AGREEMENT


         AGREEMENT made December 31, 1997, between  PrimeSource  Corporation,  a
Pennsylvania corporation (the "Company") and Edward Padley ("Executive").

         WHEREAS,  Executive  is the duly  elected  Vice  President  and General
Manager  of Prime  Distribution  West and has  made  and is  currently  making a
significant contribution to the Company's business;

         WHEREAS,  the Board of Directors  (the "Board") of the Company  believe
that the continued  services of Executive  will be of great value and importance
to the Company and are  desirous of ensuring  the  continuation  of  Executive's
services for a period of time; and

         WHEREAS,  Executive  is  willing to enter  into an  agreement  with the
Company upon the terms and conditions set forth below;

         NOW,  THEREFORE,  in  consideration  of  the  mutual  covenants  herein
contained  and of the mutual  benefits  herein  provided,  and  intending  to be
legally bound hereby, the Company and Executive hereby agree as follows:

         1. Term of Employment.  The Company  hereby  employs  Executive as Vice
President  and General  Manager and  Executive  accepts such  employment  by the
Company on the terms and conditions  herein contained for a period commencing as
of the date hereof and subject to termination only as hereinafter  provided (the
period from the date  hereof  through  termination  as  hereinafter  provided is
referred to as the "Employment Period").

         2. Duties.  During the  Employment  Period,  Executive  shall have such
duties,  responsibility  and authority and perform such services for the Company
as are consistent with  Executive's  background,  training and experience as may
from time to time be assigned to Executive  by the Board or the Chief  Executive
Officer of the Company.

         3.       Compensation.

                  (a) Commencing as of the date hereof and thereafter during the
Employment  Period,  the Company shall pay Executive a base salary at the annual
rate of no less than  $135,000,  which amount may be increased from time to time
in accordance with the Company's policies regarding general increases and at the
discretion of the Board.  Payment shall be made in accordance with the Company's
regular practice for senior executive employees as in effect from time to time.

                  (b) In  addition to the  Executive's  base  salary,  Executive
shall be entitled to  participate in the normal course of business in the annual
executive bonus  program(s) of the Company and to receive such bonus payments as
are customarily granted for the purposes of providing additional compensation to
senior executives.

                  (c) A change-of-control of the Company is defined to be any of
the following: (a) the effective date of a Major Transaction which is subject to
and satisfies the special  voting  requirement  set forth in Article VIII of the
Company's Amended and Restated Articles of Incorporation  ("Articles"),  (b) the
completion  of a tender or exchange  offer for Voting Stock (other than a tender
offer by the  Company)  which is  accepted  by the  holders of 51% of the Voting
Power of the  outstanding  Voting  Stock,  (c) the  effective  date of a merger,
consolidation,  or dissolution in which the Company is not the surviving entity,
or (d) the date on which there is a  "Significant  Change" in the  membership of
the Company's  Board  occurring by the third annual  meeting after the effective
date of a merger,  consolidation,  reorganization  or a Major Transaction or the
date on which any Person becomes a 15% shareholder (each of which is referred to
as a "Significant  Event"). A Significant Change in the Board shall be deemed to
have occurred if one-third or more of the directors are  individuals who (i) are
or were  Affiliates  or Associates  of the 15%  shareholder  or any party to the
Significant  Event and (ii) were not  Affiliates  or  Associates  of the Company
prior to the Significant  Event. A sale or series of sales or other  disposition
of a subsidiary,  division or other operating units, or the assets thereof,  not
constituting a sale of substantially all of the assets of the Company, shall not
constitute a  change-of-control.  The definitions  for  Affiliates,  Associates,
Major Transaction, Person, Voting Stock, and Voting Power are set out in Article
VII of the Articles.

