SCHEIN HENRY INC, S-1/A, 1996-06-18

SCHEIN HENRY INC
S-1/A, 1996-06-18
CATALOG & MAIL-ORDER HOUSES

Previous: SONUS PHARMACEUTICALS INC, 8-K, 1996-06-18

Next: MMCA AUTO OWNER TRUST 1995-1, 8-K, 1996-06-18

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 18, 1996

REGISTRATION NO. 333-5157
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------

HENRY SCHEIN, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 5047 11-3136595
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification Number)
organization)
</TABLE>

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

135 DURYEA ROAD
MELVILLE, NEW YORK 11747
(516) 843-5500
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
-------------------

STANLEY M. BERGMAN
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT
HENRY SCHEIN, INC.
135 DURYEA ROAD
MELVILLE, NEW YORK 11747
(516) 843-5500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-------------------

COPIES TO:

<TABLE>
<S> <C> <C>
ROBERT A. CANTONE, ESQ. MARK E. MLOTEK, ESQ. LARRY A. BARDEN, ESQ.
PROSKAUER ROSE GOETZ & GENERAL COUNSEL SIDLEY & AUSTIN
MENDELSOHN LLP HENRY SCHEIN, INC. ONE FIRST NATIONAL PLAZA
1585 BROADWAY 135 DURYEA ROAD CHICAGO, ILLINOIS 60603
NEW YORK, NEW YORK 10036 MELVILLE, NEW YORK 11747 (312) 853-7000
(212) 969-3000 (516) 843-5500
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE
PUBLIC: As soon as possible after the Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
-------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED PROPOSED MAXIMUM
TITLE OF EACH AMOUNT MAXIMUM OFFERING AGGREGATE AMOUNT OF
CLASS OF SECURITIES TO BE PRICE PER OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(2) FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per
share............................. 6,555,000 $36.625 $240,076,875 $82,785.13
</TABLE>

(1) Includes 855,000 shares subject to an over-allotment option granted to the
Underwriters.

(2) Estimated pursuant to Rule 457 solely for the purpose of calculating the
registration fee, based on the average of the high and low sale prices of
the Registrant's Common Stock on the Nasdaq National Market on May 29, 1996.
-------------------

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 SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
HENRY SCHEIN, INC.
CROSS REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS OF
INFORMATION REQUIRED BY ITEMS OF PART I OF FORM S-1

<TABLE>
<CAPTION>
REGISTRATION STATEMENT
ITEM AND HEADING LOCATION IN PROSPECTUS
---------------------------------------------- ----------------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus........ Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus.................................... Inside Front and Outside Back Cover
Pages of Prospectus
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges..................... Prospectus Summary; Risk Factors
4. Use of Proceeds............................... Use of Proceeds
5. Determination of Offering Price............... Inapplicable
6. Dilution...................................... Inapplicable
7. Selling Security Holders...................... Principal and Selling Stockholders
8. Plan of Distribution.......................... Underwriting
9. Description of Securities to be Registered.... Description of Capital Stock
10. Interests of Named Experts and Counsel........ Legal Matters
11. Information with Respect to the Registrant:
(a) Description of Business................. Business
(b) Description of Property................. Business
(c) Legal Proceedings....................... Business
(d) Market Price of and Dividends on the
Registrant's Common Equity and related
Stockholder matters..................... Dividends; Price Range of Common Stock
(e) Financial Statements.................... Financial Statements
(f) Selected Financial Data................. Selected Consolidated Financial
Information and Operating Data
(g) Supplementary Financial Information..... Pro Forma Condensed Consolidated
Financial Information
(h) Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. Management's Discussion and Analysis of
Financial Condition and Results of
Operation
(i) Changes in and Disagreements with
Accountants............................. Inapplicable
(j) Directors and Executive Officers........ Management
(k) Executive Compensation.................. Management
(l) Security Ownership of Certain Beneficial
Owners and Management................... Principal and Selling Stockholders
(m) Certain Relationships and Related
Transactions............................ Management; Certain Transactions
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................... Inapplicable
</TABLE>
<PAGE>

SUBJECT TO COMPLETION, DATED JUNE 18, 1996

PROSPECTUS

5,700,000 Shares

[LOGO] HENRY SCHEIN(R)

Common Stock

Of the 5,700,000 shares of Common Stock offered hereby, 2,880,500 shares are
being sold by Henry Schein, Inc. (the "Company") and 2,819,500 shares are being
sold by the Selling Stockholders. See "Principal and Selling Stockholders." The
Company will not receive any proceeds from the sale of shares by the Selling
Stockholders.

The Common Stock offered hereby is quoted on the Nasdaq National Market
under the symbol "HSIC." On May 31, 1996, the last reported sale price of the
Common Stock was $37.00 per share. See "Price Range of Common Stock."

SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OF COMMON
STOCK OFFERED HEREBY.
-------------------

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

[CAPTION]
<TABLE>
PROCEEDS TO
UNDERWRITING PROCEEDS TO SELLING
PRICE TO PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS
<S> <C> <C> <C> <C>
Per Share...... $ $ $ $
Total(3)....... $ $ $ $
</TABLE>

(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."

(2) Before deducting estimated expenses of $1,000,000 payable by the Company.

(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 855,000 shares of Common Stock, solely to cover
over-allotments, if any. See "Underwriting." If all such shares are
purchased, the total Price to Public, Underwriting Discount, Proceeds to
Company and Proceeds to Selling Stockholders will be $ , $ ,
$ and $ , respectively.

The shares of Common Stock are offered by the several Underwriters when, as
and if delivered to and accepted by them and subject to their right to reject
orders in whole or in part. It is expected that delivery of the certificates for
the shares of Common Stock will be made on or about , 1996.
N87111BE.g04,4070,750,H

The date of this Prospectus is , 1996
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
[Pictures]

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON
STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SEE "UNDERWRITING."

2
<PAGE>
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. The Company
operates on a 52-53 week fiscal year that ends on the last Saturday in December;
all references to the Company's operations for a particular year refer to the
year ending on the last Saturday in December. Unless otherwise indicated, all
information in this Prospectus assumes the Underwriters' over-allotment option
is not exercised. See "Underwriting."

THE COMPANY

The Company is the largest direct marketer of healthcare products and
services to office-based healthcare practitioners in the combined North American
and European markets. The Company sells products and services to approximately
230,000 customers in markets that the Company estimates exceeded $9.0 billion in
sales in 1995. The Company's customers are primarily dental practices and dental
laboratories, as well as physician practices, veterinary clinics and
institutions. In 1995, the Company sold products to over 65% of the estimated
100,000 dental practices in the United States. The Company believes that there
is strong awareness of the "Henry Schein" name among office-based healthcare
practitioners due to its more than 60 years of experience in distributing
healthcare products. Through its comprehensive catalogs and other direct sales
and marketing programs, the Company offers its customers a broad product
selection of both branded and private brand products which include approximately
50,000 stock keeping units ("SKUs") in North America and approximately 35,000
SKUs in Europe at published prices that the Company believes are below those of
many of its competitors. The Company also offers various value-added products
and services, such as practice management software. As of March 30, 1996, the
Company had sold over 16,000 dental practice management software systems, more
than any of its competitors. The Company's activities are conducted by the
Company; by its subsidiaries, including Henry Schein UK Holdings Limited in the
United Kingdom, Schein Dental Equipment Corp. ("Schein Dental Equipment") and
S&S Dental Supply, Inc., each of which distributes dental products, and Zahn
Holdings, Inc., which distributes dental laboratory products, as well as their
respective subsidiaries; and by 50%-or-less owned entities, including HS
Pharmaceutical, Inc. ("HS Pharmaceutical") and its subsidiaries, which are
engaged in the manufacture and distribution of certain generic pharmaceutical
products.

During 1995, the Company distributed over 8.5 million pieces of direct
marketing materials (such as catalogs, flyers and order stuffers) to
approximately 600,000 office-based healthcare practitioners. The Company
supports its direct marketing efforts with approximately 400 telesales
representatives who facilitate order processing and generate sales through
direct and frequent contact with customers and with approximately 250 field
sales consultants. The Company utilizes database segmentation techniques to more
effectively market its products and services to customers. In recent years, the
Company has continued to expand its management information systems and has
established strategically located distribution centers in the United States and
Europe to enable it to better serve its customers and increase its operating
efficiency. The Company believes that these investments, coupled with its broad
product offerings, enable the Company to provide its customers with a single
source of supply for substantially all their healthcare product needs and
provide them with convenient ordering and rapid, accurate and complete order
fulfillment. The Company estimates that approximately 99% of all items ordered
in the United States and Canada are shipped without back ordering, and that
approximately 99% of all orders in the United States and Canada received before
6:00 p.m. are shipped on the same day the order is received. In addition, the
Company estimates that over 90% of orders are received by its customers within
two days of placing the order.

3
<PAGE>
increased from $59.9 million in 1991 to $164.7 million in 1995, which
represented 26.7% of the Company's net sales in 1995. In 1990, the Company
established marketing and distribution capabilities in Europe. Net sales in
international markets have increased from $23.6 million in 1991 to $107.7
million in 1995, which represented 17.5% of the Company's net sales in 1995.

The Company believes that there has been consolidation among healthcare
products distributors serving office-based healthcare practitioners and that
this consolidation will continue to create opportunities for the Company to
expand through acquisitions and joint ventures. In recent years, the Company has
acquired or entered into joint ventures with a number of companies engaged in
businesses that are complementary to those of the Company.

In November 1995, the Company completed an initial public offering of
7,089,750 shares of its Common Stock. In the offering, the Company sold
5,090,000 shares of Common Stock at an intitial public offering price of $16.00
per share, and used the net proceeds primarily to repay amounts outstanding
under the Company's revolving credit agreement. Since the initial public
offering, the Company has completed five acquisitions and has entered into
agreements to acquire an additional five companies. Together, these companies
generated approximately $80 million in sales in 1995, and collectively serve
office-based healthcare practitioners in the dental, dental laboratory and
medical markets. These acquisitions further the Company's acquisition growth
strategies of leveraging its existing infrastructure, acquiring regional
distributors with networks of field sales consultants and expanding the
Company's network of equipment sales and service centers. As a result of the
acquisitions that have been completed as well as additional hirings, the Company
has increased its domestic field sales consultants from approximately 200 at the
time of the initial public offering to approximately 250 at May 31, 1996. In
addition, in December 1995, the Company introduced a new Windows(R) version of
its dental practice management software and has sold over 2,700 such units
through the first quarter of 1996. The Company has also recently introduced
ArubA(R), an enhanced Windows(R) version of its computerized order entry system,
which also contains an electronic catalog.

Prior to December 1992, the Company's business was conducted by Schein
Holdings, Inc. ("Holdings"), whose subsidiary, Schein Pharmaceutical, Inc.
("Schein Pharmaceutical"), was engaged in the manufacture and distribution of
multi-source pharmaceuticals. In December 1992, the Company was incorporated in
Delaware and Holdings transferred to the Company all the assets and liabilities
of its healthcare distribution business. Holdings retained Schein
Pharmaceutical's business of manufacturing and distributing generic
pharmaceuticals, and the Company did not assume any other liabilities of
Holdings, including the liabilities associated with Schein Pharmaceutical's
business. At the time of the transfer, the Company's and Schein Pharmaceutical's
businesses were being conducted on a stand-alone basis. As part of the transfer
of assets from Holdings to the Company, the Company received Holdings' 50%
interest in HS Pharmaceutical. HS Pharmaceutical's business is conducted
independently from that of Schein Pharmaceutical and was transferred to the
Company because of its historical connection to the Company. Other than certain
common stockholders, there is no affiliation between the Company and Schein
Pharmaceutical, and all transactions between the Company and Schein
Pharmaceutical are on an arms-length basis.

THE OFFERING

<TABLE>
<S> <C>
Shares Offered by the Company........................ 2,880,500
Shares Offered by the Selling Stockholders........... 2,819,500
Shares Outstanding Immediately After the Offering.... 21,187,494(1)
Use of Proceeds to the Company....................... Repayment of indebtedness and
general corporate purposes,
including financing possible
acquisitions. See "Use of Proceeds."
Nasdaq National Market Symbol........................ HSIC
</TABLE>

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

(1) Excludes an aggregate of 678,797 shares reserved for issuance upon the
exercise of outstanding options granted under the Company's 1994 Stock
Option Plan and 1996 Non-Employee Director Stock Option Plan and 49,838
shares reserved for issuance under the plans for options not yet granted.
See "Management--Stock Option Plan" and "--Directors Stock Option Plan."

4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AND SELECTED OPERATING DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED,
YEARS ENDED, -----------------------------
---------------------------------------------------------------------------------- PRO
PRO FORMA, FORMA,
AS AS
ADJUSTED(1) ADJUSTED(1)
------------ MARCH ---------
DECEMBER 28, DECEMBER 26, DECEMBER 25, DECEMBER 31, DECEMBER 30, DECEMBER 30, APRIL 1, 30, MARCH 30,
1991 1992 1993 1994 1995 1995 1995 1996 1996
------------ ------------ ------------ ------------ ------------ ------------ -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS
DATA:
Net sales...... $282,110 $ 362,925 $ 415,710 $ 486,610 $ 616,209 $671,448 $136,040 $185,359 $194,101
Gross profit... 82,273 105,699 121,017 142,688 190,584 205,289 40,315 54,949 57,315
Selling,
general &
admin.
expenses....... 79,775 96,287 109,574 128,560 170,823 184,509 37,329 50,245 52,311
Special
charges(2)..... 613 7,510 6,057 23,603 20,797 -- -- -- --
Operating
income
(loss)......... 1,885 1,902 5,386 (9,475) (1,036) 20,780 2,986 4,704 5,004
Net income
(loss)......... $ 986 $ 555 $ 3,910 $ (10,876) $ (10,216) $ 11,323 $ 936 $ 2,464 $ 2,782
Net income per
common share... $ .63 $ .08 $ .13 $ .14
Average shares
outstanding.... 17,952 12,184 18,670 19,728
PRO FORMA
INCOME
DATA(3):
Pro forma
operating
income......... $ 14,128 $ 19,761
Pro forma net
income......... $ 6,978 $ 9,407
Pro forma net
income per
common share... $ .58 $ .70
Pro forma
average shares
outstanding.... 12,127 13,447
SELECTED
OPERATING
DATA:
Number of
orders
shipped........ 1,824,000 2,044,000 2,274,000 2,629,000 627,932 749,724
Average order
size........... $ 199 $ 203 $ 214 $ 234 $ 216 $ 247
</TABLE>

<TABLE>
<CAPTION>
MARCH 30, 1996
----------------------
PRO FORMA,
AS
ACTUAL ADJUSTED(1)
-------- ----------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital........................................................... $124,055 $188,471
Total assets.............................................................. 303,733 379,213
Total debt................................................................ 63,647 35,265
Minority interest......................................................... 4,361 4,361
Stockholders' equity...................................................... 144,940 247,294
</TABLE>

- ------------
(1) Gives effect to (a) the Acquisitions that are described in Pro Forma
Condensed Consolidated Financial Information and the borrowings under the
Company's revolving credit facility to finance the Acquisitions, as if these
transactions had occurred on January 1, 1995 for the purpose of the
Statement of Operations Data and as if those transactions pending at March
30, 1996 had occurred at that date with respect to the Balance Sheet Data,
(b) the sale of 5,090 shares of Common Stock at $16.00 per share in
connection with the Company's 1995 initial public offering and the
application of the net proceeds therefrom to repay debt (including debt to
finance the Acquisitions) as if the initial public offering had occurred on
January 1, 1995 with respect to the Statement of Operations Data, and (c)
the sale of a sufficient number of shares of Common Stock by the Company in
this Offering at an estimated offering price of $37.00 per share to repay
debt (including debt to finance the Acquisitions) as if this Offering had
occurred on November 3, 1995 for the purpose of the Statement of Operations
Data and on March 30, 1996 with respect to the Balance Sheet Data. See "Pro
Forma Condensed Consolidated Financial Information" and Notes 1 and 2 to the
Company's Consolidated Financial Statements.

(2) Includes: (a) for 1991, special professional fees of $0.6 million; (b) for
1992, cash payments of $5.3 million for income taxes resulting from stock
grants made to an executive officer of the Company and special professional
fees of $2.2 million; (c) for 1993, non-cash special management compensation
charges of $0.6 million in amortization of deferred compensation arising
from

(Footnotes continued on following page)

5
<PAGE>
(Footnotes continued from preceding page)
the 1992 stock grants, special professional fees of $2.3 million, $0.7
million paid in connection with an acquisition and $2.5 million resulting
from the buyout of employees' rights to future income contained in their
employment agreements; (d) for 1994, non-cash special management
compensation arising from accelerated amortization of deferred compensation
arising from the 1992 stock grants to an executive officer of the Company of
$17.3 million, which included a 1994 mark-to-market adjustment (because of
certain repurchase features) of $9.1 million, due to the resolution, with
the closing of the Reorganization, of certain contingencies surrounding the
issuance of the stock grants, non-cash special management compensation
charges of $1.6 million (net of prior accruals of approximately $1.9 million
under an executive incentive plan) arising from stock issuances to certain
other senior management of the Company, valued at $3.5 million, cash
payments for income taxes of approximately $2.4 million resulting from these
stock issuances, $0.3 million for additional income taxes resulting from the
1992 stock grants and special professional fees of $2.0 million; and (e) for
1995, non-cash special management compensation charges of $17.5 million
arising from final mark-to-market adjustments (reflecting an increase in
estimated market value from 1994 to the initial public offering price of
$16.00 per share) for stock grants made to an executive officer of the
Company in 1992 and other stock issuances made to certain other senior
management of the Company (because of certain repurchase features which
expired with the initial public offering), an approximate $2.8 million
non-cash special management compensation charge (also based on the initial
public offering price of $16.00 per share) relating to compensatory options
granted in 1995 and a cash payment of $0.5 million for additional income
taxes resulting from stock issuances. Special charges have been eliminated
in the pro forma, as adjusted columns. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Reorganization"
and "Management--Stock Option Plan."

(3) Reflects the pro forma elimination of special charges incurred in 1994 and
1995 for special management compensation of $21.6 million and $20.8 million,
respectively, and special professional fees incurred in 1994 of $2.0 million
arising from the Reorganization, and the related tax effects of $5.8 million
and $1.2 million for 1994 and 1995, respectively. See "Reorganization."

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

The Company's principal executive offices are located at 135 Duryea Road,
Melville, New York 11747, and its telephone number is 516-843-5500.

As used in this Prospectus, the term the "Company" refers to Henry Schein,
Inc., a Delaware corporation, and its subsidiaries, 50% owned companies and
predecessor, unless otherwise stated.

6
<PAGE>
RISK FACTORS

In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the shares
of Common Stock offered hereby.

Control by Insiders. After the completion of this Offering, Stanley M.
Bergman, Chairman of the Board, Chief Executive Officer and President of the
Company, will own approximately, directly or indirectly, 6.8% of the outstanding
Common Stock and by virtue of a Voting Trust Agreement (which expires December
31, 1998 unless terminated earlier) with certain of the Company's current
principal stockholders, will have the right to vote up to an aggregate of
approximately 39.7% of the outstanding shares of Common Stock. In addition,
until December 31, 1998, under certain circumstances, Mr. Bergman has the right
to direct the nomination of a majority of the nominees to the Company's Board of
Directors and, from January 1, 1999 until December 31, 2003, Mr. Bergman has the
right to direct the nomination of all, or, under certain circumstances, four
(out of nine), of the nominees to the Company's Board of Directors, and in all
such events certain of the current principal stockholders are required to vote
for such nominees. Because of these voting arrangements, Mr. Bergman has
significant influence over matters requiring the approval of the Board of
Directors or stockholders of the Company. Under certain circumstances, these
voting arrangements may terminate prior to December 31, 1998. In that event,
certain of the Company's current principal stockholders may be able to
significantly influence all matters requiring stockholder approval, including
the election of directors. The foregoing, together with certain provisions in
the Company's Amended and Restated Certificate of Incorporation, including a
provision thereof requiring the approval of holders of 60% of the outstanding
stock of the Company entitled to vote prior to consummation of a merger or sale
of substantially all the assets of the Company, may make it more difficult for a
third party to acquire, or may discourage acquisition bids for the Company and
could limit the price that certain investors might be willing to pay in the
future for shares of Common Stock. See "Reorganization," "Principal and Selling
Stockholders" and "Description of Capital Stock."

Competition. The distribution of healthcare products to office-based
healthcare practitioners is intensely competitive. The Company competes with
numerous other companies, including several major manufacturers and
distributors. Some of the Company's competitors have greater financial and other
resources than the Company. Most of the Company's products are available from
several sources, and the Company's customers tend to have relationships with
several distributors. In addition, competitors of the Company could obtain
rights to market particular products to the exclusion of the Company.
Manufacturers also could increase their efforts to sell directly to end-users,
thereby by-passing distributors such as the Company. Consolidation among
healthcare products distributors serving office-based healthcare practitioners
could result in existing competitors increasing their market position through
acquisitions or joint ventures, which may materially adversely affect operating
results. In addition, new competitors may emerge which could materially
adversely affect the Company's operating results. There can be no assurance the
Company will not face increased competition in the future. See
"Business--Competition."

Expansion through Acquisitions and Joint Ventures. The Company intends to
expand in its domestic and international markets, in part, through acquisitions
and joint ventures. However, the Company's ability to successfully expand
through acquisitions and joint ventures will depend upon the availability of
suitable acquisition or joint venture candidates at prices acceptable to the
Company, the Company's ability to consummate such transactions and the
availability of financing on terms acceptable to the Company. There can be no
assurance that the Company will be effective in making acquisitions or joint
ventures. Such transactions involve numerous risks, including possible adverse
short-term effects on the Company's operating results or the market price of the
Company's Common Stock. Certain of the Company's acquisitions and future
acquisitions may also give rise to an obligation by the Company to make
contingent payments or to satisfy certain repurchase obligations, which payments
could have an adverse financial effect on the Company. In addition, integrating
acquired

7
<PAGE>
businesses and joint ventures may result in a loss of customers or product lines
of the acquired businesses or joint ventures, and also requires significant
management attention and may place significant demands on the Company's
operations, information systems and financial resources. In 1996, the Company
completed five acquisitions and entered into agreements to acquire five other
companies. Five of these completed or pending acquisitions are reflected in the
Pro Forma Condensed Consolidated Statements of Operations and account for 4.5%
and 6.0% of pro forma net sales and operating income, respectively, for the
three months ended March 30, 1996. The failure to effectively integrate acquired
businesses and joint ventures with the Company's operations could adversely
affect the Company. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business--Growth Strategy," "--Sales and
Marketing" and "--Employees."

Fluctuations in Quarterly Earnings. The Company's business has been subject
to seasonal and other quarterly influences. Net sales and operating profits have
been generally higher in the fourth quarter due to the timing of sales of
software, year-end promotions, and purchasing patterns of office-based
healthcare practitioners and have been generally lower in the first quarter due
primarily to increased purchases in the prior quarter. Quarterly results may
also be adversely affected by a variety of other factors, including the timing
of acquisitions and related costs, the release of software enhancements,
promotions, adverse weather, and fluctuations in exchange rates associated with
international operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

Practice Management Software. During 1995, approximately $17.2 million, or
2.8%, and $15.7 million, or 8.3%, of the Company's net sales and gross profit,
respectively, were derived from sales of the Company's Easy Dental(R) Plus and
AVImark(R) practice management software to United States dental and veterinary
office-based healthcare practitioners, respectively. Competition among companies
supplying practice management software is intense and increasing. The Company's
future sales of practice management software will depend, among other factors,
upon the effectiveness of the Company's sales and marketing programs, the
Company's ability to enhance its products and the ability to provide ongoing
technical support. There can be no assurance that the Company will be successful
in introducing and marketing software enhancements or new software, or that such
software will be released on time or accepted by the market. The Company's
software products, like software products generally, may contain undetected
errors or bugs when introduced or as new versions are released. While the
Company's current products have not experienced significant post-release
software errors or bugs to date, there can be no assurance that problems will
not occur in the future. Any such defective software may result in increased
expenses related to the software and could adversely affect the Company's
relationship with the customers using such software. The Company does not have
any patents on its software and relies upon copyright, trademark and trade
secret laws; there can be no assurance that such legal protections will be
available or enforceable to protect its software products. The Company's
software products are generally distributed under "shrink-wrap" licenses that
are not signed by the customer and therefore may be unenforceable in certain
jurisdictions. See "Business-- Growth Strategy" and "--Products."

Foreign Operations. During 1995, approximately 17.5% and 17.3% of the
Company's net sales and gross profit, respectively, were derived from sales to
customers located outside the United States and Canada. The Company's
international businesses are subject to a number of inherent risks, including
difficulties in opening and managing foreign offices and distribution centers;
establishing channels of distribution; fluctuations in the value of foreign
currencies; import/export duties and quotas; and unexpected regulatory, economic
and political changes in foreign markets. There can be no assurance that these
factors will not adversely affect the Company's operating results. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business--Growth Strategy" and "--Distribution."

8
<PAGE>
Dependence on Senior Management. The Company's future performance will
depend, in part, upon the efforts and abilities of certain members of senior
management, particularly Stanley M. Bergman, Chairman, Chief Executive Officer
and President, James P. Breslawski, Executive Vice President, and Steven
Paladino, Senior Vice President and Chief Financial Officer. The loss of service
of one or more of these persons could have an adverse effect on the Company's
business. As of January 1992, the Company entered into an employment agreement
with Mr. Bergman for a term of eight years. The success of certain acquisitions
and joint ventures effected by the Company may depend, in part, on the Company's
ability to retain key management of the acquired business or joint venture. See
"Management--Employment and Other Agreements."

Changes in Healthcare Industry. In recent years, the healthcare industry has
undergone significant change driven by various efforts to reduce costs,
including potential national healthcare reform, trends toward managed care, cuts
in Medicare, consolidation of healthcare distribution companies and collective
purchasing arrangements by office-based healthcare practitioners. The Company's
inability to react effectively to these and other changes in the healthcare
industry could adversely affect its operating results. The Company cannot
predict whether any healthcare reform efforts will be enacted and what effect
any such reforms may have on the Company or its customers and suppliers. See
"Business--Industry."

Government Regulation. The Company and its customers and suppliers are
subject to extensive Federal and state regulation in the United States, as well
as regulation by foreign governments, and the Company cannot predict the extent
to which future legislative and regulatory developments concerning their
practices and products or the healthcare industry may affect the Company. In
addition, the Company, as a marketer, distributor and manufacturer of healthcare
products (including its 50%-owned company, HS Pharmaceutical, which distributes
and manufactures generic pharmaceuticals), is required to obtain the approval of
Federal and foreign governmental agencies, including the Food and Drug
Administration, prior to marketing, distributing and manufacturing certain of
those products, and it is possible that the Company may be prevented from
selling new manufactured products should a competitor receive prior approval.
Further, the Company's plants and operations are subject to review and
inspection by local, state, Federal and foreign governmental entities. The
Company's suppliers are also subject to similar governmental requirements. See
"Business--Government Regulation."

Risk of Product Liability Claims and Insurance. The sale, manufacture and
distribution of healthcare products involves a risk of product liability claims
and adverse publicity. Although the Company has not been subject to a
significant number of such claims or incurred significant liabilities due to
such claims, there can be no assurance that this will continue to be the case.
In addition, the Company maintains product liability insurance coverage and has
certain rights to indemnification from third parties, but there can be no
assurance that claims outside of or exceeding such coverage will not be made,
that the Company will be able to continue to obtain insurance coverage or that
the Company will be successful in obtaining indemnification from such third
parties. The Company also may not be able to maintain existing coverage or
obtain, if it determined to do so, insurance providing additional coverage at
reasonable rates. As of May 31, 1996, the Company was named a defendant in 12
product liability cases. The Company believes that none of the currently pending
cases will have a material adverse effect on the Company. See "Business--Legal
Matters."

Cost of Shipping. Shipping is a significant expense in the operation of the
Company's business. The Company ships its products to customers generally by
United Parcel Service and other delivery services, and typically bears the cost
of shipment. Accordingly, any significant increase in shipping rates could have
an adverse effect on the Company's operating results. Similarly, strikes or
other service interruptions by such shippers could adversely affect the
Company's ability to deliver products on a timely basis. See
"Business--Distribution."

9
<PAGE>
Reliance on Telephone and Computer Systems. Because the Company believes
that its success depends, in part, upon its telesales and direct marketing
efforts and its ability to provide prompt, accurate and complete service to its
customers on a price-competitive basis, any continuing disruption in either its
computer system or its telephone system could adversely affect its ability to
receive and process customer orders and ship products on a timely basis, and
could adversely affect the Company's relations with its customers. See
"Business--Customer Service."

State Sales Tax Collection. As of May 31, 1996, the Company collected sales
tax or other similar tax only on sales of products to residents of 15 states.
Various other states have sought to impose on direct marketers the burden of
collecting state sales taxes on the sale of products shipped to those states'
residents. A successful assertion by a state or states that the Company should
have collected or be collecting state sales taxes on the sale of products
shipped to that state's residents could have an adverse effect on the Company.
See "Business--Distribution."

Potential Volatility of Stock Price. The market price of the Company's
Common Stock may be subject to fluctuations in response to quarter-to-quarter
variations in operating results, changes in earnings estimates by investment
analysts or changes in business or regulatory conditions affecting the Company,
its customers, its suppliers or its competitors. The stock market historically
has experienced volatility which has particularly affected the market prices of
securities of many companies in the healthcare industry and which sometimes has
been unrelated to the operating performances of such companies. These market
fluctuations may adversely affect the market price of the Common Stock.

Anti-takeover Provisions; Possible Issuance of Preferred Stock. Certain
provisions of the Company's Amended and Restated Certificate of Incorporation
and Amended and Restated By-Laws may make it more difficult for a third party to
acquire, or may discourage acquisition bids for, the Company and could limit the
price that certain investors might be willing to pay in the future for shares of
the Company's Common Stock. These provisions, among other things, (i) require
the affirmative vote of the holders of at least 60% of the shares entitled to
vote to approve a sale, lease, transfer or exchange of all or substantially all
of the assets of the Company, (ii) require the affirmative vote of the holders
of at least 66 2/3% of the shares entitled to vote to remove a director or to
fill a vacancy on the Board of Directors, (iii) require the affirmative vote of
the holders of at least 80% of the shares entitled to vote to amend or repeal
certain provisions of the Amended and Restated Certificate of Incorporation and
(iv) require the affirmative vote of at least 66 2/3% of the Board of Directors
to amend or repeal the Amended and Restated By-Laws of the Company. In addition,
the rights of holders of Common Stock will be subject to, and may be adversely
affected by, the rights of any holders of Preferred Stock that may be issued in
the future and that may be senior to the rights of the holders of Common Stock.
Under certain conditions, Section 203 of the Delaware General Corporation Law
would prohibit the Company from engaging in a "business combination" with an
"interested stockholder" (in general, a stockholder owning 15% or more of the
Company's outstanding voting stock) for a period of three years. In addition,
the Company's 1994 Stock Option Plan and 1996 Non-Employee Director Stock Option
Plan provide for accelerated vesting of stock options upon a change in control
of the Company, and in certain instances, agreements between the Company and its
executive officers provide for increased severance payments if such executive
officers are terminated without cause within two years after a change in control
of the Company. See "Description of Capital Stock," "Management--Employment and
Other Agreements," "--Stock Option Plan" and "--Directors Stock Option Plan."

Shares Eligible for Future Sale. Future sales of substantial amounts of
Common Stock (including shares issued upon the exercise of stock options) by the
Company's current stockholders (including certain executive officers, employees
and affiliates of the Company) after this Offering, or the perception that such
sales could occur, could adversely affect the market price for the Common Stock.
The Company and its directors, executive officers and certain stockholders have
agreed, subject to certain exceptions described in "Underwriting," not to offer,
sell or otherwise dispose of any shares of Common Stock or any securities
convertible into Common Stock or register for sale under the Securities Act of

10
<PAGE>
1933, as amended (the "Securities Act"), any Common Stock for a period of 120
days after the date of this Prospectus (the "Lock-Up Period"), without the prior
written consent of the Representatives of the Underwriters. After the
termination of the Lock-Up Period, 8,003,679 shares of Common Stock that will be
owned by certain of the Company's current stockholders, constituting
approximately 37.8% of the Company's then outstanding shares of Common Stock,
may be eligible for immediate resale in the public market pursuant to Rule 144
under the Securities Act. In connection with the Reorganization, the Company
entered into a Registration Rights Agreement with certain of the current
stockholders. The Company has granted certain registration rights in connection
with one of the Acquisitions, and may grant additional registration rights in
connection with future acquisitions. See "Reorganization," "Principal and
Selling Stockholders" and "Underwriting."

Reorganization. In connection with the reorganization of the Company's
ownership and the various agreements entered into in connection therewith
between 1992 and 1994, certain stockholders of the Company made customary
representations, warranties and covenants and provided for indemnification with
respect to the structure of the transaction and for breaches of such
representations, warranties and covenants. No claims for such indemnification
have arisen to date. Applicable accounting rules provide that certain amounts
paid or assumed by such stockholders on behalf of the Company in satisfaction of
indemnity obligations may be required to be recorded by the Company for
financial reporting purposes as an expense. Accordingly, although any such
payment or assumption may not materially impact the Company's cash flow, the
Company's results of operations would be negatively impacted in the period
incurred. In addition, there can be no assurance that such stockholders will
have the resources in the future to meet their respective indemnification
obligations, if any, under such agreements. Also, in connection with the
Reorganization, the Company, Holdings and Marvin H. Schein, a director and
principal stockholder of the Company, agreed to terminate a lifetime consulting
agreement entered into in 1982 between the Company's predecessor and Mr. Schein,
and the Company and Mr. Schein agreed to continue the consulting arrangement on
the terms set forth in a new lifetime consulting agreement (the "Consulting
Agreement"). The current Consulting Agreement modified certain of the terms of
the 1982 agreement, including the elimination of a provision limiting Mr.
Schein's compensation to $100,000 per annum if the Company's pre-tax income were
less than $3.5 million for two consecutive years. The Consulting Agreement
currently provides for initial compensation of $258,000 per year, increasing
$25,000 every fifth year beginning in 1997. The Consulting Agreement also
provides that Mr. Schein will participate in all benefit, compensation, welfare
and perquisite plans, policies and programs generally available to either the
Company's employees or the Company's senior executive officers, excluding the
Company's Stock Option Plan, that Mr. Schein's spouse, and his children until
they attain the age of 21, will be covered by the Company's health plan, and
that the Company will provide Mr. Schein with the use of an automobile and
expenses related thereto. The Consulting Agreement was originally entered into
as part of a recapitalization of the Company's predecessor in 1982 among Mr.
Schein and its other stockholders, and to secure for the Company the consulting
services of Mr. Schein, who had served the Company in various executive
capacities for more than the prior twenty years. See "Reorganization."

Forward-Looking Statements. The Private Securities Litigation Reform Act of
1995 provides a "safe harbor" for forward-looking statements. This prospectus
contains forward-looking statements based on current expectations that could be
affected by the risks and uncertainties involved in the Company's business,
including the risks and uncertainties set forth above. Subsequent written or
oral statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the cautionary statements in this
prospectus and those in the Company's reports filed with the Securities and
Exchange Commission (the "Commission").

11
<PAGE>
USE OF PROCEEDS

The net proceeds to be received by the Company from this Offering, after
deducting the estimated underwriting discount and expenses of the Offering
payable by the Company, are estimated to be $101.0 million assuming a public
offering price of $37.00 per share. The Company intends to use the net proceeds
of the Offering (i) to repay a portion of the amount outstanding under the
Company's revolving credit agreement (under which approximately $53.2 million
principal amount was outstanding as of May 31, 1996), (ii) to repay a $2.4
million note payable, incurred in connection with a 1995 acquisition (with
interest at prime minus 1%, maturing October 2000), and (iii) for general
corporate purposes, including financing possible acquisitions. In addition,
depending upon their respective closing dates, certain of the proceeds may be
used to fund one or more of the Company's pending acquisitions. The Company's
revolving credit agreement, which terminates July 1, 1999, provides for interest
to be paid at varying rates, depending on certain financial covenants, ranging
from LIBOR plus 0.63% to prime plus 1.0% per annum. See "Pro Forma Condensed
Consolidated Financial Information" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

The Company will not receive any proceeds from the sale of Common Stock by
the Selling Stockholders.

DIVIDEND POLICY

Except for a dividend paid in 1992 at the time of the separation of the
Company from Holdings, the Company has never paid a cash dividend on its Common
Stock. The Company does not anticipate paying any cash dividends on its Common
Stock in the foreseeable future; it intends to retain its earnings to finance
the expansion of its business and for general corporate purposes. Any payment of
dividends will be at the discretion of the Company's Board of Directors and will
depend upon the earnings, financial condition, capital requirements, level of
indebtedness, contractual restrictions with respect to payment of dividends and
other factors. The revolving credit agreement and the note issued in connection
with the acquisition of Beheermaatschappij Van den Braak en De Vos B.V. ("Van
den Braak") limit the distribution of dividends without the prior written
consent of the lenders. See "Reorganization."

PRICE RANGE OF COMMON STOCK

The Company's Common Stock is quoted on the Nasdaq National Market under the
symbol "HSIC." The following table sets forth, for the fiscal periods indicated,
the high and low sale prices of the Common Stock as reported by Nasdaq.

<TABLE>
<CAPTION>
HIGH LOW
--------------- ---------------
<S> <C> <C> <C> <C>
1995
Fourth Quarter (from November 3, 1995)................... $29 1/2 $20 3/8
1996
First Quarter............................................ $30 3/4 $23 1/2
Second Quarter (through May 31, 1996).................... $39 1/4 $27 1/2
</TABLE>

On May 31, 1996, there were approximately 127 holders of record of the
Company's Common Stock. The last reported sale price per share of the Common
Stock on May 31, 1996 on the Nasdaq National Market was $37.00.

12
<PAGE>
CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company at March 30, 1996, on (i) a historical basis and (ii) a pro forma basis,
as adjusted, as if the Other Recent and Pending Acquisitions had occurred on
March 30, 1996 with adjustment to give effect to (a) the issuance of 45,900
shares of Common Stock in connection with one of the Acquisitions, (b) the
borrowings to fund certain of the Acquisitions and (c) the sale by the Company
of shares of Common Stock offered hereby at $37.00 per share and the application
of a portion of the estimated net proceeds of such sale to repay debt (including
debt incurred to finance certain of the Acquisitions). This table should be read
in conjunction with the Company's consolidated financial statements and the
notes thereto appearing elsewhere in this Prospectus. See "Use of Proceeds" and
"Pro Forma Condensed Consolidated Financial Information."

<TABLE>
<CAPTION>
MARCH 30, 1996
-----------------------
PRO FORMA,
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Bank credit lines................................................... $ 8,085 $ 8,085
Current maturities of long-term debt................................ 3,861 3,879
-------- -----------
Total short-term debt............................................. $ 11,946 $ 11,964
-------- -----------
-------- -----------
Long-term debt, less current maturities:
Revolving credit agreement.......................................... $ 39,000 $ 13,000
Other............................................................... 12,701 10,301
-------- -----------
Total long-term debt.............................................. 51,701 23,301
-------- -----------
Minority interest..................................................... 4,361 4,361
-------- -----------
Stockholders' equity:
Common stock, $.01 par value; 60,000,000 shares authorized;
18,358,673 shares issued, actual; 21,285,073 shares issued, pro
forma, as adjusted(1)............................................. 183 213
Additional paid-in capital.......................................... 123,866 226,190
Retained earnings................................................... 22,210 22,210
Treasury stock, at cost, 51,679 shares.............................. (769) (769)
Foreign currency translation adjustment............................. (550) (550)
-------- -----------
Total stockholders' equity........................................ 144,940 247,294
-------- -----------
Total capitalization............................................ $201,002 $ 274,956
-------- -----------
-------- -----------
</TABLE>

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

(1) Excludes (a) 221,397 shares of Common Stock reserved for issuance upon the
exercise of outstanding options at an exercise price of $4.21 per share,
402,400 shares reserved for issuance at an exercise price of $16.00 per
share, 35,000 shares reserved for issuance at an exercise price of $29.00
per share and 10,000 shares reserved for issuance at an exercise price of
$31.00 per share granted under the Company's 1994 Stock Option Plan, and an
additional 9,838 shares reserved for issuance under such Plan as of May 31,
1996, which additional shares may be issued at an exercise price equal to
not less than the fair market value at the time of grant; and (b) 10,000
shares of Common Stock reserved for issuance upon the exercise of
outstanding options at an exercise price of $29.00 per share (the fair
market value of the Common Stock on the date of grant) granted under the
1996 Non-Employee Directors Stock Option Plan, and an additional 40,000
shares reserved for issuance under such Plan as of May 31, 1996, which
additional shares may be issued at an exercise price equal to not less than
the fair market value at the time of grant. See "Management--Stock Option
Plan" and "--Directors Stock Option Plan."

13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION AND OPERATING DATA

The following selected consolidated financial information with respect to
the Company's financial position as of December 31, 1994 and December 30, 1995,
and its results of operations for the years ended December 25, 1993, December
31, 1994 and December 30, 1995, has been derived from the audited consolidated
financial statements of the Company appearing elsewhere in this Prospectus. The
selected consolidated financial information with respect to the Company's
results of operations for the years ended December 28, 1991 and December 26,
1992 and with respect to the Company's financial position as of December 28,
1991, December 26, 1992 and December 25, 1993 has been derived from audited
financial statements of the Company that are not included in this Prospectus.
The selected consolidated financial information for the three months ended April
1, 1995 and March 30, 1996 has been derived from the unaudited consolidated
financial statements of the Company, which, in the opinion of management,
include all adjustments (consisting only of normal recurring accruals) necessary
to present fairly the information set forth therein. The results for the three
months ended March 30, 1996 are not necessarily indicative of the results that
may be expected for the full year. The selected financial data presented below
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" appearing elsewhere in this
Prospectus. The Selected Operating Data, Net Sales by Market Data and Balance
Sheet Data presented below have not been audited.

<TABLE>
<CAPTION>
YEARS ENDED, THREE MONTHS ENDED,
---------------------------------------------------------------------------------- -------------------
PRO FORMA,
AS
ADJUSTED(1)
------------
DECEMBER 28, DECEMBER 26, DECEMBER 25, DECEMBER 31, DECEMBER 30, DECEMBER 30, APRIL 1, MARCH 30,
1991 1992 1993 1994 1995 1995 1995 1996
------------ ------------ ------------ ------------ ------------ ------------ -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AND SELECTED OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............... $282,110 $ 362,925 $ 415,710 $ 486,610 $ 616,209 $671,448 $136,040 $ 185,359
Cost of sales........... 199,837 257,226 294,693 343,922 425,625 466,159 95,725 130,410
------------ ------------ ------------ ------------ ------------ ------------ -------- ---------
Gross profit............ 82,273 105,699 121,017 142,688 190,584 205,289 40,315 54,949
Selling, general and
administrative
expenses................ 79,775 96,287 109,574 128,560 170,823 184,509 37,329 50,245
Special management
compensation(2)......... -- 5,283 617 21,596 20,797 -- -- --
Special contingent
consideration(3)........ -- -- 3,216 -- -- -- -- --
Special professional
fees(4)................. 613 2,227 2,224 2,007 -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------ -------- ---------
Operating
income(loss)............ 1,885 1,902 5,386 (9,475) (1,036) 20,780 2,986 4,704
Interest income......... 1,374 1,210 856 251 475 475 69 395
Interest expense........ (2,196) (2,953) (3,216) (3,756) (5,833) (3,344) (1,288) (961)
Other income
(expense)--net.......... 312 255 (634) 541 276 321 97 (97)
------------ ------------ ------------ ------------ ------------ ------------ -------- ---------
Income (loss) before
taxes on income
(recovery), minority
interest and equity in
earnings of
affiliates.............. 1,375 414 2,392 (12,439) (6,118) 18,232 1,864 4,041
Taxes on income......... 827 622 1,351 (1,630) 5,126 7,810 781 1,783
Minority interest in net
income (loss) of
subsidiaries............ (325) (249) 318 561 509 524 172 (70)
Equity in earnings of
affiliates.............. 113 514 1,296 494 1,537 1,425 25 136
------------ ------------ ------------ ------------ ------------ ------------ -------- ---------
Income (loss) before
cumulative effect of
accounting change....... 986 555 2,019 (10,876) (10,216) 11,323 936 2,464
Cumulative effect of
accounting change....... -- -- 1,891 -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------ -------- ---------
Net income (loss)....... $ 986 $ 555 $ 3,910 ($ 10,876) ($ 10,216) $ 11,323 $ 936 $ 2,464
------------ ------------ ------------ ------------ ------------ ------------ -------- ---------
------------ ------------ ------------ ------------ ------------ ------------ -------- ---------
Net income per common
share................... $ .63 $ .08 $ .13
Average shares
outstanding............. 17,952 12,184 18,670
PRO FORMA INCOME
DATA(5):
Pro forma operating
income.................. $ 14,128 $ 19,761
Pro forma net income.... $ 6,978 $ 9,407
Pro forma net income per
common share............ $ .58 $ .70
Pro forma average shares
outstanding............. 12,127 13,447

<CAPTION>
<S> <C>
PRO FORMA,
AS
ADJUSTED(1)
-----------
MARCH 30,
1996
-----------
<S> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............... $ 194,101
Cost of sales........... 136,786
-----------
Gross profit............ 57,315
Selling, general and
administrative
expenses................ 52,311
Special management
compensation(2)......... --
Special contingent
consideration(3)........ --
Special professional
fees(4)................. --
-----------
Operating
income(loss)............ 5,004
Interest income......... 395
Interest expense........ (682)
Other income
(expense)--net.......... (64)
-----------
Income (loss) before
taxes on income
(recovery), minority
interest and equity in
earnings of
affiliates.............. 4,653
Taxes on income......... 2,044
Minority interest in net
income (loss) of
subsidiaries............ (37)
Equity in earnings of
affiliates.............. 136
-----------
Income (loss) before
cumulative effect of
accounting change....... 2,782
Cumulative effect of
accounting change....... --
-----------
Net income (loss)....... $ 2,782
-----------
-----------
Net income per common
share................... $ .14
Average shares
outstanding............. 19,728
PRO FORMA INCOME
DATA(5):
Pro forma operating
income..................
Pro forma net income....
Pro forma net income per
common share............
Pro forma average shares
outstanding.............
</TABLE>

14
<PAGE>

NET SALES BY MARKET
DATA:
Dental(6)............... $195,047 $ 228,264 $ 245,616 $ 266,212 $ 317,933 $ 71,828 $ 94,536
Medical................. 43,975 58,314 78,628 97,914 134,979 26,962 40,127
Veterinary.............. 15,974 19,481 24,312 27,872 29,680 6,650 8,458
Technology(7)........... 3,470 5,825 7,738 10,685 25,914 5,631 5,965
International(8)........ 23,644 51,041 59,416 83,927 107,703 24,969 $ 36,273
------------ ------------ ------------ ------------ ------------ -------- ---------
$282,110 $ 362,925 $ 415,710 $ 486,610 $ 616,209 $136,040 $ 185,359
------------ ------------ ------------ ------------ ------------ -------- ---------
------------ ------------ ------------ ------------ ------------ -------- ---------
BALANCE SHEET DATA (AT
PERIOD END):
Working capital......... $ 28,999 $ 28,276 $ 74,125 $ 76,392 $ 103,899 $ 82,341 $ 124,055
Total assets............ 114,453 137,957 160,793 190,020 296,867 193,496 303,733
Total debt.............. 24,835 41,373 56,567 61,138 43,049 66,959 63,647
Minority interest....... 338 411 1,051 1,823 4,547 2,097 4,361
Stockholders' equity.... 39,143 40,117 43,897 39,567 142,851 41,818 144,940

PRO FORMA,
AS
ADJUSTED(1)
-----------
MARCH 30,
1996
-----------

<S> <C>
SELECTED OPERATING DATA:
Number of orders
shipped.................
Average order size......
NET SALES BY MARKET
DATA:
Dental(6)...............
Medical.................
Veterinary..............
Technology(7)...........
International(8)........

BALANCE SHEET DATA (AT
PERIOD END):
Working capital......... $ 188,471
Total assets............ 379,213
Total debt.............. 35,265
Minority interest....... 4,361
Stockholders' equity.... 247,294
</TABLE>

(2) Includes: (a) for 1992, cash payments of $5.3 million for income taxes
resulting from stock grants made to an executive officer of the Company; (b)
for 1993, non-cash special management compensation charges of $0.6 million
in amortization of deferred compensation arising from the 1992 stock grants;
(c) for 1994, non-cash special management compensation arising from
accelerated amortization of deferred compensation arising from the 1992
stock grants to an executive officer of the Company of $17.3 million, which
included a 1994 mark-to-market adjustment (because of certain repurchase
features) of $9.1 million, due to the resolution, with the closing of the
Reorganization, of certain contingencies surrounding the issuance of the
stock grants, non-cash special management compensation charges of $1.6
million (net of prior accruals of approximately $1.9 million under an
executive incentive plan) arising from stock issuances to certain other
senior management of the Company, valued at $3.5 million, cash payments for
income taxes of approximately $2.4 million resulting from these stock
issuances and $0.3 million for additional income taxes resulting from the
1992 stock grants; and (d) for 1995, non-cash special management
compensation charges of $17.5 million arising from final mark-to-market
adjustments (reflecting an increase in estimated market value from 1994 to
the initial public offering price of $16.00 per share) for stock grants made
to an executive officer of the Company in 1992 and other stock issuances
made to certain other senior management of the Company (because of certain
repurchase features which expired with the initial public offering), an
approximate $2.8 million non-cash special management compensation charge
(also based on the initial public offering price of $16.00 per share)
relating to compensatory options granted in 1995 and a cash payment of $0.5
million for additional income taxes resulting from such stock issuances.
Special management compensation has been eliminated in the pro forma, as
adjusted columns. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Reorganization" and
"Management--Stock Option Plan."

(3) Includes $0.7 million paid in connection with an acquisition and $2.5
million resulting from the buyout of employees' rights to future income
contained in their employment agreements. Special contingent consideration
has been eliminated in the pro forma, as adjusted columns. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

(4) Includes special professional fees incurred by the Company in connection
with the Reorganization. Special professional fees have been eliminated in
the pro forma, as adjusted columns. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and
"Reorganization."

(5) Reflects the pro forma elimination of special charges incurred in 1994 and
1995 for special management compensation of $21.6 million and $20.8 million,
respectively, and special professional fees incurred in 1994 of $2.0 million
arising from the Reorganization, and the related tax effect of $5.8 million
and $1.2 million for 1994 and 1995, respectively. See "Reorganization."

(6) Dental consists of the Company's dental sales in the United States and
Canada.

(7) Technology consists of the Company's practice management software sales and
sales of certain other value-added products and services.

(8) International consists of sales (substantially all dental) to customers
outside the United States and Canada, primarily in Europe.

15
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)

The Pro Forma Condensed Consolidated Financial Information reflects (1)
financial information with respect to (i) the Company's 1995 acquisition of
Veratex (for the period set forth below), (ii) the Company's acquisition of, or
agreement to acquire, five other businesses in 1996 consisting of a 100%
interest in three companies which had net sales of approximately $31.4 million
in 1995 and an 80% interest in one company which had net sales of $4.0 million
in 1995 and (iii) the acquisition by one of the Company's 50% owned companies of
a 100% interest in a company which had net sales of approximately $2.9 million
in 1995 (collectively, the acquisitions in (ii) and (iii) are referred to as the
"Other Recent and Pending Acquisitions" and together with Veratex, such
acquisitions are referred to as the "Acquisitions"), and (2) the sale of
5,090,000 shares of Common Stock at $16.00 per share in the Company's 1995
initial public offering and the application of the net proceeds therefrom to
reduce debt, including debt to finance the Acquisitions (for the period set
forth below). Two of the companies included in the Other Recent and Pending
Acquisitions distribute dental supplies and equipment, one distributes dental
laboratory equipment and supplies, one manufactures and distributes dental
products and one distributes medical supplies. Since December 30, 1995, the
Company also acquired or entered into agreements to acquire five other
companies, the financial information for which is not reflected in the Pro Forma
Condensed Consolidated Financial Information and is not material either
individually or in the aggregate. The aggregate cash purchase price for the
Acquisitions is expected to be approximately $30.9 million, payable $22.8
million in cash and $8.1 million in notes. In addition, the Company will issue
approximately 45,900 shares of Common Stock in connection with one of the
Acquisitions. The Acquisitions will be accounted for under the purchase method
of accounting, except for the acquisition by one of the Company's 50% owned
companies, which will be accounted for under the equity method. There can be no
assurance that any of the pending acquisitions will be consummated.

The Pro Forma Condensed Consolidated Financial Information gives effect to
the adjustments described in the notes attached thereto. The financial
information of Veratex at March 30, 1996 and for the three months then ended and
for the period from July 7, 1995 to December 31, 1995 are included in the
consolidated financial information of the Company for such periods. The
accompanying pro forma condensed consolidated balance sheet combines the
historical consolidated balance sheet of the Company and the balance sheets of
the Other Recent and Pending Acquisitions as if such acquisitions had occurred
on March 30, 1996. The accompanying pro forma condensed consolidated statement
of operations for the year ended December 30, 1995 (1) combines the historical
consolidated statements of operations of the Company and the Acquisitions and
(2) reflects the sale of shares in the Company's 1995 initial public offering
and the application of the net proceeds therefrom to reduce debt, as if all the
Acquisitions and the initial public offering had occurred at January 1, 1995.
The accompanying pro forma condensed consolidated statement of operations for
the three months ended March 30, 1996 combines the historical consolidated
financial statements of operations of the Company (which includes Veratex) and
the Other Recent and Pending Acquisitions as if all such acquisitions had
occurred at December 31, 1995. The Pro Forma Condensed Consolidated Financial
Information, as adjusted, also gives effect to the completion of this Offering
and the use of a portion of the proceeds therefrom to reduce debt. See "Use of
Proceeds."

The Pro Forma Condensed Consolidated Financial Information is based on an
allocation of the expected purchase prices for the Other Recent and Pending
Acquisitions. Furthermore, such information does not purport to represent what
the Company's actual results of operations would have been had the Acquisitions,
the initial public offering or the Offering occurred on the dates indicated or
for any future period or date. The pro forma adjustments give effect to
available information and assumptions that the Company believes are reasonable.
The Pro Forma Condensed Consolidated Financial Information should be read in
conjunction with the Company's historical consolidated financial statements and
the notes thereto and the financial statements of Veratex and the notes thereto
appearing elsewhere in this Prospectus. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

16
<PAGE>
HENRY SCHEIN, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>
OTHER
HENRY RECENT AND
SCHEIN, PENDING PRO FORMA PRO FORMA PRO FORMA
INC. ACQUISITIONS ADJUSTMENTS COMBINED(1) AS ADJUSTED(2)
-------- ------------ ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Net sales.................................. $185,359 $ 8,742 $-- $ 194,101 $194,101
Cost of sales.............................. 130,410 6,376 -- 136,786 136,786
-------- ------------ ----------- ----------- --------------
Gross profit............................... 54,949 2,366 -- 57,315 57,315
Selling, general and administrative
expenses................................... 50,245 2,036 30(3) 52,311 52,311
-------- ------------ ----------- ----------- --------------
Operating income........................... 4,704 330 (30) 5,004 5,004
Interest income (expense)--net............. (566) (41) (257)(4) (864) (287)
Other--net................................. (97) 33 -- (64) (64)
-------- ------------ ----------- ----------- --------------
Income before taxes on income, minority
interest and equity in earnings of
affiliates................................. 4,041 322 (287) 4,076 4,653
Taxes on income............................ 1,783 51 (19)(5) 1,815 2,044
Minority interest in net loss of
subsidiaries............................... (70) -- 33(6) (37) (37)
Equity in earnings of affiliates........... 136 -- -- 136 136
-------- ------------ ----------- ----------- --------------
Net income................................. $ 2,464 $ 271 $ (301) $ 2,434 $ 2,782
-------- ------------ ----------- ----------- --------------
-------- ------------ ----------- ----------- --------------
Pro forma net income per common share...... $ 0.13 $ 0.14
----------- --------------
----------- --------------
Pro forma weighted average common and
common equivalent shares outstanding...... 18,716 19,728
----------- --------------
----------- --------------
</TABLE>

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

(1) Gives effect to the Other Recent and Pending Acquisitions and 45.9 shares of
Common Stock to be issued in connection therewith.

(2) Adjusted to give effect to (i) the interest savings, net of taxes, from the
application of the net proceeds from this Offering to repay debt and (ii)
the sale of sufficient shares of Common Stock at the estimated price of
$37.00 per share to fund such repayment.

(3) To adjust selling, general and administrative expenses for amortization of
goodwill and non-compete agreements of $105 arising from the Other Recent
and Pending Acquisitions and to eliminate non-recurring shareholder
compensation of approximately $75 in connection with one of the Other Recent
and Pending Acquisitions. Goodwill is amortized on a straight-line basis
over 30 years based on the expected benefit period. The non-compete
agreements are amortized on a straight-line basis over lives ranging from 5
to 7 years.

(4) To reflect an increase in interest expense due to additional borrowings
under the Company's revolving credit facility and other debt incurred to
finance the Other Recent and Pending Acquisitions calculated based on an
average interest rate of 6.4% which approximates the incremental borrowing
rate in effect for the respective period. If interest rates were to vary
1/4% from the assumed rates, the effect on pro forma net income would be
$22, and there would not be any effect on pro forma net income per common
share.

(5) To eliminate the income tax effect of the pro forma adjustments in (3) and
(4) above and the adjustment of income taxes on certain of the Acquisitions
to an estimated combined rate of 40%.

(6) To record the minority interests in the income of one of the Other Recent
and Pending Acquisitions.

18
<PAGE>
HENRY SCHEIN, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 30, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>
OTHER RECENT
HENRY AND
SCHEIN, PENDING PRO FORMA PRO FORMA PRO FORMA,
INC. VERATEX ACQUISITIONS ADJUSTMENTS COMBINED (1) AS ADJUSTED (2)
------------ ------- ------------ ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Net sales......................... $616,209 $19,853 $ 35,386 $ -- $671,448 $ 671,448
Cost of sales..................... 425,625 14,079 26,455 -- 466,159 466,159
------------ ------- ------------ ----------- ------------ ---------------
Gross profit...................... 190,584 5,774 8,931 -- 205,289 205,289
Selling, general and
administrative expenses.......... 170,823 5,015 8,159 512(3) 184,509 184,509
Special charges................... 20,797 -- -- (20,797)(4) -- --
------------ ------- ------------ ----------- ------------ ---------------
Operating income (loss)........... (1,036) 759 772 20,285 20,780 20,780
Interest income (expense) - net... (5,358) -- (181) 1,986(5) (3,553) (2,869)
Other - net....................... 276 -- 45 -- 321 321
------------ ------- ------------ ----------- ------------ ---------------
Income (loss) before taxes on
income, minority interest and
equity in earnings of
affiliates........................ (6,118) 759 636 22,271 17,548 18,232
Taxes on income................... 5,126 296 166 1,951(6) 7,539 7,810
Minority interest in net income of
subsidiaries...................... 509 -- -- 15(7) 524 524
Equity in earnings of
affiliates........................ 1,537 -- -- (112)(8) 1,425 1,425
------------ ------- ------------ ----------- ------------ ---------------
Net income (loss)................. $(10,216) $ 463 $ 470 $ 20,193 $ 10,910 $ 11,323
------------ ------- ------------ ----------- ------------ ---------------
------------ ------- ------------ ----------- ------------ ---------------
Pro forma net income per common
share............................. $ 0.61 $ 0.63
------------ ---------------
------------ ---------------
Pro forma weighted average common
and common stock equivalent
shares outstanding............... 17,772 17,952
------------ ---------------
------------ ---------------
</TABLE>

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

(1) Gives effect to (i) the Acquisitions and 45.9 shares of Common Stock to be
issued in connection therewith and (ii) the sale of 5,090 shares in the
Company's initial public offering and the application of the net proceeds
therefrom to reduce debt.

(2) Adjusted to give effect to the interest savings, net of taxes, from the
application of net proceeds from this Offering to repay debt and issuance of
shares of Common Stock at the estimated price of $37.00 per share sufficient
to fund such repayment.

(3) To adjust selling, general and administrative expenses for (i) $375 of
increased general and administrative expenses incurred by the Company in
connection with one of the Acquisitions, (ii) amortization of goodwill and
non-compete agreements of $637 arising from the Acquisitions, and (iii) the
elimination of non-recurring shareholder compensation incurred in connection
with one of the Acquisitions of $500. Goodwill is amortized on a
straight-line basis over 30 years based on the expected benefit period. The
non-compete agreements are amortized on a straight-line basis over lives
ranging from 5 to 7 years.

(4) To eliminate non-recurring special management compensation.

(5) To reflect (i) an increase of $2,117 in interest expense due to additional
borrowings under the Company's revolving credit facility and other debt
incurred to finance the Acquisitions, calculated based on an average
interest rate of 8.3% which approximates the incremental borrowing rate in
effect for the respective periods, and (ii) reflect a reduction in interest
expense resulting from assumed repayment of debt from proceeds of the
initial public offering. If interest rates were to vary /1 4% from the
assumed rates, the effect on pro forma net income would be approximately
$11, and there would not be any effect on pro forma net income per common
share.

(6) To eliminate the income tax effect of the pro forma adjustments in (3)
through (5) above and the adjustment of income taxes on certain of the
Acquisitions to an estimated combined rate of 40%.

(7) To record the minority interests in the income of certain of the
Acquisitions.

(8) To record equity in net income of one of the Acquisitions.

19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the Company's consolidated
financial condition and consolidated results of operations should be read in
conjunction with the Company's consolidated financial statements and notes
thereto included elsewhere in this Prospectus.

OVERVIEW

The Company's results of operations in recent years have been significantly
impacted by strategies and transactions undertaken by the Company to expand its
business, both domestically and internationally, in part to address significant
changes in the healthcare industry, including potential national healthcare
reform, trends toward managed care, cuts in Medicare, consolidation of
healthcare distribution companies and collective purchasing arrangements. The
Company's results of operations in recent years have also been impacted by the
Reorganization. See "Reorganization."

The Company's net sales have grown at a compounded annual rate of
approximately 21.6%, from $282.1 million in 1991 to $616.2 million in 1995. This
growth reflects increased direct marketing activities by the Company in serving
its dental customers and the utilization by the Company of its sales and
marketing strategies and cost effective infrastructure to expand the Company's
presence in the medical and veterinary markets. During this same period, the
Company established distribution capabilities in Europe, introduced practice
management software products and consummated 29 acquisitions and joint ventures.

