Macintosh and PC software
packages in the business and personal productivity, connectivity, utility and
language, educational and entertainment categories. MWHS offers products from
the larger, well known vendors as well as numerous specialty products from new
and emerging vendors. Brands offered by MWHS include Adobe, Claris, Lotus,
Macromedia, Microsoft, Novell, Quark, Symantec and Wordperfect. MWHS also
markets upgrades from a variety of vendors including Apple, Lotus, Microsoft and
Wordperfect which MWHS believes offer incremental revenue opportunities as well
as a source of customer names previously unavailable to MWHS. Software sales
represented approximately 40% and 25% of MWHS's net sales in 1994 and for the
nine months ended September 30, 1995, respectively.

Hardware. MWHS offers a large selection of hardware items. This category
includes microcomputers, printers, modems, monitors, data storage devices,
add-on circuit boards, mice, connectivity products and certain business
machines. Brands sold in this category include Apple, Daystar, Epson, Farallon,
Global Village, Hayes, Hewlett-Packard, IBM, Intel, Texas Instruments and
Toshiba.

53
<PAGE>
Hardware sales constituted approximately 46% of MWHS's net sales in 1994 and 68%
for the nine months ended September 30, 1995.

Under its private label brand, Power User, MWHS also sells products such as
microcomputers, hard drives, modems, fax modems, memory chips, CD-ROMs, drives,
cables, and accessories. These products are manufactured for MWHS by third
parties.

Supplies and Accessories. MWHS currently sells various supplies such as
media, toner cartridges, desk and computer accessories and computer furniture
through its catalogs. Sales of these products constituted approximately 14% and
7% of MWHS's net sales in 1994 and for the nine months ended September 30, 1995,
respectively.

PURCHASING

MWHS purchases products from approximately 1,700 vendors. MWHS purchases
approximately 77% of its products directly from manufacturers and the balance
from distributors. MWHS's largest vendors include Adobe, Apple, Hayes,
Hewlett-Packard, IBM, Iomega, Macromedia, Microsoft, Quark and Toshiba.
Typically, the leading 100 products sold by MWHS account for approximately 50%
of its net sales. For the nine months ended Sepember 30, 1995, purchases of
products from Apple, MWHS's largest vendor, constituted approximately 18% of
MWHS's product purchases.

MWHS believes that its volume purchases enable it to obtain favorable
product pricing. Many of MWHS's suppliers make funds available to MWHS in the
form of advertising allowances and incentives to promote and increase sales of
their products. Generally, MWHS has been able to return any unsold or obsolete
inventory to its vendors through written agreements with, or unwritten policies
of, such vendors. In addition, MWHS typically receives price protection should a
vendor subsequently lower its price.

DISTRIBUTION CENTERS

MWHS consolidated its United States distribution operations in Wilmington,
Ohio during the first quarter of 1993. The Wilmington, Ohio
warehouse/distribution center, which presently consists of 307,200 square feet
is located in three facilities adjacent to the main distribution facility of
Airborne Express. Domestic orders accepted by midnight are shipped for delivery
the following day via Airborne Express and other overnight delivery services for
a charge based on weight. Upon request, orders may also be shipped by United
Parcel Service Ground Service. MWHS also operates distribution facilities in the
United Kingdom, France, Germany, Denmark, Norway, Sweden, Finland, Belgium,
Holland, Japan, Canada, Mexico, Australia and Switzerland. MWHS's international
facilities operate under the same distribution and processing system as its
domestic business.

Domestic orders are placed at MWHS's Lakewood and Gibbsboro, New Jersey
facilities, which consist of three buildings totaling 174,000 square feet and
include telemarketing, customer service, training, management information
systems, accounting and administration. When an order is entered into the
system, a computer credit check or credit card verification is performed and, if
approved, the order is electronically transmitted to the warehouse in
Wilmington, Ohio and a packing slip is printed for order fulfillment. All
inventory items are bar coded and located in computer-designated areas which are
easily identified on the packing slip. Orders are checked with bar code scanners
prior to final packing to ensure that each order is packed correctly. MWHS ships
approximately 90% of all orders for commercially available products on the
business day the order is accepted. Inventory shrinkage has been nominal.

54
<PAGE>
MANAGEMENT INFORMATION SYSTEMS

MWHS has committed significant resources to the development of a
sophisticated computer system which is used to manage all aspects of its
business. The main computer system is comprised of a Hewlett-Packard 3000 Model
992/400, 980/400 and 980/200. This system supports telemarketing, marketing,
purchasing, accounting, customer service, warehousing and distribution. The
system allows MWHS, among other things, to monitor sales trends, make informed
purchasing decisions, provide product availability and order status information.
During 1993, MWHS expended approximately $3.4 million to expand its computer
systems. In addition to the main system, MWHS has a system of networked personal
computers which facilitates data sharing and provides an automated office
environment. During 1994, MWHS made significant installations and upgrades to
all its computer systems including systems in six international operations at an
approximate cost of $10 million. Its international operations use the same
system and are able to exchange data with MWHS's United States operations.
Routine capacity enhancements will be made periodically, as MWHS deems
necessary.

COMPETITION

The computer products retail business is highly competitive. MWHS competes
with consumer electronic and computer retail stores, including superstores, and
other direct marketers of software and computer related products. Certain
hardware and software vendors are selling their products directly through their
own catalogs. Certain competitors of MWHS have financial and other resources
greater than those of MWHS. There can be no assurance that MWHS can continue to
compete effectively against existing competitors or new competitors that may
enter the market. In addition, price is an important competitive factor in the
personal computer software and hardware market and there can be no assurance
that MWHS will not be subject to increased price competition.

MWHS's revenue has increased at a rate significantly exceeding the growth
rate of the microcomputer application software industry. No assurance can be
given that MWHS will be able to sustain this growth.

EMPLOYEES

As of December 11, 1995, MWHS employed approximately 3,030 persons, of whom
660 were in management, support services and administration; 1,220 in sales,
technical support and customer service; 480 in warehouse/distribution and 670
persons employed at international locations. MWHS's domestic employees are not
represented by a labor union and it has experienced no work stoppages. MWHS
believes that its employee relations are good.

SALES OR USE TAX

MWHS presently collects sales tax in the states of New Jersey, Connecticut
and Ohio. Various states have tried to impose on direct marketers the burden of
collecting use taxes on the sale of products shipped to state residents. The
United States Supreme Court affirmed its position that it is unlawful for a
state to impose use tax collection obligations on an out-of-state mail order
company whose only contacts with the state were the distribution of catalogs and
other advertising materials through the mail and subsequent delivery of
purchased goods by parcel post and interstate common carriers. In the event
legislation is passed to overturn the United States Supreme Court's decision,
the imposition of a use tax collection obligation on MWHS in states to which it
ships products would result in additional administrative expenses to MWHS and
could result in price increases to the customer.

55
<PAGE>
TRADEMARKS

MWHS conducts its business under the trademarks and service marks
"MacWAREHOUSE," "MacSHOPPER," "MicroWAREHOUSE," "Upgrade Warehouse," "Windows
Warehouse," "Power User," "Data CommWAREHOUSE," "CD-Rom WAREHOUSE," "Micro
SystemsWAREHOUSE," "Mac Systems WAREHOUSE," "Home ComputerWAREHOUSE,"
"LanWAREHOUSE," "WAREHOUSE-On-Line," "Academic WAREHOUSE," "Developers
WAREHOUSE," and "The Mac Superstore." MWHS intends to use and protect these or
related marks, as necessary, in the United States and in various foreign
countries. MWHS believes its trademarks and service marks have significant value
and are an important factor in the marketing of its products. MWHS's trademarks
and servicemarks, once registered, have an indefinite term as long as they are
used in connection with MWHS's business activities. MWHS intends to take all
appropriate steps to renew its registrations.

PROPERTIES

MWHS's principal facilities, all of which are leased, are as follows:

<TABLE><CAPTION>
APPROX. EXPIRATION
FACILITY LOCATION SQ. FT. OF LEASES
- -------- -------- ------- ----------
<S> <C> <C> <C>
Telemarketing, technical support,
management information systems and
customer service center............... Lakewood, NJ 92,000 1999
Telemarketing, technical support,
management information systems and
customer service center............... Gibbsboro, NJ 82,000 2002
Warehouse and distribution center..... Wilmington, OH 102,400 1998
Warehouse and distribution center..... Wilmington, OH 102,400 1999
Warehouse and distribution center..... Wilmington, OH 102,400 1997
Headquarters and administrative
offices............................... Norwalk, CT 66,400 2001
Corporate sales....................... South Norwalk, CT 31,515 1997
Offices and distribution center....... Watford, London, England 27,000 2004
Offices............................... Kingsbury, Wembley, England 10,550 1996
Distribution center................... Bonneuil Sur Marne, France 11,000 2002
Offices............................... Suresnes, France 9,900 2002
Offices and distribution center....... Neu Isenburg, Germany 10,100 2004
Offices and distribution center....... Ega, Denmark 3,735 1996
Offices and distribution center....... Oslo, Norway 8,217 1995
Offices and distribution center....... Stockholm, Sweden 11,475 1998
Offices and distribution center....... Helsinki, Finland 4,410 1996
Offices and distribution center....... Antwerp, Belgium 1,000 1996
Offices and distribution center....... Zeist, Holland 7,425 1997
Offices and distribution center....... Kanagawa, Japan 1,500 1996
Offices and distribution center....... Mexico City, Mexico 1,800 1995
Offices and distribution center....... Toronto, Canada 9,000 1998
Offices and distribution center....... Mississauga, Ontario, Canada 15,500 2000
Offices............................... Seven Hills, Sidney, Australia 2,200 1996
Distribution center................... Baulkham Hills, Sidney, Australia 5,150 1997
</TABLE>

MWHS believes that its facilities are adequate for its current needs and
that suitable additional space will be available as needed.

LEGAL PROCEEDINGS

There are no material legal proceedings pending against MWHS.

56
<PAGE>
MWHS MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

MWHS sells computer products primarily through its two main catalogs,
MacWAREHOUSE and MicroWAREHOUSE. MWHS has experienced significant growth in its
customer list, catalog mailings, sales and operating profitability since its
organization in 1987.

In late 1987, MWHS introduced its MacWAREHOUSE catalog for users of
Macintosh computers. In 1989, MWHS began distributing its first MicroWAREHOUSE
catalog for users of IBM-compatible PCs and instituted its business-to-business
outbound sales program. MWHS also publishes targeted catalogs namely, Data
CommWAREHOUSE, directed to the data communications and networking markets, Micro
SystemsWAREHOUSE, offering microcomputer systems and peripherals to the
PC/Windows market and its newest specialty catalog, Mac SystemsWAREHOUSE,
offering Mac computer systems and peripherals to the Mac market. During 1995,
MWHS combined the CD-Rom and Home ComputerWAREHOUSE catalogs with its core
catalogs and discontinued its Paperdesign WAREHOUSE and Micro SuppliesWAREHOUSE
catalogs. MWHS international catalog distribution includes the MacWAREHOUSE,
MicroWAREHOUSE and LanWAREHOUSE (the European counterpart to the U.S. Data
CommWAREHOUSE) catalogs.

Over the past few years, MWHS has expanded its international operations.
MWHS commenced full-scale operations in the United Kingdom in 1991, and in
France and Germany in 1992. In 1993, MWHS established a licensing arrangement in
Australia and acquired, through newly-formed foreign subsidiaries, businesses
with operations in Denmark, Norway and Sweden. During 1994, MWHS acquired eight
additional businesses with operations in Holland, Belgium, Finland, Norway,
Sweden, France, Mexico and Canada. MWHS also began operations in Japan and added
two new licensees, one in Chile and the other in Colombia. In 1995, MWHS has
acquired complimentary businesses in the United Kingdom, Germany, Australia and
Switzerland.

MWHS now distributes its catalogs in 15 countries, namely the United States,
the United Kingdom, France, Germany, Sweden, Denmark, Norway, Belgium, Holland,
Finland, Japan, Mexico, Canada, Australia, and Switzerland. MWHS has
discontinued its licenses in Chile and Colombia.

During 1995, MWHS received authorization from Apple Computer, Inc. to market
its full line of Macintosh computers. This authorization compliments MWHS's 1994
authorizations to sell Apple printers and scanners, IBM and other major brand
name personal computers and has enabled MWHS to broaden significantly its
product offerings.

57
<PAGE>
RESULTS OF OPERATIONS

The table below sets forth certain items expressed as a percent of net
sales, for each of the years in the three-year period ended December 31, 1994
and for the nine-month period ended September 30, 1995.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------- YEAR ENDED DECEMBER 31,
SEPTEMBER 30, -----------------------
1995 1994 1993 1992
----------------- ----- ----- -----
<S> <C> <C> <C> <C>
Net sales............................................ 100.0% 100.0% 100.0% 100.0%
Cost of sales........................................ 81.7 80.7 80.3 80.5
----- ----- ----- -----
Gross profit......................................... 18.3 19.3 19.7 19.5
----- ----- ----- -----
Selling, general and administrative expenses......... 12.6 13.5 14.1 14.5
Special incentive compensation....................... -- -- -- 3.3
Income from operations............................... 5.7 5.8 5.6 1.7
----- ----- ----- -----
Interest income (expense)............................ .1 .2 .1 (.5)
----- ----- ----- -----
Income before income taxes........................... 5.8% 6.0% 5.7% 1.2%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>

NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1994

Net sales increased by $378.9 million or 72% to $904.0 million for the nine
months ended September 30, 1995 from $525.1 million for the nine months ended
September 30, 1994. This increase in net sales was primarily attributable to an
increase in the circulation of both the MacWAREHOUSE and MicroWAREHOUSE
catalogs. Circulation of the MacWAREHOUSE catalog increased by 49% to 23.0
million and the MicroWAREHOUSE catalog circulation increased by 54% to 20.3
million. MWHS's business-to-business sales program increased by 72% over the
comparable period in 1994, and represented approximately 40% of net sales for
the first nine months of 1995. This increase was primarily due to an increase in
the circulation of business-to-business catalogs. International sales increased
to 24% of net sales in the first nine months of 1995 from 14% in the same period
last year. Also contributing to the increase in net sales on a worldwide basis
was the increase in the average order size to $400 in 1995 from $301 in 1994.
Total orders fulfilled increased from 1.9 million to 2.5 million.

Gross profit decreased as a percentage of net sales to 18.3% in 1995 from
19.4% during the same period last year. The decrease in gross profit was due to
a reduction in gross margins attributable to a higher proportion of hardware
sales which are typically at lower margins than software sales. Hardware as a
percent of total sales increased from 49% in 1994 to 68% in 1995.

Selling, general and administrative expenses increased by 62% to $114.2
million for the nine months ended September 30, 1995 from $70.5 million for the
same period in 1994, but decreased as a percentage of net sales to 12.6% from
13.4%. The increase in dollars during the first nine months of 1994 was due
primarily to an increase in fulfillment costs resulting from increased sales
volume. The decrease as a percentage of net sales was attributable to cost
controls coupled with a higher average order size due to the increased hardware
sales.

Operating income for the first nine months of 1995 was $51.2 million
compared to $31.2 million for the same period last year. International
operations generated net income before taxes of $1.5 million in 1995 as compared
to a net loss before taxes of $0.9 million for the first nine months of 1994.

Interest income totaled $1.6 million for the first nine months of 1995
compared to $0.9 million for the first nine months of 1994. This was due to
MWHS's having cash and short-term investment balances in 1995 as a result of the
public offerings in April and October of 1994.

58
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES AS OF SEPTEMBER 30, 1995

In April and October 1994, MWHS completed follow-on offerings of its MWHS
Common Stock resulting in net proceeds to MWHS of $102.1 million. As of
September 30, 1995, MWHS had cash and short-term investments totaling $51.8
million. Subsequent to September 30, 1995, MWHS completed another follow-on
offering of 1,200,000 shares of MWHS Common Stock with net proceeds of $51.0
million.

As a result of increased sales, MWHS's inventories increased to $94.9
million at September 30, 1995 from $78.7 million at December 31, 1994. This
represents a 20.6% increase in inventory on a 34.2% increase in sales from the
fourth quarter of 1994. Accounts receivable increased to $113.6 million at
September 30, 1995 from $80.8 million at December 31, 1994. This represents a
40.6% increase in accounts receivable on a 34.2% increase in sales. Accounts
receivable have increased at a faster rate than sales due to an increase in open
account purchases by commercial customers. In addition, prepaid expenses
increased by $9.3 million due primarily to the increased purchase of paper used
in catalog production. Overall, operations used $8.6 million of cash as compared
to $22.2 million during the same period last year.

Capital expenditures for the first nine months of 1995 and 1994 were $9.0
million and $10.8 million, respectively, primarily for computer systems and
distribution equipment both in the United States and internationally. Although
MWHS's primary capital need will be to fund its working capital requirements for
expected sales growth, MWHS expects that future growth will also require
continued expansion of its computer systems and distribution capacity. MWHS also
expects to continue to invest in business acquisition opportunities which may
require additional funding. At September 30, 1995, MWHS had an unused line of
credit in the United States, which provided for unsecured borrowings of up to
$15.0 million for working capital purposes. On July 25, 1995 MWHS entered into a
multi-currency credit facility for $50 million with Chase Manhattan Bank. The
purpose of the facility is to provide working capital financing for its foreign
subsidiaries. In addition, by financing in local currencies, MWHS will limit its
exposure to foreign currency exchange fluctuations. Total borrowings on
September 30, 1995 under this arrangement were $16.5 million.

MWHS believes that its existing cash reserves, including the cash generated
by the recent stock offering, cash flow from operations and existing credit
facilities will be sufficient to satisfy its operating cash needs for at least
the next 12 months. Thereafter, MWHS may require additional cash reserves.

YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993

Net sales increased by $326.0 million or 72% to $776.4 million up from
$450.4 million in 1993. The sales increase was attributable to strong growth in
the core domestic businesses: the Macintosh business was up 44% to $424.0
million, the PC/Windows business which includes both the MicroWAREHOUSE and
Micro SystemsWAREHOUSE catalogs was up 57% to $156.1 million and specialty
catalogs contributed $72.0 million. With continued international expansion,
international sales were up 281% to $124.3 million.

The sales increase for the core businesses was due to increases in the total
customer base, up 45% for the Macintosh business and 55% for the PC/Windows
business coupled with increased catalog circulation in both business areas. The
increase in average order size to $306 from $247 due primarily to the increase
in hardware sales also contributed to MWHS's sales performance. In addition
MWHS's outbound sales programs to corporate customers increased by 68% to $292.7
million.

International sales growth was attributable to a growth of 114% in the U.K.
operations as well as contributions from France, Germany, and the Scandinavian
acquisitions. With the establishment of operations in additional countries, the
total European customer base increased by 286% and the number of catalogs
distributed grew by 180% to 4.2 million.

59
<PAGE>
During 1994, MWHS added two new specialty catalogs, Micro SystemsWAREHOUSE
and Home ComputerWAREHOUSE catalogs, to its existing group of specialty catalogs
comprising Data CommWAREHOUSE, CD-Rom-WAREHOUSE, Micro SuppliesWAREHOUSE and
Paper designWAREHOUSE, all of which contributed $72.0 million in sales in 1994.

Gross profit decreased to 19.3% of net sales from 19.7% in 1993. The
decrease in gross profit was due to a higher proportion of hardware sales which
are typically at lower margins than software sales. Hardware as a percent of
total sales increased from 35% in 1993 to 46% in 1994.

Selling, general and administrative ("S,G&A") expenses increased to $104.3
million from $63.4 million in 1993, but decreased as a percent of net sales to
13.5% from 14.1% in 1993. The decrease in S,G&A expenses as a percent was the
result of cost controls coupled with increased sales and higher average order
size.

In 1994, MWHS generated $1.6 million in interest income as compared to $0.5
million in interest income in 1993. This change was due to the resources
provided by the public offerings in April and October of 1994. See "-- Liquidity
and Capital Resources as of the Period Ended December 31, 1994."

Income before income taxes was $46.9 million or 6.0% of net sales, as
compared to $26.0 million or 5.7% in 1993.

Net income increased to $28.0 million or $1.01 per share, from $15.0 million
in 1993, or $0.64 per share adjusted for a two-for-one stock split effective
April 1994.

YEAR ENDED DECEMBER 31, 1993 COMPARED TO YEAR ENDED DECEMBER 31, 1992

Net sales increased by $180.8 million or 67% to $450.4 million up from
$269.6 million in 1992. The sales increase was attributable to strong growth in
the core domestic businesses: the Macintosh business was up 37% to $300.3
million, the PC/Windows business was up 98% to $99.5 million, with continued
international expansion, international sales were up 258% to $32.6 million.
Additional specialty catalogs contributed $18.0 million.

The sales increase for the core businesses was due to increases in the
active customer base, up 25% for the Macintosh business and 78% for the
PC/Windows business coupled with increased catalog circulation in both business
areas. Also contributing to the sales increase were the outbound telemarketing
programs for both Macintosh and PC/Windows which increased by 106%.

International sales growth was attributable to a growth of 100% in the U.K.
operations and the start up of business in France and Germany. With the
establishment of operations in the new countries, the total European customer
base increased by 132% and the number of catalogs distributed grew by 165% to
1.5 million.

During 1993, MWHS launched four new specialty catalogs: Data CommWAREHOUSE,
CD-RomWAREHOUSE, Micro SuppliesWAREHOUSE and Paper designWAREHOUSE, all of which
contributed $18.0 million in sales in 1993.

Gross profit increased to 19.7% of net sales from 19.5% in 1992. The
increase in gross profit reflected the impact of higher margins in the specialty
catalogs and higher margins from international operations somewhat offset by the
increase in the PC/Windows business as a proportion of total sales which had
lower margins than the Macintosh and specialty businesses.

There was no special incentive compensation paid in 1993, compared to $8.8
million in 1992. In 1992, this item represented the value of shares of MWHS
Common Stock transferred to a consultant and issued to an officer of MWHS in
consideration for the termination of the incentive portions of their agreements
with MWHS. In order to determine the amount to be recorded as compensation
expense as of the termination date, MWHS engaged an independent appraiser to
estimate the fair market value

60
<PAGE>
per share of MWHS Common Stock. For all other periods, this item represented
amounts paid to the consultant and a co-founder under agreements which were
based on profitability.

S,G&A expenses increased to $63.4 million from $39.0 million in 1992, but
decreased as a percent of net sales to 14.1% from 14.5% in 1992. The decrease in
S,G&A expenses as a percent was the result of consolidating the warehouse and
distribution facilities in Wilmington, Ohio, and from productivity gains
attributable to the investment of over $3 million in computer equipment.

In 1993, MWHS generated $0.5 million in interest income as compared to $1.3
million in interest expense in 1992. This change was due to the resources
provided by the initial public offering in December of 1992 and from the
secondary offering in August of 1993. See "-- Liquidity and Capital Resources as
of the Period Ended December 31, 1994."

Income before income taxes was $26.0 million or 5.7% of net sales as
compared to $3.5 million or 1.2% of net sales in 1992. The income in 1992
included the charge of $8.8 million for special incentive compensation which was
discussed above. No similar charge occurred in 1993. Higher domestic income was
partially offset by losses in Europe which totaled $1.8 million in 1993 compared
to a loss of $0.2 million in 1992.

Net income increased to $15.0 million or $0.64 per share from $6.9 million
or $0.39 per share in 1992, on a pro forma basis.

LIQUIDITY AND CAPITAL RESOURCES AS OF DECEMBER 31, 1994

In December 1992, MWHS completed an initial public offering of MWHS Common
Stock resulting in net proceeds to MWHS of $53.2 million. In August 1993, MWHS
completed a secondary offering of MWHS Common Stock resulting in net proceeds to
MWHS of $22.6 million. In April and October 1994, MWHS completed follow-on
offerings of MWHS Common Stock resulting in net proceeds to MWHS of $102.1
million. As of December 31, 1994, MWHS had cash and short-term investments
totaling $74.5 million.

As a result of increased sales, MWHS's inventories increased to $78.7
million at December 31, 1994 from $45.0 million at December 31, 1993 an increase
of 75% which is in line with the sales increase of 72%. Accounts receivable
increased to $80.8 million at December 31, 1994 from $44.1 million at December
31, 1993. Accounts receivable have increased due to an increase in open account
purchases by commercial customers and an increase in advertising receivables
resulting from increased promotional activity.

Capital expenditures for the 12 months of 1994 and 1993 were $13.6 million
and $4.8 million, respectively, primarily for computer systems and distribution
equipment both in the United States and in Europe. During 1994, MWHS expanded
its telemarketing facilities and its warehousing operation by over 287,000 sq.
ft. Additionally, MWHS installed or upgraded computer systems in six countries.
Although MWHS's primary capital needs will be to fund its working capital
requirements for expected sales growth, MWHS expects that future growth will
also require continued expansion of its computer systems and distribution
capacity. At December 31, 1994, MWHS had existing credit facilities which
provided for unsecured revolving credit lines of up to $15 million and
B.P.750,000 for working capital purposes. No borrowings were outstanding under
these facilities as of December 31, 1994.

IMPACT OF INFLATION AND SEASONALITY

MWHS's results are subject to quarterly variations although, in the opinion
of management, these variations are not significant.

Sales growth tends to be stronger in the first and last quarters of the year
with the two middle quarters typically slower. The high growth quarters are
reflective of holiday buying as well as a

61
<PAGE>
customer receptiveness to prospecting. The slower quarters are impacted by the
summer months and a slowdown in buying by schools and universities.

The cost associated with both paper and postage have risen significantly in
the past several months. MWHS has taken a number of actions that have almost
completely offset these increases, such as to increase revenue yield per catalog
by using advertising space more efficiently and reducing expenses by improving
the publishing process by using the latest digital color separation technology
and in some cases, by using thinner paper.

OUTLOOK

MWHS anticipates continued growth in the installed base of personal
computers both in business and in the home. This growth along with MWHS's
strategy to expand internationally and to identify growth market opportunities
for specialty catalogs should increase MWHS's sales in the future.

62
<PAGE>
MWHS MANAGEMENT

DIRECTORS

<TABLE><CAPTION>
PERCENTAGE
SERVED SHARES OF MWHS BENEFICIALLY OWNED
NAME, AGE, PRINCIPAL OCCUPATION OR POSITION, AS COMMON ------------------
OTHER DIRECTOR STOCK BENEFICIALLY BEFORE AFTER
DIRECTORSHIPS AND COMMITTEES OF THE BOARD SINCE OWNED (1)(2) CLOSING CLOSING
- ----------------------------------------------- -------- ------------------ ------- -------
<S> <C> <C> <C> <C>
Peter Godfrey, 50.............................. 1987 2,795,962 9.04% 8.25%
Chairman, President and Chief Executive
Officer
Micro Warehouse, Inc.
Felix Dennis, 47............................... 1992 1,275,963 4.12% 3.76%
Chairman
Dennis Publishing, Ltd. (Publishing)
Committee: Compensation and Stock Option
Frederick H. Fruitman, 45...................... 1992 11,250(3) 0.03% 0.03%
Managing Director
Loeb Partners Corporation (Investment
Banking)
Director: FIND/SVP, Inc.
Committees: Audit, Compensation and
Stock Option, Nominating
Melvin Seiler, 52.............................. 1994 266,329(3) 0.86% 0.78%
Executive Vice President and Chief
Operating Officer
Micro Warehouse, Inc.
Joseph M. Walsh, 52............................ 1993 11,250(3)(4) 0.03% 0.03%
Chairman and Chief Executive Officer
Curtis Circulation Company (Magazine
Distribution)
Committees: Audit, Compensation and
Stock Option, Nominating
</TABLE>

- ------------
(1) Beneficial ownership of MWHS Common Stock is stated as of November 30, 1995.
Under rules of the Securities and Exchange Commission, persons who have
power to vote or dispose of securities, either alone or jointly with others,
are deemed to be the beneficial owners of such securities. In addition,
shares owned separately by spouses are included.

(2) No nominee is the beneficial owner of more than 9.04% of the outstanding
shares of MWHS Common Stock.

(3) Includes shares available for exercise within 60 days of December 15, 1995.

(4) Mr. Joseph M. Walsh exercised his right to acquire 5,000 shares which were
exercisable on October 19, 1994.

Peter Godfrey, co-founder, was appointed Chairman of MWHS on January 25,
1994 and has served as its President, Chief Executive Officer and a Director
since its inception in 1987. He was co-founder of Wandsworth Publishing, Inc.
and MacUser Magazine. From 1974 to 1987, Mr. Godfrey served as Chairman of Fiona
Press, Inc. Prior to 1974, he was employed in various capacities by Marshall
Cavandish Ltd., a United Kingdom publisher of reference books and magazines.

Felix Dennis has served as a Director of MWHS since October 1992 and as a
principal consultant to MWHS since its inception. Mr. Dennis is Chairman of
Dennis Publishing, Ltd., an independently owned computer publishing company that
publishes MacUser magazine as well as other computer magazines in the United
Kingdom, since 1972. He was a consultant to Wandsworth Publishing, Inc. and to
MacUser Magazine.

63
<PAGE>
Frederick H. Fruitman became a Director of MWHS in December of 1992. He has
been a Managing Director of Loeb Partners Corporation, an investment banking
firm, since 1990. Mr. Fruitman is a director of FIND/SVP, Inc.

Melvin Seiler became a Director of MWHS on January 25, 1994, has served as
Executive Vice President since August 1991 and became Chief Operating Officer of
MWHS in November 1991. From 1981 to 1991, Mr. Seiler was President of
Marketquest, a consulting firm specializing in sales and marketing for the
software industry. From 1988 until July 1991, Marketquest consulted to MWHS in
the area of corporate sales. Prior to 1981, Mr. Seiler was employed by Xerox
Corporation in various sales and marketing management positions.

Joseph M. Walsh became a Director of MWHS in February of 1993. He was
President of Curtis Circulation Company, from 1972 through 1974, and again from
1982 through November 1992 when he became Chairman of Curtis. From 1974 through
1982, he was Executive Vice President of Cadence Industries Corporation and
President of certain of its subsidiaries, including Data Systems for Health, a
computerized national billing company, US Pencil and Stationery Company,
primarily an advertising specialty mail-order company, and Perfect Subscription
Companies, which were formerly Perfect School Plans, Moore-Cottrell and Keystone
Readers Digest. He is a Certified Public Accountant.

EXECUTIVE OFFICERS

<TABLE><CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Peter Godfrey*............................ 50 Chairman, President, Chief Executive
Officer and Director
Melvin Seiler*............................ 52 Executive Vice President, Chief Operation
Officer and Director
Steven Purcell............................ 45 Vice President, Finance, Chief Financial
Officer and Treasurer
Bruce L. Lev.............................. 52 Vice President, General Counsel and
Secretary
Deborah Cooper............................ 32 Vice President, Mac Marketing
Powell Crowley............................ 49 Vice President, International Business
Development
George D'Amico............................ 40 Vice President, Sales and TQM
Stephen F. England........................ 42 Vice President, Worldwide Advertising
Martin Gordon............................. 58 Vice President and Chief Information
Officer
Merle McIntosh............................ 40 Vice President, Purchasing
Adam Shaffer.............................. 30 Vice President, Worldwide Marketing
Bruce Schellinkhout....................... 37 Vice President, Distribution
Jeffrey Sheahan........................... 42 Vice President, General Manager of
European Operations
Eric Furman............................... 32 Corporate Controller and Chief Accounting
Officer
</TABLE>

- ------------
* For additional information with respect to Messrs. Godfrey and Seiler, see
"--Directors."

Steven Purcell has served as Vice President, Finance, Chief Financial
Officer and Treasurer of MWHS since November 1991. From February 1988 to October
1991, Mr. Purcell served as President of Misco, Inc., a direct marketer of
computer supplies and accessories. From 1985 to February 1988, Mr. Purcell
served as Vice President of Finance of Electrocomponents, Inc., a distributor of
computer hardware. Misco and Electrocomponents, Inc. are wholly-owned
subsidiaries of Electrocomponents PLC. Prior to 1985, Mr. Purcell was employed
by Hubbel Incorporated. Mr. Purcell is a Certified Public Accountant.

64
<PAGE>
Bruce L. Lev joined MWHS on April 1, 1995 as Vice President, General Counsel
and Secretary. Mr. Lev has served as Secretary of MWHS since October, 1992 and
since inception the law firm of which he was Senior Partner, served as outside
counsel to MWHS. A successor to that firm continues in this capacity and Mr. Lev
is of counsel to said firm. Prior to joining MWHS, Mr. Lev was a lawyer in
private practice in Connecticut since 1968.

Deborah Cooper has served as Vice President of Mac Marketing since January
1994. From 1993 to 1994, Ms. Cooper served as Executive Director of Macintosh
Marketing for MWHS and from 1990 to 1993 was the Director of Macintosh
Marketing.

Powell Crowley has served as Vice President, International Business
Development since October 1, 1993. From April 1992 to October 1993, Mr. Crowley
served as General Manager of European Operations. From 1980 to 1992, Mr. Crowley
was employed by Inmac in various positions, including Director of Marketing and
General Manager of Europe.

George D'Amico has served as Vice President, Sales and TQM since March 1991
and served as Director of Corporate Sales of MWHS from March 1990 until March
1991. From March 1989 to March 1990, Mr. D'Amico was the General Manager of
Micro America, a distributor of computer products, and from 1984 to 1989, he was
employed by Eczel, a reseller of computer supplies, in various sales positions
including Vice President East and Central Region. Prior to 1984, Mr. D'Amico was
employed by Inmac.

Stephen F. England has served as Vice President, Worldwide Advertising since
September 1991 and served as Vice President Catalog-Operations from January 1991
until September 1991. From 1983 to 1990, Mr. England was Managing Director of
Dennis Publishing.

Martin Gordon has served as Vice President and Chief Information Officer of
MWHS since July 1991. From 1976 to June 1991, Mr. Gordon was employed in various
capacities at Margaretten & Co., a mortgage banking company, which at that time
was a subsidiary of Primerica Corporation, most recently as Vice President of
Systems. Mr. Gordon is a Certified Public Accountant.

Merle McIntosh has served as Vice President of Purchasing since October
1994. From 1992 to 1994, Mr. McIntosh served as Director of Product Management
for Entex Information Services, a computer reseller. From 1987 to 1992, Mr.
McIntosh was employed as a Senior Purchasing Manager for Wang Laboratories, a
computer manufacturer.

Adam Shaffer has served as Vice President, Worldwide Marketing since
December 1995 and Vice President-Marketing prior to his promotion since April
1993. From April 1992 to March 1993, he served as Director of the MacSHOPPER
division of MWHS. From November 1989 to April 1992, Mr. Shaffer was the
Software/Hardware Catalog and Product Manager of Global Computer Supplies
Company, a national direct marketer of computer supplies and accessories. From
1984 to 1989, he was employed by Logicsoft, Inc., one of the first direct
marketers of computer software and hardware, in various positions including
Product Marketing Manager and Assistant to the President.

Bruce Schellinkhout has served as Vice President of Distribution since
January 1993. From August 1991 to December 1992, Mr. Schellinkhout served as
Director of Distribution. From June 1989 to July 1991, Mr. Schellinkhout was
employed by MWHS in various operational and managerial positions.

Jeffrey Sheahan has served as Vice President and General Manager, European
Operations since January 1995. From October 1993 to January 1995, Mr. Sheahan
served as General Manager of European Operations and from May 1993 to October
1993, he was the Managing Director for the United Kingdom operations. From 1992
to 1993, Mr. Sheahan was Director of Corporate Sales. From 1989 to 1992, Mr.
Sheahan served as General Manager Eastern Region for Inmac. Prior to 1989, Mr.
Sheahan was employed by Eczel Corporation.

65
<PAGE>
Eric Furman has served as Corporate Controller since April 1990 and became
Chief Accounting Officer of MWHS in September 1993. From April 1988 to April
1990, Mr. Furman was employed as a Senior Accountant by Laventhol & Horwath, a
national public accounting firm. Mr. Furman is a Certified Public Accountant.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF MWHS

The following table sets forth certain information concerning the beneficial
ownership of MWHS Common Stock by each stockholder who is known by MWHS to own
beneficially in excess of 5% of the outstanding MWHS Common Stock as of December
15, 1995.

<TABLE><CAPTION>
AMOUNT AND
NATURE OF PERCENTAGE BENEFICIALLY OWNED
BENEFICIAL ---------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP BEFORE OFFERING AFTER OFFERING
- ------------------------------------ ---------- --------------- --------------
<S> <C> <C> <C>
Peter Godfrey......................................... 2,795,962 9.04% 8.25%
Micro Warehouse, Inc.
535 Connecticut Avenue
Norwalk, CT 06854
Fidelity Management & Research Corporation(1)......... 4,222,910 11.88% 10.84%
82 Devonshire Street
Boston, MA 02109
The Prudential Insurance Company of America(2)........ 2,511,219 8.13% 7.42%
751 Broad Street
Newark, NJ 07102
Jennison Associates Capital Corporation(3)............ 2,508,000 8.58% 7.83%
466 Lexington Avenue
New York, NY 10017
Massachusetts Financial Services Company(4)........... 1,566,600 8.43% 7.69%
500 Boylston Street
Boston, MA 02116
</TABLE>

- ------------
(1) Information concerning beneficial ownership by Fidelity Management &
Research Corporation ("FMR Corp.") is based on a report on Form 13G filed
with the Securities and Exchange Commission as of February 13, 1995. This
report indicates that Fidelity Management & Research Corporation has sole
voting power with respect to 55,200 shares, has no shared power to vote or
to direct the vote, and sole dispositive power with respect to 4,222,910
shares without shared dispositive power. FMR Corp. is an investment advisor
acting as investment advisor to several investment companies and is the
beneficial owner of 4,222,910 shares of MWHS Common Stock. Fidelity Magellan
Fund, one of the referenced investment companies, holds 1,827,800 shares or
6.20% of the common stock outstanding. Fidelity Magellan Fund has its
principal business office at 82 Devonshire Street, Boston, MA 02109.

(2) Information concerning beneficial ownership by Prudential Insurance Company
of America is based on a report on Form 13G filed with the Securities and
Exchange Commission as of February 7, 1995. This report indicates that
Prudential Insurance Company of America has sole voting and dispositive
power with respect to 67,400 shares, has shared voting power with respect to
2,447,119 shares and shared dispositive power with respect to 2,443,819
shares. Prudential Insurance Company of America is a mutual insurance
company whose clients have the beneficial right to the receipt of dividends
or the profits from the sales of such securities. Prudential Insurance
Company of America has its principal business office at 751 Broad St.,
Newark, NJ 07102.

(3) Information concerning beneficial ownership by Jennison Associates Capital
Corporation is based on a report on Form 13G filed with the Securities and
Exchange Commission on March 8, 1995. This report indicates that Jennison
Associates Capital Corporation has sole voting power with respect to 63,000
shares, has shared voting power with respect to 1,997,300 shares and shared
dispositive power with respect to 2,508,000 shares. Jennison Associates
Capital Corporation is an

(Footnotes continued on following page)

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<PAGE>
(Footnotes continued from preceding page)
investment advisor whose clients have the right to receive or the power to
direct the receipt of dividends or the profits from the sales of such
securities. No one client owns more than 5% of MWHS Common Stock. Jennison
Associates Capital Corporation has its principal business office at 466
Lexington Avenue, New York, NY 10017.

(4) Information concerning beneficial ownership by Massachusetts Financial
Services Company ("MFS") is based on a report on Form 13G filed with the
Securities and Exchange Commission as of February 6, 1995. This report
indicates that MFS has sole voting power with respect to 1,498,750 shares,
has no shared voting power and has sole dispositive power with respect to
1,566,600 shares without shared dispostive power. MFS is an investment
advisor and acting as investment advisor to several investment companies and
is the beneficial owner of 1,566,600 shares of MWHS Common Stock. MFS has
its principal business office at 500 Boylston Street, Boston, MA 02116.

The following table sets forth certain information concerning the beneficial
ownership of MWHS Common Stock by the Chief Executive Officer and the four other
most highly compensated executive officers of MWHS. All addresses are c/o Micro
Warehouse, Inc., 535 Connecticut Avenue, Norwalk, CT 06854.

<TABLE><CAPTION>
PERCENTAGE
AMOUNT AND BENEFICIALLY OWNED
NATURE ------------------
OF BENEFICIAL BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP (1) CLOSING CLOSING
- ------------------------------------ ------------- ------- -------
<S> <C> <C> <C>
Peter Godfrey................................................ 2,795,962 9.04% 8.25%
Melvin Seiler................................................ 266,329 * *
Steven Purcell............................................... 35,449 * *
Stephen England.............................................. 27,900 * *
Adam Shaffer................................................. 22,761 * *
All Directors and Officers as a group (17)................... 5,252,726 16.98% 15.50%
</TABLE>

- ------------
(1) Includes 20,729, 32,449, 27,500 and 20,961 shares of MWHS Common Stock which
Melvin Seiler, Steven Purcell, Stephen England and Adam Shaffer,
respectively, have the right to acquire within 60 days of December 15, 1995
through the exercise of stock options. Includes 206,701 shares of MWHS
Common Stock which Directors and Officers as a group have the right to
acquire within 60 days of December 15, 1995 through the exercise of stock
options. Grants under the Annual Bonus Plan for fiscal year 1994 were
distributed in January 1995 for executive officers and other employees and
are included herewith.

* Represents less than one percent

COMPENSATION OF MWHS EXECUTIVE OFFICERS

The following table sets forth information with respect to the Chief
Executive Officer and the four most highly compensated executive officers whose
total annual salary and bonus for the Fiscal Year ended December 31, 1994
exceeded $100,000.

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<PAGE>
SUMMARY COMPENSATION TABLE

<TABLE><CAPTION>
ANNUAL COMPENSATION
--------------------------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OTHER COMPENSATION
- --------------------------- ---- --------- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
Peter Godfrey.............................. 1994 415,000 -- 4,384,000(1)
Chairman, President and Chief 1993 400,000 --
Executive Officer 1992 325,000 75,000
Melvin Seiler (2).......................... 1994 360,000 150,000 8,273
Executive Vice President and 1993 360,000 -- 8,384
Chief Operating Officer 1992 250,000 110,000 754,953(1)
Steven Purcell(3).......................... 1994 219,000 140,000 2,318
Vice President--Finance, 1993 176,923 100,000 2,293
Chief Financial Officer and 1992 150,000 29,100 35,661
Treasurer
Stephen England(4)......................... 1994 175,620 70,000 21,220(4) 2,310
Vice President--Worldwide 1993 156,218 90,312 1,411
Advertising 1992 137,000 48,000
Adam Shaffer(5)............................ 1994 150,000 70,000 2,310
Vice President--Marketing 1993 132,539 50,000 1,969
1992 60,577 140,165 564
</TABLE>

- ------------
(1) Includes S Corporation distribution payments by MWHS in 1992.

(2) Mr. Seiler received 200,000 shares of unregistered stock on January 1, 1992
valued at $675,000. Pursuant to an agreement, such shares were subject to
restrictions on transfer until June 9, 1993. Includes payment by MWHS in
Fiscal Years 1992, 1993 and 1994 of premiums of $7,253, $6,930 and $6,923
respectively, for term life insurance and $2,700, $1,454 and $1,350 in
matching contributions under MWHS's 401(k) Savings Plan for Fiscal Years
1992, 1993 and 1994, respectively.

(3) Mr. Purcell received reimbursement of $34,536 for moving expenses in 1992
and $1,125, $2,293 and $2,318 in matching contributions under MWHS's 401(k)
Savings Plan for Fiscal Years 1992, 1993 and 1994, respectively.

(4) Stephen England received $1,411 and $2,310 in matching contributions under
MWHS's 401(k) Savings Plan for Fiscal Years 1993 and 1994, respectively. Mr.
England exercised his right to acquire and sell 1,000 vested option shares
on October 24, 1994.

(5) Mr. Shaffer received $564, $1,969 and $2,310 in matching contributions under
MWHS's 401(k) Savings Plan for Fiscal Years 1992, 1993 and 1994,
respectively.

