CANCELLATION AGREEMENT

         This Cancellation Agreement (the "Agreement") is dated as of September
4, 2001, between PrimeSource Corporation, a Pennsylvania corporation (the
"Company") and William A. DeMarco, an individual ("DeMarco").

                                   BACKGROUND

         WHEREAS, the Company and DeMarco executed an Employment Agreement dated
as of December 31, 1996 (the "Employment Agreement"), whereby the parties
established certain terms and conditions and imposed certain obligations on
themselves regarding the employment of DeMarco, including but not limited to
certain rights upon the occurrence of a change-of-control, as defined therein;
and

         WHEREAS, the Company has executed an Agreement and Plan of Merger with
Fuji Photo Film U.S.A., Inc., Enovation Graphic Systems, Inc., and FPF
Acquisition Corp., dated September 4, 2001 (the "Merger Agreement"), that would
trigger the change-of-control provisions of the Employment Agreement; and

         WHEREAS, the Company and DeMarco desire to cancel and terminate the
Employment Agreement and to establish a full and final settlement of any and all
compensation due DeMarco under Section 3(c) of the Employment Agreement as a
result of the change-of-control of the Company and the cancellation and
termination of the Employment Agreement; and

         WHEREAS, the Company desires to continue the employment of DeMarco as
the Vice President Finance and Chief Financial Officer, and DeMarco desires to
continue to serve as Vice President Finance and Chief Financial Officer of the
Company.

         NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth below and for other good and valuable consideration, and intending to
be legally bound hereby, the parties agree as follows:

         1.       CANCELLATION OF EMPLOYMENT AGREEMENT.

                  (a) The Employment Agreement is hereby cancelled and shall be
of no further force and effect as of the "Effective Date." The Effective Date
shall be the later of the following dates: the date of the consummation of the
Offer (as defined in the Merger Agreement), i.e. the date on which the shares
tendered in the Offer are accepted for payment, and the date on which DeMarco is
paid the consideration set forth in Section 1(b) below. As of the Effective
Date, neither the Company nor DeMarco shall have any further rights or
obligations under the Employment Agreement.

                  (b) In consideration of the cancellation of the Employment
Agreement, and in full satisfaction of the Company's obligations under Section
3(c) of the Employment Agreement with respect to the change-of-control resulting
from the Merger Agreement, the Company agrees to pay to DeMarco the aggregate
amount of $435,000.00 on or before the fifth business day following the
consummation of the Offer. The Company shall withhold from such payment all
amounts which it is required under applicable federal, state or local laws to
withhold for applicable income, withholding and/or employment taxes.




         2.       EFFECT OF CANCELLATION.

                  (a) Notwithstanding anything contained herein to the contrary,
DeMarco's employment with the Company as its Vice President Finance and Chief
Financial Officer shall continue on an employment at-will basis, with the same
compensation, perquisites and benefits as existed prior to the Effective Date,
provided DeMarco shall have no rights under Section 3(c) of the Employment
Agreement with respect to the change-of-control resulting from the Merger
Agreement except as provided in Section 1(b) above. By way of example only, and
not by way of limitation, after the Effective Date DeMarco will continue to
participate in the Company's present and future insurance programs, pension
plan, SERP, 401(k) Savings Plan, stock option plans, management incentive plans
and other similar or dissimilar plans applicable to executives of the Company,
as may be in effect from time-to-time and as the same may be amended or
modified, including but not limited to all rights thereunder as a result of the
change-of-control resulting from the Merger Agreement.

                  (b) This Agreement does not limit DeMarco's right to
indemnification as a director or officer either directly from the Company or
through its directors and officers liability insurance policy for claims arising
out of DeMarco's service as a director or officer of the Company, or any of its
subsidiaries or affiliates, or as trustee, administrator or fiduciary of any of
its employee benefit plans.

                  (c) DeMarco expressly acknowledges and agrees that the
consideration payable under Section 1(b) above does not constitute
"compensation" for purposes of the Supplemental Executive Retirement Plan.

         3.       BINDING EFFECT. This Agreement shall inure to the benefit of
and shall be binding upon the Company, its successors and assigns, and any
corporation which may acquire all or substantially all of the assets of the
Company or into which the parties may be consolidated or merged, and shall inure
to the benefit of DeMarco and his personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. Upon
DeMarco's death, all amounts to which he is entitled hereunder, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
DeMarco's devisee, legatee, or other designee, or, if there be no such designee,
to DeMarco's estate.

         4.       ENTIRE AGREEMENT. This Agreement represents the entire
agreement of the parties and supersedes all prior understandings and agreements
between the parties relating to the subject matter of the cancellation and
termination of the Employment Agreement. This Agreement may not be modified or
amended except by an instrument in writing signed by the parties hereto.



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

WITNESS:

/s/ David A. Beavers                        /s/ William A. DeMarco
-----------------------------------         ------------------------------------
                                            WILLIAM A. DEMARCO

ATTEST:                                     PRIMESOURCE CORPORATION


/s/ William A. DeMarco                      BY: /s/ James F. Mullan
-----------------------------------             --------------------------------
                                            NAME:   JAMES F. MULLAN
                                            TITLE:  PRESIDENT


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