Since 1991, the Company has expanded its field sales force to include
approximately 50 field sales consultants who focus exclusively on the medical
market. The Company has also expanded the number of SKUs offered to each of the
medical and veterinary markets to over 15,000 at March 30, 1996. In addition,
the Company has increased the number of direct mailings to physicians and
veterinarians and its outbound telesales contacts to these professionals. During
this period of increased focus on the medical and veterinary markets, the
Company's net sales to these markets increased from $59.9 million in 1991 to
$164.7 million in 1995, representing a compounded annual growth rate of
approximately 28.6%. For the three months ended March 30, 1996, net sales to the
medical and veterinary markets represented 26.2% of the Company's total net
sales.

Commencing in 1990, the Company began to pursue opportunities in
international markets. The Company established local distribution centers, hired
telesales personnel and field sales consultants, entered into joint ventures
with companies serving international customers and acquired local distributors.
The Company's net sales to such markets increased from $23.6 million in 1991 to
$107.7 million in 1995. At March 30, 1996, the Company operated subsidiaries or
joint ventures in the United Kingdom, The Netherlands, Belgium, Germany, France,
Spain and Ireland which generated approximately 19.6% of the Company's net sales
for the three months ended March 30, 1996.

From 1993 through 1995, the Company entered into joint ventures with or
acquired three medical distributors and 21 dental distributors, the most
significant of which were Van den Braak and Veratex, which were acquired in
November 1993 and July 1995, respectively. Van den Braak had net sales of
approximately $10.6 million in the fiscal year ended December 25, 1993, while
Veratex had net sales of approximately $39.5 million in the fiscal year ended
December 31, 1994. Since December 31, 1995, the Company has acquired or entered
into acquisition agreements with ten additional businesses.

From 1992 through 1994, the Company was a party to a series of transactions
leading to the Reorganization that resulted in, among other things, the Company
being separated from Holdings and the distribution of shares of the Common Stock
of the Company to its then current stockholders. In December 1992, an executive
officer of the Company received certain stock grants in the Company and Schein
Pharmaceutical valued at approximately $6.2 million and $2.6 million,
respectively, and cash of approximately $5.3 million to pay income taxes on the
stock grants received. These stock grants were

20
<PAGE>
subject to the occurrence of certain future events, including the fulfillment of
the employment term by the executive officer. Accordingly, these stock grants,
totaling $8.8 million, were treated as deferred compensation while the cash
payments were charged to earnings as special management compensation in the year
ended December 26, 1992. During 1993, the Company amortized the deferred
compensation relating to stock grants by the Company to the executive officer
resulting in a charge to earnings of $0.6 million. In 1994, the contingencies
relating to the stock granted to the executive officer were eliminated, such
that these shares became fully vested. Accordingly, deferred compensation of
$8.8 million, less the 1993 amortization of $0.6 million, plus a mark-to-market
adjustment (because of certain repurchase features) of approximately $9.1
million, along with a $0.3 million cash payment for income taxes relating to the
1992 stock grants, was expensed in 1994 as special management compensation.

In addition, in connection with the Reorganization, certain senior
management of the Company were issued shares of Common Stock of the Company in
1994 and 1995 to extinguish an obligation under a pre-existing long-term
incentive plan and to provide them with an ownership interest in the Company. In
connection with the issuance of the shares, a cash payment for income taxes
relating to such stock issuances of approximately $2.4 million was paid. This
cash bonus, plus $3.5 million, the fair value of the related stock issued, net
of amounts accrued under the long-term incentive plan of approximately $1.9
million, resulted in an additional special management compensation charge to the
Company of approximately $4.0 million in 1994. Charges to earnings for the year
ended 1995 related to a mark-to-market adjustment (because of certain repurchase
features) for stock grants made to an executive officer of the Company and the
stock issuances of the other senior management of approximately $15.5 million
and cash payments of $0.5 million for income taxes related to the stock
issuances. Due to the elimination of repurchase features on the stock issued to
the executive officers of the Company and other senior management upon closing
of the initial public offering in the fourth quarter of 1995, the Company
incurred special management compensation charges of approximately $2.0 million
for an additional mark-to-market adjustment to reflect the difference between
the actual initial public offering price of $16.00 per share and the prior
estimated initial public offering price of $15.00 per share.

Additionally, the Company has granted certain employees options for shares
of the Company's Common Stock which became exercisable upon the Company's
initial public offering on November 3, 1995, at which time substantially all
such options vested. Non-recurring special compensation charges for the options
issued to employees recorded in the fourth quarter of 1995 amounted to
approximately $2.8 million. In addition, the Company recorded an approximate
$1.1 million related tax benefit.

Special charges for special management compensation and special professional
fees incurred in connection with the Reorganization aggregated $0.6 million,
$7.5 million, $2.8 million, $23.6 million and $20.8 million for 1991, 1992,
1993, 1994 and 1995, respectively. There were no special management compensation
charges incurred in each of the three month periods ended April 1, 1995 and
March 30, 1996.

In addition, in 1993 the Company incurred special contingent consideration
charges of $0.7 million and $2.5 million in connection with an acquisition and
the buyout of employees' rights to future income contained in their employment
agreements, respectively.

21
<PAGE>
expanding the Company's network of equipment sales and service centers. Through
the acquisitions that have been completed as well as additional hirings, the
Company has increased its domestic field sales consultants from approximately
200 at the time of the initial public offering to approximately 250 at May 31,
1996. In addition, in December 1995, the Company introduced a new Windows(R)
version of its dental practice management software and has sold over 2,700 such
units through the first quarter of 1996. The Company has also recently
introduced ArubA(R), an enhanced Windows(R) version of its computerized order
entry system, which also contains an electronic catalog.

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated the net sales by
market of the Company and the percentage change in such items for the years
ended 1993, 1994 and 1995 and for the three months ended April 1, 1995 compared
to the three months ended March 30, 1996.

<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES PERCENTAGE INCREASE
------------------------------------------------------------------------ ----------------------------------
THREE MONTHS
ENDED APRIL 1,
YEARS ENDED, THREE MONTHS ENDED, 1995 TO
------------------------------------------ --------------------------- THREE MONTHS
DECEMBER 25, DECEMBER 31, DECEMBER 30, APRIL 1, MARCH 30, 1993 TO 1994 TO ENDED MARCH
1993 1994 1995 1995 1996 1994 1995 30, 1996
------------ ------------ ------------ ------------ ------------ ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET SALES BY
MARKET:
Dental(1).......... 59.1% 54.7% 51.6% 52.8% 51.0% 8.4% 19.4% 31.6%
Medical............ 18.9 20.1 21.9 19.8 21.6 24.5 37.9 49.1
Veterinary......... 5.8 5.7 4.8 4.9 4.6 14.6 6.5 26.9
Technology(2)...... 1.9 2.2 4.2 4.1 3.2 38.1 142.1 5.9
International(3)... 14.3 17.3 17.5 18.4 19.6 41.2 28.4 45.2
----- ----- ----- ----- -----
100.0% 100.0% 100.0% 100.0% 100.0% 17.1 26.6 36.3
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>

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

(1) Dental consists of the Company's dental sales in the United States and
Canada.

(2) Technology consists of the Company's practice management software sales and
sales of certain other value-added products and services.

(3) International consists of sales (substantially all dental) to customers
outside the United States and Canada, primarily in Europe.

Three Months Ended March 30, 1996 Compared to Three Months Ended April 1, 1995

Net sales increased $49.4 million, or 36.3%, to $185.4 million for the three
months ended March 30, 1996 from $136.0 million for the three months ended April
1, 1995. Of the $49.4 million increase, approximately $22.7 million represented
a 31.6% increase in the Company's dental business, $13.2 million represented a
49.1% increase in its medical business, $11.3 million represented a 45.2%
increase in its international business, $1.8 million represented a 26.9%
increase in its veterinary business and $0.4 million represented a 5.9% increase
in the Company's technology business. The dental net sales increase was
primarily the result of the Company's increased emphasis on its integrated sales
and marketing approach (which coordinates the efforts of its field sales
consultants with its direct marketing and telesales personnel), entering the
U.S. market for large dental equipment and acquisitions. Of the approximately
$13.2 million increase in medical net sales, approximately $6.1 million, or
46.2%, represented increased net sales to renal dialysis centers, with the
effects of acquisitions and increased outbound telesales activity primarily
accounting for the balance of the increase in net sales. In the international
market, the increase in net sales was primarily due to acquisitions and
increased unit volume growth. In the veterinary market, the increase in net
sales was primarily due to increased account penetration.

22
<PAGE>
Gross profit increased by $14.6 million, or 36.2%, to $54.9 million for the
three months ended March 30, 1996, from $40.3 million for the three months ended
April 1, 1995, while gross profit margin remained consistent at 29.6% for the
same period. The $14.6 million increase in gross profit was primarily due to
increased account penetration and the effects of acquisitions.

Selling, general and administrative expenses increased by $12.9 million, or
34.6%, to $50.2 million for the three months ended March 30, 1996 from $37.3
million for the three months ended April 1, 1995. Selling and shipping expenses
increased by $10.5 million, or 44.3%, to $34.2 million for the three months
ended March 30, 1996 from $23.7 million for the three months ended April 1,
1995. As a percentage of net sales, selling and shipping expenses increased 1.0%
to 18.4% for the three months ended March 30, 1996 from 17.4% for the three
months ended April 1, 1995. The increase in selling and shipping expenses as a
percentage of net sales was primarily due to an increase in the number of field
sales consultants. General and administrative expenses increased $2.4 million,
or 17.6%, to $16.0 million for the three months ended March 30, 1996 from $13.6
million for the three months ended April 1, 1995, primarily as a result of
acquisitions. As a percentage of net sales, general and administrative expenses
decreased 1.4% to 8.6% for the three months ended March 30, 1996 from 10.0% for
the three months ended April 1, 1995 due primarily to the relatively fixed
nature of general and administrative expenses when compared to the 36.3%
increase in sales volume for the same period.

Interest expense--net decreased $0.6 million, or 50.0%, to $0.6 million for
the three months ended March 30, 1996 from $1.2 million for the three months
ended April 1, 1995. This decrease was primarily due to a reduction in interest
expense which resulted from a decline in average interest rates to 7.2% for the
three months ended March 30, 1996 from 8.0% for the three months ended April 1,
1995 and a $10.7 million decrease in the Company's average borrowings which
primarily resulted from the availability of additional equity capital from the
Company's initial public offering in November 1995, reduced by cash used for
acquisitions.

Equity in earnings of affiliates increased by $0.1 million to $0.1 million
for the three months ended March 30, 1996. This increase in equity in earnings
of affiliates was primarily due to the acquisition of an unconsolidated
affiliate during the fourth quarter of 1995.

For the three months ended March 30, 1996, the Company's provision for taxes
was $1.8 million, while pre-tax income was $4.0 million, resulting in an
effective tax rate of 44.1%. The difference between the effective tax rate and
the Federal statutory rate relates primarily to state income taxes and currently
non-deductible net operating losses of certain foreign subsidiaries in France,
which are not included in the Company's consolidated tax return. For the three
months ended April 1, 1995, the Company's provision for taxes was $0.8 million,
while pre-tax income was $1.9 million. The effective tax rate of 41.9% for the
three months ended April 1, 1995 differed from the Federal statutory rate,
primarily due to state income taxes.

1995 Compared to 1994

Net sales increased $129.6 million, or 26.6%, to $616.2 million in 1995 from
$486.6 million in 1994. Of the $129.6 million increase, approximately $51.7
million represented a 19.4% increase in the Company's dental business, $37.1
million represented a 37.9% increase in its medical business, $23.8 million
represented a 28.4% increase in its international business, $15.2 million
represented a 142.1% increase in its technology business and $1.8 million
represented a 6.5% increase in the Company's veterinary business. The dental net
sales increase, after taking into consideration acquisitions, was primarily due
to the Company's increase in field sales consultants and telesales personnel,
database marketing programs and promotional activities. Of the approximately
$37.1 million increase in medical net sales, approximately $17.0 million, or
45.8%, represents incremental net sales to renal dialysis centers, with the
effects of acquisitions and increased telesales personnel accounting for the
other major increase in net sales. In the international market, the increase in
net sales was due to the full year benefit of an acquisition made in France in
July 1994, acquisitions made in 1995, increased unit volume growth

23
<PAGE>
and favorable exchange rate translation adjustments. The increase in net sales
for the Company's technology market was primarily the result of an increase in
unit sales due to the release of the new Windows(R) version of Easy Dental(R)
Plus software in December 1995 and substantial price increases. The increased
pricing on the Easy Dental(R) Plus software product was accompanied by
substantial sales promotions and related expense. In the veterinary market, the
Company now earns a commission on certain products which the manufacturer now
sells direct. Including those sales on a basis similar to 1994, sales to the
veterinary market would have increased by approximately 20.0%.

Gross profit increased by $47.9 million, or 33.6%, to $190.6 million in
1995, from $142.7 million in 1994, while gross profit margin increased by 1.6%
to 30.9% from 29.3% for the same period. Of the 1.6% increase in gross profit
margin, approximately 87.5%, or 1.4%, was primarily attributed to increased
sales volume of the Company's Easy Dental(R) Plus software, which carried a
higher gross profit margin than other products sold by the Company. The higher
net sales volume for the Company's technology business, up 142.1% to $25.9
million from $10.7 million for the same period last year, was primarily due to
the release of the new Windows(R) version of Easy Dental(R) Plus software, which
increased unit sales, coupled with substantial price increases. The increased
pricing on the Easy Dental(R) Plus software product was accompanied with
substantial sales promotions. The balance of the change in gross profit margin
was due to changes in product mix.

Selling, general and administrative expenses increased by $42.2 million, or
32.8%, to $170.8 million in 1995 from $128.6 million in 1994. Selling and
shipping expenses increased by $34.8 million, or 44.8%, to $112.5 million in
1995 from $77.7 million in 1994. As a percentage of net sales, selling and
shipping expenses increased 2.4% to 18.3% in 1995 from 15.9% in 1994. The
increase in selling and shipping expenses as a percentage of net sales was
primarily due to substantial sales promotions offered by the Company's
technology group in conjunction with the promotion of Easy Dental(R) Plus
software and the new Windows(R) version released in December 1995, which
accounted for approximately 0.9% of the 2.4% increase in selling and shipping
expenses as a percentage of net sales. The balance of the increase was due
primarily to various promotional programs and incremental field sales and
marketing personnel. General and administrative expenses increased $7.4 million,
or 14.5%, to $58.3 million in 1995 from $50.9 million in 1994, primarily as a
result of acquisitions. As a percentage of net sales, general and administrative
expenses decreased 1.0% to 9.5% in 1995 from 10.5% in 1994 due primarily to the
relatively fixed nature of general and administrative expenses when compared to
the 26.6% increase in sales volume for the same period.

Special charges decreased by $2.8 million to $20.8 million for 1995, from
$23.6 million for 1994. Special charges for 1995 included final, non-cash
mark-to-market adjustments of approximately $17.5 million for stock grants made
to an executive officer of the Company and stock issuances to other senior
management and approximately $2.8 million for options granted to certain
employees of the Company to acquire shares of the Company's Common Stock, and
cash payments of approximately $0.5 million for income taxes related to the
stock issuances to other senior management. In addition, the Company recorded an
approximate $1.1 million related tax benefit.

Interest expense--net increased $1.9 million, or 54.3%, to $5.4 million in
1995 from $3.5 million in 1994. This increase was due to two factors: average
interest rates rose to 8.3% in 1995 from 6.4% in 1994, and the Company's average
borrowings increased by $11.3 million in 1995 as compared to 1994 as a result of
higher working capital requirements and financing of acquisitions.

Equity in earnings of affiliates increased by $1.0 million, or 200.0%, to
$1.5 million in 1995 from $0.5 million in 1994. This increase in equity in
earnings of affiliates was primarily due to an increase in earnings of one
unconsolidated affiliate which was the result of increased sales volume and the
acquisition of another unconsolidated affiliate during the fourth quarter of
1995.

In 1995, the Company's provision for taxes was $5.1 million, while the
pre-tax loss was $6.1 million. The difference between the tax provision and the
amount that would have been recoverable by applying the statutory rate to
pre-tax loss was attributable substantially to the non-deductibility for

24
<PAGE>
income tax purposes of the $17.5 million appreciation in the value of the stock
issued to an executive officer and other senior management of the Company. On a
pro forma basis, to give effect to special charges, taxes on income for 1995
were $6.3 million, resulting in an effective tax rate of 42.9%. The difference
between the pro forma effective tax rate and the Federal statutory rate relates
primarily to state income taxes and currently non-deductible net operating
losses of certain foreign subsidiaries, primarily in France, which are not
included in the Company's consolidated tax return. In 1994, the income tax
recovery was $1.6 million, while the pre-tax loss was $12.4 million. The
effective tax rate of the Company for 1994 differed from the Federal statutory
rate, primarily due to non-deductible special charges of approximately $9.1
million arising from the appreciation in the value of stock issued to an
executive officer of the Company and currently non-deductible net operating
losses of certain foreign subsidiaries.

1994 Compared to 1993

Net sales increased $70.9 million, or 17.1%, to $486.6 million in 1994 from
$415.7 million in 1993. Of the $70.9 million increase, $24.5 million represented
a 41.2% increase in the Company's international business, $20.6 million and
$19.3 million represented an 8.4% and 24.5% increase in the Company's dental and
medical businesses, respectively, and $3.0 million represented a 38.1% increase
in net sales of the Company's technology products. The net sales increase for
the Company's international business was the result of the full year benefit of
certain acquisitions in the United Kingdom and the Netherlands, which took place
in July and October, respectively, of 1993 and comprised $12.1 million and $5.1
million, respectively, of the 1994 international net sales increase. Dental net
sales increases were primarily due to the Company's increase in telesales
personnel and field sales consultants, database marketing programs and
promotional activities. Medical net sales of products to renal dialysis centers
increased $9.9 million over 1993, while net sales to podiatrists increased $4.5
million as the result of an acquisition of a medical supply company in August
1994. Additionally, net sales of a medical supply company acquired in November
1992 increased 66.2% over 1993. Net sales of technology products increased
primarily due to increased unit net sales and price increases on the Company's
Easy Dental(R) Plus software product, which accounted for the 1994 increase.

The Company's gross profit increased by $21.7 million, or 17.9%, to $142.7
million in 1994 from $121.0 million in 1993. Of the $21.7 million increase,
approximately $8.9 million, or 41.0%, was attributable to the Company's
international business, and $9.0 million, or 41.5%, was attributable to the
Company's dental business. The gross profit increase for the Company's
international business reflects the full year benefit of certain acquisitions in
the United Kingdom and the Netherlands, which took place in July and October,
respectively, of 1993 and comprised $4.4 million and $2.8 million, respectively,
of the 1994 increase. The Company's dental gross profit increase was primarily
due to higher unit sales and increased sales of Henry Schein brand products. The
overall increase in gross profit margin to 29.3% from 29.1% was primarily due to
increased sales of higher margin products and higher margins realized on the
Company's Easy Dental(R) Plus products, offset in part by lower gross profit
margins on the Company's medical business, which decreased from 26.0% in 1993 to
21.7% in 1994 as a result of increased price competition and increased sales of
lower margin products to renal dialysis centers.

Selling, general and administrative expenses increased by $19.0 million, or
17.3%, to $128.6 million in 1994 from $109.6 million in 1993. Selling and
shipping expenses increased by $14.9 million, or 23.7%, to $77.7 million in 1994
from $62.8 million in 1993. The increase in selling and shipping expenses was
due to increased sales volume, the full year impact of certain acquisitions in
the United Kingdom and The Netherlands, an increase in promotional activities
relating to the sale of Easy Dental(R) Plus software and the impact of an
acquisition. As a percentage of net sales, selling and shipping expenses
increased 0.8% to 15.9% in 1994 from 15.1% in 1993. This increase was due to the
full year impact of certain acquisitions in The Netherlands and the United
Kingdom, and the acquisition of a medical supply company in 1994. General and
administrative expenses increased $4.1

25
<PAGE>
million, or 8.8%, to $50.9 million in 1994 from $46.8 million in 1993. As a
percentage of net sales, general and administrative expenses decreased 0.8% to
10.5% in 1994 from 11.3% in 1993.

Special charges increased by $17.5 million to $23.6 million from $6.1
million for 1993. Special charges included approximately $21.3 million in
special management compensation expense, an additional cash payment of $0.3
million for additional income taxes resulting from 1992 stock grants, and
approximately $2.0 million in special professional fees. The significant
increase in special management compensation expense was the result of the
completion of the Reorganization which caused certain stock grants awarded an
executive officer of the Company valued at $17.3 million to become fully vested,
and the issuance of stock valued at $3.5 million to certain senior management of
the Company along with cash payments for income taxes of approximately $2.4
million, net of prior executive incentive plan accruals of $1.9 million. Charges
to earnings in connection with the stock grants and issuances ceased upon the
closing of the initial public offering when the contingent buy-back features
relating to these stock grants and issuances terminated.

Interest expense--net increased $1.1 million, or 48.5%, to $3.5 million in
1994 from $2.4 million in 1993. The increase was primarily due to an increase in
average debt of $9.9 million in 1994 offset in part by decreased average
interest rates of 6.4% in 1994 from 6.6% in 1993.

Other income (expense)--net increased $1.1 million to income of $0.5 million
in 1994 from an expense of $0.6 million in 1993. This increase was primarily
attributable to a foreign exchange gain of approximately $0.5 million.

Equity in earnings of affiliates decreased by $0.8 million, or 61.9%, to
$0.5 million in 1994 from $1.3 million in 1993. This decrease in equity in
earnings of affiliates was primarily due to decreased sales volume as a result
of increased competition for the products sold by an unconsolidated 50%-owned
company.

Taxes on income (recovery) decreased $3.0 million, to a recovery of $1.6
million in 1994 from an expense of $1.4 million in 1993 due primarily to the
recognition in 1994 of certain Reorganization expenses amounting to $14.5
million. The effective tax recovery rate for 1994 was lower than the statutory
rate due primarily to non-deductible special management compensation charges of
approximately $9.1 million and currently non-deductible net operating losses of
certain foreign subsidiaries.

Inflation

Management does not believe inflation had a material adverse effect on the
financial statements for the periods presented.

Effect of Recently Issued Accounting Standards

Recently issued accounting standards applicable to the Company include
Statement of Financial Accounting Standards No. 121 ("SFAS No. 121"),
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," which establishes accounting standards for, among other things,
the impairment of long-lived assets, and certain identifiable intangibles and
goodwill. SFAS No. 121 is effective for financial statements for fiscal years
beginning after December 15, 1995 and has not had any effect on the Company's
consolidated financial statements. In addition, the Company does not intend to
adopt the fair value method of accounting for stock options as permitted by
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation."

26
<PAGE>
QUARTERLY RESULTS

The following table sets forth summary quarterly unaudited financial
information for 1994 and 1995, and the first quarter of 1996, excluding
non-recurring special charges and the related tax effects. In the opinion of
management, this quarterly information has been prepared on a basis consistent
with the Company's audited consolidated financial statements appearing elsewhere
in this Prospectus and reflects all necessary adjustments (consisting only of
normal, recurring adjustments) for a fair presentation of such unaudited
quarterly results when read in conjunction with the audited financial statements
and the notes thereto. The operating results for any quarter are not necessarily
indicative of results for any future period and there can be no assurance that
any trends reflected in such results will continue in the future.

<TABLE>
<CAPTION>
1996
QUARTER
1994 QUARTERS ENDED 1995 QUARTERS ENDED ENDED
------------------------------------------- ------------------------------------------ ---------
MARCH 26, JUNE 25, SEPT. 24, DEC. 31, APRIL 1, JULY 1, SEPT. 30, DEC. 30, MARCH 30,
1994 1994 1994 1994 1995 1995 1995 1995 1996
--------- -------- --------- -------- -------- -------- --------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales......... $ 108,356 $115,793 $ 122,695 $139,766 $136,040 $139,753 $ 156,667 $183,749 $ 185,359
Gross profit...... 31,695 33,708 34,998 42,287 40,315 42,107 48,090 60,072 54,949
Operating
income............ 1,876 3,347 4,516 4,389 2,986 4,689 5,188 6,898 4,704
Net income........ 881 1,520 1,577 3,000 936 2,066 2,093 4,312 2,464
Earnings per
share............. .07 .13 .13 .25 .08 .17 .17 .26 .13
</TABLE>

The Company's business has been subject to seasonal and other quarterly
influences. Net sales and operating profits have been generally higher in the
fourth quarter due to the timing of sales of software, year-end promotions and
purchasing patterns of office-based healthcare practitioners and have been
generally lower in the first quarter due primarily to the increased purchases in
the prior quarter. Quarterly results also may be materially affected by a
variety of other factors, including the timing of acquisitions and related
costs, the release of software enhancements, timing of purchases, special
promotional campaigns, fluctuations in exchange rates associated with
international operations and adverse weather conditions.

RISK MANAGEMENT

The Company has operations in the United States, Canada, the United Kingdom,
The Netherlands, Belgium, Germany, France, the Republic of Ireland and Spain.
Each of the Company's operations endeavors to protect its margins by using
foreign currency forward contracts to hedge the estimated foreign currency
payments to foreign vendors. The total U.S. dollar equivalent of all foreign
currency forward contracts hedging vendor payments was $4.8 million as of the
end of the first quarter in 1996. The gain (or loss) on the income statement due
to foreign currency fluctuations, net of a one-time gain of approximately $0.5
million in 1994 resulting from hedging the Van den Braak acquisition loan
described below, was $0.2 for 1995 and $0.6 million for the three months ended
March 30, 1996.

The Company considers its investment in foreign operations to be both long
term and strategic. As a result, the Company does not hedge the long term
translation exposure to its balance sheet. The Company experienced a positive
translation adjustment of $0.3 million in 1995, and a negative translation
adjustment of $0.4 million for the three months ended March 30, 1996, which were
reflected in the balance sheet as an adjustment to stockholders' equity. The
cumulative translation adjustment at the end of the first quarter of 1996 showed
a net negative translation adjustment of $0.6 million.

The Company issues a Canadian catalog once a year with prices stated in
Canadian dollars; however, orders are shipped from the Company's United States
warehouses resulting in U.S. dollar costs for Canadian dollar sales. To minimize
the exposure to fluctuations in foreign currency exchange rates, the Company
enters into foreign currency forward contracts with major international banks
and

27
<PAGE>
an unconsolidated 50%-owned company to convert estimated monthly Canadian dollar
receipts into U.S. dollars. The Company usually enters into these forward
contracts prior to the issuance of its Canadian catalog and for the expected
life of the catalog. As of March 30, 1996, the Company had 19 forward contracts
outstanding for the forward sale of 5.7 million Canadian dollars. The last of
the contracts expire on December 27, 1996; however, the Company anticipates
entering into new contracts in the normal course of its business.

The Company borrowed money in U.S. dollars under a term loan related to the
Van den Braak acquisition. The Company loaned the proceeds to Henry Schein B.V.
in Netherland Guilders ("NLG") with principal and interest payable in NLGs. To
minimize the resultant exposure to fluctuations in foreign currency exchange
rates, the Company entered into a series of foreign currency forward contracts
to sell NLGs for U.S. dollars. As of March 30, 1996, the Company had 10
contracts outstanding for the forward sale of NLG 8.2 million. The last contract
expires on October 31, 1997.

The Company entered into two interest rate swaps with major financial
institutions to exchange variable rate interest for fixed rate interest. The net
result was to substitute a weighted average fixed interest rate of 7.81% for the
variable LIBOR rate on $13.0 million of the Company's debt. The interest rate
swaps expire in October and November of 2001.

The Company from time to time makes loans to its international subsidiaries.
These loans are generally in the local currency of the subsidiary. The Company
generally uses forward contracts to fully hedge the foreign currency exposure on
these loans. As of March 30, 1996, the United States dollar value equivalent of
the Company's three foreign currency forward contracts was $0.8 million.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal capital requirements have been to fund (a) working
capital needs resulting from increased sales, extended payment terms on various
products and special inventory buying opportunities, (b) capital expenditures
and (c) acquisitions. Since sales have been strongest during the fourth quarter
and special inventory buying opportunities are most prevalent just before the
end of the year, the Company's working capital requirements have been generally
higher from the end of the third quarter to the end of the first quarter of the
following year. The Company currently finances its business primarily through a
revolving credit facility.

Net cash provided by (used in) operating activities for 1993, 1994, 1995,
the three months ended April 1, 1995 and the three months ended March 30, 1996,
was ($3.3 million), $6.3 million, ($10.8 million), ($2.6 million) and ($16.0
million), respectively. Cash used in operating activities decreased from 1992 to
1993 primarily due to higher net income, as well as greater net cash due to the
net effects of certain non-cash charges in excess of non-cash benefits and a
reduction in current assets, were in part offset by reductions in trade payables
and accrued expenses. The increase in cash provided by operating activities from
1993 to 1994 was primarily due to increases in trade payables and the net
effects of certain non-cash charges in excess of non-cash benefits were in part
offset by increases in trade receivables and a net loss. The increase in cash
used in operating activities from 1994 to 1995 was primarily due to a net loss,
as well as increases in trade receivables and the net effects of certain non-
cash charges in excess of non-cash benefits, were in part offset by increases in
trade payables. The increase in cash used in operating activities for the three
months ended April 1, 1995 and the three months ended March 30, 1996 was
primarily due to increases in trade receivables and decreases in trade payables,
were in part offset by decreases in inventories and net income.

Net cash used in investing activities increased $1.6 million in 1993 to $4.9
million; $3.0 million in 1994 to $7.9 million; $21.6 million to $29.5 million in
1995 and $1.3 million for the three months ended March 30, 1996 to $3.7 million
from $2.4 million for the three months ended April 1, 1995. Cash used in
investing activities has primarily been attributable to business acquisitions in
1995 and capital

28
<PAGE>
expenditures with respect to the opening of a distribution facility in 1993, a
new corporate headquarters in 1994 and the opening of new facilities in Europe
and the United States in 1995.

Net cash provided by financing activities was $6.2 million, $3.7 million,
$43.4 million, $6.7 million and $19.7 million for 1993, 1994, 1995, the three
months ended April 1, 1995 and the three months ended March 30, 1996,
respectively. Net cash provided by financing activities decreased in 1994 as
cash flow from operating activities increased by $9.6 million. Net cash provided
by financing activities increased in 1995 due primarily to proceeds from the
Company's initial public offering, which financed, among other things, capital
expenditures, additional working capital requirements and business acquisitions.
Net cash provided by financing activities increased in the three months ended
March 30, 1996 due primarily to additional long-term borrowings to finance
additional working capital requirements and business acquisitions.

The Company entered into a $45.0 million revolving credit facility on
September 30, 1993 that was amended and restated on July 5, 1995 to increase the
facility to $65.0 million. Borrowings under the facility were $35.8 million,
$17.0 million and $39.0 million at the end of 1994, at the end of 1995 and at
March 30, 1996, respectively. At March 30, 1996, the Company's main revolving
credit facility was unsecured. In addition, the Company's subsidiaries have
revolving credit facilities that total approximately $13.9 million.

On May 5, 1995 the Company entered into a 12-year straight amortization term
loan for $1.2 million. In addition, the Company has borrowed funds in connection
with its operations in Europe. See "Risk Management."

The aggregate purchase price for the acquisitions completed during fiscal
1995 and through May 31, 1996 was approximately $26.0 million and $8.0 million,
respectively, payable $16.4 million and $8.0 million in cash and $9.6 million
and $0 million in notes, respectively. The cash portion of the purchase price
was primarily funded by the Company's revolving credit facility. The use of
proceeds from the initial public offering, completed in November 1995, included
a pay-down of the Company's revolving credit facility and the pay-off of certain
1995 acquisition notes, as well as other existing debt. Certain of the
acquisitions call for contingent payments if certain financial targets are met.
In addition, with respect to certain acquisitions and ventures, minority
shareholders have the right at certain times to require the Company to acquire
their shares at either fair market value or a formula price based on earnings of
the entity.

The Company believes that its anticipated cash flow from operations, as well
as the availability of funds under its existing credit agreements and the net
proceeds of this offering, will provide it with liquidity sufficient to meet its
currently foreseeable capital needs.

29
<PAGE>
BUSINESS

GENERAL

The Company is the largest direct marketer of healthcare products and
services to office-based healthcare practitioners in the combined North American
and European markets. The Company sells products and services to approximately
230,000 customers in markets the Company estimates exceeded $9.0 billion in
sales in 1995. The Company's customers are primarily dental practices and dental
laboratories, as well as physician practices, veterinary clinics and
institutions. In 1995, the Company sold products to over 65% of the estimated
100,000 dental practices in the United States. The Company believes that there
is strong awareness of the "Henry Schein" name among office-based healthcare
practitioners due to its more than 60 years of experience in distributing
healthcare products. Through its comprehensive catalogs and other direct sales
and marketing programs, the Company offers its customers a broad product
selection of both branded and private brand products which include approximately
50,000 SKUs in North America and approximately 35,000 SKUs in Europe at
published prices that the Company believes are below those of many of its
competitors. The Company also offers various value-added products and services,
such as practice management software. As of March 30, 1996, the Company had sold
over 16,000 dental practice management software systems, more than any of its
competitors. The Company's activities are conducted by the Company; by its
subsidiaries, including Henry Schein UK Holdings Limited in the United Kingdom
Schein Dental Equipment and S&S Dental Supply, Inc., each of which distributes
dental products, and Zahn Holdings, Inc., which distributes dental laboratory
products, as well as their respective subsidiaries; and by 50%-or-less owned
entities, including HS Pharmaceutical and its subsidiaries, which are engaged in
the manufacture and distribution of certain generic pharmaceutical products.

The Company intends to increase its sales to existing dental customers by
intensifying its direct marketing efforts, by offering additional products and
services, and by augmenting its direct marketing and telesales efforts with
additional field sales consultants. The Company, which had traditionally focused
primarily on the dental market, is currently utilizing these strategies and its
cost-effective infrastructure to further expand into the medical and veterinary
markets. Net sales to these markets increased from $59.9 million in 1991 to
$164.7 million in 1995, which represented 26.7% of the Company's net sales in
1995. In 1990, the Company established marketing and distribution capabilities
in Europe. Net sales in international markets have increased from $23.6 million
in 1991 to $107.7 million in 1995, which represented 17.5% of the Company's net
sales in 1995.

The Company was formed on December 23, 1992 as a wholly-owned subsidiary of
Holdings. At that time, Holdings conducted the business in which the Company is
now engaged and, in addition, owned 100% of the outstanding capital stock of
Schein Pharmaceutical, a company engaged in the manufacture and distribution of
multi-source pharmaceutical products. In December 1992, Holdings separated the
Company's business from Schein Pharmaceutical by transferring to the Company all
of the assets (including Holdings' 50% interest in HS Pharmaceutical) and
liabilities of the healthcare distribution business now conducted by the
Company. The Company did not assume any other liabilities of Holdings, including
the liabilities associated with Schein Pharmaceutical's business. In February
1994, the Company, Holdings and their stockholders entered into a number of
reorganization agreements, and in September 1994, pursuant to such agreements,
all of the Common Stock held by Holdings was distributed to certain of the
current stockholders of the Company. For a more complete description of these
transactions, see "Reorganization."

INDUSTRY OVERVIEW

The Company distributes its products, supplies and equipment primarily to
office-based healthcare practitioners in the dental, medical and veterinary
markets.

30
<PAGE>
Dental. According to industry estimates, United States sales of dental
supplies and equipment have increased from $1.9 billion in 1992 to more than
$2.2 billion in 1995. In addition, according to industry estimates, in 1995
there were approximately 130,000 active dentists serving the United States
marketplace in about 100,000 dental practices. Based upon such information, the
Company believes that the average annual purchase of dental supplies and
equipment in 1995 was approximately $17,000 per dentist. The Company estimates
that the European market for dental supplies and equipment was more than $2.3
billion in 1995.

Medical. According to industry estimates, United States sales of medical
supplies and equipment to office-based physicians were more than $4.0 billion in
1995. In addition, according to industry estimates, in 1995 there were
approximately 390,000 office-based physicians serving the United States
marketplace, and based upon such information, the Company believes that the
average annual purchase of medical supplies and equipment in 1995 was
approximately $10,000 per office-based physician.

Veterinary. According to industry estimates, United States sales of supplies
and equipment to veterinarians whose practices are directed primarily to small
animals were approximately $500 million in 1995 (excluding sales of food
products, which the Company does not distribute). In addition, according to
industry estimates, in 1995 there were approximately 35,000 veterinarians whose
practices were directed primarily to small animals, practicing in approximately
21,000 small animal veterinary clinics in the United States. Based upon such
information, the Company believes that the average annual purchase of supplies
and equipment in 1995 was approximately $14,000 per veterinarian.

The office-based healthcare practitioner industry in the United States is
highly fragmented and geographically diverse. The industry ranges from sole
practitioners working out of relatively small offices to group practices or
service corporations comprised of a few to a large number of practitioners who
have combined or otherwise associated their practices. Due in part to the
inability of office-based practitioners to store and manage large quantities of
supplies in their offices, the distribution of healthcare supplies and small
equipment to office-based practitioners has traditionally been characterized by
frequent, small quantity orders, and a need for rapid, reliable and
substantially complete order fulfillment. The purchasing decision within an
office-based healthcare practice is typically made by the practitioner or by an
administrative assistant, and supplies and small equipment are generally
purchased from more than one healthcare product distributor. As a result,
distributors serving office-based healthcare practitioners generally offer a
wide selection of products at competitive prices. Most of the Company's large
competitors rely on an extensive field sales force to generate sales leads and
to take and service orders. Other distributors utilize a direct response
marketing approach, relying primarily on the use of direct mail catalogs and
related marketing materials and in-house telesales representatives to generate
orders. Certain direct marketers, including the Company, also utilize field
sales personnel to enhance their relationships with their direct mail customers
and to service and support the distribution of certain products and equipment
that generally require a greater level of customer support.

In recent years, the healthcare industry has increasingly focused on cost
containment. This trend has benefitted distributors capable of providing a broad
array of products and services at low prices. This trend has also accelerated
the growth of HMOs, group practices, other managed care accounts and collective
buying groups who, in addition to their emphasis on obtaining products at low
prices, tend to favor distributors capable of producing specialized management
information support. The Company believes that the trend towards cost
containment has the potential to favorably impact demand for practice management
systems and software that can enhance the efficiency and facilitate the
management of the practitioner's specific practice.

The supply industry serving office-based healthcare practitioners is highly
fragmented, with numerous national distributors and approximately 900 regional
distributors in North America and Europe serving the office-based practitioner
market. The Company believes that consolidation within the supply industry
serving office-based healthcare practitioners will result in a number of
distributors,

31
<PAGE>
particularly companies with limited financial and marketing resources, seeking
to combine with larger companies that can provide expansion opportunities. This
consolidation may also result in distributors seeking to acquire companies that
can enhance their current product offerings, expand the services they can offer
or provide opportunities for the distributor to serve a broader customer base.

BUSINESS STRENGTHS

The Company believes the following factors have been of principal importance
in its ability to achieve its present position in the dental, medical and
veterinary markets.

Direct Sales and Marketing Expertise. The Company believes that its more
than 60 years of experience in distributing products to healthcare practitioners
and more than 30 years of direct marketing experience has resulted in strong
awareness of the "Henry Schein" name among healthcare practitioners. The Company
supports its direct marketing effort with approximately 400 telesales
representatives who facilitate order processing and generate sales through
direct and frequent contact with its customers. The Company maintains an
in-house advertising department that produced more than 8.5 million pieces of
direct marketing material during 1995, such as general and specialty catalogs,
flyers and order stuffers, customized by market and country. The Company's
database of approximately 600,000 office-based healthcare practitioners allows
it to utilize customer segmentation techniques to more effectively market its
products and services.

Broad Product Offerings at Low Prices. The Company believes that it has one
of the most extensive product offerings in each of the markets it serves. The
Company presently offers approximately 50,000 SKUs to its North American
customers and approximately 35,000 SKUs to its European customers. Over 80% of
the Company's products in dollar volume are offered under national name brands,
and the remainder are offered under the "Henry Schein" private brand. The
Company believes its cost effective infrastructure enables it to offer products
at prices below those of many of its competitors. In addition, the Company's
pricing policy in the United States and Canada is to match its competitors'
lowest advertised price. See "Competition." Through the breadth of its product
offerings and its competitive prices, the Company strives to be a single source
of supply to a wide variety of healthcare practitioners.

Commitment to Superior Customer Service. As part of the Company's commitment
to providing superior customer service, the Company offers its customers ease of
order placement and rapid, accurate and complete order fulfillment, and the
ability to order products 24-hours a day. Products can be ordered by mail, fax,
telephone (either automated or by speaking to a telesales representative), or
via a computerized order entry system. The Company estimates that approximately
99% of all items ordered in the United States and Canada are shipped without
back ordering, and that approximately 99% of all orders in the United States and
Canada received before 6:00 p.m. are shipped on the same day the order is
received. In addition, the Company estimates that over 90% of orders are
received by its customers within two days of placing the order.

Cost-Effective Infrastructure. The Company's capital expenditures of
approximately $18.0 million over the last three fiscal years have enabled it to
operate more cost-effectively and achieve greater service efficiency at higher
sales volumes. The Company believes that these enhancements, as well as its
strategically located distribution centers in the United States and Europe,
enable it to provide its customers with broad geographic coverage on a
cost-effective basis. In addition, the Company believes that this infrastructure
provides opportunities for the Company to service and support increased net
sales without the need for commensurate increases in expenses.

32
<PAGE>
GROWTH STRATEGY

The Company believes that the continuing application of its business
strengths, coupled with a focus on the following growth strategies, will enhance
its ability to increase sales to existing dental customers, increase its medical
customer base and increase sales to its veterinary customers.

Increased Penetration of Existing Dental Customer Base. Over 65% of the
estimated 100,000 dental practices in the United States are customers of the
Company. The Company estimates that it had sales in 1995 of more than $10,000 to
less than 10% of its dental customers in the United States, and therefore
believes that it has an opportunity to increase its sales to a substantial
number of its existing dental customers. The Company intends to accomplish this
objective by (i) utilizing its current customer database to better focus its
marketing efforts, (ii) increasing the number of field sales consultants, (iii)
expanding its dental product and service offerings and (iv) increasing its focus
on large corporate accounts.

Increased Penetration of Medical Market. In 1985, the Company began to
increase its focus on the medical market. The Company believes this market
possesses many of the same characteristics as the dental market, and therefore,
opportunities exist to increase its customer base by utilizing its core
infrastructure and strength in direct marketing. The Company's net sales of
medical products have grown from $44.0 million in 1991 to $135.0 million in
1995. The Company has approximately 50 field sales consultants exclusively
dedicated to the medical market. The Company intends to expand its medical
customer base by increasing the number of field sales consultants in selected
markets, expanding its product offerings and increasing its focus on large
corporate accounts.

Increased Penetration of Existing Veterinary Customer Base. In 1985, the
Company began to increase its focus on the veterinary market. The Company's net
sales of veterinary products have grown from $16.0 million in 1991 to $29.7
million in 1995. In 1995, the Company sold products to more than 65% of the
estimated 21,000 veterinary clinics in the United States. The Company estimates
that it is the primary supplier of veterinary supplies to less than 5% of its
veterinary customers in the United States, and therefore believes that it has an
opportunity to increase its sales to a substantial number of its existing
veterinary customers. The Company intends to increase its sales to its existing
customers by utilizing its current customer database to better focus its
marketing efforts.

Acquisitions and Joint Ventures. The Company believes that consolidation
within the supply industry serving office-based healthcare practitioners is
continuing to create opportunities for the Company to acquire businesses or
enter into joint ventures that can complement the Company's current business.
During 1993 through 1995, the Company entered into joint ventures with, or
acquired, an additional 21 businesses. From January 1, 1996 to May 31, 1996, the
Company completed five acquisitions and has entered into agreements to acquire
five other companies. The Other Recent and Pending Acquisitions which were
reflected in the Pro Forma Condensed Consolidated Statement of Operations
accounted for 4.5% and 6.0% of the Company's pro forma net sales and operating
income, respectively, for the three months ended March 30, 1996. See "Risk
Factors."

Value-Added Products and Services. The Company offers its customers practice
management software, assistance with arranging electronic claims processing and
financing sources for patient billings and equipment, and large equipment
installation and repair services. The Company intends to continue to market and
expand these products and services. The Company believes that offering these
products and services enhances its relationships with its customers, promotes
customer loyalty and should increase sales of consumable supply products.

International Expansion. Sales by the Company to customers located outside
the United States and Canada have increased from approximately $23.6 million in
1991 to $107.7 million in 1995. Since 1990, the Company has established
operating subsidiaries and joint ventures in the United Kingdom, The
Netherlands, Belgium, Germany, France, Republic of Ireland and Spain. The
Company believes it is a leading distributor of healthcare products to dental
practitioners in the United Kingdom and The

33
<PAGE>
Netherlands. The Company intends to facilitate its expansion into new
territories principally by entering into joint ventures and acquisitions with
established local distributors.

CUSTOMERS

The Company serves approximately 230,000 customers worldwide in the dental,
medical and veterinary markets. The Company's dental customers include
office-based dental practices, dental laboratories, universities, institutions,
governmental agencies and large group and corporate accounts; medical customers
include office-based physician practices, podiatrists, renal dialysis centers,
surgery centers, institutions and governmental agencies; and the Company's
veterinary products are sold primarily to office-based veterinarians serving
primarily small animals.

Approximately 105,000, or 44.1%, of the Company's customers in 1995 were
dental practices and laboratories in the United States and Canada. The Company's
average annual sales to these customers was approximately $3,000 per customer in
1995. Medical and veterinary customers accounted for approximately 75,000 and
16,000, respectively, of the Company's total customers in 1995, or 31.5% and
6.7%, respectively. The average annual sales to its medical and veterinary
customers in 1995 was approximately $1,800 and $1,900 per customer,
respectively. International customers, which are predominantly dental practices
and laboratories in Europe, totalled approximately 42,000, and accounted for
17.7% of the Company's total customers in 1995. The Company's average annual
sales to these customers were approximately $2,600 per customer in 1995.

The Company believes that its customers generally order from two or more
suppliers for their healthcare product needs, and often use one supplier as
their primary resource. The Company believes that its customers generally have
larger order sizes and order more frequently from their primary suppliers. The
Company estimates that it serves as a primary supplier to less than 10% of its
total customer base, and believes it has an opportunity to increase sales by
increasing its level of business with those customers for which it serves as a
secondary supplier.

Over the past several years the Company has expanded its customer base to
include larger purchasing organizations, including certain dental laboratories,
institutions, government agencies, renal dialysis centers and surgery centers.
More recently, as cost-containment pressures have resulted in increased demand
for low-cost products and value-added services, the Company has targeted
specific groups of practices under common ownership, institutions and
professional groups. For example, the Company has an exclusive direct marketing
agreement with an American Medical Association ("AMA") sponsored service and a
veterinarian-sponsored service, pursuant to which member practitioners have
access to the services' lower priced products. In 1995, the AMA-sponsored
service and the veterinarian-sponsored purchasing service accounted for net
sales of over $16.7 million. These services, government institutions and
agencies, and other large or collective purchasers, require low-cost pricing and
detailed product and usage information and reporting. The Company believes it is
well situated to meet the needs of these customers, given its broad, low-cost
product offerings, and its management information systems. No single customer
accounted for more than 4.0% of net sales in 1995.

SALES AND MARKETING

The Company's sales and marketing efforts, which are designed to establish
and solidify customer relationships through frequent direct marketing contact,
emphasize the Company's broad product lines, competitive prices and ease of
order placement. In addition, the Company's marketing efforts involve personal
interaction with field sales consultants in certain locations. The key elements
of the Company's program in the United States are:

. Direct Marketing. During 1995, the Company distributed over 8.5
million pieces of direct marketing material, including catalogs, flyers,
order stuffers and other promotional materials to approximately 600,000
office-based healthcare practitioners. The Company's principal U.S. dental
catalog, which is issued semi-annually, contains an average of over 300
pages and includes

34
<PAGE>
approximately 18,000 SKUs. The number of catalogs and other material
received by each customer depends upon the market they serve as well as
their purchasing history. The Company's catalogs include detailed
descriptions and specifications of both branded and private brand products
and are utilized by healthcare practitioners as a reference source. By
evaluating its customers' purchasing patterns, area of specialty, past
product selections and other criteria, the Company identifies customers who
may respond better to specific promotions or products. To facilitate its
direct marketing activities, the Company maintains an in-house advertising
department which performs many creative services, which the Company believes
streamlines the production process, provides greater flexibility and
creativity in catalog production, and results in cost savings.

. Telesales. The Company supports its direct marketing with
approximately 400 inbound and outbound telesales representatives who
facilitate order processing and generate new sales through direct and
frequent contact with customers. Inbound telesales representatives are
responsible for assisting customers in purchasing decisions as well as
answering product pricing and availability questions. In addition to
assisting customers, inbound telesales representatives also market
complementary or promotional products. The Company's telesales
representatives utilize on-line computer terminals to enter customer orders
and to access information about products, product availability, pricing,
promotions and customer buying history.

The Company utilizes outbound telesales representatives and programs to
better market its services to those customer accounts identified by the
Company as either being high volume or high order frequency accounts. The
Company's U.S. dental outbound telesales representatives, accounted for
$78.6 million of the Company's net sales in 1995. The Company has
approximately 85 medical and veterinary telesales representatives who make
outbound calls in addition to handling inbound telesales. Outbound telesales
representatives strive to manage long-term relationships with these
customers through frequent and/or regularly scheduled phone contact and
personalized service.

The Company's telesales representatives generally participate in an
initial two-week training course designed to familiarize the sales
representatives with the Company's products, services and systems. In
addition, generally all telesales representatives attend periodic training
sessions and special sales programs and receive incentives, including
monthly commissions.

. Field Sales Consultants. In 1992, the Company initiated its field
sales consultant program and now has approximately 250 field sales
consultants covering certain of its major North American and European
markets. The field sales consultants concentrate on attracting new customers
and increasing sales to customers who do not currently order a high
percentage of their total product needs from the Company. This strategy is
designed to complement the Company's direct marketing and telesales
strategies and to enable the Company to better market, service and support
the sale of more sophisticated products and equipment. Once a field sales
consultant has established a relationship with a customer, the
representative encourages the customer to use the Company's automated
ordering process or its telesales representatives for its day-to-day needs.
This simplifies the ordering process for the customer and increases the
effectiveness of the field sales consultant.

CUSTOMER SERVICE

A principal element of the Company's customer service approach is to offer
an order entry process that is convenient, easy and flexible. Customers
typically place orders with one of the Company's experienced telesales
representatives. Orders may also be placed 24-hours a day by fax, mail,
PROTONE(R) (the Company's 24-hour automated phone service) or its computerized
order entry system. The Company has developed an enhanced Windows(R)-based
version of its computerized order entry system, known as ArubA(R), which was
introduced at the end of 1995.

35
<PAGE>
The Company focuses on providing rapid and accurate order fulfillment and
high fill rates. The Company estimates that approximately 99% of all items
ordered in the United States and Canada are shipped without back ordering, and
that approximately 99% of all orders in the United States and Canada received
before 6:00 p.m. are shipped on the same day the order is received. In addition,
because the Company seeks to service a customer's entire order from the
distribution center nearest the customer's facility, the Company estimates that
over 90% of orders are received by its customers within two days of placing the
order. The Company continually monitors its customer service through customer
surveys, focus groups and daily statistical reports. The Company maintains a
liberal return policy to better assure customer satisfaction with its products.

PRODUCTS

The following chart sets forth the principal categories of products offered
by the Company (and in the case of the dental laboratory products, its
wholly-owned subsidiary, Zahn Holdings, Inc., and its subsidiaries) and certain
top selling types of products in each category, with the percentage of 1995 net
sales in parenthesis:

<TABLE>
<CAPTION>
DENTAL PRODUCTS (67.3%)
- -------------------------------------------------------------------------------------------
CONSUMABLE DENTAL PRODUCTS DENTAL LABORATORY
AND SMALL EQUIPMENT (59.3%) PRODUCTS (5.8%) LARGE DENTAL EQUIPMENT (2.2%)
- ----------------------------- ----------------------------- -----------------------------
X-Ray Products; Infection Teeth; Composites; Gypsum; Dental Chairs, Units and
Control; Handpieces; Acrylics; Articulators; and Lights; X-Rays; and Equipment
Preventatives; Impression Abrasives Repair
Materials; Composites; and
Anesthetics

VALUE-ADDED PRODUCTS AND
MEDICAL PRODUCTS (23.5%) VETERINARY PRODUCTS (4.9%) SERVICES (4.3%)
- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C>
Branded and Generic Branded and Generic Software and Related
Pharmaceuticals; Surgical Pharmaceuticals; Surgical Products; and Financial
Products; Diagnostic Tests; Products; and Dental Products Products
Infection Control; and
Vitamins
</TABLE>

The percentages of 1993 and 1994 net sales were as follows: consumable
dental products and small equipment, 63.3% and 61.8%, respectively; dental
laboratory products, 6.1% and 6.6%, respectively; large dental equipment, 4.2%
and 3.6%, respectively; medical products, 18.6% and 20.1%, respectively;
veterinary products, 5.9% and 5.7%, respectively; and value-added products and
services, 1.9% and 2.2%, respectively.

Consumable Supplies and Equipment

The Company offers approximately 50,000 SKUs to its customers in North
America, of which approximately 40,000 SKUs are offered to its dental customers,
approximately 11,000 are offered to its medical customers and approximately
15,000 are offered to its veterinary customers. Over 20% of the Company's
products are offered to all three types of the Company's customers in North
America. The Company offers approximately 35,000 SKUs to its customers in
Europe. Approximately 4,000 of the Company's SKUs accounted for 80% of the
Company's sales in the United States in 1995. Approximately 17% of the Company's
net sales in 1995 were from sales of products offered under the Henry Schein
private brand (i.e., products manufactured by various third parties and HS
Pharmaceutical for distribution by the Company under the Henry Schein(R) brand).
The Company believes that the Henry Schein private brand line of over 5,000 SKUs
offered in the United States and Canada is one of the most extensive in the
industry. The Company also distributes certain generic pharmaceuticals
manufactured by HS Pharmaceutical, a 50%-owned company, and has recently begun
to manufacture and distribute certain large dental equipment as a result of its
acquisition of Schein Dental Equipment, a

36
<PAGE>
distributor and manufacturer of large dental equipment which, prior to its
acquisition, was owned 73.7% by Marvin H. Schein, a director and principal
stockholder of the Company. The Company updates its product offerings regularly
to meet its customers' changing needs.

Value-Added Products and Services

In an effort to promote customer loyalty, the Company offers certain
value-added products and services. These products and services include the
following:

. Practice Management Software. The Company sells practice management
software systems to its dental and veterinary customers. The Company has
sold over 16,000 of its Easy Dental(R) Plus software systems as of the end
of fiscal 1995, and over 2,000 of its AVImark(R) veterinary software
systems. In December 1995, the Company released its new Windows(R) version
of Easy Dental(R) Plus and sold over 2,700 such units through the first
quarter of 1996. The Company's practice management software provides
practitioners with patient treatment history, billing and accounts
receivable analysis and management, an appointment calendar, electronic
claims processing and word processing programs, and the Company provides
technical support and conversion services from other software. In addition,
the Easy Dental(R) Plus software will allow the customer to connect with the
Company's order entry management systems.

. Financial Services. The Company has begun to offer its customers
assistance in managing their practices by providing access to a number of
financial services and products at rates which the Company believes are
lower than what they would be able to secure independently. The patient
financing program provides the Company's customers a method for reducing
receivables and improving cash flow by providing patients access to
financing. The Company facilitates the processing of credit applications,
payments to its customers and electronic bankcard processing through a
third-party provider for a transaction fee. The Company does not assume any
financial obligation to its customers or their patients in these programs.

. Equipment Repair and Installation. The Company offers a repair
service, ProRepair(R), which provides one-to-two-day turnaround for
handpieces and certain small equipment. The Company also provides in-office
installation and repair services for large equipment in certain markets in
North America and Europe. The Company intends to expand its repair service
business and sales of large dental equipment in connection with its
acquisition of Schein Dental Equipment and the opening of equipment sales
and service centers. The Company opened two new dental equipment sales and
service centers in North America in 1996, and as of May 31, 1996 had a total
of 18 centers in North America and Europe. See "Certain Transactions."

INFORMATION SYSTEMS

The Company's management information systems generally allow for centralized
management of key functions, including inventory and accounts receivable
management, purchasing, sales and distribution. A key attribute of the Company's
management information systems is the daily operating control reports which
allow managers throughout the Company to share information and monitor daily
progress relating to sales activity, gross profit, credits and returns,
inventory levels, stock balancing, unshipped orders, order fulfillment and other
operational statistics. The Company is in the process of expanding and upgrading
its order processing and accounts receivable information system in the United
States.

DISTRIBUTION

The Company distributes its products in the United States and Canada
primarily from its strategically located distribution centers in the Eastern,
Central and Western United States. The Company maintains significant inventory
levels of certain products in order to satisfy customer demand for prompt
delivery and complete order fulfillment of their product needs. These inventory
levels are managed on a daily basis with the aid of the Company's sophisticated
purchasing and stock status

37
<PAGE>
management information systems. The Company's European distribution centers
include locations in the United Kingdom, France, The Netherlands, Germany and
Spain. Once a customer's order is entered, it is electronically transmitted to
the distribution center nearest the customer's location and a packing slip for
the entire order is printed for order fulfillment. The Company's automated
freight manifesting and laser bar code scanning facilitates the speed of the
order fulfillment. The Company currently ships most of its orders in the United
States by United Parcel Service. In certain areas of the United States, the
Company delivers its orders via contract carriers.

PURCHASING

The Company believes that effective purchasing is a key element to
maintaining and enhancing its position as a low-cost provider of healthcare
products. The Company frequently evaluates its purchase requirements and
suppliers' offerings and prices in order to obtain products at the best possible
cost. The Company believes that its ability to make high volume purchases has
enabled it to obtain favorable pricing and terms from its suppliers. The Company
obtains its products for its North American distribution centers from over 1,200
suppliers of name brand products; in addition, the Company has established
relationships with numerous local vendors to obtain products for its European
distribution centers. In 1995, the Company's top 10 vendors and the Company's
single largest vendor, accounted for approximately 28.5% and 10.4%,
respectively, of the Company's aggregate purchases.

COMPETITION

The distribution and manufacture of healthcare supplies and equipment is
intensely competitive. Many of the products the Company sells are available to
the Company's customers from a number of suppliers. In addition, competitors of
the Company could obtain exclusive rights from manufacturers to market
particular products. Manufacturers could also seek to sell directly to
end-users, and thereby eliminate the role of distributors, such as the Company.
Significant price reductions by the Company's competitors could result in a
similar reduction in the Company's prices as a consequence of its policy of
matching its competitors' lowest advertised prices. Any of these competitive
pressures may materially adversely affect operating results.

In the United States, the Company competes with other distributors, as well
as several major manufacturers of dental, medical and veterinary products,
primarily on the basis of price, breadth of product line, customer service and
value-added services and products. In the sale of its dental products, the
Company's two principal national competitors are Patterson Dental Co. and
Sullivan Dental Products, Inc. In addition, the Company competes against a large
number of other distributors that operate on a national, regional and local
level. The Company's largest competitors in the sale of medical products are
General Medical and Physician's Sales and Service, Inc., which are national
distributors. In the veterinary product market, the Company's two principal
national competitors include The Butler Company and Burns Veterinary Supply. The
Company also competes against a large number of small local and regional
veterinary distributors, as well as a number of manufacturers that sell direct
to veterinarians whose practices are directed primarily to small animals. With
regard to the Company's practice management software, the Company competes
against a fragmented group of competitors, none of which currently have a
significant share of the market. The Company believes that it competes in Canada
substantially on the same basis as in the United States.

The Company also faces intense competition in its international markets,
where the Company competes on the basis of price and customer service against a
large number of dental product distributors and manufacturers in the United
Kingdom, The Netherlands, Belgium, Germany, France, the Republic of Ireland and
Spain. The Company has several large competitors in these markets, including
ORBIS and the GACD Group.

38
<PAGE>
GOVERNMENTAL REGULATION

The Company's business is subject to requirements under various local,
state, Federal and foreign governmental laws and regulations applicable to the
manufacture and distribution of pharmaceuticals and medical devices. Among the
Federal laws with which the Company must comply are the Federal Food, Drug, and
Cosmetic Act, the Prescription Drug Marketing Act of 1987, and the Controlled
Substances Act. It is possible that the Company may be prevented from selling
manufactured products if the Company (including its 50%-owned company, HS
Pharmaceutical, which distributes and manufactures generic pharmaceuticals) were
to receive an adverse report following an inspection by the Food and Drug
Administration (the "FDA") or the Drug Enforcement Administration, or if a
competitor were to receive prior approval of new products from the FDA. A
violation of a law by HS Pharmaceutical could cause its operations to be
suspended. A suspension could have an adverse effect on the Company's equity in
earnings of affiliates and could cause the Company to seek alternative sources
of products manufactured by HS Pharmaceutical, possibly at higher prices than
currently paid by the Company.

The Federal Food, Drug, and Cosmetic Act generally regulates the
introduction, manufacture, advertising, labeling, packaging, storage, handling,
marketing and distribution of, and recordkeeping for, pharmaceuticals and
medical devices shipped in interstate commerce. The Prescription Drug Marketing
Act of 1987, which amended the Federal Food, Drug and Cosmetic Act, establishes
certain requirements applicable to the wholesale distribution of prescription
drugs, including the requirement that wholesale drug distributors be registered
with the Secretary of Health and Human Services or licensed by each state in
which they conduct business in accordance with federally established guidelines
on storage, handling and record maintenance. Under the Controlled Substances
Act, the Company, as a distributor of controlled substances, is required to
obtain annually a registration from the Attorney General in accordance with
specified rules and regulations and is subject to inspection by the Drug
Enforcement Administration acting on behalf of the Attorney General. The Company
is required to maintain licenses and permits for the distribution of
pharmaceutical products and medical devices under the laws of the states in
which it operates. In addition, the Company's dentist and physician customers
are subject to significant governmental regulation. There can be no assurance
that regulations that impact dentists' or physicians' practices will not have a
material adverse impact on the Company's business.

The Company believes that it is in substantial compliance with all of the
foregoing laws and the regulations promulgated thereunder and possesses all
material permits and licenses required for the conduct of its business.

PROPRIETARY RIGHTS

The Company holds trademarks relating to the "Henry Schein" name and logo,
as well as certain other trademarks. Pursuant to certain agreements executed in
connection with the reorganization of the Company, both the Company and Schein
Pharmaceutical are entitled to use the "Schein" name in connection with their
respective businesses, but Schein Pharmaceutical is not entitled to use the name
"Henry Schein." The Company intends to protect its trademarks to the fullest
extent practicable. See "Reorganization."

EMPLOYEES

As of April 30, 1996, the Company had more than 2,700 full-time employees in
the United States and Europe, including approximately 400 telesales
representatives, 250 field sales consultants, 900 warehouse employees, 70
computer programmers and technicians, 250 management employees and 800 office,
clerical and administrative employees. None of the Company's employees are
represented by a collective bargaining agreement. The Company believes that its
relations with its employees are excellent.