EMPLOYMENT AND CONSULTING AGREEMENTS

Peter Godfrey. Under an employment agreement dated July 1, 1992, Peter
Godfrey received a salary of $400,000 per year. The agreement provided that if
Mr. Godfrey's responsibilities were materially altered or diminished following a
change of control of MWHS, he had the right to receive a lump sum payment of all
amounts due under the agreement through the remainder of the term. Commencing
January 1, 1995, Mr. Godfrey entered into a five-year employment agreement.
Under the agreement, Mr. Godfrey receives a base salary of $500,000 per year
and, in addition, may receive annual incentive compensation pursuant to the
Incentive Compensation Plan not to exceed 200% of his base salary, if MWHS
attains certain performance goals. In addition, Mr. Godfrey receives options to
purchase between 40,000 and 50,000 shares of MWHS Common Stock, the exact number
of which is to be determined annually by the Compensation and Stock Option
Committee.

Melvin Seiler. Under an employment agreement from January 1, 1992 until
January 1, 1993, Melvin Seiler received for 1992 a base salary of $250,000 plus
an amount equal to the greater of 1.5% of the net pre-tax profits of MWHS, or
$110,000. From January 1, 1993 until December 31, 1994, Mr. Seiler received an
annual salary of $360,000 and for Fiscal Year 1994 bonus compensation of
$150,000, but as of January 1, 1993 no longer received any portion of MWHS's net
pre-tax profits. In connection

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<PAGE>
with the termination of the incentive portion of his agreement, MWHS issued to
Mr. Seiler 400,000 shares of MWHS Common Stock. Commencing January 1, 1995, Mr.
Seiler entered into a four-year employment agreement. Under the agreement, Mr.
Seiler receives a base salary of $360,000 per year and may receive annual
incentive compensation pursuant to the Annual Incentive Compensation Plan not to
exceed 200% of his base salary, if MWHS attains certain performance goals. In
addition, Mr. Seiler receives options to purchase between 25,000 and 35,000
shares of MWHS Common Stock, the exact number of which is to be determined
annually by the Compensation and Stock Option Committee.

Steven Purcell. Under an employment agreement dated October 1, 1994, Steven
Purcell received a base salary of $219,000 and for Fiscal Year 1994 bonus
compensation of $140,000, based upon his performance and the performance of
MWHS. Commencing January 1, 1995, Mr. Purcell entered into a three-year
employment agreement. Under the agreement, Mr. Purcell receives a base salary of
$275,000 per year and, in addition, may receive annual incentive compensation
pursuant to the Annual Incentive Compensation Plan not to exceed 200% of his
base salary, if MWHS attains certain performance goals. In addition, Mr. Purcell
receives options to purchase between 15,000 and 25,000 shares of MWHS Common
Stock, the exact number of which is to be determined annually by the
Compensation and Stock Option Committee.

Stephen F. England. Under an employment agreement dated January 1, 1992,
Stephen F. England received a base salary of $175,260 and for Fiscal Year 1994
bonus compensation of $70,000 based on achieving certain performance goals with
a minimum guaranteed bonus of $15,000. This agreement terminates upon six months
prior written notice by either Mr. England or MWHS.

Felix Dennis. Under a consulting agreement effective January 1, 1989, Felix
Dennis was entitled to receive $100,000 plus special incentive compensation
equal to one-third of the net pre-tax profits of MWHS per year for providing
certain consulting services to MWHS. The consulting agreement was amended and
now provides that Mr. Dennis receives $100,000 per year for consulting services
to MWHS and no longer receives any portion of MWHS's net pre-tax profits. The
consulting agreement terminates on December 31, 1996. In connection with the
amendment to the consulting agreement, Mr. Godfrey and Robert G. Bartner, a
stockholder and former Chairman of the Board of Directors of MWHS, agreed to
transfer to Mr. Dennis an aggregate of 2,340,000 shares of MWHS Common Stock of
MWHS held by them. Mr. Dennis received $798,000, $2,229,000 and $100,000 for
consulting services rendered in 1990 and 1991 and 1992, respectively.

Adam Shaffer. Under an amendment to an employment agreement effective April
26, 1993, Adam Shaffer received a base salary of $150,000 per year and for
Fiscal Year 1994 bonus compensation of $70,000 based upon the performance of
MWHS. The agreement terminates on December 31, 1995.

Powell Crowley. Under an employment agreement dated October 1, 1993, Powell
Crowley received a base salary of $134,000 and for Fiscal Year 1994 bonus
compensation of $24,000 based on performance in the discretion of MWHS not to
exceed twenty percent of base salary as the same may be adjusted from time to
time. This agreement may be terminated by MWHS within 30 days prior written
notice and may be terminated by Mr. Crowley upon 90 days prior written notice.

1992 AND 1994 STOCK OPTION PLANS

The Board of Directors and stockholders of MWHS approved the 1992 Stock
Option Plan and the 1994 Stock Option Plan (the "Plans") of MWHS, which provide
for the grant of stock options to officers, directors and key employees of, and
consultants to, MWHS and its subsidiaries. Under the Plans, MWHS may grant
options that are intended to qualify as incentive stock options ("Incentive
Stock Options") within the meaning of Section 422A of the Internal Revenue Code
of 1986, as amended (the "Code"), or options not intended to qualify as
Incentive Stock Options. ("Nonstatutory Stock Options"). Incentive Stock Options
may not be granted to consultants to MWHS who are not also

69
<PAGE>
employees of MWHS. A total of up to 1,500,000 shares of MWHS Common Stock may be
issued upon the exercise of options granted under the Plans.

The Plans may be administered by the Board of Directors or the Compensation
and Stock Option Committee. Subject to the provisions of the Plans, the Board
has the authority to select the employees or consultants to whom options are
granted and determine the terms of each option, including (i) the number of
shares of MWHS Common Stock covered by the option, (ii) when the option becomes
exercisable, (iii) the option exercise price, which must be at least 100%, with
respect to Incentive Stock Options, and at least 85%, with respect to
Nonstatutory Stock Options, of the fair market value of the MWHS Common Stock as
of the date of grant, and (iv) the duration of the option (which may not exceed
ten years). All options are nontransferable other than by will or the laws of
descent and distribution.

Additionally, Mr. Dennis has agreed with MWHS that he will not receive
options under the Plans. Mr. Godfrey will only receive options as granted by the
Board pursuant to his employment agreement.

SECTION 401(K) SAVINGS PLAN

Effective July 1, 1992, the Board of Directors adopted the Micro Warehouse,
Inc. 401(k) Savings Plan, which is intended to qualify under Sections 401(a) and
401(k) of the Internal Revenue Code. All full-time employees of MWHS over the
age of 21 with at least 6 months of employment are eligible to participate in
the Plan. Each eligible employee may elect to contribute to the 401(k) Plan,
through payroll deductions, up to 15% of his or her salary, limited to $9,240 in
1995. MWHS will make matching contributions of 25% of the first 6% of
contributions made by employees and may make discretionary profit sharing
contributions to the 401(k) Plan. As of December 31, 1994, MWHS has not made any
discretionary profit sharing contributions to the 401(k) Plan.

OPTIONS GRANTED IN LAST FISCAL YEAR

The following table shows the individual grant of non-qualified stock
options to the Chief Executive Officer and the other four most highly
compensated executive officers of MWHS for fiscal year 1994.

<TABLE><CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
% OF TOTAL APPRECIATION FOR 10
OPTIONS EXERCISE YR. OPTION TERM
GRANT OPTIONS GRANTED IN PRICE PER -------------------
NAME DATE(2) GRANTED(#) FY 1994 SHARES($)(1) EXPIR. 5%($) 10%($)
---- ------- ---------- ---------- ------------ ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Adam Shaffer................ 4/25/94 14,000 6.97% $21.50 4/25/04 $189,297 $479,716
</TABLE>

- ------------
(1) The potential realizable value portion of the foregoing table illustrates
value that might be realized upon exercise of the options immediately prior
to the expiration of their term, assuming the specified compounded rates of
appreciation on MWHS Common Stock over the full term of the options.

The rates of appreciation are assumed rates established by the Securities
and Exchange Commission and are not intended as a forecast of future
appreciation. Options were granted to the above executive officer on April
25, 1994; therefore, a 5% annual appreciation results in a stock price
appreciation of $13.52 per share and 10% results in a stock price
appreciation of $34.27 per share. The actual gain, if any, realized by the
recipient will depend upon the actual performance of MWHS Common Stock.
There can be no assurance that the amounts reflected in this table will be
achieved.

(Footnotes continued on following page)

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<PAGE>
(Footnotes continued from preceding page)
(2) Vests 25% per year over a four-year period as determined by the Compensation
and Stock Option Committee. The stock options granted in fiscal year 1994 to
the executive officer named above become fully vested on April 25, 1999.

(3) Messrs. Godfrey, Seiler, Purcell and England have not received any stock
option grants during fiscal year 1994.

OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES

The following table lists the shares acquired on exercise of options by the
Chief Executive Officer and the other four most highly compensated executive
officers during fiscal year 1994 and certain information as to options
unexercised at the end of fiscal year 1994.

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN-
NUMBER OF UNEXERCISED THE-MONEY OPTIONS AT FISCAL
SHARES OPTIONS AT FY END # YEAR END #(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE # REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Peter Godfrey................... -- -- -- -- -- --
Melvin Seiler................... -- -- 4,000 36,000 $ 95,980 $ 863,820
Steven Purcell.................. -- -- 16,600 89,400 $ 414,317 $ 2,193,153
Stephen England................. 1,000 $ 21,220 12,300 74,700 $ 305,538 $ 1,828,426
Adam Shaffer.................... -- -- 12,100 67,900 $ 301,939 $ 1,498,580
</TABLE>

- ------------
(1) Values have been calculated based on the closing price of MWHS Common Stock
reported on NASDAQ on December 31, 1994 at $35.00 per share.

COMPENSATION AND STOCK OPTION COMMITTEE INTERLOCKS AND INSIDERS PARTICIPATION

The Compensation and Stock Option Committee's Members from October 1993
until December 31, 1994 were Felix Dennis and Peter Godfrey. The members of the
Committee as of January 1, 1995 are Frederick H. Fruitman and Joseph M. Walsh.
Peter Godfrey, the Chairman, President and Chief Executive Officer, did not
participate in any decisions related to his compensation. Mr. Godfrey was
compensated pursuant to his employment agreement with MWHS which was entered
into prior to his joining the Compensation and Stock Option Committee.
Commencing January 1, 1995, Mr. Godfrey's employment agreement was terminated
and he entered into a new five-year agreement with MWHS. He did not participate
as a member of the Committee in any decisions related to his new employment
agreement.

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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OF MWHS

AGREEMENTS

In 1994 and 1995, MWHS paid Loeb Partners Corporation aggregate advisory
fees of $150,000 in connection with MWHS's follow-on public offerings. Frederick
H. Fruitman, a Managing Director of Loeb Partners Corporation, presently serves
as a Director of MWHS.

Under a consulting agreement effective January 1, 1989, Felix Dennis was
entitled to receive $100,000 plus special incentive compensation equal to
one-third of the net pre-tax profits of MWHS per year for providing certain
consulting services to MWHS. The consulting agreement was amended as of January
1, 1992 and now provides that Mr. Dennis receives $100,000 per year for
consulting services to MWHS and no longer receives any portion of MWHS's net
pre-tax profits. The consulting agreement terminates on December 31, 1996. In
connection with the amendment to the consulting agreement, Messrs. Godfrey and
Bartner, agreed to transfer to Mr. Dennis an aggregate of 2,340,000 shares of
MWHS Common Stock held by them. Mr. Dennis received $798,000, $2,229,000 and
$100,000 for consulting services rendered in 1990, 1991, and 1992, respectively.

Pursuant to his consulting agreement, Felix Dennis renders advice to MWHS
from time to time with respect to catalog publishing, the direct mail business
and the computer industry in general. MWHS utilizes Mr. Dennis' expertise in
magazine design and long-term experience in the computer industry in providing
strategic recommendations to management and the Board of Directors. Mr. Dennis'
annual consulting fee was negotiated on an arm's length basis.

LEASES

MWHS leases 12,000 square feet of executive office space in South Norwalk,
Connecticut from Mr. Godfrey, President and Chief Executive Officer of MWHS, and
13,500 square feet of office space in South Norwalk from an entity controlled by
Mr. Godfrey and Mr. Bartner. MWHS paid a total of $312,000 in 1994 to such
affiliated parties for rent. These leases expire on December 31, 1997.

S CORPORATION DISTRIBUTIONS AND RELATED PARTY INDEBTEDNESS

MWHS made S Corporation distribution payments of $2,117,000 and $4,384,000
to Mr. Bartner, a co-founder of MWHS, and $2,117,000 and $4,384,000 to Mr.
Godfrey for 1991 and 1992, respectively. The distribution payments represented
previously taxable income and contributed capital of MWHS for such periods,
including amounts necessary for them to pay federal and state income taxes on
MWHS's income. No distribution payments were made to them for 1989 or 1990. MWHS
became a C corporation on June 30, 1992.

The 1991 S Corporation distribution payments to Messrs. Bartner and Godfrey,
net of amounts necessary for them to pay federal and state income taxes on
MWHS's income in 1991, were returned by them to MWHS for working capital as
loans or as capital contributions which were subsequently converted to loans.
MWHS repaid all such indebtedness, totaling $12,300,000, with a portion of the
net proceeds from its initial public offering in December 1992.

MWHS made S Corporation distributions to Melvin Seiler in the amount of
$100,000 in 1992. Such amount was loaned to MWHS and was repaid in full with a
portion of the net proceeds of its initial public offering.

MICRO WAREHOUSE INTERNATIONAL, INC.

Prior to June 30, 1992, MWHS elected to be treated for federal income tax
reporting purposes as an S Corporation under Subchapter S of the Code. During
that time, regulations under the Code prohibited MWHS from establishing
subsidiary corporations. On June 2, 1992, Micro Warehouse

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<PAGE>
International, Inc. ("MWI") was organized in Delaware for the purpose of owning
all of the outstanding capital stock of the foreign corporations which were
established to conduct the business of MWHS in the United Kingdom, France and
Germany. Prior to termination of MWHS's S Corporation status, all of the
outstanding stock of MWI was held by Messrs. Godfrey and Bartner. On June 30,
1992, Messrs. Godfrey and Bartner contributed their ownership interests in MWI
to MWHS for no consideration. In addition, at the time of organization of MWI,
Messrs. Godfrey and Bartner, the stockholders of the United Kingdom entity
transferred their ownership interests to MWI.

MACUSER MAGAZINE-UNITED KINGDOM

MacUser, PC Pro, The Mac and Computer Shopper Magazines are owned and
published in the United Kingdom by Dennis Publishing, Ltd., of which Felix
Dennis is a controlling stockholder, and Chairman. MWHS may from time to time
purchase advertising space in and subscriber lists from these magazines for
purposes of marketing its products in the United Kingdom.

FUTURE POLICY

MWHS believes that the transactions described above were at rents, prices
and terms which were no less favorable to MWHS than would have been available in
similar transactions with unrelated parties. MWHS has adopted a policy that
future transactions with affiliated entities or persons will be on terms no less
favorable than could be obtained from unrelated parties and all future
transactions between MWHS and its officers, directors, principal stockholders
and affiliates will be approved by a majority of MWHS's independent directors.

DESCRIPTION OF MWHS CAPITAL STOCK

AUTHORIZED CAPITAL STOCK

MWHS's certificate of incorporation provides that the authorized capital
stock of MWHS consists of 50,000,000 shares of MWHS Common Stock, of which
30,929,058 were issued and outstanding as of November 30, 1995 and 100,000
shares of preferred stock, $0.01 par value per share ("MWHS Preferred Stock"),
none of which were issued and outstanding as of November 30, 1995.

COMMON STOCK

Each holder of MWHS Common Stock is entitled to one vote for each share held
of record on each matter submitted to a vote of stockholders and does not have
cumulative voting rights. Accordingly, the holders of a majority of the shares
of MWHS Common Stock entitled to vote in any election of directors may elect all
of the directors standing for election. Subject to any preferences which may be
granted to the holders of MWHS Preferred Stock, each holder of MWHS Common Stock
is entitled to receive ratably such dividends, if any, as may be declared by the
Board of Directors out of funds legally available therefor, as well as any
distributions to the stockholders upon liquidation, dissolution or winding up of
MWHS. Each holder of MWHS Common Stock is entitled to share ratably in all
assets of MWHS remaining after payment of all debts and other liabilities and
subject to the prior rights of any outstanding MWHS Preferred Stock. Holders of
MWHS Common Stock have no conversion, redemption, subscription or preemptive
rights or other rights to subscribe for additional shares. The outstanding
shares of MWHS Common Stock are, and the shares to be received in this offering
will be, validly issued, fully paid and nonassessable. The rights, preferences
and privileges of holders of MWHS Common Stock are subject to, and may be
adversely affected by, the rights of the holders of shares of any series of MWHS
Preferred Stock which MWHS may designate and issue in the future.

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<PAGE>
PREFERRED STOCK

The Board of Directors, without stockholder approval, may issue shares of
MWHS Preferred Stock in one or more series and may fix or alter the rights,
preferences, privileges and restrictions, including the voting rights,
redemption provisions (including sinking funds provisions), dividend rights,
dividend rates, liquidation rates, liquidation preferences and conversion
rights. The issuance of the MWHS Preferred Stock could decrease the amount of
earnings and MWHS assets available for distribution to holders of MWHS Common
Stock or adversely affect the rights and powers, including voting rights, of the
holders of MWHS Common Stock. Further, the issuance of the MWHS Preferred Stock
could have the effect of delaying, deferring, or preventing a change in control
of MWHS without further action by the stockholders.

CERTAIN CORPORATE GOVERNANCE MATTERS

MWHS's certificate of incorporation and by laws provide, in general, that
(a) subject to certain restrictions, vacancies on the Board of Directors and
newly created directorships resulting from any increase in the authorized number
of directors may be filled by a majority of the directors then in office, though
less than a quorum, or by a sole remaining director, and the directors so chosen
shall hold office until the next annual election and until their successors are
duly elected and qualified, unless sooner displaced, (b) the Board of Directors
has the authority to fix the compensation of directors, and (c) the Board of
Directors has the authority to adopt, amend or repeal the by laws. Furthermore,
MWHS is subject to Section 203 of the DGCL. See "The Merger--The Merger
Agreement--Miscellaneous-- Delaware Law".

The foregoing provisions of MWHS's certificate of incorporation and its by
laws may discourage or make more difficult the acquisition of control of MWHS by
means of a tender offer, open market purchase, proxy contest, or otherwise.
These provisions are intended to discourage or may have the effect of
discouraging certain types of coercive takeover practices and inadequate
takeover bids and to encourage persons seeking to acquire control of MWHS first
to negotiate with MWHS. MWHS's management believes that the foregoing measures,
many of which are substantially similar to the takeover-related measures in
effect for many other publicly held companies, provide benefits by enhancing
MWHS's potential ability to negotiate with the proponent of an unfriendly or
unsolicited proposal to take over or restructure MWHS that outweigh the
disadvantages of discouraging such proposals because, among other things,
negotiation of such proposals could result in an improvement of their terms.

BUSINESS OF INMAC

GENERAL

Inmac, founded in 1975, is a leading international direct-response marketer
of multi-vendor products for the computer desktop and networking industries.
Inmac pioneered the computer direct response marketing channel when it
introduced the first computer supplies and accessories catalog. Inmac markets
its products directly to personal computer, workstation, and minicomputer users
in business, professional, educational and government organizations, mainly
through targeted mailings of platform-specific and industry-specific full-color
catalogs, but also through its direct sales force, and its telemarketing
organization.

SIGNIFICANT BUSINESS DEVELOPMENTS DURING FISCAL YEAR 1995

Net income increased $2.7 million or 150% on revenue growth of $13.1 million
or 4% over the prior fiscal year. The U.S. operations improved significantly in
the last fiscal year, as reflected in the increase

74
<PAGE>
in net income over the prior fiscal year. Worldwide revenues, although impacted
by the downsizing of the U.S. operations, have continued to improve every year
since inception.

On June 29, 1995, Inmac received $20 million in a private placement of term
debt with the Prudential Insurance Company. The proceeds were used to refinance
existing debt and for working capital needs. Following the private placement,
Inmac established a $30 million syndicated multi-currency revolving credit
facility led by ABN-AMRO Bank N.V. The term debt and revolving credit facility
will provide Inmac with the flexibility to pursue strategic expansion
opportunities.

In November 1994, Inmac appointed Jeffrey A. Heimbuck to the position of
President and Chief Executive Officer, succeeding Kenneth A. Eldred, who remains
Chairman of the Board. Mr. Heimbuck was formerly President and Chief Operating
Officer of Inmac.

In July 1995, Inmac appointed Raymond E. Nystrom Vice President of Finance
and Chief Financial Officer. Mr. Nystrom, who will continue as Vice President,
General Manager of North America, formerly held various senior level finance and
accounting positions with Inmac.

PERSONAL COMPUTER PRODUCTS MARKET AND COMPUTER AFTERMARKET OVERVIEW

The personal computer products market and the computer aftermarket are
highly fragmented and consist of many channels of distribution. Inmac
participates mainly in the direct-response segment of this market. Direct
response is a method of distribution that relies on the mass mailing of
catalogs, periodical advertising and other mailers or communications directly to
targeted prospective customers. In addition to direct response, other
distribution channels include local office products suppliers, local and
national retail computer stores that carry computer supplies, and computer
superstores. Distribution channels also include manufacturers of computer
systems and aftermarket products, and computer supply and office product
distributors. For a discussion of the competition that Inmac faces in the
marketplace, see "--Competition."

The decentralization of computers throughout factory, business, engineering
and office environments has made it increasingly difficult and expensive for
many suppliers to use traditional direct sales methods to locate users, initiate
sales contacts and effectively provide service to customers. Quantities ordered
tend to be smaller, reflecting individual requirements rather than the volume
needs traditionally associated with centralized data processing departments. In
addition, the growing number of non-technical users has increased the need for a
knowledgeable source for quality products. Inmac addresses these needs through
its direct-response marketing strategy and a commitment to customer service and
support, including a qualified customer technical support staff.

MARKETING, SALES AND CUSTOMER SERVICE

Inmac markets and sells directly to business, professional, educational and
government end-users of personal computers and minicomputers. Inmac was among
the first to adapt consumer direct response sales techniques to these business
markets. Inmac's primary selling vehicle is an array of full-color catalogs, but
Inmac supplements its catalogs with promotional direct mail pieces, direct sales
personnel, customer service representatives, fax catalogs, and targeted
telephone marketing. Additionally, Inmac's product specialists provide pre-sales
and post-sales technical support.

Inmac has developed a proprietary customer and prospect list of computer
users, which Inmac believes represents a major resource to it. Inmac obtains
selective lists of prospective customers from suppliers, manufacturers, and
computer-related magazine publishers. Inmac intends to continue to develop
focused catalog mailings based on analyses of buying patterns.

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As a part of Inmac's commitment to service and support, Inmac provides a
30-day satisfaction guarantee for almost all products except for opened software
and consumables. In addition, substantially all products sold by Inmac are
guaranteed against defects in materials and workmanship for at least one year. A
number of products have longer warranties offered by manufacturers, and a few
have lifetime guarantees. Inmac tracks returns at the SKU level to monitor
product performance and customer satisfaction, and to reduce overall returns.

CUSTOMERS

Inmac conducts full-service operations in seven countries including the
United States, Canada, the United Kingdom, France, Germany, the Netherlands, and
Sweden. Inmac offers local language catalogs in each of these markets. Inmac's
products are sold to organizations in such diverse industries as aerospace,
banking, communications, education, electronics, food, government, consumer
products, and pharmaceuticals. No single customer has accounted for more than 1%
of Inmac's sales in any of the past three fiscal years. Because of Inmac's
prompt shipment policy, it has no significant order backlog.

DISTRIBUTION AND OPERATIONAL LOCATIONS

Inmac's strategy is to provide "just-in-time" delivery to its customers.
Inmac delivers approximately 95% of its orders to customers within two business
days after orders are accepted for available products. Inmac's prompt delivery
standards are the result of strategically placed distribution centers in the
U.S., Canada, and Europe, including agreements with freight-logistics providers.
Inmac maintains sales, service, and distribution operations in Dallas, Texas;
Toronto, Canada; Manchester/Liverpool and Bracknell, United Kingdom; Frankfurt,
Germany; Paris, France; Amsterdam, the Netherlands; and Smedjebacken, Sweden.

Inmac's operations in fiscal year 1995 were located in the U.S., Canada,
France, Germany, the Netherlands, Sweden, and the U.K. European sales were 73%
of consolidated sales in fiscal year 1995, 68% in fiscal year 1994, and 69% in
fiscal year 1993.

Material risks attendant to the foreign operations include foreign currency
exposure, postal strikes, transportation and tariff restrictions, product
sourcing, and regulatory approval issues. The investment in foreign countries
includes the risks of impacting operating results because of mailing list
development costs, and the potentially increased effective income tax rate
caused by unutilized foreign operating losses and higher marginal tax rates in
certain foreign tax jurisdictions.

PRODUCTS

Inmac believes that its ability to offer a broad, innovative product line
has been an important factor in its success. Inmac's marketing staff
continuously evaluates new products and selects products for catalogs based on
customer demand, quality, features, price, margins, and sales trends. Inmac also
develops or improves products to address end-user requests. Inmac currently
sells over 6,000 catalog items. Inmac offers products customized for personal
computers, workstations and minicomputers, from a large number of manufacturers,
including 3Com, 3M, Novell, Canon, IBM, Hewlett-Packard, Digital Equipment,
Sony, American Power Conversion and others. Inmac offers items in three broad
product groups:

NETWORKING AND SYSTEMS

Interconnect. Inmac offers a broad range of products to facilitate the
transfer of data within and between computer systems. These products include
cable products, connectors, and switching systems. In addition to standard cable
products, Inmac provides a custom cable service which allows end-users to

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order cables tailored to their individual requirements. These cables are
generally produced within two to three days.

Net Connect/Unix. Inmac sells a broad range of connectivity and networking
product solutions including Unix workstation support products, servers, bridges,
B/Routers, networking software, test equipment, peripheral sharing devices,
modems and extenders, and power protection devices.

Datacom/Power. Inmac offers data line drivers and data communications
products including modems and buffering systems that facilitate data exchange
and carry digital signals from point to point. Inmac also offers power
conditioning systems to protect systems from power surges and losses.

DESKTOP HARDWARE AND SOFTWARE

Personal Computers. Inmac sells a complete line of PC's including desktops
and notebooks from such industry leaders as Compaq, IBM, NEC, Packard Bell, and
Toshiba.

Peripherals. This group includes monitors, printers, CD-ROM drives, disk
drives, memory, accelerators, keyboards and other items. Monitors are available
from NEC, Sony, Philips and Magnavox. Printers offered include Hewlett-Packard
Laserjets and Deskjets, Canon Bubble-Jets and lasers, IBM by Lexmark lasers,
plus Epson, Brother, Okidata, and Panasonic printers. Inmac also offers
rewritable optical disks, CD-ROM's, and other storage devices.

Software. Inmac offers a broad selection of major software titles from
vendors including Microsoft, Lotus Development, Corel, Symantec, and Adobe. The
offering includes software for graphics and design, desktop publishing,
multi-media, business applications, programming tools, and utilities.

CONSUMABLE AND COMPLEMENTARY PRODUCTS

Accessories. Inmac provides tabletop space management products, data entry
devices, cleaning aids, glare control products and other products designed to
enhance the use of computer systems.

Furniture. Inmac offers mobile and stationary workstations and peripheral
space management products, security cabinets, storage for computer media and
printouts, and tabletop and freestanding sound control enclosures for printers
and plotters. These products are designed to the ergonomic and functional needs
of computer users.

Data Storage Media. Inmac sells a broad line of Inmac-branded flexible and
rigid media, data cartridges and reel-to-reel tape products for data storage.
Inmac also offers the most frequently requested national brand media products
ranging from flexible media to recordable CDs, to accommodate customers with
strong brand loyalties.

Supplies. Inmac provides a wide range of supplies for laser, ink jet, and
impact printers and plotters. Inmac markets these products under its Good
Impressions and Black Pearl labels, as well as popular name brands including
Hewlett-Packard.

MANUFACTURING AND SUPPLIERS

Inmac manufactures and assembles certain of its products in order to
expedite product introduction, ensure a steady supply of quality products, and
reduce cost of goods sold. Inmac manufactures and assembles cable and data
communications products in East Kilbride, Scotland, an ISO 9000 certified
facility. In addition, some cable assembly is performed at its facility in
Sunnyvale, California. The various countries into which Inmac sells in volume
have established specifications and regulations for data communication products.
Inmac tests its data communications products to assure they meet or

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exceed the applicable Federal Communications Commission Class A and Class B
emissions regulations, and also designs and tests to international
specifications as required. Approximately 5% of Inmac's sales are attributable
to products manufactured by Inmac.

Independent manufacturers produce and package substantially all of the
catalog items other than data communications products. At the end of fiscal year
1995, Inmac had over 800 suppliers worldwide. Inmac believes its relationships
with its suppliers are good.

COMPETITION

The computer products market and the computer aftermarket in which Inmac
participates are highly competitive. The major competitive factors in Inmac's
market include the quality and reliability of the products, overall company
image, service, speed of delivery, product performance, quality and price. Inmac
faces competition from other direct-response marketers, as well as from
competitors in other channels of distribution. These competitors include office
products suppliers, local and national retail computer stores, manufacturers of
computers and aftermarket products, computer supply and office products
distributors, and computer superstores. Certain hardware and software vendors
also sell their products directly through their own catalogs.

While many companies compete aggressively for part of the marketplace, no
single company is dominant. Certain of Inmac's competitors, particularly
computer manufacturers and competitors in the other channels of distribution,
have substantially greater financial and technical resources and greater sales
volume than Inmac. Inmac faces significant price competition across all product
lines and markets. Price competition on widely distributed products can be
particularly intense. Pricing is becoming an increasingly important factor on a
country by country basis. Inmac is unable to predict the impact of increased
competition, but it is possible that such competition could adversely affect
sales, gross profit, and net income.

EMPLOYEES

As of October 28, 1995, Inmac employed approximately 940 persons (275 in
North America and 665 in Europe), down almost 28% from approximately 1,300
employees in February 1993, when Inmac initiated its restructuring. None of
these employees are represented by a union and Inmac has never experienced a
work stoppage. Inmac considers its employee relations to be good.

PROPERTIES

Inmac currently leases executive offices in Santa Clara, California, in a
46,625 square foot building under a lease that expires in April 1999. Inmac
leases a 26,000 square foot facility in East Kilbride, Scotland, for use in
manufacturing data communications products. This lease expires in March 1997. In
North America, Inmac leases three facilities in addition to its executive
offices. These facilities have a total of 122,532 square feet under leases which
expire between September and November 1998. In Europe, Inmac has executive
offices in Bracknell, England totaling 21,330 square feet under leases which
expire in 2011. In Europe, Inmac also leases nine facilities with a total of
282,649 square feet under leases which expire between April 1996 and October
2015. Inmac believes that current properties are suitable for its business as
presently conducted. Certain of the facilities in the U.S. and Europe which are
noted above are not fully occupied by Inmac and have been subleased. A reserve
for the estimated costs associated with some of these sublease activities was
provided for as part of the fiscal year 1993 business restructuring.

LEGAL PROCEEDINGS

Inmac is not a party to any legal proceedings which it believes are material
to its financial results.

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

FINANCIAL CONDITION FOR THE QUARTER ENDED OCTOBER 28, 1995

Cash and cash equivalent balances decreased by $10.6 million since July 29,
1995 reflecting the reduction in short term bank borrowings of $11.3 million.
Operating activities in the first quarter of fiscal year 1996 provided $0.8
million in cash and $0.1 million was used in investing activities. In addition,
exchange rates had a $0.3 million unfavorable effect on cash balances.

Receivables, net of allowances, increased by $6.2 million since July 29,
1995 and were $2.1 million higher than the same quarter-end last year. This
increase was due to greater sales volume to date in fiscal year 1996,
particularly at quarter-end. Accounts receivable days of sales outstanding at
October 28, 1995 were higher than at July 29, 1995, due to the fiscal year 1996
first quarter sales increase and lower than the first quarter of fiscal year
1995.

Inventories increased by $0.4 million since fiscal year-end. Inventories
were $0.7 million lower than at the first quarter-end last year, reflecting
improved inventory turns due to the continued focus on inventory management.

Prepaid expenses and other current assets increased by $0.5 million since
fiscal year-end but were down $2.7 million compared to the first quarter-end
last year. The change from the first quarter of last fiscal year resulted from a
reduction of income taxes receivable and a more refined process for billing and
collection of catalog vendor funding.

Property, plant and equipment, net decreased from fiscal 1995 year-end by
$0.6 million as depreciation recorded on existing fixed assets exceeded new
fixed asset investment activity.

Accounts payable increased by $4.9 million and accrued liabilities by $2.9
million since July 29, 1995 (total increase of $7.8 million), however on a
combined basis they decreased from the first quarter-end last year by $0.7
million. The increase since fiscal 1995 year-end resulted from normal inventory
purchases to support sales growth and utilization of vendor trade payables to
fund related operating purchases.

Bank debt and other liabilities at the end of the quarter decreased $11.3
million and $23.5 million from July 29, 1995, and October 29, 1994,
respectively. The decrease since year-end reflected the utilization of cash
received in the private placement of debt consummated late in the fourth quarter
of fiscal year 1995. The decrease since the first quarter of fiscal year 1995
represented the substitution of long-term financing for short-term financing as
reflected by the $19.5 million increase in long-term debt and other liabilities.

Assets and liabilities of foreign subsidiaries are translated at the rates
of exchange at balance sheet dates. Gains and losses resulting from translation
are accumulated as a separate component of stockholders' equity. As of fiscal
1995 year-end, the translation adjustment had resulted in a cumulative decrease
in net equity of $0.6 million. A general strengthening of the U.S. dollar
relative to the European currencies since year-end resulted in an cumulative
decrease in net equity of $1.5 million as of October 28, 1995.

RESULTS OF OPERATIONS FOR THE QUARTER ENDED OCTOBER 28, 1995

Sales for the quarter increased by $6.5 million or 7.8% to $90.4 million
compared to $83.9 million for the first quarter last year. On a comparable
currency basis, first quarter sales were up 4.3%, as North American sales
increased by 5.6% reflecting the increased catalog mailings in the U.S. European
sales were up 8.7%. Currency translation favorably affected the quarter's
reported sales by 3.5%.

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Sales for the Desktop Hardware/Software Division increased by 26.6% over the
same quarter last year. This increase was led by the strong performance of the
U.S. Desktop Hardware/Software Division with sales up 41.3%. Sales for the
Networking Products Division increased 6.7%. Sales from the Consumable and
Complementary Products Division decreased 5.1%.

Gross margin for the quarter declined to 32.6% from 34.1% in the same
quarter a year ago. This margin reduction was primarily due to the promotional
pricing strategy and shift in mix of business with faster growing but lower
margin desktop hardware and software products becoming a higher percentage of
total sales. The gross margin percentage, however, reflected a better mix of
higher margin products this quarter than in the third and fourth quarters of
fiscal year 1995, which were 32.3% and 31.8%, respectively. The decrease from
first quarter last year also reflected the increasingly competitive nature of
Inmac's business in each of its markets. Inmac expects these factors to result
in a decline in gross profit margins over time.

The decline in gross profit margins were offset by a continued reduction in
selling, general and administrative expenses as a percentage of net sales.
Selling, general and administrative expenses increased $1.0 million compared to
the first quarter last year, but declined to 29.9% of sales for the first
quarter of fiscal year 1996 compared to 31.1% for the first quarter last year.
This reduction of selling, general and administrative expenses as a percentage
of sales reflected the continuing efforts of Inmac to reduce and minimize
overhead expenses.

Net interest expense was $0.5 million for the first quarter compared to $0.4
million for the same quarter last year. The higher interest expense reflected
the higher interest rate and related deferred finance cost amortization on term
debt obtained in a private placement in the fourth quarter of fiscal year 1995.

Income tax expense was $0.9 million for the first quarter compared to $1.1
million for the first quarter last year. The reduction in income taxes reflected
the stronger profitability of the U.S. and Canadian operations. Both the U.S.
and Canadian operations have net operating loss carryovers that have not been
tax effected for financial reporting purposes. Accordingly, profits in these
counties should result in a lower effective tax rate for Inmac.

LIQUIDITY AND CAPITAL RESOURCES AS OF OCTOBER 28, 1995

As of October 28, 1995, Inmac had $35.0 million in unused lines of credit
and $10.5 million in cash and cash equivalents. Inmac believes that its existing
cash balances, cash generated from future operations, borrowings under existing
lines of credit, and its ability to obtain additional credit will be sufficient
to meet its working capital needs through the end of fiscal year 1996.

FUTURE RESULTS

Inmac's new catalogs, new products, and ongoing low price strategy have
generated increased sales for Inmac; however, Inmac expects downward pressure on
prices to continue to gradually erode gross margin percentages over time. Inmac
expects sales to continue to grow faster on lower margin desktop hardware and
software products than in its other product categories. The restructuring
efforts have resulted in more cost efficient operations, and Inmac will continue
to seek ways to reduce costs to improve its operating performance and return on
assets.

The second quarter has historically been a seasonally weak quarter for Inmac
and for the industry in general. These factors resulted in losses for Inmac in
fiscal years 1992 and 1993, however, Inmac was profitable in the second quarter
of fiscal years 1994 and 1995. The current strikes and other labor unrest in
France may adversely impact Inmac's operating results in the second quarter of
fiscal year 1996.

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Inmac expects downward pressure on prices and faster growth in the lower margin
Desktop Hardware/Software Division to continue to erode overall gross margin
percentages. Although past restructuring efforts have resulted in more cost
efficient operations, Inmac will continue to seek ways to reduce costs and to
improve operating performance and return on assets.

Inmac's operating results for the rest of fiscal year 1996 will also be
affected by worldwide economic conditions including the economic conditions in
its markets. In addition, operating results will be affected by fluctuations in
exchange rates among the countries in which Inmac operates. International sales
account for over 70% of Inmac's sales. Accordingly, since currency fluctuations
are unpredictable, and even though Inmac seeks to protect itself from excessive
fluctuations, operating results may be affected from quarter to quarter. Other
factors which impact sales and operating results from quarter to quarter include
ongoing competitive pressures, sales seasonality, the timing of catalog
mailings, and the effectiveness of Inmac's promotional pricing strategy.
Operating results in fiscal year 1996 may not be comparable to the same quarters
in fiscal year 1995.

ANNUAL RESULTS OF OPERATIONS

Sales. Inmac has recorded sales increases each year since its inception in
1975. Fiscal year 1995's record sales totaled $362.5 million, an increase of
$13.1 million or 3.7% over fiscal year 1994 sales of $349.4 million. Sales for
fiscal year 1994 were 2.2% higher than fiscal year 1993.

The increase in revenues in fiscal year 1995 resulted from favorable
currency exchange rates and the strong sales performance of the Desktop
Hardware/Software Division with sales up 19% unadjusted for currency or 10% on a
currency adjusted basis. Due primarily to the U.S. downsizing, fiscal year 1995
worldwide sales on a comparable currency basis decreased by $11.9 million or 3%
compared to fiscal year 1994. As a result of a slowing of the Canadian economy
and the strategic downsizing of Inmac's U.S. business, a program which had been
undertaken to improve profitability, sales from North America for fiscal year
1995 decreased $14 million or 13%. Inmac continued to see a favorable customer
response to its divisional catalogs and competitive pricing strategy.

The fiscal year 1994 sales increase over fiscal year 1993 was attributable
to strong customer response to the three newly designed catalogs focused around
Inmac's product divisions and to a new lower pricing strategy. The increase in
revenues in fiscal year 1994 especially resulted from the strong sales
performance in the Desktop Hardware/Software Division with sales up 95% on a
currency adjusted basis. This reflected the impact of Inmac's North America
desktop products program which was introduced late in the first quarter and
continued desktop product sales growth in Europe of 62% on a comparable currency
basis.

Fiscal year 1993 sales included revenues from the two-store operation, The
Business Superstore ("TBS") in the United Kingdom, and Inmac's Japanese
subsidiary. Inmac sold the retail stores and closed the Japanese subsidiary in
April 1993. Sales for the 1994 fiscal year were negatively affected by 5%
because of currency fluctuation, which had a negative effect on sales in fiscal
year 1993 of 2%. In addition, sales in fiscal year 1994 (52 weeks) compared to
fiscal year 1993 (53 weeks) were adversely impacted by 2% due to the effect of
the 53rd week in 1993.

Inmac's sales success in the direct response marketing of computer-related
products is primarily attributable to its ability to meet customer demands for
convenience, reliability and value when purchasing information technology. Inmac
offers a very efficient source that can provide multi-national access to top
quality brands at competitive prices.

Cost of Sales. Cost of sales for fiscal year 1995 was $242.0 million, a 5.4%
increase over the $229.6 million for fiscal year 1994. This increase followed
14.1% and 19.8% increases in fiscal year 1994 and fiscal year 1993,
respectively. As a percent of net sales, the gross profit margin was 33.2% in
fiscal year 1995 compared to 34.3% in fiscal year 1994 and 41.1% in fiscal year
1993. The decline in gross

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margin percentages over the last three years reflected competitive pressures on
pricing, Inmac's lower pricing strategy and the rapid sales growth in the
Desktop Hardware/Software Division which has lower margins. The competitive
pressures on gross profit margin percentages were partially offset by Inmac's
ongoing cost reduction programs which resulted in lower purchase costs for many
products.

Selling, General and Administrative Expenses. Selling, general, and
administrative expenses decreased each year for the last three fiscal years,
both as a percent of sales and in absolute dollars. These expenses were 30.2% of
sales in 1995, compared to 32.6% in 1994, and 39.0% in 1993. These expenses
totaled $109.5 million in fiscal year 1995, a decrease of 4.0% from fiscal year
1994. This compares to the year-on-year decreases of 14.6% in fiscal year 1994
and 3.6% in fiscal year 1993.

The reductions in selling, general and administrative expenses included
savings in facility costs, savings from headcount reduction, and increased
operational and catalog efficiencies. The fiscal year 1993 reduction included
elimination of the selling, general and administrative expenses from TBS and
Inmac's Japanese subsidiary which were sold and closed respectively in the third
quarter of fiscal year 1993. Inmac continues to realize improved operating
efficiencies from its restructuring program initiated in fiscal year 1993. In
addition, the fiscal year 1995 reduction in selling, general and administrative
expenses was partially offset by expenses incurred in the pursuit of debt and/or
equity financing opportunities. Investment banker, attorney and accountant fees
expensed in fiscal year 1995, for debt and/or equity financing opportunities,
exceeded three quarters of a million dollars.

Fiscal year 1994 expenses included a non-recurring credit of $0.9 million
for reversal of remaining reserves related to the vacant facilities in the U.K.
for which the leases were successfully terminated early. The landlord negotiated
leases with new tenants with no ongoing obligation by Inmac. Fiscal year 1994
also included credits totaling $0.6 million for reduction of reserves related to
the closed Italy operations and related to redundant leased computer equipment.
The ongoing costs of these obligations will be less than originally estimated.

Fiscal year 1993 expenses included a net non-recurring credit of $1.8
million resulting from a one-time gain due to the settlement of legal
activities, offset by charges related to the consolidation of facilities in
Germany and accruals for vacant facilities in the U.K.

Provision For Business Restructuring. Inmac recorded restructuring charges
of $14.9 million net after taxes in the second quarter of fiscal year 1993 to
close unprofitable operations, to dispose of unproductive assets, and to
strategically reorganize the business. Inmac's Japan operation was closed, and
the retail operation in the U.K. was sold in the third quarter of fiscal year
1993. The organization was restructured, eliminating certain layers of
management, to improve the pace of decision-making and to reduce expense.

In fiscal year 1994, the remaining steps were completed as related to the
restructuring actions announced in fiscal year 1993. These steps included
further consolidation of the U.S. operations and moves of the French and Swedish
operations to lower cost facilities. See Note 13 of Notes to Inmac's
Consolidated Financial Statements for Years ended July 29, 1995, July 30, 1994
and July 31, 1993 for further explanation of the steps completed in fiscal year
1994.