         In the event of a change-of-control, as defined in the prior paragraph,
and the  termination  of the  Executive's  employment,  the  Executive  shall be
entitled to the continuation of his compensation and benefits for a total of two
(2) years from the date of such  termination  of employment at the rates set out
in 3(a) and (b) above, payable in equal payments at least monthly. A termination
of employment  entitling the Executive to a continuation  of compensation as set
out in this Section 3 shall be deemed to have occurred upon any  resignation  or
termination  of the  Executive's  employment  for any reason other than Cause as
defined in Section 5 (a) below  during the two year period  commencing  with the
effective  time  of the  first  change-of-control  event.  For  example,  if the
change-of-control  event occurred on March 1, 1998 and the Executive voluntarily
left the  Company's  employ on  September  15, 1998,  then he would  continue to
receive payments from the Company each month through September 15, 2000 equal to
one twelfth  (1/12) of the  greater of (a) the  Executive's  total  compensation
(salary  plus  bonus)  for the prior  calendar  year or (b) the  average  annual
compensation  (salary  plus bonus) of the  Executive  for the prior two calendar
years. For calculation purposes,  the bonus shall apply to the year for which it
was earned, which may not be the year in which it was actually paid.

         Notwithstanding the foregoing,  Executive shall not be entitled to such
continuation  of  compensation  for any period  after he (a) reaches age 66, (b)
dies,  (c) is disabled and  eligible to receive  disability  payments  under the
Company's  long  term  disability  plan,  or in the  case of a  termination  not
preceeded by a  change-of-control  within the prior two years,  (d)  voluntarily
retires from the Company.

         In addition to continuation of salary and bonus  referenced  above, for
the said two year period the Company shall also continue the Executive's  normal
fringe benefits to the extent  reasonably  possible and shall fairly  compensate
the  Executive  for the  value  of any  fringe  benefits  it can not  reasonably
continue.

         In the event of a change-of-control and termination of employment,  all
stock  options  held by the  Executive  shall be fully  vested  and  immediately
exercisable during the normal  post-employment option exercise period as set out
in the applicable stock option plan (but in no event for less than 90 days after
the employment relationship terminates).

         4.       Additional Terms.

                  (a) The Company will  reimburse  Executive for all  reasonable
expenses properly incurred by Executive in the performance of Executive's duties
hereunder in accordance with established  practices for senior executives of the
Company.

                  (b) During the Employment Period,  Executive shall be entitled
to  participate,  in accord  with the terms  thereof,  in any  present or future
bonus,  insurance,  pension,  Thrift,  ESOP,  stock  option,  or other  employee
benefit, compensation or incentive plan adopted by the Company and applicable to
senior executives generally.




         5.       Termination of Employment.

                  (a) The  Employment  Period shall cease and terminate upon the
earliest to occur of the events specified below:

                  (i) The first  anniversary  of receipt  of  written  notice by
                  Executive  from  the  Company  of  the  Company's   intent  to
                  terminate this Agreement.

                  (ii) The death of Executive. If Executive dies during the term
                  of this  Agreement,  Executive's  salary for 30 days after the
                  date on  which  death  occurs  shall  be  paid to  Executive's
                  estate.

                  (iii)  The  normal   retirement  date  of  Executive  or  upon
                  Executive's election of early retirement.

                  (iv)  Termination  of Executive's  employment  for Cause.  For
                  these purposes  "Cause" for  termination of Executive shall be
                  limited to actions by Executive  involving willful malfeasance
                  or gross  negligence or failure to act by Executive  involving
                  willful and material  nonfeasance  which,  at the time of such
                  willful   malfeasance  or  gross  negligence  or  willful  and
                  material nonfeasance,  would tend to have a materially adverse
                  effect on the Company.  Bad judgment or  negligence  shall not
                  constitute  Cause  nor shall  any act or  omission  reasonably
                  believed by the  Executive to have been in, or not opposed to,
                  the interests of the Company.

                  (b) In the event that  Executive  becomes  "totally  disabled"
within the meaning of the Company's  Long Term  Disability  Plan, the Employment
Period shall be  suspended  (to resume  following  suspension  unless  otherwise
terminated under 5(a) above) during any period in which Executive is entitled to
receive long term disability  payments under the Plan and, during such period of
suspension,  Executive  shall be  entitled to the same  benefits  that any other
employee of the Company would enjoy under the Long Term Disability Plan.

                  (c) Except as to rights  which have  accrued  hereunder,  this
Agreement and all of the liabilities  and  obligations of the parties  hereunder
shall cease and  terminate  effective  upon the  termination  of the  Employment
Period.