39
<PAGE>
FACILITIES

The Company owns or leases the following properties:

<TABLE>
<CAPTION>
OWN OR APPROXIMATE LEASE
PROPERTY LOCATION LEASE SQUARE FOOTAGE EXPIRATION DATE
- --------------------------- ---------------------- ------- -------------- ---------------
<S> <C> <C> <C> <C>
Distribution Center........ Eastern United States Own 173,000 N/A
Distribution Center........ Central United States Lease 225,000 December 1999
Distribution Center........ Western United States Lease 71,500 June 2002
Distribution Center........ United Kingdom Lease 85,000 December 2004
Corporate Headquarters..... Eastern United States Lease 100,000 December 2005
Other Facilities........... Western United States Own 75,000 N/A
</TABLE>

The Company also leases space in other locations in the United States,
Canada, France, Germany, the Republic of Ireland, The Netherlands, Spain, and
the United Kingdom. Two 50% owned companies also lease space in the United
States and Canada.

The Company believes that its properties are generally in good condition,
are well maintained, and are generally suitable and adequate to carry on the
Company's business.

The Company has additional operating capacity at its listed facilities.

LEGAL MATTERS

The manufacture or distribution of certain products by the Company involves
a risk of product liability claims, and from time to time the Company is named
as a defendant in products liability cases as a result of its distribution of
pharmaceutical and other healthcare products. As of May 31, 1996, the Company
was named a defendant in 12 such cases. The Company believes it is adequately
covered by insurance in all these cases, subject to certain self retention
limits, and that none of the currently pending cases will have a material
adverse effect on the Company. In addition, the Company was a defendant in
several cases involving the distribution of the drug L-Tryptophan, all of which
have been resolved at no cost to the Company. With respect to possible future
claims, if any, the manufacturer of L-Tryptophan has agreed to defend and
indemnify the Company for the period in which the Company served as a
distributor of this product. The Company believes that this agreement provides
adequate protection for future claims.

The Company has various insurance policies, including product liability
insurance covering risks and in amounts it considers adequate. In many cases the
Company is covered by indemnification from the manufacturer of the product.
There can be no assurance that the coverage maintained by the Company is
sufficient to cover all future claims or will be available in adequate amounts
or at a reasonable cost, or that indemnification agreements will provide
adequate protection for the Company.

As part of the Company's effort to expand its field sales force, the Company
frequently hires field sales consultants with experience in the office-based
healthcare practitioner industry. The Company's hiring practices have from time
to time resulted in litigation instituted by former employers of the field sales
consultants hired by the Company. On October 19, 1995, an action was filed
against the Company by H. Meer Dental Supply Co., Inc. ("Meer"), in the United
States District Court for the Eastern District of Michigan, Southern Division.
The complaint alleges unfair competition, predatory pricing or anti-competitive
conduct and, through the hiring of Meer sales representatives, improper
interference with Meer's relationships with its employees and customers and
misappropriation of trade secrets. There are two additional litigations that
similarly allege improper interference with employee and customer relationships.
The plaintiffs in these actions seek unspecified damages, and Meer and one of
the other plaintiffs also seek an injunction against the Company. Meer had
sought a temporary restraining order in a similar action brought in September
1995 in the United States District Court, Southern District of Ohio, Eastern
Division, which order was denied on the basis of the court concluding that it
could not make a finding at that time that there was a likelihood that Meer
would prevail on the merits. The Company intends to vigorously defend these
litigations. The Company believes that none of these three actions will have a
material adverse effect on the Company.

40
<PAGE>
REORGANIZATION

GENERAL

In December 1992, Holdings separated the Company's business from Schein
Pharmaceutical by transferring to the Company all of the assets and liabilities
of the healthcare distribution business now conducted by the Company, which
assets included Holdings' 50% interest in HS Pharmaceutical. No other assets or
liabilities, including the assets and liabilities associated with Schein
Pharmaceutical's business, were transferred to the Company. In connection with
that transaction, the Company agreed to indemnify Holdings for all of the
liabilities assumed by the Company, and Holdings agreed to indemnify the Company
for the liabilities associated with Schein Pharmaceutical's business of
manufacturing and distributing generic pharmaceuticals. Other than certain
common stockholders, there is no affiliation between the Company and Schein
Pharmaceutical, and all transactions between the Company and Schein
Pharmaceutical are on an arms-length basis.

In February 1994 the Company, Holdings, Stanley M. Bergman, Marvin H.
Schein, Pamela Joseph, Pamela Schein, Steven Paladino, James P. Breslawski,
Martin Sperber (the Chief Executive Officer of Schein Pharmaceutical) and
certain other parties entered into a number of reorganization agreements. In
September 1994, pursuant to the reorganization agreements, all of the Common
Stock held by Holdings was distributed to certain of the current stockholders of
the Company. Marvin H. Schein, Pamela Schein and Pamela Joseph have agreed to
severally indemnify the Company against certain potential costs and claims, if
any, which might be incurred by the Company in the future from the transactions
related to the Reorganization. The Company and Schein Pharmaceutical also agreed
that after September 1994 the Company would be entitled to use the "Henry
Schein" name in activities involving non-pharmaceutical products and
pharmaceuticals for dental and veterinary purposes, which activities may include
marketing, distributing, labelling, packaging, manufacturing (such as HS
Pharmaceutical's manufacturing of generic pharmaceuticals and Schein Dental
Equipment's manufacturing of large dental equipment, which are the principal
manufacturing activities currently conducted by the Company, its subsidiaries
and 50%-or-less owned entities--see "Certain Transactions--Acquisition of The
Schein Dental Equipment Corp.") and selling such products. The Company and
Schein Pharmaceutical also agreed that after September 1994, Schein
Pharmaceutical would be entitled to use the "Schein Pharmaceutical" name in
similar activities involving pharmaceuticals for non-dental human treatment.
Schein Pharmaceutical is not permitted to use the name "Henry Schein."

REORGANIZATION AGREEMENTS

Agreements Relating to Control of the Company

One of the Reorganization agreements, a Voting Trust Agreement (the "Voting
Trust"), gives Stanley M. Bergman (or his successor trustee) the right to vote
all of the shares of Common Stock owned by certain stockholders of the Company,
which will be approximately 39.7% of the outstanding shares of Common Stock
immediately after the completion of this Offering. Another of the Reorganization
agreements, the Amended and Restated HSI Agreement (the "Global Agreement"),
provides that the Board of Directors of the Company may consist of up to 11
members, and that until the earlier of January 1, 1999 or the termination of the
Voting Trust, Mr. Bergman (or his successor trustee) has the right to nominate
all but three of the nominees to the Board of Directors. Marvin H. Schein,
Pamela Joseph and Pamela Schein have the right to serve as or nominate the
remaining three directors. In general, from the earlier of January 1, 1999 or
the termination of the Voting Trust until the earlier of January 1, 2004 or the
first date on which Marvin H. Schein and his family group no longer beneficially

41
<PAGE>
own at least 25% of the outstanding Common Stock that they owned immediately
after the Reorganization, or the date of certain changes in the Company's
management, Mr. Bergman (or his successor trustee) has the right to nominate all
of the nominees to the Board of Directors, provided, that if Marvin H. Schein
does not approve such nominations, Mr. Bergman (or his successor trustee) and
Mr. Schein will each nominate four nominees (of which one will be an independent
nominee) and the ninth nominee will be selected by the two independent nominees.
As a result of the foregoing, until December 31, 1998, Mr. Bergman, as a
practical matter, will be able to significantly influence all matters requiring
stockholder approval, including the election of directors, and until January 1,
2004, Mr. Bergman will have the ability to significantly influence the election
of all or a substantial number of the directors of the Company.

The Global Agreement also requires the parties to the Voting Trust and
Marvin H. Schein to vote in favor of the individuals so nominated until the
earlier of January 1, 1999 or the termination of the Voting Trust, and to vote
their shares in favor of the nominees of Stanley M. Bergman until January 1,
2004. The Voting Trust terminates on December 31, 1998, but is subject to
earlier termination if, among other things, Stanley M. Bergman ceases to be
employed by or serve as a director of the Company (unless certain other members
of current management are serving as senior executives of the Company) or the
Company consummates a business combination which results in Marvin H. Schein
(including his family members) owning less than 5% of the voting securities of
the surviving corporation.

The Global Agreement affords Marvin H. Schein or his designee the right to
serve on each committee of the Board of Directors to which the Board of
Directors has delegated decision-making authority and the right to call a
special meeting of the Board of Directors. The Global Agreement also limits the
Company's ability to adopt a shareholder rights plan or "fair price amendment,"
if such plan or amendment would affect Marvin H. Schein or Pamela Schein
(including their respective family members), as long as Marvin H. Schein or
Pamela Schein own certain specified percentages of the outstanding Common Stock.
The Global Agreement also limits the ability of Marvin H. Schein, Pamela Schein
and Pamela Joseph to participate in any solicitation of proxies or any election
contest.

Restrictions on Transfers

The Global Agreement places certain restrictions on the ability of the
parties thereto to transfer any of the shares of Common Stock owned by them and
further provides that the Company may not, prior to the earlier of December 31,
2003 or the first date on which neither Marvin H. Schein nor Pamela Schein
(including their respective family members) own at least 5% of the outstanding
shares of Common Stock, (i) issue in one or more private transactions securities
having more than 20% of the total votes that can be cast in any election of
directors of the Company without first offering Marvin H. Schein and Pamela
Schein (including their respective family members) the right to purchase such
securities; (ii) issue securities in connection with a business combination
having more than 20%, or resulting in a person owning more than 20%, of the
total votes that can be cast in any election of directors without the consent of
Marvin H. Schein; or (iii) issue preferred stock having the right to cast more
than 20% of the total votes that can be cast in any election of directors of the
Company. In addition, certain members of management have agreed not to transfer
their shares until November 3, 1998, subject to acceleration in Mr. Bergman's
discretion. Restrictions on the ability of stockholders to transfer their stock
may make it more difficult for a third party to acquire, or may discourage
acquisition bids for, the Company, and could limit the price that certain
investors might be willing to pay in the future for shares of Common Stock.

The Global Agreement provides that the Company will indemnify each of the
other parties to the Reorganization agreements, and their family groups, from
damages resulting from (i) claims asserted by third parties relating to the
Reorganization agreements and (ii) any material breach of a representation,
warranty or covenant made by the Company in any of the Reorganization
agreements. Marvin H. Schein has agreed to consult with Pamela Schein prior to
the exercise of certain of his rights of approval and consent under the
Reorganization agreements.

42
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information regarding the directors
and executive officers of the Company.

NAME AGE POSITION
---- --- --------
<S> <C> <C>
CORPORATE
Stanley M. Bergman........................ 46 Chairman, Chief Executive Officer,
President and Director
James P. Breslawski....................... 42 Executive Vice President and Director
Gerald A. Benjamin........................ 44 Senior Vice President--Administration and
Customer Satisfaction and Director
Leonard A. David.......................... 48 Vice President--Human Resources, Special
Counsel and Director
Diane Forrest............................. 48 Senior Vice President--Information
Services and Chief Information Officer
Stephen R. LaHood......................... 48 Senior Vice President--Distribution
Services
Mark E. Mlotek............................ 40 Vice President, General Counsel, Secretary
and Director
Steven Paladino........................... 39 Senior Vice President, Chief Financial
Officer and Director
BUSINESS UNITS
Jeffrey P. Gasparini...................... 40 Senior Vice President, Medical Group
Ian G. Rosmarin........................... 45 President--Professional Services Group
James W. Stahly........................... 47 President--North American Dental Group
Michael Zack.............................. 43 Senior Vice President--International Group

OTHER DIRECTORS
Barry J. Alperin.......................... 55 Director
Pamela Joseph............................. 53 Director
Donald J. Kabat........................... 60 Director
Marvin H. Schein.......................... 54 President, Schein Dental Equipment, and
Director
Irving Shafran............................ 52 Director
</TABLE>

BACKGROUND OF DIRECTORS AND EXECUTIVE OFFICERS

STANLEY M. BERGMAN has been Chairman, Chief Executive Officer and President
since 1989, and a director of the Company since 1982. Mr. Bergman held the
position of Executive Vice President of the Company and Schein Pharmaceutical
from 1985 to 1989 and Vice President of Finance and Administration of the
Company from 1980 to 1985. Mr. Bergman is a certified public accountant.

JAMES P. BRESLAWSKI has been Executive Vice President of the Company since
1990, with primary responsibility for the North American Dental Group, the
Veterinary Group and corporate creative services, and a director of the Company
since 1990. Between 1980 and 1990, Mr. Breslawski held various positions with
the Company, including Chief Financial Officer, Vice President of Finance and
Administration and Controller. Mr. Breslawski is a certified public accountant.

GERALD A. BENJAMIN has been Senior Vice President of Administration and
Customer Satisfaction since 1993, including responsibility for the worldwide
human resource function, and has been a director of the Company since September
1994. Prior to holding his current position, Mr. Benjamin was Vice President of
Distribution Operations of the Company from 1990 to 1992 and Director of
Materials Management of the Company from 1988 to 1990. Before joining the
Company, Mr. Benjamin was

43
<PAGE>
employed for 13 years in various management positions at Estee Lauder, where his
last position was Director of Materials Planning and Control.

LEONARD A. DAVID has been Vice President of Human Resources and Special
Counsel since January 1995. Mr. David held the office of Vice President, General
Counsel and Secretary from 1990 to 1995 and practiced corporate and business law
for eight years prior to joining the Company. Mr. David has been a director of
the Company since September 1994.

DIANE FORREST joined the Company in 1994 as Senior Vice President of
Information Services and Chief Information Officer. Prior to joining the
Company, Ms. Forrest was employed by Tambrands Inc. as Vice President of
Information Services from 1987 to 1994, KPMG Peat Marwick as Senior Manager in
the management consulting division from 1982 to 1987 and Nabisco Brands, Inc. as
Corporate Manager of Manufacturing Systems from 1978 to 1982.

STEPHEN R. LAHOOD joined the Company in 1992 as Senior Vice President of
Distribution Services. Prior to joining the Company, Mr. LaHood was employed by
Lex/Schweber Electronics Inc. as Vice President of Operations and Quality from
1988 to 1991. Mr. LaHood also spent ten years at Johnson & Johnson Products,
Inc., where his last position was Manager of Corporate Business Planning and
thereafter, seven years at Schering-Plough Corporation where his last position
was Senior Director of Manufacturing Operations.

MARK E. MLOTEK joined the Company in December 1994 as Vice President,
General Counsel and Secretary, and became a director of the Company in September
1995. Prior to joining the Company, Mr. Mlotek was a partner in the law firm of
Proskauer Rose Goetz & Mendelsohn LLP, counsel to the Company, specializing in
mergers and acquisitions, corporate reorganizations and tax law from 1989 to
1994.

STEVEN PALADINO has been Senior Vice President and Chief Financial Officer
of the Company since 1993, and has been a director of the Company since 1992.
From 1990 to 1992, Mr. Paladino served as Vice President and Treasurer and from
1987 to 1990 served as Corporate Controller of the Company. Before joining the
Company, Mr. Paladino was employed as a public accountant for seven years and
most recently was with the international accounting firm of BDO Seidman, LLP.
Mr. Paladino is a certified public accountant.

JEFFREY P. GASPARINI joined the Company in February 1996 as Senior Vice
President of the Medical Group. Prior to joining the Company, Mr. Gasparini was
employed by General Medical Corp. since 1982, where his last position was
Corporate Vice President of Operations and member of the Executive Board.

IAN G. ROSMARIN joined the Company in 1992 as General Manager of the
Canadian Division and in 1993 was named to his current position of President of
the Professional Service Group of the Company. Prior to joining the Company, Mr.
Rosmarin was President of Rosmarin Management and Investment Corporation for 13
years. Mr. Rosmarin is a Canadian Chartered Accountant.

JAMES W. STAHLY joined the Company in 1994 as President of the North
American Dental Group of the Company. Before joining the Company, Mr. Stahly was
employed by Fox Meyer Corporation for seven years, where his last position was
Senior Vice President--Hospital and Alternate Care Sales. Prior to his
employment with Fox Meyer, Mr. Stahly spent 16 years at McKesson Drug Company.

MICHAEL ZACK has been responsible for the International Group of the Company
since 1989. Mr. Zack was employed by Polymer Technology (a subsidiary of Bausch
& Lomb) as Vice President of International Operations from 1984 to 1989 and by
Gruenthal Inc. as Manager of International Subsidiaries from 1975 to 1984.

44
<PAGE>

BARRY J. ALPERIN has been a director of the Company since May 1996. Mr.
Alperin has also been a private consultant since August 1995. Mr. Alperin served
as a director of Hasbro, Inc. from 1986 through May 1996 and as Vice Chairman of
Hasbro, Inc. from 1990 through July 1995. Mr. Alperin served as Co-Chief
Operating Officer of Hasbro, Inc. from 1989 through 1990 and as its Senior Vice
President and Executive Vice President from 1985 through 1989. Mr. Alperin
recently served as Chairman of the Board for Toy Manufacturers of America, an
industry trade association. Mr. Alperin currently serves as a director for
Seaman Furniture Co., Inc. and K'nex Industries, Inc.

PAMELA JOSEPH has been a director of the Company since September 1994. For
the past five years Ms. Joseph has been a self-employed artist, and is president
of MA Nose Studios, Inc. Ms. Joseph is also a trustee of Alfred University.

DONALD J. KABAT has been a director of the Company since May 1996. From 1992
until the present, Mr. Kabat has served as President of D.K. Consulting
Services, Inc. and Chief Financial Officer of Central Park Skaters, Inc. From
1970 to 1992, Mr. Kabat was a partner in Andersen Consulting, an affiliate of
Arthur Andersen, LLP.

MARVIN H. SCHEIN has been a director of the Company since September 1994 and
has provided consulting services to the Company since 1982. Mr. Schein founded
Schein Dental Equipment and had been its President for more than 15 years. Prior
to founding Schein Dental Equipment, Mr. Schein held various management and
executive positions with the Company.

IRVING SHAFRAN has been a director of the Company since September 1994 and
was nominated by Pamela Schein as her designee for director of the Company. Mr.
Shafran has been an attorney in private practice for more than twenty-five
years. From 1991 through mid-1995, Mr. Shafran was a partner in the law firm of
Anderson Kill Olick and Oshinsky, PC.

The Company's Board of Directors is currently composed of eleven directors,
six of whom are employees of the Company. Directors serve until the next annual
stockholders' meeting or until their successors have been duly elected and
qualified.

COMMITTEES OF THE BOARD OF DIRECTORS

During fiscal 1995, the Board of Directors held six meetings.

The Board of Directors established an Audit Committee of independent
directors in January 1996. The Audit Committee oversees the Company's financial
reporting process on behalf of the Board of Directors. In fulfilling its
responsibility, since January 1996, the Audit Committee recommended to the Board
of Directors, subject to stockholder approval, the selection of the Company's
independent public accountants. The Audit Committee also discussed the Company's
consolidated financial statements and the adequacy of the Company's internal
controls. The Audit Committee met with the independent public accountants to
discuss the results of their audit of the Company, their evaluation of the
Company's internal controls and the overall quality of the Company's financial
reporting. In May 1996, Messrs. Alperin and Kabat became the members of the
Audit Committee.

The Board of Directors established a Compensation Committee in January 1996
which is currently comprised of Messrs. Bergman, Alperin and Kabat. The
Compensation Committee will make recommendations regarding the compensation and
benefit policies and procedures of the Company.

The Board of Directors has a Stock Option Committee which currently consists
of Messrs. Bergman, Breslawski and Schein. The Stock Option Committee determines
grants under the Company's 1994 Stock Option Plan. The Stock Option Committee
held no meetings during fiscal 1995.

45
<PAGE>
LIMITATIONS ON LIABILITY

The Company's Amended and Restated Certificate of Incorporation provides
that no director of the Company shall be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty by such director
as a director, except for liability: (i) for any breach of the director's duty
of loyalty to the Company or its stockholders, (ii) for acts or omissions of the
director not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) in respect of certain unlawful dividend payments or
stock redemptions or purchases, or (iv) for any transaction from which the
director derived an improper personal benefit. The effect of these provisions is
to eliminate the rights of the Company and its stockholders (through
stockholders' derivative suits on behalf of the Company) to recover monetary
damages against a director for breach of fiduciary duty as a director (including
breaches resulting from grossly negligent behavior), except in the situations
described above. These provisions will not limit the liability of directors
under federal securities laws and will not affect the availability of equitable
remedies such as an injunction or recision based upon a director's breach of his
or her duty of care. In addition, the Company intends to enter into agreements
with each of its directors and certain of its officers providing for
indemnification of those individuals under certain circumstances. The Company
has obtained director and officer liability insurance that insures the Company's
directors and officers against certain liabilities.

COMPENSATION OF DIRECTORS

No directors received compensation in fiscal 1995, other than reimbursement
of expenses, for their services as directors. Messrs. Alperin and Kabat each
receive a $20,000 annual retainer. Messrs. Alperin and Kabat also receive $500
per board meeting and $250 per committee meeting attended. Each director will be
reimbursed for their out-of-pocket expenses in attending board and committee
meetings. In addition, Messrs. Alperin and Kabat have been granted options to
purchase 5,000 shares of the Company's Common Stock under the Company's 1996
Non-Employee Director Stock Option Plan.

See "Certain Transactions" for a description of Marvin H. Schein's
Consulting Agreement, including amounts paid in compensation to Mr. Schein.

46
<PAGE>
EXECUTIVE COMPENSATION

The following table sets forth information concerning compensation of the
Company's Chief Executive Officer and the four most highly paid executive
officers (collectively, the "Named Executive Officers") of the Company whose
salary and bonus exceeded $100,000 for the fiscal years ended December 31, 1994
and December 30, 1995.

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
---------------------------------- -------------------------------------
OTHER ANNUAL RESTRICTED OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION STOCK STOCK LTIP COMPENSATION
POSITION YEAR ($) ($) ($)(1) AWARDS($)(2) OPTIONS PAYOUTS($)(3) ($)(4)
- ----------------------------- ---- ------- ------- ------------ ----------- ------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stanley M. Bergman........... 1995 479,050 307,034 19,343 -- -- -- 36,144
Chairman, Chief Executive 1994 469,050 260,496 258,259 -- -- 17,303,475 24,988
Officer and President
James P. Breslawski.......... 1995 270,782 66,000 13,500 -- -- -- 21,458
Executive Vice President 1994 257,782 60,000 1,000,364 1,171,788 -- 382,618 19,184
Gerald A. Benjamin........... 1995 205,000 52,500 13,500 -- 47,200 -- 15,064
Senior Vice President 1994 185,000 42,500 189,174 220,761 -- 243,825 13,722
of Administration and
Customer Satisfaction
Steven Paladino.............. 1995 205,000 52,500 13,500 -- 54,700 -- 14,812
Senior Vice President and 1994 185,000 42,500 189,174 220,761 -- 243,825 13,496
Chief Financial Officer
Randolph W. Jones(5)......... 1995 283,445 -- 13,500 -- -- -- 21,640
President of the Diversified 1994 275,945 35,000 100,697 98,117 24,800 264,732 21,266
Healthcare Group
</TABLE>

- ------------
(1) The 1994 amounts shown in this column include amounts recorded for each of
Messrs. Breslawski, Benjamin, Paladino and Jones of $986,864, $175,674,
$175,674 and $87,197, respectively, to pay income taxes attributable to the
stock issuances made to each of them in 1994 and auto allowances of $13,500
for each executive, excluding Mr. Bergman. Mr. Bergman was given a cash
bonus of $258,259 in 1994 to pay certain additional income taxes
attributable to the stock issuances described below in footnote 3. The 1995
amounts include auto allowances of $13,500 for each executive, excluding Mr.
Bergman, and $19,343 of compensation to Mr. Bergman for the use of a car and
related expenses.

(2) Mr. Breslawski was issued 165,528 shares of Common Stock with an aggregate
value of approximately $1.2 million on December 31, 1994. Messrs. Benjamin
and Paladino were each issued 31,185 shares of Common Stock with an
aggregate value of approximately $220,761 on December 31, 1994. Mr. Jones
was issued 13,860 shares of Common Stock with an aggregate value of $98,117
on December 31, 1994.

(3) Mr. Bergman was issued 1,466,685 shares of Common Stock and was issued
shares of common stock of Schein Pharmaceutical on December 24, 1992. The
value of these shares on September 30, 1994 was $17.3 million in the
aggregate. These shares when issued had a value of $6.2 million and $2.6
million, respectively, the entire amount of which was charged as deferred
compensation. The issuances to Mr. Bergman are being included herein at
their fair market value on September 30, 1994 because, on that date, certain
contingencies relating to the stock were eliminated and the shares became
fully vested. Accordingly, the deferred compensation which was charged in
1992 and a mark-to-market adjustment to fair market value on such date was
recorded in 1994. Mr. Breslawski received $382,618 in 1994 in satisfaction
of his Executive Incentive Plan balance, payable with 30,294 shares of
Common Stock with an aggregate value of $214,454 on December 31, 1994 and a
$168,164 cash payment. Each of Messrs. Benjamin and Paladino received
$243,825 in 1994 in satisfaction of their Executive Incentive Plan balance,
payable with 19,305 shares of Common Stock with an aggregate value of
$136,662 on December 31, 1994 and $107,163 in cash. Mr. Jones received
$264,732 in 1994 in satisfaction of his Executive Incentive Plan balance,
payable with 19,800 shares of Common Stock with an aggregate value of
$140,166 on December 31, 1994 and $124,566 in cash.

(4) The 1994 amounts shown in this column represent (i) profit sharing
contributions made by the Company on behalf of Mr. Bergman, Mr. Breslawski
and Mr. Jones of $9,434, on behalf of Mr. Benjamin of $7,519 and on behalf
of Mr. Paladino of $7,524, (ii) contributions under the Company's Employee
Stock Ownership Plan ("ESOP") made by the Company on each executives' behalf
of $4,500 and (iii) excess life insurance and Supplemental Executive
Retirement Plan ("SERP") contributions of $1,186 and $9,868 for Mr. Bergman,
$950 and $4,300 for Mr. Breslawski, $653 and $1,050 for Mr. Benjamin, $422
and $1,050 for Mr. Paladino, and $1,747 and $5,585 for Mr. Jones,
respectively. The 1995 amounts shown in this column represent (i) profit
sharing contributions made by the Company on behalf of each executive of
$6,000, (ii) ESOP contributions made by the Company on each executives'
behalf of $4,500, (iii) excess life insurance and SERP contributions of
$2,610 and $23,034 for Mr. Bergman, $1,003 and $8,455 for Mr. Breslawski,
$714 and $3,850 for Mr. Benjamin, $462 and $3,850 for Mr. Paladino, and
$1,799 and $9,341 for Mr. Jones, respectively, and (iv) an anniversary bonus
to Mr. Breslawski of $1,500.

(5) As of February 9, 1996, Mr. Jones was no longer an executive officer of the
Company.

47
<PAGE>
The following table summarizes the number of shares and the terms and
conditions of stock options granted to the Named Executive Officers in fiscal
1995.

OPTION GRANTS IN FISCAL 1995

<TABLE>
<CAPTION>
PERCENT POTENTIAL REALIZABLE
OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS EXERCISE MARKET PRICE ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE PER SHARE ON PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES PER DATE OF OPTION TERM
OPTIONS IN FISCAL SHARE GRANT EXPIRATION ------------------------
NAME GRANTED 1995(1) ($/SH) ($/SH) DATE 0% ($) 5% ($) 10% ($)
- -------------------------------- ---------- ---------- -------- ------------ ---------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stanley M. Bergman.............. -- -- -- -- -- -- -- --
James P. Breslawski............. -- -- -- -- -- -- -- --
Gerald A. Benjamin.............. 17,500(2) 2.7% 16.00 16.00 11/3/2005 0 176,050 446,250
29,700(3) 4.6% 4.21 7.08 5/1/2005 85,239 217,480 420,365
Steven Paladino................. 25,000(2) 3.8% 16.00 16.00 11/3/2005 0 251,500 637,500
29,700(3) 4.6% 4.21 7.08 5/1/2005 85,239 217,480 420,365
Randolph W. Jones............... 5,000(2) 0.8% 16.00 16.00 11/3/2005 0 50,300 127,500
19,800(4) 3.0% 4.21 7.08 5/1/2005 56,826 144,936 280,243
</TABLE>

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

(1) In fiscal 1995, the Company granted options to purchase 651,297 shares of
Common Stock, consisting of 237,897 Class A options and 413,400 Class B
options.

(2) Options are exercisable in three annual installments. The first installment
was exercisable on November 3, 1995. As of March 1996, Mr. Jones' options
were cancelled.

(3) Options are currently exercisable.

(4) Options are exercisable in six annual installments. The first installment
was exercisable on December 31, 1995. As of March 1996, 16,500 of Mr. Jones'
options were cancelled.

The following table summarizes the number of all unexercised options held by
the Named Executive Officers at the end of fiscal 1995, and their value at that
date if they were in-the-money. No stock options were exercised in fiscal 1995.

AGGREGATE FISCAL 1995 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
OPTIONS AT 12/31/95 OPTIONS AT 12/31/95
---------------------------------- ----------------------------------------
EXERCISABLE UNEXERCISABLE
------------------- -------------------
NAME EXERCISABLE (#) UNEXERCISABLE (#) SHARES (#) TOTAL $ SHARES (#) TOTAL $
- ----------------------------------- --------------- ----------------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Stanley M. Bergman................. -- -- -- -- -- --
James P. Breslawski................ -- -- -- -- -- --
Gerald A. Benjamin................. 29,700 17,500 29,700 751,113 17,500 236,250
Steven Paladino.................... 29,700 25,000 29,700 751,113 25,000 337,500
Randolph W. Jones(1)............... 3,300 21,500 3,300 83,457 21,500 484,785
</TABLE>

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

(1) As of March 1996, Mr. Jones' unexercisable options were cancelled.

EMPLOYMENT AND OTHER AGREEMENTS

The Company and Mr. Stanley M. Bergman entered into an employment agreement
dated as of January 1, 1992, providing for his continued employment as Chairman
of the Board, President and Chief Executive Officer until December 31, 1999. The
employment agreement provides Mr. Bergman with a base salary of $504,050 for
1996, $519,050 for 1997, $544,050 for 1998, and $559,050 for 1999. In addition,
the employment agreement provides for incentive compensation to be determined by
the Compensation Committee of the Board of Directors (or, if there is no
Compensation Committee, the

48
<PAGE>
Board of Directors). Based on the range of incentive compensation provided for
in the employment agreement, it is anticipated that incentive compensation for
1996 will be in the range of $70,000 to $425,000. The range of incentive
compensation increases to $75,000 to $445,000 in 1997, $80,000 to $465,000 in
1998, and $85,000 to $485,000 in 1999. The employment agreement also provides
that Mr. Bergman will continue to participate in all benefit, welfare and
perquisite plans, policies and programs generally available to either the
Company's employees or the Company's senior executive officers. The Company
provides Mr. Bergman with the use of an automobile and expenses related thereto,
and other miscellaneous benefits. If Mr. Bergman's employment with the Company
is terminated without cause or terminated by Mr. Bergman following a material
breach by the Company of the employment agreement which is not cured during the
requisite period for cure of such breach, Mr. Bergman will receive all amounts
then owed to him as salary and deferred compensation and any benefits accrued
and owed to him or his beneficiaries under the then applicable benefit plans,
programs and policies of the Company. In addition, Mr. Bergman will receive as
severance pay, 100% of his then annual base salary and a payment equal to the
account balance or accrued benefit Mr. Bergman would have been credited with
under each pension plan maintained by the Company, assuming the Company would
have continued contributions until the natural expiration of the employment
agreement, less Mr. Bergman's vested account balance or accrued benefits under
each pension plan. Unless the employment agreement is terminated for cause or
pursuant to Mr. Bergman's voluntary resignation, the Company will continue the
participation of Mr. Bergman and his family in the health and medical plans,
policies and programs in effect with respect to senior executive officers of the
Company and their families. Coverage for Mr. Bergman and his spouse will
continue from the end of Mr. Bergman's employment until their respective deaths,
and coverage for his children will continue until their attainment of the age of
twenty-one.

The Company has entered into agreements with the Named Executive Officers
and certain other senior managers to provide that if an executive's employment
is terminated by the executive or by the Company without cause or for good
reason and not within two years after a change in control of the Company, the
Company will pay to the executive severance pay equal to one month's base salary
for each month the executive has been employed by the Company, with a minimum of
six months and a maximum of twelve months, subject to offset for remuneration
for subsequent employment. If the executive is terminated within two years
following a change in control of the Company which has not been approved by a
supermajority of the Board of Directors, the executive's severance pay will
equal three times the severance pay the executive would have received had no
change of control occurred, plus three times the amount of executive's incentive
bonus for the year preceding the year of termination.

See "Certain Transactions" for a description of Marvin H. Schein's
Consulting Agreement.

STOCK OPTION PLAN

The Company maintains the Henry Schein, Inc. 1994 Stock Option Plan ("Stock
Option Plan") for the benefit of certain employees of the Company and its
designated subsidiaries. The purpose of the Stock Option Plan is to enable the
Company and its designated subsidiaries to attract, retain and motivate key
employees who are important to the success and growth of the Company and to
create a mutuality of interest between the key employees and the stockholders of
the Company by granting the key employees options to purchase Common Stock.
Under the Stock Option Plan, 678,635 shares of Common Stock may be issued. The
Stock Option Plan provides for two classes of options: Class A Options, which
shall have an exercise price of $4.21 per share, and Class B Options, which have
an exercise price of not less than the fair market value of the Common Stock at
the time of grant. Class A Options to purchase an aggregate of 221,397 shares of
Common Stock are presently outstanding, and Class B Options to purchase an
aggregate of 447,400 shares of Common Stock are presently outstanding. The
maximum number of Class A Options have been issued. If options are canceled,
expire or terminate unexercised, the shares of Common Stock shall again be
available for the grant of options, provided that the number of shares covered
by Class A Options shall be reduced by the number of Class

49
<PAGE>
A Options that are canceled, expire or are terminated. Both incentive stock
options and non-qualified stock options may be issued under the Stock Option
Plan.

The maximum number of shares of Common Stock with respect to which options
may be granted under the Stock Option Plan to each participant could not exceed
100,000 shares in 1995, and shall not exceed 50,000 in each year thereafter. To
the extent that shares for which options are permitted to be granted to a
participant during a year are not covered by a grant of an option in such year,
such shares shall automatically increase the number of shares of Common Stock
available for grant of options to the participant in the subsequent year.

The Stock Option Plan is administered by a committee appointed by the
Company's Board of Directors, consisting of two or more directors, each of whom
qualifies as a disinterested person (within the meaning of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")). The committee has the full authority and discretion, subject to the
terms of the Stock Option Plan, to determine those individuals who are eligible
to be granted options and the amount and type of options. Terms and conditions
of options are set forth in written option agreements, consistent with the terms
of the Stock Option Plan. No option shall be granted under the Stock Option Plan
on or after the tenth anniversary of September 30, 1994 (the effective date of
the Stock Option Plan), but options granted prior to such date may extend beyond
that date.

The Stock Option Plan provides that it may be amended by the Company's Board
of Directors or the committee, except that no amendment may, without the
approval of stockholders of the Company, (i) increase the total number of shares
of Common Stock which may be acquired upon exercise of options granted under the
Stock Option Plan, (ii) change the types of employees eligible to participate in
the Stock Option Plan, (iii) effect any change that would require stockholder
approval under securities laws, (iv) effect any change that would require
stockholder approval under Section 162(m) of the Code or (v) reduce the purchase
price of an outstanding option below the fair market value of a share of Common
Stock on the date of such amendment. The Company's Board of Directors or the
stockholders may, however, make or authorize any appropriate adjustments to the
number of shares of Common Stock available, and the terms of outstanding
options, under the Stock Option Plan to reflect a recapitalization,
reorganization or other change in the Company's capital structure or its
business, any merger or consolidation, any issue of bonds, debentures, preferred
or preference stocks, the dissolution or liquidation of the Company or any of
its subsidiaries, or any sale or transfer of the assets of the Company's
business or any other corporate event.

The options entitle the holder to purchase a specified number of shares of
Common Stock, subject to vesting provisions, at a price set by the committee at
the time of grant, subject to certain limitations. The term of each option will
be specified by the committee upon grant, but may not exceed ten years from the
date of grant (five years in the case of owners of 10% or more of the Company's
outstanding voting stock). The committee will determine the time or times at
which each option may be exercised. Options may be exercisable in installments,
and the exercisability of options may be accelerated in some cases, including
upon a change of control of the Company (as defined in the Stock Option Plan).

Under the Stock Option Plan, the committee may grant incentive stock options
that qualify under Section 422 of the Code or non-qualified stock options. The
incentive stock options are subject to additional requirements under the Stock
Option Plan, as well as under the Code.

A participant may elect to exercise one or more of his options by giving
written notice to the committee of such election at any time after the closing
of this Offering. The participant shall specify the number of options to be
exercised and provide payment in full of the aggregate purchase price for the
shares of Common Stock for which options are being exercised. Payment may be
made (i) in cash or by check, bank draft or money order, (ii) if so permitted by
the committee, through delivery of unencumbered shares of Common Stock, a
promissory note or a combination of cash and either of the foregoing, or (iii)
on such other terms and conditions as may be acceptable to the committee.

50
<PAGE>
There were no options granted to the Named Executive Officers under the
Stock Option Plan in 1994 or prior to 1994. In 1995, Class A Options to acquire
237,897 common shares were issued to certain executive management, including
Class A Options exercisable into 29,700 shares of Common Stock to Messrs.
Benjamin and Paladino and 19,800 shares of Common Stock to Mr. Jones, all of
which are outstanding (except for 16,500 Class A Options granted to Mr. Jones
which were cancelled in March 1996), at an exercise price of $4.21 per share,
substantially all of which became exercisable upon the closing of the initial
public offering, at which time the $2,805,000 excess of the initial public
offering price of $16.00 over the exercise price was charged to special
management compensation expense.

On November 3, 1995, the Company issued Class B Options to acquire 413,400
shares of common stock to certain employees, including Class B Options to
acquire 17,500, 25,000 and 5,000 shares of Common Stock to Messrs. Benjamin,
Paladino and Jones, respectively, substantially all of which are outstanding, at
an exercise price of $16.00 per share, substantially all of which become
exercisable ratably over three years from the date of issuance.

The Class A Options and Class B Options granted to the Named Executive
Officers are exercisable up to the tenth anniversary of the date of issuance,
subject to acceleration upon termination of employment. As of December 30, 1995,
none of such options were exercised.

DIRECTORS STOCK OPTION PLAN

The Company maintains The Henry Schein, Inc. 1996 Non-Employee Director
Stock Option Plan (the "Director Plan"). The purposes of the Director Plan are
to enable the Company to attract, retain and motivate directors of the Company
who are not employees of the Company or its subsidiaries and who are important
to the success of the Company and to create a mutuality of interest between the
non-employee directors and the stockholders of the Company by granting such
directors options to purchase Common Stock of the Company. Under the Director
Plan, each director who is not also an officer or employee of the Company is
eligible to receive options to purchase shares of the Company's Common Stock. An
aggregate of 50,000 shares are available for purchase pursuant to the exercise
of options granted under the Director Plan. If options are cancelled, expire or
terminate unexercised, the shares of Common Stock shall again be available for
the grant of options under the Director Plan.

The Director Plan is administered by a committee comprised of two or more
directors appointed by the Board of Directors, each of whom qualifies as a
"disinterested person" within the meaning of Rule 16b-3 promulgated under the
Exchange Act. The committee has the full authority and discretion to determine
those individuals who are to be granted options and the amount of options. Terms
and conditions of options will be set forth in written option agreements
consistent with the terms of the Director Plan. No options shall be granted
under the Director Plan on or after March 22, 2006, but options granted prior to
such date may extend beyond that date.

The Director Plan may be terminated at any time by the Board of Directors or
the committee (subject to the continued effectiveness of outstanding options).
The Board of Directors or the committee may also amend the Director Plan, except
that no amendment may, without the approval of stockholders of the Company, (i)
increase the total number of shares of Common Stock which may be acquired upon
exercise of options granted under the Director Plan, (ii) change the
requirements for eligibility for participation in the Director Plan or (iii)
effect any change that would require stockholder approval under Rule 16b-3 (or
any successor provision) promulgated under the Exchange Act.

The term of each option will be specified by the committee upon grant, but
may not exceed ten years from the date of grant. The exercise price of each
option granted under the Director Plan and the terms upon which each option
granted under the Director Plan will be exercisable will be determined by the
committee. Under the Director Plan, the exercisability of options may be
accelerated in certain events, including upon a change of control (as defined in
the Director Plan). Subject to certain rights to exercise after the death,
disability, retirement or termination of services (other than for cause) of the

51
<PAGE>
optionee or after a change of control, options granted under the Director Plan
may be exercised only if the optionee is eligible to participate in the Director
Plan on the date of exercise.

Upon the exercise of an option, the option holder must make payment of the
full exercise price, either in cash or, if permitted by the committee, in shares
of the Company's Common Stock, by delivery of the optionee's promissory note, in
a combination of cash, shares of the Company's Common Stock or the optionee's
promissory note, or on such other terms and conditions as may be acceptable to
the committee.

On March 22, 1996, each of Messrs. Alperin and Kabat were granted options to
purchase 5,000 shares of the Company's Common Stock at an exercise price of
$29.00 per share (which was the fair market value on the date of grant).

EMPLOYEE STOCK OWNERSHIP PLAN

The Company adopted the Henry Schein, Inc. Employee Stock Ownership Plan
effective as of January 1, 1994 to enable participants to have an interest in
the Common Stock of the Company and to provide participants an opportunity to
share in the growth and prosperity of the Company. The ESOP is intended to be a
tax-qualified plan under Section 401(a) of the Code and is intended to qualify
as an employee stock ownership plan under Section 4975(e)(7) of the Code.

Employees of the Company are eligible to participate in the ESOP after six
months of service for the Company or a participating affiliate, and receive
participation credit if they complete 1,000 hours of service in a twelve
consecutive month period.

With respect to each plan year, the Company and its participating affiliates
intend to make discretionary contributions, in cash or in Common Stock, to the
ESOP. Subject to legal limitations, contributions to the ESOP will only be
allocated to the accounts of participants who either (i) are employed by the
Company or a participating affiliate on the last day of the plan year and
completed 1,000 hours of service in such plan year, or (ii) retired after
attaining age 65, died or incurred a disability during the plan year.
Contributions are allocated based on a participant's compensation. The Company
and its participating affiliates made contributions of 128,257 shares of Common
Stock to the ESOP for the 1994 plan year equal to approximately $900,000 in the
aggregate, and intend to make contributions of shares of Common Stock having a
value equal to 3% of participants' aggregate compensation for the 1995 plan year
equal to approximately $1.0 million in the aggregate.

The ESOP may borrow money and purchase Common Stock by means of an
acquisition loan. Any Common Stock which is acquired with the proceeds of an
acquisition loan will be held in a suspense account and will not be allocated or
released until a contribution is made to the ESOP (which is used to repay the
acquisition loan).

Participants in the ESOP become vested in their accounts based on a graded
seven year vesting schedule (or upon a participant's retirement after attaining
age 65, death or disability, if earlier). In general, participants are entitled
to receive the vested amounts in their accounts in the ESOP on death,
disability, retirement or five years after termination of employment in either
(i) a single lump-sum payment, or (ii) installment payments over a period not to
exceed five years (subject to extension in certain cases).

PROFIT SHARING/401(K) PLAN

The Company maintains the Henry Schein, Inc. Profit Sharing/401(k) Savings
Plan (the "Profit Sharing/401(k) Plan") to provide retirement and other benefits
to employees of the Company and certain participating affiliates and to permit
employees a means to save for their retirement. Certain plans previously
maintained by the Company or its affiliates ("Prior Plans") were merged into
this

52
<PAGE>
Profit Sharing/401(k) Plan. The Profit Sharing/401(k) Plan is intended to be a
tax-qualified plan under Section 401(a) of the Code, and contains a Code Section
401(k) feature.

Eligible employees of the Company and its participating affiliates who work
for a specified period (as described below) are eligible to participate in the
Profit Sharing/401(k) Plan. Part-time employees are eligible to make profit
sharing contributions as of the January 1 of the twelve consecutive month period
during which they are first credited with 1,000 hours of service. Full-time
employees become eligible to have profit sharing contributions made on their
behalf after they work for six consecutive months during which they complete at
least 1,000 hours of service. All employees are eligible to make 401(k)
contributions (in accordance with administrative practices) following completion
of three consecutive months during which they complete at least 250 hours of
service.

Subject to legal limitations, participants may elect, by salary reduction,
to have 401(k) contributions of 1% to 10% of their compensation made to their
accounts under the Profit Sharing/401(k) Plan. Under the Profit Sharing/401(k)
Plan, the Company and its participating affiliates may make discretionary profit
sharing contributions on behalf of participants who have completed 1,000 hours
of service during the plan year and are employed on the last day of the plan
year (or have retired after attaining age 65, died or incurred a disability in a
plan year), based on compensation. The Company and its participating affiliates
intend to make profit sharing contributions for the 1995 plan year equal to 4%
(or, in the case of certain divisions or subsidiaries, 3.5%) of eligible
compensation or approximately $1.3 million in the aggregate.

Participants in the Profit Sharing/401(k) Plan always have a 100% vested and
nonforfeitable interest in the value of their 401(k) contributions. Participants
become vested in the Company's or participating affiliate's profit sharing
contributions based on a graded seven year vesting schedule (or upon a
participant's retirement after attaining age 65, death or disability, if
earlier). Participants are entitled to receive the vested amounts in their
accounts in a single lump-sum payment on death, disability, retirement or
termination of employment. The portion of a participant's account attributable
to a Prior Plan may be eligible for payment in a different form based on the
provisions of the Prior Plan. In certain circumstances, participants may receive
loans and hardship withdrawals from their accounts in the Profit Sharing/401(k)
Plan.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

The Company established the Henry Schein, Inc. Supplemental Executive
Retirement Plan effective as of January 1, 1994 in order to provide deferred
compensation to a select group of management and highly compensated employees of
the Company and its affiliates. The SERP is a non-qualified, unfunded deferred
compensation plan. The benefits under the SERP are intended to supplement the
benefits payable under the Profit Sharing/401(k) Plan and the ESOP by providing
benefits in excess of the limitation imposed by Section 401(a)(17) of the Code.
Code Section 401(a)(17) limits the amount of compensation that may be taken into
consideration under a tax-qualified benefit plan to $150,000, as adjusted for
cost of living increase set by the Secretary of Treasury.

An employee of the Company (or one of its affiliates which participate in
either the Profit Sharing/401(k) Plan or the ESOP) must be designated by the
administrative committee of the SERP in order to participate in the SERP.

A participant's benefits under the SERP becomes vested based on a graded
seven year vesting schedule. However, if a participant retires after attaining
age 65, dies or incurs a disability, or if there is a change in control of the
Company (as defined in the SERP), the participant will become fully vested in
his account under the SERP. Participants are entitled to receive their vested
benefits upon the occurrence of a change of control of the Company or upon
termination of employment for any reason including death, disability or
retirement in a single lump-sum payment.

53
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Stanley M. Bergman, James P. Breslawski, Gerald A. Benjamin, Leonard A.
David, Mark E. Mlotek and Steven Paladino are executive officers of the Company
and members of the Board of Directors which approved incentive compensation for
the Named Executive Officers for fiscal 1995 based upon the recommendations of
the Compensation Committee. Mr. Bergman is also a member of the Compensation
Committee. Mr. Bergman did not participate in any deliberations of the
Compensation Committee or the Board of Directors with respect to his own
compensation for fiscal 1995, and none of the Named Executive Officers
participated in any deliberations of the Board of Directors with respect to
their own compensation for fiscal 1995.

CERTAIN TRANSACTIONS

REORGANIZATION

Certain of the directors, officers and stockholders of the Company entered
into a series of transactions with the Company, as described under
"Reorganization." The Company paid (i) certain of the legal and other
professional fees incurred by the executors of the Estate of Jacob M. Schein,
including Stanley M. Bergman and Pamela Joseph, in connection with such
transactions, in the amounts of approximately $552,000, $295,000 and $216,000
during 1994, 1993 and 1992, respectively, and (ii) the income taxes of $5.6
million incurred by Mr. Bergman in connection with the Company's issuance to him
of shares of Common Stock, and shares of common stock of Schein Pharmaceutical.
The Company also paid legal fees incurred by Marvin H. Schein in connection with
such transactions, in the amount of $75,000. The Company also paid a dividend in
1993 on behalf of the Estate of Esther Schein in the amount of $275,000. See
"Reorganization" and "Management--Executive Compensation."

In December 1992, Mr. Bergman was issued shares of Schein Pharmaceutical,
and on September 30, 1994, Mr. Bergman's shares in Schein Pharmaceutical and its
subsidiaries were exchanged for shares of common stock of Holdings, some of
which were sold by Mr. Bergman.

From time to time the Company has made loans to Stanley M. Bergman (for
income taxes payable by him in connection with Common Stock issued to Mr.
Bergman as part of the Reorganization), Pamela Joseph and Pamela Schein for
personal expenses. Interest on such loans accrued at the prime rate. The largest
aggregate principal amount of loans outstanding during 1994, 1993 and 1992 was
approximately $151,000, $143,000 and $0, respectively, for Stanley M. Bergman;
approximately $1.1 million, $929,000 and $668,000, respectively, for Pamela
Joseph; and approximately $187,000, $365,000 and $310,000, respectively, for
Pamela Schein. Mr. Bergman's, Ms. Joseph's and Ms. Schein's loans and all
interest accrued thereon were repaid on September 30, 1994. No loans have been
made to any of Mr. Bergman, Ms. Joseph or Ms. Schein since that date.

In connection with the Reorganization, the Company, Holdings and Marvin H.
Schein, a director and principal stockholder of the Company, agreed to terminate
a lifetime consulting agreement entered into in 1982 between the Company's
predecessor and Mr. Schein, and the Company and Mr. Schein agreed to continue
the consulting arrangement on the terms set forth in a new lifetime consulting
agreement (the "Consulting Agreement"). The current Consulting Agreement
modified certain of the terms of the 1982 agreement, including the elimination
of a provision limiting Mr. Schein's compensation to $100,000 per annum if the
Company's pre-tax income were less than $3.5 million for two consecutive years.
The 1982 agreement provided, and the current Consulting Agreement provides for
Mr. Schein's consulting services to the Company with respect to the marketing of
dental supplies and equipment, from time to time. The Consulting Agreement
currently provides for initial compensation of $258,000 per year, increasing
$25,000 every fifth year beginning in 1997. The Consulting Agreement also
provides that Mr. Schein will participate in all benefit, compensation, welfare
and perquisite plans, policies and programs generally available to either the
Company's employees or the Company's senior

54
<PAGE>
executive officers, excluding the Company's Stock Option Plan, that Mr. Schein's
spouse, and his children until they attain the age of 21, will be covered by the
Company's health plan, and that the Company will provide Mr. Schein with the use
of an automobile and expenses related thereto. The Consulting Agreement was
originally entered into as part of a recapitalization of the Company's
predecessor in 1982 among Mr. Schein and its other shareholders, and to secure
for the Company the consulting services of Mr. Schein, who had served the
Company in various executive capacities for more than the prior twenty years.
From time to time Mr. Schein and his affiliates have purchased products from the
Company, in an aggregate amount of approximately $100,000 during 1993, 1994 and
1995.

ACQUISITION OF THE SCHEIN DENTAL EQUIPMENT CORP.

On September 1, 1995, the Company acquired Schein Dental Equipment, a
distributor and manufacturer of large dental equipment, which was owned 73.7% by
Marvin H. Schein. The purchase price for the acquisition as approved by the
Board of Directors of the Company (other than Marvin H. Schein), was paid
primarily by the issuance of 1,260,416 shares of Common Stock, including 928,727
shares of Common Stock issued to Marvin H. Schein, and the balance in cash. In
addition, Schein Dental Equipment repaid approximately $1.7 million in loans to
Marvin H. Schein with funds provided by the Company. Marvin H. Schein acquired
24.6% of Schein Dental Equipment in January 1995 for $1.5 million. During 1993,
1994 and 1995, the Company sold products to Schein Dental Equipment, in the
amount of approximately $34,000, $33,000 and $30,000, respectively, and the
Company purchased products from Schein Dental Equipment, in the amounts of
approximately $1.2 million, $1.7 million and $1.8 million, respectively.

TRANSACTIONS WITH DIRECTORS, OFFICERS AND STOCKHOLDERS

During fiscal 1995, in accordance with the Global Agreement, the Company
paid legal and advisory fees for certain of its stockholders in connection with
the initial public offering aggregating approximately $310,000.

During 1994 and 1993, the Company paid Pamela Joseph approximately $82,000
and $14,000, respectively, for design and artistic services rendered to the
Company.

Prior to September 30, 1994, the Company paid for certain benefits for
Marvin H. Schein, Pamela Joseph and Pamela Schein, such as health insurance and
lease payments for automobiles, including automobile allowances. For 1994, 1993
and 1992, such amounts were approximately $19,000, $19,000 and $18,000,
respectively, for Marvin H. Schein; approximately $6,000, $11,000 and $10,000,
respectively, for Pamela Joseph; and approximately $2,000, $3,000 and $3,000,
respectively, for Pamela Schein. The Company continues to pay for certain
benefits for Marvin H. Schein, his spouse and his children pursuant to the
Consulting Agreement.

TRANSACTIONS WITH THIRD PARTIES

In the ordinary course of its business the Company buys products from and
sells products to Schein Pharmaceutical in arms' length transactions. Certain of
the Company's stockholders and directors, including Stanley M. Bergman, Marvin
H. Schein, Pamela Schein and Pamela Joseph, and persons related thereto, own
approximately 70% of the outstanding shares of Schein Pharmaceutical. In 1995,
1994 and 1993, the Company's purchases from Schein Pharmaceutical amounted to
$4.5 million, $5.9 million and $6.2 million, respectively.

55
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table presents certain information regarding beneficial
ownership of the Company's Common Stock as of May 1, 1996, by (i) each person
known to the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock, (ii) each director of the Company, (iii)
each executive officer named in the Summary Compensation Table, (iv) all
directors and executive officers as a group, and (v) each selling Stockholder.
Unless otherwise indicated, each person in the table has sole voting and
investment power as to the shares shown.

<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY OWNED SHARES OF BENEFICIALLY OWNED
PRIOR TO OFFERING (2) COMMON STOCK AFTER THE OFFERING
--------------------- TO BE --------------------
NAME AND ADDRESS (1) NUMBER PERCENT OFFERED NUMBER PERCENT
- --------------------------------------- ---------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
Stanley M. Bergman (3)................. 11,263,972 60.9% 2,792,000 8,471,972 39.7%
Marvin H. Schein, Individually and as
Trustee (4)............................ 5,817,006 31.5% 1,900,000 3,917,006 18.3%
Leslie J. Levine, as Trustee (5)....... 3,680,647 19.9% 712,300 2,968,347 13.9%
Pamela Schein (6)...................... 2,357,504 12.8% 715,000 1,642,504 7.8%
Irving Shafran and Judith Shafran, as
Trustees (7)........................... 2,357,504 12.8% 715,000 1,642,504 7.8%
Marion Bergman and Leslie Bergman, as
Trustees (8)........................... 1,274,707 6.9% -- 1,274,707 6.0%
Barry J. Alperin....................... 1,000 * -- 1,000 *
Gerald A. Benjamin (9)................. 81,190 * -- 81,190 *
James P. Breslawski (10)............... 195,822 1.1% -- 195,822 *
Leonard A. David (11).................. 30,913 * -- 30,913 *
Pamela Joseph, as Trustee (12)......... 531,020 2.9% 140,000 391,020 1.8%
Donald J. Kabat........................ 200 * -- 200 *
Mark E. Mlotek (13).................... 41,450 * -- 41,450 *
Steven Paladino (14)................... 83,690 * -- 83,690 *
Ellen Sperber, as Trustee (15)......... 147,312 * 37,000 110,312 *
Randy Jones (16)....................... 37,360 * -- 37,360 *
Community Funds Inc. (17).............. 27,500 * 27,500 -- --
Directors and Executive Officers as a
Group (17 persons) (18)................ 11,279,468 61.0 2,792,000 8,487,468 39.7%
</TABLE>

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

* Represents less than 1%.

(1) Unless otherwise indicated, the address for each person is c/o Henry
Schein, Inc., 135 Duryea Road, Melville, New York 11747.

(2) The 18,483,115 shares of Common Stock deemed outstanding prior to this
offering includes 18,306,994 shares of Common Stock outstanding on May 1,
1995 and 176,121 shares of Common Stock issuable pursuant to options held
by management which may be exercised within 60 days after the date of the
offering. The number of shares of Common Stock deemed outstanding after
this offering include an additional 2,880,500 shares of Common Stock being
offered for sale by the Company in this offering.

(3) Prior to this offering, includes (a) 164,758 shares which Mr. Bergman owns
directly and which he has the power to vote and the power to dispose of in
accordance with the Global Agreement, (b) 3,828,160 shares which Mr.
Bergman shares the power to vote pursuant to voting trust agreements, (c)
options to purchase 176,121 shares of Common Stock exercisable within 60
days by certain executives which will be subject to the Voting Trust upon
exercise and which Mr. Bergman will share the power to vote and (d) an
additional 7,094,933 shares held by certain stockholders of the Company
which must be voted for the eight nominees for director selected by Mr.
Bergman in

(Footnotes continued on following page)

56
<PAGE>
(Footnotes continued from preceding page)

accordance with the Global Agreement. Excludes 27,500 shares transferred by
Mr. Bergman to Community Funds Inc., a public charity, in June 1996. The
shares described in (a) through (c) must also be voted for the nominees for
director selected in accordance with the Global Agreement. After the
offering, reflects the sale of 2,792,000 shares to be sold by the selling
stockholders pursuant to this offering. See "Reorganization--Reorganization
Agreements."

(4) Includes (a) 2,136,359 shares which Mr. Schein owns directly and (b)
3,680,647 shares owned in trusts for the benefit of Mr. Schein and his
family members and/or trusts for charities of which Mr. Schein and Leslie
J. Levine are co-trustees, all of which shares Mr. Schein has the power to
vote and the power to dispose of in accordance with the Global Agreement.
Mr. Schein has the right to nominate one director to the Board of Directors
in accordance with the Global Agreement. Certain stockholders of the
Company (including Mr. Schein) are required to vote for the nominees for
director selected in accordance with the Global Agreement. Shares of Common
Stock to be offered include 1,187,700 shares owned directly by Mr. Schein,
670,800 shares owned in trust for the benefit of Mr. Schein and his family
members and 41,500 shares owned in a trust for the benefit of charities.
See "Reorganization--Reorganization Agreements."

(5) Mr. Levine holds such shares as co-trustee of trusts for the benefit of
Marvin H. Schein and his family members and/or trusts for charities. All of
such shares must be voted for the nominees for directors selected in
accordance with the Global Agreement. Mr. Levine has the power to dispose
of such shares in accordance with the Global Agreement. Shares of Common
Stock to be offered include 670,800 shares owned in trust for the benefit
of Marvin H. Schein and his family members and 41,500 shares owned in a
trust for the benefit of charities. See "Reorganization--Reorganization
Agreements."

(6) The shares are owned by a revocable trust established by Ms. Schein of
which Irving and Judith Shafran are trustees. Ms. Schein has the power to
dispose of such shares if she revokes the trust, subject to the Global
Agreement. All of such shares are subject to the Voting Trust. Ms. Schein
has the right to nominate one director to the Board of Directors in
accordance with the Global Agreement. Certain stockholders of the Company
(including the trustees of the revocable trust) are required to vote for
the nominees for director selected in accordance with the Global Agreement.
See "Reorganization--Reorganization Agreements."

(7) Mr. Shafran and Ms. Shafran hold such shares as trustees of a revocable
trust established by Pamela Schein. Mr. Shafran and Ms. Shafran share the
power to dispose of such shares in accordance with the Global Agreement.
All of such shares are subject to the Voting Trust and must be voted for
the nominees for director selected in accordance with the Global Agreement.
See "Reorganization--Reorganization Agreements."

(8) Leslie Bergman and Marion Bergman hold such shares as co-trustees of trusts
established by Stanley M. Bergman for the benefit of Stanley M. Bergman and
his family members. Leslie Bergman and Marion Bergman share the power to
vote such shares and the power to dispose of such shares in accordance with
the Global Agreement; provided that the shares must be voted for the
nominees for director selected in accordance with the Global Agreement. See
"Reorganization--Reorganization Agreements."

(9) Includes (a) 1,000 shares owned directly, (b) 50,490 shares subject to the
Voting Trust and (c) options to purchase 29,700 shares of Common Stock
exercisable within 60 days which will be subject to the Voting Trust upon
exercise. See "Reorganization--Reorganization Agreements."

(10) Mr. Breslawski has the power to dispose of such shares in accordance with
the Global Agreement. The shares are subject to the Voting Trust and must
be voted for the nominees for the director selected in accordance with the
Global Agreement. See "Reorganization--Reorganization Agreements."

(11) Includes (a) 2,500 shares owned directly, (b) 14,850 shares subject to the
Voting Trust and (c) options to purchase 13,563 shares of Common Stock
exercisable within 60 days which will be subject to the Voting Trust upon
exercise. See "Reorganization--Reorganization Agreements."

(Footnotes continued on following page)

57
<PAGE>
(Footnotes continued from preceding page)

(12) Ms. Joseph holds such shares as co-trustee of a trust established by Ms.
Joseph. Prior to the offering, it is anticipated that the trust will
distribute all its holdings of Common Stock to Ms. Joseph individually and
will be terminated. The shares to be offered would then be offered by Ms.
Joseph individually. Ms. Joseph shares the power to dispose of such shares
in accordance with the Global Agreement. All of such shares are subject to
the Voting Trust. Ms. Joseph has the right to nominate one director to the
Board of Directors. Certain stockholders of the Company (including Ms.
Joseph) are required to vote for the nominees for director selected in
accordance with the Global Agreement. See "Reorganization--Reorganization
Agreements."

(13) Includes (a) 2,000 shares owned directly, (b) 14,850 shares subject to the
Voting Trust, (c) options to purchase 19,800 shares of Common Stock
exercisable within 60 days which will be subject to the Voting Trust upon
exercise and (d) 4,800 shares which Mr. Mlotek has the power to vote as
trustee of trusts for certain third parties. See
"Reorganization--Reorganization Agreements."

(14) Includes (a) 3,500 shares owned directly, (b) 50,490 shares subject to the
Voting Trust and (c) options to purchase 29,700 shares of Common Stock
exercisable within 60 days which will be subject to the Voting Trust upon
exercise. All 83,690 shares must be voted for the nominees for director
selected in accordance with the Global Agreement. Mr. Paladino has the
power to dispose of such shares in accordance with the Global Agreement.
See "Reorganization--Reorganization Agreements."