Interest Expense, Net. Interest expense, net, in fiscal year 1995, fiscal
year 1994, and fiscal year 1993 was $1.4 million, $1.6 million, and $1.3 million
or 0.4%, 0.5%, and 0.4% of sales, respectively. The lower net interest expense
in fiscal year 1995 compared to fiscal year 1994 reflected lower average monthly
bank borrowings.

Inmac decreased its bank and long term debt net of cash to $10.3 million at
July 29, 1995 from $26.7 million at July 30, 1994, as a result of increased
profits and better asset management. The inventory balance at July 29, 1995 was
$2.1 million lower than prior year-end, and annual inventory turns improved from
8.1 to 8.4 turns. This was accomplished through better inventory management,
elimination of poorly performing SKUs, and drop-shipping to customers.

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Income Taxes. In August 1993, Inmac adopted Statement of Financial
Accounting Standards No. 109 (SFAS 109), Accounting for Income Taxes. Adoption
of SFAS 109 did not have a significant effect on the determination of income tax
expense for fiscal year 1994. Income tax expense for fiscal years 1995, 1994,
and 1993 was $5.1 million, $2.3 million, and $3.2 million, respectively. Income
tax expense in fiscal year 1995 varied from expected tax expense (pre-tax income
(loss) multiplied by the U.S. statutory rate) primarily due to unutilized U.S.
losses, foreign tax rates in excess of the U.S. statutory rate, and a new French
surtax applied retroactively to the beginning of the fiscal year.

Loss carryforward provisions exist under the tax laws of all countries in
which Inmac currently does business. As of July 29, 1995, Inmac had
approximately $4.5 million in unutilized foreign operating loss carryovers and
approximately $34 million in unutilized U.S. operating loss carryovers. The
accumulated operating losses will be deductible in the future when and if Inmac
and its subsidiaries that have incurred those losses become profitable. The
timing and amount of tax benefit associated with these losses is dependent upon
future operating results in particular countries and is difficult to predict.
The consolidated income tax rate also depends upon the mix of international and
domestic pretax income. Accordingly, Inmac's income tax rate for fiscal year
1996 cannot be accurately predicted. See Note 8 of Notes to Inmac's Consolidated
Financial Statements for Years ended July 29, 1995, July 30, 1994 and July 31,
1993.

Net Income (Loss). Inmac recorded net income of $4.5 million or $0.42 per
share and $1.8 million or $0.17 per share for fiscal years 1995 and 1994,
respectively, and a loss of $13.9 million or $1.47 per share in fiscal year
1993. The fiscal year 1993 loss reflected the net after-tax restructuring charge
of $14.9 million or $1.57 per share. Considered without the effect of the
restructuring charge, fiscal year 1993 would have reflected net income of $1.0
million. The lower gross profit percentage in fiscal year 1995 was more than
offset by savings in selling, general and administrative expenses, and a lower
effective income tax rate.

FINANCIAL CONDITION AS OF JULY 29, 1995

Inmac's financial condition and liquidity improved substantially from fiscal
year 1994. Bank and long term debt net of cash decreased by more than $16
million in fiscal year 1995 reflecting an increase in cash and cash equivalents
to $21.2 million at July 29, 1995 compared to $3.0 million at July 30, 1994 and
an increase in bank and long term debt to $31.5 million from $29.7 million at
the prior year-end.

Net receivables increased by $1.4 million in fiscal year 1995, while
inventories decreased by $2.1 million. The related asset performance ratios
remained strong, and average annual inventory turns increased to 8.4 in fiscal
year 1995 from 8.1 in fiscal year 1994, reflecting improvements in inventory
management, elimination of poorly performing SKUs, and drop-shipping. Average
annual accounts receivable days of sales outstanding were 47.7 days in fiscal
year 1995 compared to 46.5 days in fiscal year 1994.

Prepaid expenses and other current assets decreased a total of $0.8 million
in fiscal year 1995 resulting from a decrease in tax receivable balances.

Property, plant and equipment, net of depreciation, decreased by $2.0
million in fiscal year 1995, due primarily to a $4.0 million reduction in fixed
asset purchases as compared to fiscal year 1994.

Accounts payable and accrued liabilities increased by $2.6 million in fiscal
year 1995.

Total stockholders' equity increased in fiscal year 1995 by $9.3 million to
$42.8 million. This increase included $4.5 million of net income; $1.2 million
from stock option exercises; $0.1 million from the tax effects arising from
option exercises; and a favorable reduction in the balance sheet translation
adjustment of $3.4 million. Cumulative translation adjustments are excluded from
the measurement of income, but are recorded as a separate component of
stockholders' equity and depend on the net asset or

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liability balance on the various foreign subsidiary balance sheets and the
respective currencies as compared to the U.S. dollar at the fiscal period-end
dates. The change in cumulative translation adjustments resulted in a $1.9
million increase in equity in fiscal year 1994 and a $7.9 million decrease in
equity in fiscal year 1993.

In fiscal year 1995, operating activities provided $18.1 million in cash.
Fixed asset purchases (net of sales proceeds) used $2.4 million of cash.
Short-term bank borrowings, net of repayments, coupled with the proceeds from
the private placement, provided $1.7 million; repayment of capital lease
obligations used $0.5 million; financing costs used $0.7 million and exercises
of common stock options of Inmac provided $1.2 million.

Capital spending totaled $2.7 million in fiscal year 1995, $6.7 million in
fiscal year 1994, and $5.0 million in fiscal year 1993. Spending in fiscal year
1994 and fiscal year 1993 was mainly for more efficient distribution facilities
and computer systems.

Short-term bank borrowings decreased by $18.3 million, while long term bank
debt increased to $20.1 million at fiscal 1995 year-end compared to fiscal 1994
year-end. Average bank debt during fiscal year 1995 decreased by $1.3 million
from fiscal year 1994. During fiscal year 1995, fiscal year 1994, and fiscal
year 1993, average bank borrowings under the bank lines were approximately $26.2
million, $27.5 million, and $25.1 million, respectively. As of July 29, 1995,
$31.5 million in bank and long term borrowings were outstanding, and unused
credit facilities amounted to $35 million. Inmac was in compliance with all
covenants in its bank agreements as of July 29, 1995.

Inmac believes that its existing cash balances, cash generated from future
operations, borrowings under existing lines of credit and its ability to obtain
additional credit will be sufficient to meet its working capital needs through
the end of fiscal year 1996.

INFLATION FOR THE PERIOD ENDED JULY 29, 1995

Although Inmac's operations are influenced by general economic trends, Inmac
does not believe inflation has had a material impact on its results of
operations for the past three fiscal years.

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SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF INMAC

The following table sets forth certain information regarding the beneficial
ownership of Inmac Common Stock on December 22, 1995, as to (a) each person
known by Inmac to beneficially own five percent or more of the outstanding
shares of Inmac Common Stock, (b) each of the directors of Inmac, (c) the Chief
Executive Officer and the four other most highly compensated executive officers
of Inmac, and (d) all directors and executive officers of Inmac as a group.

<TABLE><CAPTION>
BENEFICIAL OWNERSHIP OF
COMMON STOCK
--------------------------
DIRECTORS, OFFICERS, AND FIVE PERCENT NUMBER OF APPROXIMATE
STOCKHOLDERS(1) SHARES PERCENT OWNED
------------------------------------- --------- -------------
<S> <C> <C>
Kenneth A. Eldred(2)............................................... 3,027,379 28.35%
2465 Augustine Drive
Santa Clara, CA 95050
John B. Mumford(3)................................................. 557,716 5.25%
One First Street, Suite 2
Los Altos, CA 94022
Jeffrey A. Heimbuck(4)............................................. 295,588 2.74%
John R. Emrick(5).................................................. 267,835 2.52%
Bennet R. Goldberg(6).............................................. 112,707 1.05%
Margo M. Hart(7)................................................... 51,458 *
Robert L. Katz(8).................................................. 31,625 *
William P. Doolittle(9)............................................ 25,625 *
Raymond E. Nystrom(10)............................................. 15,315 *
All executive officers and directors as a group (9 persons) (11)... 4,385,248 39.60%
</TABLE>

- ------------
* Represents less than 1% of the outstanding shares of Inmac Common Stock.

(1) The persons named in the table, to Inmac's knowledge, have sole voting and
investment power with respect to all shares of Inmac Common Stock shown as
beneficially owned by them, subject to community property laws where
applicable and the information contained in the footnotes hereunder.

(2) Includes 202,464 shares for which Mr. Eldred acts as trustee and as to which
he disclaims beneficial ownership. Includes 58,750 shares issuable upon
exercise of options exercisable within 60 days of December 22, 1995.

(3) Includes 391,341 shares for which Mr. Mumford acts as trustee and as to
which he disclaims beneficial ownership. Includes 3,875 shares issuable upon
exercise of options exercisable within 60 days of December 22, 1995.

(4) Includes 183,312 shares issuable upon exercise of options exercisable within
60 days of December 22, 1995.

(5) Includes 60,460 shares for which Mr. Emrick's spouse acts as custodian and
as to which Mr. Emrick disclaims beneficial ownership. Includes 3,875 shares
issuable upon exercise of options exercisable within 60 days of December 22,
1995.

(6) Includes 112,707 shares issuable upon exercise of options exercisable within
60 days of December 22, 1995.

(7) Includes 51,458 shares issuable upon exercise of options exercisable within
60 days of December 22, 1995.

(8) Includes 20,625 shares issuable upon exercise of options exercisable within
60 days of December 22, 1995.

(9) Includes 5,625 shares issuable upon exercise of options exercisable within
60 days of December 22, 1995.

85
<PAGE>

(10) Includes 13,115 shares issuable upon exercise of options exercisable within
60 days of December 22, 1995.

(11) Includes 453,342 shares issuable upon exercise of options exercisable
within 60 days of December 22, 1995.

LEGAL MATTERS

The validity of the MWHS Common Stock to be issued in the Merger will be
passed upon for MWHS by Jones, Day, Reavis & Pogue, New York, New York. The
federal income tax consequences in connection with the Merger will be passed
upon by Wilson, Sonsini, Goodrich & Rosati, Professional Corporation, Palo Alto,
California.

EXPERTS

The consolidated financial statements of MWHS and subsidiaries as of
December 31, 1994 and 1993, and for each of the years in the three-year period
ended December 31, 1994 have been included herein and in the registration
statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.

The consolidated financial statements of Inmac and subsidiaries as of July
29, 1995 and July 30, 1994, and for each of the years in the three-year period
ended July 29, 1995 have been included herein and in the registration statement
in reliance upon the report of KPMG Peat Marwick LLP, independent certified
public accountants, appearing elsewhere herein, and upon the authority of said
firm as experts in accounting and auditing.

FUTURE STOCKHOLDER PROPOSALS

MWHS stockholders who desire to submit proposals for inclusion in the Proxy
Statement of the Board of Directors to be utilized in connection with the MWHS
1996 Annual Meeting of Stockholders must submit such proposals to the Secretary
of MWHS no later than February 1, 1996. In the event the Merger is not
consummated, the only Inmac stockholder proposals eligible to be considered for
inclusion in the proxy materials for the Inmac 1995 Annual Meeting of
Stockholders will be those which were duly submitted by July 1, 1995.

86
<PAGE>
OTHER MATTERS

The Board of Directors of Inmac knows of no business which will be presented
for consideration at the Special Meeting other than that discussed herein.
However, if any business incidental to the conduct of the Special Meeting shall
properly come before the Special Meeting, the persons named in the enclosed form
of proxy or their substitutes will vote said proxy in respect of any such
business in accordance with their best judgment pursuant to the discretionary
authority conferred thereby. The affirmative vote of the holders of shares
representing a majority of the voting power of the shares of Inmac Common Stock
represented and entitled to vote at the Special Meeting would be required with
respect to any such matter brought to a stockholder vote. Accordingly,
abstentions and broker non-votes would have the effect of negative votes with
respect to any such matter.

By Order of the Board of Directors

/s/ Kenneth A. Eldred
----------------------------------
Kenneth A. Eldred
Secretary

Santa Clara, California
December 22, 1995

PLEASE COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN THE
ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.

87
<PAGE>
INDEX TO FINANCIAL STATEMENTS

MICRO WAREHOUSE, INC.

Report of Independent Auditors...................................................... F-2

Consolidated Balance Sheets as of September 30, 1995 (Unaudited), December 31, 1994
and 1993.................................................................................. F-3

Consolidated Statements of Income for Nine Months ended September 30, 1995 and 1994
(Unaudited) and Years ended December 31, 1994, 1993 and 1992.............................. F-4

Consolidated Statements of Stockholders' Equity for Nine Months ended September 30,
1995 (Unaudited) and Years ended December 31, 1994, 1993 and 1992......................... F-5

Consolidated Statements of Cash Flows for Nine Months ended September 30, 1995 and
1994 (Unaudited) and Years ended December 31, 1994, 1993 and 1992......................... F-6

Notes to Consolidated Financial Statements for Nine Months ended September 30, 1995
and 1994 (Unaudited) and Years ended December 31, 1994, 1993 and 1992..................... F-7

INMAC CORP.

Report of Independent Auditors...................................................... F-22

Consolidated Balance Sheets as of July 29, 1995 and July 30, 1994................... F-23

Consolidated Statements of Income (Loss) for Years ended July 29, 1995, July 30,
1994 and July 31, 1993............................................................... F-24

Consolidated Statements of Stockholders' Equity for Years ended July 29, 1995, July
30, 1994 and July 31, 1993........................................................... F-25

Consolidated Statements of Cash Flows for Years ended July 29, 1995, July 30, 1994
and July 31, 1993.................................................................... F-26

Notes to Consolidated Financial Statements for Years ended July 29, 1995, July 30,
1994 and July 31, 1993............................................................... F-27

Consolidated Balance Sheets as of October 28, 1995 (Unaudited) and July 29, 1995.... F-38

Consolidated Statements of Income for the Three Months Ended October 28, 1995 and
October 29, 1994 (Unaudited).............................................................. F-39

Consolidated Statements of Cash Flows for the Three Months Ended October 28, 1995
and October 29, 1994 (Unaudited).......................................................... F-40

Notes to Consolidated Financial Statements for the Quarters Ended October 28, 1995
and October 29, 1994 (Unaudited) and Year Ended July 29, 1995............................. F-41

PRO FORMA COMBINED - MICRO WAREHOUSE/INMAC CORP - UNAUDITED

Balance Sheet, September 30, 1995 (MWHS) and October 28, 1995 (INMAC)............... 44

Statement of Income, for the nine months ended September 30, 1995 (MWHS) and October
28, 1995 (INMAC).......................................................................... 45

Statement of Income, for the twelve months ended December 31, 1994 (MWHS) and
January 28, 1995 (INMAC).................................................................. 46

Statement of Income, for the twelve months ended December 31, 1993 (MWHS) and
January 29, 1994 (INMAC).................................................................. 47

Statement of Income, for the twelve months ended December 31, 1992 (MWHS) and
January 23, 1993 (INMAC).................................................................. 48

Notes to Unaudited Pro Forma Combined Financial Information......................... 49
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
MICRO WAREHOUSE, INC.:

We have audited the accompanying consolidated balance sheets of Micro
Warehouse, Inc. as of December 31, 1994 and 1993, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the years
in the three-year period ended December 31, 1994. These consolidated 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 Micro
Warehouse, Inc. as of December 31, 1994 and 1993, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1994, in conformity with generally accepted accounting
principles.

/s/ KPMG PEAT MARWICK LLP

Stamford, CT
January 20, 1995

F-2
<PAGE>
MICRO WAREHOUSE, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ----------------------------
1995 1994 1993
------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 36,271 $ 30,268 $ 2,424
Marketable securities at market value............... 15,526 44,204 28,185
Accounts receivable, net of allowance for doubtful
accounts ($3,607, $3,096 and $1,853 at September
30, 1995, and December 31, 1994 and 1993,
respectively)......................................... 113,616 80,828 44,099
Inventories......................................... 94,927 78,733 45,038
Prepaid expenses and other current assets........... 20,500 11,180 6,433
Due from affiliates, net............................ -- -- 385
Deferred taxes...................................... 3,825 3,555 1,911
------------- ------------ ------------
Total current assets.............................. 284,665 248,768 128,475
------------- ------------ ------------
Property, plant and equipment, net.................. 23,839 19,676 9,312
Goodwill, net....................................... 44,667 24,041 2,200
Deposits and trademarks, net........................ 1,950 1,567 1,179
------------- ------------ ------------
Total assets.................................... $ 355,121 $294,052 $141,166
------------- ------------ ------------
------------- ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable--trade............................. $ 47,370 $ 30,535 $ 28,921
Accrued expenses.................................... 3,930 13,797 10,381
Deferred revenue.................................... 6,894 4,534 3,556
Loans payable, bank................................. 16,548 -- --
Income taxes........................................ 5,070 4,700 1,200
Equipment obligations............................... 230 195 --
------------- ------------ ------------
Total current liabilities....................... 80,042 53,761 44,058
Equipment obligations............................... 445 645 --
------------- ------------ ------------
Total liabilities............................... 80,487 54,406 44,058
------------- ------------ ------------
Stockholders' equity:
Preferred stock, $.01 par value:
Authorized--100 shares; none issued................. -- -- --
Common stock, $.01 par value:
Authorized--50,000 shares; issued and outstanding--
29,728, 29,534 and 24,860 shares at September 30,
1995, and December 31, 1994 and 1993, respectively.... 297 295 249
Additional paid in capital.......................... 195,901 192,937 78,485
Retained earnings................................... 78,052 46,687 18,670
Cumulative translation adjustment................... 743 177 (296)
Valuation adjustment for marketable securities...... (359) (450) --
------------- ------------ ------------
Total stockholders' equity...................... 274,634 239,646 97,108
------------- ------------ ------------
Total liabilities and stockholders' equity...... $ 355,121 $294,052 $141,166
------------- ------------ ------------
------------- ------------ ------------
</TABLE>

See accompanying notes to consolidated financial statements

F-3
<PAGE>
MICRO WAREHOUSE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
-------------------- --------------------------------
1995 1994 1994 1993 1992
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales.............................. $904,018 $525,136 $776,377 $450,385 $269,634
Costs of goods sold.................... 738,715 423,510 626,684 361,481 217,078
-------- -------- -------- -------- --------
Gross profit........................... 165,303 101,626 149,693 88,904 52,556
Selling, general and administrative
expenses............................... 114,152 70,474 104,341 63,407 39,021
Special incentive compensation......... -- -- -- -- 8,775
-------- -------- -------- -------- --------
Income from operations before interest
and income taxes....................... 51,151 31,152 45,352 25,497 4,760
Interest income (expense).............. 1,563 875 1,589 456 (1,264)
-------- -------- -------- -------- --------
Income before income taxes............. 52,714 32,027 46,941 25,953 3,496
Income taxes........................... 21,349 12,959 18,924 10,954 3,285
-------- -------- -------- -------- --------
Net income............................. $ 31,365 $ 19,068 $ 28,017 $ 14,999 $ 211
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Pro forma data (unaudited):
Historical net income before income
taxes as above......................... $ 3,496
Pro forma adjustment for special
incentive compensation................. 8,775
--------
Pro forma income before income
taxes.................................. 12,271
--------
Provision for income taxes:
Historical........................... (3,285)
Pro forma-incremental to historical
taxes.................................. (2,041)
--------
Total taxes...................... (5,326)
--------
Net income............................. 6,945
--------
Net income per share................... $ 1.04 $ 0.71 $ 1.01 $ 0.64 $ 0.39
-------- -------- -------- -------- --------
Weighted average number of shares
outstanding............................ 30,233 26,910 27,618 23,533 17,854
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE>
MICRO WAREHOUSE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
VALUATION
COMMON STOCK ADDITONAL CUMULATIVE ADJUSTMENT
---------------- PAID-IN RETAINED TRANSLATION MARKETABLE
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT SECURITIES TOTAL
------- ------ --------- -------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1991.......... 15,600 $156 $ 2,026 $ 485 $-- $-- $ 2,667
Cumulative U.K. deficit at December
31, 1991........................... -- -- -- (296) -- -- (296)
Value of common stock issued as
incentive compensation............. 400 4 8,771 -- -- -- 8,775
Distribution of S corporation
earnings and paid-in capital....... -- -- (2,181) (6,687) -- -- (8,868)
Transfer to additional paid-in
capital of cumulative losses
through date of Subchapter S
revocation net of deferred taxes of
$4,047................................ -- -- (5,911) 9,958 -- -- 4,047
Common stock offering................ 6,556 66 53,505 -- -- -- 53,571
Net income........................... -- -- -- 211 -- -- 211
Foreign currency translation
adjustment............................ -- -- -- -- (261) -- (261)
------- ------ --------- -------- ----- ----- --------
Balance at December 31, 1992.......... 22,556 226 56,210 3,671 (261) -- 59,846
Common stock offering................ 2,300 23 22,216 -- -- -- 22,239
Common stock issued pursuant to stock
options exercised..................... 6 -- 59 -- -- -- 59
Net income........................... -- -- -- 14,999 -- -- 14,999
Foreign currency translation
adjustment............................ -- -- -- -- (35) -- (35)
------- ------ --------- -------- ----- ----- --------
Balance at December 31, 1993.......... 24,862 249 78,485 18,670 (296) -- 97,108
Common stock offerings............... 4,100 41 102,052 -- -- -- 102,093
Common stock issued pursuant to stock
options exercised..................... 37 -- 353 -- -- -- 353
Common stock issued pursuant to
foreign acquisitions............... 535 5 12,047 -- -- -- 12,052
Net income........................... -- -- -- 28,017 -- -- 28,017
Foreign currency translation
adjustment............................ -- -- -- -- 473 -- 473
Valuation adjustment for marketable
securities............................ -- -- -- -- -- (450) (450)
------- ------ --------- -------- ----- ----- --------
Balance at December 31, 1994.......... 29,534 295 192,937 46,687 177 (450) 239,646
Expenses related to common stock
offering (unaudited)............... -- -- (139) -- -- -- (139)
Common stock issued pursuant to stock
options exercised (unaudited)......... 182 2 2,422 -- -- -- 2,424
Retirement of treasury shares
(unaudited)........................... (14) -- (469) -- -- -- (469)
Common stock issued pursuant to
acquisitions (unaudited).............. 26 -- 1,150 -- -- -- 1,150
Net income (unaudited)............... -- -- -- 31,365 -- -- 31,365
Foreign currency translation
adjustment (unaudited)............. -- -- -- -- 566 -- 566
Valuation adjustment for marketable
securities (unaudited)................ -- -- -- -- -- 91 91
------- ------ --------- -------- ----- ----- --------
Balance at September 30, 1995
(unaudited)........................... 29,728 $297 $ 195,901 $ 78,052 $ 743 $ (359) $274,634
------- ------ --------- -------- ----- ----- --------
------- ------ --------- -------- ----- ----- --------
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE>
MICRO WAREHOUSE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
REPRESENTING INCREASES (DECREASES) IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------- --------------------------------
1995 1994 1994 1993 1992
-------- ------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.......................... $ 31,365 $19,068 $ 28,017 $ 14,999 $ 211
-------- ------- -------- -------- --------
Adjustments to reconcile net income
to net cash (used) provided by
operating activities:
Depreciation and amortization..... 5,634 3,204 5,313 2,528 1,941
Value of common stock issued as
compensation expense................. -- -- -- -- 8,775
Deferred taxes.................... (270) (1,284) (1,644) (649) 2,785
Changes in assets and liabilities:
Accounts receivable, net...... (26,896) (42,564) (35,740) (20,531) (11,879)
Inventories................... (13,428) (14,807) (32,470) (22,427) (9,651)
Prepaid expenses and other
current assets.............. (9,320) (3,506) (3,670) (1,958) (2,088)
Due from affiliates........... -- 385 385 153 (174)
Deposits and trademarks....... (383) 1,849 (632) (815) (475)
Accounts payable--trade....... 12,937 (179) 1,614 19,252 (3,487)
Accrued expenses.............. (9,512) 12,055 6,916 8,624 2,356
Deferred income............... 2,360 3,531 978 1,141 656
-------- ------- -------- -------- --------
Total adjustments........... (38,878) (41,316) (58,950) (14,682) (11,241)
-------- ------- -------- -------- --------
Net cash (used) provided by operating
activities........................... (7,513) (22,248) (30,933) 317 (11,030)
-------- ------- -------- -------- --------
Cash flows from investing activities:
Sales (purchases) of marketable
securities, net................... 28,769 8,871 (16,469) (25,179) (3,006)
Purchases of businesses,
represented by:
Goodwill...................... (20,035) (8,566) (10,042) (2,200) --
Other current assets.......... (4,936) (3,304) (3,873) (512) --
Acquisition of property, plant and
equipment............................ (9,047) (10,757) (13,587) (4,831) (3,600)
-------- ------- -------- -------- --------
Net cash (used) by
investing activities..... (5,249) (13,756) (43,971) (32,722) (6,606)
-------- ------- -------- -------- --------
Cash flows from financing activities:
Net line of credit borrowings
(repayments)......................... -- -- -- -- (4,707)
Net proceeds from issuance of common
stock................................ 2,285 45,009 102,446 22,298 53,571
Purchase of treasury stock.......... (469) -- -- -- --
Bank borrowings..................... 16,548 -- -- -- --
Payments to stockholders............ -- -- -- -- (13,248)
Payments of loan payable,
consultant........................... -- -- -- -- (3,298)
Principal payments of obligations
under capital leases.............. (165) (154) (171) (3,047) (530)
-------- ------- -------- -------- --------
Net cash provided (used) by
financing activities................. 18,199 44,855 102,275 19,251 31,788
-------- ------- -------- -------- --------
Effect of exchange rate changes on
cash................................. 566 85 473 (35) (261)
-------- ------- -------- -------- --------
Net change in cash................... 6,003 8,936 27,844 (13,189) 13,891
Cash and cash equivalents:
Beginning of period................. 30,268 2,424 2,424 15,613 1,722
-------- ------- -------- -------- --------
End of period....................... $ 36,271 $11,360 $ 30,268 $ 2,424 $ 15,613
-------- ------- -------- -------- --------
-------- ------- -------- -------- --------
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE>
MICRO WAREHOUSE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
AND YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1994 IS UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements include the Company and all
subsidiaries. All significant intercompany accounts and transactions are
eliminated in consolidation.

Years prior to 1994 are adjusted for a two-for-one stock split effective
April 1994.

Certain reclassifications have been made to conform prior years to the 1995
presentations.

Cash Equivalents

All repurchase agreements, money market funds and highly liquid investments
with initial maturities of three months or less are considered cash equivalents.

Marketable Securities

Marketable securities consist primarily of highly liquid tax exempt
municipal bonds.

The Company has adopted Statement of Finanical Accounting Standards,
"Accounting for Certain Investments in Debt and Equity Securities" (SFAS 115)
and in accordance with the principles thereunder, has classified all of its
investments as available-for-sale securities and has reported them at fair
value, with net unrealized gains and losses included in equity. See note 10 for
a discussion of the classification and reporting of these securities at
September 30, 1995 and December 31, 1994. In 1993, marketable securities were
reported at cost which approximated fair market value. For all investment
securities, unrealized losses that are other than temporary are recognized in
earnings.

Inventories

Inventories (all finished goods) consist of hardware, software packages and
peripheral equiment, and are stated at cost (determined under the first-in,
first-out cost method) or market, whichever is lower.

Prepaid Catalog Costs and Deferred Revenue

The costs of producing and distributing catalogs are deferred and charged to
expense over the period that each catalog remains the most current selling
vehicle (generally one to two months). Vendors have the ability to place
advertisements in the catalogs for which the Company receives advertising
allowances and incentives. These revenues are recognized on the same basis as
the catalog costs.

F-7
<PAGE>
MICRO WAREHOUSE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
AND YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1994 IS UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Property, Plant and Equipment

Property, plant and equipment (including equipment acquired under capital
leases) are stated at cost and are depreciated using accelerated and
straight-line methods over the estimated useful lives of the assets, as follows:

Computer equipment 5 years
Furniture and fixtures 7 years
Leasehold improvements Life of lease--7 years
Machinery and equipment 5 years

Intangible Assets

Intangible assets are stated at cost and are amortized using the
straight-line method over the estimated useful lives of the assets, as follows:

Trademarks 5 years
Goodwill 40 years

The Company periodically evaluates the carrying value of trademarks and the
periods of amortization to determine whether events and circumstances warrant
revised estimates of asset value or useful lives. The Company annually assesses
the recoverability of goodwill by determining whether the amortization of the
asset balance over its remaining life can be recovered through projected
undiscounted future operating cash flows. The evaluations of the carrying value
of goodwill are performed on a disaggregated basis by distinct geographic
market.

Income Taxes

Through June 29, 1992, the Company elected to be taxed as an S corporation
for federal (and certain states) income tax reporting purposes. Under this
election, the individual stockholders were deemed to have received a pro rata
distribution of the federal (or state) taxable income of the Company (whether or
not an actual cash distribution was made), which is included on their personal
tax returns. Accordingly, there was no federal income tax provision for the
periods prior to June 30, 1992. The provisions for income taxes prior to June
30, 1992 are for state income taxes payable to states which do not recognize S
corporation status.

Effective June 30, 1992, the Company revoked its S corporation election and
adopted Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" (SFAS 109) to determine the components of the provisions for
income taxes as a result of the C corporation assuming the tax position of the
(terminated) S corporation (See Note 9). SFAS 109 requires that deferred income
taxes be recognized for the tax consequences of "temporary differences" by
applying enacted statutory tax

F-8
<PAGE>
MICRO WAREHOUSE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
AND YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1994 IS UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
rates applicable to future years to differences between the financial statement
carrying amounts and the tax basis of existing assets and liabilities.

Revenue Recognition

Revenue on product sales is recognized at the time of shipment. A reserve
for product returns is established based upon historical trends.

Net Income Per Share

Net income per share is usually based on the weighted average number of
common and common equivalent shares outstanding during each period, after
retroactive adjustment for stock splits. However, pursuant to certain rules of
the Securities and Exchange Commission, for periods prior to an initial public
offering of common stock (IPO), the calculation also includes (i) shares of
common stock issued within one year of the IPO and (ii) where repayment of
indebtedness to stockholders incurred as a result of S corporation distributions
is made from proceeds from the IPO, the number of shares required to be sold in
the offering to generate the proceeds for the repayment. Following is an
analysis of the components of the shares used to compute net income per share:

<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------- --------------------------
1995 1994 1994 1993 1992
------ ------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Shares outstanding as of December 31, 1991.... 15,600 15,600 15,600 15,600 15,600
Shares issued within one year of the IPO...... 400 400 400 400 400
Required number of shares to be sold (at the
IPO price of $9 a share) in the IPO to
generate proceeds for repayments of
indebtedness to S corporation shareholders
and a consultant............................ -- -- -- -- 1,475
Retirement of Treasury Shares................. (14) -- -- -- --
Weighted average shares outstanding related
to:
The IPO..................................... 6,555 6,555 6,555 6,555 377
Follow-on offerings......................... 6,400 3,509 4,111 846 --
Acquisitions................................ 542 302 356 -- --
Incremental shares related to stock
options....................................... 750 544 596 132 2
------ ------- ------ ------ ------
30,233 26,910 27,618 23,533 17,854
------ ------- ------ ------ ------
------ ------- ------ ------ ------
</TABLE>

Foreign Currency Translation

Assets and liabilities of foreign subsidiaries are translated into U.S.
dollars at the exchange rate in effect at the balance sheet date or at
historical rates, as applicable. Revenue and expenses are translated

F-9
<PAGE>
MICRO WAREHOUSE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
AND YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1994 IS UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
at average rates in effect during the period. The resultant translation
adjustment is reflected as a separate component of stockholders' equity on the
balance sheet.

Unaudited Pro Forma and Condensed Quarterly Data

In the opinion of management, the unaudited pro forma and condensed
quarterly financial data (in note 14) reflect all adjustments consisting of
recurring accruals and pro forma adjustments (described in note 15) which are
necessary to a fair statement of the results of operations for the periods
presented.

2. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of:

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------- -----------------
1995 1994 1993
------------- ------- -------
<S> <C> <C> <C>
Computer equipment.................................... $27,091 $18,816 $10,856
Furniture and fixtures................................ 3,652 3,479 1,416
Leasehold improvements................................ 4,316 4,143 1,525
Machinery and equipment............................... 5,056 4,439 1,890
------------- ------- -------
40,115 30,877 15,687
------------- ------- -------
Less accumulated depreciation and amortization........ 16,276 11,201 6,375
------------- ------- -------
$23,839 $19,676 $ 9,312
------------- ------- -------
------------- ------- -------
</TABLE>

3. BORROWING ARRANGEMENTS

Lines of Credit

At September 30, 1995, and December 31, 1994 and 1993, the Company had a
$15,000 unused line of credit in the United States. The line of credit provides
for unsecured borrowing with interest at the bank's prime rate minus 0.75% or
LIBOR plus 1.0%.

At September 30, 1995 and December 31, 1994, the Company also had a B.P.125
and B.P.750, respectively, unused line of credit in the United Kingdom. The line
also provides for unsecured borrowing with interest at the banks base rate plus
1.5%.

The Company also has a $50 million multi-currency borrowing facility
initiated in 1995 which permits borrowing by its subsidiaries in local
currencies. The balance outstanding on September 30, 1995, was $16.5 million.
The facility provides for borrowing with interest at the bank's prime rate or
LIBOR plus 0.75%--1.50%, based on DEBT/EBIT. The facility is secured by
inventory and receivables.

F-10
<PAGE>
MICRO WAREHOUSE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
AND YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1994 IS UNAUDITED)

3. BORROWING ARRANGEMENTS--(CONTINUED)
Equipment Obligations

The Company is obligated under notes for computer equipment expiring in the
year 1999. Interest on these notes is at approximately 5%.

Future minimum lease payments for periods ending December 31 are as follows:

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
<S> <C> <C>
1995................................................... $ 18 $210
1996................................................... 230 230
1997................................................... 230 230
1998................................................... 230 230
1999................................................... 20 20
----- -----

Total maximum lease payments........................... 728 920
Less amounts representing interest................... 53 80
----- -----
Present value of net minimum lease
payments............................................. 675 840
Less current maturies................................ 230 195
----- -----
Long-term portion...................................... $ 445 $645
----- -----
----- -----
</TABLE>

4. GOODWILL, DEPOSITS AND TRADEMARKS

Amounts consist of:

<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, -----------------
1995 1994 1993
------------- ------- ------
<S> <C> <C> <C>
Goodwill..................................................... $45,340 $24,155 $2,200
Less: Amortization (673) (114) --
------------- ------- ------
$44,667 $24,041 $2,200
------------- ------- ------
------------- ------- ------
Deposits..................................................... $ 783 $ 439 $ 483
Trademarks................................................... 1,834 1,538 862
------------- ------- ------
2,617 1977 1,345
Less: Amortization........................................... (667) (410) (166)
------------- ------- ------
$ 1,950 $ 1,567 $1,179
------------- ------- ------
------------- ------- ------
</TABLE>

F-11
<PAGE>
MICRO WAREHOUSE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
AND YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1994 IS UNAUDITED)

5. ACCRUED EXPENSES

Accrued expenses at September 30, 1995 and December 31, 1994 and 1993
include approximately $5,600, $5,500 and $2,900, respectively, of accrued
catalog costs.

6. STOCKHOLDERS' EQUITY

Initial and Follow-On Public Offerings

In December 1992, the Company issued 6,556,000 shares of common stock, which
included 855,000 shares issued pursuant to the underwriters over-allotment
option, at $9.00 a share in an IPO. The proceeds to the Company were $53,249 net
of the underwriting discount of $4,130 and other direct expenses of $1,616,
including $322 recorded in 1993. In August 1993, the Company issued 2,300,000
shares of common stock, which included 300,000 shares issued pursuant to the
underwriters over-allotment option, at $10.50 per share in a follow-on offering.
The proceeds to the Company were $22,562 net of the underwriting discount of
$1,207 and other direct expenses of $381. On April 18, 1994, the Company issued
2,000,000 shares of common stock at $21.25 per share in a follow-on offering.
The proceeds to the Company, net of the underwriting discount of $2,020 and
other direct expenses of $301, were $40,179. On October 21, 1994, the Company
issued 2,100,000 shares of common stock at $31.00 per share in a follow-on
offering. The proceeds to the Company, net of the underwriting discount of
$2,940 and other direct expenses of $246, were $61,914.

1992 and 1994 Stock Option Plans

The 1992 and 1994 Stock Option Plans (the 'Plans") provide for the grant of
stock options to officers, directors and key employees of, and consultants to,
the Company and its subsidiaries. Under the Plans, the Company may grant options
that are intended to qualify as incentive stock options ("Incentive Stock
Options") within the meaning of Section 422A of the Internal Revenue Code of
1986, as amended (the "Code"), or options not intended to qualify as Incentive
Stock Options ("Nonstatutory Stock Options"). A total of 1,500,000 shares of
common stock have been reserved for issuance upon the exercise of options
granted under the Plans.

The Plans are administered by the Compensation and Stock Option Committee of
the Board of Directors. Subject to the provisions of the 1992 Plan, the
Committee has the authority to select the employees, directors and consultants
to whom options are granted and determine the terms of each option, including
(i) the number of shares of common stock covered by the option, (ii)when the
option becomes exercisable, (iii) the option exercise price, which must be at
least 100%, with respect to Incentive Stock Options, and at least 85%, with
respect to Nonstatutory Stock Options, of the fair market value of the common
stock as of the date of grant, and (iv) the duration of the option (which may
not exceed ten years). All options are nontransferable other than by will or the
laws of descent and distribution.

F-12
<PAGE>
MICRO WAREHOUSE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
AND YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1994 IS UNAUDITED)

6. STOCKHOLDERS' EQUITY--(CONTINUED)
Following is the activity under the Plans:

<TABLE>
<CAPTION>
NUMBER OF SHARES
-----------------------------------
DECEMBER 31,
SEPTEMBER 30, ------------------
1995 1994 1993
------------- ------- -------
<S> <C> <C> <C>
Shares:
Outstanding at January 1,................................. 960,408 842,400 119,950
Granted at $9.00 to $44.50 a share........................ 222,933 200,800 733,300
Exercised at $9.00 to $30.125 a share..................... (183,547) (36,891) (6,184)
Canceled or expired at $21.50 to $30.125 a share.......... (1,684) (45,901) (4,666)
------------- ------- -------
Outstanding, end of period at $9.00 to $44.50 a share..... 998,110 960,408 842,400
------------- ------- -------
------------- ------- -------
Exercisable, end of period at $9.00 to $31.00 a share..... 167,473 148,722 --
------------- ------- -------
------------- ------- -------
Available for grant, end of period........................ 275,268 496,517 --
------------- ------- -------
------------- ------- -------
</TABLE>

7. COMMITMENTS

Leases

The Company rents some of its office facilities from affiliates and also
occupies office and warehouse space under various operating leases with
independent parties which provide for minimum annual rentals and escalations
based on increases in real estate taxes and other operating expenses.

Future minimum annual rentals for periods ending December 31 were as
follows:

<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 DECEMBER 31, 1994
------------------ ------------------
RELATED RELATED
TOTAL PARTY TOTAL PARTY
------- ------- ------- -------
<S> <C> <C> <C> <C>
1995..................................................... $ 1,160 $ 78 $ 3,121 $ 312
1996..................................................... 4,502 312 2,977 312
1997..................................................... 4,540 312 3,037 312
1998..................................................... 3,960 -- 2,665 --
1999..................................................... 2,878 -- 1,914 --
2000 and after........................................... 5,282 3,731 --
------- ------- ------- -------
Total.................................................. $22,322 $ 702 $17,445 $ 936
------- ------- ------- -------
------- ------- ------- -------
</TABLE>

F-13
<PAGE>
MICRO WAREHOUSE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
AND YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1994 IS UNAUDITED)

7. COMMITMENTS--(CONTINUED)
Rent expense was as follows:

<TABLE>
<CAPTION>
RENT EXPENSE
-----------------------
TOTAL RELATED PARTY
------ -------------
<S> <C> <C>
Nine months ended September 30, 1995................................... $3,411 $ 234
Year ended December 31, 1994........................................... 3,492 312
Year ended December 31, 1993........................................... 1,357 312
Year ended December 31, 1992........................................... 869 337
</TABLE>

401(k) Savings Plan

Effective July 1, 1992, the Company adopted a 401(k) Savings Plan which
covers substantially all full-time employees who meet the plan's eligibility
requirements. Participants may make tax deferred contributions of up to 15% of
annual compensation (subject to other limitations specified by the Internal
Revenue Code) and the Company will make a 25% matching contribution for amounts
which do not exceed 6% of participant's annual compensation. The Company may
also make discretionary profit sharing contributions to the Plan. During 1995,
1994 and 1993, the Company incurred approximately $272, $293, and $180,
respectively, of expense related to the 401(k) matching component of this plan.

8. SPECIAL INCENTIVE COMPENSATION

Effective January 1, 1989, the Company entered into an agreement for
marketing services with a consultant which required (in addition to a fixed
annual fee) a special incentive payment equal to one-third of the Company's
profits before taxes. The agreement had no specific term.

An employment agreement with an executive officer entered into in August
1991 required the Company to accrue as additional incentive compensation the
vested value of phantom stock up to a maximum of 2.5% of the common shares
outstanding based on a formula.

As of January 1, 1992, the foregoing incentive arrangements were terminated.
As of that date, the consultant received an irrevocable right to receive a 30%
interest in the Company through a transfer of shares by the existing
stockholders and the executive officer received a 2.5% equity interest through
the issuance of previously unissued shares of common stock. In order to
determine the amount to be recorded as compensation expense as of the
termination date, the Company engaged an independent appraiser to estimate the
fair market value per share of its common stock.

F-14
<PAGE>
MICRO WAREHOUSE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
AND YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1994 IS UNAUDITED)

9. INCOME TAXES

Termination of S Corporation Status

As a result of the Company terminating its S corporation status on June 30,
1992, the C corporation assumed the tax bases of the assets and liabilities of
the (terminated) S corporation. Concurrently, the Company adopted SFAS 109 in
order to determine the components of the provsion for income taxes.

Components of the net deferred tax asset relate to:

<TABLE>
<CAPTION>
DECEMBER 31 INITIAL
SEPTEMBER 30, ----------------------------- JUNE 30,
1995 1994 1993 1992 1992
------------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Deferred tax assets:
Value of additional incentive
compensation............................... $-- $ -- $ -- $ 116 $3,402
Valuation reserves:
Accounts receivable.................... 757 1,004 651 451 446
Inventory.............................. 1,079 850 280 178 113
Refunds payable........................ 218 211 182 158 --
Investments............................ -- 370 -- -- --
Medical insurance...................... 356 338 249 -- --
Required capitalization of additional
cost into inventory for tax reporting
purposes................................... 1,152 473 273 283 68
Other.................................... 873 860 401 76 18
Foreign tax loss carryforwards........... 3,082 2,047 1,174 298 --
Valuation allowance for loss
carryforwards.............................. (3,082) (2,047) (1,174) (298) --
------------- ------- ------- ------- --------
Total deferred tax asset................. 4,435 4,106 2,036 1,262 4,047
------------- ------- ------- ------- --------
Deferred tax liability:
Property plant and equipment............. (610) (551) (125) -- --
------------- ------- ------- ------- --------
Net deferred tax asset................... $ 3,825 $ 3,555 $ 1,911 $ 1,262 $4,047
------------- ------- ------- ------- --------
------------- ------- ------- ------- --------
</TABLE>

F-15
<PAGE>
MICRO WAREHOUSE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
AND YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1994 IS UNAUDITED)

9. INCOME TAXES--(CONTINUED)
Provision for Income Taxes

The U.S. and foreign component of income before income taxes were:

<TABLE>
<CAPTION>
U.S. FOREIGN
------- -------
<S> <C> <C>
Nine months ended September 30, 1995.................... $51,173 $ 1,541
Year ended December 31, 1994............................ 48,027 (1,086)
</TABLE>

The provision for income taxes were:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------ ----------------------------
1995 1994 1994 1993 1992
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Current
Federal.................................. $18,289 $12,311 $17,878 $ 9,395 $ --
State.................................... 1,660 1,084 1,719 2,043 500
Foreign.................................. 1,670 650 971 165 --
------- ------- ------- ------- ------
21,619 14,045 20,568 11,603 500
------- ------- ------- ------- ------
Deferred
Federal.................................. (125) (952) (1,472) (484) 1,989
State.................................... (115) (82) (131) (104) 796
Foreign.................................. (30) (52) (41) (61) --
------- ------- ------- ------- ------
(270) (1,086) (1,644) (649) 2,785
------- ------- ------- ------- ------
Total...................................... $21,349 $12,959 $18,924 $10,954 $3,285
------- ------- ------- ------- ------
------- ------- ------- ------- ------
</TABLE>

The 1992 provision is a combination of taxes for the six months then ended
(period for which the Company was a C corporation) and the full year (state
taxes where S corporation status is not recognized).