                  (d) If (i) Executive's  employment  hereunder is terminated by
the  Company  other  than  pursuant  to  Section  5(a)  hereof,  (ii)  Executive
terminates  his   employment   hereunder   because  his  authority,   duties  or
responsibilities   are  altered  so  as  to  be  inconsistent  with  Executive's
background,  training and  experience,  or (iii) the  Executive  terminates  his
employment  hereunder because of the Company's  continued failure to perform its
obligations  hereunder,  then the  Executive  shall be entitled  to receive,  in
addition to any other damages which Executive may suffer as a direct or indirect
result  of  the  termination  of  Executive's  employment  by the  Company,  the
compensation  and benefits which would  otherwise have been payable to Executive
under Section 3 hereof through the remaining  balance of the  Employment  Period
which would have pertained had the Company given  Executive  notice of intent to
terminate this Agreement on the date Executive's  employment ceases, as provided
in Section 5(a) (i) above.

         6.     Non-Competition and Confidentiality.  The Executive agrees that:

         (a) The Company shall cease providing  payments  hereunder  (other than
payments  already  earned or accrued) if, during the  compensation  period,  the
Executive  shall be employed by or  otherwise  engage in any  business  which is
competitive with any business of the Company, and

         (b) during and after the  compensation  period,  the Executive will not
divulge  or  appropriate  to the  Executive's  own use or the use of others  any
secret or  confidential  information or knowledge  pertaining to the business of
the Company,  or any of its subsidiaries,  obtained during his employment by the
Company.

         Executive  agrees  that the above  covenant  not to compete is fair and
reasonably   necessary  for  the   protection  of  the  Company's   confidential
information  and  business.  In the event a court should  decline to enforce any
part of this covenant,  such covenant shall be deemed to be modified to restrict
Executive's  competition  with the Company to the maximum extent which the court
shall find enforceable.

         The Board has  determined,  in its best judgment,  that the payments to
the  Executive  hereunder  are  reasonable  consideration  for not  competing as
defined  in (a)  and for  maintaining  the  confidentiality  of  information  as
provided for in (b) above.

         7.  Assignment.  This Agreement  shall not be assignable by the Company
except to a  majority-owned  subsidiary  or parent entity of the Company or to a
successor  to the  Company  and  its  business  by way of  merger,  acquisition,
purchase of assets or otherwise and this  Agreement is and shall be binding upon
and inure to the  benefit of any such  parent,  subsidiary  or  successor.  This
Agreement  shall not be assignable by Executive but it shall be binding upon and
inure to the benefit of Executive's heirs,  executors,  administrators and legal
representatives.

         8. Notices.  All notices,  requests,  demands and other  communications
hereunder must be in writing and shall be deemed to have been given if delivered
by hand or mailed by first class,  certified or registered mail,  return receipt
requested, postage and registry fees prepaid, and addressed as follows:

         To the Company:   President
                                    PrimeSource Corporation
                                    4350 Haddonfield Road, Suite 222
                                    Pennsauken, NJ  08109-3377

         To the Executive: Edward Padley
                                    1314 Marguette Ave. #2502
                                    Minneapolis, MN   55403

         Addresses may be changed by notice in writing to the other party.

         9. Arbitration. Any dispute or disagreement arising between the parties
hereto  with  respect  to  this  Agreement  or  its  validity,  construction  or
performance  shall be settled  by binding  arbitration  in  accordance  with the
Commercial Arbitration Rules of the American Arbitration  Association as amended
from time to time. The cost of arbitration  shall be borne by the Company.  Each
party shall,  however,  bear the cost of preparing and  presenting its own case,
including counsel fees and expenses.  Judgment upon the award of arbitrators may
be entered by either party in any court having jurisdiction.

         10.   Miscellaneous.   This  Agreement  is  the  entire  agreement  and
understanding between the parties hereto and supersedes all prior agreements and
understandings,  oral or written,  relating to the subject matter hereof, and no
change,  alteration or modification  hereof may be made except in writing signed
by both parities  hereto.  The headings in this Agreement are for convenience of
reference  only and shall not be considered as part of this  Agreement nor limit
or otherwise affect the meaning hereof.  This Agreement shall in all respects be
governed  by and  construed  and  enforced  in  accordance  with the laws of the
Commonwealth of Pennsylvania.

         IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.

ATTEST:                                              PRIMESOURCE CORPORATION


-----------------------------                     ------------------------------
Corporate Secretary                       President and Chief Executive Officer


                                                 ------------------------------
                                                              Edward Padley