(15) Ms. Sperber holds such shares as trustee of a trust for the benefit of Mr.
Sperber and his family group members. All of such shares must be voted for
the nominees for director selected in accordance with the Global Agreement.
Ms. Sperber has the power to dispose of such shares in accordance with the
Global Agreement. See "Reorganization--Reorganization Agreements."

(16) Includes (a) 400 shares owned directly, (b) 33,660 shares subject to the
Voting Trust and (c) options to purchase 3,300 shares of Common Stock
exercisable within 60 days which will be subject to the Voting Trust upon
exercise. See "Reorganization--Reorganization Agreements."

(17) These shares were transferred by Stanley M. Bergman to Community Funds
Inc., a public charity, in June 1996.

(18) Includes (a) all shares described in the preceding notes (2) through (15),
16(b) and 16(c), and (b) 4,000 shares held by other executive officers
which are not subject to the Voting Trust and 1,200 shares held by other
directors. See "Reorganization--Reorganization Agreements."

58
<PAGE>
DESCRIPTION OF CAPITAL STOCK

The following summary does not purport to be complete and is subject to, and
qualified in its entirety by, the Amended and Restated Certificate of
Incorporation (the "Restated Charter") and Amended and Restated Bylaws (the
"Restated By-laws") of the Company which are included as exhibits to the
registration statement, and by the provisions of applicable law.

The authorized capital stock of the Company consists of 60,000,000 shares of
Common Stock having a par value of $.01 per share and 1,000,000 shares of
Preferred Stock having a par value of $.01 per share.

COMMON STOCK

As of March 30, 1996, there were 18,306,994 shares of Common Stock
outstanding, held by stockholders of record (including various trusts) and
51,679 shares of Common Stock held by the Company in treasury. An aggregate of
728,635 shares of Common Stock are reserved for issuance under the Company's
1994 Stock Option Plan and 1996 Non-Employee Director Stock Option Plan.

All outstanding shares of Common Stock are, and the shares offered hereby
will be, fully paid and nonassessable. The holders of Common Stock are entitled
to one vote for each share held of record on all matters voted upon by
stockholders and may not cumulate votes. Thus, the owners of a majority of the
Common Stock outstanding may elect all of the directors if they choose to do so,
and the owners of the balance of such shares would not be able to elect any
directors. Subject to the rights of holders of any future series of undesignated
Preferred Stock which may be designated, each share of outstanding Common Stock
is entitled to participate equally in any distribution of net assets made to the
stockholders in liquidation, dissolution or winding up of the Company and is
entitled to participate equally in dividends as and when declared by the Board
of Directors. There are no redemption, sinking fund, conversion or preemptive
rights with respect to the shares of Common Stock. All shares of Common Stock
have equal rights and preferences.

PREFERRED STOCK

The Board of Directors is authorized, subject to certain limitations
prescribed by law, without further stockholder approval, to issue from time to
time up to an aggregate of 1,000,000 shares of Preferred Stock in one or more
series with such designations and such powers, preferences and rights, and such
qualifications, limitations or restrictions (which may differ with respect to
each series) as the Board may fix by resolution. Unless otherwise provided by
board resolution, the consent of the holders of any class or series of Preferred
Stock shall not be required for the issuance by the Board of Directors of any
other series of Preferred Stock. No dividend may be declared on any series of
Preferred Stock unless a dividend is declared on all shares of Preferred Stock
of each other series entitled to cumulative dividends, then outstanding, which
rank senior to or equally as to dividends with the series in question.

The rights, preferences and privileges of holders of Common Stock are
subject to, and may be adversely affected by, the rights of the holders of
shares of any series of Preferred Stock which the Company may designate and
issue in the future. The Company has no present plans to issue any shares of
Preferred Stock.

At present, no shares of Preferred Stock are issued or have been authorized
by the Board of Directors for issuance. Under the Restated Charter, no action by
the Company's stockholders is necessary, and only action of the Board of
Directors is required, to authorize the issuance of any of the shares of
additional authorized Preferred Stock. The Board of Directors is empowered to
establish, and to designate the name of, each class or series of the shares of
Preferred Stock and to set the terms of

59
<PAGE>
such shares (including terms with respect to redemption, sinking fund, dividend,
liquidation, preemptive, conversion and voting rights and preferences).
Accordingly, the Board of Directors, without stockholder approval, may issue
shares of Preferred Stock with terms (including terms with respect to
redemption, sinking fund, dividend, liquidation, preemptive, conversion and
voting rights and preferences) that could adversely affect the voting power and
other rights of holders of the Common Stock.

The undesignated Preferred Stock may have the effect of discouraging an
attempt, through the acquisition of a substantial number of shares of Common
Stock, to acquire control of the Company with a view to effecting a merger, sale
or exchange of assets or a similar transaction. For example, the Board of
Directors could issue such shares as a dividend to holders of Common Stock or
place such shares privately with purchasers who may side with the Board of
Directors in opposing a takeover bid. The anti-takeover effects of the
undesignated Preferred Stock may deny stockholders the receipt of a premium on
their Common Stock and may also have a depressive effect on the market price of
the Common Stock.

CERTAIN PROVISIONS OF DELAWARE LAW

The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law (the "DGCL"). Subject to certain exceptions, Section 203
prohibits a publicly-held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless the interested stockholder attained such status with the
approval of the Board of Directors or unless the business combination is
approved in a prescribed manner. A "business combination" includes mergers,
asset sales and other transactions resulting in a financial benefit to the
interested stockholder. Subject to certain exceptions, an "interested
stockholder" is a person who, together with affiliates and associates, owns, or
within three years did own, 15% or more of the corporation's voting stock.

ANTI-TAKEOVER EFFECT OF PROVISIONS OF THE RESTATED CHARTER AND RESTATED BY-LAWS

Certain provisions of the Restated Charter and Restated By-Laws could
discourage potential acquisition proposals and could delay or prevent a change
in control of the Company. These provisions are intended to enhance the
likelihood of continuity and stability in the composition of the Board of
Directors and in the policies formulated by the Board of Directors and to
discourage certain types of transactions that may involve an actual or
threatened change of control of the Company, such as an unsolicited acquisition
proposal. Because these provisions could have the effect of discouraging a third
party from acquiring control of the Company, they may inhibit fluctuations in
the market price of shares of Common Stock that could otherwise result from
actual or rumored takeover attempts and, therefore could deprive stockholders of
an opportunity to realize a takeover premium. These provisions also may have the
effect of limiting the price that certain investors might be willing to pay in
the future for shares of the Company's Common Stock and of preventing changes in
the management of the Company.

The Company's Restated Charter provides that if stockholder approval is
required for the adoption of any agreement for the merger or consolidation of
the Company with another corporation or for the sale, lease, transfer or
exchange of all or substantially all of the assets of the Company, then the
affirmative vote of holders of 60% of the outstanding stock entitled to vote
shall be required to approve such action.

The Restated Charter and Restated By-Laws provide that the number of
directors will be fixed from time to time at no less than five and no more than
eleven through December 31, 1998. Thereafter, the number of directors shall be
nine. Any director may be removed with or without cause at any time by the
affirmative vote of at least 66 2/3% of the shares entitled to vote at a special
meeting of the stockholders called for that purpose and the vacancies thus
created may be filled at that same meeting

60
<PAGE>
by the affirmative vote of at least 66 2/3% of the shares entitled to vote at
such meeting. Ordinary vacancies in the Board of Directors shall also be filled
by the affirmative vote of stockholders holding at least 66 2/3% of the
outstanding share entitled to vote.

The DGCL provides generally that the affirmative vote of a majority of the
shares entitled to vote on any matter is required to amend a corporation's
certificate of incorporation or by-laws, unless a corporation's certificate of
incorporation or by-laws, as the case may be, requires a greater percentage. The
Company's Restated Charter requires the affirmative vote of at least 80% of the
outstanding stock to amend or repeal certain of its provisions. A two-thirds
vote is required to amend or repeal the Company's Restated By-Laws. The Restated
By-Laws may also be amended or repealed by a two-thirds vote of the Board of
Directors. Such stockholder vote would be in addition to any separate class vote
that might in the future be required pursuant to the terms of any Preferred
Stock that might be outstanding at the time any such amendments are submitted to
stockholders.

AGREEMENTS RELATING TO CONTROL OF THE COMPANY

The Voting Trust gives Stanley M. Bergman (or his successor trustee) the
right to vote all of the shares of Common Stock owned by certain stockholders of
the Company. In addition, the Global Agreement provides that the Board of
Directors of the Company may consist of up to 11 members, and that until the
earlier of January 1, 1999 or the termination of the Voting Trust, Mr. Bergman
(or his successor trustee) has the right to nominate all but three of the
nominees to the Board of Directors. Marvin H. Schein, Pamela Joseph and Pamela
Schein have the right to serve as or nominate the remaining three directors. In
general, from the earlier of January 1, 1999 or the termination of the Voting
Trust until the earlier of January 1, 2004 or the first date on which Marvin H.
Schein and his family group no longer beneficially own at least 25% of the
outstanding Common Stock that they owned immediately after the Reorganization,
or the date of certain changes in the Company's management, Mr. Bergman (or his
successor trustee) has the right to nominate all of the nominees to the Board of
Directors, provided, that if Marvin H. Schein does not approve such nominations,
Mr. Bergman (or his successor trustee) and Mr. Schein will each nominate four
nominees (of which one will be an independent nominee) and the ninth nominee
will be selected by the two independent nominees. The Global Agreement also
requires the parties to the Voting Trust and Marvin H. Schein to vote in favor
of the individuals so nominated until the earlier of January 1, 1999 or the
termination of the Voting Trust, and to vote their shares in favor of the
nominees of Stanley M. Bergman until January 1, 2004. As a result of the
foregoing, until December 31, 1998, Mr. Bergman, as a practical matter, will be
able to significantly influence all matters requiring stockholder approval,
including the election of directors, and until January 1, 2004, Mr. Bergman will
have the ability to significantly influence the election of all or a substantial
number of the directors of the Company.

The Global Agreement also affords Marvin H. Schein or his designee the right
to serve on each committee of the Board of Directors to which the Board of
Directors has delegated decision-making authority and the right to call a
special meeting of the Board of Directors. The Global Agreement also limits the
Company's ability to adopt a shareholder rights plan or "fair price amendment,"
if such plan or amendment would affect Marvin H. Schein or Pamela Schein
(including their respective family members), as long as Marvin H. Schein or
Pamela Schein own certain specified percentages of the outstanding Common Stock.
See "Reorganization."

RESTRICTIONS ON TRANSFERS

61
<PAGE>
total votes that can be cast in any election of directors of the Company without
first offering Marvin H. Schein and Pamela Schein (including their respective
family members) the right to purchase such securities; (ii) issue securities in
connection with a business combination having more than 20%, or resulting in a
person owning more than 20%, of the total votes that can be cast in any election
of directors without the consent of Marvin H. Schein; or (iii) issue preferred
stock having the right to cast more than 20% of the total votes that can be cast
in any election of directors of the Company. In addition, certain members of
management have agreed not to transfer their shares until November 3, 1998,
subject to acceleration in Mr. Bergman's discretion. Restrictions on the ability
of stockholders to transfer their stock may make it more difficult for a third
party to acquire, or may discourage acquisition bids for, the Company, and could
limit the price that certain investors might be willing to pay in the future for
shares of Common Stock. See "Reorganization."

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is the Trust Company
of New Jersey, Jersey City, New Jersey.

62
<PAGE>
UNDERWRITING

The Underwriters named below (the "Underwriters"), for which William Blair &
Company, L.L.C., Alex. Brown & Sons Incorporated, Montgomery Securities and
Smith Barney Inc. are acting as representatives (the "Representatives") have
severally agreed, subject to the terms and conditions set forth in the
Underwriting Agreement by and among the Company, the Selling Stockholders and
the Underwriters, to purchase from the Company and the Selling Stockholders, and
the Company and the Selling Stockholders have agreed to sell to the
Underwriters, the respective number of shares of Common Stock set forth opposite
each Underwriter's name below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
William Blair & Company, L.L.C..................................
Alex. Brown & Sons Incorporated.................................
Montgomery Securities...........................................
Smith Barney Inc................................................

---------
Total..................................................... 5,700,000
---------
---------
</TABLE>

The nature of the Underwriters' obligations under the Underwriting Agreement
is such that all shares of the Common Stock offered hereby, excluding shares
covered by the over-allotment option granted to the Underwriters, must be
purchased if any are purchased.

The Representatives have advised the Company and the Selling Stockholders
that the Underwriters propose to offer the Common Stock to the public initially
at the public offering price set forth on the cover page of this Prospectus and
to select dealers at such price less a concession of not more than $
per share. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share to certain other dealers. The
Underwriters may also offer shares to employees of the Company at the public
offering price set forth on the cover page of this Prospectus. After the public
offering contemplated hereby, the public offering and other selling terms may be
changed by the Representatives.

The Company has granted to the Underwriters an option exercisable within 30
days after the date of this Prospectus, to purchase up to an additional 855,000
shares of Common Stock to cover over-allotments, at the same price per share to
be paid by the Underwriters for the other shares offered

63
<PAGE>
hereby. If the Underwriters purchase any such additional shares pursuant to this
option, each Underwriter will be committed to purchase such additional shares in
approximately the same proportion as set forth in the table above. The
Underwriters may exercise the option only for the purpose of covering
over-allotments, if any, made in connection with the distribution of shares of
Common Stock offered hereby.

The Company and its directors, executive officers and certain stockholders
have agreed not to offer, sell or otherwise dispose of any Common Stock or any
securities convertible into Common Stock or register for sale under the
Securities Act any Common Stock for a period of 120 days after the date of this
Prospectus without the prior written consent of the Representatives.

The rules of the Commission generally prohibit the Underwriters and other
members of the selling group, if any, from making a market in the Common Stock
during a "cooling-off" period immediately preceding the commencement of sales in
the offering. The Commission has, however, adopted exemptions from these rules
that permit passive market making under certain conditions. These rules permit
an Underwriter or other members of the selling group, if any, to continue to
make a market in the Common Stock subject to the condition, among others, that
its bid not exceed the highest bid by a market maker not connected with the
offering and that its net purchases on any one trading day not exceed prescribed
limits. Pursuant to these exemptions, certain Underwriters and other members of
the selling group, if any, may engage in passive market making in the Common
Stock during the cooling-off period.

The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the Underwriters may be required to
make in respect thereof.

LEGAL MATTERS

The validity of the shares of Common Stock being offered hereby will be
passed upon for the Company and the Selling Stockholders by Proskauer Rose Goetz
& Mendelsohn LLP, New York, New York. Certain legal matters in connection with
this Offering will be passed upon for the Underwriters by Sidley & Austin,
Chicago, Illinois.

EXPERTS

The consolidated financial statements and schedule of Henry Schein, Inc. and
Subsidiaries, the financial statements of Veratex (a division of The Veratex
Corporation) and the consolidated financial statements of HS Pharmaceutical,
Inc. and Subsidiaries included in this Prospectus and in the Registration
Statement have been audited by BDO Seidman, LLP, independent certified public
accountants, to the extent and for the periods set forth in their reports
appearing elsewhere in this Prospectus and in the Registration Statement, and
are included in reliance upon such reports given upon the authority of such firm
as experts in auditing and accounting.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement under the
Securities Act with respect to the Common Stock offered by this Prospectus. This
Prospectus does not contain all the information set forth in the Registration
Statement. For further information with respect to the Company and the Common
Stock, reference is made to the Registration Statement and the exhibits and
schedules filed therewith. Statements contained in this Prospectus regarding the
contents of any agreement or other document filed as an exhibit to the
Registration Statement are not necessarily

64
<PAGE>
complete, and in each instance reference is made to the copy of such agreement
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. In addition, the Company is subject
to the informational requirements of the Exchange Act, and in accordance
therewith files reports and other information with the Commission. The
Registration Statement, including the exhibits and schedules thereto, as well as
the Company's periodic reports, proxy statements and other information, may be
inspected at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W. Washington, D.C. 20549;
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60621;
and Seven World Trade Center, New York, New York 10048; and copies of all or any
part thereof may be obtained from such office upon payment of the prescribed
fees. The Company's Common Stock is traded on the Nasdaq National Market and
such reports, proxy statements and other information may be inspected at the
offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006

65
<PAGE>

[THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY]

<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
HENRY SCHEIN, INC. AND SUBSIDIARIES
Report of Independent Certified Public Accountants................................. F-2
Consolidated Financial Statements:
Balance Sheets as of December 31, 1994, December 30, 1995 and March 30, 1996
(unaudited).......................................................................... F-3
Statements of Operations for the years ended December 25, 1993, December 31, 1994
and December 30, 1995 and for the three months ended March 30, 1996 (unaudited)
and July 1, 1995 (unaudited)......................................................... F-4
Statements of Stockholders' Equity for the years ended December 25, 1993,
December 31, 1994 and December 30, 1995 and the three months ended March 30,
1996 (unaudited)..................................................................... F-5
Statements of Cash Flows for the years ended December 25, 1993, December 31, 1994
and December 30, 1995 and the three months ended March 30, 1996 (unaudited) and
July 1, 1995 (unaudited)............................................................. F-6
Notes to Consolidated Financial Statements....................................... F-7
VERATEX
Report of Independent Certified Public Accountants................................. F-28
Financial Statements:
Statements of Assets Purchased as of December 31, 1994 and June 30, 1995
(unaudited).......................................................................... F-29
Statements of Revenues and Direct Operating Expenses for the year ended December
31, 1994 and the six months ended June 30, 1994 (unaudited) and June 30, 1995
(unaudited).......................................................................... F-30
Notes to Financial Statements.................................................... F-31
HS PHARMACEUTICAL, INC. AND SUBSIDIARIES
Report of Independent Certified Public Accountants................................. F-32
Consolidated Financial Statements:
Balance Sheets as of December 31, 1994 and December 30, 1995..................... F-33
Statements of Income and Retained Earnings for the years ended December 25, 1993,
December 31, 1994 and December 30, 1995.............................................. F-34
Statements of Cash Flows for the years ended December 25, 1993, December 31, 1994
and December 30, 1995................................................................ F-35
Notes to Consolidated Financial Statements....................................... F-36
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Henry Schein, Inc.
Melville, New York

We have audited the accompanying consolidated balance sheets of Henry
Schein, Inc. and Subsidiaries as of December 31, 1994 and December 30, 1995 and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 30, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 Henry
Schein, Inc. and Subsidiaries at December 31, 1994 and December 30, 1995 and the
results of their operations and their cash flows for each of the three years in
the period ended December 30, 1995, in conformity with generally accepted
accounting principles.

As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for income taxes in 1993.

BDO SEIDMAN, LLP

New York, New York
February 23, 1996

F-2
<PAGE>
HENRY SCHEIN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30, MARCH 30,
1994 1995 1996
------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 4,450 $ 7,603 $ 7,500
Accounts receivable, less reserves of $4,319, $6,335 and
$5,891, respectively.................................. 57,464 91,248 104,859
Inventories............................................. 76,933 96,515 87,897
Deferred income taxes................................... 5,232 6,896 6,715
Other................................................... 14,077 19,492 18,579
------------ ------------ -----------
Total current assets.................................. 158,156 221,754 225,550
Property and equipment, net................................. 19,908 29,713 30,816
Goodwill and other intangibles, net......................... 5,044 24,389 26,186
Investments and other....................................... 6,912 21,011 21,181
------------ ------------ -----------
$190,020 $296,867 $ 303,733
------------ ------------ -----------
------------ ------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................ $ 45,158 $ 65,105 $ 56,184
Bank credit lines....................................... 6,646 9,325 8,085
Accruals:
Salaries and related expenses......................... 5,002 9,074 9,999
Premium coupon redemptions............................ 3,992 4,474 4,354
Other................................................. 17,995 26,534 19,012
Current maturities of long-term debt.................... 2,971 3,343 3,861
------------ ------------ -----------
Total current liabilities............................. 81,764 117,855 101,495
Long-term debt.............................................. 51,521 30,381 51,701
Other liabilities........................................... 600 1,233 1,236
------------ ------------ -----------
Total liabilities..................................... 133,885 149,469 154,432
------------ ------------ -----------
Redeemable stock, 2,084,398 shares.......................... 14,745 -- --
------------ ------------ -----------
Minority interest........................................... 1,823 4,547 4,361
------------ ------------ -----------
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, authorized 60,000,000;
issued: 9,923,859, 18,358,673 and 18,358,673,
respectively................................................ 99 183 183
Additional paid-in capital.............................. 9,964 123,866 123,866
Retained earnings....................................... 29,962 19,746 22,210
Treasury stock, at cost, 51,679 shares in 1995 and
1996........................................................ -- (769) (769)
Foreign currency translation adjustment................. (458) (175) (550)
------------ ------------ -----------
Total stockholders' equity............................ 39,567 142,851 144,940
------------ ------------ -----------
$190,020 $296,867 $ 303,733
------------ ------------ -----------
------------ ------------ -----------
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE>
HENRY SCHEIN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
------------------------------------------ --------------------
DECEMBER 25, DECEMBER 31, DECEMBER 30, APRIL 1, MARCH 30,
1993 1994 1995 1995 1996
------------ ------------ ------------ -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales................................... $415,710 $486,610 $616,209 $136,040 $ 185,359
Cost of sales............................... 294,693 343,922 425,625 95,725 130,410
------------ ------------ ------------ -------- ---------
Gross profit............................. 121,017 142,688 190,584 40,315 54,949
Operating expenses:
Selling, general and administrative...... 109,574 128,560 170,823 37,329 50,245
Special management compensation.......... 617 21,596 20,797 -- --
Special contingent consideration......... 3,216 -- -- -- --
Special professional fees................ 2,224 2,007 -- -- --
------------ ------------ ------------ -------- ---------
Operating income (loss)................ 5,386 (9,475) (1,036) 2,986 4,704
Other income (expense):
Interest income.......................... 856 251 475 69 395
Interest expense......................... (3,216) (3,756) (5,833) (1,288) (961)
Other-net................................ (634) 541 276 97 (97)
------------ ------------ ------------ -------- ---------
Income (loss) before taxes on income
(recovery), minority interest and
equity in earnings of affiliates..... 2,392 (12,439) (6,118) 1,864 4,041
Taxes on income (recovery).................. 1,351 (1,630) 5,126 781 1,783
Minority interest in net income (loss) of
subsidiaries................................ 318 561 509 172 (70)
Equity in earnings of affiliates............ 1,296 494 1,537 25 136
------------ ------------ ------------ -------- ---------
Income (loss) before cumulative effect of
accounting change........................... 2,019 (10,876) (10,216) 936 2,464
Cumulative effect of accounting change...... 1,891 -- -- -- --
------------ ------------ ------------ -------- ---------
Net income (loss)........................... $ 3,910 $(10,876) $(10,216) $ 936 $ 2,464
------------ ------------ ------------ -------- ---------
------------ ------------ ------------ -------- ---------
Net income per common share................. $ .08 $ .13
-------- ---------
-------- ---------
Weighted average common and common
equivalent shares outstanding.............. 12,184 18,670
-------- ---------
-------- ---------
Pro forma:
Historical net loss...................... $(10,876) $(10,216)
Pro forma adjustments:
Special management compensation and
professional fees........................... 23,603 20,797
Tax effect of above.................... (5,749) (1,174)
------------ ------------
Pro forma net income..................... $ 6,978 $ 9,407
------------ ------------
------------ ------------
Pro forma net income per common share.... $ .58 $ .70
------------ ------------
------------ ------------
Pro forma weighted average common and
common equivalent shares outstanding........ 12,127 13,447
------------ ------------
------------ ------------
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE>
HENRY SCHEIN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
COMMON STOCK FOREIGN
$.01 PAR VALUE ADDITIONAL CURRENCY TOTAL
------------------ PAID-IN RETAINED TREASURY TRANSLATION DEFERRED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS STOCK ADJUSTMENT COMPENSATION EQUITY
---------- ------ ---------- -------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 26,
1992....................... 11,390,544 $114 $ 11,225 $ 38,050 $-- $(458) $ (8,814) $ 40,117
Net income................. -- -- -- 3,910 -- -- -- 3,910
Deemed dividend............ -- -- -- (570) -- -- -- (570)
Amortization of deferred
compensation............... -- -- -- -- -- -- 617 617
Foreign currency
translation adjustment.... -- -- -- -- -- (177) -- (177)
---------- ------ ---------- -------- -------- ----- ------------ -------------
BALANCE, DECEMBER 25,
1993....................... 11,390,544 114 11,225 41,390 -- (635) (8,197) 43,897
Net loss................... -- -- -- (10,876) -- -- -- (10,876)
Deemed dividend............ -- -- -- (552) -- -- -- (552)
Adjustment resulting from
revaluation of stock
issued for special
compensation (including
$4,897 attributable to
stock of former parent)... -- -- 9,104 -- -- -- (9,104) --
Stock issued and issuable,
in part, to settle accrued
liability under long-term
executive incentive
compensation plan.......... 489,456 5 3,460 -- -- -- -- 3,465
Recognition of deferred
compensation............... -- -- -- -- -- -- 17,301 17,301
Stock issued to ESOP
trust...................... 128,257 1 899 -- -- -- -- 900
Reclassification of
redeemable stock issued as
special compensation and
to ESOP trust............. (2,084,398) (21) (14,724) -- -- -- -- (14,745)
Foreign currency
translation adjustment.... -- -- -- -- -- 177 -- 177
---------- ------ ---------- -------- -------- ----- ------------ -------------
BALANCE, DECEMBER 31,
1994....................... 9,923,859 99 9,964 29,962 -- (458) -- 39,567
Net loss................... -- -- -- (10,216) -- -- -- (10,216)
Shares issued for
acquisition................ 1,260,416 13 6,500 -- -- -- -- 6,513
Stock issued in initial
public offering........... 5,090,000 51 72,417 -- -- -- -- 72,468
Reclassification of
redeemable stock issued as
special compensation and
to ESOP trust upon closing
of initial public
offering................... 2,084,398 20 32,180 -- -- -- -- 32,200
Issuance of compensatory
stock options............. -- -- 2,805 -- -- -- -- 2,805
Purchase of treasury stock
(51,679 shares)............ -- -- -- -- (769) -- -- (769)
Foreign currency
translation adjustment.... -- -- -- -- -- 283 -- 283
---------- ------ ---------- -------- -------- ----- ------------ -------------
BALANCE, DECEMBER 30,
1995....................... 18,358,673 183 123,866 19,746 (769) (175) -- 142,851
Net income (unaudited)..... -- -- -- 2,464 -- -- -- 2,464
Foreign currency
translation adjustment
(unaudited)................ -- -- -- -- -- (375) -- (375)
---------- ------ ---------- -------- -------- ----- ------------ -------------
BALANCE, MARCH 30, 1996
(UNAUDITED)................ 18,358,673 $183 $ 123,866 $ 22,210 $ (769) $(550) -- $ 144,940
---------- ------ ---------- -------- -------- ----- ------------ -------------
---------- ------ ---------- -------- -------- ----- ------------ -------------
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE>
HENRY SCHEIN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
---------------------------------------- -------------------
DECEMBER 25, DECEMBER 31, DECEMBER 30, APRIL 1, MARCH 30,
1993 1994 1995 1995 1996
------------ ------------ ------------ -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).............................. $ 3,910 $(10,876) $(10,216) $ 936 $ 2,464
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization................ 3,981 3,811 6,037 914 1,716
Provision for losses and allowances on
accounts receivable........................ 316 1,061 2,016 154 (360)
Stock issued to ESOP trust................... -- 900 -- -- --
Provision (benefit) for deferred income
taxes.......................................... (1,551) (3,553) (1,091) (787) 168
Special management compensation.............. 617 18,866 20,289 -- --
Special contingent consideration............. 3,216 -- -- -- --
Cumulative effect of accounting change....... (1,891) -- -- -- --
Undistributed earnings of affiliates......... (1,296) (494) (1,537) (25) (136)
Minority interest in net income (loss) of
subsidiaries................................... 318 561 509 172 (70)
Other........................................ 198 (965) (558) 62 24
Changes in assets and liabilities:
Increase in accounts receivable............ (6,852) (12,809) (35,055) (6,692) (11,898)
(Increase) decrease in inventories......... (8,424) (5,412) (7,342) 5,378 10,037
(Increase) decrease in other current
assets......................................... 4,630 (3,571) (4,411) 2,168 1,454
Increase (decrease) in accounts payable and
accruals....................................... (491) 18,759 20,562 (4,901) (19,435)
------------ ------------ ------------ -------- ---------
Net cash provided by (used in) operating
activities..................................... (3,319) 6,278 (10,797) (2,621) (16,036)
------------ ------------ ------------ -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures......................... (2,903) (5,919) (9,219) (1,652) (1,956)
Business acquisitions, net of cash
acquired....................................... (1,114) -- (16,377) (280) (1,925)
Other........................................ (905) (1,972) (3,893) (488) 149
------------ ------------ ------------ -------- ---------
Net cash used in investing activities........ (4,922) (7,891) (29,489) (2,420) (3,732)
------------ ------------ ------------ -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt..... 1,489 5,391 3,698 269 662
Principal payments on long-term debt......... (1,590) (1,150) (15,289) (459) (924)
Proceeds from issuance of stock.............. -- -- 72,468 -- --
Proceeds from borrowings from banks.......... 13,600 3,764 2,446 6,254 23,960
Purchase of treasury stock................... -- -- (769) -- --
Payments on borrowings from banks............ (6,746) (4,200) (20,826) (293) (3,559)
Deemed dividend.............................. (295) (552) -- -- --
Other........................................ (227) 445 1,711 906 (474)
------------ ------------ ------------ -------- ---------
Net cash provided by financing activities...... 6,231 3,698 43,439 6,677 19,665
------------ ------------ ------------ -------- ---------
Net increase (decrease) in cash and cash
equivalents.................................... (2,010) 2,085 3,153 1,636 (103)
Cash and cash equivalents, beginning of
period......................................... 4,375 2,365 4,450 4,450 7,603
------------ ------------ ------------ -------- ---------
Cash and cash equivalents, end of period....... $ 2,365 $ 4,450 $ 7,603 $ 6,086 $ 7,500
------------ ------------ ------------ -------- ---------
------------ ------------ ------------ -------- ---------
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE>
HENRY SCHEIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION RELATED TO THE THREE MONTHS ENDED
APRIL 1, 1995 AND SUBSEQUENT TO DECEMBER 30, 1995 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)

NOTE 1--SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of Henry Schein,
Inc. and all of its wholly-owned and majority-owned subsidiaries (the
"Company"). Investments in unconsolidated affiliates which are 50% or less owned
are accounted for under the equity method. All material intercompany accounts
and transactions are eliminated in consolidation.

Use of Estimates

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

Fiscal Year

The Company reports its operations on a 52-53 week basis ending on the last
Saturday of December. Accordingly, fiscal years ended December 25, 1993 and
December 30, 1995 consisted of 52 weeks and the fiscal year ended December 31,
1994 consisted of 53 weeks.

Revenue Recognition

Sales are recorded when products are shipped or services are rendered,
except for the portion of revenues from sales of practice management software
which is attributable to noncontractual postcontract customer support, which is
deferred and recognized ratably over the period in which the support is expected
to be provided.

Inventories

Inventories consist substantially of finished goods and are valued at the
lower of cost or market. Cost is determined by the first-in, first-out ("FIFO")
method.

Property and Equipment and Depreciation and Amortization

Property and equipment are stated at cost. Depreciation is computed
primarily under the straight-line method over the following estimated useful
lives:

YEARS
-----
Buildings and improvements......................................... 40
Machinery and warehouse equipment.................................. 5-10
Furniture, fixtures and other...................................... 3-10
Computer equipment................................................. 5

F-7
<PAGE>
HENRY SCHEIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDED
APRIL 1, 1995 AND SUBSEQUENT TO DECEMBER 30, 1995 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)

NOTE 1--SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Amortization of leasehold improvements is computed using the straight-line
method over the lesser of the useful life of the assets or the lease term.

Taxes on Income

The Company filed a consolidated Federal income tax return with Schein
Holdings, Inc. for the period ended September 30, 1994 (see Note 2). For the
balance of 1994 the Company filed a consolidated Federal income tax return with
its 80% or greater owned subsidiaries and expects to continue to do so
thereafter. Income taxes for financial statement presentation were calculated
through the period ending September 30, 1994 as if the Company filed a separate
tax return.

Effective for 1993, the Company adopted Statement of Financial Accounting
Standards No. 109 ("SFAS No. 109"), "Accounting for Income Taxes." SFAS No. 109
provides that deferred income taxes are recognized for the tax consequences of
temporary differences between the financial reporting bases and the tax bases of
the Company's assets and liabilities.

Premium Coupon Program

The Company issues premium coupons to certain customers in conjunction with
sales of its products which are redeemable for gifts. Premium coupon redemptions
are accrued as issued based upon expected redemption rates.

Statement of Cash Flows

For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments and other short-term investments with an initial
maturity of three months or less to be cash equivalents. The Company has
determined that the effect of foreign exchange rate changes on cash flows is not
material.

Foreign Currency Translation and Transactions

The financial position and results of operations of the Company's foreign
subsidiaries are determined using local currency as the functional currency.
Assets and liabilities of these subsidiaries are translated at the exchange rate
in effect at each year-end. Income statement accounts are translated at the
average rate of exchange prevailing during the year. Translation adjustments
arising from the use of differing exchange rates from period to period are
included in the cumulative translation adjustment account in stockholders'
equity. Gains and losses resulting from foreign currency transactions are
included in earnings, except for certain hedging transactions (see below).

Financial Instruments

The Company uses forward exchange contracts to hedge certain firm
commitments denominated in foreign currencies. Gains and losses on these
positions are deferred and included in the basis of the transaction when it is
completed. In order to manage interest rate exposure, the Company has entered
into interest rate swap agreements to exchange variable rate debt based on LIBOR
into fixed rate debt

F-8
<PAGE>
HENRY SCHEIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDED
APRIL 1, 1995 AND SUBSEQUENT TO DECEMBER 30, 1995 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)

NOTE 1--SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
without the exchange of the underlying principal amounts. Net payments or
receipts under the agreements are recorded as adjustments to interest expense.

The carrying amounts reported in the consolidated balance sheets for cash
and cash equivalents, accounts receivable, accounts payable, and accrued
liabilities approximate fair value because of the immediate or short-term
maturity of these financial instruments. The carrying amount reported for
long-term debt approximates fair value because the underlying instruments are at
variable rates which are repriced frequently.

Acquisitions

The net assets of businesses purchased are recorded at their fair value at
the acquisition date and the consolidated financial statements include their
operations from that date. Any excess of acquisition costs over the fair value
of identifiable net assets acquired is included in goodwill and is amortized on
a straight-line basis over periods not exceeding 30 years.

Deferred Catalog Costs

Effective for 1993, the Company adopted AICPA Statement of Position 93-7
("SOP 93-7"), "Reporting on Advertising Costs." SOP 93-7 establishes accounting
standards for reporting the costs of advertising and direct response
advertising. The cumulative effect of this change was not material. In
accordance with this statement the net costs of direct mail catalogs used to
order merchandise are deferred and amortized ratably over the expected benefit
period of the specific catalog, which ranges from six to twelve months, and are
not material.

Long-Lived Assets

Long-lived assets, such as goodwill and property and equipment, are
evaluated for impairment when events or changes in circumstances indicate that
the carrying amount of the assets may not be recoverable through the estimated
undiscounted future cash flows from the use of these assets. When any such
impairment exists, the related assets will be written down to fair value. This
policy is in accordance with Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," which is effective for fiscal years beginning after
December 15, 1995. No impairment losses have been necessary through March 31,
1996.

Unaudited Interim Consolidated Financial Statements

In the opinion of the Company's management, the consolidated balance sheet
as of March 30, 1996, the consolidated statements of operations and cash flows
for the three months ended April 1, 1995 and March 30, 1996, and the
consolidated statement of stockholders' equity for the three months ended March
30, 1996 contain all adjustments (consisting of only normal recurring accruals)
necessary to present fairly the information set forth therein. The results of
operations for the three months ended March 30, 1996 are not necessarily
indicative of the results for any other period.

F-9
<PAGE>
HENRY SCHEIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDED
APRIL 1, 1995 AND SUBSEQUENT TO DECEMBER 30, 1995 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)

NOTE 1--SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Stock-Based Compensation

The Company does not presently intend to adopt the fair value method of
accounting for stock options as permitted by Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation".

Earnings Per Share
(a) Historical Net Income Per Share

Historical net income per share for the three months ended April 1, 1995 and
March 30, 1996 is computed using the weighted average number of common and
common equivalent shares outstanding, after reflecting a 99-for-1 stock split
effected immediately prior to the initial public offering.

The common equivalent shares relating to the stock options issued to
executive management in 1995 have been treated as if they were outstanding since
the beginning of 1995 and are calculated using the treasury stock method, using
the initial public offering price of $16.00 per share for assumed repurchase for
the three months ended April 1, 1995 and the average share price for the three
months ended March 30, 1996.

(b) Pro Forma Net Income Per Share

Historical per share information for the years ended December 31, 1994 and
December 30, 1995 is not considered relevant as it would differ materially from
pro forma per share data, given the significance of the pro forma adjustments.
Pro forma net income per share is computed using pro forma net income and the
pro forma weighted average number of common and common equivalent shares
outstanding, after reflecting a 99-for-1 stock split effected immediately prior
to the initial public offering.

The common equivalent shares relating to the stock options issued to
executive management in 1995, the shares issued to senior management in 1994 to
extinguish a previously accrued liability, and the shares contributed to the
ESOP trust in 1994 have been treated as if they were outstanding since the
beginning of 1994. Such ESOP shares and common equivalent shares relating to the
stock options are calculated using the treasury stock method, using the initial
public offering price of $16.00 per share for assumed repurchase for the period
prior to the initial public offering. For the period subsequent to the initial
public offering, application of the treasury stock method to the stock options
reflects the average share price.

As required by APB Opinion No. 15, supplementary pro forma income per share
for the year ended December 30, 1995 was $.67. For this calculation, the
weighted average number of common shares includes the shares assumed to provide
the proceeds, at the initial public offering price, needed to retire average
revolving credit borrowings and debt for the period from the beginning of the
year (or the date the debt was incurred) to the respective retirement date, and
the pro forma net income was adjusted to exclude the related financing and
interest expenses of the debt.

F-10
<PAGE>
HENRY SCHEIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDED
APRIL 1, 1995 AND SUBSEQUENT TO DECEMBER 30, 1995 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)

NOTE 2--REORGANIZATION

On December 26, 1992, Henry Schein, Inc., a New York corporation ("Old
HSI"), reorganized its corporate structure to split into separate healthcare
distribution and pharmaceutical companies (the "Split"). The Split was
accomplished by transferring substantially all of Old HSI's assets and
liabilities relating to the distribution business to Henry Schein USA, Inc., a
newly formed corporation ("New HSI"). Subsequent to the Split, the name of Old
HSI was changed to Schein Holdings, Inc. and the name of New HSI was changed to
Henry Schein, Inc. ("HSI"). As a result of the Split, Schein Holdings, Inc.
("Holdings") became the parent of the Company and Schein Pharmaceutical, Inc.
(the pharmaceutical company, "SPINC").

The accompanying financial statements give retroactive effect to the Split
as described above, and reflect the historical cost bases of the assets and
liabilities of the distribution business.

On February 16, 1994, the shareholders of Holdings and HSI and certain HSI
management entered into an agreement (the "HSI Agreement") whereby certain
voting and non-voting shares of HSI stock were exchanged for new voting stock of
HSI, a 100-for-1 stock split was effectuated, and certain additional agreements
were entered into between HSI, the shareholders and management. The effect of
the stock exchanges was that Holdings distributed all of its shares in HSI to
certain shareholders of Holdings in exchange for its stock.

The HSI Agreement was subject to approval by the Westchester County
Surrogate Court, which approval was obtained on September 20, 1994. The HSI
Agreement was also subject to the closing of a transaction between the
shareholders of Holdings and Miles, Inc. ("Miles", an unrelated third party)
involving the sale by shareholders of Holdings of 28% of their shares to Miles.

In connection with the reorganization, during 1992 HSI issued 1,466,685
shares of common stock (valued at $6,173) to one of its executive officers and
147,312 shares of common stock (valued at $620) to an executive officer of
SPINC. In addition, SPINC issued shares to one of its executive officers and an
executive officer of HSI. Each company made cash payments to its respective
executive officer to cover the income taxes relating to the stock issuances. The
HSI shares issued to its executive officer originally were to vest after 10
years of employment. The other stock issuances were forfeitable if certain
events did not occur.

The stock issuances to HSI's executive officer were accounted for based on
the estimated fair value at the date of issuance, as deferred compensation,
which was classified as a reduction of stockholders' equity in the financial
statements of the applicable company whose executive officer received the
shares. Accordingly, the fair value of the shares of HSI issued to the executive
officer of SPINC was recorded as a distribution to Holdings. Conversely, the
fair value of the shares issued to HSI's executive officer by SPINC in the
amount of $2,641 was treated as a contribution to HSI's capital. The cash
payment to HSI's executive officer in the amount of $5,283 was charged to
operations in 1992 as a special management compensation charge. In 1994, an
additional cash payment of $258 was paid to HSI's executive officer to pay
certain additional income taxes attributable to the 1992 stock issuance and was
recorded as a special management compensation charge.

As part of the HSI Agreement, the vesting and events of forfeiture were
removed and the stock issued in 1992 became fully vested. Accordingly, the
estimated fair value of the stock issuances to HSI's executive officer were
revalued to reflect the fair values of HSI and SPINC at the time of vesting and

F-11
<PAGE>
HENRY SCHEIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDED
APRIL 1, 1995 AND SUBSEQUENT TO DECEMBER 30, 1995 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)

NOTE 2--REORGANIZATION--(CONTINUED)
the related deferred compensation, net of amortization, of $17,301 was charged
to earnings as special management compensation in 1994.

Additionally, pursuant to previous commitments, certain senior management of
HSI were issued 489,456 shares including 91,377 shares issued subsequent to
December 31, 1994 and 83,259 shares issued prior to the closing of the initial
public offering in part to extinguish a previously accrued liability under a
pre-existing long-term incentive plan. In connection with the issuance of these
shares, a cash payment of approximately $2,472 was paid to cover the income
taxes relating to this stock issuance and was charged, along with the estimated
fair value of the related stock issued of $3,465, less the related obligations
extinguished of approximately $1,900, as special compensation and is included in
special compensation in 1994.

The shares issued to the executive officer and the senior management of HSI
were subject to repurchase by HSI at fair market value in the event employment
was terminated for any reason or an initial public offering of HSI's stock did
not occur by December 31, 1999. The repurchase feature was eliminated upon the
closing of the initial public offering. Special management compensation for the
year ended December 30, 1995 includes a $17,484 charge to operations to reflect
the appreciation in the fair market value of stock grants and issuances based on
the initial public offering price of $16.00 and a cash payment of approximately
$508 to cover income taxes related to those stock grants and issuances.

In addition, special management compensation for the year ended December 30,
1995 includes a charge of $2,805 to reflect the excess of the initial public
offering price over the exercise price of Class A options issued to certain
executive management in May 1995 (see Note 14(a)).

Special charges incurred in connection with this reorganization consist of
special management compensation expense of $617, $21,596, $20,797, and special
professional fees of $2,224, $2,007, $0, for the years ended 1993, 1994 and
1995, respectively.

During the years ended 1993, 1994 and 1995, the Company incurred special
professional fees related to the reorganization in the amounts of $570, $552 and
$0, respectively, on behalf of its stockholders. These amounts were deemed to be
dividends and deducted from retained earnings.

NOTE 3--OTHER CURRENT ASSETS

Other current assets consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30, MARCH 30,
1994 1995 1996
------------ ------------ ---------
<S> <C> <C> <C>
Prepaid expenses........................ $ 5,246 $ 3,941 $ 4,564
Vendor rebates receivable............... 3,052 5,744 5,948
Amounts due from affiliates............. 1,863 2,084 2,267
Refundable income taxes................. 551 2,645 897
Other................................... 3,365 5,078 4,903
------------ ------------ ---------
$ 14,077 $ 19,492 $18,579
------------ ------------ ---------
------------ ------------ ---------
</TABLE>

F-12
<PAGE>
HENRY SCHEIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION RELATED TO THE THREE MONTHS ENDED
APRIL 1, 1995 AND SUBSEQUENT TO DECEMBER 30, 1995 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)

NOTE 4--PROPERTY AND EQUIPMENT--NET

Major classes of property and equipment consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30, MARCH 30,
1994 1995 1996
------------ ------------ ---------
<S> <C> <C> <C>
Land.................................... $ 1,189 $ 1,718 $ 1,699
Buildings and leasehold improvements.... 18,228 23,288 23,486
Machinery and warehouse equipment....... 5,921 10,509 10,142
Furniture, fixtures and other........... 10,421 12,165 13,379
Computer equipment...................... 12,098 15,937 17,230
------------ ------------ ---------
47,857 63,617 65,936
Less accumulated depreciation and
amortization............................ 27,949 33,904 35,120
------------ ------------ ---------
Net property and equipment.............. $ 19,908 $ 29,713 $30,816
------------ ------------ ---------
------------ ------------ ---------
</TABLE>

NOTE 5--GOODWILL AND OTHER INTANGIBLES--NET

Goodwill and other intangibles consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30, MARCH 30,
1994 1995 1996
------------ ------------ ---------
<S> <C> <C> <C>
Goodwill................................ $4,799 $ 22,267 $24,861
Other................................... 1,333 3,917 3,469
------------ ------------ ---------
6,132 26,184 28,330
Less accumulated amortization........... 1,088 1,795 2,144
------------ ------------ ---------
$5,044 $ 24,389 $26,186
------------ ------------ ---------
------------ ------------ ---------
</TABLE>

Goodwill represents the excess of the purchase price of acquisitions over
the fair value of net assets acquired. During 1995, three acquisitions (the
distribution business of The Veratex Corporation, Schein Dental Equipment Corp.
and PRN Medical, Inc.) accounted for $15,282 of the $17,468 increase in
goodwill. Other intangibles include covenants not to compete, customer lists and
deferred acquisition costs. Goodwill and other intangibles are amortized on a
straight-line basis over periods not exceeding 30 years.

F-13
<PAGE>
HENRY SCHEIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDED
APRIL 1, 1995 AND SUBSEQUENT TO DECEMBER 30, 1995 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)

NOTE 6--INVESTMENTS AND OTHER

Investments and other consist of:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30, MARCH 30,
1994 1995 1996
------------ ------------ ---------
<S> <C> <C> <C>
Investments in unconsolidated affiliates................. $5,093 $ 9,865 $ 9,471
Long-term receivables (see Note 11(b))................... 761 8,399 7,933
Deferred borrowing costs and other, net of accumulated
amortization of $254, $1,664 and $1,879, respectively.... 1,058 2,747 3,277
------------ ------------ ---------
$6,912 $ 21,011 $21,181
------------ ------------ ---------
------------ ------------ ---------
</TABLE>

The Company's investments are predominately 50% owned unconsolidated
affiliates consisting of various companies involved in the healthcare
distribution business and HS Pharmaceutical, Inc., which manufactures generic
pharmaceuticals. As of December 30, 1995, the Company's investments in
unconsolidated affiliates were $3,507 more than the Company's proportionate
share of the underlying equity of these affiliates. This amount, which has been
treated as goodwill, is being amortized over 30 years and charged to equity in
the operating results of these companies. Combined unaudited financial data for
these companies for periods subsequent to their acquisition follows:

DECEMBER 31, DECEMBER 30,
1994 1995
------------ ------------
Current assets............................... $ 15,338 $ 28,904
Total assets................................. 20,170 35,220
Liabilities.................................. 13,463 22,995
Stockholders' equity......................... 6,707 12,225

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED
------------------------------------------ --------------------
DECEMBER 25, DECEMBER 31, DECEMBER 30, APRIL 1, MARCH 30,
1993 1994 1995 1995 1996
------------ ------------ ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
Net sales................................. $ 41,623 $ 34,003 $ 55,090 $ 6,590 $20,303
Operating income.......................... 3,997 3,183 5,147 254 832
Net income................................ 1,670 1,428 2,920 30 415
</TABLE>

NOTE 7--BUSINESS ACQUISITIONS

The Company acquired 24 healthcare distribution businesses between 1993 and
March 30, 1996, including, on July 7, 1995, the distribution business of The
Veratex Corporation ("Veratex"), a national direct marketer of medical, dental
and veterinary products. The total amount of cash paid and promissory notes
issued for these acquisitions was approximately $6,910, $2,660 and $22,710 for
1993, 1994 and 1995, respectively. The Company also issued 1,260,416 shares of
common stock in connection with the acquisition of Schein Dental Equipment
Corp., of which approximately 928,700 shares were issued to a stockholder of the
Company. In addition, the Veratex acquisition agreement also provides for
contingent payments of up to $2,000 if certain financial targets are met.
Acquisitions completed during

F-14
<PAGE>
HENRY SCHEIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDED
APRIL 1, 1995 AND SUBSEQUENT TO DECEMBER 30, 1995 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)

NOTE 7--BUSINESS ACQUISITIONS--(CONTINUED)
the three months ended March 30, 1996 were not material. These acquisitions have
been accounted for under the purchase method, except for the shares issued to a
stockholder as noted above which involves carryover of predecessor basis with
respect to the affiliate's proportionate share of net assets. Operations of
these businesses have been included in the consolidated financial statements
from their acquisition dates.

The summarized unaudited pro forma results of operations set forth below for
1994 and 1995 assume the acquisitions in 1994 and 1995 occurred as of the
beginning of each of these periods.

YEAR ENDED
----------------------------
DECEMBER 31, DECEMBER 30,
1994 1995
------------ ------------
Net sales...................................... $493,171 $669,016
Net loss....................................... (11,030) (11,107)
Pro forma net income, reflecting adjustment for
special management compensation and
professional fees............................ 6,824 8,516
Pro forma net income per common share.......... .56 .60

Pro forma net income per common share, including acquisitions, may not be
indicative of actual results, primarily because the pro forma earnings include
historical results of operations of acquired entities and do not reflect any
cost savings that may result from the Company's integration efforts.

During 1993, the Company incurred a charge of $2,528 resulting from the
buyout of an employee's rights to future income contained in his employment
agreement and paid contingent consideration of $688 to the prior owners of
another company acquired in 1993. These payments were charged to operating
expenses in 1993.

NOTE 8--BANK CREDIT LINES

At March 30, 1996, certain subsidiaries of the Company had available various
bank credit lines totaling approximately $13,876, expiring through March 1997.
Borrowings of $8,085 under these credit lines at interest rates ranging from
4.0% to 9.5% were collateralized by accounts receivable, inventory and property
and equipment of the subsidiaries with an aggregate net book value of $20,715 at
March 30, 1996.

F-15
<PAGE>
HENRY SCHEIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDED
APRIL 1, 1995 AND SUBSEQUENT TO DECEMBER 30, 1995 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)

NOTE 9--LONG-TERM DEBT

Long-term debt consists of:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30, MARCH 30,
1994 1995 1996
------------ ------------ ---------
<S> <C> <C> <C>

Borrowings under Revolving Credit Agreement (a).......... $ 35,800 $ 17,000 $39,000

Note payable for business acquisition (b)................ 4,836 4,383 4,383

Note payable for business acquisition (c)................ -- 2,400 2,400

Notes payable to banks, interest variable (8% at March
30, 1996), payable in quarterly installments ranging
from $15 to $31 through 2003, secured by inventory and
accounts receivable of $12,089 for 1994, $15,727 for
1995 and $16,003 for 1996.............................. 2,191 2,020 1,921

Note payable in monthly installments of $8 through July
2007, uncollateralized, interest increases 1% annually
to 5% in 2000, 6% from 2001 to 2007.................... -- 1,150 1,125

Mortgage payable to bank in quarterly installments of
$14, interest at 7.4% through November 2013,
collateralized by a building with a net book value of
$1,697................................................... 1,103 1,137 1,083

Note payable in semi-annual installments of $225 through
September 1998, uncollateralized, imputed interest at
8%....................................................... 1,422 972 747

Note payable in annual installments of $136 through March
2001, uncollateralized, interest at prime which
approximated 8% at March 30, 1996........................ 953 817 681

Term loan payable to bank in quarterly installments of
$63 with a balloon payment of $2,500 at maturity,
interest variable through December 2004, collateralized
by a building with a carrying value of $7,092--repaid
in November 1995....................................... 5,000 -- --

Various notes and loans payable with interest, in varying
installments through 1998, uncollateralized.............. 3,187 3,845 4,222
------------ ------------ ---------

Total.................................................... 54,492 33,724 55,562

Less current maturities.................................. 2,971 3,343 3,861
------------ ------------ ---------

Total long-term debt..................................... $ 51,521 $ 30,381 $51,701
------------ ------------ ---------
------------ ------------ ---------
</TABLE>

(a) Revolving Credit Agreement

The Company's revolving credit agreement, as amended, provides for maximum
borrowings of $65 million through July 1999. The interest rate on any borrowings
under the agreement is based on prime or LIBOR as defined in the agreement,
which were 8.25% and 5.31%, respectively, at March 30, 1996. The borrowings
outstanding at March 30, 1996 were at interest rates ranging from 5.94% to
8.25%. The agreement provides for a 0.19% fee on any unused portion of the
commitment. The agreement also

F-16
<PAGE>
HENRY SCHEIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDED
APRIL 1, 1995 AND SUBSEQUENT TO DECEMBER 30, 1995 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)

NOTE 9--LONG-TERM DEBT--(CONTINUED)
provides, among other things, that HSI will maintain, on a consolidated basis,
as defined, a minimum tangible net worth, current, cash flow, and interest
coverage ratios, a maximum leverage ratio, and contains restrictions relating to
annual dividends in excess of $500, guarantees of subsidiary debt, investments
in subsidiaries, mergers and acquisitions, liens, capital expenditures, certain
changes in ownership and employee and shareholder loans. As of March 30, 1996,
approximately $5,173 of the Company's retained earnings represented
undistributed earnings of affiliates.

(b) Note Payable for Business Acquisition

In November 1993, a subsidiary of the Company entered into a term loan
agreement for $5,290 with a bank. The proceeds of this loan were used to acquire
a dental supply distribution company. Principal is payable in semi-annual
installments of $227 through October 1997, with a final balloon payment of
$3,474 on October 31, 1997. Interest is payable quarterly at a rate of 6.7% per
year. The agreement also provides for the same financial covenants and
restrictions as the revolving credit agreement.

In October 1995, the Company entered into a term loan agreement for $2,400
with a third party. The proceeds of this loan were used to acquire a medical
distribution company. Principal is payable in quarterly installments of $120
through October 2000. Interest is payable quarterly at the prime rate less 1.0%
per year.

As of December 30, 1995, the aggregate amounts of long-term debt maturing in
each of the next five years are as follows: 1996--$3,343; 1997--$5,789;
1998--$1,750; 1999--$18,850; 2000--$1,105.

NOTE 10--TAXES ON INCOME (RECOVERY)

The Company adopted SFAS No. 109 as of the beginning of 1993. The cumulative
effect on prior years of this change in accounting principle increased 1993 net
income by $1,891. The difference between calculating the 1993 income tax
provision under SFAS No. 109 and APB No. 11 was not material.

F-17
<PAGE>
HENRY SCHEIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDED
APRIL 1, 1995 AND SUBSEQUENT TO DECEMBER 30, 1995 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)

NOTE 10--TAXES ON INCOME (RECOVERY)--(CONTINUED)
Taxes on income (recovery) are based on income (loss) before taxes on income
(recovery), minority interest and equity in earnings of affiliates as follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED
------------------------------------------ --------------------
DECEMBER 25, DECEMBER 31, DECEMBER 30, APRIL 1, MARCH 1,
1993 1994 1995 1995 1996
------------ ------------ ------------ -------- --------
<S> <C> <C> <C> <C> <C>
Domestic.................................. $1,304 $(13,978) $ (7,435) $ 1,417 $3,710
Foreign................................... 1,088 1,539 1,317 447 331
------------ ------------ ------------ -------- --------
Total income (loss) before taxes on income
(recovery), minority interest and equity
in earnings of affiliates............... $2,392 $(12,439) $ (6,118) $ 1,864 $4,041
------------ ------------ ------------ -------- --------
------------ ------------ ------------ -------- --------
</TABLE>

The provision for (recovery of) income taxes on income (loss) before the
1993 cumulative effect of accounting change was as follows:

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
------------------------------------------ ---------------------
DECEMBER 25, DECEMBER 31, DECEMBER 30, APRIL 1, MARCH 30,
1993 1994 1995 1995 1996
------------ ------------ ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
Current tax expense (recovery):
U.S. Federal........................... $2,304 $ 1,528 $ 4,677 $ 1,148 $ 1,072
State and local........................ 373 459 924 218 345
Foreign................................ 225 (64) 616 202 198
------------ ------------ ------------ -------- ---------
Total current............................ 2,902 1,923 6,217 1,568 1,615
------------ ------------ ------------ -------- ---------
Deferred tax expense (benefit):
U.S. Federal........................... (1,521) (3,563) (836) (591) 150
State and local........................ (30) (155) (285) (196) 28
Foreign................................ -- 165 30 -- (10)
------------ ------------ ------------ -------- ---------
Total deferred........................... (1,551) (3,553) (1,091) (787) 168
------------ ------------ ------------ -------- ---------
Total provision (recovery)............... $1,351 $ (1,630) $ 5,126 $ 781 $ 1,783
------------ ------------ ------------ -------- ---------
------------ ------------ ------------ -------- ---------
</TABLE>

F-18
<PAGE>
HENRY SCHEIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDED
APRIL 1, 1995 AND SUBSEQUENT TO DECEMBER 30, 1995 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)

NOTE 10--TAXES ON INCOME (RECOVERY)--(CONTINUED)
The tax effects of temporary differences that give rise to the Company's
deferred tax asset (liability) are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30, MARCH 30,
1994 1995 1996
------------ ------------ ---------
<S> <C> <C> <C>
Current deferred tax assets:
Inventory, premium coupon redemptions
and accounts receivable valuation
allowances.............................. $2,914 $3,592 $ 3,534
Uniform capitalization adjustments to
inventories............................. 1,156 1,472 1,407
Accrued special professional fees and
other accrued liabilities............... 1,162 1,832 1,774
------------ ------------ ---------
Total current deferred tax asset........ 5,232 6,896 6,715
------------ ------------ ---------
Non-current deferred tax assets
(liabilities):
Property and equipment................ (373) (428) (425)
Provision for long-term executive
incentive compensation and other
accrued liabilities..................... 348 (110) (97)
Net operating losses of foreign
subsidiaries............................ 140 2,403 2,011
------------ ------------ ---------
Total non-current deferred tax asset.... 115 1,865 1,489
Valuation allowance for non-current
deferred tax assets..................... (140) (2,403) (2,011)
------------ ------------ ---------
Net non-current deferred tax
liabilities............................. (25) (538) (522)
------------ ------------ ---------
Net deferred tax asset.................. $5,207 $6,358 $ 6,193
------------ ------------ ---------
------------ ------------ ---------
</TABLE>

The net deferred tax asset is realizable as the Company has sufficient
taxable income in prior carryback years to realize the tax benefit for
deductible temporary differences. The non-current deferred liability is included
in Other liabilities on the Consolidated Balance Sheets.

F-19
<PAGE>
HENRY SCHEIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDED
APRIL 1, 1995 AND SUBSEQUENT TO DECEMBER 30, 1995 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)

NOTE 10--TAXES ON INCOME (RECOVERY)--(CONTINUED)
The tax provisions (recovery) differ from the amount computed using the
Federal statutory income tax rate as follows:

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
-------------------------------------------- ---------------------
DECEMBER 25, DECEMBER 31, DECEMBER 30, APRIL 1, MARCH 30,
1993 1994 1995 1995 1996
------------ ------------ ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
Provision (recovery) at Federal
statutory rate...................... $ 837 $ (4,354) $ (2,141) $ 652 $ 1,414
State income taxes, net of Federal
income tax effect................... 501 53 582 145 176
Net foreign and domestic losses for
which no tax benefits are
available........................... 186 23 574 125 242
Foreign income taxed at other than
the Federal statutory rate.......... 221 (214) (25) 10 2
Non-deductible appreciation in stock
issued as special management
compensation........................ -- 3,318 6,109 -- --
Deduction for charitable
contributions....................... -- (180) -- -- --
Write-off of related party debt
deducted for tax purposes only...... (320) -- -- -- --
Other............................... (74) (276) 27 (151) (51)
------------ ------------ ------------ -------- ---------
Income tax provision (recovery)..... $1,351 $ (1,630) $ 5,126 $ 781 $ 1,783
------------ ------------ ------------ -------- ---------
------------ ------------ ------------ -------- ---------
</TABLE>

Provision has not been made for U.S. or additional foreign taxes on
undistributed earnings of foreign subsidiaries. Those earnings have been and
will continue to be reinvested. These earnings could become subject to
additional tax if they were remitted as dividends, if foreign earnings were
loaned to the Company or a U.S. affiliate, or if the Company should sell its
stock in the foreign subsidiaries. It is not practicable to determine the amount
of additional tax, if any, that might be payable on the foreign earnings;
however, the Company believes that foreign tax credits would substantially
offset any U.S. tax. At December 30, 1995, the cumulative amount of reinvested
earnings was approximately $1,560.

NOTE 11--FINANCIAL INSTRUMENTS AND CREDIT RISK CONCENTRATIONS

(a) Financial Instruments

To reduce its exposure to fluctuations in foreign currencies and interest
rates, the Company is party to foreign currency forward contracts and interest
rate swaps with major financial institutions.

While the Company is exposed to credit loss in the event of nonperformance
by the counterparties of these contracts, the Company does not anticipate
nonperformance by the counterparties. The Company does not require collateral or
other security to support these financial instruments.

F-20
<PAGE>
HENRY SCHEIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION RELATED TO THE THREE MONTHS ENDED
APRIL 1, 1995 AND SUBSEQUENT TO DECEMBER 30, 1995 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)

NOTE 11-- FINANCIAL INSTRUMENTS AND CREDIT RISK CONCENTRATIONS-- (CONTINUED)

As of March 30, 1996, the Company has outstanding foreign currency forward
contracts aggregating $13,768 related to debt and the purchase and sale of
merchandise. The contracts hedge against currency fluctuations of the Canadian
dollar ($4,195), British Pound ($756), Swiss Franc ($554), the Netherlands
Guilder ($6,815), Deutsche Mark ($648), and the Spanish Peseta ($800). The
contracts expire at various dates through October 1997. At March 30, 1996, the
Company had net deferred gains from foreign currency forward contracts of $15.

As of March 30, 1996, interest rate swaps totaling $13,000 were outstanding.
The swaps are used to convert floating rate debt to fixed rate debt to reduce
the Company's exposure to interest rate fluctuations. The net result was to
substitute a weighted average fixed interest rate of 7.81% for the variable
LIBOR rate on $13,000 of the Company's debt. The swaps expire in October and
November 2001. Under the interest rate environment during the three months ended
March 30, 1996, the net fair value of the Company's interest rate swap
agreements resulted in a realized loss of $7.