The following table accounts for the difference between the actual tax
provision and the amounts obtained by applying the statutory U.S. Federal income
tax of 35% in 1995, 1994 and 1993 and 34% in 1992 to income before taxes.

F-16
<PAGE>
MICRO WAREHOUSE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
AND YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1994 IS UNAUDITED)

9. INCOME TAXES--(CONTINUED)
Effective tax rate reconciliation (percent):
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
-------------- ----------------------
1995 1994 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Statutory federal tax rate......................... 35.0 35.0 35.0 35.0 34.0
State income taxes net of Federal benefit.......... 2.0 2.0 2.0 4.6 7.9
Tax-exempt interest income......................... (1.0) (2.9) (2.6) (1.0) --
Rate differential of foreign income tax............ 3.1 1.9 1.3 2.6 1.4
Other, net......................................... 1.4 4.5 4.6 1.0 .1
---- ---- ---- ---- ----
Effective tax rate................................. 40.5 40.5 40.3 42.2 43.4
---- ---- ---- ---- ----
---- ---- ---- ---- ----
</TABLE>

10. MARKETABLE SECURITIES

As discussed in note 1, the Company adopted SFAS no. 115 and has classified
its securities as available for sale. Accordingly, the Company recognizes
valuation changes as a direct component of equity.

The following is a summary of marketable securities at September 30, 1995
and December 31, 1994:

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Securities available-for-sale--Governmental
obligations
September 30, 1995................................ $15,885 $1 $360 $15,526
December 31, 1994................................. $44,654 $3 $453 $44,204
</TABLE>

F-17
<PAGE>
MICRO WAREHOUSE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
AND YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1994 IS UNAUDITED)

11. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------- ----------------------------
1995 1994 1994 1993 1992
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Cash paid during the period for:
Interest.................................. $ 265 $ 200 $ 249 $ 122 $1,276
Income taxes.............................. 20,914 13,657 17,407 10,252 258
Noncash investing and financing activities:
Assets acquired and goodwill established
through issuance of common stock............ 1,150 10,944 12,052 -- --
Equipment acquired under capital lease
obligations................................. -- -- 1,021 876 1,649
Distribution of S corporation earnings.... -- -- -- -- 6,687
</TABLE>

12. ACQUISITIONS

During 1995, the Company acquired seven businesses with operations in the
United Kingdom, Australia, Germany, Switzerland and the U.S. The aggregate
purchase price was comprised of approximately $23,956 in cash and 26,000 common
shares with an average market value of approximately $45.00 per share. The
aggregate goodwill was $21,185.

During 1994, the Company acquired eight businesses with operations in
Holland, Belgium, Finland, Norway, Sweden, France, Mexico and Canada. The
aggregate purchase price was comprised of approximately $13,915 in cash and
335,000 common shares with an average market value of approximately $22.50 per
share. The aggregate goodwill was $17,580.

On December 1, 1993 the Company acquired through newly-formed foreign
subsidiaries, businesses with operations in Denmark, Norway and Sweden. The
aggregate purchase price included approximately $2,700 in cash and up to 200,000
common shares, contingent upon the businesses achieving sales and earnings goals
in 1994 and 1995. In an effort to synchronize its global operational and
strategic objectives, the Company waived the contingencies in January, 1994 and
issued the full amount of the aforementioned common shares (which are restricted
as to sale). The value of these shares ($4,514) was added to goodwill in 1994.

13. OPERATIONS BY GEOGRAPHIC AREAS

The Company operates primarily in one industry segment, the distribution of
computer hardware, software, supplies and accessories. Information about the
Company's operations in different geographic

F-18
<PAGE>
MICRO WAREHOUSE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
AND YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1994 IS UNAUDITED)

13. OPERATIONS BY GEOGRAPHIC AREAS--(CONTINUED)
areas for the nine months ended September 30, 1995 and 1994 and the years ended
December 31, 1994 and 1993 are presented below. European operations in 1992 were
nominal.
<TABLE>
<CAPTION>
ASIA/
NINE MONTHS ENDED SEPTEMBER 30, 1995 NORTH AMERICA EUROPE PACIFIC CONSOLIDATED
- ------------------------------------------------ ------------- -------- ------- ------------
<S> <C> <C> <C> <C>
Net operating revenues.......................... $ 713,026 $187,806 $ 3,186 $904,018
Income from operations.......................... 50,784 892 (525) 51,151
Identifiable operating assets................... 270,189 80,360 4,572 355,121

ASIA/
NINE MONTHS ENDED SEPTEMBER 30, 1994 NORTH AMERICA EUROPE PACIFIC CONSOLIDATED
- ------------------------------------------------ ------------- -------- ------- ------------
<S> <C> <C> <C> <C>
Net operating revenues.......................... $ 450,223 $ 74,913 N/A $525,136
Income (loss) from operations................... 32,010 (858) N/A 31,152
Identifiable operating assets................... 177,030 40,936 N/A 217,966
<CAPTION>

ASIA/
YEAR ENDED DECEMBER 31, 1994 NORTH AMERICA EUROPE PACIFIC CONSOLIDATED
- ------------------------------------------------ ------------- -------- ------- ------------
<S> <C> <C> <C> <C>
Net operating revenues.......................... $ 652,116 $124,261 N/A $776,377
Income(loss)from operations..................... 46,438 (1,086) N/A 45,352
Identifiable operating assets................... 230,080 63,972 N/A 294,052
<CAPTION>
YEAR ENDED DECEMBER 31, 1993 NORTH AMERICA EUROPE PACIFIC CONSOLIDATED
- ------------------------------------------------ ------------- -------- ------- ------------
<S> <C> <C> <C> <C>
Net operating revenues.......................... $ 417,804 $ 32,581 N/A $450,385
Income (loss) from operations................... 27,299 (1,802) N/A 25,497
Identifiable operating assets................... 126,425 14,741 N/A 141,166
</TABLE>

F-19
<PAGE>
MICRO WAREHOUSE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
AND YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1994 IS UNAUDITED)

14. QUARTERLY FINANCIAL DATA (UNAUDITED)

Selected quarterly financial data for the nine months ended September 30,
1995 and years ended December 31, 1994, 1993 and 1992:

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1995:
Net sales...................................... $277,497 $289,240 $337,281
Gross profit................................... 52,478 53,084 59,741
Net income..................................... 9,934 10,054 11,377
Net income per share........................... $ 0.33 $ 0.33 $ 0.37
Weighted average number of shares
outstanding...................................... 30,080 30,221 30,367
1994:
Net sales...................................... $156,839 $166,967 $201,330 $251,241
Gross profit................................... 30,618 32,754 38,254 48,067
Net income..................................... 5,775 6,303 6,990 8,949
Net income per share........................... $ 0.23 $ 0.23 $ 0.25 $ 0.30
Weighted average number of shares
outstanding...................................... 25,488 27,246 27,846 29,606
1993:
Net sales...................................... $ 98,783 $101,527 $109,415 $140,660
Gross profit................................... 19,851 20,293 21,398 27,362
Net income..................................... 2,803 2,907 3,892 5,397
Net income per share........................... $ 0.12 $ 0.13 $ 0.16 $ 0.21
Weighted average number of shares
outstanding...................................... 22,624 22,626 23,692 25,190
1992
Net sales...................................... $ 58,113 $ 61,592 $ 66,917 $ 83,012
Gross profit................................... 11,340 11,720 12,477 17,019
Pro forma net income........................... 1,993 1,257 1,621 2,074
Pro forma net income per share................. $ 0.11 $ 0.07 $ 0.09 $ 0.11
Weighted average number of shares
outstanding...................................... 17,565 17,565 17,565 18,710
</TABLE>

The quarterly amounts of net income per share in 1995, 1993 and 1992 do not
equal amounts for the year due to rounding.

15. PRO FORMA ADJUSTMENTS (UNAUDITED)

The following pro forma adjustments have been made to the historical results
of 1992 operations to make the presentations more meaningful in relation to
future periods:

(a) Elimination of amounts of special incentive compensation--see note
8. The amount represents the value of common stock transferred to the
consultant (by the existing stockholders) and issued to an employee (by the
Company) to terminate the incentive portion (based on income before taxes)
of their respective agreements. The value was based on an independent
appraisal of the Company's common stock at January 1, 1992.

F-20
<PAGE>
MICRO WAREHOUSE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
AND YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1994 IS UNAUDITED)

15. PRO FORMA ADJUSTMENTS (UNAUDITED)--(CONTINUED)
(b) Computation of income taxes which would have been recorded had the
Company been a C corporation for the entire year and after eliminating the
compensation in (a).

The 1992 combined historical and pro forma provisions for income tax expense
were as follows:

<TABLE>
<CAPTION>
FEDERAL STATE
------------------- -------------------
CURRENT DEFERRED CURRENT DEFERRED TOTAL
------- -------- ------- -------- ------
<S> <C> <C> <C> <C> <C>
Historical....................................... $ -- $ 1,989 $ 500 $ 796 $3,285
Pro forma adjustment............................. 3,969 (2,157) 1,092 (863) 2,041
------- -------- ------- -------- ------
$5,326
------
------
</TABLE>

16. SUBSEQUENT EVENT (UNAUDITED)

On October 2, 1995, the Company issued 1,200,000 shares of common stock at
$44.50 a share in a follow-on offering. The proceeds to the Company, net of the
underwriting discount ($2,328) and other direct expenses ($83), were $50,989.

F-21
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
INMAC CORP.:

We have audited the accompanying consolidated balance sheets of Inmac Corp.
and subsidiaries as of July 29, 1995, and July 30, 1994, and the related
consolidated statements of income (loss), stockholders' equity, and cash flows
for each of the years in the three-year period ended July 29, 1995. These
consolidated 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.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Inmac Corp.
and subsidiaries as of July 29, 1995 and July 30, 1994, and the results of their
operations and their cash flows for each of the years in the three-year period
ended July 29, 1995, in conformity with generally accepted accounting
principles.

/S/ KPMG PEAT MARWICK LLP

San Jose, California
September 11, 1995

F-22
<PAGE>
INMAC CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 29, 1995 AND JULY 30, 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................ $ 21,165 $ 2,992
Receivables, less allowance for returns and doubtful receivables of
$1,927 in 1995 and $2,497 in 1994.................................. 48,745 47,395
Inventories.......................................................... 27,924 29,979
Prepaid expenses..................................................... 3,620 3,661
Taxes receivable and other current assets............................ 4,435 5,167
-------- --------
Total current assets............................................... 105,889 89,194
Property, plant and equipment.......................................... 8,402 10,412
Other assets........................................................... 2,058 1,265
-------- --------
$116,349 $100,871
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................................... $ 19,528 $ 20,472
Accrued liabilities.................................................. 17,554 14,018
Bank debt and other liabilities...................................... 11,643 29,988
Income taxes......................................................... 3,902 1,713
-------- --------
Total current liabilities.......................................... 52,627 66,191
Long-term debt and other liabilities................................... 20,883 1,127
Stockholders' equity:
Preferred stock, par value $.01 per share. Authorized 2,000 shares;
none outstanding................................................... -- --
Common stock, par value $.01 per share. Authorized 30,000 shares;
outstanding 10,451 in 1995 and 10,088 in 1994.......................... 16,292 14,978
Retained earnings.................................................... 27,184 22,653
Cumulative translation adjustments................................... (637) (4,078)
-------- --------
Total stockholders' equity......................................... 42,839 33,553
Commitments
-------- --------
$116,349 $100,871
-------- --------
-------- --------
</TABLE>

See accompanying notes to consolidated financial statements.

F-23
<PAGE>
INMAC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
YEARS ENDED JULY 29, 1995, JULY 30, 1994 AND JULY 31, 1993
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Sales....................................................... $362,511 $349,449 $342,027
Cost of sales............................................... 241,986 229,642 201,338
-------- -------- --------
Gross profit.............................................. 120,525 119,807 140,689
Selling, general and administrative expenses................ 109,467 114,045 133,493
Provision for business restructuring........................ -- -- 16,546
-------- -------- --------
Operating income (loss)................................... 11,058 5,762 (9,350)
Interest expense, net....................................... 1,442 1,635 1,348
-------- -------- --------
Income (loss) before income taxes......................... 9,616 4,127 (10,698)
Income taxes................................................ 5,085 2,311 3,179
-------- -------- --------
Net income (loss)......................................... $ 4,531 $ 1,816 $(13,877)
-------- -------- --------
-------- -------- --------
Net income (loss) per common and common equivalent share.... $ 0.42 $ 0.17 $ (1.47)
-------- -------- --------
-------- -------- --------
Weighted average common and common equivalent shares
outstanding................................................. 10,750 10,831 9,464
-------- -------- --------
-------- -------- --------
</TABLE>

See accompanying notes to consolidated financial statements.

F-24
<PAGE>
INMAC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JULY 29, 1995, JULY 30, 1994, AND JULY 31, 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
-------------------
CUMULATIVE
NO. OF TRANSLATION RETAINED TREASURY
SHARES AMOUNT ADJUSTMENTS EARNINGS STOCK TOTAL
------ ---------- ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balances at July 25, 1992................ 9,453 $ 14,565 $ 1,983 $ 34,714 $ (2,012) $ 49,250
Net loss............................... -- -- -- (13,877) -- (13,877)
Exercises of common stock options...... 83 270 -- -- -- 270
Translation adjustments................ -- -- (7,922) -- -- (7,922)
------ ---------- ----------- -------- -------- --------
Balances at July 31, 1993................ 9,536 14,835 (5,939) 20,837 (2,012) 27,721
Net income............................. -- -- -- 1,816 -- 1,816
Exercises of common stock options...... 552 1,800 -- -- -- 1,800
Tax effects arising from shares issued
under stock option plans............. -- 355 -- -- -- 355
Translation adjustments................ -- -- 1,861 -- -- 1,861
------ ---------- ----------- -------- -------- --------
Balances at July 30, 1994................ 10,088 16,990 (4,078) 22,653 (2,012) 33,553
Net income............................. -- -- -- 4,531 -- 4,531
Exercises of common stock options...... 363 1,220 -- -- -- 1,220
Tax effects arising from shares issued
under stock option plans............. -- 94 -- -- -- 94
Translation adjustments................ -- -- 3,441 -- -- 3,441
------ ---------- ----------- -------- -------- --------
Balances at July 29, 1995................ 10,451 $ 18,304 $ (637) $ 27,184 $ (2,012) $ 42,839
------ ---------- ----------- -------- -------- --------
------ ---------- ----------- -------- -------- --------
</TABLE>

See accompanying notes to consolidated financial statements.

F-25
<PAGE>
INMAC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JULY 29, 1995, JULY 30, 1994 AND JULY 31, 1993
(IN THOUSANDS)

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).......................................... $ 4,531 $ 1,816 $(13,877)
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Allowance for returns and doubtful receivables......... (570) (939) 8
Depreciation and amortization.......................... 4,289 3,628 2,714
Loss on disposal of fixed assets....................... 128 721 4,484
Writedown of assets as part of restructuring........... -- -- 4,809
Deferred income taxes.................................. (155) 565 (942)
Tax effects arising from shares issued under stock
option plans......................................... 94 355 --
Translation adjustment................................. 2,914 1,862 (6,200)
Change in operating assets and liabilities:
Receivables.......................................... (780) (3,508) 352
Inventories.......................................... 2,055 (3,276) 15,622
Prepaid expenses & other current assets.............. 773 (4,057) 8,389
Accounts payable and accrued liabilities............. 2,592 (9,012) 2,087
Income taxes......................................... 2,343 361 (1,182)
Other assets......................................... (107) (218) 427
-------- -------- --------
Net cash provided (used) by operating activities..... 18,107 (11,702) 16,691
-------- -------- --------
Cash flows from investing activities:
Purchases of property, plant and equipment................. (2,706) (6,745) (5,001)
Proceeds from sales of equipment........................... 342 234 122
-------- -------- --------
Net cash used by investing activities................ (2,364) (6,511) (4,879)
-------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of long term debt................... 20,000 -- --
Short-term bank borrowings and repayments.................. (18,277) 8,929 (13,475)
Repayment of capital lease obligations..................... (452) (309) (245)
Deferred financing cost.................................... (686) -- --
Proceeds from exercise of stock options.................... 1,220 1,800 270
-------- -------- --------
Net cash provided (used) by financing activities..... 1,805 10,420 (13,450)
-------- -------- --------
Effect of exchange rate changes on cash...................... 625 (1) (1,722)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents......... 18,173 (7,794) (3,360)
Cash and cash equivalents at beginning of year............... 2,992 10,786 14,146
-------- -------- --------
Cash and cash equivalents at end of year..................... $ 21,165 $ 2,992 $ 10,786
-------- -------- --------
-------- -------- --------
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest................................................... $ 1,498 $ 2,112 $ 1,834
-------- -------- --------
-------- -------- --------
Income taxes, net.......................................... $ 2,330 $ 2,895 $ 4,677
-------- -------- --------
-------- -------- --------
</TABLE>

Supplemental schedule of noncash investing and financing activities:

Capital lease obligations totaling $42,000 in fiscal 1995, $436,000 in
fiscal 1994, and $978,000 in fiscal 1993 were incurred when the Company entered
into leases for new equipment.

See accompanying notes to consolidated financial statements.

F-26
<PAGE>
INMAC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JULY 29, 1995, JULY 30, 1994 AND JULY 31, 1993

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting principles and policies of Inmac
Corp. and its subsidiaries is presented to assist the reader in evaluating the
Company's financial statements included in this report. These principles and
policies conform to generally accepted accounting principles.

Principles of Consolidation

The financial statements reflect the consolidated balances of Inmac Corp.
and its wholly owned subsidiaries. All intercompany balances and transactions
have been eliminated in consolidation.

Segment Reporting

The Company is a direct response marketer of computer accessories, data
communications products, and computer hardware and software products. The
Company operates in one industry segment.

Revenue Recognition

Revenue on product sales is recognized upon shipment. Allowances are
provided for returns and warranties.

Cost of Sales

Cost of sales includes costs of purchased and manufactured products and
freight charges from suppliers. In fiscal 1994, certain field operations related
expenses were reclassified from cost of sales to selling, general and
administrative expenses to more accurately reflect the nature of such expenses.
This reclassification does not affect earnings. Appropriate reclassifications
were made to the fiscal 1993 consolidated financial statements to conform to the
fiscal 1994 and fiscal 1995 presentation.

Warranties

The Company's products are generally under warranty against defects in
material and workmanship for a period ranging from one year for most products to
a lifetime for certain other products. The Company also has a thirty-day
satisfaction guarantee. The Company has established reserves for these
anticipated future warranty costs which is periodically adjusted to reflect
actual experience.

Cash Equivalents

The Company considers all highly liquid debt instruments purchased with
original maturities of three months or less to be cash equivalents.

Inventories

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

Property, Plant and Equipment

F-27
<PAGE>
INMAC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED JULY 29, 1995, JULY 30, 1994 AND JULY 31, 1993

to seven years. Leasehold improvements are amortized over the shorter of the
useful life of the asset or the related lease term.

Catalog Costs

Catalog costs are deferred and amortized over the expected revenue stream to
match costs with revenues. The amortization period is thirteen weeks.

Deferred Financing Cost

Debt financing costs are deferred and amortized as interest expense, using
the straight line method, over the term of the related debt.

Foreign Currency Translation

Assets and liabilities of foreign subsidiaries are translated at year-end
rates of exchange and revenues and expenses are translated at the average rates
of exchange for the year. Translation gains and losses are excluded from the
measurement of net income (loss) and are recorded as a separate component of
stockholders' equity. Gains and losses resulting from foreign currency
transactions are included in net income.

Income Taxes

In August 1993, the Company adopted Statement of Financial Accounting
Standards No. 109 (SFAS 109), Accounting for Income Taxes. SFAS 109 changed the
Company's method of accounting for income taxes from the deferred method to the
asset and liability method. The asset and liability method requires the
recognition of deferred tax assets and liabilities for the expected tax
consequences of temporary differences between the tax bases of assets and
liabilities and the financial statement carrying amounts. To the extent a
deferred tax asset does not meet the more likely than not criterion of SFAS 109,
a valuation allowance has been established.

Net Income (Loss) Per Share

Net income (loss) per share has been computed using the weighted average
number of common and common equivalent shares outstanding. Net income (loss) per
share includes the effect of dilutive common stock options for all periods
except when inclusion would have been antidilutive. The difference between
primary and fully diluted earnings per share is not material for any of the
periods presented, and has therefore been excluded.

2. INVENTORIES

Inventories are summarized as follows (in thousands):

<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Raw materials and manufacturing supplies....................... $ 1,621 $ 2,868
Finished goods................................................. 26,303 27,111
------- -------
$27,924 $29,979
------- -------
------- -------
</TABLE>

F-28
<PAGE>
INMAC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED JULY 29, 1995, JULY 30, 1994 AND JULY 31, 1993

3. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, net, are summarized as follows (in
thousands):

<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Land and buildings............................................. $ -- $ 324
Machinery and equipment........................................ 13,722 13,901
Furniture and fixtures......................................... 4,614 4,937
Leasehold improvements......................................... 3,540 3,351
------- -------
21,876 22,513
Accumulated depreciation and amortization...................... (13,474) (12,101)
------- -------
$ 8,402 $10,412
------- -------
------- -------
</TABLE>

4. ACCRUED LIABILITIES

Accrued liabilities are summarized as follows (in thousands):

<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Payroll and related items...................................... $ 6,624 $ 4,183
Accrued restructuring costs.................................... 233 754
Other.......................................................... 10,697 9,081
------- -------
$17,554 $14,018
------- -------
------- -------
</TABLE>

5. BANK DEBT

Long-term debt consisted of the following:

<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
9.87% unsecured senior notes................................... $13,000 $ --
10.24% unsecured senior notes payable in Netherlands Guilders
(NLG).......................................................... 7,057 --
Other long-term borrowings..................................... 1,195 1,435
------- -------
21,252 1,435
Less current maturities........................................ (369) (308)
------- -------
Total long-term debt........................................... $20,883 $ 1,127
------- -------
------- -------
</TABLE>

Aggregate maturities of long-term debt for the next five years are as
follows (in thousands): 1996--$369; 1997--$2,353; 1998--$4,338; 1999--$4,162;
2000--$4,011; and thereafter--$6,019.

On June 29, 1995, the Company issued notes for $13,000,000 and NLG
10,918,600 (US $7,057,000 at July 29, 1995 currency exchange rate) of unsecured
senior debt in a private placement (the "Notes"). The Notes mature beginning in
fiscal 1997 through fiscal 2002. The Notes are subject to covenants that
restrict the Company's ability to pay dividends, incur indebtedness, and
repurchase Company stock. Further, to the extent a lien is placed on a current
asset of the Company, the Company covenants that it will secure the Notes
equally and ratably.

On June 30, 1995, the Company entered into a currency swap agreement to
hedge currency risk on interest and principal payments on $7,000,000 of the
Notes. The swap agreement effectively converted

F-29
<PAGE>
INMAC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED JULY 29, 1995, JULY 30, 1994 AND JULY 31, 1993

$7,000,000 of the Notes into Deutsche Mark debt with a fixed interest rate of
10.02%. The counterparty on the swap agreement is a major international
financial institution.

On July 27, 1995, the Company entered into a $30,000,000 unsecured
multi-currency revolving credit facility with a syndicate of banks (the
"Facility"). The Facility is intended to replace various revolving credit
facilities with banks in various countries in which the Company does business.
In general, borrowings under the Facility carry interest at the London Interbank
Offered Rate (LIBOR) plus 1.15%. As of fiscal year end, no borrowings under the
Facility were outstanding. The Company pays an annual commitment fee of 0.3% on
the unused portion of the Facility.

Short-term bank debt at fiscal year end consisted of borrowings under six
revolving credit facilities most of which expired on or before September 13,
1995, replaced by the Facility discussed above. Borrowings under these lines
bear interest at Inmac's option of the prime rate or LIBOR.

6. COMMITMENTS

The Company leases its offices, warehouses and manufacturing facilities
under lease agreements which expire at various dates through 2015.

Future minimum lease payments under noncancellable capital and operating
leases as of July 29, 1995, are (in thousands):

FISCAL YEAR
-----------
1996........................................................... $ 7,062
1997........................................................... 6,238
1998........................................................... 4,869
1999........................................................... 3,070
2000........................................................... 1,794
Thereafter..................................................... 12,064
-------
Total minimum lease payments............................... $35,097
-------
-------

Rent expense under operating leases was $7.2 million in 1995, $8.8 million
in 1994, and $9.2 million in 1993.

F-30
<PAGE>
INMAC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED JULY 29, 1995, JULY 30, 1994 AND JULY 31, 1993

7. STOCKHOLDERS' EQUITY

A summary of the activity under the Company's stock option plans for the
three years ended July 29, 1995, is as follows:

<TABLE>
<CAPTION>
SHARES PRICES
---------- --------------
<S> <C> <C>
Outstanding at July 25, 1992........................... 971,100 $3.500- 13.500
Granted.............................................. 2,326,485 3.125- 6.125
Exercised............................................ (83,098) 3.125- 3.250
Canceled or expired.................................. (1,228,014) 3.125- 6.625
----------
Outstanding at July 31, 1993........................... 1,986,473 3.125- 13.500
Granted.............................................. 420,050 3.375- 8.000
Exercised............................................ (552,467) 3.125- 4.500
Canceled or expired.................................. (113,403) 3.125- 13.500
----------
Outstanding at July 30, 1994........................... 1,740,653 3.125- 8.000
Granted.............................................. 339,550 3.250- 6.375
Exercised............................................ (362,781) 3.125- 6.625
Canceled or expired.................................. (196,660) 3.125- 7.625
----------
Outstanding at July 29, 1995........................... 1,520,762 3.125- 8.000
----------
----------
Balances as of July 29, 1995:
Exercisable.......................................... 608,658 $3.125- 8.000
Available for Future Grant........................... 169,717
</TABLE>

Generally, options vest in monthly increments during a four or five year
period from the date of grant. Vested options are exercisable during the ten
year period from the date of grant. The Company adopted an option exchange
program in September 1992 whereby holders of common stock options under the 1983
Stock Option Plan on October 6, 1992, were given the opportunity to exchange
options for 959,100 shares at a weighted average exercise price of $5.14 per
share for the same number of options at $3.25 per share, the fair market value
of the stock on that date. The holders of these exchanged options maintain all
the rights and privileges associated with the original grant, except the new
options were not exercisable until April 6, 1993. The effect of the exchange is
reflected in the fiscal 1993 activity above.

In connection with the unsecured senior debt, the Company issued 175,000
warrants as consideration for the execution of the financing agreement. The
exercise price of the warrants is $6.756. The expiration date is September 15,
2001.

Authorized, unissued shares of common stock were reserved for the following
purposes as of the end of each fiscal year noted:

<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Employee & Director Stock Plans.................. 1,690,479 2,099,581 2,213,077
Warrants......................................... 175,000 -- --
--------- --------- ---------
Total authorized, unissued shares................ 1,865,479 2,099,581 2,213,077
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-31
<PAGE>
INMAC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED JULY 29, 1995, JULY 30, 1994 AND JULY 31, 1993

8. INCOME TAXES

The Company adopted Statement of Financial Accounting Standards No. 109
(SFAS 109) Accounting for Income Taxes at the beginning of fiscal 1994. Adoption
of SFAS 109 did not have a significant effect on the determination of income tax
expense, nor did it result in a cumulative effect adjustment on the Company's
opening retained earnings for fiscal 1994.

The provision for income taxes is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets and
liabilities. The provision for income taxes consisted of (in thousands):

<TABLE>
<CAPTION>
1995 1994 1993
------ ------ -------
<S> <C> <C> <C>
Current:
State and Local....................................... $ 19 $ 50 $ 50
Foreign............................................... 5,221 1,696 4,071
------ ------ -------
5,240 1,746 4,121
------ ------ -------
Deferred:
State and Local....................................... 50 (50) --
Foreign............................................... (205) 615 (942)
------ ------ -------
(155) 565 (942)
------ ------ -------
Total income taxes.................................... $5,085 $2,311 $ 3,179
------ ------ -------
------ ------ -------
</TABLE>

Tax benefit of $0.1 million and $0.4 million in fiscal 1995 and fiscal 1994,
respectively, was allocated to additional paid-in capital for deductions
associated with the Company's stock option plans.

The provision for income taxes differs from the "expected" tax expense
(computed by applying the Federal statutory corporate rate to income (loss)
before taxes). A reconciliation between the Company's expected tax expense and
the actual tax expense is as follows (in thousands):

<TABLE>
<CAPTION>
1995 1994 1993
------ ------ -------
<S> <C> <C> <C>
Income taxes based on Federal statutory rate............ $3,269 $1,403 $(3,637)
State income taxes, net of Federal income tax effect.... 69 -- 30
Tax rate differential on foreign income and effect of
foreign losses........................................ 1,202 (955) 1,971
Unutilized U.S. losses.................................. 545 1,813 4,844
Other adjustments....................................... -- 50 (29)
------ ------ -------
Total income taxes...................................... $5,085 $2,311 $ 3,179
------ ------ -------
------ ------ -------
</TABLE>

F-32
<PAGE>
INMAC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED JULY 29, 1995, JULY 30, 1994 AND JULY 31, 1993

Major components of the deferred provision for income taxes prior to the
adoption of SFAS 109 are as follows (in thousands):

<TABLE>
<CAPTION>
1993
-----
<S> <C>
Tax depreciation in excess of depreciation reported in the financial
statements................................................................ $ (6)
Catalog expenses deferred for financial reporting......................... 3
Non-deductible portion of inventory and warranty reserve.................. 85
Effect of installment sales & bad debts................................... 1
Restructuring charges..................................................... (924)
Other..................................................................... (101)
-----
$(942)
-----
-----
</TABLE>

Deferred tax assets are recognized for deductible temporary differences,
operating loss carryforwards and credit carryforwards if it is more likely than
not that the tax benefits will be realized. To the extent a deferred tax asset
cannot be recognized under this criterion, a valuation allowance must be
established. Based on historical taxable income and future taxable income
projections over the periods in which the deferred tax assets are deductible,
management believes it is more likely than not that the Company will realize tax
benefit in an amount equivalent to the net deferred tax asset. Major components
of deferred tax assets and liabilities including the corresponding valuation
allowance are as follows (in thousands):

<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Deferred Tax Assets:
Net operating losses and credit carryforwards................ $13,704 $12,646
Inventory valuation.......................................... 605 1,030
Employee benefits............................................ 609 429
Receivable valuation......................................... 153 343
Restructuring................................................ 82 371
Miscellaneous accrued expenses............................... 636 419
Other........................................................ 262 270
------- -------
Deferred tax asset before valuation allowance.............. 16,051 15,508
Valuation allowance.......................................... (14,375) (13,771)
------- -------
Deferred tax asset net of valuation allowance.............. 1,676 1,737
Deferred Tax Liabilities:
Catalog Costs................................................ (521) (651)
Deferred income.............................................. (252) (303)
Other........................................................ -- (35)
------- -------
Deferred tax liability..................................... (773) (989)
------- -------
Net Deferred Tax Asset....................................... $ 903 $ 748
------- -------
------- -------
</TABLE>

The Company has approximately $4.5 million in unutilized foreign operating
loss carryforwards and approximately $34 million in U.S. Federal operating loss
carryforwards. Of these loss carryforwards, $3.7 million have no expiration
dates; $34 million expire beginning fiscal 2008 through fiscal 2010; and $0.8
million expire beginning fiscal 2001 through fiscal 2002. In addition, the
Company has approximately $0.6 million of unutilized alternative minimum tax
credits that can be carried forward indefinitely. Under U.S. tax law, certain
changes in stock ownership can result in a limitation on the

F-33
<PAGE>
INMAC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED JULY 29, 1995, JULY 30, 1994 AND JULY 31, 1993

amount of net operating loss that can be utilized each year. Under the tax laws
of the foreign countries in which the Company does business, certain changes in
stock ownership can result in restrictions on the use of net operating losses.
The net operating losses are potentially subject to these limitations.
Approximately $1.0 million of the valuation allowance associated with net
operating loss and credit carryforwards will be allocated to additional paid-in
capital when realized.

A breakdown of pretax domestic and foreign income after allocation of
elimination entries is as follows (in thousands):

<TABLE>
<CAPTION>
1995 1994 1993
------- ------- --------
<S> <C> <C> <C>
Domestic............................................. $(1,602) $(5,332) $(14,249)
Foreign.............................................. 11,218 9,459 3,551
------- ------- --------
Income (loss) before income taxes.................... $ 9,616 $ 4,127 $(10,698)
------- ------- --------
------- ------- --------
</TABLE>

9. EMPLOYEE PROFIT SHARING, BONUS AND BENEFIT PLANS

The Company has various profit sharing and bonus plans under which payments
may be made to employees and to senior management. All payments made pursuant to
the profit sharing and bonus plans are solely at the discretion of the Board of
Directors. Expenses under these plans were approximately $1.8 million in 1995,
$0.1 million in 1994 and $1.1 million in 1993. The Company's contributions to an
employee investment plan pursuant to Section 401(k) of the Internal Revenue Code
totaled approximately $0.1 million in 1995, $0.1 million in 1994 and $0.2
million in 1993.

10. FOREIGN OPERATIONS

The Company had operations in fiscal 1994 in North America (Canada and U.S.)
and in Europe (the U.K., Germany, France, the Netherlands and Sweden). The
Company sold its two store retail operation in the U.K. and closed its Japan
operation in fiscal 1993.

F-34
<PAGE>
INMAC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED JULY 29, 1995, JULY 30, 1994 AND JULY 31, 1993

The consolidated financial statements include the following significant
components and the elimination of intercompany balances and transactions (in
thousands):

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Assets:
Europe.......................................... $116,844 $ 80,805 $ 71,315
North America................................... 44,536 41,596 44,060
Intercompany eliminations....................... (45,031) (21,530) (21,244)
-------- -------- --------
$116,349 $100,871 $ 94,131
-------- -------- --------
-------- -------- --------
Sales:
Europe.......................................... $263,493 $236,109 $234,995
North America................................... 99,018 113,340 107,126
Intercompany eliminations....................... -- -- (94)
-------- -------- --------
$362,511 $349,449 $342,027
-------- -------- --------
-------- -------- --------
Income before income taxes:
Europe.......................................... $ 11,303 $ 6,489 $ 7,222
North America................................... (1,687) (10,321) (10,075)
Intercompany eliminations and consolidating
adjustments....................................... -- 7,959 (7,845)
-------- -------- --------
$ 9,616 $ 4,127 $(10,698)
-------- -------- --------
-------- -------- --------
</TABLE>

The Company's assets located outside the United States consist primarily of
cash, accounts receivable and inventories. Intercompany eliminations relating to
revenues resulted primarily from sales from the parent company to its
subsidiaries.

11. INTEREST EXPENSE, NET

Interest expense, net, consists of (in thousands):

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Interest Expense................................ $ 2,386 $ 2,283 $ 2,743
Interest Income................................. (944) (648) (1,395)
-------- -------- --------
Interest Expense, Net......................... $ 1,442 $ 1,635 $ 1,348
-------- -------- --------
-------- -------- --------
</TABLE>

F-35
<PAGE>
INMAC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED JULY 29, 1995, JULY 30, 1994 AND JULY 31, 1993

12. QUARTERLY DATA (UNAUDITED)

The following tables present selected quarterly data for fiscal 1995 and
1994 (in thousands, except per share data):

<TABLE>
<CAPTION>
FISCAL 1995 QUARTERS ENDED
--------------------------------------------
OCT. 29, JAN. 28, APR. 29, JULY 29,
1994 1995 1995 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales...................................... $ 83,875 $ 89,713 $101,326 $ 87,597
Gross profit............................... $ 28,605 $ 31,311 $ 32,772 $ 27,837
Net income................................. $ 1,051 $ 1,033 $ 1,921 $ 526
Net income per share....................... $ 0.10 $ 0.10 $ 0.18 $ 0.05
Market price of common stock:
High..................................... $ 7 $ 6 1/4 $ 6 3/8 $ 9 1/2
Low...................................... $ 4 3/8 $ 4 3/4 $4 11/16 $ 5 1/2
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1994 QUARTERS ENDED
--------------------------------------------
OCT. 30, JAN. 29, APR. 30, JULY 30,
1993 1994 1994 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales....................................... $ 79,126 $ 88,926 $ 98,592 $ 82,805
Gross profit................................ $ 29,890 $ 30,711 $ 32,008 $ 27,198
Net income (loss)........................... $ 642 $ 718 $ 1,040 $ (584)
Net income (loss) per share................. $ 0.06 $ 0.07 $ 0.10 $ (0.06)
Market price of common stock:
High...................................... $ 12 1/2 $ 12 5/8 $ 9 3/8 $ 6 1/2
Low....................................... $ 5 1/2 $ 6 1/2 $ 5 5/8 $ 3 1/4
</TABLE>

The Company has experienced, and expects to continue to experience,
fluctuations in sales and net income on a quarterly basis. These fluctuations
are due to a number of factors, including seasonality, the timing of catalog
mailings, the impact of new marketing or new business development programs, and
currency fluctuations.

13. BUSINESS RESTRUCTURING

The 1993 results include pretax charges of $16.5 million ($14.9 million
after taxes or $1.57 per share) for the estimated costs of closing or selling
unprofitable operations, disposing of poorly performing assets, revaluing
certain fixed assets, writing down inventories to net realizable values, and
providing for severance costs related to the strategic restructuring of the
management organization. These costs are identified as "Provision for business
restructuring" in the Company's financial statements.

F-36
<PAGE>
INMAC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED JULY 29, 1995, JULY 30, 1994 AND JULY 31, 1993

The accrued restructuring costs balance, identified in Note 4--Accrued
Liabilities, is analyzed as follows (in thousands):

<TABLE>
<CAPTION>
1995 1994 1993
----- ------- ------
<S> <C> <C> <C>
Balance at beginning of year............................. $ 754 $ 3,145 $ 269
Deductions for costs of facilities closed in fiscal 1989
restructuring............................................ -- (201) (68)
Accruals in fiscal 1993 for current portion of estimated
future costs of fiscal 1993 restructuring................ -- -- 2,944
Accrued restructuring cost balances reclassified from
long-term debt and other liabilities................... -- 840 --
Deductions for cash expenses of severance, benefits,
relocations, facility moves, and software changes, etc.
as provided for in the business restructuring in fiscal
1993..................................................... (521) (3,030) --
----- ------- ------
Balance at end of year................................... $ 233 $ 754 $3,145
----- ------- ------
----- ------- ------
</TABLE>

The deductions in fiscal 1995 and 1994 for cash expenses provided for in the
business restructuring in fiscal 1993 include the following items (in
thousands):

<TABLE>
<CAPTION>
1995 1994
---- ------
<S> <C> <C>
Severance, benefits, and related costs............................. $362 $1,554
Costs to move Inmac S.A. (France).................................. -- 374
Costs to move Inmac A.B. (Sweden).................................. -- 338
U.S. relocation costs.............................................. 159 223
Hiring, training, and outplacement................................. -- 96
Software changes necessitated by new operating structure........... -- 99
Other.............................................................. -- 346
---- ------
$521 $3,030
---- ------
---- ------
</TABLE>

F-37
<PAGE>
INMAC CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF
OCTOBER 28, 1995 AND JULY 29, 1995
(IN THOUSANDS)

<TABLE>
<CAPTION>
OCTOBER 28, JULY 29,
1995 1995
----------- --------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 10,548 $ 21,165
Receivables, net of allowances...................................... 54,974 48,745
Inventories......................................................... 28,321 27,924
Prepaid expenses.................................................... 4,130 3,620
Taxes receivable and other current assets........................... 4,439 4,435
----------- --------
Total current assets............................................ 102,412 105,889
----------- --------
Property, plant and equipment, net.................................... 7,791 8,402
Other assets.......................................................... 1,797 2,058
----------- --------
Total assets.................................................... $ 112,000 $116,349
----------- --------
----------- --------
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................... $ 24,379 $ 19,528
Accrued liabilities................................................. 20,464 17,554
Bank debt and other liabilities..................................... 334 11,643
Income taxes........................................................ 2,878 3,902
----------- --------
Total current liabilities....................................... 48,055 52,627
Long-term debt and other liabilities.................................. 20,520 20,883
Stockholders' equity:
Preferred stock, par value $.01 per share. Authorized 2,000 shares;
none outstanding.................................................. -- --
Common stock, par value $.01 per share. Authorized 30,000 shares;
outstanding 10,560 at October 1995 and 10,451 at July 1995........ 16,669 16,292
Retained earnings................................................... 28,286 27,184
Cumulative translation adjustments.................................. (1,530) (637)
----------- --------
Total stockholders' equity...................................... 43,425 42,839
Total liabilities and stockholders' equity...................... $ 112,000 $116,349
----------- --------
----------- --------
</TABLE>

See accompanying notes to consolidated financial statements.

F-38
<PAGE>
INMAC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED OCTOBER 28, 1995 AND OCTOBER 29, 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------
OCTOBER 28, OCTOBER 29,
1995 1994
----------- -----------
<S> <C> <C>
Sales................................................................. $90,404 $83,875
Cost of sales......................................................... 60,900 55,270
----------- -----------
Gross profit........................................................ 29,504 28,605
Selling, general, and administrative expenses......................... 27,028 26,063
----------- -----------
Operating income.................................................... 2,476 2,542
Interest expense, net................................................. 510 364
----------- -----------
Income before income taxes.......................................... 1,966 2,178
Income taxes.......................................................... 864 1,127
----------- -----------
Net income.......................................................... $ 1,102 $ 1,051
----------- -----------
----------- -----------
Net income per common and common equivalent share..................... $ 0.10 $ 0.10
----------- -----------
----------- -----------
Weighted average common and common equivalent shares outstanding...... 11,143 10,671
----------- -----------
----------- -----------
</TABLE>

See accompanying notes to consolidated financial statements.

F-39
<PAGE>
INMAC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
OCTOBER 28, 1995 AND OCTOBER 29, 1994
(IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------
OCTOBER 28, OCTOBER 29,
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income.......................................................... $ 1,102 $ 1,051
Adjustments to reconcile net income to net cash provided by
operating activities:
Allowance for returns and doubtful receivables.................... 57 154
Depreciation and amortization..................................... 750 1,250
(Gain)/Loss on disposal of fixed assets........................... (11) 53
Translation adjustment............................................ (732) 1,375
Change in operating assets and liabilities:
Receivables..................................................... (6,286) (5,622)
Inventories..................................................... (397) 920
Prepaid expenses and other current assets....................... (514) (2,402)
Accounts payable and accrued liabilities........................ 7,761 11,035
Income taxes.................................................... (1,142) 371
Other assets.................................................... 261 60
----------- -----------
Net cash provided by operating activities..................... 849 8,245
----------- -----------
Cash flows from investing activities:
Purchases of property, plant, and equipment......................... (145) (835)
Proceeds from sales of property and equipment....................... 17 67
----------- -----------
Net cash used in investing activities......................... (128) (768)
----------- -----------
Cash flows from financing activities:
Short-term bank borrowings and repayments........................... (11,268) (6,151)
Principal payments under capital lease obligations.................. (118) (35)
Proceeds from sale of common stock.................................. 377 124
----------- -----------
Net cash used by financing activities......................... (11,009) (6,062)
----------- -----------
Effect of exchange rate changes on cash............................... (329) 237
----------- -----------
Net increase (decrease) in cash and cash equivalents.................. (10,617) 1,652
Cash and cash equivalents at beginning of year........................ 21,165 2,992
----------- -----------
Cash and cash equivalents year-to-date................................ $ 10,548 $ 4,644
----------- -----------
----------- -----------
Supplemental disclosures of cash flow information:
Cash paid year-to-date for:
Interest.......................................................... $ 592 $ 263
----------- -----------
----------- -----------
Income taxes...................................................... $ 2,498 $ 689
----------- -----------
----------- -----------
</TABLE>

See accompanying notes to consolidated financial statements.