In October 1994, a subsidiary of the Company recorded a $509 foreign
currency gain relating to an intercompany loan intended to be repaid. This gain
is reflected in the Other-net section of the Consolidated Statements of
Operations.

(b) Concentrations of Credit Risk

Certain financial instruments potentially subject the Company to
concentrations of credit risk. These financial instruments consist primarily of
trade receivables and short-term cash investments.

The Company places its short-term cash investments with high credit quality
financial institutions and, by policy, limits the amount of credit exposure to
any one financial institution. Concentrations of credit risk with respect to
trade receivables are limited due to a large customer base and its dispersion
across different types of healthcare professionals and geographic areas. The
Company maintains an allowance for losses based on the expected collectability
of all receivables. Included in Accounts Receivable and Long-Term Receivables
(see Note 6) at March 30, 1996 is $16,096 and $7,604, respectively, related to
Easy Dental(R) Plus software sales with non-interest bearing extended payment
terms. Total unamortized discounts at March 30, 1996 amounted to $1,326 based on
an imputed interest rate of 8.5%.

NOTE 12--RELATED PARTY TRANSACTIONS

(a) In the ordinary course of business, the Company purchases pharmaceutical
products from certain unconsolidated affiliates. Net purchases from these
affiliates amounted to $9,645, $12,055 and $8,730 in 1993, 1994 and 1995,
respectively, and $909 and $3,179 for the three months ended April 1, 1995 and
March 30, 1996, respectively. Included in Accounts Payable at December 31, 1994
and December 30, 1995 were $2,075 and $1,591, respectively, and $488 at March
31, 1996, for amounts due to these affiliates for purchases made from them.

F-21
<PAGE>
HENRY SCHEIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDED
APRIL 1, 1995 AND SUBSEQUENT TO DECEMBER 30, 1995 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)

NOTE 12--RELATED PARTY TRANSACTIONS--(CONTINUED)
(b) The Company also shares certain services with these and other
unconsolidated affiliates which are charged to the affiliates at cost. The
Company charged these affiliates $4,089, $1,691 and $891 during 1993, 1994 and
1995, respectively, for these services and $201 and $193 during the three months
ended April 1, 1995 and March 30, 1996, respectively. In addition, sales (at
cost) to unconsolidated affiliates were $3,043, $3,160 and $3,784 in 1993, 1994
and 1995, respectively, and $911 and $44 for the three months ended April 1,
1995 and March 30, 1996, respectively.

(c) The Company recorded interest income of $616, $87, $88, $23 and $30, and
interest expense of $610, $13, $26, $10 and $24, in 1993, 1994, 1995 and the
three months ended April 1, 1995 and March 30, 1996, respectively, attributable
to transactions with unconsolidated affiliates. Included in Other Current Assets
are amounts due from unconsolidated affiliates of $1,863, $2,051 and $2,267 at
December 31, 1994, December 30, 1995 and March 30, 1996, respectively.

(d) A subsidiary of the Company leases its primary operating facility from
an officer of the subsidiary. Rent expense attributed to this facility amounted
to $86, $209 and $52 for 1994, 1995 and the three months ended March 30, 1996,
respectively.

(e) During 1994, a subsidiary of the Company entered into a sales service
agreement with an entity ("Salesco") owned by an officer of the subsidiary.
Under the terms of this agreement the subsidiary is required to reimburse
Salesco for all reasonable expenses incurred in connection with the services it
provides to the subsidiary and pay a fee to Salesco based upon a formula applied
to its pre-tax profit. Amounts paid during 1994, 1995 and 1996 under this
agreement were not material.

(f) The Company purchases products from Schein Dental Equipment Corp.
("SDEC"), formerly owned by a stockholder. In September 1995, the Company
acquired SDEC. Net purchases from SDEC prior to the acquisition amounted to
$1,183, $1,738 and $1,803, in 1993, 1994 and 1995, respectively, and $490 for
the three months ended April 1, 1995.

NOTE 13--SEGMENT AND GEOGRAPHIC DATA

The Company is engaged principally in one line of business, the distribution
of healthcare products to healthcare practitioners and professionals. The
following table presents information about the

F-22
<PAGE>
HENRY SCHEIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDED
APRIL 1, 1995 AND SUBSEQUENT TO DECEMBER 30, 1995 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)

NOTE 13--SEGMENT AND GEOGRAPHIC DATA--(CONTINUED)
Company by geographic area. There were no material amounts of sales or transfers
among geographic areas and there were no material amounts of United States
export sales.

1993 UNITED STATES EUROPE CONSOLIDATED
---- ------------- ------- ------------
<S> <C> <C> <C>
Net sales................................................. $ 361,199 $54,511 $415,710
Operating income.......................................... 3,580* 1,806 5,386
Pre-tax income............................................ 1,304* 1,088 2,392
Identifiable assets....................................... 130,355 30,438 160,793
Depreciation and amortization............................. 2,592 1,389 3,981
Capital expenditures...................................... 2,122 781 2,903

1994
-----
<S> <C> <C> <C>
Net sales................................................. $ 408,463 $78,147 $486,610
Operating income (loss)................................... (11,649)* 2,174 (9,475)
Pre-tax income (loss)..................................... (13,978)* 1,539 (12,439)
Identifiable assets....................................... 155,772 34,248 190,020
Depreciation and amortization............................. 2,524 1,287 3,811
Capital expenditures...................................... 4,425 1,494 5,919

1995
-----
<S> <C> <C> <C>
Net sales................................................. $ 516,794 $99,415 $616,209
Operating income (loss)................................... (3,626)* 2,590 (1,036)
Pre-tax income (loss)..................................... (7,435)* 1,317 (6,118)
Identifiable assets....................................... 243,677 53,190 296,867
Depreciation and amortization............................. 4,704 1,333 6,037
Capital expenditures...................................... 5,523 3,696 9,219

</TABLE>

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

* Includes special management compensation, special professional fees and
special contingent consideration expense of $6,057, $23,603 and $20,797, for
1993, 1994 and 1995, respectively.

NOTE 14--EMPLOYEE BENEFIT PLANS

(a) Stock Options

The Company maintains a 1994 Stock Option Plan for the benefit of certain
employees under which 679,635 shares of common stock may be issued. The Plan
provides for two classes of options: Class A options and Class B options. A
maximum of 237,897 shares of common stock may be covered by Class A options.
Both incentive and nonqualified stock options may be issued under the Plan.

In 1995, Class A options to acquire 237,897 common shares were issued to
certain executive management at an exercise price of $4.21 per share,
substantially all of which became exercisable upon the closing of the initial
public offering, at which time the $2,805 excess of the initial public offering
price of $16.00 over the exercise price was charged to special management
compensation expense.

F-23
<PAGE>
HENRY SCHEIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDED
APRIL 1, 1995 AND SUBSEQUENT TO DECEMBER 30, 1995 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)

NOTE 14--EMPLOYEE BENEFIT PLANS--(CONTINUED)
On November 3, 1995, the Company issued Class B options to acquire 413,400
shares of common stock to certain employees at an exercise price of $16.00 per
share, substantially all of which become exercisable ratably over three years
from the date of issuance. The Class A and Class B options are exercisable up to
the tenth anniversary of the date of issuance, subject to acceleration upon
termination of employment. As of March 30, 1996, no options were exercised.

(b) Profit Sharing Plans

The Company has qualified noncontributory profit sharing plans for eligible
employees. Contributions to the plans as determined by the Board of Directors
and charged to operations during 1993, 1994, 1995 and the three months ended
April 1, 1995 and March 30, 1996 amounted to $1,936, $1,719, $2,178, $620 and
$803, respectively.

In 1994, the Company established an ESOP and a related trust as a benefit
for substantially all of its domestic employees. This plan supplements the
Company's Profit Sharing Plan. Under this plan, the Company issued 128,257
shares of HSI common stock to the trust in 1994 at an estimated fair value of
$900, which was charged to operations. For 1995, the Company will contribute 3%
of eligible compensation with shares of the Company's common stock.

(d) Supplemental Executive Retirement Plan

In 1994, the Company instituted a nonqualified supplemental executive
retirement plan for eligible employees. Contributions, as determined by the
Board of Directors and charged to operations, were $27 and $68 for 1994 and
1995, respectively, and $17 and $22 for the three months ended April 1, 1995 and
March 30, 1996.

NOTE 15--COMMITMENTS AND CONTINGENCIES

(a) Operating Leases

The Company leases facilities and equipment under noncancelable operating
leases expiring through 2009. Management expects that in the normal course of
business, leases will be renewed or replaced by other leases.

F-24
<PAGE>
HENRY SCHEIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDED
APRIL 1, 1995 AND SUBSEQUENT TO DECEMBER 30, 1995 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)

NOTE 15--COMMITMENTS AND CONTINGENCIES--(CONTINUED)
Future minimum annual rental payments under the noncancelable leases at
December 30, 1995 are as follows:

1996............................................................. $ 7,696
1997............................................................. 7,304
1998............................................................. 6,308
1999............................................................. 4,751
2000............................................................. 4,028
Thereafter....................................................... 14,309
-------
Total minimum lease payments..................................... $44,396
-------
-------

Total rental expense for 1993, 1994 and 1995 was $4,878, $5,874 and $7,324,
respectively and $1,547 and $2,216 for the three months ended April 1, 1995, and
March 30, 1996, respectively.

(b) Litigation

Various claims, suits and complaints, such as those involving government
regulations and product liability, arise in the ordinary course of the Company's
business. In the opinion of the Company, all such pending matters are without
merit, covered by insurance or are of such kind, or involve such amounts, as
would not have a material adverse effect on the financial statements of the
Company if disposed of unfavorably.

The Company has employment, consulting and noncompete agreements expiring
through 2000 (except for a lifetime consulting agreement with a principal
stockholder which provides for initial compensation of $258 per year, increasing
$25 every fifth year beginning in 1997). The agreements provide for varying base
aggregate annual payments of approximately $2,996 per year which decrease
periodically to approximately $1,437 per year. In addition, some agreements have
provisions for incentive and additional compensation.

NOTE 16--SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid for interest and income taxes amounted to the following:

F-25
<PAGE>
HENRY SCHEIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDED
APRIL 1, 1995 AND SUBSEQUENT TO DECEMBER 30, 1995 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)

NOTE 16--SUPPLEMENTAL CASH FLOW INFORMATION--(CONTINUED)
In conjunction with business acquisitions, the Company used cash as follows:

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
------------------------------------------ --------------------
DECEMBER 25, DECEMBER 31, DECEMBER 30, APRIL 1, MARCH 30,
1993 1994 1995 1995 1996
------------ ------------ ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
Fair value of assets acquired, excluding
cash..................................... $ 10,163 $ 3,525 $ 59,544 $ 1,210 $ 5,819
Less liabilities assumed and created upon
acquisition.............................. (9,049) (3,525) (43,167) 930 3,894
------------ ------------ ------------ -------- ---------
Net cash paid............................ $ 1,114 $ -- $ 16,377 $ 280 $ 1,925
------------ ------------ ------------ -------- ---------
------------ ------------ ------------ -------- ---------
</TABLE>

In 1995, the Company entered into a note payable of $2,400 in connection
with one of its acquisitions.

In connection with the HSI Agreement, certain expenses incurred on behalf of
and advances to stockholders amounting to $275 are included in deemed dividends
for 1993.

NOTE 17--OTHER INCOME (EXPENSE)--NET

Other income (expense)-net consists of the following:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
-------------------------------------------- ---------------------
DECEMBER 25, DECEMBER 31, DECEMBER 30, APRIL 1, MARCH 30,
1993 1994 1995 1995 1996
------------ ------------ ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
Investment losses................... $ (463) -$- -$- $-- $--
Gain (loss) on sale of assets....... (70) 100 33 4 --
Net foreign exchange gain (loss).... (79) 415 43 (57) (120)
Other non-operating income
(expense)........................... (22) 26 200 150 23
------ ----- ----- -------- ---------
$ (634) $541 $276 $ 97 $ (97)
------ ----- ----- -------- ---------
------ ----- ----- -------- ---------
</TABLE>

NOTE 18--QUARTERLY INFORMATION (UNAUDITED)

The following table sets forth summary quarterly unaudited financial
information for 1994, 1995, and the first quarter of 1996 excluding
non-recurring special charges and the related tax effects:

<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------
MARCH 26, JUNE 25, SEPTEMBER 24, DECEMBER 31,
1994 1994 1994 1994
--------- -------- ------------- ------------
<S> <C> <C> <C> <C>
Net sales.................................... $ 108,356 $115,793 $ 122,695 $139,766
Gross profit................................. 31,695 33,708 34,998 42,287
Pro forma operating income................... 1,876 3,347 4,516 4,389
Pro forma net income......................... 881 1,520 1,577 3,000
Pro forma earnings per share................. 0.07 0.13 0.13 0.25
</TABLE>

F-26
<PAGE>
HENRY SCHEIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDED
APRIL 1, 1995 AND SUBSEQUENT TO DECEMBER 30, 1995 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)

NOTE 18--QUARTERLY INFORMATION (UNAUDITED)--(CONTINUED)

<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------------
APRIL 1, JULY 1, SEPTEMBER 30, DECEMBER 30, MARCH 30,
1995 1995 1995 1995 1996
-------- -------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Net sales.......................... $136,040 $139,753 $ 156,667 $183,749 $ 185,359
Gross profit....................... 40,315 42,107 48,090 60,072 54,949
Pro forma operating income......... 2,986(1) 4,689 5,188 6,898 4,704(1)
Pro forma net income............... 936(1) 2,066 2,093 4,312 2,464(1)
Pro forma earnings per share....... 0.08(1) 0.17 0.17 0.26 0.13(1)
</TABLE>

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

(1) Historical.

The Company's business has been subject to seasonal and other quarterly
influences. Net sales and operating profits have been generally higher in the
fourth quarter due to timing of sales of software, year-end promotions and
purchasing patterns of office-based healthcare practitioners and have been
generally lower in the first quarter due primarily to the increased purchases in
the prior quarter. Quarterly results also may be materially affected by a
variety of other factors, including the timing of acquisitions and related
costs, the release of software enhancements, timing of purchases, special
promotional campaigns, fluctuations in exchange rates associated with
international operations and adverse weather conditions.

Earnings per share calculations for each quarter were based on the weighted
average number of shares outstanding for each period, and the sum of the
quarters may not necessarily be equal to the full year earnings per share
amount.

F-27
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Stockholders
Henry Schein, Inc.

We have audited the accompanying statement of assets purchased of Veratex (a
division of The Veratex Corporation) as of December 31, 1994, and the statement
of revenues and direct operating expenses for the year then ended. These
financial statements are the responsibility of Veratex's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

The accompanying statement of assets purchased and statement of revenues and
direct operating expenses were prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission (for inclusion
in the registration statement on Form S-1 of Henry Schein, Inc.), and is not
intended to be a complete presentation of the Company's financial position or
results of operations.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the assets purchased of Veratex (a division of The
Veratex Corporation) at December 31, 1994, and its revenues and direct operating
expenses for the year then ended in conformity with generally accepted
accounting principles.

BDO SEIDMAN, LLP

New York, New York
July 24, 1995

F-28
<PAGE>
VERATEX
(A DIVISION OF THE VERATEX CORPORATION)
STATEMENTS OF ASSETS PURCHASED
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 31,
1994 1995
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Accounts receivable................................................ $3,100,000 $ 3,300,000
Inventories........................................................ 5,591,000 4,989,000
Furniture and fixtures............................................. 75,000 75,000
------------ -----------
Assets purchased................................................... $8,766,000 $ 8,364,000
------------ -----------
------------ -----------
</TABLE>

See accompanying notes to financial statements.

F-29
<PAGE>
VERATEX
(A DIVISION OF THE VERATEX CORPORATION)
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, --------------------------
1994 1994 1995
------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Net sales........................................... $ 39,538,000 $20,161,000 $19,853,000
Cost of sales....................................... 26,999,000 13,628,000 14,079,000
------------ ----------- -----------
Gross profit........................................ 12,539,000 6,533,000 5,774,000
Direct operating expenses........................... 10,369,000 5,084,000 5,015,000
------------ ----------- -----------
Revenues in excess of direct operating expenses..... $ 2,170,000 $ 1,449,000 $ 759,000
------------ ----------- -----------
------------ ----------- -----------
Pro forma income taxes (unaudited).................. $ 846,000 $ 565,000 $ 296,000
------------ ----------- -----------
------------ ----------- -----------
</TABLE>

See accompanying notes to financial statements.

F-30
<PAGE>
VERATEX
(A DIVISION OF THE VERATEX CORPORATION)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 1995 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1994 AND 1995 IS UNAUDITED.)

NOTE 1--BASIS OF PRESENTATION

The statements of assets purchased and statements of revenues and direct
operating expenses relate to Veratex (the "Company"), the retail distribution
division of The Veratex Corporation. The Company is engaged in the business of
distributing a wide range of health care supplies and paper products via mail
order. Under an agreement dated June 14, 1995, inventories, certain furniture
and fixtures and the business of the division are to be sold to Henry Schein,
Inc.

The financial statements have been prepared to substantially comply with
rules and regulations of the Securities and Exchange Commission for businesses
acquired. Such financial statements, rather than complete financial statements,
are presented because the business was acquired from an unaffiliated third party
in a negotiated transaction and the seller would not allow management of Henry
Schein, Inc. access to records supporting net assets that will not be acquired
(such as certain property and equipment, accounts payable, accrued liabilities
and debt) and expenses not allocated by the group to the divisions, primarily
consisting of corporate compensation, data processing and management fees.
Accordingly, the statements present only the assets to be acquired and the
revenues and expenses directly attributable to the Company, consisting primarily
of selling expenses, freight and advertising. Pro forma income taxes are based
on applying the statutory Federal and state income tax rates to revenues in
excess of direct operating expenses. The Company's historical costs of finished
goods obtained from related entities do not reflect any markups that would
otherwise be charged to unrelated third parties by these entities. The
accompanying statements of revenues and direct operating expenses include
adjustments to cost of sales of $1,844,000, $931,000 and $915,000 for the year
ended December 31, 1994 and the six months ended June 30, 1994 and 1995,
respectively, for the estimated effect of these markups.

The financial statements presented are not representative of the actual
operations of the Company and, accordingly, statements of financial position and
cash flows are not applicable.

Interim Financial Information

The statement of assets purchased as of June 30, 1995 and the statements of
revenues and direct operating expenses for the six months ended June 30, 1994
and 1995, in the opinion of the Company's management, include all adjustments,
consisting of normal, recurring accruals necessary for a fair presentation. The
revenues and direct operating expenses for the six months ended June 30, 1995
are not necessarily indicative of the results for any other period.

NOTE 2--REVENUE RECOGNITION

Revenue is recognized when inventory is shipped to the customer.

NOTE 3--INVENTORIES

Inventories consist of merchandise purchased for resale and finished goods
acquired from related entities in the group. All inventories are valued at the
lower of cost or market. Cost is determined using the replacement cost method,
which approximates actual cost on a first-in, first-out basis.

F-31
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

HS Pharmaceutical, Inc.

We have audited the accompanying consolidated balance sheets of HS
Pharmaceutical, Inc. and Subsidiaries as of December 31, 1994 and December 30,
1995 and the related consolidated statements of income and retained earnings and
cash flows for each of the three years in the period ended December 30, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these 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 HS
Pharmaceutical, Inc. and Subsidiaries at December 31, 1994 and December 30, 1995
and the results of their operations and their cash flows for each of the three
years in the period ended December 30, 1995, in conformity with generally
accepted accounting principles.

BDO Seidman, LLP

New York, New York
February 16, 1996

F-32
<PAGE>
HS PHARMACEUTICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
------------ ------------
<S> <C> <C>
ASSETS
Current:
Accounts receivable, less allowance for doubtful accounts of
$105,400 and $95,703............................................. $ 7,257,514 $ 7,062,447
Inventories.................................................... 3,059,126 4,258,660
Advances to affiliates......................................... 1,239,478 543,925
Prepaid expenses and other..................................... 377,286 565,845
------------ ------------
Total current assets....................................... 11,933,404 12,430,877
Property and equipment, net...................................... 3,576,613 3,539,376
Intangibles, less accumulated amortization of $182,833 and
$201,479......................................................... 184,085 165,439
Deposits and other............................................... 269,056 5,786
Advances and notes to affiliates................................. -- 1,076,723
------------ ------------
$ 15,963,158 $ 17,218,201
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft................................................. $ 900,722 $ 324,875
Revolving credit agreement..................................... 1,000,000 --
Accounts payable and accrued expenses.......................... 3,845,875 4,266,631
Income taxes payable........................................... 85,826 480,684
Current portion of long-term debt.............................. 1,093,268 834,700
------------ ------------
Total current liabilities.................................. 6,925,691 5,906,890
Long-term debt, less current portion............................. 2,770,718 2,195,980
Deferred income taxes............................................ 71,000 152,000
------------ ------------
Total liabilities.......................................... 9,767,409 8,254,870
------------ ------------
------------ ------------
Commitments and contingencies
Stockholders' equity:
Common stock--no par value, shares authorized 200; issued and
outstanding 20................................................... 382,845 40,100
Additional paid-in capital..................................... -- 342,745
Retained earnings.............................................. 5,812,904 8,580,486
------------ ------------
Total stockholders' equity................................. 6,195,749 8,963,331
------------ ------------
$ 15,963,158 $ 17,218,201
------------ ------------
------------ ------------
</TABLE>

See accompanying notes to consolidated financial statements.

F-33
<PAGE>
HS PHARMACEUTICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------
DECEMBER 25, DECEMBER 31, DECEMBER 30,
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net sales........................................... $ 26,424,528 $ 24,500,962 $ 28,123,977
Cost of sales....................................... 16,580,174 15,925,685 17,467,680
------------ ------------ ------------
Gross profit...................................... 9,844,354 8,575,277 10,656,297
Operating expenses:
Selling, general and administrative............... 4,777,310 5,615,183 6,157,515
------------ ------------ ------------
Operating income................................ 5,067,044 2,960,094 4,498,782
Other income (expense):
Interest expense, net............................. (310,963) (395,159) (500,293)
Foreign exchange remeasurement gain............... 1,523 47,543 (10,163)
Contract settlement............................... 120,520 -- --
Other............................................. -- -- 147,387
------------ ------------ ------------
Income before taxes on income................... 4,878,124 2,612,478 4,135,713
Taxes on income..................................... 1,875,500 1,004,000 1,368,131
------------ ------------ ------------
Net income.......................................... 3,002,624 1,608,478 2,767,582
Retained earnings, beginning of year................ 1,201,802 4,204,426 5,812,904
------------ ------------ ------------
Retained earnings, end of year...................... $ 4,204,426 $ 5,812,904 $ 8,580,486
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

See accompanying notes to consolidated financial statements.

F-34
<PAGE>
HS PHARMACEUTICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------
DECEMBER 25, DECEMBER 31, DECEMBER 30,
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................... $3,002,624 $1,608,478 $2,767,582
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization...................... 484,277 469,763 425,861
Provision for losses on accounts receivable........ 203,774 38,843 15,000
Provision for deferred income taxes................ 6,500 16,000 81,000
Other.............................................. -- 25,000 5,000
Changes in assets and liabilities:
(Increase) decrease in accounts receivable....... (1,590,054) (1,821,447) 180,067
(Increase) decrease in inventories............... 232,953 (33,420) (1,199,165)
(Increase) decrease in advances to affiliates.... (734,339) 156,123 (381,170)
(Increase) decrease in prepaid expenses and
other.................................................. 134,956 (212,711) (138,634)
(Increase) decrease in deposits and other........ (1,800) (258,071) 263,270
Increase (decrease) in accounts payable and
accrued expenses....................................... (2,207,023) 940,230 415,386
Increase (decrease) in income taxes payable...... 1,848,882 (1,763,056) 339,870
------------ ------------ ------------
Net cash provided by (used in) operating activities.... 1,380,750 (834,268) 2,774,067
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................. (928,508) (1,156,332) (369,978)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in bank overdraft................ 186,211 (309,837) (575,847)
Credit line borrowings, net.......................... -- 1,000,000 (1,000,000)
Proceeds from long-term debt......................... -- 1,792,020 --
Principal payments on long-term debt................. (638,453) (491,583) (828,242)
------------ ------------ ------------
Net cash provided by (used in) financing activities.... (452,242) 1,990,600 (2,404,089)
------------ ------------ ------------
Net increase (decrease) in cash........................ -- -- --
Cash, beginning of year................................ -- -- --
------------ ------------ ------------
Cash, end of year...................................... $ -- $ -- $ --
------------ ------------ ------------
------------ ------------ ------------
Supplemental cash flow information:
Interest paid........................................ $ 297,338 $ 387,101 $ 608,216
Taxes paid........................................... $ 20,542 $2,836,776 $ 996,520
</TABLE>

See accompanying notes to consolidated financial statements.

F-35
<PAGE>
HS PHARMACEUTICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--SUMMARY OF ACCOUNTING POLICIES

Description of Business

HS Pharmaceutical, Inc. and Subsidiaries (the "Company") manufactures and
distributes pharmaceutical products and sells other accessory products to
dental, medical and veterinary distributors worldwide.

Principles of Consolidation

The consolidated financial statements include the accounts of HS
Pharmaceutical, Inc. and all of its wholly-owned subsidiaries. All material
intercompany accounts and transactions are eliminated in consolidation.

Use of Estimates

Fiscal Year

The Company reports its operations on a 52-53 week basis ending on the last
Saturday of December. Accordingly, fiscal years ended December 30, 1995 and
December 25, 1993 consisted of 52 weeks and the fiscal year ended December 31,
1994 consisted of 53 weeks.

Inventories

Inventories are valued at the lower of cost or market value. Manufactured
inventories of raw materials, work-in-progress and finished goods are valued
using standard costing methods, which approximate the first-in, first-out (FIFO)
method. The cost of inventory purchased for resale is determined by the FIFO
method.

Property and Equipment and Depreciation and Amortization

Property and equipment are stated at cost. Depreciation is computed
primarily under the straight-line method over the following estimated useful
lives:

YEARS
-----
Buildings and improvements......................................... 40
Machinery and warehouse............................................ 5-10
Computer hardware.................................................. 5
Capital lease equipment............................................ 5-10

F-36
<PAGE>
HS PHARMACEUTICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 1--SUMMARY OF ACCOUNTING POLICIES--(CONTINUED)
Amortization of leasehold improvements is computed using the straight-line
method over the lesser of the useful lives of the assets or the lease term.

Intangibles

Intangibles consist of costs incurred in connection with obtaining
abbreviated new drug applications, investigational new drug exemptions and
licenses, permits and approvals relating to the manufacture and sale of
pharmaceutical products. These costs are being amortized using the straight-line
method over their estimated useful lives which is expected to be 20 years.

Taxes on Income

Statement of Cash Flows

Foreign Currency Remeasurement

Monetary assets and liabilities denominated in foreign currency have been
remeasured into the functional currency (the U.S. dollar) at the year-end rate
of exchange (U.S. $1 = Canadian $1.35, $1.40 and $1.31 at December 30, 1995,
December 31, 1994 and December 25, 1993, respectively). Non-monetary items are
remeasured at historical rates. Revenue and expenses are remeasured based on the
average monthly rate. Foreign exchange remeasurement gains and losses are
included in the determination of net income for the year.

Long-Lived Assets

F-37
<PAGE>
HS PHARMACEUTICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 2--INVENTORIES

Inventories consist of the following:

DECEMBER 31, DECEMBER 30,
1994 1995
------------ ------------
Raw materials................................. $ 711,394 $ 962,845
Work-in-progress.............................. 53,464 136,062
Finished goods................................ 468,489 418,780
Parts......................................... 156,286 148,012
------------ ------------
Total manufactured inventories................ 1,389,633 1,665,699
Inventory purchased for resale................ 1,669,493 2,592,961
------------ ------------
$3,059,126 $4,258,660
------------ ------------
------------ ------------

NOTE 3--PROPERTY AND EQUIPMENT, NET

Major classes of property and equipment consist of the following:

DECEMBER 31, DECEMBER 30,
1994 1995
------------ ------------
Land........................................... $ 23,474 $ 23,474
Building....................................... 1,314,486 1,331,400
Machinery and equipment........................ 5,256,967 5,552,819
Computer hardware.............................. 238,188 281,645
Capital lease equipment........................ 359,658 359,658
Leasehold improvements......................... 185,765 199,519
------------ ------------
7,378,538 7,748,515
Less accumulated depreciation and amortization. 3,801,925 4,209,139
Net property and equipment..................... $3,576,613 $3,539,376
------------ ------------
------------ ------------

NOTE 4--BANK OVERDRAFT

Bank overdraft bears interest at the U.S. and Canadian prime rates, as well
as LIBOR plus 3/4%, which were 8.5% and 9.0% for prime, respectively, and 6.63%
for LIBOR at the time the Company entered into such overdraft agreement, and is
due on demand. The bank overdraft and bank loans payable (see Note 6) are
secured by a general assignment of accounts receivable, a general security
agreement on all machinery and equipment, and a $2,500,000 demand debenture on
land and building.

F-38
<PAGE>
HS PHARMACEUTICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 5--REVOLVING CREDIT AGREEMENT

During 1995, the Company entered into a $2,000,000 revolving credit
agreement with its bank, expiring September 30, 1996. Borrowings are due on
demand, collateralized by accounts receivable and inventories and bear interest
at Canadian prime plus 1/8%.

NOTE 6--LONG-TERM DEBT

Long-term debt consists of the following:

DECEMBER 31, DECEMBER 30,
1994 1995
------------ ------------
Term loans payable in monthly installments
maturing at varying dates from August 1997
through December 1999, with interest at Canadian
prime plus 0.5%................................. $2,492,643 $1,877,901
Notes payable bearing interest at prime, payable
in annual installments of $191,885 principal,
plus interest, due March 31, 2001............... 1,343,194 1,151,308
Capital lease obligations, payable in monthly
installments of $2,227, including interest, due
January 1996...................................... 28,149 1,471
------------ ------------
3,863,986 3,030,680
Less: Current portion............................. 1,093,268 834,700
------------ ------------
$2,770,718 $2,195,980
------------ ------------
------------ ------------

Principal payments on long-term debt mature as follows:

YEAR AMOUNT
---- ------
1996........................................................... $ 834,700
1997........................................................... 741,656
1998........................................................... 571,246
1999........................................................... 460,062
2000........................................................... 312,411
----------
$2,920,075
----------
----------

F-39
<PAGE>
HS PHARMACEUTICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 7--RELATED PARTY TRANSACTIONS

(a) Certain services of a 50% shareholder are provided to the Company at the
shareholder's cost. Total charges from this shareholder were approximately
$83,000, $109,000 and $105,000 for 1995 , 1994 and 1993, respectively. In
addition, the Company has made advances to this shareholder during 1995, 1994
and 1993. At December 30, 1995 and December 31, 1994, "Advances to affiliates"
includes amounts due from this shareholder of approximately $390,000 and
$256,000, respectively, and "Accounts payable and accrued expenses" includes
amounts due to this shareholder of approximately $927,000 and $906,000,
respectively.

In March 1991, the Company entered into an agreement with this same
shareholder to supply products at prices and quantities as defined in the
agreement. Sales to this same shareholder (including sales under this agreement)
accounted for approximately 22%, 24% and 27% of the Company's sales for 1995,
1994 and 1993, respectively. Included in "Accounts receivable" at December 30,
1995 and December 31, 1994 were approximately $1,356,000 and $1,276,000,
respectively, for amounts due from this shareholder.

(b) In March 1991, the other 50% shareholder of the Company granted the
Company a ten-year license to use certain of their trademarks. Royalties of
$75,000 annually are required under the terms of the agreement and were paid in
1995, 1994 and 1993.

In the ordinary course of business, the Company sells products to this same
shareholder. Net sales to this shareholder amounted to approximately $608,000,
$1,167,000 and $606,000 for 1995, 1994 and 1993, respectively. Included in
"Accounts receivable" at December 30, 1995 and December 31, 1994 were
approximately $88,000 and $653,000, respectively, for amounts due from this
shareholder.

In addition, the Company also purchases pharmaceutical products from this
shareholder. Net purchases from this shareholder amounted to approximately
$4,434,000, $3,773,000 and $4,775,000 for 1995, 1994 and 1993, respectively.
Included in "Accounts payable and accrued expenses" at December 30, 1995 were
approximately $974,000 and $1,001,000, respectively, for amounts due to this
shareholder.

(c) Interest expense related to accounts payable and accrued expenses owing
to the above shareholders amounted to approximately $51,000, $65,000 and $77,000
for 1995, 1994 and 1993, respectively.

(d) An affiliated company supplies a new product line to the Company.
Included in "Advances to affiliates" are net amounts due from this affiliate of
approximately $974,000 and $983,000 at December 30, 1995 and December 31, 1994,
respectively.

NOTE 8--COMMITMENTS AND CONTINGENCIES

The Company leases facilities and equipment under noncancelable operating
leases expiring through 1998. Total rental expense for 1995, 1994 and 1993 was
approximately $163,000, $153,000 and

F-40
<PAGE>
HS PHARMACEUTICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 8--COMMITMENTS AND CONTINGENCIES--(CONTINUED)
$108,000, respectively. At December 30, 1995, future minimum annual rental
payments under these leases are as follows:

YEAR AMOUNT
---- ------
1996............................................................ $153,000
1997............................................................ 148,000
1998............................................................ 148,000
1999............................................................ 105,000
2000............................................................ 1,000
--------
$555,000
--------
--------

NOTE 9--TAXES ON INCOME

The Company adopted SFAS No. 109 as of the beginning of 1993. The cumulative
effect of this change was not material.

Taxes on income are as follows:

<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------
DECEMBER 25, DECEMBER 31, DECEMBER 30,
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Domestic.............................. $2,763,533 $1,193,905 $2,500,916
Foreign............................... 2,114,591 1,418,573 1,634,797
------------ ------------ ------------
Total income before taxes on income... $4,878,124 $2,612,478 $4,135,713
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------
DECEMBER 25, DECEMBER 31, DECEMBER 30,
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Current tax expense:
Current tax expense:
U.S. Federal........................ $ 859,000 $ 382,000 $ 764,670
State and local..................... 265,000 124,000 26,801
Foreign............................. 745,000 482,000 495,660
------------ ------------ ------------
Total current......................... 1,869,000 988,000 1,287,131
Deferred tax expense:
Foreign............................. 6,500 16,000 81,000
------------ ------------ ------------
Total provision....................... $1,875,500 $1,004,000 $1,368,131
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

The deferred tax liability arises from temporary differences relating to
depreciation and amortization.

The Company's effective tax rate approximates the U.S. Federal statutory
rate.

F-41
<PAGE>
HS PHARMACEUTICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 10--MAJOR CUSTOMERS AND EXPORT SALES

Sales to one unaffiliated customer accounted for approximately 13% of net
sales in 1993. Sales to this customer and another unaffiliated customer
accounted for approximately 25% of net sales in 1995 and 1994.

The Company had export sales amounting to 14%, 16% and 12% of net sales for
1995, 1994 and 1993, respectively.

NOTE 11--EMPLOYEE BENEFIT PLAN

Effective January 1, 1992, the Company adopted a 401(k) profit sharing plan
to provide retirement benefits for eligible employees. Matching contributions by
the Company, which were determined by the board of directors, were approximately
$39,000, $36,000 and $29,000 for 1995, 1994 and 1993, respectively.

In addition, the Company maintains a defined contribution plan for eligible
employees. Contributions to this plan, which were determined by the board of
directors, were approximately $92,000, $97,000 and $50,000 for 1995, 1994 and
1993, respectively.

NOTE 12--FINANCIAL INSTRUMENTS AND CREDIT RISK CONCENTRATIONS

Certain financial instruments potentially subject the Company to
concentrations of credit risk. These financial instruments consist primarily of
trade receivables and temporary cash investments. The carrying value of
financial instruments approximated fair value as of December 30, 1995 because of
the short maturity of these instruments.

Concentrations of credit risk with respect to trade receivables are limited
due to a large customer base and its dispersion across different geographic
areas. The Company maintains an allowance for losses based on the expected
collectability of all receivables.

F-42
<PAGE>
- ------------------------------------------- --------------------------------
- ------------------------------------------- --------------------------------

NO DEALER, SALESPERSON, OR ANY OTHER
PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS
OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT 5,700,000 Shares
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
THE COMPANY OR THE UNDERWRITER. THIS [LOGO] HENRY SCHEIN(R)
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF ANY OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY Common Stock
TO ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, IMPLY
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY OR THAT THE INFORMATION
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE.

-------------------
----------------
TABLE OF CONTENTS PROSPECTUS

PAGE , 1996
---- ----------------
Prospectus Summary.................... 3
The Company........................... 3
Risk Factors.......................... 7
Use of Proceeds....................... 12
Dividend Policy....................... 12
Price Range of Common Stock........... 12
Capitalization........................ 13
Selected Consolidated Financial
Information and Operating Data........ 14
Pro Forma Condensed Consolidated
Financial Information................. 16
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 20 William Blair & Company
Business.............................. 30
Reorganization........................ 41
Management............................ 43 Alex. Brown & Sons
Certain Transactions.................. 54 INCORPORATED
Principal and Selling Stockholders.... 56
Description of Capital Stock.......... 59 Montgomery Securities
Underwriting.......................... 63
Legal Matters......................... 64 Smith Barney Inc.
Experts............................... 64
Additional Information................ 64
Index to Financial Statements......... F-1

- ------------------------------------------- --------------------------------
- ------------------------------------------- --------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth an itemized statement of all estimated
expenses in connection with the registration, offering and sale of the
Securities being registered hereby other than underwriting discounts and
commissions.*

SEC registration fee.......................................... $ 82,786
NASD fee...................................................... 24,508
NASDAQ fee.................................................... 17,500
Transfer agents' fees......................................... 1,000
Costs of printing and engraving............................... 200,000
Legal fees and expenses....................................... 300,000
Accounting fees and expenses.................................. 200,000
Blue sky expenses and counsel fees............................ 25,000
Directors and Officers Insurance.............................. 50,000
Miscellaneous................................................. 99,206
-----------
Total............................................. $ 1,000,000
-----------
-----------

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

* Pursuant to the Global Agreement, the Company will pay all of the expenses
incurred in connection with the registration, offering and sale of the Common
Stock, other than (i) underwriting discounts, commissions, spreads and similar
amounts payable to any underwriter or broker-dealer that are attributable to
the sale of Selling Stockholders' shares, (ii) transfer taxes incurred by such
Selling Stockholders in connection with the sale of such shares, and (iii) any
fees and expenses which the Company is prohibited from paying on behalf of
Selling Stockholders under applicable "blue sky" laws, rules and regulations.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Article TENTH of the Company's Amended and Restated Certificate of
Incorporation provides that the Company shall indemnify and hold harmless, to
the fullest extent authorized by the Delaware General Corporation Law, its
officers and directors against all expenses, liability and loss actually and
reasonably incurred in connection with any civil, criminal, administrative or
investigative action, suit or proceeding. The Amended and Restated Certificate
of Incorporation also extends indemnification to those serving at the request of
the Company as directors, officers, employees or agents of other enterprises.

In addition, Article NINTH of the Company's Amended and Restated Certificate
of Incorporation provides that no director shall be personally liable for any
breach of fiduciary duty. Article NINTH does not eliminate a director's
liability (i) for a breach of his or her duty of loyalty to the Company or its
stockholders, (ii) for acts of intentional misconduct, (iii) under Section 174
of the Delaware General Corporation Law for unlawful declarations of dividends
or unlawful stock purchases or redemptions, or (iv) for any transactions from
which the director derived an improper personal benefit.

Section 145 of the Delaware General Corporation Law permits a corporation to
indemnify its directors and officers against expenses (including attorney's
fees), judgments, fines and amounts paid in settlements actually and reasonably
incurred by them in connection with any action, suit or proceeding brought by
third parties, if such directors or officers acted in good faith and in a manner
they reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reason to believe their conduct was unlawful. In a derivative action, i.e., one
by or in the right of the corporation, indemnification may be made only for
expenses actually and reasonably incurred by directors and officers in
connection with the defense or settlement of an action or

II-1
<PAGE>
suit, and only with respect to a matter as to which they shall have acted in
good faith and in a manner they reasonably believed to be in or not opposed to
the best interest of the corporation, except that no indemnification shall be
made if such person shall have been adjudged liable to the corporation, unless
and only to the extent that the court in which the action or suit was brought
shall determine upon application that the defendant officers or directors are
reasonably entitled to indemnity for such expenses despite such adjudication of
liability.

Section 102(b)(7) of the Delaware General Corporation Law provides that a
corporation may eliminate or limit the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that such provision shall not eliminate or limit
the liability of a director (i) for any breach of the director's duty of loyalty
to the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an improper personal benefit. No
such provision shall eliminate or limit the liability of a director for any act
or omission occurring prior to the date when such provision becomes effective.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

There were no underwriters retained in any of the issuances of securities
described below. All issuances of stock described below were made without
registration in reliance upon Section 4(2) of the Securities Act of 1933.

(a) On September 30, 1994, the Company reclassified and changed each share
of Class A Common Stock and Class B Common Stock into 100 shares of Common
Stock.

(b) The Company issued 314,820, 91,377 and 83,259 shares of Common Stock on
December 27, 1994, May 1, 1995 and September 22, 1995, respectively, for par
value to certain management employees and executive officers.

(c) In connection with the Company's acquisition of Schein Dental Equipment
in the third quarter of 1995, the Company issued an aggregate of 1,260,416
shares of Common Stock to the stockholders of Schein Dental Equipment, in
exchange for 100% of their interests in Schein Dental Equipment.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Financial Statement Schedules

(i) Valuation and Qualifying Accounts

(b) Exhibits

The exhibits required by Item 601 of Regulation S-K and filed herewith are
listed in the Exhibit List immediately preceding the exhibits.

ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 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 Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling

II-2
<PAGE>
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 of 1933 and will be governed by the final adjudication of such
issue.

The undersigned Company hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus 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.

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Amendment No. 1 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Melville, and the State of New York, on this 18th day of June, 1996.

By: /s/ STANLEY M. BERGMAN
..................................

Stanley M. Bergman
Chairman, Chief Executive Officer,
President and
Director

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
their capacities on June 18, 1996.

<TABLE>
<CAPTION>
NAME CAPACITY DATE
- ------------------------------------- ------------------------------------- ------------------
<S> <C> <C>

/s/ STANLEY M. BERGMAN Chairman, Chief Executive Officer, June 18, 1996
..................................... President and Director (Principal
Stanley M. Bergman Executive Officer)

* Senior Vice President, Chief June 18, 1996
..................................... Financial Officer and Director
Steven Paladino (Principal Financial and Accounting
Officer)

* Director June 18, 1996
.....................................
James P. Breslawski

* Director June 18, 1996
.....................................
Gerald A. Benjamin

* Director June 18, 1996
.....................................
Leonard A. David

* Director June 18, 1996
.....................................
Mark E. Mlotek

* Director June 18, 1996
.....................................
Barry J. Alperin

* Director June 18, 1996
.....................................
Pamela Joseph

* Director June 18, 1996
.....................................
Donald J. Kabat

* Director June 18, 1996
.....................................
Marvin H. Schein

* Director June 18, 1996
.....................................
Irving Shafran
</TABLE>

II-4
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE

Henry Schein, Inc.
Melville, New York

The audits referred to in our report dated February 23, 1996 relating to the
consolidated financial statements of Henry Schein, Inc., which is included in
the Prospectus constituting a part of this Registration Statement included the
audit of financial statement Schedule II, Valuation and Qualifying Accounts.
This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement schedule based upon our audits.

In our opinion, such financial statement schedule presents fairly, in all
material respects, the information set forth therein.

BDO SEIDMAN, LLP

New York, New York
February 23, 1996

S-1
<PAGE>
HENRY SCHEIN, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ---------------------------------------------------- -------- ---------- -------- --------
ADD
----------
BALANCE
AT BALANCE
BEGINNING CHARGED TO AT END
OF COSTS AND OF
DESCRIPTIONS PERIOD EXPENSES DEDUCTIONS PERIOD
- ---------------------------------------------------- -------- ---------- -------- --------
<S> <C> <C> <C> <C>
Year Ended December 25, 1993
Allowance for doubtful accounts................... $1,699 $ 316 $ -- $2,015
Other accounts receivable allowances(1)........... 1,415 -- (172) 1,243
-------- ---------- -------- --------
$3,114 $ 316 $ (172) $3,258
-------- ---------- -------- --------
-------- ---------- -------- --------
Year ended December 31, 1994
Allowance for doubtful accounts................... $2,015 $ 246 $ -- $2,261
Other accounts receivable allowances(1)........... 1,243 815 -- 2,058
-------- ---------- -------- --------
$3,258 $1,061 $ -- $4,319
-------- ---------- -------- --------
-------- ---------- -------- --------
Year ended December 30, 1995
Allowance for doubtful accounts................... $2,261 $ 253 $ -- $2,514
Other accounts receivable allowances(1)........... 2,058 1,763 -- 3,821
-------- ---------- -------- --------
$4,319 $2,016 $ -- $6,335
-------- ---------- -------- --------
-------- ---------- -------- --------
</TABLE>

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

(1)Primarily allowance for sales returns.

S-2
<PAGE>
EXHIBIT INDEX

EXHIBIT PAGE
NO. EXHIBIT NO.
- ------- ------- -----
<C> <S> <C>

1.1 Form of Underwriting Agreement+++

3.1 Form of Amended and Restated Articles of Incorporation+

3.2 Form of Bylaws+

5.1 Opinion of Proskauer Rose Goetz and Mendelsohn LLP with respect to the
legality of the securities being registered*

9.1 Voting Trust Agreement dated September 30, 1994, as amended, among the
Company, the Estate of Jacob M. Schein, the Trusts under Articles Third and
Fourth of the Will of Jacob M. Schein, the Trust established by Pamela Joseph
under Trust Agreement dated February 9, 1994, the Trust established by Martin
Sperber under Trust Agreement dated September 19, 1994, management
stockholders and Stanley M. Bergman, as voting trustee+

9.2 Agreements dated December 27, 1994 among the Company, various executive
officers and Stanley M. Bergman, as voting trustee+

9.3 Agreements dated as of May 1, 1995 among the Company, various executive
officers and Stanley M. Bergman, as voting trustee+

10.1 Amended and Restated HSI Agreement (the "HSI Agreement"), effective as of
February 16, 1994, among the Company, Marvin H. Schein, the Trust established
by Marvin H. Schein under Trust Agreement dated September 9, 1994, the
Charitable Trust established by Marvin H. Schein under Trust Agreement dated
September 12, 1994, the Estate of Jacob M. Schein, the Trusts established by
Articles Third and Fourth of the Will of Jacob M. Schein, the Trust
established by Pamela Joseph under Trust Agreement dated February 9, 1994,
the Trust established by Martin Sperber under Trust Agreement dated September
19, 1994, the Trust established by Stanley M. Bergman under Trust Agreement
dated September 15, 1994, Pamela Schein, Pamela Joseph, Martin Sperber,
Stanley M. Bergman, Steven Paladino and James P. Breslawski (collectively,
the "HSI Parties")+

10.2 HSI Registration Rights Agreement dated September 30, 1994, among the
Company, Pamela Schein, the Trust established by Pamela Joseph under Trust
Agreement dated February 9, 1994, Marvin H. Schein, the Trust established by
Marvin H. Schein under Trust Agreement dated December 31, 1993, the Trust
established by Marvin H. Schein under Trust Agreement dated September 19,
1994, the Charitable Trust established by Marvin H. Schein under Trust
Agreement dated September 12, 1994, Martin Sperber, the Trust established by
Martin Sperber under Trust Agreement dated September 19, 1994, Stanley M.
Bergman and the Trust established by Stanley M. Bergman under Trust Agreement
dated September 15, 1994+

10.3 Letter Agreement dated September 30, 1994 to the Company from Marvin H.
Schein, Pamela Joseph and Pamela Schein+

10.4 Release to the HSI Agreement dated September 30, 1994+

10.5 Separation Agreement dated as of September 30, 1994 by and between the
Company, Schein Pharmaceutical, Inc. and Schein Holdings, Inc.+
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. EXHIBIT NO.
- ------- ------- -----
<C> <S> <C>
10.6 Restructuring Agreement dated September 30, 1994 among Schein Holdings, Inc.,
the Company, the Estate of Jacob M. Schein, Marvin H. Schein, the Trust
established by Marvin H. Schein under Trust Agreement dated December 31,
1993, the Trust established by Marvin H. Schein under Trust Agreement dated
September 9, 1994, the Charitable Trust established by Marvin H. Schein under
Trust Agreement dated September 12, 1994, Pamela Schein, Pamela Joseph, the
Trust established by Pamela Joseph under Trust Agreement dated February 9,
1994; the Trusts under Articles Third and Fourth of the Will of Jacob M.
Schein; Stanley M. Bergman, the Trust established by Stanley M. Bergman under
Trust Agreement dated September 15, 1994, Martin Sperber, the Trust
established by Martin Sperber under Trust Agreement dated December 31, 1993,
and the Trust established by Martin Sperber under Trust Agreement dated
September 19, 1994

10.7 Agreement and Plan of Corporate Separation and Reorganization dated as of
September 30, 1994 among Schein Holdings, Inc., the Company, the Estate of
Jacob M. Schein, Marvin H. Schein, the Trust established by Marvin H. Schein
under Trust Agreement dated December 31, 1993, the Trust established by
Marvin H. Schein under Trust Agreement dated September 9, 1994, the
Charitable Trust established by Marvin H. Schein under Trust Agreement dated
September 12, 1994, Pamela Schein, the Trust established by Article Fourth of
the Will of Jacob M. Schein for the benefit of Pamela Schein and her issue
under Trust Agreement dated September 29, 1994, Pamela Joseph, the Trust
established by Pamela Joseph under Trust Agreement dated February 9, 1994,
the Trust established by Pamela Joseph under Trust Agreement dated September
28, 1994 and the Trusts under Articles Third and Fourth of the Will of Jacob
M. Schein+

10.8 Henry Schein, Inc. 1994 Stock Option Plan, as amended and restated effective
as of July 1, 1995+

10.9 Henry Schein, Inc. Amendment and Restatement of the Supplemental Executive
Retirement Plan+

10.10 Henry Schein, Inc. Summary Executive Incentive Plan+

10.11 Consulting Agreement dated September 30, 1994 between the Company and Marvin
H. Schein+

10.12 Employment Agreement dated as of January 1, 1992 between the Company and
Stanley M. Bergman+

10.13 Amended and Restated Stock Issuance Agreement dated as of December 24, 1992
between the Company and Stanley M. Bergman+

10.14 Stock Issuance Agreements dated December 27, 1994 between the Company and
various executive officers+

10.15 Agreement and Plan of Merger dated as of September 1, 1995, among Henry
Schein, Inc., Schein Dental Equipment Corp., Marvin H. Schein and others+

10.16 Stock Purchase Agreement dated August 25, 1995 by Henry Schein, Inc., PRN
Medical, Inc. and its shareholders, and Florida Doctor Supply, Inc. and its
shareholders+

10.17 Restated Standard Indemnity Agreement dated February 8, 1993, as amended
January 25, 1993, by and between Showa Denko America, Inc. and the Company+

10.18 Guaranty Agreement by and between Showa Denko K.K. and the Company, relating
to the Restated Standard Indemnity Agreement dated February 8, 1993, as
amended January 25, 1993, by and between Showa Denko America, Inc. and the
Company+

10.19 Stock Issuance Agreements dated as of May 1, 1995 between the Company and
executive officers+

10.20 Agreement of Purchase and Sale of Assets dated February 28, 1996 by and among
the Company, Benton Dental, Inc. and Modern Dental Concepts, Inc.++
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. EXHIBIT NO.
- ------- ----------------------------------------------------------------------------- -----
<C> <S> <C>
10.21 Credit Agreement dated as of December 8, 1994 between the Company and The
Chase Manhattan Bank, N.A.+

10.22 Loan Agreement dated May 5, 1995 by and between the Company and New York
State Urban Development Corporation+

10.23 Term Loan Agreement dated as of November 15, 1993 between Henry Schein
Europe, Inc. and Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.+

10.24 Corporate Guarantee dated November 15, 1993 by the Company, Zahn Dental Co.,
Inc., Zahn Dental (Florida), Inc., Zahn Dental (Mass), Inc., Tri-State
Medical Supply, Inc. and Zahn Holdings, Inc. with respect to the Term Loan
dated as of November 15, 1993 between Henry Schein Europe, Inc. and
Cooperatieve Centrale Raiffeisen-Boerenleenbank, B.A.+

10.25 Joint and Several Guarantee dated February 7, 1995 by the Company in favor of
Banque Nationale de Paris+

10.26 Joint and Several Guarantee dated February 7, 1995 by the Company in favor of
Banque Francaise du Commerce Exterieur+

10.27 Guarantee dated March 1, 1996 by the Company in favor of Deutsche Bank AG++

10.28 Lease Agreement dated December 22, 1995 by and between Dugan Realty, L.L.C.
and the Company++

10.29 Commercial Guaranty dated August 1, 1994 by the Company in favor of the Mid-
City National Bank+

10.30 Discretionary Line of Credit dated August 18, 1995 between PNC Bank, Delaware
and one of the Company's 50% owned companies+

10.31 Discretionary Line of Credit Demand Note dated August 18, 1995 in favor of
one of the Company's 50% owned companies+

10.32 Loan Agreement dated March 30, 1992 between the Royal Bank of Scotland plc,
Henry Schein U.K. Holdings Limited and BDG U.K. Holdings Limited+

10.33 Loan Agreement dated January 28, 1994 between the Royal Bank of Scotland plc,
Henry Schein U.K. Holdings Limited and Dental Express (Supplies) Limited+

10.34 Credit Agreement dated June 5, 1995 among Canadian Imperial Bank of Commerce
and one of the Company's 50% owned companies+

10.35 Master Lease Agreement dated as of February 28, 1991 between General Electric
Capital Corporation and the Company+

10.36 Master Lease Agreement dated December 2, 1994 between Chase Equipment
Leasing, Inc. and the Company+

10.37 Software License Agreement dated as of June 20, 1995 between the Company and
XcelleNet, Inc.+

10.38 Software License Agreement dated as of October 31, 1994, as amended, between
J.D. Edwards & Company+

10.39 Software Update Agreement dated as of October 31, 1994, as amended, between
J.D. Edwards & Company+

10.40 Software Services Agreement dated as of October 31, 1994, as amended, between
J.D. Edwards & Company+

10.41 Lease dated December 3, 1990 between WRC Properties, Inc. and the Company+

10.42 Lease dated March 2, 1992 between Vista Distribution Center, Inc. and the
Company+

10.43 Lease dated as of September 30, 1993, as amended October 14, 1993 and May 23,
1995, by and between Broad Hollow Realty Co. and the Company+
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. EXHIBIT NO.
- ------- ------- -----
<C> <S> <C>
10.44 Lease dated April 27, 1995 by Lyndean Investments Limited to Kent Dental
Limited and Henry Schein U.K. Holdings Limited+

10.45 Lease dated October 23, 1994 between Georg and Pia Netzhammer and Henry-
Schein Dentina GmbH (English translation and original version)+

10.46 Lease dated January 11, 1995 between Lyndean Investments Limited, Kent Dental
Limited and Henry Schein U.K. Holdings Limited+

10.47 Stock Purchase Agreement dated as of August 18, 1995 among the Company, the
Mark Family Partnership and others+

10.48 Group Purchasing Program Agreement dated March 31, 1994, as amended June 26,
1995, by and between AMA Resources, Inc. and the Company+

10.49 Hospital Supply Purchase Agreement dated as of November 10, 1994 between
Veterinary Centers of America, Inc. and the Company+

10.50 Award of Contract to the Company dated April 14, 1995 by Department of the
Army+

10.51 Sales Agent Agreement dated March 1, 1995 by and between Merck & Co., Inc.
and the Company+

10.52 Supply Agreement dated March 20, 1991+

10.53 Shareholders' Agreement dated March 20, 1991 among Deproco, Inc., the
Company, and others+

10.54 Non-Negotiable Promissory Note dated March 20, 1991 from the Company to N-
Tech+

10.55 Guaranty dated March 20, 1991 by the Company and others in favor of N-Tech,
Inc.+

10.56 Demand Debenture dated December 20, 1988 from one of the Company's 50% owned
companies to Canadian Imperial Bank of Commerce+

10.57 Pledge Agreement dated December 20, 1988 of one of the Company's 50% owned
companies to Canadian Imperial Bank of Commerce+

10.58 Shareholders' Agreement dated as of December 1, 1990 by and among the
shareholders of Henry Schein Espana, S.A.+

10.59 Shareholders' Agreement dated as of April 1, 1991 between the shareholders of
Schein-Dentina, B.V. (English translation)+

10.60 Put and Call Option Agreement dated August 29, 1991 between Schein
International (Europe) Inc. and the shareholders of Henry Schein U.K.
Holdings Limited+

10.61 Deed of Guarantee dated August 29, 1991 between Henry Schein, Inc. and the
shareholders of Henry Schein U.K. Holdings Limited+

10.62 Stock Purchase Agreement dated November 1, 1992 among SSN Healthcare Supply,
Inc., the Company, Tri-State Medical Supply, Inc. and a shareholder+

10.63 Stock Purchase and Shareholders' Agreement dated March 19, 1993 by and among
S.A. Hospithera and Henry Schein Europe, Inc.+

10.64 Agreement dated March 19, 1993 by and among S.A. Hospithera N.V., Henry
Schein Europe Inc., and S.A. Henry Schein Hospithera N.V.+

10.65 Supply Agreement dated as of March 15, 1993 between Henry Schein B.V. and
S.A. Henry Schein Hospithera N.V.+

10.66 Put and Call Option Agreement dated July 1, 1993 between P.W. White Holdings
Limited and Henry Schein Europe Inc.+

10.67 Shareholders' Agreement dated July 1, 1993 between the shareholders of Henry
Schein UK Holdings Ltd.+
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. EXHIBIT NO.
- ------- ------- -----
<C> <S> <C>
10.68 Consortium Agreement dated July 1, 1993 between the shareholders of Henry
Schein UK Holdings Ltd.+

10.69 Guarantee dated July 1, 1993 between the Company and P.W. White Holdings
Limited+

10.70 Restructuring Agreement dated July 30, 1993 by and among the Company, Dental
Plan, Inc., and certain of its employees+

10.71 Share Purchase Agreement dated as of November 17, 1993 by and among Henry
Schein B.V. and Johannes Cornelis van den Braak+

10.72 Asset Purchase and Business Development Agreement dated May 23, 1994 among
the Company, Chicago Medical Equipment Company, and its principal
stockholder, Universal Footcare Holdings Corp., Universal Footcare Products,
Inc. and Universal Footcare Sales Co., L.L.C.+

10.73 Sales Service Agreement dated as of August 1, 1994 between Universal Footcare
Products, Inc. and Universal Footcare Sales Co., L.L.C.+

10.74 Unanimous Shareholders Agreement dated August 4, 1994 among Henry Schein
Canada Inc., the Company, 972704 Ontario Inc. and its shareholders, and
Consolidated Dental Ltd.+

10.75 Share Purchase Agreement dated June 27, 1994 by and between the shareholders
of Henry Schein France S.A.+

10.76 Shareholders Agreement dated January 1, 1995 among SSN Healthcare Supply,
Inc., South Jersey Medical Supply Co., Inc., South Jersey Surgical Supply
Co., Inc., and its shareholders+

10.77 Shareholders Agreement dated as of January 24, 1995 by and among the
shareholders of Dentisoft, Inc.+

10.78 Purchase Agreement dated as of June 14, 1995 among The Veratex Corporation,
the Company and HSI Michigan Corp.+

10.79 Form of Henry Schein, Inc. Non-Employee Director Stock Option Plan++

10.80 Supply Agreement made as of July 7, 1995 between Tidi Products, Inc. and the
Company+

10.81 Agreement Subject to Conditions Precedent dated July 21, 1995 between Henry
Schein Europe Inc., Henry Schein France S.A., Gerard Ifker, Didier Cochet,
Frederic Ladet, Jean-Hugues Lelievre and Christophe Morales (English
Translation)+

10.82 Put and Call Option Agreement dated June 9, 1995 between William Roger
Killiner and Henry Schein U.K. Holdings Limited+

10.83 Put and Call Option Agreement dated June 9, 1995 between Anthony Alan
Anderson and Henry Schein U.K. Holdings Limited+

10.84 Agreement of Purchase and Sale of Assets dated as of July 1, 1995 by and
among Precision Dental Specialties, Inc. and its shareholders, PDS
Acquisition Corp., and the Company+

10.85 Shareholders Agreement dated as of July 1, 1995 by and among Precision Dental
Specialties, Inc. and its shareholders, PDS Acquisition Corp., and the
Company+

10.86 Agreement dated January 1, 1995 between Henry Schein (UK) Holdings Ltd. and
The Royal Bank of Scotland plc+

10.87 Agreement dated March 4, 1993 between Henry Schein (UK) Holdings Ltd. and The
Royal Bank of Scotland plc+

10.88 Loan Agreement dated November 16, 1993 between Henry Schein B.V. and others
and Crediet-en Effectenbank N.V. (English translation and original version)+
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. EXHIBIT NO.
- ------- ------- -----
<C> <S> <C>
10.89 Multicurrency Credit Policy between Henry Schein Espana, S.A. and others and
Banco Popular Espanol, S.A. (English translation and original version)+

10.90 Amended and Restated Credit Agreement (the "Amended Credit Agreement") dated
as of July 5, 1995 among the Company, The Chase Manhattan Bank, N.A., Natwest
Bank, N.A., Cooperatieve Centrale Raiffeisen Boerenleenbank, B.A. "Rabobank
Nederland". New York Branch and European American Bank+

10.91 First Amendment to the Amended Credit Agreement dated December 15, 1995 among
the Company, The Chase Manhattan Bank, N.A., Natwest Bank, N.A., Cooperatieve
Centrale Raiffeisen Boerenleenbank, B.A. "Rabobank Nederland", New York
Branch and European American Bank++

10.92 Agreement and Plan of Merger dated as of April 26, 1996 among the Company,
SSC Holdings, Inc., Scientific Supply Company, Lawrence J. Frankel, the
Lawrence and Pamela Frankel Charitable Remainder Trust, Norman Frankel,
Rudolph Kelemen and Bruce Barber*

10.93 Registration Rights Agreement among the Company, Lawrence J. Frankel, the
Lawrence and Pamela Frankel Charitable Remainder Trust, Norman Frankel,
Rudolph Kelemen and Bruce Barber*

10.94 Acquisition Agreement dated as of May 23, 1996 among HSI, Silverman's Dental
Supply Corp. San Francisco Dental Supply, Inc. and Larry Olsen*

10.95 Acquisition Agreement dated as of May 23, 1996 the Company and Pattison-
McGrath Company Dental Supplies*

11.1 Statement re: computation of per share income (loss)*

21.1 List of Subsidiaries of the Registrant*

23.1 Consent of BDO Seidman, LLP*

23.2 Consent of Proskauer Rose Goetz & Mendelsohn LLP included in its opinion to
be filed as Exhibit 5.1 to this Registration Statement*
</TABLE>

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

* Filed herewith.

** To be filed by amendment.

+ Incorporated by reference to the Company's Registration Statement on Form S-1
(Commission File No. 33-96528).

++ Incorporated by reference to the Company's Annual Report on Form 10-K
(Commission File No. 0-27078).

+++Incorporated by reference to the Company's Registration statement on Form
S-1 (Commission File No. 333-5157)

EXHIBIT 5.1

[PROSKAUER ROSE GOETZ & MENDELSOHN LLP]

June 4, 1996

Henry Schein, Inc.
135 Duryea Road
Melville, New York 11747

Re: Registration Statement on Form S-1
----------------------------------

Ladies and Gentlemen:

You have requested our opinion in connection with the statement on Form S-1
filed on the date hereof (the "Registration Statement"), under which Henry
Schein, Inc. (the "Company") will offer 3,735,500 shares (including 855,000
shares subject to over-allotment in favor of the underwriters) (the "Primary
Shares") of its Common Stock, par value of $.01 per share (the "Common Stock"),
in a public offering, and certain stockholders of the Company will offer up to
2,819,500 shares (the "Selling Stockholder Shares") of the Common Stock in a
public offering. The shares of Common Stock to be offered by the Company and
such stockholders are collectively referred to herein as the "Offered Shares."

We have reviewed the Amended and Restated Certificate of Incorporation of
the Company, resolutions by the Company's Board of Directors, the Registration
Statement and the other exhibits thereto, including the form of Underwriting
Agreement (the "Underwriting Agreement") relating to the Offered Shares filed as
Exhibit 1.1 to the Registration Statement, and have examined such corporate
documents and records and other certificates and have made such investigations
of law as we deemed necessary in order to render the opinion hereinafter set
forth. Based upon and subject to the foregoing, the Selling Stockholder Shares,
and

<PAGE>
Henry Schein, Inc.
June 4, 1996
Page 2

when issued in accordance with the terms of the Underwriting Agreement the
Primary Shares, will be duly authorized, legally issued and fully paid and
nonassessable.

We consent to the use of our name under the caption "Legal Matters" in the
Registration Statement and to the filing of this opinion as an exhibit to the
Registrstaion Statement. In giving this consent, we do not hereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act or the rules and regulations of the Securities and Exchange
Commission thereunder.

Very truly yours,

PROSKAUER ROSE GOETZ & MENDELSOHN LLP

Exhibit 10.92

AGREEMENT AND PLAN OF MERGER

among

HENRY SCHEIN, INC.

SSC HOLDINGS, INC.

SCIENTIFIC SUPPLY COMPANY

LAWRENCE J. FRANKEL

THE LAWRENCE AND PAMELA FRANKEL
CHARITABLE REMAINDER TRUST

NORMAN FRANKEL

RUDOLPH KELEMEN

and

BRUCE BARBER

Dated as of April 26, 1996

<PAGE>
TABLE OF CONTENTS

ARTICLE I

THE MERGER; THE SURVIVING CORPORATION . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Effective Time of the Merger . . . . . . . . . . . . . . . 2
Section 1.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.4 Certificate of Incorporation. . . . . . . . . . . . . . . . 2
Section 1.5 By-Laws. . . . . . . . . . . . . . . . . . . . . . . . . . 2

ARTICLE II

CONVERSION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.1 Exchange Ratio. . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.2 Exchange of Company Stock. . . . . . . . . . . . . . . . . 4
Section 2.3 No Fractional Securities. . . . . . . . . . . . . . . . . . 4

ARTICLE III

DETERMINATION OF EXCHANGE VALUE . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.1 Parent's Calculations of 1995 EBITD and Adjusted February 29
Net Worth. . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.2 The Stockholders' Dispute of Parent's Calculations of 1995
EBITD and/or Adjusted February 29 Net Worth. . . . . . . . 5
Section 3.3 Final 1995 EBITD and Final Adjusted February 29 Net Worth;
Determination of Exchange Value. . . . . . . . . . . . . . 6

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . . 7
Section 4.1 Organization. . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.2 Capitalization. . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.3 Company Subsidiaries. . . . . . . . . . . . . . . . . . . . 8
Section 4.4 Authority Relative to this Agreement. . . . . . . . . . . . 8
Section 4.5 Consents and Approvals; No Violations. . . . . . . . . . . 8
Section 4.6 Financial Statements. . . . . . . . . . . . . . . . . . . . 9
Section 4.7 Absence of Certain Changes or Events; Material Contracts. . 9
Section 4.8 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.9 Absence of Undisclosed Liabilities. . . . . . . . . . . . 10
Section 4.10 No Default. . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.11 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 10

<PAGE>
Section 4.12 Title to Properties; Encumbrances. . . . . . . . . . . . 11
Section 4.13 Intellectual Property. . . . . . . . . . . . . . . . . . 11
Section 4.14 Compliance with Applicable Law. . . . . . . . . . . . . . 12
Section 4.15 Employee Benefit Plans; ERISA; Labor Matters. . . . . . . 13
Section 4.16 Environmental Laws and Regulations . . . . . . . . . . . 14
Section 4.17 Accounting Matters. . . . . . . . . . . . . . . . . . . . 15
Section 4.18 Affiliate Transactions . . . . . . . . . . . . . . . . . 15
Section 4.19 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . 15

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF PARENT . . . . . . . . . . . . . . . . . 15
Section 5.1 Organization . . . . . . . . . . . . . . . . . . . . . . 15
Section 5.2 Capitalization. . . . . . . . . . . . . . . . . . . . . . 16
Section 5.3 Authority Relative to this Agreement. . . . . . . . . . . 16
Section 5.4 Consents and Approvals No Violations. . . . . . . . . . . 16
Section 5.5 Reports and Financial Statements. . . . . . . . . . . . . 17
Section 5.6 Accounting Matters . . . . . . . . . . . . . . . . . . . 17
Section 5.7 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . 17

ARTICLE VI

CONDUCT OF BUSINESS PENDING THE MERGER . . . . . . . . . . . . . . . . . . 18
Section 6.1 Conduct of Business by the Company Pending the Merger. . 18
Section 6.2 Conduct of Business by Parent Pending the Merger. . . . . 19
Section 6.3 Conduct of Business of Sub. . . . . . . . . . . . . . . . 19

ARTICLE VII

ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7.1 Access and Information. . . . . . . . . . . . . . . . . . 20
Section 7.2 No Solicitation. . . . . . . . . . . . . . . . . . . . . 20
Section 7.3 Reasonable Best Efforts . . . . . . . . . . . . . . . . . 21
Section 7.4 Salary; Employee Benefits. . . . . . . . . . . . . . . . 21
Section 7.5 Stockholder Loans. . . . . . . . . . . . . . . . . . . . 21
Section 7.6 Certain Distributions. . . . . . . . . . . . . . . . . . 21
Section 7.7 Non-Compete Agreements. . . . . . . . . . . . . . . . . . 21
Section 7.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 7.9 Public Announcements. . . . . . . . . . . . . . . . . . . 21
Section 7.10 Supplemental Disclosure. . . . . . . . . . . . . . . . . 22

<PAGE>
ARTICLE VIII

CONDITIONS TO CONSUMMATION OF THE MERGER . . . . . . . . . . . . . . . . . 22
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger.
22
Section 8.2 Conditions to Obligations of Parent and Sub to Effect the
Merger. . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 8.3 Conditions to Obligation of the Company to Effect the Merger.
24

ARTICLE IX

TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . 25
Section 9.2 Effect of Termination . . . . . . . . . . . . . . . . . . 25

ARTICLE X

INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 10.1 Survival of Representations and Warranties . . . . . . . 25
Section 10.2 Indemnification by Stockholders . . . . . . . . . . . . . 26
Section 10.3 Indemnification by Parent . . . . . . . . . . . . . . . . 26
Section 10.4 Indemnification Procedures . . . . . . . . . . . . . . . 26

ARTICLE XI

RESTRICTIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 11.1 Non-Competition . . . . . . . . . . . . . . . . . . . . . 28
Section 11.2 Non-Solicitation of Employees . . . . . . . . . . . . . . 28
Section 11.3
Non-Solicitation or Interference with Customers and Suppliers . . . . 28
Section 11.4
Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

ARTICLE XII

GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 12.1 Amendment and Modification . . . . . . . . . . . . . . . 28
Section 12.2 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 12.3 Survivability; Investigations . . . . . . . . . . . . . . 29
Section 12.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 12.5 Descriptive Headings; Interpretation . . . . . . . . . . 30
Section 12.6 Entire Agreement; Assignment . . . . . . . . . . . . . . 30
Section 12.7 Governing Law. . . . . . . . . . . . . . . . . . . . . . 30
Section 12.8 Severability. . . . . . . . . . . . . . . . . . . . . . . 30
Section 12.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . 31

iii
<PAGE>
AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER dated as of April 26, 1996, among HENRY
SCHEIN, INC., a Delaware corporation ("Parent"), SSC HOLDINGS, INC., an Illinois
------
corporation and wholly-owned subsidiary of Parent ("Sub"), SCIENTIFIC SUPPLY
---
COMPANY, an Illinois corporation (the "Company"), and LAWRENCE J. FRANKEL, the
-------
LAWRENCE AND PAMELA FRANKEL CHARITABLE REMAINDER TRUST CREATED UNDER A TRUST
AGREEMENT DATED AS OF MARCH 1, 1996, NORMAN FRANKEL, RUDOLPH KELEMEN and BRUCE
BARBER (collectively, the "Stockholders").
------------

The Parent, the Sub, the Company and the Stockholders desire that
Parent acquire the Company pursuant to the merger of Sub with and into the
Company in accordance with the terms of this Agreement, and the Illinois
Business Corporation Act ("IBCA").
----

The parties hereto agree as follows:

ARTICLE I

THE MERGER; THE SURVIVING CORPORATION

Section 1.1 The Merger. In accordance with the provisions of this
----------
Agreement and the IBCA, at the Effective Time (as defined in Section 1.2), Sub
shall be merged with and into the Company (the "Merger"), the separate existence
------
of Sub shall thereupon cease, and the Company shall be the surviving corporation
in the Merger (the "Surviving Corporation") and shall continue its corporate
---------------------
existence under the laws of the State of Illinois. The Merger shall have the
effects set forth in Section 11.50 of the IBCA.

Section 1.2 Effective Time of the Merger. The Merger shall become
----------------------------
effective at the time of filing of or at such later time specified in, a
properly executed Certificate of Merger, in the form required by and executed in
accordance with the IBCA, filed with the Secretary of State of the State of
Illinois, in accordance with the provisions of Section 11.35 of the IBCA. Such
filing shall be made as soon as practicable after the Closing (as defined in
Section 1.3). When used in this Agreement, the term "Effective Time" shall mean
--------------
the date and time at which the Merger shall become effective.

Section 1.3 Closing. The closing of the transactions contemplated by this
-------
Agreement (the "Closing") shall take place at the offices of Aronberg Goldgehn
-------
Davis & Garmisa, One IBM Plaza, Suite 3000, Chicago, Illinois, at 10:00 a.m.,
local time, on May 17, 1996 or on such other date and at such other time and
place as Parent and the Company shall agree (the "Closing Date").
------------

<PAGE>
Section 1.4 Certificate of Incorporation. The Articles of
----------------------------
Incorporation of Sub in effect at the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation until amended in accordance with
applicable law, except that the name of the Surviving Corporation shall be
"Scientific Supply Company."

Section 1.5 By-Laws. The By-Laws of Sub as in effect at the
-------
Effective Time shall be the By-Laws of the Surviving Corporation until amended
in accordance with applicable law.

Section 1.6 Directors and Officers of Surviving Corporation.
-----------------------------------------------

(a) The directors of Sub at the Effective Time shall be the initial
directors of the Surviving Corporation and shall hold office from the Effective
Time until their respective successors are duly elected or appointed and
qualified in the manner provided in the Articles of Incorporation or By-Laws of
the Surviving Corporation or as otherwise provided by law.

(b) The officers of Sub at the Effective Time shall be the initial
officers of the Surviving Corporation and shall hold office from the Effective
Time until their respective successors are duly elected or appointed and
qualified in the manner provided in the Articles of Incorporation or By-Laws of
the Surviving Corporation, or as otherwise provided by law.

ARTICLE II

CONVERSION OF SHARES

Section 2.1 Exchange Ratio. At the Effective Time, by virtue of the
--------------
Merger and without any action on the part of the holder thereof:

(a) Each share of common stock, par value $100.00 per share, of the
Company (the "Company Common Stock"), issued and outstanding immediately
--------------------
prior to the Effective Time (other than shares to be cancelled in
accordance with Section 2.1(b)) shall be converted into the right to
receive (x) a number of shares of the common stock, par value $.01 per
share, of Parent (the "Parent Common Stock"), payable upon the surrender of
-------------------
the certificate formerly representing such share of Company Common Stock

<PAGE>
in accordance with Section 2.2, equal to the quotient derived by dividing
(i) the Interim Stock Value (as defined in Section 3.2(b)) by (ii) the
product of (A) the number of outstanding shares of Company Common Stock at
the Closing multiplied by (B) the average of the per share closing prices
for the Parent Common Stock on the NASDAQ National Market System ("NASDAQ")
------
for the ten trading days immediately preceding the Closing and (y) an
amount in cash equal to the quotient derived by dividing (i) the Interim
Cash Value (as defined in Section 3.2(b)) by (ii) the number of outstanding
shares of Company Common Stock at the Closing.

(b) All shares of Company Common Stock that are held by the Company
as treasury shares shall be cancelled and retired and cease to exist, and
no securities of Parent or other consideration shall be delivered in
exchange therefor. As used in this Agreement, the term "Subsidiary" means,
----------
with respect to any party, any corporation or other organization, whether
incorporated or unincorporated, of which at least a majority of the
securities or other interests having by their terms ordinary voting power
to elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such party and/or one or more
of its Subsidiaries.

(c) Each share of common stock, par value $.01 per share, of Sub
("Sub Common Stock"), issued and outstanding immediately prior to the
----------------
Effective Time shall be converted into and become one fully paid and
nonassessable share of common stock, par value $.01 per share, of the
Surviving Corporation.

<PAGE>
(d) The holders of shares of Company Common Stock as to which
appraisal rights shall have been duly demanded under applicable law
("Dissenting Shares"), if any, shall be entitled to payment by the
-----------------
Surviving Corporation of the appraised value of such shares to the extent
permitted by and in accordance with the provisions of applicable law;
provided, however, that (i) if any holder of the Dissenting Shares shall,
-------- -------
under the circumstances permitted by applicable law, subsequently deliver a
written withdrawal of such holder's demand for appraisal of such shares or
(ii) if any holder fails to establish such holder's entitlement to rights
to payment as provided under applicable law or (iii) if neither any holder
of Dissenting Shares nor the Surviving Corporation has filed a petition
demanding a determination of the value of all Dissenting Shares within the
time provided under applicable law, such holder or holders (as the case may
be) shall forfeit such right to payment for such shares and such shares
shall thereupon be deemed to have been converted into Parent Common Stock
and cash pursuant to Section 2.1(a) as of the Effective Time. The
Surviving Corporation shall be solely responsible for, and shall pay out of
its own funds, any amounts which become due and payable to holders of
Dissenting Shares, and such amounts shall not be paid directly or
indirectly by Parent.

Section 2.2 Exchange of Company Stock. Promptly after the Effective
-------------------------
Date, each Stockholder shall present to the Parent for cancellation a
certificate or certificates which immediately prior to the Effective Time repre-
sented outstanding shares of Company Common Stock (the "Certificates") that were
------------
converted pursuant to Section 2.1 into the right to receive shares of Parent
Common Stock prior to the Closing Date, and the Parent shall thereupon deliver
to such Stockholder in exchange therefor (x) a certificate representing that
number of whole shares of Parent Common Stock which such Stockholder has the
right to receive pursuant to the provisions of this Article II and (y) cash in
lieu of any fractional shares of Parent Common Stock to which such Stockholder
is entitled pursuant to Section 2.3, after giving effect to any required tax
withholdings. The shares of Parent Common Stock shall be deemed to have been
issued at the Effective Time.

Section 2.3 No Fractional Securities. No certificates or scrip
------------------------
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates or pursuant to Section 3.4, and such
fractional interests shall not entitle the owner thereof to vote or to any
rights of a security holder. In lieu of any such fractional securities, each
holder of Company Common Stock who would otherwise have been entitled to a
fraction of a share of Parent Common Stock upon surrender of such holder's
Certificates or pursuant to Section 3.4 will be entitled to receive, and Parent
will timely make a cash payment (without interest) determined by multiplying (i)
the fractional interest to which such holder would otherwise be entitled (after
taking into account all shares of Parent Common Stock then held of record by
such holder) and (ii) the average of the per share closing prices for Parent
Common Stock on NASDAQ for the ten trading days immediately preceding the
Closing (the "Parent Stock Price").
------------------

<PAGE>
ARTICLE III

DETERMINATION OF INTERIM AND FINAL EXCHANGE VALUE;
ADJUSTMENT TO MERGER CONSIDERATION

Section 3.1 Company's Calculations of 1995 EBITD, Adjusted April 12
-------------------------------------------------------
Net Worth and April 12 Inventory. On the date hereof, the Company shall deliver
- --------------------------------
to Parent a statement (the "Company's Statement") in reasonable detail of the
-------------------
Company's calculation of 1995 EBITD (as defined below), Adjusted April 12 Net
Worth (as defined below) and April 12 Inventory (as defined below). For
purposes of this Agreement, "1995 EBITD" means the product of (x) the Company's
----------
net income, increased solely by non-recurring expenses and adjustments listed on
Exhibit A, interest, depreciation and taxes (but only to the extent such non-
recurring expenses and adjustments interest, depreciation and taxes have been
deducted in the computation of net income), for the eight-month period ending
February 29, 1996 and (y) 1.5; "Adjusted April 12 Net Worth" means (x) the
---------------------------
Company's net worth as of April 12, 1996 (including in the calculation of
Adjusted April 12 Net Worth the items described on Exhibit B-1 and excluding
from the calculation of Adjusted April 12 Net Worth the Company's inventory as
of April 12, 1996 and the items described on Exhibit B-2); and "April 12
--------
Inventory" means the dollar value of the Company's inventory as of April 12,
- ---------
1996 (excluding from the calculation of April 12 Inventory the inventory
described on Exhibit C). 1995 EBITD, Adjusted April 12 Net Worth and April 12
Inventory shall be calculated in accordance with generally accepted accounting
principles consistently applied, including, in the case of Adjusted April 12 Net
Worth, principles relating to the establishment of reserves on inventory,
accounts receivable and the like ("GAAP"), as adjusted in accordance with the
----
accounting principles set forth on Exhibit D.

Section 3.2 Parent's Calculations of 1995 EBITD, Adjusted April 12
------------------------------------------------------
Net Worth and/or April 12 Inventory.
- -----------------------------------

(a) Prior to and after the Closing, Parent's authorized
representatives shall have the right at reasonable times and on reasonable
notice, at the Parent's sole expense, to review and/or audit the books and
records of the Company and the work papers of the Company's accountants, and
shall be provided access to the Company's employees and/or representatives
(including, without limitation, the Company's accountants). If Parent disagrees
with the accuracy of the Company's calculation under Section 3.1 of 1995 EBITD
(the "Company's Calculation of 1995 EBITD"), the Company's calculation under
-----------------------------------
Section 3.1 of Adjusted April 12 Net Worth (the "Company's Calculation of
------------------------
Adjusted April 12 Net Worth") or the Company's calculation under Section 3.1 of
- ---------------------------
April 12 Inventory (the "Company's Calculation of April 12 Inventory"), the
-------------------------------------------
Parent shall deliver to the Company and each of the Stockholders, prior to the
end of the 15 business days following the date hereof, a statement and
explanation of such disagreement (the "Parent's Statement"), accompanied by an
------------------
alternative determination of 1995 EBITD ("Parent's Calculation of 1995 EBITD"),
----------------------------------
Adjusted April 12 Net Worth ("Parent's Calculation
---------------------

<PAGE>
of Adjusted April 12 Net Worth") and/or April 12 Inventory ("Parent's
- ------------------------------ --------
Calculation of April 12 Inventory"), provided that in no event shall Parent's
- ---------------------------------
delivery of Parent's Statement be a condition of Closing.

(b) For purposes of this Agreement: "Interim Exchange Value" means
----------------------
(i) the product of (A) Parent's Calculation of 1995 EBITD and (B) the Value
Multiple (as defined in Section 3.2(c)), plus (ii) if Parent's Calculation of
Adjusted April 12 Net Worth is greater than $275,000, then the difference
between Parent's Calculation of Adjusted April 12 Net Worth and $275,000, minus
(iii) if Parent's Calculation of Adjusted April 12 Net Worth is less than
$275,000, then the difference between $275,000 and Parent's Calculation of
Adjusted April 12 Net Worth, plus (iv) if Parent's Calculation of April 12
Inventory is greater than $1,675,000, then the product of (A) 60% and (B) the
difference between Parent's Calculation of April 12 Inventory and $1,675,000,
minus (v) if Parent's Calculation of April 12 Inventory is less than $1,675,000
but more than $725,000, then the product of (A) 60% and (B) the difference
between $1,675,000 and Parent's Calculation of April 12 Inventory, minus (vi) if
Parent's Calculation of April 12 Inventory is $725,000 or less, then the sum of
(A) $360,000 and (B) the difference between $725,000 and Parent's Calculation of
April 12 Inventory; "Interim Stock Value" means an amount equal to 20% of
-------------------
Interim Exchange Value, or, with respect to any Stockholder, such greater or (in
the case of any Stockholder other than Lawrence Frankel) lesser percentage as
such Stockholder may elect by notice to Parent not less than three business days
prior to the Closing (the "Stock Percentage"); and "Interim Cash Value" means an
---------------- ------------------
amount equal to 80% of Interim Exchange Value, or, with respect to any
Stockholder, such greater or lesser percentage such that the sum of such
percentage and the Stock Percentage for such Stockholder equals 100%.
Notwithstanding anything contained in the preceding sentence: (w) in no event
shall the aggregate amount of cash paid to the Stockholders at the Closing
exceed 80% of Interim Exchange Value; (x) upon any failure of Parent so to
timely deliver Parent's Statement, the Company's Statement shall be deemed
final, binding and conclusive on each of the parties hereto, and, for purposes
of the preceding sentence, the Company's Calculation of 1995 EBITD, the
Company's Calculation of Adjusted April 12 Net Worth and the Company's
Calculation of April 12 Inventory shall be deemed Parent's Calculation of 1995
EBITD, Parent's Calculation of Adjusted April 12 Net Worth and the Parent's
Calculation of April 12 Inventory, respectively; (y) if Parent's Calculation of
1995 EBITD is less than 90% of the Company's Calculation of 1995 EBITD, then,
for purposes of the preceding sentence, Final 1995 EBITD (as defined in Section
3.4(a)) shall be deemed Parent's Calculation of 1995 EBITD (it being understood
that, if Parent's Calculation of 1995 EBITD is less than 90% of the Company's
Calculation of 1995 EBITD, the Closing shall be deferred pending the
determination of 1995 EBITD pursuant to Sections 3.3 and 3.4); and (z) for
purposes of the preceding sentence, the Company's Calculation of 1995 EBITD
shall be deemed Parent's Calculation of 1995 EBITD, unless the difference
between the Company's Calculation of 1995 EBITD and Parent's Calculation of 1995
EBITD is greater than $50,000.

<PAGE>
quotient derived by dividing (i) (A) 10,080,000 minus (B) notes payable - bank
of the Company at the Closing minus (C) long term debt of the Company at the
Closing minus (D) other loans to Stockholders and indebtedness of the Company at
the Closing minus (E) accrued and unpaid interest in respect of (B), (C) and (D)
(the "Value Base") by (ii) 1,062,067.
----------

Section 3.3 Dispute Resolution.
------------------

(a) If Parent shall timely deliver Parent's Statement, then Parent
and the Stockholders will attempt in good faith to resolve all differences with
regard to their respective determinations of 1995 EBITD, Adjusted April 12 Net
Worth and/or April 12 Inventory during the next 20 business days or such longer
period as Parent and the Stockholders may agree in writing. If Parent and the
Stockholders are unable to resolve such differences and agree as to 1995 EBITD,
Adjusted April 12 Net Worth and/or April 12 Inventory prior to the expiration of
such 20 business day period (or longer period if so agreed), 1995 EBITD,
Adjusted April 12 Net Worth and/or April 12 Inventory shall be determined as set
forth in Section 3.3(b).

(b) (i) Written reports of disagreement over the amounts in Sections
3.2(a) shall be prepared in concise form by Parent and the Stockholders and
submitted (along with copies of Parent's Statement and the Stockholders'
Dispute Statement) to the Third Accountants (as defined below) no later
than 10 business days following the later of (A) the last day of the 15
business day (or longer period if so agreed) period referred to in the last
sentence of Section 3.2(a) or (B) the designation of the Third Accountants.
For purposes of this Section 3.3(b), the "Third Accountants" shall be Ernst
-----------------
& Young (Chicago, Illinois office). Each of Parent and the Stockholders
shall also be entitled to make a brief supplemental oral presentation to
the Third Accountants in this regard.

(ii) The Third Accountants shall be instructed to deliver to
Parent and the Stockholders a written report setting forth such Third
Accountants' calculation, to the extent in dispute, of 1995 EBITD, Adjusted
April 12 Net Worth and/or April 12 Inventory (the "Third Accountants'
Report") no later than 20 business days following the earlier of (A) such
firm's receipt of the later of the reports of disagreement submitted to it
by Parent and the Stockholders as aforesaid and (B) the last day permitted
for the delivery of such reports as provided above. The determination, to
the extent in dispute, of 1995 EBITD, Adjusted April 12 Net Worth and/or
April 12 Inventory set forth in the Third Accountant's Report shall be
deemed final, binding and conclusive upon each party, absent manifest
error. One-half of any fees and expenses of the Third Accountants shall be
paid by Parent and the other half of such fees and expenses shall be paid
by the Stockholders.

Section 3.4 Final 1995 EBITD, Final Adjusted April 12 Net Worth and
-------------------------------------------------------
Final
- ------

<PAGE>
April 12 Inventory; Adjustment to Merger Consideration.
- ------------------------------------------------------

(a) 1995 EBITD, Adjusted April 12 Net Worth and April 12 Inventory as
mutually agreed to by Parent and the Stockholders pursuant to 3.3(a), or as
deemed final, binding and conclusive pursuant to Section 3.3(b)(ii), shall be
deemed the "Final 1995 EBITD", "Final Adjusted April 12 Net Worth" and "Final
---------------- --------------------------------- -----
April 12 Inventory", respectively.
- ------------------

(b) For purposes of this Agreement: "Final Exchange Value" means (i)
--------------------
the product of (A) Final 1995 EBITD and (B) the Value Multiple, plus (ii) if the
Final Calculation of Adjusted April 12 Net Worth is greater than $275,000, then
the difference between the Final Calculation of Adjusted April 12 Net Worth and
$275,000, minus (iii) if the Final Calculation of Adjusted April 12 Net Worth is
less than $275,000, then the difference between $275,000 and the Final
Calculation of Adjusted April 12 Net Worth, plus (iv) if the Final Calculation
of April 12 Inventory is greater than $1,675,000, then the product of (A) 60%
and (B) the difference between the Final Calculation of April 12 Inventory and
$1,675,000, minus (v) if the Final Calculation of April 12 Inventory is less
than $1,675,000 but more than $725,000, then the product of (A) 60% and (B) the
difference between $1,675,000 and the Final Calculation of April 12 Inventory,
minus (vi) if the Final Calculation of April 12 Inventory is $725,000 or less,
then the sum of (A) $360,000 and (B) the difference between $725,000 and the
Final Calculation of April 12 Inventory; "Final Stock Value" means an amount
-----------------
equal to the Stock Percentage of the Final Exchange Value; and "Final Cash
----------
Value" means an amount equal to a percentage of the Final Exchange Value, equal
- -----
to 100% minus the Stock Percentage (the "Cash Percentage"). Notwithstanding
---------------
anything contained in the preceding sentence: (x) in no event shall the
aggregate amount of cash paid to the Stockholders hereunder exceed 80% of Final
Exchange Value; and (y) for purposes of the preceding sentence, the Company's
Calculation of 1995 EBITD shall be deemed Final 1995 EBITD, unless the
difference between the Company's Calculation of 1995 EBITD and Final 1995 EBITD
is greater than $50,000.

(c) If the Final Exchange Value exceeds the Interim Exchange Value,
then, promptly after the determination of Final Exchange Value, Parent shall
deliver to each Stockholder, with respect to each share of Company Common Stock
held by such Stockholder immediately prior to the Closing, (x) a number of
shares of Parent Common Stock equal to the quotient derived by dividing (i) the
Final Stock Value minus the Interim Stock Value by (ii) the product of (A) the
number of outstanding shares of Company Common Stock at the Closing multiplied
by (B) the Parent Stock Price and (y) an amount in cash equal to the quotient
derived by dividing (i) the Final Cash Value minus the Interim Cash Value by
(ii) the number of outstanding shares of Company Common Stock at the Closing.

(d) If the Interim Exchange Value exceeds the Final Exchange Value,
then, promptly after the determination of Final Exchange Value, each Stockholder
shall deliver to the Parent, with respect to each share of Company Common Stock
held by such

<PAGE>
Stockholder immediately prior to the Closing, (x) a number of shares of Parent
Common Stock equal to the quotient derived by dividing (i) the Interim Stock
Value minus the Final Stock Value by (ii) the product of (A) the number of
outstanding shares of Company Common Stock at the Closing multiplied by (B) the
Parent Stock Price and (y) an amount in cash equal to the quotient derived by
dividing (i) the Interim Cash Value minus the Final Cash Value by (ii) the
number of outstanding shares of Company Common Stock at the Closing.

Section 3.5 Cash Earn-Out.
-------------

(a) For each of the 12-month periods ended December 31, 1996, 1997,
1998, 1999 and 2000, Parent shall pay to each Stockholder an amount equal to the
product of (x) a fraction, the numerator of which is the number of shares of
Company Common Stock owned by such Stockholder as of the Closing, and the
denominator of which is the aggregate number of outstanding shares of Company
Common Stock as of the Closing and (y) the Cash Earn-Out Amount (as defined
below) for such 12-month period. For purposes of this Agreement: "Cash Earn-
----------
Out Amount" for any 12-month period shall mean the product of (i) $10,000 and
- ----------
(ii) the product of (A) 100 and (B) a fraction, the numerator of which is (I)
Gross Profit (as defined below) for such 12-month period minus (II) Gross Profit
for the preceding 12-month period ("Base Gross Profit"), and the denominator of
-----------------
which is Base Gross Profit; and "Gross Profit" for any 12-month period means the
------------
aggregate gross profit, determined in accordance with generally accepted
accounting principles consistently applied, of Parent, its Subsidiaries and the
Company for such 12-month period in respect of sales of the Company, and sales
of Parent and its Subsidiaries to medical (and not podiatric) physicians,
clinics, hospital laboratories, schools and universities, government
institutions (sales to which are primarily of medical (and not podiatric)
products) and HMOs in Illinois (and any other territory mutually agreed to by
Parent and Lawrence Frankel), as shown on the consolidated financial statements
of Parent and the Company, as the case may be, and taking into consideration
manufacturer and vendor rebates and adjustments (such rebates and adjustments to
be allocated to products sold by the Company, and products sold by Parent and
its Subsidiaries to medical (and not podiatric) physicians, clinics, hospital
laboratories, schools and universities, government institutions (sales to which
are primarily of medical (and not podiatric) products) and HMOs in Illinois (and
any other territory mutually agreed to by Parent and Lawrence Frankel), in the
case of each product, based on the proportion that sales of such product bears
to the aggregate amount of sales of such product by the Company, Parent and its
Subsidiaries), the "actual" purchase price from the manufacturer or vendor
(including any discounts and rebates) and cash payment terms, provided that
Gross Profit for the Company for the 12-month period ended December 31, 1995
shall be deemed to be $5,162,000. The Cash Earn-Out Amount for each 12-month
period shall be paid within 90 days after the end of such 12-month period.

(b) If Parent or any of its Subsidiaries consummates prior to
December 31, 2000 an acquisition that is reasonably likely to have a material
effect on Gross Profit,

<PAGE>
Parent and Lawrence Frankel shall discuss in good faith and agree to any
adjustment to Base Gross Profit appropriate in order to eliminate the effect of
such acquisition on Gross Profit.

(c) In no event shall payments to the Stockholders pursuant to the
preceding paragraph exceed an aggregate of $1,000,000.

Section 3.6 Additional Earn-Out. If (a) the difference between the
-------------------
Company's Calculation of 1995 EBITD is more than $50,000 greater than Parent's
Calculation of 1995 EBITD and (b) aggregate Gross Profit for the 36-month period
ended December 31, 1998 equals or exceeds the product of (i) 3.31 and (ii) Gross
Profit for the 12-month period ended December 31, 1995 (Gross Profit for the
Company for the 12-month period ended December 31, 1995 being deemed to be
$5,162,000), subject to adjustment in accordance with the second succeeding
sentence, then Parent shall: (1) issue to the Stockholders a number of shares
of Parent Common Stock equal to the quotient derived by dividing (x) the product
of (I) 20% and (II) (A) the Value Base minus (B) the product of the Value
Multiple and Final 1995 EBITD by (y) the Parent Stock Price and (2) pay to the
Stockholders in cash an amount equal to the product of (I) 80% and (II) (A) the
Value Base minus (B) the product of the Value Multiple and Final 1995 EBITD.
Such shares of Parent Common Stock shall be issued, and such cash shall be paid,
within 90 days after the end of such 36-month period and shall be allocated
among the Stockholders as the Stockholders shall direct in writing within 30
days after the end of such 36-month period. If Parent or any of its
Subsidiaries consummates prior to December 31, 1998 an acquisition that is
reasonably likely to have a material effect on Gross Profit, Parent and Lawrence
Frankel shall discuss in good faith and agree to any adjustment to Gross Profit
for the Company for the 12-month period ended December 31, 1995 appropriate in
order to eliminate the effect of such acquisition on Gross Profit.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

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

Section 4.1 Organization. The Company is a corporation duly
------------
organized, validly existing and in good standing under the laws of the State of
Illinois and has the corporate power to carry on its business as it is now being
conducted or presently proposed to be conducted. The Company is duly qualified
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary, except where
the failure to be so qualified will not have a Company Material Adverse Effect.
For purposes of this Agreement, "Company Material
-----------------

<PAGE>
Adverse Effect" means a material adverse effect, individually or in the
- --------------
aggregate, on the financial condition, results of operations or business of the
Company and its Subsidiaries taken as a whole, or the ability of the Company to
consummate the Merger and the other transactions contemplated by this Agreement.

Section 4.2 Capitalization.
--------------

(a) The authorized capital stock of the Company consists of 100,000
shares of Company Common Stock. As of the date hereof, 11,160 shares of Company
Common Stock were issued and outstanding. Schedule 4.2(a) lists each of the
stockholders of the Company and the number and class of common stock owned by
each such stockholder. Each of the Stockholders represents that all of the
shares of Company Common Stock set forth beside such Stockholder's name on
Schedule 4.2(a) are owned by such Stockholder free and clear of any Liens (as
defined in Section 4.3).

(b) Except as disclosed in this Section 4.2 or as set forth on
Schedule 4.2(b), (i) there is no outstanding right, subscription, warrant, call,
option or other agreement or arrangement of any kind (collectively, "Rights") to
------
purchase or otherwise to receive from the Company or any of its Subsidiaries any
of the outstanding authorized but unissued or treasury shares of the capital
stock or any other security of the Company or any of its Subsidiaries, (ii)
there is no outstanding security of any kind convertible into or exchangeable
for such capital stock and (iii) there is no voting trust or other agreement or
understanding to which the Company or any of its Subsidiaries is a party or is
bound with respect to the voting of the capital stock of the Company or any of
its Subsidiaries.

Section 4.3 Company Subsidiaries. Schedule 4.3(a) contains a
--------------------
complete and accurate list of all Subsidiaries or affiliates of the Company.
Each Subsidiary of the Company is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation. Each
Subsidiary of the Company has the corporate power to carry on its business as it
is now being conducted or presently proposed to be conducted. Each Subsidiary
of the Company is duly qualified as a foreign corporation authorized to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or held under lease or the nature of its activities makes
such qualification necessary, except where the failure to be so qualified will
not have a Company Material Adverse Effect. All of the outstanding shares of
capital stock of the Subsidiaries of the Company that are corporations are
validly issued, fully paid and nonassessable. All of the outstanding shares of
capital stock of each Subsidiary of the Company are owned by the Company or a
Subsidiary of the Company free and clear of any liens, pledges, security
interests, claims, charges or other encumbrances of any kind whatsoever
("Liens").
-----

Section 4.4 Authority Relative to this Agreement. The Company has
------------------------------------
the requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. Each of the
Stockholders has the

<PAGE>
capacity to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated on its part hereby have been duly authorized by the Company's Board
of Directors and stockholders, and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or for the Company to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by the Company and each of the Stockholders
and constitutes a valid and binding agreement of the Company and each of the
Stockholders, enforceable against the Company and each of the Stockholders in
accordance with its terms.

Section 4.5 Consents and Approvals; No Violations. Neither the
-------------------------------------
execution, delivery and performance of this Agreement by the Company or the
Stockholders, nor the consummation by the Company or the Stockholders of the
transactions contemplated hereby, will (i) conflict with or result in any breach
of any provisions of the charter, by-laws or other organizational documents of
the Company or any of its Subsidiaries, (ii) require a filing with, or a permit,
authorization, consent or approval of, any federal, state, local or foreign
court, arbitral tribunal, administrative agency or commission or other
governmental or other regulatory authority or administrative agency or
commission (a "Governmental Entity"), except the filing and recordation of a
-------------------
Certificate of Merger as required by the IBCA, (iii) except as set forth on
Schedule 4.5, result in a violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, or result in the creation of a
Lien on any property or asset of the Company or any of its Subsidiaries pursuant
to, any of the terms, conditions or provisions of any material note, bond,
mortgage, indenture, license, contract, agreement or other instrument or
obligation (each, a "Contract") to which the Company or any of its Subsidiaries
--------
is a party or by which any of them or any of their properties or assets may be
bound or (iv) violate any law, order, writ, injunction, decree, statute, rule or
regulation of any Governmental Entity applicable to the Company, any of its
Subsidiaries or any of their properties or assets.

Section 4.6 Financial Statements. The Company has delivered to the
--------------------
Parent (a) the unaudited financial statements of the Company as of June 30,
1993, 1994 and 1995, and for each of the fiscal years then ended (the "Financial
---------
Statements"), and has delivered to the Parent the Company's internally prepared
- ----------
restated income statement of the Company for the six months ended December 31,
1995 and the eight months ended February 29, 1996 (the "Restated Financial
------------------
Statements"). Except as disclosed on Schedule 4.6, the Financial Statements of
- ----------
the Company have been prepared in accordance with GAAP consistently applied
throughout the periods indicated (except as otherwise noted therein). The
Financial Statements and Restated Financial Statements, which are attached
hereto as Schedule 4.6, are true and correct, and fairly present the
consolidated financial position of the Company and its consolidated Subsidiaries
as at the dates thereof and the consolidated results of operations and cash
flows of the Company and its consolidated Subsidiaries for the periods then
ended. Since January 1, 1996, there has been no change

<PAGE>
in any of the significant accounting (including tax accounting) policies,
practices or procedures of the Company or any of its consolidated Subsidiaries.
The accounting books and records of the Company are organized and maintained, in
a manner that would enable the financial statements of the Company to be
audited.

Section 4.7 Absence of Certain Changes or Events; Material Contracts.
--------------------------------------------------------
Except as set forth on Schedule 4.7, since December 31, 1995, (i) neither the
Company nor any of its Subsidiaries has conducted its business and operations
other than in the ordinary course of business and consistent with past practices
or taken any actions that, if it had been in effect, would have violated or been
inconsistent with the provisions of Section 6.1 and (ii) there has not been any
fact, event, circumstance or change affecting or relating to the Company or any
of its Subsidiaries which to the best knowledge of the Company and its
Stockholders has had or is reasonably likely to have a Company Material Adverse
Effect. Except as set forth on Schedule 4.7, the transactions contemplated by
this Agreement will not constitute a change of control under or require the
consent from or the giving of notice to a third party pursuant to the terms,
conditions or provisions of any material Contract to which Parent or any of its
Subsidiaries is a party.

Section 4.8 Litigation. Except as set forth on Schedule 4.8, there
----------
is no material suit, action, proceeding or investigation pending or, to the best
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries, including any material suit, action or proceeding brought by
the Company, and, to the best knowledge of the Company, no basis for any such
suit, action, proceeding or investigation; nor is there any material judgment,
decree, injunction, ruling or order of any Governmental Entity outstanding
against the Company or any of its Subsidiaries.

Section 4.9 Absence of Undisclosed Liabilities. Except for
----------------------------------
liabilities or obligations which are accrued or reserved against in the
Financial Statements or the Restated Financial Statements or which were incurred
after January 1, 1996 in the ordinary course of business and consistent with
past practice, and except as set forth on Schedule 4.9, none of the Company and
its Subsidiaries has any liabilities or obligations (whether absolute, accrued,
contingent or otherwise) in excess of $50,000.

Section 4.10 No Default. Except as set forth on Schedule 4.10,
----------
neither the Company nor any Subsidiary of the Company is in default or violation
(and no event has occurred which with notice or the lapse of time or both would
constitute a default or violation) of any term, condition or provision of (i)
its charter, by-laws or comparable organizational documents, (ii) any Contract
to which the Company or any of its Subsidiaries is a party or by which they or
any of their properties or assets may be bound, or (iii) any order, writ,
injunction, decree, statute, rule or regulation of any Governmental Entity
applicable to the Company or any of its Subsidiaries, except, in the cases of
clauses (ii) and (iii), for defaults or violations which would not have a
Company Material Adverse Effect.

<PAGE>
Section 4.11 Taxes.
-----

(a) The Company has heretofore delivered or will make available to
Parent true, correct and complete copies of the consolidated federal, state,
local and foreign income, franchise sales and other Tax Returns (as hereinafter
defined) filed by the Company and the Company Subsidiaries for each of the
Company's years ended June 30, 1995, 1994 and 1993 inclusive. Except as set
forth on Schedule 4.11, the Company has duly filed, and each Subsidiary has duly
filed, all material federal, state, local and foreign income, franchise, sales
and other Tax Returns required to be filed by the Company or any of its
Subsidiaries. All such Tax Returns are true, correct and complete, and the
Company and any of its Subsidiaries have duly paid, all Taxes (as hereinafter
defined) shown on such Tax Returns and has made adequate provision for payment
of all accrued but unpaid Taxes anticipated in respect of all periods since the
periods covered by such Tax Returns. Except as set forth on Schedule 4.11, all
deficiencies assessed as a result of any examination of Tax Returns of the
Company or any of its Subsidiaries by federal, state, local or foreign tax
authorities have been paid or reserved on the financial statements of the
Company in accordance with GAAP consistently applied. The Company has
heretofore delivered or will make available to Parent true, correct and complete
copies of all written tax-sharing agreements and written descriptions of all
such unwritten agreements or arrangements to which the Company or any of its
Subsidiaries is a party. Except as set forth in Schedule 4.11, no issue has
been raised during the past five years by any federal, state, local or foreign
taxing authority which, if raised with regard to any other period not so
examined, could reasonably be expected to result in a proposed material
deficiency for any other period not so examined. Except as disclosed in
Schedule 4.11 hereof, neither the Company nor any of its Subsidiaries has
granted any extension or waiver of the statutory period of limitations
applicable to any claim for any material Taxes. Except as set forth in Schedule
4.11, (i) no consent has been filed under Section 341(f) of the Internal Revenue
Code of 1986, as amended (the "Code"), with respect to any of the Company or the
----
Subsidiaries of the Company; (ii) neither the Company nor any of the
Subsidiaries of the Company has participated in, or cooperated with, an
international boycott within the meaning of Section 999 of the Code; and (iii)
neither the Company nor any of the Subsidiaries of the Company has issued or
assumed any corporate acquisition indebtedness, as defined in Section 279(b) of
the Code. The Company and each Subsidiary of the Company have complied (and
until the Effective Time will comply) in all material respects with all
applicable laws, rules and regulations relating to the payment and withholding
of Taxes (including, without limitation, withholding of Taxes pursuant to
Sections 1441 and 1442 of the Code or similar provisions under any foreign laws)
and have, within the time and in the manner prescribed by law, withheld from
employee wages and paid over to the proper governmental authorities all amounts
required to be so withheld and paid over under all applicable laws.

(b) For purposes of this Agreement, the term "Taxes" shall mean all
-----
taxes, charges, fees, levies, duties, imposts or other assessments, including,
without limitation, income, gross receipts, excise, property, sales, use,
transfer, gains, license, payroll,

<PAGE>
withholding, capital stock and franchise taxes, imposed by the United States, or
any state, local or foreign government or subdivision or agency thereof,
including any interest, penalties or additions thereto. For purposes of this
Agreement, the term "Tax Return" shall mean any report, return or other
----------
information or document required to be supplied to a taxing authority in
connection with Taxes.

Section 4.12 Title to Properties; Encumbrances. Except as described
---------------------------------
in the following sentence or as set forth on Schedule 4.12, each of the Company
and its Subsidiaries has good, valid and marketable title to, or a valid
leasehold interest in, all of its material properties and assets (real, personal
and mixed, tangible and intangible), including, without limitation, all the
properties and assets reflected in the consolidated balance sheet of the Company
and its Subsidiaries as of December 31, 1995 (except for properties and assets
disposed of in the ordinary course of business and consistent with past
practices since December 31, 1995). None of such properties or assets are
subject to any Liens (whether absolute, accrued, contingent or otherwise),
except minor imperfections of title and encumbrances, if any, which are not
substantial in amount, do not materially detract from the value of the property
or assets subject thereto and do not impair the operations of any of the Company
and its Subsidiaries.

Section 4.13 Intellectual Property. (a) Except as set forth on
---------------------
Schedule 4.13(a), the Company and its Subsidiaries are the sole and exclusive
owners of all material patents, patent applications, patent rights, trademarks,
trademark rights, trade names, trade name rights, copyrights, service marks,
trade secrets, registrations for and applications for registration of
trademarks, service marks and copyrights, technology and know-how, rights in
computer software and other proprietary rights and information and all technical
and user manuals and documentation made or used in connection with any of the
foregoing, used or held for use in connection with the businesses of the Company
or any of its Subsidiaries as currently conducted, other than software licenses
(collectively, the "Intellectual Property"), free and clear of all Liens except
---------------------
as set forth on Schedule 4.13(a) and except minor imperfections of title and
encumbrances, if any, which are not substantial in amount, do not materially
detract from the value of the Intellectual Property subject thereto and do not
impair the operations of any of the Company and its Subsidiaries.

(b) All grants, registrations and applications for Intellectual
Property that are used in and are material to the conduct of the Business (as
hereinafter defined) (i) are valid, subsisting, in proper form and enforceable,
and have been duly maintained, including the submission of all necessary filings
and fees in accordance with the legal and administrative requirements of the
appropriate jurisdictions and (ii) have not lapsed, expired or been abandoned,
and no application or registration therefor is the subject of any legal or
governmental proceeding before any registration authority in any jurisdiction.

<PAGE>
use all of the material Intellectual Property used by it or held for use by it
in connection with its business. To the knowledge of the Company, there are no
conflicts with or infringements of any Intellectual Property by any third party.
The conduct of the businesses of the Company and its Subsidiaries as currently
conducted (collectively, the "Business") does not conflict with or infringe in
--------
any way any proprietary right of any third party, which conflict or infringement
would have a Company Material Adverse Effect, and there is no claim, suit,
action or proceeding pending or, to the knowledge of the Company, threatened
against the Company or any of its Subsidiaries (i) alleging any such conflict or
infringement with any third party's proprietary rights, or (ii) challenging the
ownership, use, validity or enforceability of the Intellectual Property.

Section 4.14 Compliance with Applicable Law. Except as set forth on
------------------------------
Schedule 4.14, (i) the Company and its Subsidiaries hold, and are in compliance
with the terms of, all permits, licenses, exemptions, orders and approvals of
all Governmental Entities necessary for the current and proposed conduct of
their respective businesses ("Company Permits"), except for failures to hold or
---------------
to comply with such permits, licenses, exemptions, orders and approvals which
would not have a Company Material Adverse Effect, (ii) no fact exists or event
has occurred, and no action or proceeding is pending or, to the Company's
knowledge, threatened, that has a reasonable possibility of resulting in a
revocation, nonrenewal, termination, suspension or other material impairment of
any material Company Permits, (iii) the businesses of the Company and its
Subsidiaries are not being conducted in violation of any applicable law,
ordinance, regulation, judgment, decree or order of any Governmental Entity
("Applicable Law"), and (iv) to the knowledge of the Company, (x) no investiga-
--------------
tion or review by any Governmental Entity with respect to the Company or its
Subsidiaries is pending or threatened and (y) no Governmental Entity has
indicated an intention to conduct the same.

Section 4.15 Employee Benefit Plans; ERISA; Labor Matters.
--------------------------------------------

(a) Schedule 4.15 hereto sets forth a true and complete list of each
material employee benefit plan, arrangement or agreement that is maintained, or
was maintained at any time during the five (5) calendar years preceding the date
of this Agreement (the "Company Plans"), by the Company or by any trade or
-------------
business, whether or not incorporated (a "Company ERISA Affiliate"), which
-----------------------
together with the Company would be deemed a "single employer" within the meaning
of Section 414(b), (c), (m) or (o) of the Code or Section 4001 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
-----

(b) Each of the Company Plans is and has been in compliance with
ERISA and the Code in all material respects; each of the Company Plans intended
to be "qualified" within the meaning of Section 401(a) of the Code is so
qualified.

(c) Neither the Company nor any Company ERISA Affiliate nor any
predecessors of the Company or any Company ERISA Affiliate maintains, has ever

<PAGE>
maintained, contributes to or has ever contributed to a plan which is subject to
Section 412 of the Code or Title IV of ERISA. No Company Plan is a
multiemployer plan (within the meaning of Sections 3(37) or 4001(a)(3) of ERISA
or Section 414(f) of the Code) ("Multiemployer Plan") and no Company Plan is a
------------------
multiple employer plan as defined in Section 413 of the Code ("Multiple Employer
-----------------
Plan"); and all material contributions or other amounts payable by the Company
- ----
as of the Effective Time with respect to each Company Plan in respect of current
or prior plan years have been either paid or accrued on the balance sheet of the
Company. Neither the Company nor any Company ERISA Affiliate is or was
obligated to contribute to any Multiemployer Plan or Multiple Employer Plan. To
the best knowledge of the Company, there are no material pending, threatened or
anticipated claims (other than routine claims for benefits) by, on behalf of or
against any of the Company Plans or any trusts related thereto.

(d) Neither the Company nor any Company ERISA Affiliate, nor any
Company Plan, nor any trust created thereunder, nor any trustee or administrator
thereof has engaged in a transaction in connection with which the Company or any
Company ERISA Affiliate, any Company Plan, any such trust, or any trustee or
administrator thereof, or any party dealing with any Company Plan or any such
trust could be subject to either a material civil penalty assessed pursuant to
Section 409 or 502(i) of ERISA or a material tax imposed pursuant to Section
4975 or 4976 of the Code. No Company Plan provides death or medical benefits
(whether or not insured), with respect to current or former employees of the
Company or any Company ERISA Affiliate beyond their retirement or other
termination of service other than (i) coverage mandated by applicable law
(excluding "COBRA") or (ii) death benefits under any "employee pension plan," as
that term is defined in Section 3(2) of ERISA) that is qualified under Section
401(a) of the Code).

(e) Neither the Company nor any of its Subsidiaries is a party to, or
bound by, any collective bargaining agreement, contract or other understanding
with a labor union or labor organization and, to the knowledge of the Company,
there is no activity involving any employees of the Company or its Subsidiaries
seeking to certify a collective bargaining unit or engaging in any other
organizational activity.

(f) Neither the Company nor any Company ERISA Affiliate, or any
officer or employee thereof, has made any promises or commitments, whether
legally binding or not, to create any additional plan, agreement or arrangement,
or to modify or change any existing Company Plan.

Section 4.16 Environmental Laws and Regulations. (a) Except as set
----------------------------------
forth on Schedule 4.16(a): (i) the Company and its Subsidiaries are and, to the
best knowledge of the Company, have been in compliance with, and the Company is
not aware of any outstanding allegations by any person or entity that the
Company or its Subsidiaries is not and has not been in compliance with, all
applicable laws, rules, regulations, common law, ordinances, decrees, orders or
other binding legal requirements relating to pollution

<PAGE>
(including the treatment, storage and disposal of wastes and the remediation of
releases and threatened releases of materials), the protection of the
environment, and the exposure to regulated substances, materials or wastes in
the environment or work place ("Environmental Laws"); and (ii) the Company and
------------------
its Subsidiaries currently hold all permits, licenses, registrations and other
governmental authorizations (including exemptions, waivers, and the like) and
financial assurance required under Environmental Laws for the Company and its
Subsidiaries to operate the Business.

(b) Except as set forth on Schedule 4.16(b), (i) to the knowledge of
the Company and its Stockholders, there is no friable asbestos-containing
material in or on any real property currently owned, leased or operated by the
Company or its Subsidiaries and (ii) there are and have been no underground
storage tanks (whether or not required to be registered under any applicable
law), dumps, landfills, lagoons, surface impoundments, injection wells or other
land disposal units in or on any property currently owned, leased or operated by
the Company or its Subsidiaries.

(c) Except as set forth on Schedule 4.16(c), (i) neither the Company
nor its Subsidiaries has received (x) any written communication from any person
stating or alleging that any of them may be a potentially responsible party
under any Environmental Law (including, without limitation, the Federal
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended) with respect to any actual or alleged environmental contamination or
(y) any request for information under any Environmental Law from any
Governmental Entity with respect to any actual or alleged material environmental
contamination; and (ii) none of the Company, its Subsidiaries or any
Governmental Entity is conducting or has conducted (or, to the knowledge of the
Company, is threatening to conduct) any environmental remediation or
investigation which could result in a material liability of the Company or its
Subsidiaries under any Environmental Law.

Section 4.17 Affiliate Transactions. Except as set forth in Schedule
----------------------
4.17, there are no material Contracts or other transactions between the Company
or any of its Subsidiaries, on the one hand, and any (i) officer, director or
stockholder of the Company or any of its Subsidiaries or (ii) affiliate (as such
term is defined in Regulation 12b-2 promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") of any such officer, director or
------------
stockholder, on the other hand, other than compensation and benefits paid or
provided to employees in the ordinary course and on arms-length terms.

Section 4.18 Brokers. No broker, finder or financial advisor is
-------
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger or the

<PAGE>
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.

Section 4.19 Customers and Suppliers. Except as set forth in
-----------------------
Schedule 4.19, the Company is not engaged in any disputes with customers or
suppliers. Except as disclosed in Schedule 4.19 hereto, to the best of the
Company's knowledge, no customer or supplier is considering termination, non-
renewal or any adverse modification of its arrangements with the Company, and
the transactions contemplated by this Agreement will not, to the best of the
Company's knowledge, have any adverse effect on the Company's relationship with
any of its suppliers or customers. Except as set forth on Schedule 4.19, there
has not been any adverse change and there are no facts known to the Company or
any Stockholder which may reasonably be expected to indicate that any adverse
change may occur in the business relationship of the Company with any material
customer of or supplier to the Company.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF PARENT

Parent represents and warrants to the Company as follows:

Section 5.1 Organization. Parent is a corporation duly organized,
------------
validly existing and in good standing under the laws of the State of Delaware
and has the corporate power to carry on its business as it is now being
conducted or presently proposed to be conducted. Parent is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities make such qualification necessary, except where the
failure to be so qualified will not have a Parent Material Adverse Effect. For
purposes of this Agreement, "Parent Material Adverse Effect" means a material
------------------------------
adverse effect, individually or in the aggregate, on the financial condition,
results of operations or business of Parent and its Subsidiaries taken as a
whole or on the ability of Parent to consummate the Merger and the other
transactions contemplated by this Agreement (a "Parent Material Adverse
-----------------------
Effect"). Sub is a corporation duly organized, validly existing and in good
- ------
standing under the laws of the State of Delaware. Sub has not engaged in any
business (other than in connection with this Agreement and the transactions
contemplated hereby) since the date of its incorporation.

Section 5.2 Capitalization.
--------------

(a) The authorized capital stock of Parent consists of 60,000,000
shares of Parent Common Stock. As of December 31, 1995, (i) 18,306,994 shares
of Parent Common Stock were issued and outstanding and (ii) options to acquire
651,297 shares of Parent Common Stock (the "Parent Stock Options") were
--------------------
outstanding under all stock

<PAGE>
option plans of Parent. All of the outstanding shares of capital stock of
Parent are, and the shares of Parent Common Stock issuable in exchange for
shares of Company Common Stock at the Effective Time in accordance with this
Agreement will be, when so issued, duly authorized, validly issued, fully paid
and nonassessable.

(b) The authorized capital stock of Sub consists of 2,000 shares of
Sub Common Stock, of which 100 shares, as of the date hereof, were issued and
outstanding. All of such outstanding shares are owned by Parent, and are
validly issued, fully paid and nonassessable.

Section 5.3 Authority Relative to this Agreement. Each of Parent and
------------------------------------
Sub has the requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by each of Parent and Sub and the consummation by
Parent and Sub of the transactions contemplated on its part hereby have been
duly authorized by their respective Boards of Directors, and no other corporate
proceedings on the part of Parent or Sub are necessary to authorize this
Agreement or for Parent and Sub to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by each
of Parent and Sub and constitutes a valid and binding agreement of each of
Parent and Sub, enforceable against Parent and Sub in accordance with its terms.

Section 5.4 Consents and Approvals No Violations. Neither the
------------------------------------
execution, delivery and performance of this Agreement by Parent or Sub, nor the
consummation by Parent or Sub of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provisions of the Certificate of
Incorporation or Articles of Incorporation, as the case may be, of By-Laws of
Parent or of Sub, (ii) require a filing with, or a permit, authorization,
consent or approval of, any Governmental Entity except in connection with or in
order to comply with the applicable provisions of the Securities Act of 1933, as
amended (the "Securities Act"), the Exchange Act, state securities or "blue sky"
--------------
laws, the By-Laws of the National Association of Securities Dealers (the
"NASD"), and the filing and recordation of a Certificate of Merger as required
----
by the IBCA, (iii) except as set forth on Schedule 5.4 hereto, result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration) under, or result in the creation of a Lien on any property or
asset of Parent or any of its Subsidiaries pursuant to, any of the terms,
conditions or provisions of any material contract to which Parent or Sub is a
party or by which either of them or any of their properties or assets may be
bound or (iv) violate any law, order, writ, injunction, decree, statute, rule or
regulation of any Governmental Entity applicable to Parent, Sub or any of their
properties or assets.

Section 5.5 Reports and Financial Statements. Parent has timely
--------------------------------
filed all reports required to be filed with the Securities and Exchange
Commission ("SEC") pursuant to the Exchange Act or the Securities Act
---
(collectively, the "Parent SEC Reports"),
------------------

<PAGE>
and has previously made available to the Company and the Stockholders true and
complete copies of all such Parent SEC Reports. Such Parent SEC Reports, as of
their respective dates, complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may be, and
none of such SEC Reports contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of Parent included in the Parent
SEC Reports have been prepared in accordance with GAAP consistently applied
throughout the periods indicated (except as otherwise noted therein or, in the
case of unaudited statements, as permitted by applicable law and fairly present
(subject, in the case of unaudited statements, to normal, recurring year-end
adjustments and any other adjustments described therein) the consolidated
financial position of Parent and its consolidated Subsidiaries as at the dates
thereof and the consolidated results of operations and cash flows of Parent and
its consolidated Subsidiaries for the periods then ended. Except as set forth
on Schedule 5.5, since the date of Parent's last quarterly report on Form 10-Q,
there has not been any fact, event, circumstance or change affecting or relating
to the Company or any of its Subsidiaries which has had or is reasonably likely
to have a Parent Material Adverse Effect.

Section 5.6 Brokers. No broker, finder or financial advisor is
-------
entitled to any brokerage finder's or other fee or commission in connection with
the Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Sub

Section 5.7 Legal Proceedings. There are no outstanding court orders
-----------------
or administrative decisions to which Parent or any of it Subsidiaries is a party
or bound which, if resolved adversely to Parent or such Subsidiary, would have a
Parent Material Adverse Effect. Parent has provided to the Company copies of
its "auditors' letter" in respect of the 1995 fiscal year and any updates
thereto.

Section 5.8 Absence of Undisclosed Liabilities. Except for
----------------------------------
liabilities or obligations which are accrued or reserved against in Parent's
financial statements or were thereafter incurred in the ordinary course of
business and consistent with past practice, Parent has no liabilities or
obligations (whether absolute, accrued, contingent or otherwise) of a nature
required by generally accepted accounting principles to be reflected in its
consolidated balance sheet (or reflected in the notes thereto) or which would
have a Parent Material Adverse Effect.

Section 5.9 Taxes. Parent has duly filed, and each of its
-----
Subsidiaries has duly filed, all material federal, state, local and foreign
income, franchise, sales and other Tax Returns required to be filed by Parent or
any of its Subsidiaries. All such Tax Returns are true, correct and complete,
and Parent and each of its Subsidiaries have duly paid, all Taxes shown on such
Tax Returns and have made adequate provision for payment of all accrued but
unpaid Taxes anticipated in respect of all periods since the

<PAGE>
periods covered by such Tax Returns. All deficiencies assessed as a result of
any examination of Tax Returns of Parent or any of its Subsidiaries by federal,
state, local or foreign tax authorities have been paid or reserved on the
financial statements of Parent in accordance with generally accepted accounting
principles consistently applied. Parent and each of its Subsidiaries have
complied in all material respects with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes (including, without
limitation, withholding of Taxes pursuant to Sections 1441 and 1442 of the Code
or similar provisions under any foreign laws) and have, within the time and in
the manner prescribed by law, withheld from employee wages and paid over to the
proper governmental authorities all amounts required to be so withheld and paid
over under all applicable laws.

Section 5.10 Insurance. Parent has delivered to the Company copies
---------
of each of its material insurance policies. All such insurance policies are in
full force and effect and the premiums due thereon have been timely paid.
Neither Parent nor any of its Subsidiaries is presently in default regarding the
provisions of such policy, nor have they failed to give any notice or present
any material claim thereunder in due and timely fashion. The consummation of
the transactions contemplated by this Agreement will not constitute a default
under any such insurance policy.