F-40
<PAGE>
INMAC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS ENDED OCTOBER 28, 1995 (UNAUDITED) AND OCTOBER 29, 1994 (UNAUDITED)
AND YEAR ENDED JULY 29, 1995

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The financial statements reflect the consolidated balances of Inmac Corp.
and its wholly owned subsidiaries. All intercompany balances and transactions
have been eliminated in consolidation.

SEGMENT REPORTING

The Company is a direct response marketer of computer accessories, data
communications products, and computer hardware and software products. The
Company operates in one industry segment.

REVENUE RECOGNITION

Revenue on product sales is recognized upon shipment. Allowances are
provided for returns and warranties.

WARRANTIES

CASH EQUIVALENTS

The Company considers all highly liquid debt instruments purchased with
original maturities of three months or less to be cash equivalents.

INVENTORIES

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

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost. Depreciation and
amortization are provided on the straight-line method over the estimated useful
lives of the assets which range principally from three to seven years. Leasehold
improvements are amortized over the shorter of the useful life of the asset or
the related lease term.

CATALOG COSTS

Catalog costs are deferred and amortized over the expected revenue stream to
match costs with revenues. The amortization period is thirteen weeks.

F-41
<PAGE>
INMAC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
QUARTERS ENDED OCTOBER 28, 1995 (UNAUDITED) AND OCTOBER 29, 1994 (UNAUDITED)
AND YEAR ENDED JULY 29, 1995

DEFERRED FINANCING COST

Debt financing costs are deferred and amortized as interest expense, using
the straight line method, over the term of the related debt.

FOREIGN CURRENCY TRANSLATION

INCOME TAXES

The Company uses the asset and liability method of accounting for income
taxes. The asset and liability method requires the recognition of deferred tax
assets and liabilities for the expected tax consequences of temporary
differences between the tax bases of assets and liabilities and the financial
statement carrying amounts. To the extent a deferred tax asset does not meet the
more likely than not criterion of SFAS 109, a valuation allowance has been
established.

NET INCOME (LOSS) PER SHARE

Net income per share has been computed using the weighted average number of
common and common equivalent shares outstanding. Net income per share includes
the effect of dilutive common stock options for all periods. The difference
between primary and fully diluted earnings per share is not material for any of
the periods presented, and has therefore been excluded.

QUARTERLY INFORMATION

The financial statements as of October 28, 1995 and for the three months
ended October 28, 1995 and October 29, 1994 were prepared by Inmac without audit
and are subject to year-end adjustment. It is suggested that these interim
statements be read in conjunction with the audited financial statements and
notes thereto included in Inmac's Annual report filed on Form 10-K for the
fiscal year ended July 29, 1995.

2. INVENTORIES

Inventories are summarized as follows (in thousands):

<TABLE>
<CAPTION>
OCTOBER JULY
1995 1995
------- -------
<S> <C> <C>
Raw materials and manufacturing supplies........................ $ 1,472 $ 1,621
Finished goods.................................................. 26,849 26,303
------- -------
$28,321 $27,924
------- -------
------- -------
</TABLE>

F-42
<PAGE>
INMAC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
QUARTERS ENDED OCTOBER 28, 1995 (UNAUDITED) AND OCTOBER 29, 1994 (UNAUDITED)
AND YEAR ENDED JULY 29, 1995

3. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, net, are summarized as follows (in
thousands):

<TABLE>
<CAPTION>
OCTOBER JULY
1995 1995
------- -------
<S> <C> <C>
Machinery and equipment.......................................... 13,809 13,722
Furniture and fixtures........................................... 4,654 4,614
Leasehold improvements........................................... 3,499 3,540
------- -------
21,962 21,876
Accumulated depreciation and amortization........................ (14,171) (13,474)
------- -------
$ 7,791 $ 8,402
------- -------
------- -------
</TABLE>

4. ACCRUED LIABILITIES

Accrued liabilities are summarized as follows (in thousands):

<TABLE>
<CAPTION>
OCTOBER JULY
1995 1995
------- -------
<S> <C> <C>
Payroll and related items....................................... $ 6,634 $ 6,624
Accrued restructuring costs..................................... 204 233
Other........................................................... 13,626 10,697
------- -------
$20,464 $17,554
------- -------
------- -------
</TABLE>

5. BANK DEBT

Long-term debt consisted of the following (in thousands):

<TABLE>
<CAPTION>
OCTOBER JULY
1995 1995
------- -------
<S> <C> <C>
9.87% unsecured senior notes.................................... $13,000 $13,000
10.24% unsecured senior notes payable in Netherlands Guilders
(NLG)........................................................... 6,928 7,057
Other long-term borrowings...................................... 926 1,195
------- -------
20,854 21,252
Less current maturities......................................... (334) (369)
------- -------
Total long-term debt............................................ $20,520 $20,883
------- -------
------- -------
</TABLE>

Aggregate maturities of long-term debt for the next five years as of October
28, 1995, are as follows (in thousands): 1996--$222; 1997--$2,294; 1998--$4,270;
1999 - $4,104; 2000--$3,986; and thereafter--$5,978.

On June 29, 1995, the Company issued notes for $13,000,000 and NLG
10,918,600 (US $6,927,852 at October 28, 1995, currency exchange rate) of
unsecured senior debt in a private placement (the "Notes"). The Notes mature
beginning in fiscal 1997 through fiscal 2002. The Notes are subject to covenants
that restrict the Company's ability to pay dividends, incur indebtedness, and

F-43
<PAGE>
INMAC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
QUARTERS ENDED OCTOBER 28, 1995 (UNAUDITED) AND OCTOBER 29, 1994 (UNAUDITED)
AND YEAR ENDED JULY 29, 1995

repurchase Company stock. Further, to the extent a lien is placed on a current
asset of the Company, the Company covenants that it will secure the Notes
equally and ratably.

On June 30, 1995, the Company entered into a currency swap agreement to
hedge currency risk on interest and principal payments on $7,000,000 of the
Notes. The swap agreement effectively converted $7,000,000 of the Notes into
Deutsche Mark debt with a fixed interest rate of 10.02%. The counterparty on the
swap agreement is a major international financial institution.

Short-term bank debt at July 29, 1995 consisted of borrowings under six
revolving credit facilities most of which expired on or before September 13,
1995, replaced by the Facility discussed above.

6. COMMITMENTS

The Company leases its offices, warehouses and manufacturing facilities
under lease agreements which expire at various dates through 2015.

Future minimum lease payments under noncancellable capital and operating
leases as of October 28, 1995, are (in thousands):

<TABLE>
<CAPTION>
FISCAL YEAR
- -----------
<S> <C>
1996...................................................................... $ 5,297
1997...................................................................... 6,238
1998...................................................................... 4,869
1999...................................................................... 3,070
2000...................................................................... 1,794
Thereafter................................................................ 12,064
-------
Total minimum lease payments.............................................. $33,332
-------
-------
</TABLE>

Rent expense under operating leases was $1.7 million for the three months
ended October 28, 1995 and $2.0 million for the three months ended October 29,
1994.

F-44
<PAGE>
INMAC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
QUARTERS ENDED OCTOBER 28, 1995 (UNAUDITED) AND OCTOBER 29, 1994 (UNAUDITED)
AND YEAR ENDED JULY 29, 1995

7. STOCKHOLDERS' EQUITY

A summary of the activity under the Company's stock option plans for the
three years ended July 29, 1995 and the quarter ended October 28, 1995, is as
follows:

<TABLE>
<CAPTION>
SHARES PRICES
---------- --------------
<S> <C> <C> <C>
Outstanding at July 25, 1992............................ 971,100 $3.500- 13.500
Granted............................................... 2,326,485 3.125- 6.125
Exercised............................................. (83,098) 3.125- 3.250
Canceled or expired................................... (1,228,014) 3.125- 6.625
----------
Outstanding at July 31, 1993............................ 1,986,473 3.125- 13.500
Granted............................................... 420,050 3.375- 8.000
Exercised............................................. (552,467) 3.125- 4.500
Canceled or expired................................... (113,403) 3.125- 13.500
----------
Outstanding at July 30, 1994............................ 1,740,653 3.125- 8.000
Granted............................................... 339,550 3.250- 6.375
Exercised............................................. (362,781) 3.125- 6.625
Canceled or expired................................... (196,660) 3.125- 7.625
----------
Outstanding at July 29, 1995............................ 1,520,762 3.125- 8.000
Granted............................................... 80,600 6.203- 9.250
Exercised............................................. (108,498) 3.250- 7.625
Canceled or expired................................... (91,152) 3.250- 7.625
----------
Outstanding at October 28, 1995......................... 1,401,712 3.125- 9.250
----------
----------

Balances as of October 28, 1995:
Exercisable........................................... 639,674 $3.125- 8.000
Available for Future Grant............................ 163,390
</TABLE>

F-45
<PAGE>
INMAC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
QUARTERS ENDED OCTOBER 28, 1995 (UNAUDITED) AND OCTOBER 29, 1994 (UNAUDITED)
AND YEAR ENDED JULY 29, 1995

Authorized, unissued shares of common stock were reserved for the following
purposes as of the end of each fiscal year noted:

<TABLE>
<CAPTION>
OCTOBER JULY
1995 1995
--------- ---------
<S> <C> <C>
Employee & Director Stock Plans.............................. 1,565,102 1,690,479
Warrants..................................................... 175,000 175,000
--------- ---------
Total authorized, unissued shares........................ 1,740,102 1,865,479
--------- ---------
--------- ---------
</TABLE>

8. INCOME TAXES

<TABLE>
<CAPTION>
OCTOBER OCTOBER
1995 1994
------- -------
<S> <C> <C>
Current:
State and Local.................................................. $ 20 $ 10
Foreign.......................................................... 635 1,152
------- -------
655 1,162
Deferred:
State and Local.................................................. 10 20
Foreign.......................................................... 199 (55)
------- -------
209 (35)
------- -------
Total income taxes............................................. $ 864 $ 1,127
------- -------
------- -------
</TABLE>

<TABLE>
<CAPTION>
OCTOBER OCTOBER
1995 1994
------- -------
<S> <C> <C>
Income taxes based on Federal statutory rate....................... $ 668 $ 741
State income taxes, net of Federal income tax effect............... 10 10
Tax rate differential on foreign income and effect of foreign
losses............................................................. 180 252
Unutilized U.S. losses............................................. -- 124
Other adjustments.................................................. 6 --
------- -------
Total income taxes............................................. $ 864 $ 1,127
------- -------
------- -------
</TABLE>

F-46
<PAGE>
INMAC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
QUARTERS ENDED OCTOBER 28, 1995 (UNAUDITED) AND OCTOBER 29, 1994 (UNAUDITED)
AND YEAR ENDED JULY 29, 1995

Company will realize tax benefit in an amount equivalent to the net deferred tax
asset. Major components of deferred tax assets and liabilities including the
corresponding valuation allowance are as follows (in thousands):

<TABLE>
<CAPTION>
OCTOBER JULY
1995 1995
-------- --------
<S> <C> <C>
Deferred Tax Assets:
Net operating losses and credit carryforwards................ $ 13,902 $ 13,704
Inventory valuation.......................................... 543 605
Employee benefits............................................ 515 609
Receivable valuation......................................... 165 153
Restructuring................................................ 70 82
Miscellaneous accrued expenses............................... 629 636
Other........................................................ 275 262
-------- --------
Deferred tax asset before valuation allowance.............. 16,099 16,051
Valuation allowance.......................................... (14,625) (14,375)
-------- --------
Deferred tax asset net of valuation allowance.............. 1,474 1,676
Deferred Tax Liabilities:
Catalog Costs................................................ (580) (521)
Deferred income.............................................. (200) (252)
-------- --------
Deferred tax liability................................... (780) (773)
-------- --------
Net Deferred Tax Asset................................. $ 694 $ 903
-------- --------
-------- --------
</TABLE>

The Company has approximately $4.9 million in unutilized foreign operating
loss carryforwards and approximately $34.3 million in U.S. Federal operating
loss carryforwards. Of these loss carryforwards, $4.1 million have no expiration
dates; $34.3 million expire beginning fiscal 2008 through fiscal 2010; and $0.8
million expire beginning fiscal 2001 through fiscal 2002. In addition, the
Company has approximately $0.6 million of unutilized alternative minimum tax
credits that can be carried forward indefinitely. Under U.S. tax law, certain
changes in stock ownership can result in a limitation on the amount of net
operating loss that can be utilized each year. Under the tax laws of the foreign
countries in which the Company does business, certain changes in stock ownership
can result in restrictions on the use of net operating losses. The net operating
losses are potentially subject to these limitations. Approximately $1.0 million
of the valuation allowance associated with net operating loss and credit
carryforwards will be allocated to additional paid-in capital when realized.

A breakdown of pretax domestic and foreign income after allocation of
elimination entries is as follows (in thousands):

<TABLE>
<CAPTION>
OCTOBER OCTOBER
1995 1994
------- -------
<S> <C> <C>
Domestic........................................................ $ 197 $ (258)
Foreign......................................................... 1,769 2,436
------- -------
Income before income taxes.................................. $ 1,966 $ 2,178
------- -------
------- -------
</TABLE>

F-47
<PAGE>
INMAC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
QUARTERS ENDED OCTOBER 28, 1995 (UNAUDITED) AND OCTOBER 29, 1994 (UNAUDITED)
AND YEAR ENDED JULY 29, 1995

9. EMPLOYEE PROFIT SHARING, BONUS AND BENEFIT PLANS

The Company has various profit sharing and bonus plans under which payments
may be made to employees and to senior management. All payments made pursuant to
the profit sharing and bonus plans are solely at the discretion of the Board of
Directors. Expenses under these plans were approximately $0.4 million for the
three months ended October 28, 1995 and $0.4 million for the three months ended
October 29, 1994. The Company's contributions to an employee investment plan
pursuant to Section 401(k) of the Internal Revenue Code totaled less than $0.1
million in each of the three month periods ended October 28, 1995 and October
29, 1994.

10. FOREIGN OPERATIONS

The Company had operations in North America (Canada and U.S.) and in Europe
(the U.K., Germany, France, the Netherlands and Sweden).

The consolidated financial statements include the following significant
components and the elimination of intercompany balances and transactions (in
thousands):

<TABLE>
<CAPTION>
OCTOBER JULY
1995 1995
-------- --------
<S> <C> <C>
Assets:
Europe...................................................... $114,389 $116,844
North America............................................... 46,664 44,536
Intercompany eliminations................................... (49,053) (45,031)
-------- --------
$112,000 $116,349
-------- --------
-------- --------
</TABLE>

<TABLE>
<CAPTION>
OCTOBER OCTOBER
1995 1994
------- -------
<S> <C> <C>
Sales:
Europe........................................................ $63,379 $58,290
North America................................................. 27,025 25,585
Intercompany eliminations..................................... -- --
------- -------
$90,404 $83,875
------- -------
------- -------
Income before income taxes:
Europe........................................................ $ 1,766 2,487
North America................................................. 200 (159)
Intercompany eliminations and consolidating adjustments....... -- (150)
------- -------
$ 1,966 $ 2,178
------- -------
------- -------
</TABLE>

The Company's assets located outside the United States consist primarily of
cash, accounts receivable and inventories.

F-48
<PAGE>
INMAC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
QUARTERS ENDED OCTOBER 28, 1995 (UNAUDITED) AND OCTOBER 29, 1994 (UNAUDITED)
AND YEAR ENDED JULY 29, 1995

11. INTEREST EXPENSE, NET

Interest expense, net, consists of (in thousands):

<TABLE>
<CAPTION>
OCTOBER OCTOBER
1995 1994
------- -------
<S> <C> <C>
Interest expense................................................ $ 623 $ 402
Interest income................................................. (113) (38)
-------- -------
Interest expense, net........................................... $ 510 $ 364
-------- -------
-------- -------
</TABLE>

12. QUARTERLY DATA

The following table presents selected quarterly data for fiscal 1995 (in
thousands, except per share data):
<TABLE>
<CAPTION>
FISCAL 1995 QUARTERS ENDED
------------------------------------------------------------------------------------
OCT. 29, JAN. 28, APR. 29, JULY 29,
1994 1995 1995 1995
---------------- ---------------- ---------------- --------------------
<S> <C> <C> <C> <C>
Sales............................. $ 83,875 $ 89,713 $101,326 $ 87,597
Gross profit...................... $ 28,605 $ 31,311 $ 32,772 $ 27,837
Net income........................ $ 1,051 $ 1,033 $ 1,921 $ 526
Net income per share.............. $ 0.10 $ 0.10 $ 0.18 $ 0.05
Market price of common stock:
High............................ $ 7 $ 6 1/4 $ 6 3/8 $ 9 1/2
Low............................. $ 4 3/8 $ 4 3/4 $ 4 11/16 $ 5 1/2

OCT 28,
1995
-------------
<S> <C>
Sales............................. $ 90,404
Gross profit...................... $ 29,504
Net income........................ $ 1,102
Net income per share.............. $ 0.10
Market price of common stock:
High............................ $ 8 3/4
Low............................. $ 6 13/64
</TABLE>

13. BUSINESS RESTRUCTURING

The accrued restructuring costs balance, identified in Note 4--Accrued
Liabilities, is analyzed as follows (in thousands):

<TABLE>
<CAPTION>
OCTOBER JULY
1995 1995
------- -----
<S> <C> <C>
Balance at beginning of period...................................... $ 233 $ 754
Deductions for cash expenses of severance, benefits, relocations,
facility moves, and software changes, etc. as provided for in the
business restructuring in fiscal 1993............................. (29) (521)
------- -----
Balance at end of period............................................ $ 204 $ 233
------- -----
------- -----
</TABLE>

F-49
<PAGE>
INMAC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
QUARTERS ENDED OCTOBER 28, 1995 (UNAUDITED) AND OCTOBER 29, 1994 (UNAUDITED)
AND YEAR ENDED JULY 29, 1995

Cash payments for the three months ended October 28, 1995, and for the year
ended July 29, 1995, for amounts expensed as a part of the fiscal 1993 business
restructuring include the following items (in thousands):

<TABLE>
<CAPTION>
OCTOBER JULY
1995 1995
------- ----
<S> <C> <C>
Severance, benefits, and related costs.............................. -$- $362
U.S. relocation costs............................................... 29 159
------- ----
$29 $521
------- ----
------- ----
</TABLE>

F-50
<PAGE>

[FORM OF PROXY]

INMAC CORP.

This Proxy is Solicited on Behalf of the Board of Directors of Inmac Corp.
for use at the Special Meeting of Stockholders to be held on January 25, 1996

The undersigned holder of shares of Inmac Corp. (the "Company") hereby appoints
Kenneth Eldred, Jeffrey Heimbuck, Raymond Nystrom and Bennet Goldberg, and each
of them, as proxies of the undersigned, with full power of substitution and
resubstitution, to represent and vote as set forth herein all of the shares of
Common Stock of the Company held of record by the undersigned on December 22,
1995 at the Special Meeting of Stockholders of the Company to be held on January
25, 1996, at 9:00 a.m., Pacific Time, at Inmac's principal executive offices
located at 2465 Augustine Drive, Santa Clara, California 95052 and at any and
all postponements and adjournments thereof.

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED
"FOR" THE PROPOSAL TO ADOPT THE MERGER AGREEMENT, AND IN ACCORDANCE WITH THE
JUDGMENT OF THE PERSON OR PERSONS VOTING THE PROXY WITH RESPECT TO ANY OTHER
BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING.

(Continued, and to be dated and signed, on the other side)

Please mark your
vote as in this example.
/X/
- --------------------------------------------------------------------------------
THE DIRECTORS OF INMAC RECOMMEND A VOTE FOR THE
ADOPTION OF THE MERGER AGREEMENT.
- --------------------------------------------------------------------------------
Adoption of the Agreement and Plan of Merger, dated as of November
30, 1995 by and among Micro Warehouse, Inc., a wholly owned
subsidiary of Micro Warehouse, Inc. and Inmac Corp. and, in their
discretion, the proxies are authorized to vote upon such other
matters as may properly come before the Special Meeting.

FOR / / AGAINST / / ABSTAIN / /
- --------------------------------------------------------------------------------

This proxy should be dated,
signed by the stockholder as
his or her name appears
below, and returned promptly
in the enclosed envelope.
Joint owners should each
sign personally, and
trustees and others signing
in a representative capacity
should indicate the capacity
in which they sign.

Dated:_________________________________

______________________________________
Signature of Stockholder

USING BLUE OR BLACK INK, PLEASE MARK, SIGN, AND PROMPTLY RETURN
THIS PROXY CARD IN THE ENVELOPE PROVIDED

<PAGE>

Appendix A

==============================================================================

AGREEMENT AND PLAN OF MERGER

by and among

MICRO WAREHOUSE, INC.,

INDIGO HOLDING COMPANY, INC.

and

INMAC CORP.

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

Dated as of November 30, 1995

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

==============================================================================

A-1

<PAGE>

Table of Contents

Page

1. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . 2

2. Certificate of Incorporation, By-laws, Directors
and Officers of the Surviving Corporation . . . . . . . . . . . . . 2
2.1 Certificate of Incorporation and By-laws of Surviving
Corporation . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Directors and Officers of Surviving Corporation . . . . . . . 2

3. Conversion of Securities . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Conversion of Securities . . . . . . . . . . . . . . . . . . 3
3.2 Payment for Company Common Shares . . . . . . . . . . . . . . 4
3.3 Fractional Shares . . . . . . . . . . . . . . . . . . . . . . 6
3.4 No Transfer after the Effective Time . . . . . . . . . . . . 6

4. Representations and Warranties of the Company . . . . . . . . . . . . 6
4.1 Existence; Good Standing; Corporate Authority . . . . . . . . 6
4.2 Authorization, Validity and Effect of Agreement . . . . . . . 7
4.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . 7
4.4 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 8
4.5 Other Interests . . . . . . . . . . . . . . . . . . . . . . . 8
4.6 No Conflict; Required Filings and Consents . . . . . . . . . 8
4.7 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 SEC Documents and Financial Statements . . . . . . . . . . . 10
4.9 Absence of Certain Changes . . . . . . . . . . . . . . . . . 11
4.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.11 Employee Benefit Plans; Employment Agreements . . . . . . . . 11
4.12 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . 13
4.13 Registration Statement . . . . . . . . . . . . . . . . . . . 13
4.14 Properties . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.15 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.16 Environmental Matters . . . . . . . . . . . . . . . . . . . . 15
4.17 Intellectual Property . . . . . . . . . . . . . . . . . . . . 16
4.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.19 Product Warranties and Liabilities . . . . . . . . . . . . . 18
4.20 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . 19
4.21 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.22 Material Contracts . . . . . . . . . . . . . . . . . . . . . 19
4.23 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.24 State Takeover Statutes . . . . . . . . . . . . . . . . . . . 20
4.25 Opinion of Financial Advisor . . . . . . . . . . . . . . . . 20

A-2

<PAGE>

Table of Contents (Cont'd)

Page
----

4.26 Ownership of Parent Common Shares . . . . . . . . . . . . . . 20

5. Representations and Warranties of Parent and Merger Sub . . . . . . . 21
5.1 Existence; Good Standing; Corporate Authority . . . . . . . . 21
5.2 Authorization, Validity and Effect of Agreement . . . . . . . 21
5.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . 21
5.4 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 22
5.5 No Conflict; Required Filings and Consents . . . . . . . . . 22
5.6 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.7 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . 23
5.8 Absence of Certain Changes . . . . . . . . . . . . . . . . . 24
5.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.10 Employee Benefit Plans; Employment Agreements . . . . . . . . 25
5.11 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . 25
5.12 Registration Statement . . . . . . . . . . . . . . . . . . . 25
5.13 Properties . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.15 Intellectual Property . . . . . . . . . . . . . . . . . . . . 27
5.16 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.17 Product Warranties and Liabilities . . . . . . . . . . . . . 28
5.18 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . 29
5.19 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.20 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.21 Issuance of Parent Common Shares . . . . . . . . . . . . . . 29
5.22 Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . 29

6. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.1 Alternative Proposals . . . . . . . . . . . . . . . . . . . . 30
6.2 Conduct of Business by the Company . . . . . . . . . . . . . 30
6.3 Conduct of Business by Parent . . . . . . . . . . . . . . . . 33
6.4 Meeting of Stockholders . . . . . . . . . . . . . . . . . . . 34
6.5 Filings, Other Action . . . . . . . . . . . . . . . . . . . . 34
6.6 Access to Information; Confidentiality . . . . . . . . . . . 34
6.7 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.8 Registration Statement . . . . . . . . . . . . . . . . . . . 35
6.9 Listing Application . . . . . . . . . . . . . . . . . . . . . 36
6.10 Further Action . . . . . . . . . . . . . . . . . . . . . . . 36
6.11 Affiliate Letters . . . . . . . . . . . . . . . . . . . . . . 36
6.12 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.13 Insurance; Indemnity . . . . . . . . . . . . . . . . . . . . 37
6.14 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . 38
6.15 Conveyance Taxes . . . . . . . . . . . . . . . . . . . . . . 39

A-3

<PAGE>

Table of Contents (Cont'd)

Page
----

6.16 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.17 Pooling Accounting Treatment . . . . . . . . . . . . . . . . 39
6.18 Company Warrants . . . . . . . . . . . . . . . . . . . . . . 39

7. Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.1 Conditions to Each Party's Obligation To Effect the Merger . 39
7.2 Conditions to Obligation of Company To Effect the Merger . . 40
7.3 Conditions to Obligation of Parent and Merger Sub to Effect
the Merger . . . . . . . . . . . . . . . . . . . . . . . . . 41

8. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.1 Termination by Mutual Consent . . . . . . . . . . . . . . . . 42
8.2 Termination by Either Parent or Company . . . . . . . . . . . 42
8.3 Termination by Company . . . . . . . . . . . . . . . . . . . 43
8.4 Termination by Parent and Merger Sub . . . . . . . . . . . . 43
8.5 Effect of Termination and Abandonment . . . . . . . . . . . . 44
8.6 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . 44

9. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.1 Nonsurvival of Representations, Warranties and Agreements . . 45
9.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.3 Assignment; Binding Effect . . . . . . . . . . . . . . . . . 46
9.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 46
9.5 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 47
9.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 47
9.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.9 Interpretation . . . . . . . . . . . . . . . . . . . . . . . 47
9.10 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.11 Incorporation of Schedules . . . . . . . . . . . . . . . . . 47
9.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . 47
9.13 Enforcement of Agreement . . . . . . . . . . . . . . . . . . 47
9.14 Effect of Exercise of Purchase Option . . . . . . . . . . . . 48

A-4

<PAGE>

<TABLE>
<CAPTION>
List of Schedules
<S> <C>
Schedule 3.1(e) -Options
Schedule 4.4 -Company Subsidiaries
Schedule 4.6(a) -Company Required Filings and Consents
Schedule 4.7 -Company Compliance
Schedule 4.8 -Company SEC Correspondence
Schedule 4.10 -Company Litigation
Schedule 4.11(a) -Company Employee Benefit Plans and Employment
Agreements
Schedule 4.11(f) -Merger-related Changes to Company Employee Benefit Plans
Schedule 4.12 -Company Labor Matters
Schedule 4.15(b) -Company Sales and Use Taxes
Schedule 4.16 -Company Environmental Matters
Schedule 4.17 -Company Intellectual Property
Schedule 4.18 -Company Insurance
Schedule 4.19(a) -Company Product Warranties and Liabilities
Schedule 4.19(c) -Company Trade Regulation Correspondence
Schedule 4.22(a) -Company Material Contracts
Schedule 4.22(b) -Company Material Contracts with a Change in Control Provision
Schedule 4.22(c) -Company Arrangements regarding Assets
Schedule 5.4 -Parent Subsidiaries
Schedule 5.5(a) -Parent Required Filings and Consents
Schedule 5.6 -Parent Compliance
Schedule 5.10 -Parent Employee Benefit Plans and Employment Agreements
Schedule 5.15 -Parent Intellectual Property
Schedule 5.16 -Parent Insurance
Schedule 5.17(a) -Parent Product Warranties and Liabilities
Schedule 5.17(c) -Parent Trade Regulation Correspondence
Schedule 7.3(f) -Obligations of the Company
</TABLE>

<TABLE>
<CAPTION>
List of Exhibits

<S> <C>
Exhibit A - Form of Amended and Restated Certificate of Incorporation
Exhibit B - Form of Amended and Restated By-Laws
Exhibit C - Form of Company Affiliate Letter
Exhibit D - Form of Parent Affiliate Letter
Exhibit E - Form of Company Representation Letter
Exhibit F - Form of Parent and Merger Sub Representation Letter
</TABLE>

A-5

<PAGE>

INDEX OF DEFINED TERMS
----------------------

Page
----

Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Affiliate Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Alternative Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Blue Sky Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Closing Market Price . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Closing Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company Benefit Arrangement . . . . . . . . . . . . . . . . . . . . . . . 12
Company Common Share . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Company Employee Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Company Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Company Equity Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Company Intellectual Property Rights . . . . . . . . . . . . . . . . . . 17
Company Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . 7
Company Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . 7
Company Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Company Stock Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Competing Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Continuing Directors . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Controlled Group Liability . . . . . . . . . . . . . . . . . . . . . . . 12
Conversion Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Exchange Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
FCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Form S-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
FTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

A-6

<PAGE>

Indemnification Agreements . . . . . . . . . . . . . . . . . . . . . . . 37
Indemnified Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Intellectual Property Rights . . . . . . . . . . . . . . . . . . . . . . 17
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
NASDAQ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Parent Benefit Arrangement . . . . . . . . . . . . . . . . . . . . . . . 25
Parent Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Parent Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Parent Employee Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Parent Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Parent Equity Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Parent Intellectual Property Rights . . . . . . . . . . . . . . . . . . . 28
Parent Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . 21
Parent Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . . 21
Parent Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Parent Stock Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Product Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Proxy Statement/Prospectus . . . . . . . . . . . . . . . . . . . . . . . 35
Purchase Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Stock Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Stock Agreement Transaction . . . . . . . . . . . . . . . . . . . . . . . 20
Stockholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Termination Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

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<PAGE>

Agreement and Plan of Merger

Agreement and Plan of Merger (this "Agreement"), dated as of
November 30, 1995, by and among Micro Warehouse, Inc., a Delaware corporation
("Parent"), Indigo Holding Company, Inc., a Delaware corporation and a wholly
owned subsidiary of Parent ("Merger Sub"), and Inmac Corp., a Delaware
corporation (the "Company").

Recitals

A. Each of the Boards of Directors of the Company and Parent has
determined that a business combination between the Company and Parent is in
the best interests of its respective companies and stockholders.

B. Each of the Company, Parent and Merger Sub desires to effect a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), whereby Merger Sub will merge with and
into the Company (the "Merger"), with the Company being the surviving
corporation, and such Merger will be accounted for financial accounting
purposes as a "pooling of interests," all upon the terms and subject to the
conditions of this Agreement.

C. As a condition to its willingness to enter into this
Agreement, Parent has required that, simultaneously with the execution
herewith, Kenneth A. Eldred and Roberta E. Eldred, trustees of the Kenneth
and Roberta Eldred Revocable Trust U/T/A, dated November 28, 1983, as amended
as of January 19, 1990, and Kenneth A. Eldred, trustee of the Eldred 1995
Charitable Remainder Unit Trust U/T/A, dated as of September 14, 1995
(collectively, the "Stockholders") enter into the Stock Agreement, dated as
of even date herewith (the "Stock Agreement"), with Parent, pursuant to which
Stockholders are granting to Parent the option (the "Purchase Option") to
purchase the Company Common Shares (as defined below) owned by Stockholders
and are agreeing to certain voting and other restrictions.

D. Each of the Company, Parent and Merger Sub desires to provide
for the consummation of the Merger and certain other transactions relating
thereto, on the terms and subject to the conditions set forth herein.

1. The Merger

1.1 The Merger. (a) On the terms and subject to the conditions
----------
of this Agreement, at the Effective Time (as defined below), Merger Sub will
be merged with and into the Company in accordance with the applicable
provisions of the General Corporation Law of the State of Delaware (the
"DGCL"), and the separate corporate existence of Merger Sub will thereupon
cease. The Company will be the surviving corporation in the Merger (as such,
the "Surviving Corporation") and shall be a wholly owned subsidiary of
Parent.

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<PAGE>

(b) At the Effective Time, the corporate existence of the Company
with all its rights, privileges, powers and franchises will continue
unaffected and unimpaired by the Merger. The Merger will have the effects
specified in the DGCL.

1.2 The Closing. The closing of the transactions contemplated by
-----------
this Agreement (the "Closing") will take place at the offices of Jones, Day,
Reavis & Pogue, 599 Lexington Avenue, New York, New York, at 10:00 a.m.,
local time, within two business days following the date on which the last of
the conditions (excluding conditions that by their terms cannot be satisfied
until the Closing Date (as defined below)) set forth in Article 7 is
satisfied or waived in accordance herewith, or at such other place, time or
date as the parties may agree. The date on which the Closing occurs is
hereinafter referred to as the "Closing Date".

1.3 Effective Time. On the Closing Date, Merger Sub and the
--------------
Company will cause a certificate of merger (the "Certificate of Merger"),
executed in accordance with the relevant provisions of the DGCL, to be filed
with the Secretary of State of the State of Delaware as provided in Section
251 of the DGCL. Upon completion of such filing, the Merger will become
effective in accordance with the DGCL. The time and date on which the Merger
becomes effective is herein referred to as the "Effective Time."

2. Certificate of Incorporation, By-laws, Directors
and Officers of the Surviving Corporation

2.1 Certificate of Incorporation and By-laws of Surviving
-----------------------------------------------------
Corporation. (a) The certificate of incorporation of the Surviving
-----------
Corporation to be in effect from and after the Effective Time until amended
in accordance with its terms and the DGCL will be the certificate of
incorporation of the Company immediately prior to the Effective Time, as
amended and restated in the form of Exhibit A.

(b) The by-laws of the Surviving Corporation to be in effect from
and after the Effective Time until amended in accordance with their terms and
the DGCL will be the by-laws of the Company immediately prior to the
Effective Time, as amended and restated in the form of Exhibit B.

2.2 Directors and Officers of Surviving Corporation. (a) The
-----------------------------------------------
members of the initial Board of Directors of the Surviving Corporation will
be the members of the Board of Directors of Merger Sub immediately prior to
the Effective Time, each of whom will serve on the Board of Directors of the
Surviving Corporation in accordance with the certificate of incorporation and
by-laws of the Surviving Corporation until his/her successor has been duly
elected or appointed and qualified or until his/her earlier death,
resignation or removal in accordance with the certificate of incorporation
and the by-laws of the Surviving Corporation.

(b) The officers of the Surviving Corporation as of the Effective
Time will be the officers of Merger Sub immediately prior to the Effective
Time. Each such

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<PAGE>

person will continue in such office of the Surviving Corporation until
his/her successor has been duly elected or appointed and qualified or until
his/her earlier death, resignation or removal in accordance with the
certificate of incorporation and the by-laws of the Surviving Corporation.

3. Conversion of Securities

3.1 Conversion of Securities. (a) At the Effective Time, each
------------------------
share of Common Stock, par value $0.01 per share, of the Company (each a
"Company Common Share") issued and outstanding immediately prior to the
Effective Time (other than Company Common Shares owned by Parent or any
direct or indirect wholly owned Subsidiary (as defined below) of Parent or
any of the Company's direct or indirect wholly owned Subsidiaries, which
shall be cancelled) will, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into the right to receive a
number of shares of Common Stock, par value $0.01 per share, of Parent (the
"Parent Common Shares") equal to a fraction (the "Conversion Rate"), the
numerator of which will be 12 and the denominator of which will be the
Closing Market Price (as defined below) of one Parent Common Share; provided,
however, that (i) in the event the Closing Market Price of one Parent Common
Share is less than $43.54, the Conversion Rate shall be equal to 0.276 and
(ii) in the event the Closing Market Price of one Parent Common Share is
greater than $53.21, the Conversion Rate shall be equal to 0.225. For
purposes hereof, "Closing Market Price" shall mean, with respect to one
Parent Common Share, the average Closing Price for such a Parent Common Share
for the period of the 20 most recent trading days ending on the fifth
business day prior to the Closing Date. "Closing Price" shall mean, on any
date, the last reported sale price of one Parent Common Share on the Nasdaq
National Market (the "NASDAQ").

(b) All Company Common Shares to be converted into Parent Common
Shares pursuant to this Section 3.1 will by virtue of the Merger and without
any action on the part of the holders thereof, cease to be outstanding, be
cancelled and retired and cease to exist, and each holder of a certificate
previously representing any such Company Common Shares will thereafter cease
to have any rights with respect to such Company Common Shares, except the
right to receive for each of the Company Common Shares, upon the surrender of
such certificate in accordance with Section 3.2, the amount of Parent Common
Shares specified above and cash in lieu of fractional Parent Common Shares as
contemplated by Section 3.3 (collectively, the "Consideration").

(c) At the Effective Time, each Company Common Share issued and
outstanding and owned by any of Parent's direct or indirect wholly owned
Subsidiaries or any of the Company's direct or indirect wholly owned
Subsidiaries immediately prior to the Effective Time will, by virtue of the
Merger and without any action on the part of the holder thereof, cease to be
outstanding, be cancelled and retired without payment of any consideration
therefor and cease to exist.

(d) At the Effective Time, each share of common stock, par value
$0.01 per share, of Merger Sub issued and outstanding immediately prior to
the Effective Time will, by virtue of the Merger and without any action on
the part of Merger Sub or the holder

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<PAGE>

thereof, be converted into one share of common stock, par value $0.01 per
share, of the Surviving Corporation, with the result that the Surviving
Corporation will be a wholly owned Subsidiary of Parent.

(e) Subject to the satisfaction of the obligations of the Company
with respect thereto in Schedule 7.3(f), at the Effective Time, each
outstanding option, whether exercisable or unexercisable, to purchase Company
Common Shares (each, an "Option") listed on Schedule 3.1(e) and each
outstanding Option issued in accordance with Section 6.2(f) will be assumed
by Parent and will constitute an option to acquire, on substantially the same
terms and conditions as were applicable under such Option immediately prior
to the Effective Time, a number of Parent Common Shares equal to the product
of the Conversion Rate and the number of Company Common Shares subject to
such Option immediately prior to the Effective Time, at a price per share
equal to the aggregate exercise price for the Company Common Shares subject
to such Option divided by the number of full Parent Common Shares deemed to
be purchasable pursuant to such Option, rounded to the nearest cent;
provided, however, that (i) subject to the provisions of clause (ii) below,
Parent will not issue any fractional Parent Common Share upon any exercise of
any Option and any right in respect thereof will, without further action, be
forfeited and (ii) in the case of any Option to which Section 421 of the Code
applies by reason of its qualification under Section 422 or Section 423 of
the Code, the option price, the number of shares purchasable pursuant to such
Option and the terms and conditions of exercise of such Option shall be
determined in order to comply with Section 424 of the Code. Notwithstanding
the foregoing, the Company will not take any actions to effect this Section
3.1(e) to the extent such actions would be inconsistent with accounting for
the Merger as a "pooling of interests." Schedule 3.1(e) is a true and
complete list of persons who have received options granted pursuant to
Company Stock Plans, the amounts of such grants and the grant prices thereof.
After the Effective Time, Parent will issue to each holder of an outstanding
Option a document evidencing the foregoing agreement and will promptly file
and keep effective a registration statement on Form S-8 or other applicable
form for the Parent Common Shares issued upon exercise of such Options.

(f) At or promptly following the Effective Time, unless the
Company Warrant (as defined below) is exercised, Parent will, and will cause
the Surviving Corporation to, execute an agreement providing that any holder
of a Company Warrant will have the right until the expiration date thereof to
exercise such Company Warrant for the number of Parent Common Shares
receivable pursuant to Section 3.1(a) by a holder of the number of Company
Common Shares for which such Company Warrant might have been exercised
immediately prior to the Effective Time upon the payment of the exercise
price and the other terms and conditions of such Company Warrants.

3.2 Payment for Company Common Shares. (a) At the Effective
---------------------------------
Time, Parent will make available to State Street Bank and Trust Company or
such other exchange agent as may be selected by Parent and reasonably
acceptable to the Company (the "Exchange Agent"), for the benefit of the
holders of Company Common Shares, a sufficient number of certificates
representing Parent Common Shares required to effect the delivery of the
aggregate Consideration pursuant to Section 3.1(a) (the certificates
representing Parent Common Shares and any cash delivered to the Exchange
Agent pursuant to Section 3.3

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<PAGE>

comprising such aggregate Consideration being hereinafter referred to as the
"Exchange Fund"). The Exchange Agent will, pursuant to irrevocable
instructions, deliver the Parent Common Shares contemplated to be issued
pursuant to Section 3.1(a) out of the Exchange Fund, and, except as provided
in Section 3.3, the Exchange Fund will not be used for any other purpose.

(b) Promptly after the Effective Time, the Exchange Agent will
mail to each holder of record (other than holders of certificates for Company
Common Shares referred to in Section 3.1(c)) of a certificate or certificates
which immediately prior to the Effective Time represented outstanding Company
Common Shares (the "Certificates") (i) a form of letter of transmittal (which
will specify that delivery will be effected, and risk of loss and title to
the Certificates will pass, only upon proper delivery of the Certificates to
the Exchange Agent) and (ii) instructions for use in effecting the surrender
of the Certificates for payment therefor. Upon surrender of Certificates for
cancellation to the Exchange Agent, together with such letter of transmittal
duly executed and any other required documents, the holder of such
Certificates will be entitled to receive for each of the Company Common
Shares represented by such Certificates the Consideration and the
Certificates so surrendered will promptly be cancelled. Until so
surrendered, Certificates will represent solely the right to receive the
Consideration. No dividends or other distributions that are declared after
the Effective Time on Parent Common Shares and payable to the holders of
record thereof after the Effective Time will be paid to persons entitled by
reason of the Merger to receive Parent Common Shares until such persons
surrender their Certificates. Upon such surrender, there will be paid to the
person in whose name the Parent Common Shares are issued any such dividends
or other distributions, with a record date after the Effective Time but prior
to the time of such surrender, previously paid to the holders of Parent
Common Shares, and any such dividends or distributions not previously paid to
the holders of Parent Common Shares shall be paid to the person in whose name
the Parent Common Shares are issued on the appropriate payment date. In no
event will the persons entitled to receive such dividends or other
distributions be entitled to receive interest on such dividends or other
distributions. If any cash or certificate representing Parent Common Shares
is to be paid to or issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it will be a condition of
such exchange that the Certificate so surrendered be properly endorsed and
otherwise in proper form for transfer and that the person requesting such
exchange pay to the Exchange Agent any transfer or other taxes required by
reason of the issuance of certificates for such Parent Common Shares in a
name other than that of the registered holder of the Certificate surrendered,
or establish to the satisfaction of the Exchange Agent that such tax has been
paid or is not applicable. The Exchange Agent will not be entitled to vote
or exercise any rights of ownership with respect to such Parent Common Shares
for the account of the persons entitled thereto.

(c) Any portion of the Exchange Fund or the cash made available to
the Exchange Agent pursuant to Section 3.3 which remains unclaimed by the
former stockholders of the Company for 180 days after the Effective Time will
be delivered to Parent and any former stockholders of the Company will
thereafter look only to Parent for payment of their claim for the
Consideration for the Company Common Shares.

A-12

<PAGE>

(d) Neither Parent, Merger Sub, the Surviving Company nor the
Exchange Agent shall be liable to any holder of Company Common Shares for
such shares (or dividends or distributions with respect thereto) or cash from
the Exchange Fund (or from Parent after the Exchange Fund has terminated)
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law. At such time as any amounts remaining unclaimed by
holders of any such shares would otherwise escheat to or become property of
any Governmental Entity (as defined below), such amounts shall, to the extent
permitted by applicable law, become the property of Parent free and clear of
any claims or interest of any such holders or their successors, assigns or
personal representatives previously entitled thereto.

(e) The Exchange Agent shall invest any cash included in the
Exchange Fund, as directed by Parent, on a daily basis. Any interest and
other income resulting from such investments shall be paid to Parent.

(f) Certificates surrendered for exchange by any affiliate of the
Company within the meaning of Rule 145 of the rules and regulations
promulgated by the Securities Act (each such person, an "Affiliate") shall
not be exchanged for certificates representing Parent Common Shares until
Parent has received an Affiliate Letter from such Affiliate as provided in
Section 6.11.

3.3 Fractional Shares. No fractional Parent Common Shares will be
-----------------
issued in the Merger. In lieu of any such fractional securities, each holder
of Company Common Shares who would otherwise have been entitled to a fraction
of a Parent Common Share upon surrender of Certificates for exchange pursuant
to this Article 3 will be paid an amount in cash (without interest), rounded
to the nearest cent, determined by multiplying (a) the per share Closing
Price on the NASDAQ of Parent Common Shares on the date of the Effective Time
(or, if Parent Common Shares do not trade on the NASDAQ on such date, the
first date of trading of Parent Common Shares on the NASDAQ after the
Effective Time) by (b) the fractional interest to which such holder otherwise
would be entitled. Promptly upon request from the Exchange Agent, Parent
will make available to the Exchange Agent the cash necessary for this
purpose.

3.4 No Transfer after the Effective Time. No transfers of Company
------------------------------------
Common Shares will be made on the stock transfer books of the Company after
the close of business on the day prior to the date of the Effective Time.

4. Representations and Warranties of the Company

The Company hereby represents and warrants to each of the Merger
Sub and Parent as follows:

4.1 Existence; Good Standing; Corporate Authority. The Company is
---------------------------------------------
a corporation duly incorporated, validly existing and in good standing under
the laws of Delaware. The Company is duly licensed or qualified to do
business as a foreign corporation and is in good standing under the laws of
any other state of the United States in which the

A-13

<PAGE>

character of the properties owned or leased by it or in which the transaction
of its business makes such qualification necessary, except where the failure
to be so qualified or to be in good standing would not have a material
adverse effect on the business, assets, results of operations or financial
condition of the Company and its Subsidiaries (as defined below) taken as a
whole (a "Company Material Adverse Effect"). The Company has all requisite
corporate power and authority to own, operate and lease its properties and
carry on its business as now conducted. Each of the Company's Subsidiaries
is a corporation or partnership duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization,
has the corporate or partnership power and authority to own its properties
and to carry on its business as it is now being conducted, and is duly
qualified to do business and is in good standing in each jurisdiction in
which the ownership of its property or the conduct of its business requires
such qualification, except for jurisdictions in which such failure to be so
qualified or to be in good standing would not have a Company Material Adverse
Effect. The copies of the Company's certificate of incorporation and by-laws
previously made available to Parent are true and correct. 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.

4.2 Authorization, Validity and Effect of Agreement. The Company
-----------------------------------------------
has the requisite corporate power and authority to execute and deliver this
Agreement and all agreements and documents contemplated hereby to be executed
and delivered by it, and, subject to receipt of necessary stockholder
approval, to consummate the transactions contemplated hereby and thereby.
Subject only to the approval of this Agreement, the Merger and the
transactions contemplated hereby by the holders of a majority of the
outstanding Company Common Shares, this Agreement, the Merger and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all requisite corporate action. This Agreement has been
duly and validly executed by the Company and constitutes, and all agreements
and documents contemplated hereby to be executed and delivered by the Company
(when executed and delivered pursuant hereto) will constitute, the valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to creditors' rights generally and (ii) the availability of
injunctive relief and other equitable remedies.

4.3 Capitalization. The authorized capital stock of the Company
--------------
consists of 30,000,000 Company Common Shares and 2,000,000 shares of
preferred stock, par value $0.01 per share (the "Company Preferred Shares").
As of November 29, 1995, (a) 10,578,873 Company Common Shares were issued and
outstanding, all of which are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights, and 175,000 shares were held in
the Company's treasury, (b) no Company Preferred Shares were outstanding or
held in the Company's treasury, (c) no Company Common Shares or Company
Preferred Shares were held by Subsidiaries of the Company, (d) 1,545,811
Company Common Shares were reserved for future issuance pursuant to
outstanding stock options granted under the Company's stock option plans
described on Schedule 4.11(a) (the

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<PAGE>

"Company Stock Plans") and 163,390 shares were reserved for future grants
under such plans, and (e) 175,000 Company Common Shares were reserved for
future issuance upon conversion of the Company Warrants. Except as set forth
in this Section 4.3, there are no outstanding options, warrants, calls,
subscriptions, bonds, debentures, notes or other obligations the holders of
which have the right to vote or which are convertible into or exercisable for
securities having the right to vote with the stockholders of the Company on
any matter. Since such date, (i) no additional shares of capital stock of
the Company have been issued, except pursuant to the Company Stock Plans or
pursuant to the exercise of options thereunder and (ii) no options, warrants
or other rights to subscribe for, securities or rights convertible into or
exchangeable for, or contracts, commitments or arrangements by which the
Company is or may be required to issue or sell additional shares of the
Company's capital stock (collectively, "Company Equity Rights") have been
granted.

4.4 Subsidiaries. Schedule 4.4 sets forth a complete and accurate
------------
list of the Subsidiaries of the Company and indicates for each such
Subsidiary the jurisdiction of incorporation or organization. The Company
owns, directly or indirectly, each of the outstanding shares of capital stock
(or other ownership interests having by their terms ordinary voting power to
elect a majority of directors or others performing similar functions with
respect to such Subsidiary) of each of the Company's Subsidiaries (except for
directors' qualifying shares). No equity securities of any of the Company's
Subsidiaries may be required to be issued (other than to the Company or
another of the Company's Subsidiaries) by reason of any Company Equity Rights
for shares of the capital stock of any of the Company's Subsidiaries. There
are no contracts, commitments, understandings or arrangements by which the
Company or any of the its Subsidiaries is or may be obligated to transfer any
shares of the capital stock of any of the Company's Subsidiaries. Each of
the outstanding shares of capital stock of each of the Company's Subsidiaries
is duly authorized, validly issued, fully paid and nonassessable, and is
owned, directly or indirectly, by the Company (except for directors'
qualifying shares) free and clear of all liens, pledges, security interests,
claims or other encumbrances other than liens imposed by local or foreign law
which are not material. The following information for each of the Company's
Subsidiaries has been previously provided to Parent, if applicable: (i) its
name and jurisdiction of incorporation or organization; (ii) its authorized
capital stock or share capital; and (iii) the number of issued and
outstanding shares of capital stock or share capital.

4.5 Other Interests. Except for interests in the Company's
---------------
Subsidiaries, neither the Company nor any of the Company's Subsidiaries owns,
directly or indirectly, any interest or investment (whether equity or debt)
in any corporation, partnership, joint venture, business, trust or entity
(other than (a) non-controlling investments in the ordinary course of
business and corporate partnering, development, cooperative marketing and
similar undertakings and arrangements entered into in the ordinary course of
business and (b) other investments of less than $1,000,000 in the aggregate).

4.6 No Conflict; Required Filings and Consents. (a) The
------------------------------------------
execution and delivery of this Agreement by the Company do not, and the
consummation by the Company of the transactions contemplated hereby will not,
(i) conflict with or violate the certificate of incorporation or by-laws or
equivalent organizational documents of the Company or any of its
Subsidiaries, (ii) subject to making the filings and obtaining the approvals
identified in

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<PAGE>

Section 4.6(b), conflict with or violate any law, rule, regulation, order,
judgment or decree (whether United States or foreign) applicable to the
Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected, or (iii) subject to
making the filings, obtaining the approvals and effecting any other matters
identified in Schedule 4.6(a), result in any breach of or constitute a
default (or an event which with notice or lapse of time or both would become
a default) under, result in the loss of a material benefit under, or give to
others any right of purchase or sale, or any right of termination, amendment,
acceleration, increased payments or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of the
Company or any of its Subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries or any property or
asset of the Company or any of its Subsidiaries is bound or affected, except,
in the case of clauses (ii) and (iii), for any such conflicts, violations,
breaches, defaults or other occurrences which would not prevent or delay
consummation of any of the transactions contemplated hereby in any material
respect, or otherwise prevent the Company from performing its obligations
under this Agreement in any material respect, and would not, individually or
in the aggregate, have a Company Material Adverse Effect.

(b) The execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement and the consummation by the
Company of the transactions contemplated hereby will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or foreign (each a
"Governmental Entity") by either the Company or any of its Subsidiaries,
except (i) for (A) applicable requirements, if any, of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Securities Act of
1933, as amended (the "Securities Act"), and state securities or "blue sky"
laws ("Blue Sky Laws"), (B) the pre-merger notification requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
rules and regulations thereunder (the "HSR Act") and required approvals and
consents of other Governmental Entities (whether domestic or foreign) and the
rules and regulations thereunder, (C) the filing of the Certificate of Merger
pursuant to the DGCL, (D) filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval, triggered by the Merger or the
other transactions contemplated by this Agreement, and (E) applicable
requirements, if any, of the Code, and state, local and foreign tax laws, and
(ii) where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent the
Company from performing its obligations under this Agreement in any material
respect, and would not, individually or in the aggregate, have a Company
Material Adverse Effect.

(c) The affirmative vote of the holders of a majority of the
outstanding Company Common Shares is the only vote of the holders of any
class or series of capital stock of the Company necessary to approve this
Agreement and the transactions contemplated hereby on behalf of the Company.

4.7 Compliance. Except as set forth in Schedule 4.7, neither the
----------
Company nor any of its Subsidiaries is in conflict with, or in default or
violation of, (a) any law, rule,

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<PAGE>

regulation, order, judgment or decree (whether United States or foreign)
applicable to the Company or any of its Subsidiaries or by which any property
or asset of the Company or any of its Subsidiaries is bound or affected or
(b) any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any property or asset of the Company or any of its
Subsidiaries is bound or affected, in each case except for such conflicts,
defaults or violations that would not, individually or in the aggregate, have
a Company Material Adverse Effect. The Company and its Subsidiaries have
obtained all licenses, permits and other authorizations and have taken all
actions required by applicable law or government regulations in connection
with their business as now conducted, except where the failure to obtain any
such item or to take any such action would not, individually or in the
aggregate, have a Company Material Adverse Effect. Neither the Company nor
any of its Subsidiaries has received any notification or communication from
any Governmental Entity threatening to revoke any license, franchise, permit
or authorization of any Governmental Entity, which revocation would have a
Company Material Adverse Effect.

4.8 SEC Documents and Financial Statements. (a) Attached to
--------------------------------------
Schedule 4.8 are (i) all comment, inquiry or similar type letters received by
the Company and/or its Subsidiaries from any federal and/or state securities
regulatory authorities and any written communication by the Company and/or
its Subsidiaries in response and (ii) all no-action requests or similar
inquiries sent by the Company and/or its Subsidiaries to such authorities and
any written communication received in response, in each case since July 1,
1992. The Company has filed all forms, reports and documents required to be
filed by it with the Securities and Exchange Commission (the "SEC") since
January 1, 1990 (collectively, the "Company Reports"). As of their
respective dates, the Company Reports and any such reports, forms and other
documents filed by the Company with the SEC after the date of this Agreement
(x) complied, or will comply, as to form in all material respects with the
applicable requirements of the Securities Act, the Exchange Act and the rules
and regulations thereunder and (y) did not, or will not, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in the light
of the circumstances under which they were made, not misleading. The
representation in clause (y) of the preceding sentence does not apply to any
misstatement or omission in any Company Report filed prior to the date of
this Agreement which was superseded by a subsequent Company Report filed
prior to the date of this Agreement. No Subsidiary of the Company is
required to file any report, form or other document with the SEC.

(b) Each of the consolidated balance sheets of the Company
included in or incorporated by reference into the Company Reports (including
the related notes and schedules) presents fairly, in all material respects,
the consolidated financial position of the Company and its Subsidiaries as of
its date, and each of the consolidated statements of income, stockholders'
equity and cash flows of the Company included in or incorporated by reference
into the Company Reports (including any related notes and schedules) presents
fairly, in all material respects, the results of operations, stockholders
equity or cash flows, as the case may be, of the Company and its Subsidiaries
for the periods set forth therein (subject, in the case of unaudited
statements, to normal year-end audit adjustments which

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<PAGE>

would not be material in amount or effect), in each case in accordance with
generally accepted accounting principles consistently applied during the
periods involved, except as may be noted therein.

(c) Neither the Company nor any of its Subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) that would be required to be reflected on, or
reserved against in, a balance sheet of the Company or in the notes thereto,
prepared in accordance with generally accepted accounting principles
consistently applied, except for (i) liabilities or obligations that were so
reserved on, or reflected in (including the notes to), the consolidated
balance sheet of the Company as of July 29, 1995, (ii) liabilities or
obligations arising in the ordinary course of business since July 29, 1995,
and (iii) liabilities or obligations which would not, individually or in the
aggregate, have a Company Material Adverse Effect.

(d) The Company has previously furnished to Parent all accounting
management letters and audit response letters for the Company or its
Subsidiaries since January 1, 1992.

4.9 Absence of Certain Changes. Except as described in the
--------------------------
Company Reports, since July 29, 1995, there has not been (a) any Company
Material Adverse Effect, (b) any declaration, setting aside or payment of any
dividend of other distribution with respect to its capital stock, or (c) any
material change in its accounting principles, practices or methods.

4.10 Litigation. Except as set forth in Schedule 4.10, there are
----------
no actions, suits or proceedings pending against the Company or any of its
Subsidiaries or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries, or against any property, asset, interest
or right of any of them, at law or in equity, or before or by any
Governmental Entity, that, individually or in the aggregate, are likely to
have a Company Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is subject to any judgment, order, writ, injunction or decree
that would have a Company Material Adverse Effect.

4.11 Employee Benefit Plans; Employment Agreements. (a) Schedule
---------------------------------------------
4.11(a) sets forth a true and complete list of all the following: (i) each
"employee benefit plan," as such term is defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA"), pursuant to which
the Company or any of its Subsidiaries has (A) any material liability with
respect to current or former employees, agents, directors, or independent
contractors of the Company or its Subsidiaries ("Company Employees") or (B)
any obligation to issue capital stock of the Company or any of its
Subsidiaries (each, a "Company Employee Plan"), and (ii) each other foreign
or domestic plan, program, policy, contract, arrangement or scheme providing
for bonuses, pensions, deferred pay, stock or stock related awards, severance
pay, salary continuation or similar benefits, hospitalization, medical,
dental or disability benefits, life insurance or other employee benefits, or
compensation to or for any Company Employees or any beneficiaries or
dependents of any Company Employees (other than directors' and officers'
liability policies), whether or not insured or funded, (A) pursuant to which
the Company or any of its Subsidiaries has any

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<PAGE>

material liability or (B) constituting an employment, severance or
termination agreement or arrangement with any officer or director of the
Company or any Subsidiary (each, a "Company Benefit Arrangement"). The
Company has provided to Parent with respect to each Company Employee Plan and
Company Benefit Arrangement: (i) a true and complete copy of all written
documents comprising such Company Employee Plan or Company Benefit
Arrangement (including amendments and forms of individual agreements relating
thereto) or, if there is no such written document, an accurate and complete
description of such Company Employee Plan or Company Benefit Arrangement;
(ii) the most recent Form 5500 or Form 5500-C (including all schedules
thereto), if applicable; (iii) the most recent financial statements and
actuarial reports, if any; (iv) the summary plan description currently in
effect and all material modifications thereof, if any; and (v) the most
recent Internal Revenue Service determination letter, if any.

(b) Each Company Employee Plan and Company Benefit Arrangement has
been established and maintained in all material respects in accordance with
its terms and all applicable laws, including, but not limited to, ERISA and
the Code. Neither the Company nor any of its Subsidiaries nor any of their
respective current or former directors, officers, or employees, nor, to the
knowledge of the Company, any other disqualified person or party-in-interest
with respect to any Company Employee Plan, have engaged directly or
indirectly in any "prohibited transaction," as such term is defined in
section 4975 of the Code or section 406 of ERISA, with respect to which the
Company or any of its Subsidiaries could have or has any material liability.
All contributions required to be made to the Company Employee Plans and
Company Benefit Arrangements have been made in a timely fashion. Each
Company Employee Plan that is intended to be qualified under section 401(a)
of the Code is so qualified, and each related trust is exempt from taxation
under section 501(a) of the Code.

(c) With respect to each Company Employee Plan that is subject to
Title IV of ERISA: (i) as of the last applicable valuation date, the present
value of all benefit liabilities under such Company Employee Plan exceeded
the value of the assets of such Company Employee Plan allocable to such
benefit liabilities using the actuarial methods, factors and assumptions used
for the most recent actuarial report with respect to such Company Employee
Plan; and (ii) there has been no termination, partial termination or
"reportable event" (as defined in section 4043 of ERISA) with respect to any
such Company Employee Plan. No Company Employee Plan that is subject to
section 412 of the Code has incurred any "accumulated funding deficiency" (as
defined in section 412 of the Code), whether or not waived.

(d) No Company Employee Plan is a "multiemployer plan" as that
term is defined in section 3(37) of ERISA or a "multiple employer plan"
described in section 4063(a) of ERISA, and neither the Company nor any ERISA
Affiliate of the Company has at any time contributed to or been obligated to
contribute to such a multiemployer plan or multiple employer plan.

(e) Except with respect to a Company Employee Plan, neither the
Company nor any ERISA Affiliate of the Company has any Controlled Group
Liability, nor do any circumstances exist that could result in any of them
having any Controlled Group Liability. "Controlled Group Liability" means
any and all liabilities under (i) Title IV of

A-19

<PAGE>

ERISA, (ii) section 302 of ERISA, (iii) sections 412 and 4971 of the Code and
(iv) the continuation coverage requirements of section 601 et seq. of ERISA
and section 4980B of the Code.

(f) Except as set forth in Schedule 4.11(f), neither the execution
nor delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, constitutes an event under any Company Employee Plan,
Company Benefit Arrangement, loan to, or individual agreement or contract
with, a Company Employee that will result in any payment (whether of
severance pay or otherwise), restriction or limitation upon the assets of any
Company Employee Plan or Company Benefit Arrangement, acceleration of payment
or vesting, increase in benefits or compensation, or required funding, with
respect to any Company Employee, or the forgiveness of any loan or other
commitment of any Company Employee.

(g) There are no actions, suits, arbitrations, inquiries,
investigations or other proceedings (other than routine claims for benefits)
pending or, to the Company's knowledge, threatened with respect to any
Company Employee Plan or Company Benefit Arrangement.

(h) No amounts paid or payable by the Company or any Subsidiary to
or with respect to any Company Employee as a result of or in connection with
the transactions contemplated hereby will fail to be deductible for federal
income tax purposes by reason of section 280G of the Code.

(i) No employees and no beneficiaries or dependents of the Company
Employees are or may become entitled under any Company Employee Plan or
Company Benefit Arrangement to post-employment welfare benefits of any kind,
including without limitation death or medical benefits, other than coverage
mandated by section 4980B of the Code.

4.12 Labor Matters. Except as set forth in Schedule 4.12 or the
-------------
Company Reports as of the date hereof, (i) there are no controversies pending
or, to the knowledge of the Company or any of its Subsidiaries, threatened,
between the Company or any of its Subsidiaries and any of their respective
employees, which controversies have or could reasonably be expected to have a
Company Material Adverse Effect; (ii) neither the Company nor any of its
Subsidiaries is a party to any material collective bargaining agreement or
other labor union contract applicable to persons employed by the Company or
its Subsidiaries, nor does the Company or any of its Subsidiaries know of any
activities or proceedings of any labor union to organize any such employees;
and (iii) neither the Company nor any of its Subsidiaries has any knowledge
of any strikes, slowdowns, work stoppages, lockouts, or threats thereof, by
or with respect to any employees of the Company or any of its Subsidiaries
which could reasonably be expected to have a Company Material Adverse Effect.

4.13 Registration Statement. None of the information supplied or
----------------------
to be supplied by the Company for inclusion in the Form S-4 (as defined
below) or the Proxy Statement/Prospectus (as defined below) shall, at the
respective times such documents are

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<PAGE>

filed with the SEC, and, in the case of the Registration Statement, when it
becomes effective, and, in the case of the Proxy Statement/Prospectus, when
it is first mailed to the stockholders of the Company and at the time of the
Stockholders' Meeting (as defined below), be false or misleading with respect
to any material fact, or omit to state any material fact necessary in order
to make the statements therein, in light of the circumstances under which
they are made, not misleading. All documents that the Company is responsible
for filing with the SEC or any other Governmental Entity in connection with
the transactions contemplated hereby shall comply as to form in all material
respects with the provisions of applicable law and the applicable rules and
regulations thereunder.

4.14 Properties. Except as disclosed or reserved against in the
----------
most recent financial statements contained in the Company Reports, the
Company and each of its Subsidiaries have good and marketable title to all of
the properties and assets, tangible or intangible, reflected in such
financial statements as being owned by the Company and each of its
Subsidiaries as of the dates thereof, free and clear of all liens,
encumbrances, charges, defaults or equities of whatever character except such
imperfections or irregularities of title, liens, encumbrances, charges or
defaults that do not affect the use thereof in any material respect and
statutory liens securing payments not yet due ("Liens"). All leased
buildings and all leased fixtures, equipment and other property and assets
that are material to the Company's business on a consolidated basis are held
under leases or subleases that are valid and binding instruments enforceable
in accordance with their respective terms, and there is not, to the knowledge
of the Company, under any of such leases, any existing material default or
event of default (or event which with notice or lapse of time, or both, would
constitute a material default), except where the lack of such validity and
binding nature or the existence of such default or event of default would not
have a Company Material Adverse Effect.

4.15 Taxes. (a) The Company and each of its Subsidiaries has
-----
filed all tax returns and reports required to be filed by it, or requests for
extensions to file such returns or reports have been timely filed and granted
and have not expired, and all tax returns and reports are complete and
accurate in all respects, except to the extent that such failures to file or
be complete and accurate in all respects, as applicable, individually or in
the aggregate, would not have a Company Material Adverse Effect. The Company
and each of its Subsidiaries has paid (or the Company has paid on its behalf)
or made provision for all taxes shown as due on such tax returns and reports.
No claim has been made since January 1, 1991 by an authority in a
jurisdiction where the Company or any of its Subsidiaries does not file tax
returns that it is or may be subject to taxation by that jurisdiction. The
most recent financial statements contained in the Company Reports reflect
adequate reserves for all taxes payable by the Company and its Subsidiaries
for all taxable periods and portions thereof accrued through the date of such
financial statements, and no deficiencies for any taxes have been proposed,
asserted or assessed against the Company or any of its Subsidiaries that are
not adequately reserved for, except for inadequately reserved taxes and
inadequately reserved deficiencies that would not, individually or in the
aggregate, have a Company Material Adverse Effect. There are no liens for
taxes (other than for current taxes not yet due and payable) on the assets of
the Company or its Subsidiaries. No requests for waivers of the time to
assess any taxes against the Company or any of its Subsidiaries have been
granted or are pending, except for requests with respect to such taxes that
have been adequately

A-21

<PAGE>

reserved for in the most recent financial statements contained in the Company
Reports, or, to the extent not adequately reserved, the assessment of which
would not, individually or in the aggregate, have a Company Material Adverse
Effect. Neither the Company nor any of its Subsidiaries is a party to or
bound by any agreement providing for the allocation or sharing of taxes.
Neither the Company nor any of its Subsidiaries has filed a consent pursuant
to or agreed to the application of Section 341(f) of the Code. Each of the
Company and its Subsidiaries has disclosed on its federal income tax returns
all positions taken therein that could give rise to a substantial
understatement of federal income tax within the meaning of Section 6662 of
the Code. All taxes that are required by the laws of the United States, any
state or political subdivision thereof, or any foreign country to be withheld
or collected by the Company or any of its Subsidiaries have been duly
withheld or collected and, to the extent required, have been paid to the
proper governmental authorities or properly deposited as required by
applicable laws. None of the Company and its Subsidiaries (i) has been a
member of an affiliated group filing a consolidated federal income tax return
(other than a group the common parent of which was the Company), or (ii) has
any liability for the taxes of any person (other than any of the Company and
its Subsidiaries) under Treas. Reg. Sec. 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract or
otherwise. For purposes of this Agreement, the term tax (including, with
correlative meaning, the terms "taxes" and "taxable") shall include all
federal, state, local, and foreign income, profits, franchise, gross
receipts, payroll, sales, employment, use, property, withholding, excise, and
other taxes, duties, or assessments of any nature whatsoever, together with
all interest, penalties, and additions imposed with respect to such amounts.

(b) Schedule 4.15(b) sets forth each state in which the Company
and its Subsidiaries have collected or remitted any sales and/or use taxes
since January 1, 1991. To the Company's knowledge, neither the Company nor
any of its Subsidiaries has conducted activities in any other state that
would require such taxes to be collected or remitted. No claim has ever been
made since January 1, 1991 by an authority in a jurisdiction where the
Company or any of its Subsidiaries does not pay sales and/or use taxes that
it is or may be subject to a requirement to remit such taxes in that
jurisdiction.

(c) The consummation of the Merger and the other transactions
contemplated hereby will not result in any taxes being imposed by any state
of the United States on the stockholders of the Company as a result of the
ownership by the Company or any of its Subsidiaries of any interest in real
property.

(d) None of the Company, its predecessors or, to the knowledge of
the Company, any of its Affiliates or stockholders has taken or agreed to
take any action that would prevent the Merger from being effected as a
"pooling of interests" or would prevent the Merger from constituting a
transaction qualifying as a tax-free reorganization under Section 368(a) of
the Code.

4.16 Environmental Matters. Except as set forth in Schedule 4.16
---------------------
or the Company Reports, and except in all cases as, in the aggregate have not
had and could not reasonably be expected to have a Company Material Adverse
Effect, the Company and each of its Subsidiaries to the Company's knowledge
(i) have obtained all applicable permits,

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<PAGE>

licenses and other authorization which are required to be obtained under all
applicable federal, state, local or foreign laws or any regulation, code,
plan, order, decree, judgment, notice or demand letter issued, entered,
promulgated or approved thereunder ("Environmental Laws") relating to
pollution or protection of the environment, including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, or hazardous or toxic materials or wastes into ambient air,
surface water, ground water, or land or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or hazardous or toxic
materials or wastes by the Company or its Subsidiaries (or their respective
agents); (ii) are in compliance with all terms and conditions of such
required permits, licenses and authorization, and also are in compliance with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in applicable
Environmental Laws; (iii) as of the date hereof, are not aware of nor have
received notice of any past or present violations of Environmental Laws, or
any event, condition, circumstance, activity, practice, incident, action or
plan which is reasonably likely to interfere with or prevent continued
compliance with or which would give rise to any common law or statutory
liability, or otherwise form the basis of any claim, action, suit or
proceeding, against the Company or any of its Subsidiaries based on or
resulting from the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling, or the emission, discharge or
release into the environment, of any pollutant, contaminant or hazardous or
toxic material or waste; and (iv) have taken all actions necessary under
applicable Environmental Laws to register any products or materials required
to be registered by the Company or its Subsidiaries (or any of their
respective agents) thereunder.

4.17 Intellectual Property. (a) Schedule 4.17 sets forth an
---------------------
accurate and complete list of all material (i) patents, patent applications,
patent rights, trademarks (registered and unregistered), trademark
applications, trade names (registered and unregistered), service marks
(registered and unregistered), service mark applications, and computer
programs, that are owned by the Company or any of its Subsidiaries, (ii)
unexpired licenses relating to the Company Intellectual Property Rights (as
defined below) that have been granted to or by the Company or any of its
Subsidiaries and (iii) other agreements relating to Intellectual Property
Rights necessary for the conduct of the business of the Company and its
Subsidiaries, together with a complete listing of all liens, security
interests, claims and rights to use of third parties with respect to each
listed item of Intellectual Property Rights.

(b) The Company and its Subsidiaries collectively own or have the
right to use all of the Company Intellectual Property Rights that are in the
aggregate material to the conduct of the business of the Company and its
Subsidiaries. Such ownership or right to use are free and clear of all
liens, security interests, claims and rights to use of third parties that
would in the aggregate be material to the business of the Company and its
Subsidiaries.

(c) The Company has taken steps sufficient to safeguard and
maintain the secrecy and confidentiality of, or the Company's proprietary
rights in, all of the unpatented know how, technology, proprietary processes,
formulae and other information owned by the Company or any of its
Subsidiaries, except for such items as are not, in the aggregate material to
the conduct of the business of the Company and its Subsidiaries. Without

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<PAGE>

limiting the generality of the foregoing, the Company and its Subsidiaries
have obtained confidentiality and invention assignment agreements from
substantially all past and present employees and independent contractors
involved in the creation or development of the Company Intellectual Property
Rights.

(d) Except for licenses listed in Schedule 4.17 as royalty
bearing, there are no royalties, honoraria, fees or other payments payable by
the Company or any of its Subsidiaries to any person by reason of the
ownership, use, license, sale or disposition of any of the Company
Intellectual Property Rights.

(e) Neither the Company nor, to the Company's knowledge, any of
its Subsidiaries (i) is infringing or misappropriating the right or claimed
right of any other party with respect to any Intellectual Property Rights or
(ii) has knowledge of any alleged or claimed infringement or misappropriation
of any third party Intellectual Property Right by any product or process
manufactured, used, sold or under development by or for the Company or its
Subsidiaries that in the case of (i) or (ii), if proven, would be reasonably
likely to have a Company Material Adverse Effect.

(f) No independent contractor who has performed services for the
Company or any of its Subsidiaries has any right, title or interest in the
Company Intellectual Property Rights that is reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect.

(g) The execution, delivery and performance of this Agreement by
the Company, and the consummation by the Company of the transactions
contemplated hereby will not breach, violate or conflict with any agreement
governing the Company Intellectual Property Rights, and will not cause the
forfeiture or termination of, give rise to a right of forfeiture or
termination of, or impair the right of the Company or any of its Subsidiaries
to use, sell, license or dispose of, any such Company Intellectual Property
Right, which breach, violation, conflict, forfeiture, termination or
impairment would result in a Company Material Adverse Effect.

(h) For purposes of this Agreement, "use," with respect to
Intellectual Property Rights, includes make, reproduce, display or perform
(publicly or otherwise), prepare derivative works based on, sell, distribute,
disclose and otherwise exploit such Intellectual Property Rights and products
incorporating or subject to such Intellectual Property Rights.

(i) As used in this Agreement, the term "Intellectual Property
Rights" means intellectual property rights, including patents, patent
applications, patent rights, trademarks, trademark applications, trade names,
service marks, service mark applications, copyrights, copyright applications,
publication rights, computer programs and other computer software (including
source codes and object codes), inventions, know how, trade secrets,
technology, proprietary processes and formulae. The term "Company
Intellectual Property Rights" means all Intellectual Property Rights that are
used, have been used, or are intended to be used in, or relate to, the
conduct of any business by the Company or any of its Subsidiaries.

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<PAGE>

4.18 Insurance. Schedule 4.18 sets forth all policies of insurance
---------
of the Company and all material policies of insurance of its Subsidiaries and
fidelity or surety bonds insuring the Company or any of its Subsidiaries or
their respective businesses, assets, employees, officers and directors. All
policies of insurance and fidelity or surety bonds listed on Schedule 4.18
are in full force and effect. Except as described in Schedule 4.18, as of
the date hereof, there are no claims by the Company or any of its
Subsidiaries under any such policy or instrument as to which any insurance
company is denying liability or defending under a reservation of rights
clause. The life insurance policy on Kenneth A. Eldred with American Life
Insurance Company can be terminated by the Company on any anniversary date
thereof.

4.19 Product Warranties and Liabilities. (a) Except as set forth
----------------------------------
in Schedule 4.19(a), neither the Company nor any of its Subsidiaries has any
material forms of warranties or guarantees of its products and services that
are in effect or proposed to be used by it. Schedule 4.19(a) sets forth (i)
the form of warranty for each product or category of product manufactured by
the Company and (ii) a description of each pending or, to the knowledge of
the Company, threatened material action, suit, investigation or proceeding
under any warranty or guaranty against the Company or any of its
Subsidiaries. Except as set forth in Schedule 4.19(a), neither the Company
nor any of its Subsidiaries has incurred, nor does the Company know of any
basis for alleging, any material liability, damage, loss, cost or expense as
a result of any defect or other deficiency (whether of design, materials,
workmanship, labeling instructions or otherwise) ("Product Liability") with
respect to any product sold or services rendered by or on behalf of the
Company or any of its Subsidiaries, whether such Product Liability is
incurred by reason of any express warranty (including, without limitation,
any warranty of merchantability or fitness), any doctrine of common law
(tort, contract or other), any statutory provision, any foreign law or
otherwise and irrespective of whether such Product Liability is covered by
insurance, which Product Liability would have a Company Material Adverse
Effect.

(b) There is no pending or, to the knowledge of the Company,
threatened recall or investigation of any product sold by the Company or any
of its Subsidiaries, which recall or investigation would have a Company
Material Adverse Effect.

(c) Attached to Schedule 4.19(c) are (i) all requests for
information, inquiry or similar type letters received by the Company and/or
its Subsidiaries from any federal, state and/or foreign trade regulatory
authorities (including without limitation the Federal Trade Commission (the
"FTC") and the Federal Communications Commission (the "FCC")), and any
written communication by the Company and/or its Subsidiaries in response and
(ii) all inquiries sent by the Company and/or its Subsidiaries to such
authorities and any written communication received in response, in each case
of (i) and (ii) since January 1, 1991. The Company has obtained all
necessary approvals and licenses, and is in compliance with all rules,
regulations and promulgations of any Government Entity (including without
limitation the FTC or FCC), relating to the manufacture, production or
provision of goods and services meant for sale or distribution, except where
the failure to have such approvals or be in compliance would not result in a
Company Material Adverse Effect.

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<PAGE>

4.20 Accounts Receivable. The accounts receivable of the Company
-------------------
and its Subsidiaries as reflected in the most recent financial statements
contained in the Company Reports, to the extent uncollected on the date
hereof, and the accounts receivable reflected on the books of the Company and
its Subsidiaries are valid and existing and represent monies due, and the
Company has made adequate reserves for receivables not collectible in the
ordinary course of business (subject to year-end adjustments in the ordinary
course), and (subject to the aforesaid reserves) are subject to no refunds or
other adjustments and to no defenses, rights of setoff, assignments,
restrictions, encumbrances or conditions enforceable by third parties on or
affecting any thereof, except for such refunds, adjustments, defenses, rights
of setoff, assignments, restrictions, encumbrances or conditions that would
not have a Company Material Adverse Effect.

4.21 Inventory. The inventories of the Company and its
---------
Subsidiaries as reflected in the most recent financial statements contained
in the Company Reports, or acquired by the Company or any of its Subsidiaries
after the date thereof, (i) are carried at an amount not in excess of the
lower of cost or net realizable value, and (ii) do not include any inventory
which is obsolete, surplus or not usable or saleable in the lawful and
ordinary course of business of the Company and its Subsidiaries as heretofore
conducted, in each case net of reserves provided therefor.

4.22 Material Contracts. (a) Except (i) as set forth in the
------------------
Company Reports (including the exhibits thereto) filed prior to the date of
this Agreement, (ii) as set forth in Schedule 4.22(a), and (iii) for this
Agreement and other agreements that are not material to the Company's
business, as of the date of this Agreement neither the Company nor any of its
Subsidiaries is a party to any oral or written (A) consulting agreement, (B)
joint venture, (C) noncompetition or similar agreement that restricts the
Company or its Subsidiaries from engaging in a line of business, (D) supply
or operating contract, and (E) agreement or other arrangement of or involving
the Company or any of its Subsidiaries with respect to indebtedness for money
borrowed, including letters of credit, guaranties, indentures, swaps and
similar agreements.

(b) Each of the contracts, instruments, mortgages, notes, security
agreements leases, agreements or understandings, whether written or oral, to
which the Company or any of its Subsidiaries is a party that relates to or
affects the assets or operations of the Company or any of its Subsidiaries or
to which the Company or any of its Subsidiaries or their respective assets or
operations may be bound or subject is a valid and binding obligation of the
Company and in full force and effect with respect to the Company or such
Subsidiary and, to the Company's knowledge, with respect to all other parties
thereto, except for where the failure to be valid, binding and in full force
and effect would not in the aggregate have a Company Material Adverse Effect.
Any of the foregoing that contain a provision that triggers upon a change in
control of the Company (other than those agreements set forth in Schedule
4.11(f)) are set forth on Schedule 4.22(b). Except to the extent that the
consummation of the transactions contemplated by this Agreement may require
the consent of third parties which consent requirements are set forth on
Schedule 4.6(a), there are no existing defaults by the Company or any of its
Subsidiaries thereunder or, to the knowledge of the Company, by any other
party thereto, which defaults in the aggregate would have a Company Material
Adverse Effect; and no event of default has occurred, and no event,

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condition or occurrence exists, that (whether with or without notice, lapse
of time, the declaration of default or other similar event) would constitute
a default by the Company or any of its Subsidiaries thereunder, other than
defaults that would not in the aggregate have a Material Adverse Effect.

(c) Except as set forth in Schedule 4.22(c), the Company has no
agreements or arrangements to sell or otherwise dispose of, or lease, acquire
or otherwise invest in, any property, lines of business or other assets that
are in the aggregate material to the Company's business, other than
agreements and arrangements for such sale, disposition, lease, acquisition or
investment that are in the ordinary course of the Company's business.

4.23 No Brokers. The Company has not entered into any contract,
----------
arrangement or understanding with any person or firm which may result in the
obligation of the Company or Parent to pay any finder's fees, brokerage or
agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the
transactions contemplated hereby, except that the Company has retained
William Blair & Company as its financial advisors, the arrangements with
which have been disclosed in writing to Parent prior to the date hereof.
Other than the foregoing arrangements, none of the executive officers of the
Company is aware of any claim for payment of any finder's fees, brokerage or
agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the
transactions contemplated hereby.

4.24 State Takeover Statutes. The Board of Directors of the
-----------------------
Company has approved the Merger, this Agreement, the transactions
contemplated hereby, and the grant of the Purchase Option and the purchase of
Company Common Shares pursuant thereto (collectively, the "Stock Agreement
Transaction") and such approval is sufficient to render inapplicable to the
Merger, this Agreement, the transactions contemplated hereby and the Stock
Agreement Transaction, the provisions of Section 203 of the DGCL. To the
knowledge of the Company, no other "fair price," "merger moratorium,"
"control share acquisition" or other anti-takeover statute or similar statute
or regulation applies or purports to apply to the Merger, this Agreement, the
Stock Agreement or any of the transactions contemplated hereby or thereby.

4.25 Opinion of Financial Advisor. The Company has received the
----------------------------
opinion of William Blair & Company to the effect that, as of the date hereof,
the consideration to be received by the holders of Company Common Shares in
the Merger is fair to such holders from a financial point of view.

4.26 Ownership of Parent Common Shares. None of the Company or any
---------------------------------
Affiliates of the Company owns any Parent Common Shares or other securities
convertible into Parent Common Shares.

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<PAGE>

5. Representations and Warranties of Parent and Merger Sub

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

5.1 Existence; Good Standing; Corporate Authority. Each of Parent
---------------------------------------------
and Merger Sub is a corporation duly incorporated, validly existing and in
good standing under the laws of Delaware. Parent is duly licensed or
qualified to do business as a foreign corporation and is in good standing
under the laws of any other state of the United States in which the character
of the properties owned or leased by it or in which the transaction of its
business makes such qualification necessary, except where the failure to be
so qualified or to be in good standing would not have a material adverse
effect on the business, assets, results of operations or financial condition
of Parent and its Subsidiaries taken as a whole (a "Parent Material Adverse
Effect"). Parent has all requisite corporate power and authority to own,
operate and lease its properties and carry on its business as now conducted.
The copies of the certificate of incorporation and by-laws of Parent and the
certificate of incorporation and by-laws of Merger Sub previously made
available to the Company are true and correct.

5.2 Authorization, Validity and Effect of Agreement. Each of
-----------------------------------------------
Parent and Merger Sub has the requisite corporate power and authority to
execute and deliver this Agreement and all agreements and documents
contemplated hereby to be executed and delivered respectively by it and to
consummate the transactions contemplated hereby and thereby. This Agreement,
the Merger and the consummation by Parent and Merger Sub of the transactions
contemplated hereby have been duly and validly authorized by the respective
Boards of Directors of Parent and Merger Sub and by Parent as sole
stockholder of Merger Sub, and no other corporate action on the part of
Parent and Merger Sub is necessary to authorize this Agreement or the Merger
or to consummate the transactions contemplated hereby. This Agreement has
been duly and validly executed by each of Parent and Merger Sub and
constitutes, and all agreements and documents contemplated hereby to be
executed and delivered by Parent or Merger Sub (when executed and delivered
pursuant hereto) will constitute, the valid and binding obligations of Parent
or Merger Sub, as the case may be, enforceable respectively against them in
accordance with their respective terms, subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to creditors' rights generally and (ii) the availability of
injunctive relief and other equitable remedies.

5.3 Capitalization. The authorized capital stock of Parent
--------------
consists of 50,000,000 Parent Common Shares and 100,000 shares of preferred
stock, par value $0.01 per share (the "Parent Preferred Shares"). As of
November 29, 1995, (a) 30,929,058 Parent Common Shares were issued and
outstanding, all of which are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights, and no shares were held in
Parent's treasury, (b) no Parent Preferred Shares were outstanding or held in
Parent's treasury, (c) no Parent Common Shares or Parent Preferred Shares
were held by Subsidiaries of the Parent, and (d) 975,610 Parent Common Shares
were reserved for future issuance pursuant to outstanding stock options
granted under Parent's stock option plans described on Schedule 5.10 (the
"Parent Stock Plans") and 297,768 shares were reserved for future grants
under such plans. Except as set forth in this Section 5.3, there are no
outstanding options,

A-28

<PAGE>

warrants, calls, subscriptions, bonds, debentures, notes or other obligations
the holders of which have the right to vote or which are convertible into or
exercisable for securities having the right to vote with the stockholders of
Parent on any matter. Since such date, (i) no additional shares of capital
stock of Parent have been issued, except pursuant to the Parent's Stock Plans
and (ii) no options, warrants or other rights to subscribe for, securities or
rights convertible into or exchangeable for, or contracts, commitments or
arrangements by which Parent is or may be required to issue or sell
additional shares of the Parent's capital stock (collectively, "Parent Equity
Rights") have been granted. The Parent Common Shares to be issued pursuant
to the Merger will be duly authorized, validly issued, fully paid and non-
assessable.

5.4 Subsidiaries. Schedule 5.4 sets forth a complete and accurate
------------
list of the Subsidiaries of Parent and indicates for each such Subsidiary the
jurisdiction of incorporation or organization. Parent owns, directly or
indirectly, each of the outstanding shares of capital stock (or other
ownership interests having by their terms ordinary voting power to elect a
majority of directors or others performing similar functions with respect to
such Subsidiary) of each of its Subsidiaries. No equity securities of any of
Parent's Subsidiaries may be required to be issued (other than to Parent or
another of Parent's Subsidiaries) by reason of any Parent Equity Rights for
shares of the capital stock of any of Parent's Subsidiaries. There are no
contracts, commitments, understandings or arrangements by which Parent or any
of the its Subsidiaries is or may be obligated to transfer any shares of the
capital stock of any of Parent's Subsidiaries. Each of the outstanding
shares of capital stock of each of Parent's Subsidiaries is duly authorized,
validly issued, fully paid and nonassessable, and is owned, directly or
indirectly, by Parent. Each of the outstanding shares of capital stock of
each of Parent's Subsidiaries is owned, directly or indirectly, by Parent
free and clear of all liens, pledges, security interests, claims or other
encumbrances other than liens imposed by local or foreign law which are not
material. The following information for each of Parent's Subsidiaries has
been previously provided to the Company, if applicable: (i) its name and
jurisdiction of incorporation or organization; (ii) its authorized capital
stock or share capital; and (iii) the number of issued and outstanding shares
of capital stock or share capital.