ARTICLE VI

CONDUCT OF BUSINESS PENDING THE MERGER

Section 6.1 Conduct of Business by the Company Pending the Merger.
-----------------------------------------------------
Prior to the Effective Time, unless Parent shall otherwise agree in writing, or
as otherwise expressly contemplated by this Agreement:

(a) except as described on Schedule 6.1(a), the Company shall
conduct, and cause each of its Subsidiaries to conduct, its business only in the
ordinary and usual course consistent with past practice, and the Company shall
use, and cause each of its Subsidiaries to use, its reasonable efforts to
preserve intact the present business organization, keep available the services
of its present officers and key employees, and preserve the goodwill of those
having business relationships with it;

(b) the Company shall not, nor shall it permit any of its
Subsidiaries to, (i) amend its charter, bylaws or other organizational
documents, (ii) split, combine or reclassify any shares of its outstanding
capital stock, (iii) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property, or (iv) directly or indirectly
redeem or otherwise acquire any shares of its capital stock or shares of the
capital stock of any of its Subsidiaries;

<PAGE>
(i) authorize for issuance, issue or sell or agree to issue or sell any shares
of, or Rights to acquire or convertible into any shares of, its capital stock or
shares of the capital stock of any of its Subsidiaries (whether through the
issuance or granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise); (ii) merge or consolidate with another entity; (iii)
acquire or purchase an equity interest in or a substantial portion of the assets
of another corporation, partnership or other business organization or otherwise
acquire any assets outside the ordinary and usual course of business and
consistent with past practice or otherwise enter into any material contract,
commitment or transaction outside the ordinary and usual course of business
consistent with past practice; (iv) sell, lease, license, waive, release,
transfer, encumber or otherwise dispose of any of its assets outside the
ordinary and usual course of business and consistent with past practice; (v)
incur, assume or prepay any material indebtedness or any other material
liabilities other than in the ordinary course of business and consistent with
past practice; (vi) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person; (vii) make any loans, advances or capital contributions to, or
investments in, any other person, other than to Subsidiaries of the Company and
extensions of credit to customers in the ordinary course of business consistent
with past practice; (viii) authorize or make capital expenditures other than in
the ordinary course of business consistent with past practice; (ix) permit any
insurance policy naming the Company or any Subsidiary of the Company as a
beneficiary or a loss payee to be cancelled or terminated other than in the
ordinary course of business; or (x) enter into any contract, agreement,
commitment or arrangement with respect to any of the foregoing;

(d) the Company shall not, nor shall it permit its Subsidiaries to,
(i) adopt, enter into, terminate or amend (except as may be required by
Applicable Law) any Company Plan or other arrangement for the current or future
benefit or welfare of any director, officer or current or former employee, (ii)
increase in any manner the compensation or fringe benefits of, or pay any bonus
to, any director, officer or employee (except for normal increases in salaried
compensation in the ordinary course of business consistent with past practice),
or (iii) take any action to fund or in any other way secure, or to accelerate or
otherwise remove restrictions with respect to, the payment of compensation or
benefits under any employee plan, agreement, contract, arrangement or other
Company Plan; and

(e) the Company shall not, nor shall it permit its Subsidiaries to,
take any action with respect to, or make any material change in, its accounting
or tax policies or procedures, except as required by law.

Section 6.2 Conduct of Business of Sub. During the period from the
--------------------------
date of this Agreement to the Effective Time, Sub shall not engage in any
activities of any nature except as provided in or contemplated by this
Agreement. It is understood that Sub was formed by Parent solely for the
purpose of effecting the Merger, and that Sub will have no material assets and
no material liabilities prior to the Merger.

<PAGE>
ARTICLE VII

ADDITIONAL AGREEMENTS

Section 7.1 Access and Information. Each of the Company and Parent
-----------------------
shall (and shall cause its Subsidiaries and its and their respective officers,
directors, employees, auditors and agents to) afford to the other and to the
other's officers, employees, financial advisors, legal counsel, accountants,
consultants and other representatives reasonable access during normal business
hours throughout the period prior to the Effective Time to all of its books and
records (other than privileged documents) and its properties, plants and
personnel and, during such period, each shall furnish promptly to the other a
copy of each report, schedule and other document filed or received by it
pursuant to the requirements of federal securities laws, provided that no
investigation pursuant to this Section 7.1 shall affect any representations or
warranties made herein or the conditions to the obligations of the respective
parties to consummate the Merger. Unless otherwise required by law, each party
agrees that it (and its Subsidiaries and its and their respective
representatives) shall hold in confidence all non-public information so
acquired.

Section 7.2 No Solicitation. Prior to the Effective Time, the
----------------
Company agrees that neither it, any of its Subsidiaries or its affiliates, nor
any of the respective directors, officers, employees, agents or representatives
of the foregoing will, directly or indirectly, solicit, initiate, facilitate or
encourage (including by way of furnishing or disclosing non-public information)
any inquiries or the making of any proposal with respect to any merger,
consolidation or other business combination involving the Company or any
Subsidiary of the Company or the acquisition of all or any significant assets or
capital stock of the Company or any Subsidiary of the Company taken as a whole
(an "Acquisition Transaction") or negotiate, explore or otherwise engage in
------------------------
discussions with any person (other than Parent and its representatives) with
respect to any Acquisition Transaction or enter into any agreement, arrangement
or understanding with respect to any such Acquisition Transaction or which would
require it to abandon, terminate or fail to consummate the Merger or any other
transaction contemplated by this Agreement. The Company agrees that as of the
date hereof, it, its Subsidiaries and affiliates, and the respective directors,
officers, employees, agents and representatives of the foregoing, shall
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any person (other than Parent and its
representatives) conducted heretofore with respect to any Acquisition
Transaction. The Company agrees to immediately advise Parent in writing of any
inquiries or proposals (or desire to make a proposal) received by (or indicated
to), any such information requested from, or any such negotiations or
discussions sought to be initiated or continued with, any of it, its
Subsidiaries or affiliates, or any of the respective directors, officers,
employees, agents or representatives of the foregoing, in each case from a
person (other than Parent and its representatives) with respect to an
Acquisition Transaction, and the terms thereof, including the identity of such
third party, and to update on an ongoing basis or upon Parent's request, the
status thereof, as well as any actions taken or other developments

<PAGE>
pursuant to this Section 7.2.

Section 7.3 Reasonable Best Efforts. Subject to the terms and
------------------------
conditions herein provided, each of the parties hereto agrees to use its
reasonable best efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, the obtaining of
all necessary waivers, consents and approvals and the effecting of all necessary
registrations and filings.

Section 7.4 Salary; Employee Benefits. Parent agrees to cause the
--------------------------
Surviving Corporation, for not less than two years after the Effective Time, (A)
to maintain the salaries of members of the Company's senior management listed on
Schedule 7.4 at no less than their present Levels and (B)(i) to continue to
maintain the Company Plans listed on Schedule 4.15 that are in effect as of the
date hereof or (ii) to make available to employees of the Surviving Corporation
reasonably comparable benefits, considered in the aggregate, under one or more
employee benefit plans of Parent or any of its Subsidiaries.

Section 7.5 Stockholder Transactions. At the Closing, (a) Parent
-------------------------
shall cause the Company to pay or otherwise discharge in full in cash all loans
and other indebtedness to the Stockholders, including accrued and unpaid
interest, up to the aggregate amount of $2,100,000, and (b) each Stockholder
shall pay, and shall cause each of the Company's and Stockholder's affiliates,
and each of the entities and ventures listed on Schedule 4.3(a), to pay, in full
all accounts receivable and advances payable by such Stockholder or affiliate or
entity or venture to the Company.

Section 7.6 Non-Compete Agreements. Prior to and after the Closing,
-----------------------
the Company shall use its best efforts to have each of the salespersons listed
on Schedule 7.7 enter into Non-Compete Agreements, substantially in the form
attached hereto as Exhibit E ("Non-Compete Agreements"), with such changes as
----------------------
shall be mutually agreed to by Parent and Larry Frankel. Prior to and after the
Closing, the Company and Parent shall develop a mutually satisfactory plan
pursuant to which the Company's salespersons (the "Salespersons") will be paid
------------
by the Company, subsequent to the Closing, an aggregate of $250,000 in cash.
Such plan shall include, among other things, an allocation of amounts among the
Salespersons. Such amount shall be accrued as a liability on the books of the
Company prior to the Closing, but shall not be treated as a liability for
purposes of calculating Adjusted April 12 Net Worth.

Section 7.7 Certain Company Liabilities. The Company and
------------------------------
Stockholders agree that the sum of the Company's (a) notes payable - bank, (b)
long term debt, (c) other loans to the Stockholders and other indebtedness and
(d) accrued and unpaid interest with respect to the foregoing shall not exceed
an aggregate of $2,100,000 at the Closing.

<PAGE>
Section 7.7 Expenses. Whether or not the Merger is consummated, all
--------
costs and expenses incurred in connection with this Agreement (including the
Exhibits hereto) and the transactions contemplated hereby (and thereby) shall be
paid by the party incurring such expenses, provided that if the Merger is
consummated, Parent shall cause the Company to pay up to $50,000 of Company and
Stockholder fees and expenses. The balance of Company and Stockholder fees and
expenses shall be paid by the Stockholders.

Section 7.8 Public Announcements. Each of Parent, Sub, and the
--------------------
Company agrees that it will not issue any press release or otherwise make any
public statement with respect to this Agreement (including the Exhibits hereto)
or the transactions contemplated hereby (or thereby) without the prior consent
of the other party, which consent shall not be unreasonably withheld or delayed;
provided, however, that such disclosure can be made without obtaining such prior
- -------- -------
consent if (i) the disclosure is required by law or by obligations imposed
pursuant to any listing agreement with any national securities exchange and
(ii) the party making such disclosure has first used its reasonable best efforts
to consult with (but not obtain the consent of) the other party about the form
and substance of such disclosure.

Section 7.9 Supplemental Disclosure. The Company shall give prompt
-----------------------
notice to Parent, and Parent shall give prompt notice to the Company, of (i) the
existence, nonexistence, occurrence, or non-occurrence, of any fact,
circumstance or event the existence, nonexistence, occurrence, or non-occurrence
of which would be likely to cause (x) any representation or warranty by any
party contained in this Agreement to be untrue or inaccurate or (y) any
covenant, condition or agreement contained in this Agreement not to be complied
with or satisfied and (ii) any failure of the Company or Parent, as the case may
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
-------- -------
of any notice pursuant to this Section 7.10 shall not have any effect for the
purpose of determining the satisfaction of the conditions set forth in Article
VIII of this Agreement or otherwise limit or affect the remedies available
hereunder to any party (except to the extent any breach of representation or
warranty is cured by the breaching party within 20 business days after delivery
of such notice). If (p) any of Stanley Bergman, Mark Mlotek or Jeff Gasparini
("Parent Senior Management") obtains actual knowledge after March 25, 1996 and
------------------------
prior to the Effective Date, of the existence, nonexistence, occurrence, or non-
occurrence, of any fact, circumstance or event the existence, nonexistence,
occurrence, or non-occurrence of which would be likely to cause any
representation or warranty of the Company contained in this Agreement to be
untrue or inaccurate, (q) such member of Parent Senior Management fails to give
the Company prompt notice thereof and (r) if the Company had received prompt
notice thereof, it would have cured any breach of representation or warranty
resulting therefrom, then the Company shall have waived any right to seek
indemnification, arising out of such breach of representation or warranty.

<PAGE>
ARTICLE VIII

CONDITIONS TO CONSUMMATION OF THE MERGER

Section 8.1 Conditions to Each Party's Obligation to Effect the
-------------------------------------------------------
Merger. The respective obligations of each party to effect the Merger shall be
- ------
subject to the satisfaction at or prior to the Effective Time of the condition
that no Governmental Entity (including a federal or state court) of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and which
materially restricts, prevents or prohibits consummation of the Merger or any
transaction contemplated by this Agreement; provided, however, that the parties
-------- -------
shall use their reasonable best efforts to cause any such decree, judgment,
injunction or other order to be vacated or lifted.

Section 8.2 Conditions to Obligations of Parent and Sub to Effect the
---------------------------------------------------------
Merger. The obligations of Parent and Sub to effect the Merger shall be subject
- ------
to the satisfaction at or prior to the Effective Time of the following
additional conditions, unless waived in writing by Parent:

(a) Representations and Warranties. The representations and
---------------------------------
warranties of the Company and Stockholders set forth in this Agreement
shall be true and correct in all material respects, as of the date hereof
(or, to the extent such representations and warranties shall not have been
true and correct as of the date hereof, any breach thereof has been cured
within 30 days after written notice of such breach is given by the Company
to the Parent), and, except to the extent such representations and
warranties speak as of an earlier date, as of the Effective Time as though
made at and as of the Effective Time, and Parent shall have received a
certificate signed on behalf of the Company by the chief executive officer
or the chief financial officer of the Company to such effect.

(b) Performance of Obligations of the Company. Each of the Company
------------------------------------------
and its Subsidiaries and each Stockholder shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Effective Time, and Parent shall have received
a certificate signed on behalf of the Company by the chief executive
officer or the chief financial officer of the Company to such effect.

(c) Stock Price. The Parent Stock Price shall not be less than 80%
-----------
the average of the per share closing price for the Parent Common Stock on
NASDAQ for the ten trading days immediately preceding the date hereof.

(d) 1995 EBITD. Parent's Calculation of 1995 EBITD shall be not
-----------
greater than 120% of the Company's Calculation of 1995 EBITD.

<PAGE>
(e) Opinion of Counsel. Parent shall have received the opinion of
-------------------
Aronberg Goldgehn Davis & Garmisa, in the form attached hereto as Exhibit
F.

(f) Consent. All notices to, and consents, approvals and waivers
-------
from, third parties under the Contracts set forth on Schedule 4.5 shall
have been obtained, in each case without any condition or qualification
adverse to Parent or Sub.

Section 8.3 Conditions to Obligation of the Company to Effect the
--------------------------------------------------------
Merger. The obligation of the Company and the Stockholders to effect the Merger
- ------
shall be subject to the satisfaction at or prior to the Effective Time of the
following additional conditions, unless waived in writing by the Company:

(a) Representations and Warranties. (i) The representations and
-------------------------------
warranties of Parent set forth in this Agreement shall be true and correct
in all material respects as of the date hereof, and, except to the extent
such representations and warranties speak as of an earlier date, as of the
Effective Time as though made on and as of the Effective Time, and the
Company shall have received a certificate signed on behalf of Parent by the
chief executive officer or the chief financial officer of Parent to such
effect.

(b) Performance of Obligations of Parent and Sub. Each of Parent and
--------------------------------------------
Sub shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Effective
Time, and the Company shall have received a certificate signed on behalf of
Parent by the chief executive officer or the chief financial officer of
Parent to such effect.

(c) Stock Price. The Parent Stock Price shall not be less than 80%
-----------
of the average of the per share closing price for the Parent Common Stock
on NASDAQ for the ten trading days immediately preceding the date hereof;
provided, that, if the Parent Stock Price shall be less than 80% of the
--------
average of the per share closing price for the Parent Common Stock on
NASDAQ for the ten trading days immediately preceding the date hereof,
Parent shall have the right to pay each Stockholder, in lieu of Parent
Common Stock to be issued to such Stockholder pursuant to this Agreement
and notwithstanding anything contained in this Agreement that provides for
the issuance to such Stockholder of Parent Common Stock, an amount in cash
equal to the aggregate Parent Stock Price of such Parent Common Stock (and
thereby satisfy the condition contained in this Section 8.3(c)).

(d) 1995 EBITD. Parent's Calculation of 1995 EBITD shall be not less
----------
than 85% of the Company's Calculation of 1995 EBITD; provided that if this
Agreement terminates as a result of this condition not being satisfied or
waived, and the Company and/or the Stockholders enter into any agreement
with respect to the sale of the Company prior to the six month anniversary
of this Agreement,

<PAGE>
Company shall pay to Parent, at the closing of any such transaction, an
amount equal to Parent's out-of-pocket costs incurred in connection with
the transactions contemplated hereby (including without limitation fees and
disbursements incurred in connection with due diligence and the preparation
and negotiation of any documentation), up to $100,000.

(e) Registration Rights Agreement. Parent shall have entered into a
-----------------------------
Registration Rights Agreement, substantially in the form attached hereto as
Exhibit G.

(f) Opinion of Counsel. The Company and Stockholders shall have
-------------------
received the opinion of Proskauer Rose Goetz & Mendelsohn LLP, in the form
attached hereto as Exhibit H.

ARTICLE IX

TERMINATION

Section 9.1 Termination. This Agreement may be terminated at any time
-----------
prior to the Effective Time:

(a) by mutual consent of Parent and the Company;

(b) by either Parent or the Company, if the Merger shall not have
been consummated before July 31, 1996 (unless, in the case of any such
termination pursuant to this Section 9.1(b), the failure to so consummate
the Merger by such date shall have been caused by the action or failure to
act of the party (or its Subsidiaries) seeking to terminate this Agreement,
which action or failure to act constitutes a breach of this Agreement);

(c) by Parent, if (i) there has been a breach of any representations
or warranties of the Company set forth herein the effect of which is a
Company Material Adverse Effect or (ii) there has been a breach in any
material respect of any of the covenants or agreements set forth in this
Agreement on the part of the Company, which breach (in the case of either
(i) or (ii)) is not curable or, if curable, is not cured within 30 days
after written notice of such breach is given by Parent to the Company; or

(d) by the Company, if (i) there has been a breach of any
representations or warranties of Parent set forth herein the effect of
which is a Parent Material Adverse Effect or (ii) there has been a breach
in any material respect of any of the covenants or agreements set forth in
this Agreement on the part of Parent, which breach (in the case of either
(i) or (ii)) is not curable or, if curable, is not cured

<PAGE>
within 30 days after written notice of such breach is given by the Company
to Parent.

Section 9.2 Effect of Termination. In the event of termination of
---------------------
this Agreement pursuant to this Article IX, the Merger shall be deemed abandoned
and this Agreement shall forthwith become void, without liability on the part of
any party hereto, except as provided in this Section 9.2, Section 7.1 and
Section 7.8 and 7.9, and except that nothing herein shall relieve any party from
liability for any breach of this Agreement.

ARTICLE X

INDEMNIFICATION

Section 10.1 Survival of Representations and Warranties. All
---------------------------------------------
representations and warranties contained in Articles IV and V of this Agreement
shall survive the Closing until June 30, 1997, except that the representations
and warranties contained in Section 4.9 shall survive until the second
anniversary of the Closing, the representations and warranties contained in
Sections 4.11 and 4.17 shall survive the Closing until the expiration of the
applicable statute of limitations, and the representations and warranties
contained in Sections 4.2, 4.4, 4.5 (except, in the case of Section 4.5, to the
extent Losses (as defined in Section 10.2) arising from a breach of
representations and warranties contained therein involve only the payment of
cash to a third party), 4.16, 5.2, 5.3, 5.4 (except, in the case of Section 5.4,
to the extent Losses arising from a breach of representations and warranties
contained therein involve only the payment of cash to a third party) and 5.7
shall survive the Closing indefinitely.

Section 10.2 Indemnification by Stockholders. From and after the
--------------------------------
Closing, the Stockholders shall jointly and severally indemnify and save Parent,
the Surviving Corporation and their respective Affiliates, directors, officers,
employees, agents and representatives and all of their successors and assigns
(collectively "Parent Claimants" and individually "Parent Claimant") harmless
----------------- ---------------
from and defend each of them from and against any and all demands, claims,
actions, liabilities, losses, costs, damages or expenses whatsoever (including
any reasonable attorneys' fees) (collectively, "Losses") asserted against,
------
imposed upon or incurred by any Parent Claimant resulting from or arising out of
(a) any inaccuracy or breach of any representation or warranty of the
Stockholders or the Company contained herein; (b) any breach of any covenant or
obligation of Stockholders or the Company contained herein; or (c) the inability
of the Company to take as a deduction in the computation of its taxable income
any compensation or bonuses described in this Agreement or the schedules hereto.

Section 10.3 Indemnification by Parent. From and after the Closing,
-------------------------
Parent shall indemnify and save the Stockholders, and their respective
Affiliates and directors, officers, employees, agents and representatives
(collectively "Company Claimants" and
-----------------

<PAGE>
individually "Company Claimant") harmless from and defend each of them from and
----------------
against any and all Losses asserted against, imposed upon or incurred by the
Company Claimants resulting from or arising out of (a) any inaccuracy or breach
of any representation or warranty of Parent or Sub contained herein; or (2) any
breach of any covenant or obligation of Parent or Sub contained herein.

Section 10.4 Indemnification Procedures.
--------------------------

(a) The rights and obligations of each party claiming a right to
indemnification hereunder ("Indemnitee") from the other party ("Indemnitor")
---------- ----------
shall be governed by the following rules:

(i) The Indemnitee shall give prompt written notice to the
Indemnitor of any state of facts which Indemnitee determines will give rise to a
claim by the Indemnitee against the Indemnitor based on the indemnity agreements
contained herein, stating the nature and basis of said claims and the amount
thereof, to the extent known. No failure to give such notice shall affect the
indemnification obligations of Indemnitor hereunder, except to the extent such
failure materially prejudices such Indemnitor's ability successfully to defend
the matter giving rise to the indemnification claim.

(ii) In the event any action, suit or proceeding is brought
against the Indemnitee, with respect to which the Indemnitor may have liability
under the indemnity agreements contained herein, then upon the written
acknowledgment by the Indemnitor within thirty days of the bringing of such
action, suit or proceeding that it is undertaking and will prosecute the defense
of the claim under such indemnity agreements and confirming that the claim is
one with respect to which the Indemnitor is obligated to indemnify and that it
will be able to pay the full amount of potential liability in connection with
any such claim, the action, suit or proceeding (including all proceedings on
appeal or for review which counsel for the Indemnitee shall deem appropriate)
may be defended by the Indemnitor, provided that the Indemnitee shall provide
--------
such reasonable assistance as is reasonably requested by Indemnitor, at no cost
to Indemnitee. However, in the event the Indemnitor shall not offer reasonable
assurances as to its financial capacity to satisfy any final judgment or
settlement, the Indemnitee may assume the defense and dispose of the claim,
after 30 days' prior written notice to the Indemnitor, at the Indemnitor's cost.
The Indemnitee shall have the right to employ its own counsel in any other case,
but the fees and expenses of such counsel shall be at the Indemnitee's own
expense unless (a) the employment of such counsel and the payment of such fees
and expenses both shall have been specifically authorized by the Indemnitor in
connection with the defense of such action, suit or proceeding or (b) the
Indemnitee shall have reasonably concluded and specifically notified the
Indemnitor that there may be specific defenses available to it which are
different from or additional to those available to the Indemnitor, or that such
action, suit or proceeding involves or could have an effect upon any matter
beyond the scope of the indemnity agreements contained herein.

<PAGE>
(iii) In addition, in any event specified in clause (b) of the
second sentence of subparagraph (ii) above, the Indemnitor, to the extent made
necessary by such different or additional defenses, shall not have the right to
direct the defense of such action, suit or proceeding on behalf of the
Indemnitee. If Indemnitor and Indemnitee cannot agree on a mechanism to
separate the defense of matters extending beyond the scope of indemnification,
such matters shall be defended on the basis of joint consultation.

(iv) The Indemnitee shall be kept fully informed by the
Indemnitor of such action, suit or proceeding at all stages thereof, whether or
not it is represented by counsel. The Indemnitor shall, at the Indemnitor's
expense, make available to the Indemnitee and its attorneys and accountants all
books and records of the Indemnitor relating to such proceedings or litigation,
and the parties hereto agree to render to each other such assistance as they may
reasonably require of each other in order to ensure the proper and adequate
defense of any such action, suit or proceeding.

(b) The Indemnitor shall make no settlement of any claims which
Indemnitor has undertaken to defend, without Indemnitee's consent, unless the
Indemnitor fully indemnifies the Indemnitee for all losses, there is no finding
or admission of violation of law by, or effect on any other claims that may be
made against, the Indemnitee and the relief granted in connection therewith
requires no action on the part of and has no effect on the Indemnitee.

10.5 Limitation on Indemnification. The Stockholders shall have no
------------------------------
liability under this Agreement for breach of warranty or misrepresentation: (a)
unless the aggregate amount of Losses to Parent and its affiliates from all
claims under this Agreement for breach of warranty and misrepresentation exceeds
$50,000 (the "Indemnification Threshold"); provided, that if the Indemnification
-------------------------
Threshold is met, all liabilities for breach of warranty or representation under
this Agreement shall be indemnifiable; and (b) in connection with any Losses (up
to $380,000) resulting from the adjustment described in the first sentence of
Schedule 4.6.

ARTICLE XI

RESTRICTIVE COVENANTS

Section 11.1 Non-Competition. Except as set forth on Schedule 11.1,
---------------
none of the Stockholders nor any of their respective affiliates shall, for a
period of five years after the Effective Date, directly or indirectly, engage,
anywhere in the world, in the sale or offering or promoting for sale of any
product, process, good or service which is the same as, is functionally similar
to, or competes with, any product, process, good or service which Parent has
sold or offered or promoted for sale within the three years preceding the
Effective Date in connection with Parent's business.

<PAGE>
Section 11.2 Non-Solicitation of Employees. None of the Stockholders
-----------------------------
nor any of their respective Affiliates shall directly or indirectly, for itself
or on behalf of any other individual or entity, hire any employee of Parent,
including, without limitation, any employees of the Company that Parent or its
affiliates has hired in its sole discretion, or induce nor attempt to induce any
such employee to leave his or her employment with Parent at any time within five
years from the Effective Date.

Section 11.3 Non-Solicitation or Interference with Customers and
------------------------------------------------------
Suppliers. None of the Stockholders nor any of their respective Affiliates
- ---------
shall, directly or indirectly, for itself or on behalf of any other individual
or entity, solicit, divert, take away or attempt to take away any of Parent's or
Parent's affiliates' customers or suppliers or the business or patronage of any
such customers or suppliers or in any way interfere with, disrupt or attempt to
disrupt any then existing relationships between Parent or Parent's affiliates
and any of their respective customers or suppliers or other individuals or
entities with whom it deals or contact or enter into any business transaction
with any such customers or suppliers or other individuals or entities for any
purpose at any time within five years from the Effective Date.

Section 11.4 Acknowledgements. Each of the Stockholders acknowledges
----------------
that, in view of the nature of the Company's business and the business
objectives of Parent in acquiring the Company, and the consideration paid to the
Stockholders therefor, the restrictions contained in this Article XI are
reasonably necessary to protect the legitimate business interests of Parent and
that any violation of such restrictions will result in irreparable injury to
Parent and the business Parent has acquired hereunder for which damages will not
be an adequate remedy. Each of the Stockholders therefore acknowledges that, if
any such restrictions are violated, Parent shall be entitled to preliminary and
injunctive relief as well as to an equitable accounting of earnings, profits and
other benefits arising from such violation.

ARTICLE XII

GENERAL PROVISIONS

Section 12.1 Amendment and Modification. At any time prior to the
--------------------------
Effective Time, this Agreement may be amended, modified or supplemented only by
written agreement (referring specifically to this Agreement) of Parent, Sub and
the Company with respect to any of the terms contained herein.

Section 12.2 Waiver. At any time prior to the Effective Time, Parent
------
and Sub, on the one hand, and the Company and the Stockholders, on the other
hand, may (i) extend the time for the performance of any of the obligations or
other acts of the other, (ii) waive any inaccuracies in the representations and
warranties of the other contained herein or in any documents delivered pursuant
hereto and (iii) waive compliance by the

<PAGE>
other with any of the agreements or conditions contained herein which may
legally be waived. Any such extension or waiver shall be valid only if set
forth in an instrument in writing specifically referring to this Agreement and
signed on behalf of such party.

Section 12.3 Survivability; Investigations. The respective
------------------------------
representations and warranties of Parent, the Company and the Stockholders
contained herein or in any certificates or other documents delivered prior to or
as of the Effective Time (i) shall not be deemed waived or otherwise affected by
any investigation made by any party hereto and (ii) shall not survive beyond the
Effective Time. The covenants and agreements of the parties hereto (including
the Surviving Corporation after the Merger) shall survive the Effective Time
without limitation (except for those which, by their terms, contemplate a
shorter survival period).

Section 12.4 Notices. All notices and other communications hereunder
-------
shall be in writing and shall be delivered personally or by next-day courier or
telecopied with confirmation of receipt, to the parties at the addresses
specified below (or at such other address for a party as shall be specified by
like notice; provided that notices of a change of address shall be effective
only upon receipt thereof. Any such notice shall be effective upon receipt, if
personally delivered or telecopied, or one day after delivery to a courier for
next-day delivery.

(a) If to Parent or Sub, to:

Henry Schein, Inc.
135 Duryea Road
Melville, New York 11747

Attention: Mark E. Mlotek, Esq.

with a copy to:

Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036

Attention: Richard L. Goldberg, Esq.

(b) if to the Company or the Stockholders, to:

Scientific Supply Company
9405 West River Street
Schiller Park, Illinois 60176

Attention: Lawrence Frankel

<PAGE>
with a copy to:

Aronberg Goldgehn Davis & Garmisa
Suite 3000 One IBM Plaza
Chicago, Illinois 60611

Attention: Ned S. Robertson, Esq.

Section 12.5 Descriptive Headings; Interpretation. The headings
------------------------------------
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. References in this
Agreement to Sections, Schedules, Exhibits or Articles mean a Section, Schedule,
Exhibit or Article of this Agreement unless otherwise indicated. References to
this Agreement shall be deemed to include the Exhibits and Schedules hereto,
unless the context otherwise requires. The term "person" shall mean and include
an individual, a partnership, a joint venture, a corporation, a trust, a
Governmental Entity or an unincorporated organization.

Section 12.6 Entire Agreement; Assignment. This Agreement
----------------------------
(including the Schedules and other documents and instruments referred to herein)
constitutes the entire agreement and supersedes all other prior agreements and
understandings, both written and oral, among the parties or any of them, with
respect to the subject matter hereof. This Agreement is not intended to confer
upon any person not a party hereto any rights or remedies hereunder. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. This Agreement shall not be
assigned by operation of law or otherwise by Parent, Sub or the Company;
provided that Parent or Sub may assign its rights and obligations hereunder to a
- --------
direct or indirect subsidiary of Parent, but no such assignment shall relieve
Parent or Sub, as the case may be, of its obligations hereunder.

Section 12.7 Governing Law. This Agreement shall be governed by
-------------
and construed in accordance with the laws of the State of Delaware without
giving effect to the provisions thereof relating to conflicts of law.

Section 12.8 Severability. In case any one or more of the
------------
provisions contained in this Agreement should be invalid, illegal or
unenforceable in any respect against a party hereto, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby and such invalidity, illegality or
unenforceability shall only apply as to such party in the specific jurisdiction
where such judgment shall be made.

Section 12.9 Counterparts. This Agreement may be executed in two
------------
or more counterparts, each of which shall be deemed to be an original but all of
which shall

<PAGE>
constitute one and the same agreement.

Section 12.10 Knowledge. When used in any representation or
---------
warranty contained herein, the term "knowledge" shall be deemed to mean
knowledge after due inquiry.

IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.

HENRY SCHEIN, INC. SCIENTIFIC SUPPLY COMPANY

By:________________________________ By:________________________________
Authorized Officer Authorized Officer

SSC HOLDINGS, INC. ___________________________________
LAWRENCE FRANKEL

By:________________________________
Authorized Officer
THE LAWRENCE AND PAMELA FRANKEL
CHARITABLE REMAINDER TRUST CREATED
UNDER TRUST AGREEMENT DATED AS OF
MARCH 1, 1996

By:________________________________
Lawrence Frankel, Trustee

___________________________________
NORMAN FRANKEL

___________________________________
RUDOLPH KELEMEN

___________________________________
BRUCE BARBER

EXHIBIT 10.93

EXHIBIT G

REGISTRATION RIGHTS AGREEMENT

This agreement dated __________, 1996 is among Henry Schein, Inc., a
Delaware corporation ("Parent"), and Lawrence J. Frankel, Norman Frankel,
------
Rudolph Kelemen and Bruce Barber (collectively, the "Stockholders").
------------

Pursuant to the terms of the agreement and plan of merger (the "Merger
------
Agreement") dated April ___, 1996 among Parent, SSC Holdings, Inc., an Illinois
- ---------
corporation and wholly-owned subsidiary of Parent ("Sub"), Scientific Supply
---
Company, an Illinois corporation (the "Company"), and the Stockholders, each
-------
share of Company Common Stock (as defined in the Merger Agreement) issued and
outstanding immediately prior to the Effective Time (as defined in the Merger
Agreement) shall be convertible into the right to receive a number of shares of
common stock, par value $.01 per share, of Parent ("Parent Common Stock"), as
-------------------
provided in the Merger Agreement.

In connection with the transactions contemplated by the Merger
Agreement, the parties are entering into this registration rights agreement.

Accordingly, the parties agree as follows:

1. Definitions. As used in this agreement:
-----------

1.1 "Prior Holders" means any person or entity previously
-------------
granted rights pursuant to the registration rights agreement dated September 30,
1994 among Parent and certain parties named therein (the "Prior Registration
------------------
Rights Agreement").
- ----------------

1.2 "Registrable Shares" means the shares of Parent Common Stock
------------------
issued to the Stockholders pursuant to the Merger Agreement. Registrable Shares
shall cease to be such when (i) a registration statement covering such
Registrable Shares has become or been declared effective and they have been
disposed of pursuant to that registration statement, (ii) eligible to be sold,
transferred or distributed pursuant to or in compliance with Rule 144 (or any
similar provision then in force) or any other exemption from registration under
the Securities Act of 1933 (the "Securities Act") or (iii) they have been
--------------
otherwise transferred and Parent has delivered new certificates not

<PAGE>
subject to any stop transfer order or other restriction on transfer and not
bearing a legend restricting transfer in the absence of an effective
registration statement.

2. Piggyback Registration.
----------------------

2.1 Inclusion in Registration. If at any time after the date of
-------------------------
this agreement, Parent proposes to register any of its shares of common stock
under the Securities Act (other than pursuant to Form S-8 or S-4 or a comparable
registration statement, pursuant to an employee benefits plan or in connection
with any transaction of the type referred to in Rule 145 under the Securities
Act) it will promptly give notice to the Stockholders of its intention to do so.
If any Stockholder notifies Parent within 20 days after receipt of any such
notice of its desire to include any Registrable Shares in such proposed
registration, Parent shall afford that Stockholder the opportunity to have such
Registrable Shares registered under such registration statement.

Notwithstanding anything in this section 2 to the contrary, Parent
shall have the right, in its sole and absolute discretion, at any time after it
shall have given any notice pursuant to this section 2 (irrespective of whether
a written request for inclusion of any Registrable Shares shall have been made),
to elect to postpone or not to file such proposed registration statement or to
withdraw the same after filing but prior to the effective date thereof.

2.2 Underwriting Requirements. If the registration of which
-------------------------
Parent gives notice pursuant to this section 2 is for a registered public
offering involving an underwriting of shares, Parent shall so advise the
Stockholders as part of the notice given pursuant to section 2.1. Parent shall
not be required under this section 2 to include any Registrable Shares in such
underwriting unless each Stockholder desiring to participate in such
underwritten public offering accepts the terms of the underwriting as agreed
upon between Parent and the underwriters selected by it, and then only in such
quantity as will not, in the opinion of the underwriters, jeopardize the success
of the offering by the Company. If any stockholder disapproves of the terms of
any such underwriting, that stockholder may elect to withdraw from the
underwriting by written notice to Parent and the representative of the
underwriters. Any Registrable Shares

<PAGE>
or other securities excluded or withdrawn from such underwriting shall be
withdrawn from such registration.

Subject to the rights of the Prior Holders contained in the Prior
Registration Rights Agreement, notwithstanding any other provision of this
section 2, if the total number of shares, including the Registrable Shares,
requested by all stockholders, to be included in the offering exceeds the number
of shares to be sold other than by Parent that the underwriters reasonably
believe compatible with the success of the offering, then the number of selling
stockholders' shares (including the Registrable Shares) that may be included in
the offering shall be apportioned pro rata among all selling stockholders
(including the Stockholders) according to the total number of shares entitled to
be included in the offering owned by each selling stockholder or in such other
proportions as shall mutually be agreed to by all selling stockholders. If the
number of Registrable Shares included in the underwriting is less than 50% of
the number of Registrable Shares proposed by the Stockholders to be distributed
through such underwriting, then, as promptly as practicable, but in any event
within six months after the effective date of such registration statement,
Parent shall use its reasonable best efforts to either (a) effect a registration
of the Registrable Shares or (b) repurchase the Registrable Shares at a price
equal to the fair market value of such Registrable Shares at the date of
repurchase.

2.3 Number. The Stockholders shall be entitled to have their
------
shares included in an unlimited number of registrations pursuant to this section
2.

3. Expenses of Registration. Except as otherwise provided in this
------------------------
agreement, Parent shall pay all registration, filing and qualification fees,
accounting fees and printing expenses of Parent, reasonable fees and
disbursements of counsel for Parent and reasonable fees and expenses of one
counsel for the Stockholders up to $5,000. All (i) underwriting discounts and
commissions, (ii) stock transfer taxes incurred in respect of the Registrable
Shares being sold and (iii) legal and accounting fees, expenses and
disbursements of the Stockholders (except as set forth above) shall be borne and
paid ratably by the Stockholders of the Registrable Securities included in any
such registration.

<PAGE>
4. Registration Procedures. In the case of each registration
-----------------------
effected by Parent pursuant to this agreement, Parent shall:

(a) keep such registration statement effective for a period
of 120 days or until each Stockholder has completed the distribution described
in the registration statement, whichever occurs first;

(b) furnish each Stockholder copies of any registration
statement and each preliminary or final prospectus, or supplement or amendment
required to be prepared pursuant to this agreement, as any Stockholder may from
time to time reasonably request;

(c) prepare and promptly file with the Securities and
Exchange Commission (the "SEC") and promptly notify each Stockholder of the
---
filing of any amendments or supplements to such registration statement or
prospectus as may be necessary to correct any statements or omissions if, at any
time when a prospectus relating to the Registrable Shares is required to be
delivered under the Securities Act, any event with respect to Parent shall have
occurred as a result of which any such prospectus or any other prospectus as
then in effect would include an untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made, in the
light of the circumstances under which they were made, not misleading; and

(d) use its best efforts to qualify as soon as reasonably
practicable the Registrable Shares included in the registration statement for
sale under the securities or blue-sky laws of such states and jurisdictions
within the United States as shall be reasonably requested by any Stockholder;
provided that Parent shall not be required in connection therewith or as a
- --------
condition thereto to qualify to do business, to become subject to taxation or to
file a consent to service of process generally in any of the aforesaid states or
jurisdictions.

5. Delay of Registration
---------------------

No Stockholder shall have any right to take any action to restrain,
enjoin or otherwise delay any registration as a result of any controversy that
may arise with respect to the interpretation or implementation of this
agreement.

<PAGE>
6. Indemnification
---------------

(a) Parent shall indemnify each Stockholder offering
Registrable Shares for sale pursuant to each registration that has been effected
pursuant to this agreement against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
of a material fact contained in any registration statement under which such
Registrable Shares were registered under the Securities Act, or based on any
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse each
such Stockholder for any legal or other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action; provided, however, that Parent shall pay for only one firm
-------- -------
of counsel for all such Stockholders and Parent shall not be liable to a
Stockholder in any such case (i) to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue statement
or omission based upon information furnished to Parent by such Stockholder or
(ii) in the case of a sale directly by a Stockholder of Registrable Shares
(including a sale of such Registrable Shares through any underwriter retained by
such Stockholder engaging in a distribution on behalf of such Stockholder), such
untrue statement or omission was contained in a preliminary prospectus and
corrected in a final or amended prospectus, and such Stockholder failed to
deliver a copy of the final or amended prospectus at or prior to the
confirmation of the sale of the Registrable Shares to the person or entity
asserting any such loss, claim, damage or liability.

(b) Each of the Stockholders shall, if Registrable Shares
held by them are included in the securities as to which such registration is
being effected, severally indemnify Parent, each of its directors and officers
who sign such registration statement, each affiliate and control person of
Parent, each underwriter, if any, of Parent's securities covered by such
registration statement, each other Stockholder and each other security holder
whose securities are included in such registration, and each affiliate thereof
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement of a material fact
contained in any such registration statement under which such Registrable Shares
were registered under

<PAGE>
the Securities Act, or based on any omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse Parent, such directors, officers, employees,
affiliates, other Stockholders or security holders or underwriters for any legal
or any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement or omission is made
in such registration statement in reliance upon and in conformity with
information furnished to Parent by such Holder.

(c) Each party entitled to indemnification under this
section 6 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and any claim or any litigation resulting therefrom. In case any action
is brought against an Indemnified Party, and it notifies the Indemnifying
Parties of the commencement thereof, the Indemnifying Party will be entitled to
participate in and, to the extent it so determines, assume the defense thereof;
provided that counsel for the Indemnifying Party, who shall conduct the defense
of such claim or any litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not unreasonably be withheld), and the
Indemnified Party may participate in such defense at such party's expense.
After notice from the Indemnifying Party of its election to so assume the
defense thereof, the Indemnifying Party will not be liable to such Indemnified
Party for any legal or other expenses subsequently incurred by the Indemnified
Party in connection with the defense thereof. Each Indemnified Party shall
furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.

7. Conditions to Registration. As a condition to Parent's
--------------------------
obligation under this agreement to cause a registration statement to be filed or
Registrable Shares to be included in a registration statement, each Stockholder
shall provide such information and execute such documents as may reasonably be
required in connection with such registration. In addition, Parent shall not be
obligated to file a registration statement or to include Registrable

<PAGE>
Shares in a registration statement under this agreement as to any Stockholder,
(i) if Parent shall have received opinions of counsel reasonably satisfactory to
such Stockholder and to the effect that the proposed disposition of such
Registrable Shares by such Holder may be effected without registration under the
Securities Act, (ii) to the extent any such Registrable Shares can then be sold
during a single three month period pursuant to Rule 144 under the Securities Act
or (iii) unless such Stockholder shall enter into customary agreements
(including underwriting and lock-up agreements in customary form) and take all
such other actions as Parent or the underwriters, if any, reasonably request in
order to expedite or facilitate the disposition of the Registrable Shares of
such Stockholder. Without limiting the foregoing, no Stockholder may
participate in any registration under this agreement which is underwritten
unless such Stockholder (a) agrees to sell its securities on the basis provided
in any such underwriting arrangements and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements.

8. Rule 144. With a view to making available the benefits of
--------
certain rules and regulations of the SEC which may permit the sale of the
restricted securities to the public without registration, Parent agrees to (a)
make and keep public information available as those terms are understood and
defined in Rule 144 under the Securities Act at all times filed by the Company
for an offering of its securities to the general Public, and (b) use its best
efforts to file with the SEC in a timely manner all reports and other documents
required of Parent under the Securities Exchange Act of 1934.

9. Notices. All notices and other communications under this
-------
agreement shall be in writing and shall be delivered personally or by next-day
courier or telecopied, to the parties at the addresses specified below (or at
such other address for a party as shall be specified by like notice):

<PAGE>
if to Parent, to:

Henry Schein, Inc.
135 Duryea Road
Melville, New York 11747
Fax: 516-843-5675
Attention: Mark E. Mlotek, Esq.

with a copy to:

Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
Fax: 212-969-2900
Attention: Richard L. Goldberg, Esq.

if to the Stockholders, to:

Scientific Supply Company
9405 West River Street
Schiller Park, Illinois 60176
Fax: 847-671-0064
Attention: Lawrence Frankel

with a copy to:

Aronberg Goldgehn Davis & Garmisa
Suite 3000 One IBM Plaza
Chicago, Illinois
Fax: 312-828-9635
Attention: Ned S. Robertson, Esq.

All such notices and communications shall be deemed received upon (a) actual
receipt by the addressee, (b) actual delivery to the appropriate address or (c)
in the case of a facsimile transmission, upon transmission by the sender and
issuance by the transmitting machine of a confirmation slip confirming the
number of pages constituting the notice have been transmitted without error.

10. Assignment. The registration rights granted pursuant to this
----------
agreement shall not be assignable.

11. Separability. If any provision of this agreement is invalid or
------------
unenforceable, the balance of this agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall

<PAGE>
nevertheless remain applicable to all other persons and circumstances.

12. Governing Law. This agreement shall be governed by and construed
-------------
in accordance with the law of the State of Delaware applicable to agreements
made and to be performed wholly in Delaware.

13. Equitable Relief. The parties acknowledge that the remedy at law
----------------
for breach of this agreement may be inadequate and that, in addition to any
other remedy a party may have for a breach of this agreement, that party may be
entitled to an injunction restraining any such breach or threatened breach, or a
decree of specific performance, without posting any bond or security. The
remedy provided in this section 13 is in addition to, and not in lieu of, any
other rights or remedies a party may have.

14. Counterparts. This agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement.

HENRY SCHEIN, INC.

By:_____________________
Name:
Title:

_________________________
Lawrence J. Frankel

_________________________
Norman Frankel

_________________________
Rudolph Kelemen

_________________________
Bruce Barber

EXHIBIT 10.94

ACQUISITION AGREEMENT

dated as of May 23, 1996

Among

HENRY SCHEIN, INC.,
SILVERMAN'S DENTAL SUPPLY CORP.,
SAN FRANCISCO DENTAL SUPPLY, INC.,

and

LARRY OLSON

<PAGE>

TABLE OF CONTENTS

PAGE

ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 2

ARTICLE II SALE AND PURCHASE OF INVENTORY, SALE AND PURCHASE OF EX-
TERRITORY BUSINESS, SALE AND PURCHASE OF SF DESIGNATED
TERRITORY RELATED BUSINESS AND SALE AND PURCHASE OF
SF/ROBIN BUSINESS . . . . . . . . . . . . . . . . . . . . . 21
2.1 Purchase of Inventory . . . . . . . . . . . . . . . . . . . 21
2.2 Purchase of the Ex-Territory Business. . . . . . . . . . . . 23
2.3 Purchase of the SF Designated Territory Related
Business. . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.4 Purchase of SF/Robin Business. . . . . . . . . . . . . . . . 26
2.5 Adjusted Purchase Price Determination . . . . . . . . . . . 29
2.6 Options . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.7 HSI Bridge Loan . . . . . . . . . . . . . . . . . . . . . . 36
2.8 HSI Common Stock . . . . . . . . . . . . . . . . . . . . . . 36
2.9 Allocation of Purchase Price . . . . . . . . . . . . . . . . 37
2.10 Nonassignable Contracts and Authorizations . . . . . . . . . 37
2.11 Control of Acquired Business During Adjustment Period . . . 37
2.12 Guarantee of Performance by SF . . . . . . . . . . . . . . . 38

ARTICLE III CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.1 The Closing . . . . . . . . . . . . . . . . . . . . . . . . 38
3.2 Obligations of SF and Olson . . . . . . . . . . . . . . . . 38
3.3 Obligations of HSI and Silverman's. . . . . . . . . . . . 39

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SF AND OLSON . . . . . . . 40
4.1 Organization and Qualification . . . . . . . . . . . . . . . 40
4.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.3 No Breach . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.4 Financial Statements and Sales Information . . . . . . . . . 41
4.5 Absence of Certain Changes or Events . . . . . . . . . . . . 41
4.6 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.7 Real Property . . . . . . . . . . . . . . . . . . . . . . . 42
4.8 Intellectual Property . . . . . . . . . . . . . . . . . . . 42
4.9 Contracts and Commitments . . . . . . . . . . . . . . . . . 42
4.10 Accounts Receivable . . . . . . . . . . . . . . . . . . . . 43
4.11 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . 43

(i)

<PAGE>

PAGE

4.12 Customers and Suppliers . . . . . . . . . . . . . . . . . . 43
4.13 Litigation, Etc. . . . . . . . . . . . . . . . . . . . . . . 43
4.14 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . 44
4.15 Compliance with Law; Necessary Authorizations . . . . . . . 44
4.16 Finders . . . . . . . . . . . . . . . . . . . . . . . . . . 44
4.17 Consents and Approvals of Governmental Authorities . . . . . 45
4.18 Related Party Transactions; Intercompany Accounts . . . . . 45

ARTICLE V REPRESENTATIONS AND WARRANTIES
OF HSI AND SILVERMAN'S . . . . . . . . . . . . . . . . . . . 45
5.1 Organization and Qualification . . . . . . . . . . . . . . . 45
5.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.3 No Breach . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.4 HSI Financial Statements and Sales Information . . . . . . . 46
5.5 Absence of Certain Changes or Events . . . . . . . . . . . . 46
5.6 Customers and Suppliers . . . . . . . . . . . . . . . . . . 47
5.7 Litigation, Etc. . . . . . . . . . . . . . . . . . . . . . . 47
5.8 Finders . . . . . . . . . . . . . . . . . . . . . . . . . . 47

ARTICLE VI COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.1 Certain Covenants of SF and Olson . . . . . . . . . . . . . 47
6.2 Obtaining Consents . . . . . . . . . . . . . . . . . . . . . 49
6.3 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.4 Transfer and Retention of Records . . . . . . . . . . . . . 50
6.5 Product Replacement and Repairs . . . . . . . . . . . . . . 50
6.6 Employee Matters . . . . . . . . . . . . . . . . . . . . . . 50
6.7 Further Assurances . . . . . . . . . . . . . . . . . . . . . 51
6.8 Name Change . . . . . . . . . . . . . . . . . . . . . . . . 51
6.9 Certain Leased Property Related Matters . . . . . . . . . . 51

ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS
OF HSI AND SILVERMAN'S . . . . . . . . . . . . . . . . . . . 51
7.1 Representations and Warranties Accurate . . . . . . . . . . 51
7.2 Performance by SF and Olson. . . . . . . . . . . . . . . . 52
7.3 Certificate . . . . . . . . . . . . . . . . . . . . . . . . 52
7.4 Opinions of Counsel for SF and Olson . . . . . . . . . . . . 52
7.5 Authorization; Legal Prohibition . . . . . . . . . . . . . . 52
7.6 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.7 Closing Deliveries . . . . . . . . . . . . . . . . . . . . . 53
7.8 Absence of Adverse Changes . . . . . . . . . . . . . . . . . 53
7.9 Payments by SF to Shareholders and Debtholders. . . . . . . 53
7.10 Satisfactory Completion of Due Diligence. . . . . . . . . . 54

(ii)

<PAGE>

PAGE

7.11 Confirmation of Agreed Upon Ex-Territory Business Value . . 54
7.12 Distribution Agreement . . . . . . . . . . . . . . . . . . . 54
7.13 Actions by SF . . . . . . . . . . . . . . . . . . . . . . . 54
7.14 Additional Documents, Etc. . . . . . . . . . . . . . . . . . 54

ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF
SF AND OLSON . . . . . . . . . . . . . . . . . . . . . . . . 54
8.1 Representations and Warranties Accurate . . . . . . . . . . 54
8.2 Performance by Buyer . . . . . . . . . . . . . . . . . . . . 54
8.3 Certificate . . . . . . . . . . . . . . . . . . . . . . . . 54
8.4 Opinion of Counsel for HSI and Silverman's . . . . . . . . . 55
8.5 Authorizations; Legal Prohibition . . . . . . . . . . . . . 55
8.6 Closing Deliveries . . . . . . . . . . . . . . . . . . . . . 55
8.7 Actions by HSI and Silverman's. . . . . . . . . . . . . . 55
8.8 Additional Documents, Etc. . . . . . . . . . . . . . . . . . 55

ARTICLE IX RESTRICTIVE COVENANTS . . . . . . . . . . . . . . . . . . . 55
9.1 Non-Competition . . . . . . . . . . . . . . . . . . . . . . 55
9.2 Non-Solicitation of Employees . . . . . . . . . . . . . . . 56
9.3 Non-Solicitation or Interference with
Customers and Suppliers . . . . . . . . . . . . . . . . . . 56
9.4 Acknowledgements . . . . . . . . . . . . . . . . . . . . . . 56

ARTICLE X INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 57
10.1 Survival of Representations and Warranties . . . . . . . . . 57
10.2 Indemnification by SF and Olson . . . . . . . . . . . . . . 57
10.3 Indemnification by HSI and Silverman's . . . . . . . . . . . 57
10.4 Indemnification Procedures . . . . . . . . . . . . . . . . . 58

ARTICLE XI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 59
11.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . 59
11.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 61
11.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 61
11.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 61
11.5 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . 61
11.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 61
11.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 62
11.8 Governing Law; Submission to Jurisdiction . . . . . . . . . 62
11.9 Binding Effect; Assignment . . . . . . . . . . . . . . . . . 63
11.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . 63
11.11 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 63
11.12 No Partnership; Etc. . . . . . . . . . . . . . . . . . . . . 63

(iii)

<PAGE>

PAGE

11.13 Third Parties . . . . . . . . . . . . . . . . . . . . . . . 63

(iv)

<PAGE>

EXHIBITS AND SCHEDULES

Exhibits

1.29 Employment Agreement
2.7 SF Note
2.12 Olson Guaranty
3.2(b) Opinion of Counsel for SF and Olson
3.2(d)-1 Bill of Sale to HSI
3.2(d)-2 Bill of Sale to Silverman's
3.3(d) Opinion of Counsel for HSI and Silverman's
3.3(e)-1 Assumption Agreement in favor of SF from HSI
3.3(e)-2 Assumption Agreement in favor of SF from Silverman's

Schedules

1.52(a) Ex-Territory Contracts
1.52(b) Ex-Territory Excluded Assets
1.124 SF Designated Territory Excluded Assets
1.139 SF/Robin Excluded Assets
2.2.2(e) Ex-Territory Excluded Liabilities
2.3(b) Assumed SF Designated Territory Contracts
2.3(c) SF Excluded Liabilities
2.4(b) Assumed SF/Robin Contracts
2.4(c) SF/Robin Excluded Liabilities
4.3 No Breach
4.4A SF Financial Statements
4.4B SF Financial Statements - Exceptions to Generally Accepted Accounting
Principles
4.5 Absence of Certain Changes or Events
4.6 Certain Excluded Assets
4.7 Real Property
4.8 Intellectual Property
4.9 SF/Robin Contracts
4.10 Accounts Receivable
4.11 Inventory
4.12 Customers and Suppliers - Adverse Change, etc.
4.13 Litigation, etc.
4.14 Employee Benefit Plans
4.15(a) Compliance with Law
4.15(b) Authorizations
4.17 Consents and Approvals of Governmental Authorities
4.18 Related Party Transactions
5.4A HSI Financial Statements

(v)

<PAGE>

5.4B HSI Financial Statements - Exceptions to Generally Accepted
Accounting Principles
5.5 Absence of Certain Changes or Events
5.7 Litigation, etc.
7.9 Payments by SF to Shareholders and Debtholders

(vi)

<PAGE>
ACQUISITION AGREEMENT

ACQUISITION AGREEMENT, dated as of May 23, 1996 (the "Agreement"), by and among
Henry Schein, Inc., a Delaware corporation ("HSI"), Silverman's Dental Supply
Corp., a New York corporation ("Silverman's"), San Francisco Dental Supply,
Inc., a California corporation ("SF"), and Larry Olson, an individual and the
principal stockholder of SF ("Olson").

WITNESSETH

WHEREAS, HSI is principally engaged in the distribution of healthcare
products, supplies and equipment primarily to office-based healthcare
practitioners in the dental, medical and veterinary markets (the "HSI
Business"), including, without limitation, the Pattison Business (as such term
is hereinafter defined); and

WHEREAS, Silverman's is principally engaged in the distribution
through direct marketing of dental supplies and equipment (the "Silverman's
Business"); and

WHEREAS, SF is principally engaged in the distribution of dental
supplies and equipment (the "SF Business"); and

WHEREAS, Silverman's is a wholly-owned subsidiary of HSI; and

WHEREAS, Olson is the principal stockholder of SF and, in such
capacity, controls SF; and

WHEREAS, as a result of the transactions contemplated hereby, Olson
shall become the sole stockholder of SF; and

WHEREAS, subject to the terms and conditions of this Agreement, SF
desires to sell and transfer, and HSI desires to purchase and acquire, certain
specified inventory owned by SF; and

WHEREAS, subject to the terms and conditions of this Agreement, SF
desires to sell and transfer, and HSI desires to purchase and acquire, the Ex-
Territory Business (as such term is hereinafter defined); and

<PAGE>
WHEREAS, subject to the terms and conditions of this Agreement, SF
desires to sell and transfer, and HSI desires to purchase and acquire, the SF
Designated Territory Related Business (as such term is hereinafter defined); and

WHEREAS, subject to the terms and conditions of this Agreement, SF
desires to sell and transfer, and HSI and Silverman's desire to purchase and
acquire, the SF/Robin Business (as such term is hereafter defined); and

WHEREAS, HSI and Pattison (as such term is hereinafter defined) have
concurrently entered into the Pattison Agreement (as such term is hereinafter
defined) pursuant to which, among other things, HSI shall acquire certain
specified assets and the related business from Pattison; and

WHEREAS, the parties hereto have previously entered into that certain
Acquisition Agreement, dated of even date herewith (the "Original Agreement"),
by means of their execution and delivery of that certain Agreement, dated of
even date herewith (the "Agreement"); and

WHEREAS, the parties hereto desire to enter into this Agreement to
amend and restate the Original Agreement as amended, modified and supplemented
by the Agreement and set forth their complete agreement and understanding with
respect to the subject matter hereof;

NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the parties hereto have
agreed, and do hereby agree, as follows:

ARTICLE I DEFINITIONS
-----------

The terms defined in this Article I, whenever used herein (including
the exhibits and schedules hereto, unless otherwise defined therein), shall have
the following meanings.

1.1 "Acquired Assets" shall mean, collectively, the Purchased
---------------
Inventory, the Ex-Territory Assets, the SF Designated Territory Related Assets
and the SF/Robin Assets.

1.2 "Adjusted Purchase Price Dispute Statement" shall mean either the
-----------------------------------------
Designated Territory Sales Dispute Statement or the Silverman's/Robin Sales
Dispute Statement, as the case may be.

1.3 "Affiliate" shall mean any Person that directly or indirectly
---------
controls, is controlled by or is under common control with another Person.

1.4 "Agreed Upon Ex-Territory Business Value" shall mean $2,383,231.
---------------------------------------

1.5 "Agreement" shall mean this Acquisition Agreement, including all
---------
Schedules and Exhibits hereto, in each case, as the same may be amended from
time to time.

1.6 "Agreement Date" shall mean May 23, 1996 which is the date on
--------------
which this Agreement shall be effective.

<PAGE>
1.7 "Assumed Contracts" shall mean, collectively, the leases,
-----------------
agreements, contracts, commitments and understandings specifically assumed
pursuant to Sections 2.3(b) and 2.4(b).

1.8 "Authorizations" shall mean all licenses, permits, approvals,
--------------
authorizations, qualifications, concessions or the like, issued by any federal,
state, local or foreign regulatory or governmental authorities.

1.9 "Business" shall mean the distribution of dental supplies and
--------
equipment, including the HSI Business (but only to the extent the HSI Business
includes the distribution of dental supplies and equipment), the Silverman's
Business, the Pattison Business, the SF Business and the SF/Robin Business.

1.10 "Business Day" shall mean any day other than a Saturday, Sunday
------------
or other day on which banks are closed or are authorized to be closed in New
York, New York.

1.11 "Buyer Claimant" shall have the meaning set forth in Section
--------------
10.2 of this Agreement.

1.12 "Closing" shall mean the closing of the purchase and sale of the
-------
Acquired Assets and the Ex-Territory Business, the SF Designated Territory
Related Business and the SF/Robin Business as contemplated by this Agreement.

1.13 "Closing Date" shall have the meaning set forth in Section 3.1
------------
of this Agreement.

1.14 "Closing Inventory Report" shall have the meaning set forth in
------------------------
Section 2.1.3(a) of this Agreement.

1.15 "Closing Payments" shall mean the sum of (i) the SF Closing
----------------
Inventory Payment, (ii) the amount, if any, payable by HSI pursuant to Section
2.1.3(c), (iii) the Agreed Upon Ex-Territory Business Value, (iv) the HSI
Closing Sales Payment Amount, (v) the Silverman's/Robin Closing Sales Payment
Amount, (vi) the amount, if any, payable by HSI pursuant to Section 2.3(g) and
(vii) the amount, if any, payable by HSI pursuant to Section 2.4(g).

1.16 "Closing SF Inventory Value" shall mean the Inventory Purchase
--------------------------
Price of all Inventory of SF as of the Closing Date which is included in the
Purchased Inventory as determined in accordance with Section 2.1.3(b).

1.17 "Code" shall mean the Internal Revenue Code of 1986, as amended.
----

1.18 "Combined Designated Territory Net Sales Base" shall mean
--------------------------------------------
$33,716,478

<PAGE>
1.19 "Combined HSI/SF Sales" shall mean the sum of HSI Sales and SF
---------------------
Sales.

1.20 "Combined Silverman's/Robin Net Sales Base" shall mean
-----------------------------------------
$13,955,456.

1.21 "Combined Silverman's/Robin Sales" shall mean the sum of
--------------------------------
Silverman's Sales and SF/Robin Sales.

1.22 "Credit Agreement" shall have the meaning set forth in Section
----------------
7.6(b).

1.23 "Corporate Account" shall mean any customer which conducts a
-----------------
dental practice which is principally owned by one or more Persons who do not
practice dentistry at the location of such customer. For purposes of
illustration, the parties hereto agree that as of the Agreement Date the
Corporate Accounts include Parke-Dental.

1.24 "Dealer Sales" shall mean any customer who is not a practicing
------------
dentist or doctor or a Corporate Account.

1.25 "Designated Territory" shall mean, collectively, Iowa, Kansas,
--------------------
Minnesota, Missouri, Nebraska, Wisconsin, the portion of Upper Michigan included
within the following ZIP codes: all ZIP codes between 49800 and 49999, and the
portion of Greater St. Louis included within the following ZIP codes: all ZIP
codes between 62000 and 62299.

1.26 "Designated Territory Business" shall mean the HSI Business (but
-----------------------------
only to the extent the HSI Business includes the distribution of dental supplies
and equipment) and the SF Business as conducted in the Designated Territory.

1.27 "Designated Territory Sales" shall mean all Net Sales by HSI and
--------------------------
its Affiliates located in the Designated Territory for the 12-month period
beginning on the first day of the fourth calendar month immediately succeeding
the Closing Date minus New Reps Sales; provided, however, that with respect to
----- -------- -------
Corporate Accounts, Designated Territory Sales shall only include Corporate
Accounts of those Persons who maintain corporate headquarters in the Designated
Territory.

1.28 "Employee Benefit Plan" means any "employee benefit plan" within
---------------------
the meaning of Section 3(3) of ERISA, and any other bonus, profit sharing,
compensation, pension, severance, deferred compensation, fringe benefit,
insurance, welfare, medical, post-retirement health or welfare benefit, medical
reimbursement, health, life, stock option, stock purchase, tuition refund,
service award, company car, scholarship, relocation, disability, accident, sick
pay, sick leave, vacation, termination, individual employment, executive
compensation, incentive, bonus, commission, payroll practices, retention or
other plan, agreement, policy, trust fund or arrangement, whether written

<PAGE>
or unwritten, and whether maintained, sponsored or contributed to by SF or any
entity that would be deemed a "single employer" with SF under Section 414(b),
(c), (m) or (o) of the Code or Section 4001(a)(14) of ERISA (an "ERISA
Affiliate") on behalf of any of the current, former or retired employees of SF
or their beneficiaries or with respect to which SF or any ERISA Affiliate of SF
has or has had any obligation on behalf of any such employee or beneficiary.