5.5 No Conflict; Required Filings and Consents. (a) The
------------------------------------------
execution and delivery of this Agreement by Parent and Merger Sub do not, and
the consummation by Parent and Merger Sub of the transactions contemplated
hereby will not, (i) conflict with or violate the certificate of
incorporation or by-laws or equivalent organizational documents of Parent or
Merger Sub, (ii) subject to making the filings and obtaining the approvals
identified in Section 5.5(b), conflict with or violate any law, rule,
regulation, order, judgment or decree (whether United States or foreign)
applicable to Parent or any of its Subsidiaries or by which any property or
asset of Parent or any of its Subsidiaries is bound or affected, or (iii)
subject to making the filings, obtaining the approvals and effecting any
other matters identified in Schedule 5.5(a), result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, result in the loss of a material benefit
under, or give to others any right of termination, amendment, acceleration,
increased payments or cancellation of, or result in the creation of a lien or
other encumbrance on any property or asset of Parent or any of its
Subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or
obligation to which Parent or any of its Subsidiaries is a party or by

A-29

<PAGE>

which Parent or any of its Subsidiaries or any property or asset of Parent or
any of its Subsidiaries is bound or affected, except in the case of clauses
(ii) and (iii), for any such conflicts, violations, breaches, defaults or
other occurrences which would not prevent or delay consummation of any of the
transactions contemplated hereby in any material respect, or otherwise
prevent Parent or Merger Sub from performing its obligations under this
Agreement in any material respect, and would not, individually or in the
aggregate, have a Parent Material Adverse Effect.

(b) The execution and delivery of this Agreement by Parent and
Merger Sub do not, and the performance of this Agreement and the consummation
of the transactions contemplated hereby by either of them will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity, except (i) for (A) applicable
requirements, if any, of the Exchange Act, the Securities Act and Blue Sky
Laws, (B) the pre-merger notification requirements of the HSR Act, and
required approvals and consents of other Governmental Entities (whether
domestic or foreign) and the rules and regulations thereunder (C) the filing
of a certificate of merger pursuant to the DGCL, (D) such filings and
consents as may be required under any environmental, health or safety law or
regulation pertaining to any notification, disclosure or required approval
triggered by the Merger or the transactions contemplated by this Agreement,
and (E) applicable requirements, if any, of the Code and state, local and
foreign tax laws, and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would
not prevent or delay consummation of any of the transactions contemplated
hereby in any material respect, or otherwise prevent Parent or Merger Sub
from performing its obligations under this Agreement in any material respect,
and would not, individually or in the aggregate, have a Parent Material
Adverse Effect.

5.6 Compliance. Except as set forth in Schedule 5.6, neither
----------
Parent nor any of its Subsidiaries is in conflict with, or in default or
violation of, (a) any law, rule, regulation, order, judgment or decree
(whether United States or foreign) applicable to Parent or any of its
Subsidiaries or by which any property or asset of Parent or any of its
Subsidiaries is bound or affected or (b) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Parent or any of its Subsidiaries or any property or
asset of Parent or any of its Subsidiaries is bound or affected, in each case
except for any such conflicts, defaults or violations that would not,
individually or in the aggregate, have a Parent Material Adverse Effect.
Parent and its Subsidiaries have obtained all licenses, permits and other
authorizations and have taken all actions required by applicable law or
governmental regulations in connection with their business as now conducted,
except where the failure to obtain any such item or to take any such action
would not, individually or in the aggregate, have a Parent Material Adverse
Effect. Neither Parent nor any of its Subsidiaries has received any
notification or communication from any Governmental Entity threatening to
revoke any license, franchise, permit or authorization of any Governmental
Entity, which revocation would have a Parent Material Adverse Effect.

5.7 SEC Documents. (a) Parent has filed all forms, reports and
-------------
documents required to be filed by it with the SEC since January 1, 1990
(collectively, the "Parent Reports"). As of their respective dates, the
Parent Reports, and any such reports,

A-30

<PAGE>

forms and other documents filed by Parent with the SEC after the date of this
Agreement (i) complied, or will comply, as to form in all material respects
with the applicable requirements of the Securities Act, the Exchange Act and
the rules and regulations thereunder and (ii) did not, or will not, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. The representation in clause (ii) of the preceding sentence will
not apply to any misstatement or omission in any Parent Report filed prior to
the date of this Agreement which was superseded by a subsequent Parent Report
filed prior to the date of this Agreement. No Subsidiary of Parent is
required to file any report, form or other document with the SEC.

(b) Each of the consolidated balance sheets included in or
incorporated by reference into the Parent Reports (including the related
notes and schedules) presents fairly, in all material respects, the
consolidated financial position of Parent and its Subsidiaries, as of its
date, and each of the consolidated statements of income, retained earnings
and cash flows included in or incorporated by reference into the Parent
Reports (including any related notes and schedules) presents fairly, in all
material respects, the results of operations, retained earnings or cash
flows, as the case may be, of Parent and its Subsidiaries for the periods set
forth therein (subject, in the case of unaudited statements, to normal year-
end audit adjustments which would not be material in amount or effect), in
each case in accordance with generally accepted accounting principles
consistently applied during the periods involved, except as may be noted
therein.

(c) Neither Parent nor any of its Subsidiaries has any liabilities
or obligations of any nature (whether accrued, absolute, contingent or
otherwise) that would be required to be reflected on, or reserved against in,
a balance sheet of Parent or in the notes thereto, prepared in accordance
with generally accepted accounting principles consistently applied, except
for (i) liabilities or obligations that were so reserved on, or reflected in
(including the notes to), the consolidated balance sheet of Parent as of
December 31, 1994, (ii) liabilities or obligations arising in the ordinary
course of business since December 31, 1994, and (iii) liabilities or
obligations which would not, individually or in the aggregate, have a Parent
Material Adverse Effect.

5.8 Absence of Certain Changes. Except as described in the Parent
--------------------------
Reports, since September 30, 1995, there has not been (a) any Parent Material
Adverse Effect, (b) any declaration, setting aside or payment of any dividend
of other distribution with respect to its capital stock, or (c) any material
change in its accounting principles, practices or methods.

5.9 Litigation. Except as described in the Parent Reports, there
----------
are no actions, suits or proceedings pending against Parent or its
Subsidiaries or, to the knowledge of the executive officers of Parent,
threatened against Parent or any of its Subsidiaries, or against any
property, interest, asset or right of any of them, at law or in equity, or
before or by any Government Entity that, individually or in the aggregate,
are likely to have a Parent Material Adverse Effect. Neither Parent nor any
of its Subsidiaries is subject to any judgment, order, writ, injunction or
decree that would have a Parent Material Adverse Effect.

A-31

<PAGE>

5.10 Employee Benefit Plans; Employment Agreements. (a) Schedule
---------------------------------------------
5.10 sets forth a true and complete list of all the following: (i) each
"employee benefit plan," as such term is defined in Section 3(3) of ERISA,
pursuant to which Parent or any of its Subsidiaries has (A) any material
liability with respect to current or former employees, agents, directors, or
independent contractors of Parent or its Subsidiaries ("Parent Employees") or
(B) any obligation to issue capital stock of Parent or any of its
Subsidiaries (each, a "Parent Employee Plan"), and (ii) each other foreign or
domestic plan, program, policy, contract, arrangement or scheme providing for
bonuses, pensions, deferred pay, stock or stock related awards, severance
pay, salary continuation or similar benefits, hospitalization, medical,
dental or disability benefits, life insurance or other employee benefits, or
compensation to or for any Parent Employees or any beneficiaries or
dependents of any Parent Company Employees (other than directors' and
officers' liability policies), whether or not insured or funded, (A) pursuant
to which Parent or any of its Subsidiaries has any material liability or (B)
constituting an employment, severance or termination agreement or arrangement
with any officer or director of Parent or any Subsidiary (each, a "Parent
Benefit Arrangement"). Parent has provided to the Company with respect to
each Parent Employee Plan and Parent Benefit Arrangement: (i) a true and
complete copy of all written documents comprising such Parent Employee Plan
or Parent Benefit Arrangement (including amendments and individual agreements
relating thereto) or, if there is no such written document, an accurate and
complete description of such Parent Employee Plan or Parent Benefit
Arrangement; (ii) the most recent Form 5500 or Form 5500-C (including all
schedules thereto), if applicable; (iii) the most recent financial statements
and actuarial reports, if any; (iv) the summary plan description currently in
effect and all material modifications thereof, if any; and (v) the most
recent Internal Revenue Service determination letter, if any.

(b) Each Parent Employee Plan and Parent Benefit Arrangement has
been established and maintained in all material respects in accordance with
its terms and all applicable laws, including, but not limited to, ERISA and
the Code.

5.11 Labor Matters. Except as set forth in the Parent Reports as
-------------
of the date hereof, (i) there are no controversies pending or, to the
knowledge of Parent or any of its Subsidiaries, threatened, between Parent or
any of its Subsidiaries and any of their respective employees, which
controversies have or could reasonable be expected to have a Parent Material
Adverse Effect; (ii) neither Parent nor any of its Subsidiaries is a party to
any material collective bargaining agreement or other labor union contract
applicable to persons employed by Parent or its Subsidiaries, nor does Parent
or any of its Subsidiaries know of any activities or proceedings of any labor
union to organize any such employees; and (iii) neither Parent nor any of its
Subsidiaries has any knowledge of any strikes, slowdowns, work stoppages,
lockouts, or threats thereof, by or with respect to any employees of Parent
or any of its subsidiaries which could reasonably be expected to have a
Parent Material Adverse Effect.

5.12 Registration Statement. None of the information supplied or
----------------------
to be supplied by Parent for inclusion in the Form S-4 or the Proxy
Statement/Prospectus shall, at the respective times such documents are filed
with the SEC, and, in the case of the Form

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<PAGE>

S-4, when it becomes effective, and, in the case of the Proxy
Statement/Prospectus, when it is first mailed to the stockholders of the
Company and at the time of the Stockholders' Meeting, be false or misleading
with respect to any material fact, or omit to state any material fact
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. All documents that
Parent is responsible for filing with the SEC or any other Governmental
Entity in connection with the transactions contemplated hereby shall comply
as to form in all material respects with the provisions of applicable law and
the applicable rules and regulations thereunder.

5.13 Properties. Except as disclosed or reserved against in the
----------
most recent financial statements contained in the Parent Reports, Parent and
each of its Subsidiaries have good and marketable title to all of the
material properties and assets, tangible or intangible, reflected in such
financial statements as being owned by Parent and each of its Subsidiaries as
of the dates thereof, free and clear of all Liens. All leased buildings and
all leased fixtures, equipment and other property and assets that are
material to Parent's business on a consolidated basis are held under leases
or subleases that are valid and binding instruments enforceable in accordance
with their respective terms, and there is not, to the knowledge of Parent,
under any of such leases, any existing material default or event of default
(or event which with notice or lapse of time, or both, would constitute a
material default), except where the lack of such validity and binding nature
or the existence of such default or event of default would not have a Parent
Material Adverse Effect.

5.14 Taxes. (a) Each of Parent and its Subsidiaries has filed all
-----
tax returns and reports required to be filed by it, or requests for
extensions to file such returns or reports have been timely filed and granted
and have not expired, and all tax returns and reports are complete and
accurate in all respects, except to the extent that such failures to file or
be complete and accurate in all respects, as applicable, individually or in
the aggregate, would not have a Parent Material Adverse Effect. Parent and
each of its Subsidiaries has paid (or Parent has paid on its behalf) or made
provision for all taxes shown as due on such tax returns and reports. The
most recent financial statements contained in the Parent Reports reflect
adequate reserves for all taxes payable by Parent and its Subsidiaries for
all taxable periods and portions thereof accrued through the date of such
financial statements, and no deficiencies for any taxes have been proposed,
asserted or assessed against Parent or any of its Subsidiaries that are not
adequately reserved for, except for inadequately reserved taxes and
inadequately reserved deficiencies that would not, individually or in the
aggregate, have a Parent Material Adverse Effect. No requests for waivers of
the time to assess any taxes against Parent or any Parent Subsidiary have
been granted or are pending, except for requests with respect to such taxes
that have been adequately reserved for in the most recent financial
statements contained in the Parent Reports, or, to the extent not adequately
reserved, the assessment of which would not, individually or in the
aggregate, have a Parent Material Adverse Effect.

(b) None of Parent, its predecessors, Merger Sub or, to the
knowledge of Parent, any of Parent's Affiliates has taken or agreed to take
any action that would prevent the Merger from being effected as a "pooling of
interests" or would prevent the Merger from constituting a transaction
qualifying as a tax-free reorganization under Section 368(a) of the Code.

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<PAGE>

5.15 Intellectual Property. (a) Schedule 5.15 sets forth an
---------------------
accurate and complete list of all material (i) patents, patent applications,
patent rights, trademarks (registered and unregistered), trademark
applications, trade names (registered and unregistered), service marks
(registered and unregistered), service mark applications and copyrights that
are owned by Parent or any of its Subsidiaries, (ii) unexpired licenses
relating to the Parent Intellectual Property Rights (as defined below) that
have been granted to or by Parent or any of its Subsidiaries and (iii) other
agreements relating to Intellectual Property Rights necessary for the conduct
of the business of Parent and its Subsidiaries, together with a complete
listing of all liens, security interests, claims and rights to use of third
parties with respect to each listed item of Intellectual Property Rights.

(b) Parent and its Subsidiaries collectively own or have the right
to use all of the Parent Intellectual Property Rights that are in the
aggregate material to the conduct of the business of Parent and its
Subsidiaries. Such ownership or right to use are free and clear of all
liens, security interests, claims and rights to use of third parties that
would in the aggregate be material to the business of the Parent and its
Subsidiaries.

(c) Parent has taken steps sufficient to safeguard and maintain
the secrecy and confidentiality of, or Parent's proprietary rights in, all of
the unpatented know how, technology, proprietary processes, formulae and
other information owned by Parent or any of its Subsidiaries, except for such
items as are not, in the aggregate material to the conduct of the business of
Parent and its Subsidiaries. Without limiting the generality of the
foregoing, Parent and its Subsidiaries have obtained confidentiality and
invention assignment agreements from substantially all past and present
employees and independent contractors involved in the creation or development
of the Parent Intellectual Property Rights.

(d) Except for licenses listed in Schedule 5.15 as royalty
bearing, there are no royalties, honoraria, fees or other payments payable by
Parent or any of its Subsidiaries to any person by reason of the ownership,
use, license, sale or disposition of any of the Parent Intellectual Property
Rights.

(e) Neither Parent nor any of its Subsidiaries (i) is infringing
or misappropriating the right or claimed right of any other party with
respect to any Intellectual Property Rights or (ii) has knowledge of any
alleged or claimed infringement or misappropriation of any third party
Intellectual Property Right by any product or process manufactured, used,
sold or under development by or for Parent or its Subsidiaries that in the
case of (i) or (ii), if proven, would be reasonably likely to have a Parent
Material Adverse Effect.

(f) No independent contractor who has performed services for
Parent or any of its Subsidiaries has any right, title or interest in the
Parent Intellectual Property Rights that is reasonably likely to have,
individually or in the aggregate, a Parent Material Adverse Effect.

(g) The execution, delivery and performance of this Agreement by
Parent, and the consummation by Parent of the transactions contemplated
hereby will not breach, violate or conflict with any agreement governing the
Parent Intellectual Property Rights, and

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<PAGE>

will not cause the forfeiture or termination of, give rise to a right of
forfeiture or termination of, or impair the right of Parent or any of its
Subsidiaries to use, sell, license or dispose of, any such Parent
Intellectual Property Right, which breach, violation, conflict, forfeiture,
termination or impairment would result in a Parent Material Adverse Effect.

(h) The term "Parent Intellectual Property Rights" means all
Intellectual Property Rights that are used, have been used, or are intended
to be used in, or relate to the conduct of any business by Parent or any of
its Subsidiaries.

5.16 Insurance. All policies of insurance and fidelity or surety
---------
bonds insuring Parent or any of its Subsidiaries or their respective
businesses, assets, employees, officers and directors are in full force and
effect. Except as described in Schedule 5.16, as of the date hereof, there
are no claims by Parent or any of its Subsidiaries under any such policy or
instrument as to which any insurance company is denying liability or
defending under a reservation of rights clause.

5.17 Product Warranties and Liabilities. (a) Except as set forth
----------------------------------
in Schedule 5.17(a), neither Parent nor any of its Subsidiaries has any
material forms of warranties or guarantees of its products and services that
are in effect or proposed to be used by it. Schedule 5.17(a) sets forth (i)
the form of warranty for each product or category of product manufactured by
Parent and (ii) a description of each pending or, to the knowledge of Parent,
threatened material action, suit, investigation or proceeding under any
warranty or guaranty against Parent or any of its Subsidiaries. Except as
set forth in Schedule 5.17(a), neither Parent nor any of its Subsidiaries has
incurred, nor does Parent know of any basis for alleging, any Product
Liability with respect to any product sold or services rendered by or on
behalf of Parent or any of its Subsidiaries, whether such Product Liability
is incurred by reason of any express warranty (including, without limitation,
any warranty of merchantability or fitness), any doctrine of common law
(tort, contract or other), any statutory provision, any foreign law or
otherwise and irrespective of whether such Product Liability is covered by
insurance, which Product Liability would have a Parent Material Adverse
Effect.

(b) There is no pending or, to the knowledge of Parent, threatened
recall or investigation of any product sold by Parent or any of its
Subsidiaries, which recall or investigation would have a Parent Material
Adverse Effect.

(c) Attached to Schedule 5.17(c) are (i) all requests for
information, inquiry or similar type letters received by Parent and/or its
Subsidiaries from any federal, state and/or foreign trade regulatory
authorities (including without limitation the FTC and the FCC, and any
written communication by Parent and/or its Subsidiaries in response and (ii)
all inquiries sent by Parent and/or its Subsidiaries to such authorities and
any written communication received in response, in each case of (i) and (ii)
since January 1, 1991. Parent has obtained all necessary approvals and
licenses, and is in compliance with all rules, regulations and promulgations
of any Government Entity (including without limitation the FTC or FCC),
relating to the manufacture, production or provision of goods and services
meant for sale or distribution, except where the failure to have such
approvals or be in compliance would not result in a Parent Material Adverse
Effect.

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5.18 Accounts Receivable. The accounts receivable of Parent and
-------------------
its Subsidiaries as reflected in the most recent financial statements
contained in the Parent Reports, to the extent uncollected on the date
hereof, and the accounts receivable reflected on the books of Parent and its
Subsidiaries are valid and existing and represent monies due, and Parent has
made reserves reasonably considered adequate for receivables not collectible
in the ordinary course of business, and (subject to the aforesaid reserves)
are subject to no refunds or other adjustments and to no defenses, rights of
setoff, assignments, restrictions, encumbrances or conditions enforceable by
third parties on or affecting any thereof, except for such refunds,
adjustments, defenses, rights of setoff, assignments, restrictions,
encumbrances or conditions that would not have a Parent Material Adverse
Effect.

5.19 Inventory. The inventories of Parent and its Subsidiaries as
---------
reflected in the most recent financial statements contained in the Parent
Reports, or acquired by Parent or any of its Subsidiaries after the date
thereof, (i) are carried at an amount not in excess of the lower of cost or
net realizable value, and (ii) do not include any inventory which is
obsolete, surplus or not usable or saleable in the lawful and ordinary course
of business of Parent and its Subsidiaries as heretofore conducted, in each
case net of reserves provided therefor.

5.20 No Brokers. Neither Parent nor Merger Sub has entered into
----------
any contract, arrangement or understanding with any person or firm which may
result in the obligation of the Company or Parent to pay any finder's fees,
brokerage or agent's commissions or other like payments in connection with
the negotiations leading to this Agreement or the consummation of the
transactions contemplated hereby, except that Parent has retained Goldman,
Sachs & Co. and Montgomery Securities as its financial advisers. Other than
the foregoing arrangements, none of the executive officers of the Company is
aware of any claim for payment of any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations
leading to this Agreement or the consummation of the transactions
contemplated hereby.

5.21 Issuance of Parent Common Shares. The Parent Common Shares
--------------------------------
required to be issued pursuant to Article 3 will, when issued in accordance
with Article 3, be duly authorized, validly issued, fully paid and
nonassessable, and no stockholder of Parent will have any preemptive right of
subscription or purchase in respect thereof.

5.22 Merger Sub. Merger Sub was formed solely for the purpose of
----------
engaging in the transactions contemplated hereby. Except for obligations or
liabilities incurred in connection with its incorporation or organization and
the transactions contemplated hereby, Merger Sub has not incurred any
obligations or liabilities or engaged in any business or activities of any
type or kind whatsoever or entered into any agreements or arrangements with
any person or entity.

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6. Covenants

6.1 Alternative Proposals. Upon execution of this Agreement, the
---------------------
Company will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted
heretofore. Prior to the Effective Time, the Company agrees (a) that neither
it nor any of its Subsidiaries will, nor will it or any of its Subsidiaries
permit their respective officers, directors, employees, agents and
representatives (including, without limitation, any investment banker,
attorney or accountant retained by it or any of its Subsidiaries) to,
initiate, solicit or encourage, directly or indirectly, any Alternative
Proposal (as defined below) or, except as set forth below, 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 otherwise facilitate any effort or attempt to make or implement an
Alternative Proposal. An "Alternative Proposal" means, other than the
transactions contemplated hereby and by the Stock Agreement, the receipt by
the Company of 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 any purchase of all or any significant portion of the
assets of the Company or any of its Subsidiaries or a 10% or more equity
interest in the Company by a person or entity that takes a position
detrimental to the Merger. Notwithstanding the foregoing, in the event the
Company receives an unsolicited written proposal or written offer with
respect to an Alternative Proposal, the Board of Directors of the Company
shall be entitled, solely to the extent it has been advised (i) by its
outside counsel that a failure to do so would violate its fiduciary
obligations under applicable law and (ii) by its financial advisor that the
Alternative Proposal is financially superior to the Merger and the
transactions contemplated thereby, to review and participate in negotiations
concerning such proposal and furnish relevant information concerning the
Company to the offeror; provided that (A) the Company shall have furnished,
or concurrently with the provision of such information to such offeror shall
furnish, Parent with all such information provided to such offeror and (B)
the offeror executes a confidentiality agreement with the Company on
substantially the same terms as that entered into with Parent. The Company
shall notify Parent promptly of any such unsolicited Alternative Proposal, or
any inquiry or contact with any person with respect thereto. In addition, in
the event the Company (i) enters into negotiations with respect to an
unsolicited Alternative Proposal or (ii) the Company's Board of Directors
shall withdraw its approval of this Agreement and the transactions
contemplated hereby or its recommendation to the stockholders of the Company
to approve the same, then the Company shall immediately deliver an additional
notice of such events to Parent. Nothing in this Section 6.1 will (x) permit
the Company to terminate this Agreement, (y) permit the Company to enter into
any agreement with respect to an Alternative Proposal for as long as this
Agreement remains in effect (it being agreed that for as long as this
Agreement remains in effect, the Company will not enter into any agreement
with any person that provides for, or in any way facilitates, an Alternative
Proposal), or (z) affect any other obligation of the Company under this
Agreement.

6.2 Conduct of Business by the Company. Prior to the Effective
----------------------------------
Time, except as contemplated by any other provision of this Agreement, unless
Parent has previously consented in writing thereto, the Company:

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(a) Will, and will cause each of its Subsidiaries to, conduct its
operations in the ordinary and normal course, consistent with past practice;

(b) Will use its reasonable best efforts, and will cause each of
its Subsidiaries to use its reasonable best efforts, to preserve intact their
business organizations and goodwill, keep available the services of their
respective officers and employees and maintain satisfactory relationships
with those persons having business relationships with them;

(d) Will, upon the occurrence of any event or change in
circumstances as a result of which any representation or warranty of the
Company contained in Article 4 would be untrue or incorrect if such
representation or warranty were made immediately following the occurrence of
such event or change in circumstance, promptly (and in any event within two
business days of an executive officer of the Company obtaining knowledge
thereof) notify Parent thereof;

(e) Will promptly deliver to Parent true and correct copies of any
report, statement or schedule filed with the SEC subsequent to the date of
this Agreement;

(f) Will not (i) except pursuant to the exercise of Company Equity
Rights and other contractual rights existing on the date hereof and disclosed
pursuant to this Agreement, issue any shares of its capital stock, effect any
stock split or otherwise change its capitalization as it existed on the date
hereof, (ii) grant, confer or award any option, warrant, conversion right or
other Company Equity Rights not existing on the date hereof to acquire any
shares of its capital stock, (iii) grant, confer or award any bonuses or
other forms of incentive compensation to any officer, director or employee,
except for cash bonuses or incentives consistent with past practice or under
any existing agreement, (iv) increase any compensation under any employment
agreement with any of its present or future officers, directors or employees,
except for normal increases for officers and employees consistent with past
practice or the terms of such employment agreement, (v) grant any severance
or termination pay to, or enter into any employment, severance or termination
agreement with any officer, director or employee or amend any such agreement
in any material respect, except for severance arrangements consistent with
past practice with respect to officers and employees terminated by the
Company, or (vi) adopt any new employee benefit plan or program (including
any stock option, stock benefit or stock purchase plan) or amend any existing
employee benefit plan or program in any material respect;

(g) Will not (i) declare, set aside or pay any dividend or make
any other distribution or payment with respect to any shares of its capital
stock or other ownership interests or (ii) directly or indirectly redeem,
purchase or otherwise acquire any shares of its capital stock or capital
stock of any of its Subsidiaries, or make any commitment for any such action;

(h) Will not, and will not permit any of its Subsidiaries to,
sell, lease or otherwise dispose of any of its assets (including capital
stock of Subsidiaries) or to acquire

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<PAGE>

any business or assets, except for (i) any purchase of inventory undertaken
in the ordinary course of business, (ii) any printing services contracted for
in the ordinary course of business (provided that the term of any such
contract in (i) or (ii) is no longer than one year), or (iii) in the ordinary
course of business and for an amount not exceeding $250,000;

(i) Will not incur any material amount of indebtedness for
borrowed money or make any loans, advances or capital contributions to, or
investments (other than non-controlling investments in the ordinary course of
business) in, any other person other than a wholly owned Subsidiary of the
Company, or issue or sell any debt securities, other than borrowings under
existing lines of credit in the ordinary course of business;

(j) Will not, except pursuant to and in accordance with the
capital budget previously disclosed in writing to Parent, authorize, commit
to or make capital expenditures;

(k) Will not mortgage or otherwise encumber or subject to any lien
any properties or assets except for such of the foregoing as are in the
ordinary course of business and would not be reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect;

(l) Will not enter into or agree to enter into any contract
without the prior written consent of Parent unless such contract is entered
into by the Company for (i) any purchase of inventory undertaken in the
ordinary course of business, (ii) any printing services contracted for in the
ordinary course of business (provided that the term of any such contract in
(i) or (ii) is no longer than one year), or (iii) any other contract in the
ordinary course of business and the total payments by the Company
contemplated thereby do not exceed $100,000 and have a term of no longer than
one year (or as provided in Section 6.2(m);

(m) Will not enter into that certain contract with GSI S.A. unless
such contract has a maximum termination liability of $250,000;

(n) Will, in advance of execution, review with Parent the terms
and conditions of the proposed new contract with United Parcel Service;

(o) Will maintain insurance consistent with past practices for its
businesses and properties;

(p) Will not make any change to its accounting (including tax
accounting) methods, principles or practices, except as may be required by
generally accepted accounting principles and except, in the case of tax
accounting methods, principles or practices, in the ordinary course of
business of the Company or any of its Subsidiaries;

(q) Will not knowingly take any action, or knowingly fail to take
any action, that would (i) jeopardize the treatment of the Merger as a
"pooling of interests" for accounting purposes or (ii) jeopardize
qualification of the merger as a tax-free reorganization within the meaning
of Section 368(a) of the Code; and

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<PAGE>

(r) Will not take or agree in writing or otherwise to take any
action which would make any of the representations or warranties of the
Company contained in this Agreement untrue or incorrect or prevent the
Company from performing or cause the Company not to perform its covenants
hereunder.

6.3 Conduct of Business by Parent. Prior to the Effective Time,
-----------------------------
except as contemplated by any other provision of this Agreement, unless the
Company has previously consented in writing thereto, Parent:

(a) Will, and will cause each of its Subsidiaries to, conduct its
operations in the ordinary and normal course, consistent with past practice;

(c) Will not amend its certificate of incorporation or by-laws or
comparable governing instruments (other than by-law amendments which are not
material to Parent or to the consummation of the transactions contemplated by
this Agreement);

(d) Will, upon the occurrence of any event or change in
circumstances as a result of which any representation or warranty of Parent
contained in Article 5 would be untrue or incorrect if such representation or
warranty were made immediately following the occurrence of such event or
change in circumstance, promptly (and in any event within two business days
of an executive officer of Parent obtaining knowledge thereof) notify the
Company thereof;

(e) Will promptly deliver to the Company true and correct copies
of any report, statement or schedule filed with the SEC subsequent to the
date of this Agreement;

(f) Will not declare, set aside or pay any extraordinary dividend
or make any other extraordinary distribution or payment with respect to any
shares of its capital stock;

(g) Will not knowingly take any action, or knowingly fail to take
any action, that would (i) jeopardize the treatment of the Merger as a
"pooling of interests" for accounting purposes or (ii) jeopardize
qualification of the merger as a tax-free reorganization within the meaning
of Section 368(a) of the Code; and

(h) Will not take or agree in writing or otherwise to take any
action which would make any of the representations or warranties of Parent
contained in this Agreement untrue or incorrect or prevent Parent from
performing or cause Parent not to perform its covenants hereunder.

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<PAGE>

6.4 Meeting of Stockholders. The Company will take all action
-----------------------
necessary in accordance with applicable law and its certificate of
incorporation and by-laws to convene a meeting of its stockholders (the
"Stockholders' Meeting") as promptly as practicable after the date hereof to
consider and vote upon the adoption of this Agreement and the approval of the
Merger, the other transactions contemplated hereby and such other related
matters as it deems appropriate. The Board of Directors of the Company will
recommend such adoption and approval and the Company and the Board will each
take all lawful action to solicit such approval, including, without
limitation, timely mailing the Proxy Statement/Prospectus (as defined below);
provided, however, that the Board of Directors of the Company may withdraw,
modify or change such recommendation if the Company receives an Alternative
Proposal and the Board believes based upon consultation with its outside
counsel and its financial advisor that a failure to do so would violate its
fiduciary duties to the stockholders of the Company imposed by law and the
Alternative Proposal is financially superior to the Merger and the
transactions contemplated thereby (taking into account the presence or
absence of a financing contingency.)

6.5 Filings, Other Action. Subject to the terms and conditions
---------------------
herein provided, the parties will: (a) promptly make their respective
filings and thereafter make any other required submissions under the HSR Act;
(b) use all reasonable efforts to cooperate with one another in
(i) determining which filings are required to be made prior to the Effective
Time with, and which consents, approvals, permits or authorizations are
required to be obtained prior to the Effective Time from, governmental or
regulatory authorities of the United States, the several states and foreign
jurisdictions in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby and (ii) timely
making all such filings and timely seeking all such consents, approvals,
permits or authorizations; and (c) use all reasonable efforts to take, or
cause to be taken, all other action and do, or cause to be done, all other
things necessary, proper or appropriate to consummate and make effective the
transactions contemplated by this Agreement. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purpose of this Agreement, the proper officers and directors of parties will
take all such necessary action.

6.6 Access to Information; Confidentiality. From the date hereof
--------------------------------------
to the Effective Time, each of the Company and Parent will (a) allow all
designated officers, attorneys, accountants and other representatives of the
other reasonable access at all reasonable times to the offices, records and
files, correspondence, audits and properties, as well as to all information
relating to commitments, contracts, titles and financial position, or
otherwise pertaining to the business and affairs, of the Company and Parent
and their respective Subsidiaries, as the case may be, (b) furnish to the
other, the other's counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information as
such persons may reasonably request, (c) instruct the employees, counsel and
financial advisors of the Company and Parent, as the case may be, to
cooperate with the other in the other's investigation of the business of it
and its Subsidiaries and (d) keep the other fully apprised and informed of
all significant developments with respect to the assets, business activities,
financial condition, earnings and prospects of it and its Subsidiaries. Each
of the Company and Parent will be permitted to make extracts from or to make
copies of such books and records as may be reasonably necessary. Each party
shall

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<PAGE>

keep such information confidential, subject to the requirements of any
governmental or other authorities, except with respect to information that is
ascertainable from public or published information or trade sources.

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

6.8 Registration Statement. (a) As soon as practicable following
----------------------
the date hereof, Parent and the Company will cooperate and promptly prepare
and file with the SEC a Registration Statement on Form S-4 (the "Form S-4")
under the Securities Act, which will contain a proxy statement/prospectus and
a form of proxy in connection with the vote of the Company's stockholders
with respect to the Merger and the offer to such stockholders of the
securities to be issued pursuant to the Merger (the "Proxy Statement/
Prospectus"). The respective parties will cause the Form S-4 to comply as to
form in all material respects with the applicable provisions of the
Securities Act, the Exchange Act and the rules and regulations thereunder.
Parent will use all reasonable efforts, and the Company will cooperate with
Parent, to have the Form S-4 declared effective by the SEC as promptly as
practicable and to keep the Form S-4 effective as long as is necessary to
consummate the Merger. Parent will, as promptly as practicable, provide
copies of any written comments received from the SEC with respect to the Form
S-4 to the Company and advise the Company of any verbal comments with respect
to the Form S-4 received from the SEC. Parent will use its reasonable
efforts to obtain, prior to the effective date of the Form S-4, all necessary
state securities law or "Blue Sky" permits or approvals required to carry out
the transactions contemplated by this Agreement and will pay all expenses
incident thereto. Parent agrees that the Proxy Statement/Prospectus and each
amendment or supplement thereto at the time of mailing thereof and at the
time of the Stockholders' Meeting or, in the case of the Form S-4 and each
amendment or supplement thereto, at the time it is filed or becomes
effective, will not include 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; provided, however, that the foregoing will not apply to the
extent that any such untrue statement of a material fact or omission to state
a material fact was made by Parent in reliance upon and in conformity with
written information concerning the Company furnished to Parent by the Company
specifically for use in the Form S-4. The Company agrees that the written
information concerning the Company provided by it for inclusion in the Proxy
Statement/Prospectus and each amendment or supplement thereto, at the time of
mailing thereof and at the time of the meeting of stockholders of the
Company, or, in the case of written information concerning the Company
provided by the Company for inclusion in the Form S-4 or any amendment or
supplement thereto, at the time it is filed or becomes effective, will not
include 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. No amendment or supplement

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<PAGE>

to the Form S-4 or the Proxy Statement/Prospectus will be made by Parent or
the Company without the approval of the other party, such approval not to be
unreasonably withheld or delayed. Parent will advise the Company, promptly
after it receives notice thereof, of the time when the Form S-4 has become
effective or any supplement or amendment has been filed, the issuance of any
stop order, the denial or suspension of the qualification of Parent Common
Shares issuable in connection with the Merger for offering or sale in any
jurisdiction, or any request by the SEC for any amendment or supplement to
the Form S-4 or the Proxy Statement/Prospectus or comments thereon and
responses thereto or requests by the SEC for additional information.

(b) Parent will use its reasonable best efforts to facilitate the
prompt receipt of registered shares by all of the Company's stockholders.

6.9 Listing Application. Parent will promptly prepare and submit
-------------------
to the NASDAQ a supplemental listing application covering Parent Common
Shares issuable in the Merger, and will use reasonable efforts to obtain,
prior to the Effective Time, approval for the listing of such Parent Common
Shares, subject to official notice of issuance.

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

6.11 Affiliate Letters. (a) Promptly after the Company sets the
-----------------
record date for the Stockholder's Meeting, the Company will deliver to Parent
a list of names and addresses of those persons who were, in the Company's
reasonable judgment, at the record date for the Stockholders' Meeting,
Affiliates of the Company. The Company will use all reasonable efforts to
deliver or cause to be delivered to Parent, prior to the Closing Date, from
each of the Affiliates of the Company identified in the foregoing list, a
letter which will include, among other things, an agreement of such Affiliate
to the effect that such Affiliate did not within 30 days prior to the
Effective Time, sell, transfer or otherwise dispose of any shares of the
capital stock of the Company or the Parent (as the case may be) held by the
Affiliate, and that the Affiliate will not sell, transfer or otherwise
dispose of, or reduce his risk relative to any shares of the capital stock of
the Parent until after such time as results covering at least 30 days of
combined operations of the Parent and the Company have been published by the
Parent within the meaning of Section 201.01 of the SEC's Codification of
Financial Reporting Policies (an "Affiliate Letter"). Such letter for
Affiliates of the Company will be in the form attached hereto as Exhibit C.
Parent will be entitled to place legends as specified in such Affiliate
Letters on the certificates evidencing any Parent Common Stock to be received
by such Affiliates pursuant to the terms of this Agreement, and to issue
appropriate stop-transfer instructions to the transfer agent for Parent
Common Stock, consistent with the terms of such Affiliate Letters.

(b) Promptly after the Company sets the record date for the
Stockholders' Meeting, Parent will deliver to the Company a list of names and
addresses of those persons who were, in Parent's reasonable judgment, at the
record date for the Stockholders' Meeting, Affiliates of Parent. Parent will
use all reasonable efforts to deliver or cause to be delivered

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to the Company, prior to the Closing Date, from each of the Affiliates of
Parent identified in the foregoing list, an Affiliate Letter in the form
attached hereto as Exhibit D.

6.12 Expenses. Whether or not the Merger is consummated, all costs
--------
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby will be paid by the party incurring such expenses except
as expressly provided herein and except that (a) the filing fee in connection
with the HSR Act filing, (b) the filing fee in connection with the filing of
the Form S-4 or Proxy Statement/Prospectus with the SEC, and (c) the expenses
incurred in connection with printing and mailing the Proxy Statement/
Prospectus, will be shared equally by the Company and Parent.

6.13 Insurance; Indemnity. (a) From and after the Effective Time,
--------------------
Parent will cause the Surviving Corporation to indemnify, defend and hold
harmless, to the fullest extent that the Company would be required under its
certificate of incorporation, by-laws, indemnification agreements with its
officers and directors (the "Indemnification Agreements") and applicable law,
each person who is now or was during the past six months prior to the date
hereof an officer or director of the Company (individually, an "Indemnified
Party" and collectively, the "Indemnified Parties"), against all losses,
claims, damages, liabilities, costs or expenses (including attorneys' fees),
judgments, fines, penalties and amounts paid in settlement in connection with
any claim, action, suit, proceeding or investigation arising out of or
pertaining to acts or omissions, or alleged acts or omissions, by them in
their capacities as such occurring at or prior to the Effective Time. In the
event of any such claim, action, suit, proceeding or investigation (an
"Action"), any Indemnified Party wishing to claim indemnification will
promptly notify the Surviving Corporation thereof (provided that failure to
so notify the Surviving Corporation will not affect the obligations of the
Surviving Corporation to provide indemnification except to the extent that
the Surviving Corporation shall have been prejudiced as a result of such
failure). With respect to any Action for which indemnification is requested,
the Surviving Corporation will be entitled to participate therein at its own
expense and, except as otherwise provided below, to the extent that it may
wish, the Surviving Corporation may assume the defense thereof, with counsel
reasonably satisfactory to the Indemnified Party. After notice from the
Surviving Corporation to the Indemnified Party of its election to assume the
defense of an Action, the Surviving Corporation will not be liable to the
Indemnified Party for any legal or other expenses subsequently incurred by
the Indemnified Party in connection with the defense thereof, other than as
provided below. The Surviving Corporation will not settle any Actions
without the consent of the Indemnified Party where such settlement includes
an admission of civil or criminal liability on behalf of an officer or
director or requires any payment to be made by the Indemnified Party. The
Indemnified Party will have the right to employ counsel in any Action, but
the fees and expenses of such counsel incurred after notice from the
Surviving Corporation of its assumption of the defense thereof will be at the
expense of the Indemnified Party, unless (i) the employment of counsel by the
Indemnified Party has been authorized by the Surviving Corporation, (ii) the
Indemnified Party will have reasonably concluded upon the advice of counsel
that there may be a conflict of interest between the Indemnified Party and
the Surviving Corporation in the conduct of the defense of an Action, or
(iii) the Surviving Corporation shall not in fact have employed counsel to
assume the defense of an Action, in each of which cases the reasonable fees
and expenses of counsel selected by the Indemnified Party will be at the
expense of the Surviving Corporation. Notwithstanding the

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foregoing, the Surviving Corporation will not be liable for any settlement
effected without its written consent and the Surviving Corporation will not
be obligated pursuant to this Section 6.13(a) to pay the fees and
disbursements of more than one counsel for all Indemnified Parties in any
single Action, except to the extent two or more of such Indemnified Parties
have conflicting interests in the outcome of such action. In the event of
any conflict between the provisions of the Indemnification Agreements and
this Section 6.13, the provisions of the Indemnification Agreements shall
prevail.

(b) For a period of five years after the Effective Time, Parent
will cause to be maintained officers' and directors' liability insurance
covering the Indemnified Parties who are currently covered, in their
capacities as officers and directors, by the Company's existing officers' and
directors' liability insurance policies on terms substantially no less
advantageous to the Indemnified Parties than such existing insurance;
provided, however, that Parent will not be required in order to maintain or
procure such coverage to pay premiums on an annualized basis in excess of
200% of the current annual premium paid by the Company for its existing
coverage (the "Cap") (which current annual premium the Company represents and
warrants to be approximately $135,000); 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 will only be required to obtain
as much coverage as can be obtained by paying premiums on an annualized basis
equal to the Cap.

(c) The provisions of this Section 6.13 will survive the
consummation of the Merger and expressly are intended to benefit each of the
Indemnified Parties.

6.14 Employee Benefits. Notwithstanding anything to the contrary
-----------------
contained herein, from and after the Effective Time, the Surviving
Corporation will have sole discretion over the hiring, promotion, retention
and firing of employees of the Surviving Corporation. Notwithstanding the
immediately preceding sentence, Parent will (i) satisfy, or cause the
Surviving Corporation to satisfy, all obligations of the Company or any of
its Subsidiaries under any existing severance agreement between the Company
or any of its Subsidiaries and any of their officers or employees and (ii)
until the expiration of one year after the Effective Time, satisfy, or cause
the Surviving Corporation to satisfy, all obligations of the Company or any
of its Subsidiaries under their current respective severance policies.
Parent will provide, or will cause the Surviving Corporation to provide, for
the benefit of employees of the Surviving Corporation who were employees of
the Company immediately prior to the Effective Time "employee benefit plans"
within the meaning of Section 3(3) of ERISA (a) until the expiration of one
year after the Effective Time, that are, in the aggregate, substantially
comparable to the "employee benefit plans" provided to such individuals by
the Company or any Subsidiary on the date hereof, and (b) thereafter that
are, at the election of Parent, either (i) in the aggregate, substantially
comparable to the "employee benefit plans" provided to such individuals by
the Company or any Subsidiary on the date hereof or (ii) in the aggregate,
substantially comparable to the "employee benefit plans" provided to
similarly situated employees of Parent or its Subsidiaries who were not
employees of the Company or any Subsidiary immediately prior to the Effective
Time; provided, however, that notwithstanding the foregoing (A) nothing
herein will be deemed to require Parent to modify the benefit formulas under
any pension, profit sharing or savings plan of the Company or any Subsidiary
in a manner that increases the aggregate expenses

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<PAGE>

thereof as of the date hereof in order to comply with the requirements of
ERISA or the Code, (B) employee stock ownership, stock bonus, stock option
and similar equity-based plans, programs and arrangements of the Company or
any of its Subsidiaries are not encompassed within the meaning of the term
"employee benefit plans" hereunder, and (C) nothing herein will obligate
Parent or the Surviving Corporation to continue any particular "employee
benefit plan" for any period after the Effective Time. Notwithstanding the
foregoing, the life insurance policy on Mr. Eldred referred to in Section
4.18 will be terminated.

6.15 Conveyance Taxes. The Company and Parent will cooperate in
----------------
the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer or
gains, sales, use, transfer, value added, stock transfer and stamp taxes, any
transfer, recording, registration and other fees and any similar taxes which
become payable in connection with the transactions contemplated by this
Agreement that are required or permitted to be filed on or before the
Effective Time and each party will pay any such tax or fee which becomes
payable by it on or before the Effective Time.

6.16 Consents. The Company will use all reasonable efforts to
--------
obtain each of the consents identified in Schedule 4.6(a).

6.17 Pooling Accounting Treatment. Each of Parent and the Company
----------------------------
agrees not to take any action that to its knowledge could reasonably be
expected to adversely affect the ability of Parent to treat the Merger as a
pooling of interests.

6.18 Company Warrants. The Company will use reasonable efforts to
----------------
influence The Prudential Insurance Company of America to enter into an
agreement to exercise its Company Warrants at or prior to the Effective Time.

7. Conditions

7.1 Conditions to Each Party's Obligation To Effect the Merger.
----------------------------------------------------------
The respective obligations of each party to effect the Merger will be subject
to the fulfillment at or prior to the Closing Date of the following
conditions:

(a) This Agreement and the transactions contemplated hereby shall
have been approved in the manner required by applicable law by the holders of
the issued and outstanding shares of capital stock of the Company.

(b) The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.

(c) Neither of the parties hereto shall be subject to any order or
injunction of a court of competent jurisdiction which prohibits the
consummation of the transactions contemplated by this Agreement. In the
event any such order or injunction shall have been issued, each party agrees
to use its reasonable best efforts to have any such injunction lifted.

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<PAGE>

(d) The Form S-4 shall have become effective and shall be
effective at the Effective Time, and no stop order suspending effectiveness
of the Form S-4 shall have been issued, no action, suit, proceeding or
investigation by the SEC to suspend the effectiveness thereof shall have been
initiated and be continuing or, to the knowledge of Parent or the Company, be
threatened in writing, and all necessary approvals under state securities
laws relating to the issuance or trading of Parent Common Shares to be issued
to the Company stockholders in connection with the Merger shall have been
received.

(e) All consents, authorizations, orders and approvals of (or
filings or registrations with) any Governmental Entity required in connection
with the execution, delivery and performance of this Agreement shall have
been obtained or made, except for filings in connection with the Merger and
any other documents required to be filed after the Effective Time and except
where the failure to have obtained or made any such consent, authorization,
order, approval, filing or registration would not have a material adverse
effect on the business, financial condition or results of operations of the
Surviving Corporation following the Effective Time.

(f) Parent Common Shares to be issued to the Company's
stockholders in connection with the Merger shall have been approved for
listing on the NASDAQ, subject only to official notice of issuance.

(g) Each of Parent and the Company shall have received letters,
(i) dated as of the date hereof and (ii) dated as of the Effective Time, from
their respective independent public accountants to the effect that the Merger
will qualify for "pooling of interests" accounting treatment under Accounting
Principles Board Opinion No. 16 if consummated in accordance with this
Agreement.

7.2 Conditions to Obligation of Company To Effect the Merger. The
--------------------------------------------------------
obligation of the Company to effect the Merger will be subject to the
fulfillment at or prior to the Closing Date of the following additional
conditions:

(a) (i) The representations and warranties of Parent and Merger
Sub contained in this Agreement shall have been true and correct in all
material respects as of the date hereof and (ii) the representations and
warranties of Parent and Merger Sub contained in this Agreement and in any
document delivered in connection herewith shall be true and correct in all
material respects as of the Closing Date, except (A) for changes specifically
permitted by this Agreement and (B) that those representations and warranties
which address matters only as of a particular date shall remain true and
correct in all material respects as of such date.

(b) Each of Parent and Merger Sub shall have performed or complied
in all material respects with all agreements and conditions contained in this
Agreement required to be performed or complied with by it on or prior to the
Closing Date.

(c) Parent and Merger Sub shall have delivered to the Company a
certificate, dated the date of the Closing, signed by the President or any
Vice President of

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<PAGE>

each of Parent and Merger Sub, certifying as to the fulfillment of the
conditions specified in Section 7.2(a) and (b).

(d) From the date of this Agreement through the Effective Time,
there shall not have occurred any material adverse change in the business or
properties of Parent and its Subsidiaries.

(e) Parent and Merger Sub shall have obtained all material
consents, waivers, approvals, authorizations or orders and made all filings
in connection with the authorization, execution and delivery of this
Agreement by Parent and Merger Sub and the consummation by each of the
transactions contemplated hereby.

(f) The Company shall have received an opinion of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, satisfactory to the Company,
dated the Effective Time, to the effect that the Merger will be treated for
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Code. In rendering such opinion, counsel may rely on, and both
of the Company and Parent and Merger Sub shall make, those representations
substantially in the form contained in Exhibits E and F respectively, and all
of such representatives shall be true as of the Effective Time.

7.3 Conditions to Obligation of Parent and Merger Sub to Effect
-----------------------------------------------------------
the Merger. The obligation of Parent and Merger Sub to effect the Merger
----------
will be subject to the fulfillment at or prior to the Closing Date (or such
other date as may be specified below) of the following additional conditions:

(a) (i) The representations and warranties of the Company
contained in this Agreement shall have been true and correct in all material
respects as of the date hereof and (ii) the representations and warranties of
the Company contained in this Agreement and in any document delivered in
connection herewith shall be true and correct in all material respects as of
the Closing Date, except (A) for changes specifically permitted by this
Agreement and (B) that those representations and warranties which address
matters only as of a particular date shall remain true and correct in all
material respects as of such date.

(b) The Company shall have performed or complied in all material
respects with all agreements and conditions contained in this Agreement
required to be performed or complied with by it on or prior to the Closing
Date.

(c) The Company shall have delivered to Parent and Merger Sub a
certificate, dated the date of the Closing, signed by the President or any
Vice President of the Company, certifying as to the fulfillment of the
conditions specified in Section 7.3(a) and (b).

(d) From the date of this Agreement through the Effective Time,
there shall not have occurred any material adverse change in the business or
properties of the Company or any of its Subsidiaries in the United Kingdom,
France or Germany.

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<PAGE>

(e) The Company shall have obtained all material consents,
waivers, approvals, authorizations or orders and made all filings in
connection with the authorization, execution and delivery of this Agreement
by the Company and the consummation by it of the transactions contemplated
hereby.

(f) The Company or the Board of Directors of the Company or the
other persons or entities described in Schedule 7.3(f), as the case may be,
shall have taken the actions set forth in Schedule 7.3(f).

(g) The Stock Agreement shall have remained in full force and
effect through the Effective Time.

(h) The Company shall have received an opinion of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, satisfactory to the Company,
dated the Effective Time, to the effect that the Merger will be treated for
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Code. In rendering such opinion, counsel may rely on, and both
of the Company and Parent and Merger Sub shall make, those representations
substantially in the form contained in Exhibits E and F, respectively, and
all of such representations shall be true as of the Effective Time.

8. Termination

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

8.2 Termination by Either Parent or 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 March 31, 1996, which date will be automatically extended
by that amount of time that is reasonably required by the SEC or other
Governmental Entities (whether domestic or foreign) to review filings, which
date will be no later than April 30, 1996; subject to further extension if
necessary to allow 30 days to pass from the date the Company receives an
Alternative Proposal (the "Outside Date") (b) the approval of the Company's
stockholders required by Section 7.1(a) is not obtained at the Stockholders'
Meeting or at any adjournment thereof or by written consent, 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 issues an order, decree or ruling or takes any other action
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
becomes final and non-appealable; provided, that the party seeking to
terminate this Agreement pursuant to this clause (c) has used all reasonable
efforts to remove such injunction, order or decree; and provided, in the case
of a termination pursuant to the foregoing, that the terminating party has
not breached this Agreement in any manner that proximately contributes to the
failure to consummate the Merger by the Outside Date.

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<PAGE>

8.3 Termination by Company. This Agreement may be terminated and
----------------------
the Merger may be abandoned at any time prior to the Effective Time, before
or after the adoption by the stockholders of the Company referred to in
Section 7.1(a), by action of the Board of Directors of the Company, if (a)
there has been a breach by Parent or Merger Sub of any representation or
warranty contained in this Agreement which is not curable or, if curable, is
not cured by the Outside Date and such breach had or is reasonably likely to
have a Parent Material Adverse Effect or (b) there has been a material breach
of any of the covenants set forth in this Agreement on the part of Parent,
which breach is not curable or, if curable, is not cured within 30 calendar
days after written notice of such breach is given by the Company to Parent,
provided, that such 30 day period shall be extended for so long as Parent
shall be making all reasonable attempts to cure such breach, (c) an
involuntary case under the United States Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law is commenced against Parent or
any of its Subsidiaries, a decree or order of a court of competent
jurisdiction for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers of Parent or any of
its Subsidiaries or over their respective assets shall have been entered or
the involuntary appointment of an interim receiver, trustee or other
custodian of Parent or any of its Subsidiaries shall have occurred and any
such event described in this clause (c) shall have continued for 30 days or
(d) Parent or any of its Subsidiaries has an order for relief entered with
respect to it or commences a voluntary case under the United States
Bankruptcy Code or any applicable bankruptcy, insolvency or other similar
law, or consents to the entry of an order for relief in an involuntary case,
to the conversion of an involuntary case to a voluntary case or to the
appointment of or taking possession by a receiver, trustee or other custodian
of any part of the Parent's property, or makes any assignment for the benefit
of creditors.

8.4 Termination by Parent and Merger Sub. This Agreement may be
------------------------------------
terminated and the Merger may be abandoned at any time prior to the Effective
Time, before or after the approval by the stockholders of the Company
referred to in Section 7.1(a), by action of the Boards of Directors of
Parent, if (a) the Board of Directors of the Company shall have withdrawn or
modified in a manner materially adverse to Parent or Merger Sub its approval
or recommendation of this Agreement or the Merger or shall have recommended
an Alternative Proposal to the Company's stockholders, (b) there has been a
breach by the Company of any representation or warranty contained in this
Agreement which is not curable or, if curable, is not cured by the Outside
Date and such breach had or is reasonably likely to have a Company Material
Adverse Effect, (c) there has been a material breach of any of the covenants
set forth in this Agreement on the part of the Company, which breach is not
curable or, if curable, is not cured within 30 days after written notice of
such breach is given by Parent to the Company, provided, that such 30 day
period shall be extended for so long as the Company shall be making all
reasonable attempts to cure such breach, (d) there has been a material breach
by Stockholders of the Stock Agreement, (e) an involuntary case under the
United States Bankruptcy Code or any applicable bankruptcy, insolvency or
other similar law is commenced against the Company or any of its
Subsidiaries, a decree or order of a court of competent jurisdiction for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers of the Company or any of its Subsidiaries
or over their respective assets shall have been entered or the involuntary
appointment of an interim receiver, trustee or other custodian of the Company
or any of its Subsidiaries shall have occurred and any such event described
in this clause (e) shall have

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<PAGE>

continued for 30 days or (f) the Company or any of its Subsidiaries has an
order for relief entered with respect to it or commences a voluntary case
under the United States Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law, or consents to the entry of an order for
relief in an involuntary case, to the conversion of an involuntary case to a
voluntary case or to the appointment of or taking possession by a receiver,
trustee or other custodian of any part of the Company's property, or makes
any assignment for the benefit of creditors.

8.5 Effect of Termination and Abandonment. In the event of
-------------------------------------
termination of this Agreement and the abandonment of the Merger pursuant to
this Article 8, all obligations of the parties hereto will terminate, except
the obligations of the parties pursuant to this Section 8.5, Section 8.6 and
Section 6.12 and the confidentiality provisions contained in Section 6.6 and
except for the provisions of Sections 9.3, 9.4, 9.6, 9.8, 9.9, 9.12, 9.13
and, if the Purchase Option has been exercised prior to the termination
thereof, 9.14. Moreover, in the event of termination of this Agreement
pursuant to Sections 8.2, 8.3 or 8.4, nothing herein will prejudice the
ability of the non-breaching party from seeking damages from any other party
for any willful breach of this Agreement, including without limitation
attorneys' fees and the right to pursue any remedy at law or in equity.

8.6 Fees and Expenses. (a) Except as provided below and in
-----------------
Section 6.12, all fees and expenses incurred in connection with the Merger,
this Agreement, the Stock Agreement and the transactions contemplated by this
Agreement and the Stock Agreement shall be paid by the party incurring such
fees or expenses, whether or not the Merger is consummated, except that
expenses incurred in connection with printing and mailing the Proxy Statement
and the Form S-4, and governmental filing fees, shall be shared equally by
Parent and the Company.

(b) If the conditions to the Merger set forth in Sections 7.1(b)
through (f) are not satisfied, none of the parties hereto shall be entitled
to a Termination Fee (as defined below) or Expenses (as defined below).

(c) The Company shall pay in immediately available funds to Parent
upon demand a fee (a "Termination Fee") plus all Expenses, promptly, but in
no event later than two business days, in an amount equal to $1,480,677, if
(i) the conditions to the Merger set forth in Section 7.3 are not satisfied
(other than as a result of a willful and material breach of this Agreement by
Parent or Merger Sub, which breach shall not have been cured within five
business days following Parent's receipt of written notice of such breach
from the Company (a "Parent Breach")), (ii) the Company breaches this
Agreement, or (iii) the requisite approval of the Company's stockholders for
the Merger is not obtained at the Stockholders' Meeting, at any adjournment
thereof or by written consent, and there is no Alternative Proposal.

(d) Parent or Merger Sub shall pay in immediately available funds
to the Company upon demand a Termination Fee plus all Expenses, promptly, but
in no event later than two business days, in an amount equal to $1,480,677,
(i) if the conditions to the Merger set forth in Section 7.2 are not
satisfied (other than as a result of a willful and material breach of this
Agreement by the Company, which breach shall not have been cured within

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<PAGE>

five business days following the Company's receipt of written notice of such
breach from Parent or Merger Sub) or (ii) Parent or Merger Sub breaches this
Agreement.

(e) The Company shall pay in immediately available funds to Parent
upon demand a Termination Fee plus all Expenses, promptly, but in no event
later than two business days, in an amount equal to $4,442,032, if (i) the
requisite approval of the Company's stockholders for the Merger is not
obtained at the Stockholders' Meeting, at any adjournment thereof or by
written consent and there is any Alternative Proposal, (ii) the Stockholders'
Meeting does not occur prior to the Outside Date and there is any Alternative
Proposal, (iii) the Company's Board of Directors shall have withdrawn or
materially modified its approval or recommendation of this Agreement other
than due to the occurrence of a Parent Material Adverse Effect and Parent or
Merger Sub terminates this Agreement, or (iv) the Company engages in a
Competing Transaction.

For purposes of this Agreement, a "Competing Transaction" means, if
within six months following the earlier of (x) termination of this Agreement,
(y) the date, if any, that the stockholders of the Company fail to approve
the Merger, and (z) the date, if any, that the Board of Directors of the
Company withdraws or materially modifies its approval or recommendation of
this Agreement:

(A) The Company and a person or entity other than Parent
and/or Merger Sub shall have entered into a letter of intent or a
definitive agreement with respect to an Alternative Proposal; or

(B) A tender or exchange offer for 25% or more of the shares
of any capital stock of the Company shall have been commenced.

(f) For purposes of this Agreement "Expenses" shall mean all fees
and expenses, up to a maximum of $2,000,000, reasonably incurred or paid by
or on behalf of a party or any of its affiliates in connection with the
Merger or the consummation of any of the transactions contemplated by this
Agreement or the Stock Agreement, including all fees and expenses of counsel,
investment banking firms, accountants, experts and consultants to a party or
any of its affiliates.

9. General Provisions

9.1 Nonsurvival of Representations, Warranties and Agreements.
---------------------------------------------------------
All representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement will be deemed to the extent
expressly provided herein to be conditions to the Merger and will not survive
the Merger, provided, however, that the agreements contained in Article 3,
Section 6.13 and this Article 9 will survive the Merger and Sections 6.12,
8.5 and 8.6 will survive termination.

9.2 Notices. Any notice required to be given hereunder will be
-------
sufficient if in writing, and sent by facsimile transmission and by courier
service (with proof of service),

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<PAGE>

hand delivery or certified or registered mail (return receipt requested and
first-class postage prepaid), addressed as follows:

If to Parent or Merger Sub: If to the Company:

Micro Warehouse, Inc. Inmac Corp.
535 Connecticut Avenue 2465 Augustine Drive
Norwalk, CT 06854 Santa Clara, CA 95052
Attention: Bruce L. Lev Attention: Jeffrey A. Heimbuck
Fax No.: (203) 899-4203 Fax No.: (408) 727-4131

With copies to: With copies to:

Jones, Day, Reavis & Pogue Wilson, Sonsini, Goodrich & Rosati
901 Lakeside Avenue Professional Corporation
Cleveland, Ohio 44114 650 Page Mill Road
Attention: Paul T. Ruxin Palo Alto, CA 94304-1050
Fax No.: (216) 579-0212 Attention: Barry Taylor
Fax No.: (415) 496-4092

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

9.3 Assignment; Binding Effect. Neither this Agreement nor any of
--------------------------
the rights, interests or obligations hereunder will be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence,
this Agreement will be binding upon and will inure to the benefit of the
parties hereto and their respective successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, except for the
provisions of Section 6.13, nothing in this Agreement, expressed or implied,
is intended to confer on any person other than the parties hereto or their
respective heirs, successors, executors, administrators and assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.

9.4 Entire Agreement. This Agreement, the Exhibits, the Schedules
----------------
and any documents delivered by the parties in connection herewith, together
with the Confidentiality Agreement, dated October 6, 1995, between Parent and
the Company, which will survive the execution and delivery of this Agreement,
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings among the
parties with respect thereto. No addition to or modification of any
provision of this Agreement will be binding upon any party hereto unless made
in writing and signed by all parties hereto.

9.5 Amendment. This Agreement may be amended by the parties
---------
hereto, by action taken by their respective Board of Directors, at any time
before or after approval of matters presented in connection with the Merger
by the stockholders of the Company but

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<PAGE>

after any such stockholder approval, no amendment will be made which by law
requires the further approval of such stockholders without obtaining such
further approval. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.

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

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

9.8 Headings. Headings of the Articles and Sections of this
--------
Agreement are for the convenience of the parties only, and will be given no
substantive or interpretive effect whatsoever.

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

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

9.11 Incorporation of Schedules. The Schedules attached hereto and
--------------------------
referred to herein are hereby incorporated herein and made a part hereof for
all purposes as if fully set forth herein.

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

9.13 Enforcement of Agreement. The parties hereto agree that
------------------------
irreparable damage would occur in the event that any of the provisions of
this Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly

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<PAGE>

agreed that the parties will be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any Delaware Court, this being in addition to any other
remedy to which they are entitled at law or in equity.

9.14 Effect of Exercise of Purchase Option. In the event that
-------------------------------------
Parent purchases Company Common Shares upon exercise of the Purchase Option:

(a) If requested by Parent, the Company will, promptly following
the purchase of Company Common Shares upon exercise of the Purchase Option
and from time to time thereafter, take all action which can be taken by the
Company to cause a number of directors of the Company proportionate to the
amount of Company Common Shares owned by Parent to be persons designated by
Parent (whether, at the request of Parent, by increasing the size of the
number of directors of the Company or by seeking the resignation of directors
and causing Parent's designees to be elected to fill the vacancies so
created). At such time, the Company also will take all action permitted by
law to cause persons designated by Parent to constitute at least the same
percentage as is on the Company's Board of Directors and of each committee of
the Company's Board of Directors. The Company's obligation to cause
designees of Parent to be so elected or appointed as directors of the Company
will be subject to Section 14(f) of the Exchange Act and Rule 14(f)-1
promulgated thereunder. Parent will supply to the Company in writing and
will be solely responsible for any information with respect to it and its
designees, officers, directors and affiliates required by Section 14(f) and
Rule 14f-1, and the Company will use all reasonable efforts to file as
promptly as practicable with the SEC and transmit to all holders of record of
securities of the Company who would be entitled to vote at a meeting for
election of directors such information as is required under Section 14(f) and
Rule 14(f)-1. Notwithstanding the foregoing, until the Effective Time, the
Company will use all reasonable efforts to assure that the Company's Board of
Directors has at least three directors who are directors on the date hereof
(the "Continuing Directors") and to assure that the Continuing Directors
represent a majority of the Company's directors; provided further, that, in
such event, if the number of Continuing Directors is reduced below three for
any reason whatsoever, any remaining Continuing Directors (or Continuing
Director, if there is only one remaining) will be entitled to designate three
persons to fill such vacancies who will be deemed to be Continuing Directors
for purposes of this Agreement or, if no Continuing Director then remains,
the other directors will designate three persons to fill such vacancies who
are not shareholders, affiliates or associates of Parent and such persons
will be deemed to be Continuing Directors for purposes of this Agreement.
The Company will use all reasonable efforts to cause the person(s) so
designated by the Continuing Directors to be elected to the Board of
Directors of the Company.

(b) Parent will use all reasonable efforts in accordance with
applicable law and the Company's certificate of incorporation and by-laws to
convene a meeting of the Company's stockholders as promptly as practicable to
consider and vote upon the Merger, including, without limitation, timely
mailing of the Proxy Statement/Prospectus.

(c) Parent will, with respect to all Company Common Shares
acquired by it upon exercise of the Purchase Option and any other Company
Common Shares that it owns

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<PAGE>

of record or beneficially on the record date for voting at the meeting of
stockholders called to consider and vote upon the Merger, vote or cause to be
voted such Company Common Shares (or execute or cause to be executed written
consents with respect thereto) (i) in favor of the adoption of this Agreement
and approval of the Merger and the other transactions contemplated hereby,
(ii) against any Alternative Proposal, and (iii) in favor of any other matter
necessary for the consummation of the transactions contemplated by this
Agreement and considered and voted upon at such meeting of the Company's
stockholders.

(d) Notwithstanding any other provision contained herein to the
contrary, from and after the date of the closing of the exercise of the
Purchase Option, the obligations of Parent and the Merger Sub to effect the
Merger will be subject only to the fulfillment at or prior to the Closing
Date of the conditions set forth in Section 7.1(a), (c) and (d) and all other
conditions to the obligations of the Parent and the Merger Sub to effect the
Merger on the terms and conditions of this Agreement as in effect immediately
prior to the exercise of the Purchase Option will be deemed satisfied or
waived and the conditions to the obligations of the Company to effect the
Merger in Sections 7.1(g) and 7.2(f) will be deemed waived.

(e) Notwithstanding any other provision contained herein to the
contrary, from and after the date of the closing of the exercise of the
Purchase Option, Parent and Merger Sub will not be entitled to terminate this
Agreement or abandon the Merger unless a United States federal or state court
of competent jurisdiction or United States federal or state governmental,
regulatory or administrative agency or commission issues an order, decree or
ruling or takes any other action permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement and
such order, decree, ruling or other action becomes final and non-appealable.

(f) Any action by the Company to waive or amend any provision of
this Agreement will require the approval of a majority of the Continuing
Directors.

A-56

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement and
caused the same to be duly delivered on their behalf on the day and year
first written above.

MICRO WAREHOUSE, INC.

By: /s/ Peter Godfrey
------------------------
Peter Godfrey
President

INDIGO HOLDING COMPANY, INC.

By: /s/ Steven Purcell
------------------------
Steven Purcell
President

INMAC CORP.

By: /s/ Jeffrey A. Heimbuck
------------------------
Jeffrey A. Heimbuck
President

A-57

<PAGE>

ANNEX B

WILLIAM BLAIR AND COMPANY
222 WEST ADAMS STREET
CHICAGO, ILLINOIS
60606

November 30, 1995

Board of Directors
Inmac Corp.
2465 Augustine Drive
Santa Clara, CA 95052-8031

Gentlemen:

You have requested our opinion as to the fairness, from a financial point
of view, to the shareholders of Inmac Corp. (the "Company") of the
consideration to be received pursuant to the terms of the Agreement and
Plan of Merger dated as of November 30, 1995 (the "Merger Agreement") by
and among Micro Warehouse, Inc. ("Micro Warehouse"), Merger Subsidiary, a
wholly owned subsidiary of Micro Warehouse ("Merger Sub"), and the Company.

Pursuant to the terms of the Merger Agreement, Merger Sub will be merged
with and into the Company (the "Merger") and each outstanding share of
common stock of the Company will be converted into the right to receive a
number of common shares of Micro Warehouse equal to a fraction (the
"Conversion Rate"), the numerator of which will be $12.00 and the
denominator of which will be the Closing Market Price (as defined below) of
one Micro Warehouse common share; provided, however, that (i) in the event
the Closing Market Price is less than $43.54, the Conversion Rate shall
equal $12.00 divided by $43.54 and (ii) in the event the Closing Market
Price is greater than $53.21, the Conversion Rate shall equal $12.00
divided by $53.21 (the "Conversion" and, together with the Merger, the
"Transaction"). For purposes hereof, the "Closing Market Price" of Micro
Warehouse common stock shall mean the average of the last reported sale
price on the NASDAQ National Market for the period of the 20 most recent
trading days ending on the fifth business day prior to the closing date of
the transaction.

We have acted as financial advisor to the Company in connection with the
Transaction. In connection with our review of the Transaction and the
preparation of our opinion herein, we have (a) reviewed the terms and
conditions of the Merger Agreement and the financial terms of the
Transaction as set forth in the Merger Agreement; (b) reviewed the terms
and conditions of the Stock Agreement between Micro Warehouse and Ken
Eldred; (c) analyzed certain publicly available financial statements of
the Company and Micro Warehouse, respectively; (d) analyzed

Telephone (312) 236-1600

B-1

<PAGE>

certain financial and other information relating to the prospects of the
Company provided to us by the Company's management, including financial
projections; (e) discussed the past and current operations and financial
condition and the prospects of the Company with senior executives of the
Company; (f) analyzed certain internal financial statements and other data
concerning Micro Warehouse prepared by the management of Micro Warehouse;
(g) discussed the past and current operations and financial condition and
prospects of Micro Warehouse with senior executives of Micro Warehouse; (h)
reviewed the historical prices and trading activity for the Company's
common stock and that of Micro Warehouse, respectively; (i) reviewed the
financial terms, to the extent publicly available, of selected actual
business combinations we believe to be relevant; and (j) performed such
other analysis as we have deemed appropriate.

We have assumed the accuracy and completeness of all such information and
have not attempted to verify independently any of such information, nor
have we made or obtained an independent valuation or appraisal of any of
the assets or liabilities of the Company or Micro Warehouse. With respect
to financial information, we have assumed that it has been reasonably
prepared on bases reflecting the best currently available estimates and
judgements of the Company's and Micro Warehouse's management, as the case
may be, as to the respective future financial performance of the Company
and Micro Warehouse. We assume no responsibility for, and express no view
as to, such forecasts or the assumptions on which they are based. Our
opinion is necessarily based solely upon information available to us and
business, market, economic and other conditions as they exist on, and can
be evaluated as of, the date hereof. Our opinion does not address the
Company's underlying business decision to effect the Transaction.

In rendering our opinion, we have assumed that the Transaction will be
consummated on the terms described in the Agreement, without any waiver of
any material terms or conditions by the Company and that obtaining the
necessary regulatory approvals for the Transactions will not have an
adverse effect on the Company or Micro Warehouse.

William Blair & Company has been engaged in the investment banking business
since 1935. We undertake the valuation of investment securities in
connection with public offerings, private placements, business
combinations, estate and gift tax valuations and similar transactions. For
our services, including the rendering of this opinion, the Company will pay
us a fee, a significant portion of which is contingent upon consummation of
the Transaction, and indemnify us against certain liabilities. William
Blair & Company has provided investment banking and financial advisory
services to the Company in the past for which we have received customary
compensation.

It is understood that this letter may not be disclosed or otherwise referred
to without our prior written consent, except that this opinion may be
included in filings made by the Company or Micro Warehouse with the
Securities and Exchange Commission with respect to the Merger.

Based upon and subject to the foregoing, it is our opinion as investment
bankers that, as of November 30, 1995, the consideration to be received by
the shareholders of the Company in the Transaction pursuant to the
Agreement is fair, from a financial point of view, to such shareholders.

Very truly yours,

/s/ William Blair & Company
---------------------------
William Blair & Company

B-2

<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS

MWHS's certificate of incorporation and by laws provide for the
indemnification of the directors, officers, employees, and agents of MWHS and
its subsidiaries to the fullest extent that may be permitted by Delaware law
from time to time. Under Delaware law, directors, officers, employees, and other
individuals may be indemnified against expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement in connection with specified
actions, suits, or proceedings, whether civil, criminal, administrative, or
investigative (other than an action by or in the right of the corporation (a
"derivative action")) if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of MWHS and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe their conduct was unlawful. A similar standard of care is applicable in
the case of a derivative action, except that indemnification only extends to
expenses (including attorneys' fees) incurred in connection with defense or
settlement of such an action and Delaware law requires court approval before
there can be any indemnification of expenses where the person seeking
indemnification has been found liable to MWHS.

The certificate provides, among other things, that MWHS will, to the fullest
extent permitted by Section 145 of the General Corporation Law of Delaware, as
the same may be amended and supplemented, indemnify any and all persons whom it
shall have power to indemnify under such section from and against any and all of
the expenses, liabilities or other matters referred to in or covered by such
section, and the indemnification provided for therein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any by law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in their official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.

MWHS is a party to indemnification agreements (the "Indemnification
Agreements") with each of its officers and directors (each an "Indemnitee).
Under these Indemnification Agreements, MWHS must indemnify an Indemnitee to the
fullest extent permitted by Delaware Law for losses and expenses incurred in
connection with actions in which the Indemnitee is involved by reason of having
been a director or employee of MWHS. MWHS is also obligated to advance expenses
an Indemnitee may incur in connection with such actions before any resolution of
the action, and the Indemnitee may sue to enforce his or her right to
indemnification or advancement of expenses.

MWHS also maintains an insurance policy insuring its directors and officers
against liability for certain acts and omissions while acting in their official
capacities.

There is no material litigation pending, and neither MWHS nor any of its
directors knows of any threatened litigation, which might result in a claim for
indemnification by any director or officer.

ITEM 21. EXHIBITS

<TABLE><CAPTION>
<C> <S>
2.1 --Agreement and Plan of Merger, dated as of November 30, 1995 (included as
Appendix A to the Proxy Statement/Prospectus forming a part of this
Registration Statement)
The Registrant agrees to furnish supplementally a copy of any omitted schedule to
the SEC upon request
3.1* --Certificate of Incorporation of Registrant, as Amended
3.2* --By Laws of Registrant, as Amended
</TABLE>

II-1
<PAGE>

<TABLE>
<C> <S>
4.1* --Specimen Stock Certificate of Registrant
5.1 --Opinion of Jones, Day, Reavis & Pogue
8.1** --Opinion of Wilson, Sonsini, Goodrich & Rosati, Professional Corporation
10.1* --Stock Option Plan
10.2* --Lease Agreements between C.P. Lakewood, L.P. and the Registrant relating to the
Lakewood, New Jersey facilities
10.3* --Lease Agreement between Miller-Valentine Partners and the Registrant relating
to the Wilmington, Ohio facility
10.4* --Lease Agreement between Peter Godfrey and the Registrant relating to a South
Norwalk, Connecticut facility
10.5*(a) --Lease Agreement between Hialet Associates and the Registrant relating to a
South Norwalk, Connecticut facility (53 Water Street)
10.5*(b) --Lease Agreement between Hialet Associates and the Registrant relating to a
South Norwalk, Connecticut facility (29 Haviland Street)
10.6* --Lease Agreement between 50 Water Street Associates and the Registrant relating
to a South Norwalk, Connecticut facility
10.7* --Lease between Union Square Assoc. Ltd. Part. and the Registrant relating to a
South Norwalk, Connecticut facility
10.8* --Lease Agreement between South Norwalk Redevelopment Limited Partnership and the
Registrant relating to a South Norwalk, Connecticut facility
10.9* --Lease Agreement between Unigate (UK) Limited and the Registrant relating to the
Barnet, England facility
10.10* --Lease Agreement between Misco, Sofibus and the Registrant relating to the
Bonneuil Sur Marne, France facility
10.11* --Lease Agreement between J & W Computer GNBTT and the Registrant relating to the
Kelkheim, Germany facility
10.12* --Employment Agreement between Peter Godfrey and the Registrant
10.13* --Employment Agreement between Robert G. Bartner and the Registrant
10.14* --Employment Agreement between Melvin Seiler and the Registrant
10.15* --Employment Agreement between Steven Purcell and the Registrant
10.16* --Employment Agreement between Stephen England and the Registrant
10.17* --Consulting Agreement between Felix Dennis and the Registrant, as amended
10.18* --Form of Indemnification Agreement with Officers and Directors
10.19* --Agreement and Plan of Merger of Micro Warehouse, Inc., a Delaware corporation
dated October 1, 1992
10.20* --Commercial Revolving Loan and Security Agreement between State Street Bank and
Trust Company and the Registrant dated July 1, 1991.
10.21* --Amendment Agreement between State Street Bank and Trust Company and the
Registrant dated November 20, 1991
10.22* --Second Amendment Agreement between State Street Bank and Trust Company and the
Registrant dated July 10, 1992
10.23* --Third Amendment Agreement between State Street Bank and Trust Company and the
Registrant dated October 1, 1992
10.24* --Letter Agreement between Loeb Partners Corporation and the Registrant dated
April 10, 1992
10.25* --Employment Agreement between Powell E. Crowley and the Registrant
10.26* --Second Amendment to Lease Agreement between Peter Godfrey and the Registrant
relating to a South Norwalk, Connecticut facility
10.27* --Second Amendment to Lease Agreement between Hialet Associates and the
Registrant relating to a South Norwalk, Connecticut facility (53 Water Street)
</TABLE>

II-2
<PAGE>

<TABLE>
<C> <S>
10.28* --Employment Agreement between Adam W. Shaffer and the Registrant
10.29* --Amendment to Employment Agreement between Adam W. Shaffer and the Registrant
10.30* --Lease Agreement between Miller-Valentine Partners and the Registrant relating
to the Wilmington, Ohio facility
10.31* --Letter Agreement between Loeb Partners Corporation and the Registrant dated
July 8, 1993
10.32* --Lease Agreement between 50 Water Street Associates and the Registrant relating
to the South Norwalk facility
10.33* --Employment Agreement between Powell E. Crowley and the Registrant
10.34* --Lease Agreement between BBS Norwalk One Inc. and the Registrant relating to the
Norwalk, Connecticut facility.
13.2* --Annual Report to Shareholders for the fiscal year ended December 31, 1994 (such
Annual Report, except for those portions thereof which are expressly
incorporated by reference in this filing, is furnished solely for the
information of the Commission and is not to be deemed "filed" as part of this
filing.)
22.1* --Subsidiaries of the Registrant
23.1 --Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5.1)
23.2** --Consent of Wilson, Sonsini, Goodrich & Rosati, Professional Corporation
(included in Exhibit 8.1)
23.3** --Consent of KPMG Peat Marwick LLP
24.1** --Powers of Attorney (included on the Signature Page)
99.1 --Opinion of William Blair & Company (included as Appendix B to the Proxy
Statement/Prospectus forming a part of this Registration Statement)
99.2** --Consent of William Blair & Company
</TABLE>

- ------------
* Exhibits have been previously filed as an Exhibit to the Registrant's Annual
Report on Form 10-K for Fiscal Year 1993, Registrant's Annual Report on Form
10-K for Fiscal Year 1994 or to the Registration Statements on Form S-1 (File
Nos. 33-53100 and 33-66066) or amendments thereto and are incorporated by
reference herein.

** Previously filed.

ITEM 22. UNDERTAKINGS

(a) The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made
of the securities registered hereby, a post-effective amendment to this
Registration Statement:

(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;

(ii) to reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
this Registration Statement; and

(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;

(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment will be deemed to be a
new registration statement relating to the

II-3
<PAGE>
securities offered therein, and the offering of such securities at that time
will be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

(b) (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.

(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to this Registration Statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Proxy
Statement/Prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
this Registration Statement through the date of responding to the request.

(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.

II-4
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Norwalk, State of Connecticut on December 21, 1995.

MICRO WAREHOUSE, INC.

By /s/ PETER GODFREY
-----------------------------------
Peter Godfrey
President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:

<TABLE><CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>

/s/ PETER GODFREY President, Chief Executive
- ------------------------------------------- Officer, Director
Peter Godfrey (Principal Executive
Officer)

* Vice President, Chief
- ------------------------------------------- Financial Officer and
Steven Purcell Treasurer (Principal
Financial Officer)

* Corporate Controller and
- ------------------------------------------- Chief Accounting Officer
Eric Furman

* Director
- -------------------------------------------
Melvin Seiler

* Director
- -------------------------------------------
Felix Dennis

* Director
- -------------------------------------------
Frederick H. Fruitman

* Director
- -------------------------------------------
Joseph M. Walsh
</TABLE>

The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement pursuant to the Powers of Attorney
executed by the above named persons.

/s/ PETER GODFREY

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

Peter Godfrey
Attorney-in-Fact

II-5
<PAGE>
INDEX TO EXHIBITS

<TABLE><CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE NO.
- ------- ------------------------------------------------------------------------ --------
<C> <S> <C>
2.1 --Agreement and Plan of Merger, dated as of November 30, 1995 (included
as Appendix A to the Proxy Statement/Prospectus forming a part of this
Registration Statement)
The Registrant agrees to furnish supplementally a copy of any omitted
schedule to the SEC upon request
3.1* --Certificate of Incorporation of Registrant, as Amended
3.2* --By Laws of Registrant, as Amended
4.1* --Specimen Stock Certificate of Registrant
5.1 --Opinion of Jones, Day, Reavis & Pogue
8.1** --Opinion of Wilson, Sonsini, Goodrich & Rosati, Professional
Corporation
10.1* --Stock Option Plan
10.2* --Lease Agreements between C.P. Lakewood, L.P. and the Registrant
relating to the Lakewood, New Jersey facilities
10.3* --Lease Agreement between Miller-Valentine Partners and the Registrant
relating to the Wilmington, Ohio facility
10.4* --Lease Agreement between Peter Godfrey and the Registrant relating to a
South Norwalk, Connecticut facility
10.5*(a) --Lease Agreement between Hialet Associates and the Registrant relating
to a South Norwalk, Connecticut facility (53 Water Street)
10.5*(b) --Lease Agreement between Hialet Associates and the Registrant relating
to a South Norwalk, Connecticut facility (29 Haviland Street)
10.6* --Lease Agreement between 50 Water Street Associates and the Registrant
relating to a South Norwalk, Connecticut facility
10.7* --Lease between Union Square Assoc. Ltd. Part. and the Registrant
relating to a South Norwalk, Connecticut facility
10.8* --Lease Agreement between South Norwalk Redevelopment Limited
Partnership and the Registrant relating to a South Norwalk,
Connecticut facility
10.9* --Lease Agreement between Unigate (UK) Limited and the Registrant
relating to the Barnet, England facility
10.10* --Lease Agreement between Misco, Sofibus and the Registrant relating to
the Bonneuil Sur Marne, France facility
10.11* --Lease Agreement between J & W Computer GNBTT and the Registrant
relating to the Kelkheim, Germany facility
10.12* --Employment Agreement between Peter Godfrey and the Registrant
10.13* --Employment Agreement between Robert G. Bartner and the Registrant
10.14* --Employment Agreement between Melvin Seiler and the Registrant
10.15* --Employment Agreement between Steven Purcell and the Registrant
10.16* --Employment Agreement between Stephen England and the Registrant
10.17* --Consulting Agreement between Felix Dennis and the Registrant, as
amended
10.18* --Form of Indemnification Agreement with Officers and Directors
10.19* --Agreement and Plan of Merger of Micro Warehouse, Inc., a Delaware
corporation dated October 1, 1992
10.20* --Commercial Revolving Loan and Security Agreement between State Street
Bank and Trust Company and the Registrant dated July 1, 1991.
10.21* --Amendment Agreement between State Street Bank and Trust Company and
the Registrant dated November 20, 1991
</TABLE>

<PAGE>

<TABLE><CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE NO.
- ------- ------------------------------------------------------------------------ --------
<C> <S> <C>
10.22* --Second Amendment Agreement between State Street Bank and Trust Company
and the Registrant dated July 10, 1992
10.23* --Third Amendment Agreement between State Street Bank and Trust Company
and the Registrant dated October 1, 1992
10.24* --Letter Agreement between Loeb Partners Corporation and the Registrant
dated April 10, 1992
10.25* --Employment Agreement between Powell E. Crowley and the Registrant
10.26* --Second Amendment to Lease Agreement between Peter Godfrey and the
Registrant relating to a South Norwalk, Connecticut facility
10.27* --Second Amendment to Lease Agreement between Hialet Associates and the
Registrant relating to a South Norwalk, Connecticut facility (53 Water
Street)
10.28* --Employment Agreement between Adam W. Shaffer and the Registrant
10.29* --Amendment to Employment Agreement between Adam W. Shaffer and the
Registrant
10.30* --Lease Agreement between Miller-Valentine Partners and the Registrant
relating to the Wilmington, Ohio facility
10.31* --Letter Agreement between Loeb Partners Corporation and the Registrant
dated July 8, 1993
10.32* --Lease Agreement between 50 Water Street Associates and the Registrant
relating to the South Norwalk facility
10.33* --Employment Agreement between Powell E. Crowley and the Registrant
10.34* --Lease Agreement between BBS Norwalk One Inc. and the Registrant
relating to the Norwalk, Connecticut facility.
13.2* --Annual Report to Shareholders for the fiscal year ended December 31,
1994 (such Annual Report, except for those portions thereof which are
expressly incorporated by reference in this filing, is furnished
solely for the information of the Commission and is not to be deemed
"filed" as part of this filing.)
22.1* --Subsidiaries of the Registrant
23.1 --Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5.1)
23.2** --Consent of Wilson, Sonsini, Goodrich & Rosati, Professional
Corporation (included in Exhibit 8.1)
23.3** --Consent of KPMG Peat Marwick LLP
24.1** --Powers of Attorney (included on the Signature Page)
99.1 --Opinion of William Blair & Company (included as Appendix B to the
Proxy Statement/Prospectus forming a part of this Registration
Statement)
99.2** --Consent of William Blair & Company
</TABLE>

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

* Exhibits have been previously filed as an Exhibit to the Registrant's Annual
Report on Form 10-K for Fiscal Year 1993, Registrant's Annual Report on Form
10-K for Fiscal Year 1994 or to the Registration Statements on Form S-1 (File
Nos. 33-53100 and 33-66066) or amendments thereto and are incorporated by
reference herein.

** Previously filed.

Exhibit 5.1

December 22, 1995

Micro Warehouse, Inc.
535 Connecticut Avenue
Norwalk, Connecticut 06854

Ladies and Gentlemen:

We have acted as counsel to Micro Warehouse, Inc. ("MWHS") in connection
with the issuance of up to 2,968,069 shares (the "Shares") of Common Stock,
par value $.01 per share, in connection with the transactions contemplated by
the Agreement and Plan of Merger, dated as of November 30, 1995, by and among
MWHS, Indigo Holding Company, Inc. and Inmac Corp.

We have examined such documents, records, and matters of law as we have
deemed necessary for the purposes of this opinion. Based thereupon, we are
of the opinion that the Shares are duly authorized and, when the Registration
Statement (the "Registration Statement") on Form S-4 (File No. 33-65039) has
been declared effective by the Securities and Exchange Commission and the
Shares are issued and delivered as contemplated thereby, the Shares will be
validly issued, fully paid, and nonassessable.

In rendering this opinion, we have (a) assumed that (i) each agreement
or instrument pursuant to which any of the Shares are to be issued
(collectively, the "Agreements") will at the time of such issuance have been
duly authorized, executed, and delivered by the parties thereto and will
constitute valid, binding, and enforceable obligations of such parties and
(ii) the resolutions of MWHS's Board of Directors authorizing MWHS to issue
the Shares will remain in full force and effect until all of the Shares have
been issued and (b) relied, as to matters of fact, without any independent
investigation, inquiry, or verification, upon statements or certificates of
responsible officers of the parties to the Agreements and other
representations of such parties.

We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement, and to the reference to us under the caption "Legal
Matters" in the Proxy Statement/ Prospectus constituting a part of the
Registration Statement.

Very truly yours,

/s/ Jones, Day, Reavis & Pogue
Jones, Day, Reavis & Pogue