1.29 "Employment Agreement" shall mean the Employment Agreement
--------------------
between Olson and HSI substantially in the form of Exhibit 1.29.

1.30 "Encumbrance" shall mean any lien, charge, restriction, encum-
-----------
brance, option, right of first refusal, security interest, easement, obligation
or claim or other third party right of any kind.

1.31 "Environment" shall mean any surface or subsurface physical
-----------
medium or natural resource, including, air, land, soil, surface waters, ground
waters, stream and river sediments, and biota.

1.32 "Environmental Laws" shall mean any federal, state, local or
------------------
foreign law, rule, regulation, ordinance, code, order or judgment (including the
common law and any judicial or administrative interpretations, guidances,
directives or opinions) relating to the injury to, or the pollution or
protection of human health and safety or the Environment.

1.33 "Environmental Liabilities" shall mean any claims, judgments,
-------------------------
damages (including punitive damages), losses, penalties, fines, liabilities,
encumbrances, liens, violations, costs and expenses (including attorneys' and
consultants' fees) of investigation, remediation or defense of any matter
relating to human health, safety or the Environment of whatever kind or nature
by any party, entity or authority, (a) which are incurred as a result of (i) the
existence of Hazardous Substances in, on, under, at or emanating from any real
property presently or formerly owned or operated by SF or any of its Affiliates,
(ii) the offsite transportation, treatment, storage or disposal of Hazardous
Substances generated by SF or any of its Affiliates, or (iii) the violation of
any Environmental Laws or (b) which arise under the Environmental Laws.

1.34 "ERISA" shall mean the Employee Retirement Income Security Act
-----
of 1974, as amended, and the regulations thereunder.

1.35 "ERISA Affiliate" shall have the meaning set forth in Section
---------------
1.28 of this Agreement.

1.36 "Estimated Closing SF Inventory Value" shall mean an estimate of
------------------------------------
the Inventory Purchase Price of all Inventory of SF as of the Closing Date
prepared in good faith by SF in accordance with Section 2.1.3(a).

<PAGE>
1.37 "Estimated Designated Territory Sales" shall mean an estimate of
------------------------------------
Designated Territory Sales prepared in good faith by HSI in accordance with
Section 2.5.1(d).

1.38 "Estimated Goodwill" shall mean an estimate of Goodwill prepared
------------------
in good faith by HSI in accordance with Section 2.6.3.

1.39 "Estimated HSI Sales" shall mean $25,076,044.
-------------------

1.40 "Estimated HSI/SF Average Eligible Sales" shall mean an estimate
---------------------------------------
of the HSI/SF Average Eligible Sales prepared in good faith by HSI in accordance
with Section 2.6.3.

1.41 "Estimated New Reps Sales" shall mean an estimate of New Reps
------------------------
Sales prepared in good faith by HSI in accordance with Section 2.5.1.1(a).

1.42 "Estimated New Reps Sales Statement" shall have the meaning set
----------------------------------
forth in Section 2.5.1.1(b).

1.43 "Estimated SF Sales" shall mean $8,640,434.
------------------

1.44 "Estimated SF Share of the Overlapping Business Purchase Price"
-------------------------------------------------------------
shall mean an estimate of the SF Share of the Overlapping Business Purchase
Price prepared in good faith by HSI in accordance with Section 2.6.3.

1.45 "Estimated SF Share of the Overlapping Designated Territory
----------------------------------------------------------
Business Purchase Price" shall mean an estimate of the SF Share of the
- -----------------------
Overlapping Designated Territory Business Purchase Price prepared in good faith
by HSI in accordance with Section 2.6.3.

1.46 "Estimated SF/Robin Sales" shall mean $7,745,456.
------------------------

1.47 "Estimated Silverman's Sales" shall mean $6,210,000.
---------------------------

1.48 "Estimated Silverman's/Robin Average Eligible Sales" shall mean
--------------------------------------------------
an estimate of the Silverman's/Robin Average Eligible Sales prepared in good
faith by HSI in accordance with Section 2.6.3.

1.49 "Estimated Silverman's/Robin Sales" shall mean an estimate of
---------------------------------
Silverman's/Robin Sales prepared in good faith by HSI in accordance with Section
2.5.2(d).

1.50 "Ex-Territory" shall mean any place located in the United States
------------
of America exclusive of the Designated Territory.

<PAGE>
1.51 "Ex-Territory Assets" shall have the meaning set forth in
-------------------
Section 1.50.

1.52 "Ex-Territory Business" shall mean all of SF's right, title and
---------------------
interest in and to its assets (wherever located, tangible and intangible
(including goodwill), real, personal or mixed, whether known or unknown and
whether or not carried on the books and records of SF) and the SF Business as a
going concern, in each case, as conducted in the Ex-Territory (excluding only
the assets specified in the proviso below), including, but not limited to, the
following (the "Ex-Territory Assets"):

(a) all of SF's rights under agreements, arrangements,
commitments, and understandings ("Ex-Territory Contracts") relating to the SF
Business as a going concern as conducted in the Ex-Territory and which are set
forth on schedule 1.50(a);

(b) all of SF's records, files and other data relating to the
SF Business as a going concern as conducted in the Ex-Territory;

(c) all of SF's copyrights and all of SF's rights in the
trademarks, service marks, trade names and logos now or previously used by SF in
the SF Business as a going concern as conducted in the Ex-Territory;

(d) all of SF's inventions, computer software, trade secrets
and confidential data relating to the SF Business as a going concern as
conducted in the Ex-Territory;

(e) all rights to the name "San Francisco Dental Supply" and
all names derivative therefrom (the "SF Name") in the Ex-Territory, and all
rights to the names "DDS," "PRN Dental Supply," "Dental Preferred," "Critser's"
and "Midwestern Dental" (both within and outside the Ex-Territory) and all names
derivative therefrom (collectively, the "Other SF Names");

(f) all of SF's equipment (including office equipment),
computers, furniture, fixtures, leasehold improvements, stationery, forms,
labels, promotional materials and similar supplies used by SF in the SF Business
as a going concern conducted in the Ex-Territory;

(g) all other tangible assets owned by SF wherever located in
the Ex-Territory;

(h) customer lists, customer sales orders and sales leads,
customer shipping labels and forms, customer sales and vendor purchase
histories, catalogs, brochures, mailing lists, advertising materials, records,
files, computer software, and other information pertaining to SF or the SF
Business or the customers and suppliers thereto in the Ex-Territory;

<PAGE>
(i) to the extent transferable, all manufacturer's warranties
with respect to any of the foregoing;

(j) all Authorizations relating to the SF Business as conducted
in the Ex-Territory;

(k) all "800 numbers"; and

(l) all claims against third parties;

provided, however, that the term "Ex-Territory Business" shall not include (i)
- -------- -------
the minute books and stock ledger of SF; (ii) cash and cash equivalents on hand
or in banks and debt and equity securities; (iii) SF's accounts receivable or
Non-Matching Inventory which is not designated as Optional SF Inventory, (iv)
any asset or business included and used principally in the Designated Territory
Business or the SF/Robin Business, (v) the assets specifically listed on
Schedule 1.52 hereto or (vi) the Oats Business.

1.53 "Ex-Territory Contracts" shall have the meaning set forth in
----------------------
Section 1.52(a).

1.54 "Excess Designated Territory Sales" shall mean the amount, if
---------------------------------
positive, by which Designated Territory Sales exceed the Combined Designated
Territory Net Sales Base by more than the Inflation Rate.

1.55 "Excess Silverman's/Robin Sales" shall mean the amount, if
------------------------------
positive, by which Silverman's/Robin Sales exceed the Combined Silverman's/Robin
Net Sales Base by more than the Inflation Rate.

1.56 "Excluded Liabilities" shall mean all liabilities or obligations
--------------------
of SF or Olson of any kind whatsoever, excluding solely those liabilities or
obligations which become Assumed Contracts pursuant to this Agreement.

1.57 "GAAP" shall mean generally accepted accounting principles
----
consistently applied.

1.58 "Goodwill" shall mean with respect to any acquisition of an
--------
Overlapping Designated Territory Business or Overlapping Business, as the case
may be, the excess, if any, of the purchase price of any such Business over the
book value of such Business as determined in accordance with GAAP.

1.59 "Hazardous Discharge" shall mean any releasing, spilling,
-------------------
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, migrating, disposing or dumping (including the movement of any
material through or in air, soil, surface or groundwater) of Hazardous
Substances, whether on, off, under or

<PAGE>
from the Real Property or any other real property owned, operated, leased or
used at any time by SF or any of its predecessors.

1.60 "Hazardous Substances" shall mean petroleum, petroleum products,
--------------------
petroleum-derived substances, radioactive materials, hazardous wastes,
polychlorinated biphenyls, lead based paint, urea formaldehyde, asbestos or any
materials containing asbestos, and any materials, wastes or substances regulated
or defined as or included in the definition of "hazardous substances,"
"hazardous materials," "hazardous constituents," "toxic substances,"
"pollutants," "contaminants" or any similar denomination intended to classify
substances by reason of toxicity, carcinogenicity, ignitability, corrosivity or
reactivity under any Environmental Laws.

1.61 "HSI" shall mean Henry Schein, Inc., a Delaware corporation.
---

1.62 "HSI Business" shall have the meaning set forth in the recitals
------------
hereto.

1.63 "HSI Closing Documents" shall have the meaning set forth in
---------------------
Section 5.2.

1.64 "HSI Common Stock" shall mean the common stock, par value $.01
----------------
per share, of HSI.

1.65 "HSI Designated Territory Assets" shall mean only the following
-------------------------------
assets used by HSI in connection with the dental supply and equipment products
sold by HSI in the Designated Territory: customer lists, customer sales orders
and sales leads, customer shipping labels and forms, customer sales and vendor
purchase histories, catalogs, brochures, mailing lists, advertising materials,
records, files, computer software, and other information pertaining to the HSI
Designated Territory Related Business or the customers and suppliers thereto.

1.66 "HSI Designated Territory Related Business" shall mean the HSI
-----------------------------------------
Business as presently conducted to the extent it includes the sale of dental
supplies and equipment in the Designated Territory as a going concern.

1.67 "HSI Financial Statements" shall mean the audited consolidated
------------------------
financial statements of HSI as of December 25, 1993, December 31, 1994 and
December 30, 1995, and for each of the fiscal years then ended.

1.68 "HSI Material Adverse Effect" shall mean any material adverse
---------------------------
effect, individually or in the aggregate, on the condition (financial or
otherwise), business, assets, operations or prospects of any of HSI or
Silverman's, the HSI Designated Territory Related Business or the Silverman's
Business, taken as a whole.

1.69 "HSI Net Margin Factor" shall mean the product of (x) 8.5 and
---------------------
(y) the quotient of HSI's consolidated after tax net income divided by HSI's
consolidated net

<PAGE>
sales, in each case, for the most recently completed fiscal year of HSI
preceding the determination of the HSI Net Margin Factor. For all purposes of
this Agreement, the amounts referred to in clause (y) of the immediately
preceding sentence shall be determined solely by reference to the audited
financial statements of HSI.

1.70 "HSI Sales" shall mean the sum of the Net Sales of HSI to
---------
customers located in the Designated Territory (other than Net Sales to Corporate
Accounts and Dealer Sales) for the fourth quarter of fiscal year 1995 and the
first quarter of fiscal year 1996 multiplied by 2, plus Net Sales of Pattison
for the fiscal year ending February 29, 1996, determined, in each case, in
accordance with Section 2.3(f).

1.71 "HSI Closing Sales Payment Amount" shall have the meaning set
--------------------------------
forth in Section 2.3(e).

1.72 "HSI/SF Combined Average Eligible Sales" shall mean the sum of
--------------------------------------
the following: (i) the product of (A) HSI/SF Combined Eligible Sales for the
12-month period ("Year 1") ending on the last day of the calendar month
immediately preceding the date of exercise of a put or call option pursuant to
Sections 2.6.1(a) or 2.6.2(a), as the case may be, and (B) 45%, (ii) the product
of (A) HSI/SF Combined Eligible Sales for the 12-month period immediately
preceding Year 1 ("Year 2") and (B) 35%, and (iii) the product of (A) HSI/SF
Combined Eligible Sales for the 12-month period immediately preceding Year 2 and
(B) 20%.

1.73 "HSI/SF Combined Eligible Sales" shall mean, for any period, the
------------------------------
dollar value of the aggregate Net Sales by HSI and its Affiliates under the
"Schein" or "SF Dental" name to customers located in the Designated Territory
(other than Net Sales to Corporate Accounts and Dealer Sales), as determined in
accordance with Section 2.6.3; provided, however, that with respect to Corporate
-------- -------
Accounts, HSI/SF Combined Eligible Sales shall only include Corporate Accounts
of those Persons who maintain corporate headquarters in the Designated
Territory.

1.74 "HSI/SF Combined Sales" shall mean the sum of HSI Sales and SF
---------------------
Sales.

1.75 "HSI/SF Designated Territory Assumed Liabilities" shall have the
-----------------------------------------------
meaning set forth in Section 2.3(b) hereto.

1.76 "HSI/SF Sales Dispute Statement" shall have the meaning set
------------------------------
forth in Section 2.3(f).

1.77 "HSI/Silverman's Authorizations" shall mean, collectively, all
------------------------------
Authorizations held, used or required by HSI and/or Silverman's in connection
with the HSI Designated Territory Related Business and the Silverman's Business.

<PAGE>
1.78 "HSI/Silverman's Business" shall mean the HSI Business and
------------------------
Silverman's Business with respect to dental supplies and equipment sold under
the name "Schein" and "Silverman's".

1.79 "Indemnitee" and "Indemnitor" shall have the meanings set forth
---------- ----------
in Section 10.4(a) of this Agreement.

1.80 "Ineligible Inventory" shall mean all Inventory which is
--------------------
obsolete, damaged, excessive, below standard quality or slow moving (i.e., items
----
that are for discontinued or expected to be discontinued product lines, or have
a stated expiration date of 6 months or less from the Closing Date, or items
that have not been used or sold within 6 months prior to the date hereof, or
items that have not been sold within the customary inventory turnover cycle of
SF with respect to such item, or items for which there is excess capacity (i.e.,
----
more products are on hand of any such item than have been sold in the past nine
(9) months)).

1.81 "Inflation Rate" shall mean the increase in the cost of living
--------------
for the 12-month period beginning on the first day of the fourth calendar month
immediately succeeding the Closing Date based on "The Consumer Price Index for
all Urban Consumers (1967 = 100)" (the "Index"), published by the United States
Department of Labor and computed as follows:

(i) The Index number in the column for Chicago-Gary-Lake County,
Ill-In-Wi, entitled "all items," for the fourth calendar month immediately
succeeding the Closing Date, shall be the "base index number" and the
corresponding Index number for such month for the next year shall be the current
Index number;

(ii) The increase in the cost of living during the relevant
measurement period shall be determined by subtracting the base Index number
(BIN) from the current Index number (CIN), and dividing the result thereof by
the BIN, in accordance with the following formula: increase in cost of living =
CIN minus BIN BIN; and
- ---

(iii) In the event the Index is discontinued, the parties hereto shall
accept comparable statistics on the cost of living for Chicago-Gary-Lake County,
Ill-In-Wi as computed and published by an agency of the United States or by a
responsible financial periodical of recognized authority then to be selected by
the parties hereto.

1.82 "Intellectual Property" shall mean all United States and foreign
---------------------
patents and pending patent applications, unpatented inventions, trademarks,
service marks and trade names, including, without limitation, the marks and
patents described on Schedule 4.8 of this Agreement, and copyrights, and
registrations and pending applications therefor, and all trade secrets, trade
names, computer programs and software, research and development, know-how,
customer lists, manufacturing, engineering and other drawings and blueprints,
technology, technical information, engineering data, design and engineering
specifications, inventions and other proprietary processes and

<PAGE>
information of any kind owned by SF or Olson or in which SF or Olson has a
proprietary or ownership or usage right, and all software necessary or desirable
to operate equipment included in the Acquired Assets, all as set forth on
Schedule 4.8 of this Agreement.

1.83 "Inventory" shall mean all inventory and related items
---------
(including all production, shipping and packaging supplies) relating to or used
or useful in connection with the SF Business, the Ex-Territory Business, the SF
Designated Territory Related Business or the SF/Robin Business.

1.84 "Inventory Dispute Statement" shall have the meaning set forth
---------------------------
in Section 2.1.3(b) of this Agreement.

1.85 "Inventory Disputed Items" shall have the meaning set forth in
------------------------
Section 2.1.3(b) of this Agreement.

1.86 "Inventory Purchase Price" shall mean the lower of (x) the
------------------------
Invoice Price or (y) market price of all Purchased Inventory goods and products
other than Ineligible Inventory, minus an inventory reserve computed in
accordance with GAAP.

1.87 "Invoice Price" shall mean, in the case of Purchased Inventory
-------------
finished goods and products other than Ineligible Inventory, the last actual
purchase price in accordance with SF's customary accounting principles (after
giving effect to any actual discounts or allowances (including cash discounts
and vendor rebates)) immediately prior to the Closing Date at which SF purchased
such Inventory from a non-Related Party.

1.88 "IRS" shall mean the Internal Revenue Service (or any successor
---
agency thereto).

1.89 "Losses" shall have the meaning set forth in Section 10.2 of
------
this Agreement.

1.90 "Material Adverse Effect" shall mean any material adverse
-----------------------
effect, individually or in the aggregate, on the condition (financial or
otherwise), business, assets, operations or prospects of SF, or the SF Business,
the Ex-Territory Business, the SF Designated Territory Related Business or the
SF/Robin Business or the Acquired Assets.

1.91 "New Reps Sales" shall mean all Net Sales attributable to New
--------------
Sales Reps for the 3-month period immediately succeeding the Closing Date
multiplied by 4, determined in accordance with Section 2.5.1.1(b).

1.92 "New Reps Sales Dispute Statement" shall have the meaning set
--------------------------------
forth in Section 2.5.1.1.(b).

1.93 "New Sales Reps" shall have the meaning set forth in Section
--------------
2.5.1.1(a).

<PAGE>
1.94 "Net Sales" shall mean net sales (as determined in accordance
---------
with GAAP, taking into account any returns and allowances) of dental supplies
and equipment (other than software).

1.95 "Non-Matching Inventory" shall mean any Inventory owned or held
----------------------
by SF which is not SF Like Kind Inventory or Ineligible Inventory.

1.96 "Oats Business" shall mean the marketing, development and sale
-------------
of oats based products through any entity owned or controlled by Olson
including, but not limited to, Ultravena Industries USA Ltd., Sativa Medical USA
Ltd. and Advanced Dental Technologies Ltd.

1.97 "Olson" shall mean Larry Olson.
-----

1.98 "Option Dispute Statement" shall have the meaning set forth in
------------------------
Section 2.6.3.

1.99 "Option Statement" shall have the meaning set forth in Section
----------------
2.6.3.

1.100 "Optional SF Inventory" shall mean all Inventory owned by SF
---------------------
which is not SF Like Kind Inventory; provided, however, that the Optional SF
-------- -------
Inventory shall not include any Ineligible Inventory.

1.101 "Overlapping Business" shall mean any Person principally engaged
--------------------
in the distribution of dental supplies or equipment to the discount or "low end"
market segment of the same type or same customer base as the Silverman's/Robin
Business.

1.102 "Overlapping Business Purchase Price" shall mean the sum of all
-----------------------------------
cash and the fair market value of all property paid by HSI and/or its Affiliates
(including, for this purpose, the assumption of any debt) for the purchase of
each Overlapping Business, plus imputed interest thereon at the Prime Rate.

1.103 "Overlapping Designated Territory Business" shall mean any
-----------------------------------------
Person engaged in the distribution of dental supplies or equipment (in whole or
in part) to customers located in the Designated Territory.

1.104 "Overlapping Designated Territory Business Purchase Price" shall
--------------------------------------------------------
mean the sum of all cash and the fair market value of all property paid by HSI
and/or the Affiliates (including, for this purpose, the assumption of any debt)
for the purchase of each Overlapping Designated Territory Business, plus imputed
interest thereon at the Prime Rate.

1.105 "Pattison" shall mean Pattison-McGrath Company Dental Supplies,
--------
a Missouri corporation and wholly-owned subsidiary of SF.

<PAGE>
1.106 "Pattison Agreement" shall mean the Acquisition Agreement, dated
------------------
as of May 23, 1996, by and between HSI and Pattison.

1.107 "Pattison Assets" shall mean the "Pattison Assets" as such term
---------------
is defined in the Pattison Agreement.

1.108 "Pattison Business" shall mean the "Business" as such term is
-----------------
defined in the Pattison Agreement.

1.109 "Pattison Note" shall mean the "Pattison Note" as such term is
-------------
defined in the Pattison Agreement.

1.110 "Permitted Activities" shall have the meaning set forth in
--------------------
Section 9.1 of this Agreement.

1.111 "Permitted Encumbrances" means mechanics', carriers', workmen's,
----------------------
repairmen's and other similar liens arising or incurred in the ordinary course
of business, purchase money liens arising in the ordinary course of business and
liens for taxes, assessments and other governmental charges not due and payable
or that may be paid without penalty.

1.112 "Person" shall mean any natural person, corporation, limited or
------
limited liability partnership, general partnership, joint venture, association,
joint-stock company, limited liability company, company, trust, bank, trust
company, land trust, business trust or other organization, whether or not a
legal entity, and any governmental unit or agency or political subdivision
thereof.

1.113 "Prime Rate" shall mean the fluctuating prime or base rate
----------
publicly announced from time to time by The Chase Manhattan Bank, N.A. (or any
successor thereto).

1.114 "Purchased Inventory" shall mean all Inventory purchased by HSI
-------------------
pursuant to Section 2.1.1.

1.115 "Real Property" shall mean the real property and interest in
-------------
real property described on Schedule 4.7 held by SF and the plants, buildings,
structures, storage tanks, erections and improvements of all kinds made to,
located on or forming a part of the real property and interests in real property
(including, without limitation, all fixtures), together with all easements,
rights-of-way, appurtenances and tenements to, on or otherwise beneficial to the
use of such real property or interests in real property or in the operation of
the SF Business, the Ex-Territory Business, the SF Designed Territory Related
Business or the SF/Robin Business.

1.116 "Related Party" shall have the meaning set forth in Section 4.18
-------------
of this Agreement.

<PAGE>
1.117 "Robin Name" shall mean the name "Robin," "Robin Dental" or
----------
"Robin Dental Company" and all names derivative therefrom.

1.118 "Securities Act" shall mean the Securities Act of 1933, together
--------------
with the rules and regulations promulgated thereunder.

1.119 "Seller Claimant" shall have the meaning set forth in Section
---------------
10.3 of this Agreement.

1.120 "SF" shall mean San Francisco Dental Supplies, Inc., a
--
California corporation, and, unless the context otherwise requires, shall also
include all of SF's subsidiaries.

1.121 "SF Closing Documents" shall have the meaning set forth in
--------------------
Section 4.2.

1.122 "SF Closing Inventory Payment" shall have the meaning set forth
----------------------------
in Section 2.1.2.

1.123 "SF Closing Sales Payment Amount" shall have the meaning set
-------------------------------
forth in Section 2.3(c).

1.124 "SF Designated Territory Assets" shall mean all of SF's right,
------------------------------
title and interest in and to its assets (wherever located, tangible and
intangible (including goodwill), real, personal or mixed, whether known or
unknown and whether or not carried on the books and records of SF) and the SF
Business as a going concern, in each case, as conducted in the Designated
Territory (excluding only the assets specified in the proviso below), including,
but not limited to, the following:

(a) all of SF's rights under agreements, arrangements,
commitments, and understandings ("SF Designated Territory Contracts") relating
to the SF Designated Territory Related Business;

(b) all of SF's records, files and other data relating to the
SF Designated Territory Related Business;

(c) all of SF's copyrights and all of SF's rights in the
trademarks, service marks, trade names and logos now or previously used by SF in
the SF Designated Territory Related Business;

(d) all of SF's inventions, computer software, trade secrets
and confidential data relating to the SF Designated Territory Related Business;

(e) all rights to the SF Name and the Other Names in the
Designated Territory;

<PAGE>
(f) all of SF's equipment (including office equipment),
computers, furniture, fixtures, leasehold improvements, stationery, forms,
labels, promotional materials and similar supplies used principally in
connection with the SF Designated Territory Related Business;

(g) all other tangible assets owned by SF wherever located in
the Designated Territory;

(h) customer lists, customer sales orders and sales leads,
customer shipping labels and forms, customer sales and vendor purchase
histories, catalogs, brochures, mailing lists, advertising materials, records,
files, computer software, and other information pertaining to the SF Designated
Territory Related Business or the customers and suppliers thereto in the
Designated Territory;

(i) to the extent transferable, all manufacturer's warranties
with respect to any of the foregoing;

(j) all Authorizations relating to the SF Designated Territory
Related Business;

(k) all "800 numbers"; and

(l) all claims against third parties;

provided, however, that the term "SF Designated Territory Assets" shall not
- -------- -------
include (i) the minute books and stock ledger of SF; (ii) cash and cash
equivalents on hand or in banks and debt and equity securities; (iii) SF's
accounts receivable or Non-Matching Inventory which is not designated as
Optional SF Inventory, (iv) any asset or business included in the Ex-Territory
Business, the Robin Business or the SF/Robin Business, (v) the real property and
other SF assets specifically set forth on Schedule 1.124 hereto or (vi) the Oats
Business.

1.125 "SF Designated Territory Contracts" shall have the meaning set
---------------------------------
forth in Section 1.124(a).

1.126 "SF Designated Territory Related Business" shall mean the SF
----------------------------------------
Business as a going concern as conducted in the Designated Territory.

1.127 "SF Excluded Assets" shall mean, collectively, all of the assets
------------------
of SF referred to in the proviso contained in the definitions of Ex-Territory
Business, SF Designated Territory Assets and SF/Robin Assets and the Oats
Business.

1.128 "SF Financial Statements" shall mean, collectively, (a) in the
-----------------------
case of each of SF, Robin Dental Company and Critser's Dental Equipment, Inc.,
its unaudited financial statements as of (i) December 31, 1993, 1994 and 1995,
and for each of the fiscal

<PAGE>
years then ended and (ii) March 31, 1996, and for the fiscal quarter then ended
and (b) in the case of Midwestern Dental, Inc., its unaudited financial
statements as of (i) February 29, 1996 and February 28, 1995, and for each of
the fiscal years then ended and (ii) March 31, 1996, and for the month then
ended.

1.129 "SF Like Kind Inventory" shall mean all Inventory owned by SF
----------------------
relating to or useful in connection with the SF Business, the SF Designated
Territory Related Business, the Ex-Territory Business or the SF/Robin Business
which (i) matches a stock keeping unit currently sold by HSI and/or (ii) is
large dental equipment, and which is not, in either case, Ineligible Inventory.

1.130 "SF Name" shall have the meaning set forth in Section 1.52(e).
-------

1.131 "SF Note" shall have the meaning set forth in Section 2.7.
-------

1.132 "SF Sales" shall mean the sum of the Net Sales of SF to non-
--------
Related Parties located in the Designated Territory (other than Net Sales to
Corporate Accounts and Dealer Sales) for the fourth quarter of fiscal year 1995
and the first quarter of fiscal year 1996 multiplied by 2, determined in
accordance with Section 2.3(f).

1.133 "SF Share of the Overlapping Business Purchase Price" shall mean
---------------------------------------------------
the product of (x) the Overlapping Business Purchase Price and (y) a fraction,
the numerator of which is total Net Sales of the Overlapping Businesses
attributable to the distribution of dental supplies and equipment to the
discount or "low-end" market segment of the same type or same customer base as
the Silverman's/Robin Business at the time of acquisition and the denominator of
which is the sum of the total Net Sales of the Overlapping Businesses at the
time of acquisition plus all other Net Sales of any such Overlapping Businesses
which do not constitute sales attributable to the distribution of dental
supplies and equipment to the discount or "low-end" market segment of the same
type and to the same customer base as the Silverman's/Robin Business, multiplied
----------
by 20%.

1.134 "SF Share of the Overlapping Designated Territory Business
---------------------------------------------------------
Purchase Price" shall mean the product of (x) the Overlapping Designated
- --------------
Territory Business Purchase Price and (y) a fraction, the numerator of which is
total Net Sales of the Overlapping Designated Territory Businesses within the
Designated Territory at the time of acquisition and the denominator of which is
the sum of total Net Sales of the Overlapping Designated Territory Businesses at
the time of acquisition plus all other Net Sales of any such Overlapping
Designated Territory Businesses to customers located inside or outside of the
Designated Territory, multiplied by 30%.
----------

1.135 "SF/Robin Authorizations" shall mean, collectively, all
-----------------------
Authorizations held, used or required by SF in connection with the SF Business,
the Ex-Territory Business, SF Designated Territory Related Business and/or the
SF/Robin Business.

<PAGE>
1.136 "SF/Robin Business" shall mean the SF Business, but only with
-----------------
respect to the distribution through direct marketing of dental supplies and
equipment principally under the name "Robin" and "Robin Dental" as presently
conducted, excluding the Oats Business.

1.137 "SF/Robin Contracts" shall have the meaning set forth in Section
------------------
4.9.

1.138 "SF/Robin Closing Sales Payment Amount" shall have the meaning
-------------------------------------
set forth in Section 2.4(e).

1.139 "SF/Robin Assets" shall mean all right, title and interest of SF
---------------
in and to its assets (wherever located, tangible and intangible (including
goodwill), real, personal or mixed, whether known or unknown and whether or not
carried on the books and records of SF) relating to the SF/Robin Business and
the SF/Robin Business as a going concern (excluding only the assets specified in
the proviso below), including, but not limited to, the following:

(a) all of SF's rights under agreements, arrangements,
commitments, and understandings relating to the SF/Robin Business;

(b) all of SF's records, files and other data relating to the
SF/Robin Business;

(c) all of SF's copyrights and all of SF's rights in the
trademarks, service marks, trade names and logos now or previously used by SF in
the SF/Robin Business;

(d) all of SF's inventions, computer software, trade secrets
and confidential data relating to the SF/Robin Business;

(e) all rights to the SF Name and the Other Names as used in
the SF/Robin Business and all rights to the Robin Name;

(f) all of SF's equipment (including office equipment),
computers, furniture, fixtures, leasehold improvements, stationery, forms,
labels, promotional materials and similar supplies used principally in
connection with the SF/Robin Business;

(g) all other tangible assets owned by SF and used in the
SF/Robin Business wherever located;

(h) customer lists, customer sales orders and sales leads,
customer shipping labels and forms, customer sales and vendor purchase
histories, catalogs, brochures, mailing lists, advertising materials, records,
files, computer software, and other information pertaining to the SF/Robin
Business or the customers and suppliers thereto;

<PAGE>
(i) to the extent transferable, all manufacturer's warranties
with respect to any of the foregoing;

(j) all Authorizations relating to the SF/Robin Business;

(k) all "800 numbers"; and

(l) all claims against third parties;

provided, however, that the term "SF/Robin Assets" shall not include (i) the
- -------- -------
minute books and stock ledger of SF; (ii) cash and cash equivalents on hand or
in banks and debt and equity securities; (iii) SF's accounts receivable or Non-
Matching Inventory which is not designated as Optional SF Inventory, (iv) any
asset or business included in the Ex-Territory Business or the Designated
Territory Business, (v) any asset specifically listed on Schedule 1.134 hereto
or (vi) the Oats Business.

1.140 "SF/Robin Sales" shall mean the sum of the Net Sales of the
--------------
SF/Robin Business to non-Related Parties (other than Net Sales to Corporate
Accounts and Dealer Sales) for the fourth quarter of fiscal year 1995 and the
first quarter of fiscal year 1996 multiplied by 2, determined in accordance with
Section 2.4(f).

1.141 "Shortfall Designated Territory Sales" shall mean the amount, if
------------------------------------
positive, by which the Combined Designated Territory Sales Base exceeds
Designated Territory Sales.

1.142 "Shortfall Silverman's/Robin Sales" shall mean the amount, if
---------------------------------
positive, by which the Combined Silverman's/Robin Sales Base exceeds
Silverman's/Robin Sales.

1.143 "Silverman's" shall mean Silverman's Dental Supply Corp., a New
-----------
York corporation.

1.144 "Silverman's Assets" shall mean all of Silverman's right, title
------------------
and interest in and to its assets (wherever located, tangible and intangible
(including goodwill), real, personal or mixed, whether known or unknown and
whether or not carried on the books and records of Silverman's) and the
Silverman's Business as a going concern (excluding only the assets specified in
the proviso below), including, but not limited to, the following:

(a) all of Silverman's rights under agreements, arrangements,
commitments, and understandings ("Silverman's Contracts") relating to the
Silverman's Business;

(b) all of Silverman's records, files and other data relating
to the Silverman's Business;

<PAGE>
(c) all of Silverman's copyrights and all of Silverman's rights
in the trademarks, service marks, trade names and logos now or previously used
by Silverman's in the Silverman's Business;

(d) all of Silverman's inventions, computer software, trade
secrets and confidential data relating to the Silverman's Business;

(e) all of Silverman's equipment (including office equipment),
computers, furniture, fixtures, leasehold improvements, stationery, forms,
labels, promotional materials and similar supplies used principally in
connection with the Silverman's Business;

(f) all other tangible assets owned by Silverman's wherever
located;

(g) customer lists, customer sales orders and sales leads,
customer shipping labels and forms, customer sales and vendor purchase
histories, catalogs, brochures, mailing lists, advertising materials, records,
files, computer software, and other information pertaining to the Silverman's
Business or the customers and suppliers thereto;

(h) to the extent transferable, all manufacturer's warranties
with respect to any of the foregoing;

(i) all Authorizations relating to the Silverman's Business;

(j) all "800 numbers"; and

(k) all claims against third parties;

provided, however, that the term "Silverman's Assets" shall not include (i) the
- -------- -------
minute books and stock ledger of Silverman's; (ii) cash and cash equivalents on
hand or in banks and debt and equity securities; (iii) Silverman's accounts
receivable; (iv) Inventory of Silverman's or (v) any asset or business included
in the Ex-Territory Business or the Designated Territory Business.

1.145 "Silverman's Contracts" shall have the meaning set forth in
---------------------
Section 1.144(a).

1.146 "Silverman's Sales" shall mean the sum of the Net Sales of
-----------------
Silverman's to unaffiliated third parties (other than Net Sales to Corporate
Accounts and Dealer Sales) during the fourth quarter of fiscal year 1995 and the
first quarter of fiscal year 1996 multiplied by 2, determined in accordance with
Section 2.4(f).

1.147 "Silverman's/Robin Assumed Liabilities" shall have the meaning
-------------------------------------
set forth in Section 2.4(b).

<PAGE>
1.148 "Silverman's/Robin Business" shall mean, collectively, the
--------------------------
combined businesses of Silverman's and SF/Robin.

1.149 "Silverman's Closing Sales Payment Amount" shall have the
----------------------------------------
meaning set forth in Section 2.4(e).

1.150 "Silverman's/Robin Combined Average Eligible Sales" shall mean
-------------------------------------------------
the sum of the following: (i) the product of (A) Silverman's/Robin Combined
Eligible Sales for the 12-month period ("Year 1") ending on the last day of the
calendar month immediately preceding the date of exercise of a put or call
option pursuant to Sections 2.6.1(b) or 2.6.2(b), as the case may be, and (B)
45%, (ii) the product of (A) Silverman's/Robin Combined Eligible Sales for the
12-month period immediately preceding Year 1 ("Year 2") and (B) 35%, and (iii)
the product of (A) Silverman's/Robin Combined Eligible Sales for the 12-month
period immediately preceding Year 2 and (B) 20%.

1.151 "Silverman's/Robin Combined Eligible Sales" shall mean, for any
-----------------------------------------
period, the dollar value of the aggregate Net Sales by HSI and/or Silverman's
under the "Silverman's" or "Robin" name (other than Net Sales to Corporate
Accounts and Dealer Sales), as determined in accordance with Section 2.6.3.

1.152 "Silverman's/Robin Sales" shall mean all Net Sales of the
-----------------------
Silverman's/Robin Business for the 12-month period beginning on the last day of
the fourth calendar month immediately succeeding the Closing Date.

1.153 "Silverman's/Robin Sales Dispute Statement" shall have the
-----------------------------------------
meaning set forth in Section 2.5.2(d).

1.154 "Silverman's/Robin Sales Statement" shall have the meaning set
---------------------------------
forth in Section 2.5.2(d).

1.155 "Taxes" (or "Tax" where the context requires) shall mean all
-----
federal, state, local, foreign or other taxes, duties, or similar charges
(including, without limitation, income (whether net or gross), profits, premium,
estimated, excise, sales, use, environmental (including taxes under Code Section
59A), occupancy, franchise, license, value added stamp, windfall profits, social
security, gross receipts, franchise, ad valorem, severance, capital levy,
production, transfer, gains, withholding, occupation, employment and payroll
related and property taxes, alternative or add-on, minimum or estimated, import
and export duties and other governmental charges and assessments) imposed by any
taxing or governmental authority on or payable by SF or any other party with
respect to the income, operations, products, assets or properties of SF, whether
attributable to statutory or nonstatutory rules and whether or not measured in
whole or in part by net income, and including interest, additions to tax or
interest, and penalties with respect thereto, and including expenses associated
with contesting any proposed adjustment related to any of the foregoing.

<PAGE>
1.156 "Third Accountants" shall mean Ernst & Young LLP.
-----------------

1.157 "Undisputed HSI Sales" shall have the meaning set forth in
--------------------
Section 2.3(f).

1.158 "Undisputed HSI/SF Combined Sales" shall mean the sum of
--------------------------------
Undisputed HSI Sales and Undisputed SF Sales.

1.159 "Undisputed SF Sales" shall have the meaning set forth in
-------------------
Section 2.3(f).

1.160 "Undisputed SF/Robin Sales" shall have the meaning set forth in
-------------------------
Section 2.4(e).

1.161 "Undisputed Silverman's Sales" shall have the meaning set forth
----------------------------
in Section 2.4(e).

1.162 "Undisputed Silverman's/Robin Combined Sales" shall mean the sum
-------------------------------------------
of Undisputed Silverman's Sales and Undisputed SF/Robin Sales.

ARTICLE II SALE AND PURCHASE OF INVENTORY, SALE
------------------------------------
AND PURCHASE OF EX-TERRITORY BUSINESS,
--------------------------------------
SALE AND PURCHASE OF SF DESIGNATED
----------------------------------
TERRITORY RELATED BUSINESS AND SALE AND
---------------------------------------
PURCHASE OF SF/ROBIN BUSINESS
-----------------------------

2.1 Purchase of Inventory.
---------------------

2.1.1 Purchased Inventory. (a) Upon terms and subject to the
-------------------
conditions hereof, upon the basis of the agreements, representations and
warranties contained in, and the schedules and exhibits to, this Agreement, at
the Closing, SF shall sell, transfer, assign, convey, and deliver to HSI, and
HSI shall purchase and acquire from SF, all of the SF Like Kind Inventory, free
and clear of all Encumbrances.

(b) At the Closing, at the option of HSI (the exercise of which
shall be in the sole and absolute discretion of HSI), HSI may purchase and
acquire from SF, and, if HSI exercises such option, SF shall sell, transfer,
assign, convey, and deliver to HSI, all or such portion of the Optional SF
Inventory as shall be designated by HSI, free and clear of all Encumbrances.

2.1.2 Purchase Price. In consideration for the Purchased
--------------
Inventory, HSI shall pay to SF at the Closing an amount equal to the product of
(x) the Estimated Closing SF Inventory Value and (y) 80% (the "SF Closing
Inventory Payment").

<PAGE>
2.1.3 Closing Inventory. (a) At least five (5) Business
-----------------
Days before the Closing Date1, SF shall complete preparation of an inventory
report (by SKU number, quantity and Invoice Price) setting forth the Estimated
Closing SF Inventory Value (such inventory report is hereinafter referred to as
the "Closing Inventory Report").

(b) SF will deliver the Closing Inventory Report to HSI at
least three (3) Business Days before the Closing Date. Following receipt of the
Closing Inventory Report, HSI will have a period of twenty (20) Business Days
after the Closing Date to review the Closing Inventory Report. At or before the
end of such review period, HSI will either (i) accept the Closing Inventory
Report in its entirety, in which case the Closing SF Inventory Value shall be
deemed to be equal to the Estimated Closing SF Inventory Value as set forth in
the Closing Inventory Report or (ii) deliver to SF a written explanation (the
"Inventory Dispute Statement") of those items in the Closing Inventory Report
which HSI in good faith disputes (the "Inventory Disputed Items"), in which case
the Estimated Closing SF Inventory Value not affected by Inventory Disputed
Items shall be deemed to be as set forth in the Closing Inventory Report.
Within a further period of thirty (30) Business days from the date on which the
Inventory Dispute Statement is delivered by HSI, the parties will attempt to
resolve in good faith any Inventory Disputed Items. In the absence of such
resolution by the last day of such thirty (30) Business Day period, the
unresolved Inventory Disputed Items will be referred for final binding
resolution by the Third Accountants. Each of HSI and SF shall be entitled to
make a brief supplemental oral presentation to the Third Accountants. The
Closing SF Inventory Value affected by any Inventory Disputed Items will be
determined by the Third Accountants within thirty (30) days of such reference
based upon the definitions of Inventory, SF Like Kind Inventory, Closing SF
Inventory Value, Inventory Purchase Price, Invoice Price, Non-Matching Inventory
and Ineligible Inventory as set forth herein. The determination of such firm
will be final, binding, non-appealable and uncontestable by the parties hereto
and will not be subject to collateral attack for any reason. Promptly after the
determination by the Third Accountants, HSI or SF, as the case may be, shall
make the payments, if any, required by Section 2.1.3(c). The fees and expenses
of the Third Accountants shall be paid one-half by HSI and one-half by SF.

(c) If the Closing SF Inventory Value is (i) greater than the
SF Closing Inventory Payment, then HSI shall pay SF an amount equal to such
difference within ten (10) days after the determination of the Closing SF
Inventory Value or (ii) less than the SF Closing Inventory Payment, then SF
shall pay HSI an amount equal to such difference within ten (10) days after the
determination of the Closing SF Inventory Value.

2.1.4 Right to Set-Off. Notwithstanding anything in this
----------------
Agreement to the contrary, HSI shall have the right to offset any amount
otherwise due and payable

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

1 In light of the changed circumstances, it seemed appropriate
to make this change.

<PAGE>
by HSI to SF on the Closing Date pursuant to any provision of this Agreement
against any amount due and payable by SF to HSI on the Closing Date.

2.2 Purchase of the Ex-Territory Business.
-------------------------------------

2.2.1 Purchase of the Ex-Territory Business. Upon terms and
-------------------------------------
subject to the conditions hereof, upon the basis of the agreements,
representations and warranties contained in, and the schedules and exhibits to,
this Agreement at the Closing, SF shall sell, transfer, assign, convey, and
deliver to HSI, and HSI shall purchase and acquire from SF, all of the Ex-
Territory Business free and clear of all Encumbrances (other than Permitted
Encumbrances).

2.2.2 Purchase Price. In consideration for the Ex-Territory
--------------
Business, at the Closing HSI shall pay to SF an amount equal to the Agreed Upon
Ex-Territory Business Value. Notwithstanding anything in this Agreement to the
contrary, HSI is not assuming, and shall not have any liability, (a) for any
income, franchise, sales, payroll, withholding or other taxes of SF, (b) for any
expenses of SF related to the negotiation, preparation and execution of this
Agreement, (c) as a "successor-in-interest" to SF with respect to the Ex-
Territory Business, (d) for any accounts payable of SF, or (e) for any matter or
thing set forth on Schedule 2.2.2(e).

2.2.3 Right to Set-Off. Notwithstanding anything in this
----------------
Agreement to the contrary, HSI shall have the right to offset any amount
otherwise due and payable by HSI to SF on the Closing Date pursuant to any
provision of this Agreement against any amount due and payable by SF to HSI on
the Closing Date.

2.3 Purchase of the SF Designated Territory Related Business.
--------------------------------------------------------

(a) At the Closing, and in accordance with the terms and
provisions of this Agreement, SF will assign, transfer, convey and deliver to
HSI, and HSI will acquire from SF, all of SF's right, title and interest in and
to the SF Designated Territory Assets and the SF Designated Territory Related
Business as a going concern, free and clear of all Encumbrances (other than
Permitted Encumbrances and the liabilities and obligations referred to in
Section 2.3(b)). Notwithstanding anything in this Agreement to the contrary, SF
is not assigning, transferring, conveying or delivering to HSI any of the SF
Excluded Assets. HSI shall initially use the HSI Designated Territory Assets,
HSI Designated Territory Related Business, the Pattison Assets and the Pattison
Business, together with the SF Designated Territory Assets and the SF Designated
Territory Related Business, to conduct the Designated Territory Business.

(b) At the Closing, and in accordance with the terms and
provisions of, this Agreement, HSI is assuming and agreeing to pay, perform and
discharge only the following obligations and liabilities relating to the SF
Designated Territory Assets and the SF Designated Territory Related Business
(collectively, the "HSI/SF Designated Territory Assumed Liabilities"): all
liabilities and obligations of SF

<PAGE>
arising after the Closing Date under the SF Designated Territory Contracts
listed on Schedule 2.3(b) hereto.

(c) Except as specifically provided in Section 2.3(b), HSI is
not assuming, and shall not have any liability for, any liabilities or
obligations of SF or any liabilities or obligations which arose or may arise out
of the operations of the SF Designated Territory Assets or the SF Designated
Territory Related Business prior to the Closing Date, and SF shall pay, perform
and discharge all such liabilities and obligations when due in the ordinary
course of business. Without limitation to the generality of the foregoing, HSI
is not assuming, and shall not have any liability, (a) for any income,
franchise, sales, payroll, withholding or other taxes of SF, (b) for any
expenses of SF related to the negotiation, preparation and execution of this
Agreement or the consummation of the transactions contemplated hereby, (c) as a
"successor-in-interest" to SF with respect to the SF Designated Territory
Related Business, (d) for any accounts payable of SF, or (e) for any matter or
thing set forth on Schedule 2.3(c).

(d) As total consideration for the assets and business being
sold, transferred, conveyed and delivered to HSI by SF pursuant to this Section
2.3, HSI shall:

(i) Assume the HSI/SF Designated Territory Assumed
Liabilities; and

(ii) Pay SF the amount referred to in Section 2.3(e)(x)
and (g) below; and

(iii) Pay SF any amount which may become due and
payable pursuant to Section 2.5.1(a), 2.6.1(a) or 2.6.2(a), as the case may
be.

(e) In connection with the sale, transfer, conveyance and
delivery to HSI by SF of the SF Designated Territory Assets and SF Designated
Territory Related Business, at the Closing, (x) HSI shall pay SF an amount (the
"HSI Closing Sales Payment Amount"), if positive, equal to the Undisputed SF
Sales minus the product of (i) Undisputed HSI/SF Combined Sales and (ii) 30%,
-----
multiplied by 25% or (y) SF shall pay to HSI an amount (the "SF Closing Sales
- -------------
Payment Amount") if positive, equal to the Undisputed HSI Sales minus the
-----
product of (i) Undisputed HSI/SF Combined Sales and (ii) 70%, multiplied by 25%.

(f) The authorized representatives of each of HSI and SF shall
have the right at reasonable times and on reasonable notice, at the sole expense
of each of them, to review and/or audit the books and records of HSI and SF,
respectively, relating to the Estimated HSI Sales, on the one hand, and the
Estimated SF Sales, as well as the work papers of their respective independent
public accountants, in each case solely for the purpose of verifying the
Estimated HSI Sales and the Estimated SF Sales. Such right of review must be
completed within forty-five (45) Business Days after the Agreement Date. If
prior to the end of such review period, either HSI or SF in good faith

<PAGE>
disagrees with or disputes the accuracy of the Estimated HSI Sales on the one
hand, or the Estimated SF Sales, on the other hand, then HSI or SF, as the case
may be, shall deliver to the other party a written statement and explanation of
such disagreement or dispute which sets forth in reasonable detail the good
faith bases of any such disagreement or dispute (a "HSI/SF Sales Dispute
Statement" (and, to the extent Estimated HSI Sales or Estimated SF Sales, are
not subject to any HSI/SF Sales Dispute Statement, such Estimated HSI Sales or
Estimated SF Sales are hereinafter referred to as "Undisputed HSI Sales" and
"Undisputed SF Sales", respectively)). If prior to the end of the above
referenced forty-five (45) Business Day review period following the Agreement
Date, either HSI or SF shall fail to deliver a HSI/SF Sales Dispute Statement,
then the Estimated HSI Sales or the Estimated SF Sales, as the case may be,
shall be deemed to equal both the HSI Sales and Undisputed HSI Sales, on the one
hand, or the SF Sales and Undisputed SF Sales on the other hand. If, however,
either HSI or SF shall have delivered an HSI/SF Sales Dispute Statement prior to
the end of such review period, then HSI and SF will attempt in good faith to
resolve all differences with regard to the determination of HSI Sales and/or SF
Sales during the next twenty (20) Business Day period commencing after the end
of such review period. If HSI and SF are unable to resolve such differences
prior to the expiration of such twenty (20) Business Day period (or such longer
period if so agreed by HSI and SF), the HSI Sales and/or SF Sales shall be
determined as set forth in Section 2.3(i) of this Agreement.

(g) Within ten (10) days after the determination of SF Sales
and HSI Sales, HSI shall pay SF an amount equal to the amount, if any, by which
(I) the SF Sales minus the product of (i) HSI/SF Combined Sales and (ii) 30%,
-----
multiplied by 25% exceeds (II) the HSI Closing Sales Payment Amount.
- ---------- --

(h) Within ten (10) days after the determination of HSI Sales
and SF Sales, SF shall pay to HSI an amount equal to the amount, if any, by
which (I) the HSI Sales minus the product of (i) HSI/SF Combined Sales and (ii)
-----
70%, multiplied by 25% exceeds (II) the SF Closing Sales Payment Amount.
---------- --

(i) Written reports of disagreement or disputes with respect to
any amounts referred to in Section 2.3(f) shall be prepared in concise form by
HSI and SF and submitted, together with copies of any HSI/SF Sales Dispute
Statements, to the Third Accountants no later than ten (10) Business Days
following the last day of the twenty (20) Business Day period (or longer period
if so agreed) referred to in the last sentence of Section 2.2(f). Each of HSI
and SF shall also be entitled to make a brief supplemental oral presentation to
the Third Accountants regarding any such disagreement or dispute. The Third
Accountants shall be instructed by HSI and SF to deliver a written report
setting forth such Third Accountants' resolution of any difference or dispute
referred to it no later than thirty (30) Business Days following the earlier of
(i) such firm's receipt of the report of disagreement or disputes submitted to
it by HSI and SF pursuant to this Section 2.2(i) and (ii) the last day permitted
for the submission of such report as provided above. The determination of the
Third Accountants with respect to any disagreement or dispute referred to it by
HSI and SF as provided in this Section 2.2(i)

<PAGE>
will be final, binding, non-appealable and uncontestable by the parties hereto
and will not be subject to collateral attack for any reason. Promptly after the
determination by the Third Accountants, HSI or SF, as the case may be, shall
make the payments, if any, required by Sections 2.2(g) and (h).

(j) Notwithstanding anything in this Section 2.3 to the
contrary, no disagreement or dispute as to HSI Sales and/or SF Sales shall delay
or prevent the Closing.

(k) Notwithstanding anything in this Agreement to the contrary,
HSI shall have the right to offset any amount otherwise due and payable by HSI
to SF pursuant to any provision of this Agreement against any amount due and
payable by SF to HSI.

2.4 Purchase of SF/Robin Business.
-----------------------------

(a) At the Closing, and in accordance with the terms and
provisions of this Agreement, SF will assign, transfer, convey and deliver to
Silverman's, and Silverman's will acquire from SF, all of the right, title and
interest of SF in and to the SF/Robin Assets and the SF/Robin Business as a
going concern, free and clear of all Encumbrances (other than Permitted
Encumbrances and the liabilities and obligations referred to in Section 2.4(b)).
Notwithstanding anything in this Agreement to the contrary, SF is not assigning,
transferring, conveying or delivering to Silverman's any of the SF Excluded
Assets. Silverman's shall initially use the SF/Robin Assets and the SF/Robin
Business, together with the Silverman's Assets and the Silverman's Business, to
conduct the Silverman's/Robin Business.

(b) At the Closing, and in accordance with the terms and
provisions of this Agreement, Silverman's is assuming and agreeing to pay,
perform and discharge only the following obligations and liabilities relating to
the SF/Robin Assets and the SF/Robin Business (collectively, the
"Silverman's/Robin Assumed Liabilities"): all liabilities and obligations of SF
arising after the Closing Date under the SF/Robin Contracts listed on Schedule
2.4(b) hereto.

(c) Except as specifically provided in Section 2.4(b),
Silverman's is not assuming, and shall not have any liability for, any
liabilities or obligations of SF, or any liabilities or obligations which arose
or may arise out of the operations of the SF/Robin Assets or the SF/Robin
Business prior to the Closing Date, and SF shall pay, perform and discharge all
such liabilities and obligations when due in the ordinary course of business.
Without limitation to the generality of the foregoing, Silverman's is not
assuming, and shall not have any liability, (a) for any income, franchise,
sales, payroll, withholding or other taxes of SF, (b) for any expenses of SF
related to the negotiation, preparation and execution of this Agreement, (c) as
a "successor-in-interest" to SF with respect to the SF/Robin Business, (d) for
any accounts payable of SF, or (e) for any matter or thing set forth on Schedule
2.4(c).

<PAGE>
(d) As total consideration for the assets and business being
sold, transferred, conveyed and delivered to Silverman's by SF pursuant to this
Section 2.4, Silverman's shall:

(i) Assume the Silverman's/Robin Assumed Liabilities;
and

(ii) Pay SF the amount referred to in Section 2.4(e)(x)
and (g) below; and

(iii) Pay SF any amount which may become due and
payable pursuant to Section 2.5.2(a), 2.6.1(b) or 2.6.2(b), as the case may
be.

(e) In connection with the sale, transfer, conveyance and
delivery to HSI by SF of the SF/Robin Assets and SF/Robin Business, at the
Closing, (x) HSI shall pay SF an amount (the "Silverman's Closing Sales Payment
Amount"), if positive, equal to the Undisputed SF/Robin Sales minus the product
-----
of (i) Undisputed Silverman's/Robin Combined Sales and (ii) 20%, multiplied by
-------------
20% or (y) SF shall pay to HSI an amount (the "SF/Robin Closing Sales Payment
Amount"), if positive, equal to the Undisputed Silverman's Sales minus the
-----
product of (i) Undisputed Silverman's/Robin Combined Sales and (ii) 80%,
multiplied by 20%.
- ---------- --

(f) The authorized representatives of each of Silverman's, on
the one hand, and SF, on the other hand, shall have the right at reasonable
times and on reasonable notice, at the sole expense of each of them, to review
and/or audit the books and records of Silverman's, on the one hand, and SF, on
the other hand, relating to the Estimated Silverman's Sales, on the one hand,
and the Estimated SF/Robin Sales, on the other hand, as well as the work papers
of their respective independent public accountants, in each case solely for the
purpose of verifying the Estimated Silverman's Sales and the Estimated SF/Robin
Sales. Such right of review must be completed within forty-five (45) Business
Days after the Agreement Date. If prior to the end of such review period,
either Silverman's on the one hand, or SF, on the other hand, in good faith
disagrees with or disputes the accuracy of the Estimated Silverman's Sales, on
the one hand, or the Estimated SF/Robin Sales, on the other hand, then
Silverman's or SF, as the case may be, shall deliver to the other party a
written statement and explanation of such disagreement or dispute which sets
forth in reasonable detail the good faith bases of any such disagreement or
dispute (a "Silverman's/Robin Sales Dispute Statement" (and, to the extent
Estimated Silverman's Sales or Estimated SF/Robin Sales are not subject to any
Silverman's/Robin Sales Dispute Statement, such Estimated Silverman's Sales or
Estimated SF/Robin Sales are hereinafter referred to as "Undisputed Silverman's
Sales" and "Undisputed SF/Robin Sales," respectively)). If prior to the end of
the above referenced forty-five (45) Business Day review period following the
Agreement Date, either Silverman's or SF shall fail to deliver a
Silverman's/Robin Sales Dispute Statement, then the Estimated Silverman's Sales
or the Estimated SF/Robin Sales, as the case may be, shall be deemed to equal
both the Silverman's Sales and Undisputed Silverman's Sales, on the

<PAGE>
one hand, or the SF/Robin Sales and Undisputed Silverman's Sales, on the other
hand. If, however, either Silverman's or SF shall have delivered a
Silverman's/Robin Sales Dispute Statement prior to the end of such review
period, then Silverman's and SF will attempt in good faith to resolve all
differences with regard to the determination of Silverman's Sales and/or
SF/Robin Sales during the next twenty (20) Business Day period commencing after
the end of such review period. If Silverman's and SF are unable to resolve such
differences prior to the expiration of such twenty (20) Business Day period (or
such longer period if so agreed by Silverman's and SF), the Silverman's Sales
and/or SF/Robin Sales shall be determined as set forth in Section 2.4(i) of this
Agreement.

(g) Within ten (10) days after the determination of SF/Robin
Sales and Silverman's Sales, HSI shall pay SF an amount equal to the amount, if
any, by which (I) the SF/Robin Sales minus the product of (i) Silverman's/Robin
-----
Combined Sales and (ii) 20%, multiplied by 20% exceeds (II) the Silverman's
---------- --
Closing Sales Payment Amount.

(h) Within ten (10) days after the determination of Silverman's
Sales and SF/Robin Sales, SF shall pay to HSI an amount equal to the amount, if
any, by which (I) the Silverman's Sales minus the product of (i)
-----
Silverman's/Robin Combined Sales and (ii) 80%, multiplied by 20%, exceeds (II)
---------- --
the SF/Robin Closing Sales Payment Amount.

(i) Written reports of disagreement or disputes with respect to
any amounts referred to in Section 2.4(f) shall be prepared in concise form by
Silverman's, on the one hand, and SF, on the other hand, and submitted, together
with copies of any Silverman's/Robin Sales Dispute Statements, to the Third
Accountants no later than ten (10) Business Days following the last day of the
twenty (20) Business Day period (or longer period if so agreed) referred to in
the last sentence of Section 2.2(f). Each of Silverman's, on the one hand, and
SF, on the other hand, shall also be entitled to make a brief supplemental oral
presentation to the Third Accountants regarding any such disagreement or
dispute. The Third Accountants shall be instructed by Silverman's and SF to
deliver a written report setting forth such Third Accountants' resolution of any
difference or dispute referred to it no later than thirty (30) Business Days
following the earlier of (i) such firm's receipt of the report of disagreement
or disputes submitted to it by Silverman's, on the one hand, and SF, on the
other hand, pursuant to this Section 2.4(i) and (ii) the last day permitted for
the submission of such report as provided above. The determination of the Third
Accountants with respect to any disagreement or dispute referred to it by
Silverman's, on the one hand, and SF, on the other hand, as provided in this
Section 2.4(i) will be final, binding, non-appealable and uncontestable by the
parties hereto and will not be subject to collateral attack for any reason.
Promptly after the determination by the Third Accountants, HSI, on the one hand,
or SF, on the other hand, as the case may be, shall make the payments, if any,
required by Sections 2.4(g) and (h).

<PAGE>
(j) Notwithstanding anything in this Section 2.4 to the
contrary, no disagreement or dispute as to Silverman's Sales and/or SF/Robin
Sales shall delay or prevent the Closing.

2.5 Adjusted Purchase Price Determination.
-------------------------------------

2.5.1 Designated Territory Adjusted Purchase Price.
--------------------------------------------

(a) If Designated Territory Sales exceed the Combined
Designated Territory Net Sales Base by more than the Inflation Rate, then HSI
shall pay to SF an amount equal to the product of (i) Excess Designated
Territory Sales and (ii) 30%, multiplied by 25%; provided, however, that in no
------------- -------- -------
event shall such amount exceed $2,000,000.

(b) If the Combined Designated Territory Net Sales Base exceeds
Designated Territory Sales by more than the Inflation Rate, then SF shall pay to
HSI an amount equal to the product of (i) Shortfall Designated Territory Sales
and (ii) 40%, multiplied by 25%; provided, however, that in no event shall such
------------- -------- -------
amount exceed $2,000,000.

(c) HSI shall have the right to offset any amount otherwise due
and payable by HSI pursuant to Section 2.5.1(a) against any amount due and
payable by SF or Olson, as the case may be, to HSI (i) pursuant to this Section
2.5 or (ii) as a result of any Losses incurred by any Buyer Claimant in
connection with a breach of a representation, warranty or covenant contained in
this Agreement.

<PAGE>
or dispute (a Designated Territory Sales Dispute Statement"). If prior to the
end of the above referenced thirty (30) Business Day review period following the
receipt of the Designated Territory Sales Statement, SF shall fail to deliver a
Designated Territory Sales Dispute Statement, then the Designated Territory
Sales and the Designated Territory Sales Statement shall be deemed final and the
Estimated Designated Territory Sales as set forth therein shall be deemed to
equal the Designated Territory Sales. If, however, SF shall have delivered a
Designated Territory Sales Dispute Statement prior to the end of such review
period, then HSI and SF will attempt in good faith to resolve all differences
with regard to the determination of Designated Territory Sales during the next
twenty (20) Business Day period commencing after the end of such review period.
If HSI and SF are unable to resolve such differences prior to the expiration of
such twenty (20) Business Day period (or such longer period if so agreed by HSI
and SF), the Designated Territory Sales shall be determined as set forth in
Section 2.5.3 of this Agreement.

(e) Notwithstanding anything herein to the contrary, the term
"Designated Territory Sales" as used in this Section 2.5.1 shall not include Net
Sales attributable to any Overlapping Designated Territory Business acquired by
HSI or any of the Affiliates after the Closing Date.

(f) Notwithstanding anything in this Agreement to the contrary,
HSI shall have the right to offset any amount otherwise due and payable by HSI
to SF pursuant to any provision of this Agreement against any amount due and
payable by SF to HSI.

2.5.1.1 Interim Designated Territory Adjusted Purchase
----------------------------------------------
Price.
- -----

(a) Notwithstanding anything in this Agreement to the contrary,
during the period between the Agreement Date and the Closing Date SF shall not
employ, hire or otherwise engage any additional field sales personnel without
the prior written consent of HSI (which consent shall be given or withheld in
the sole discretion of HSI). Any such additional field sales personnel employed
by SF with the permission of HSI are hereinafter referred to collectively as
"New Sales Reps."

(b) Within twenty (20) Business Days after the third full
calendar month following the Closing Date, HSI shall prepare a statement (the
"Estimated New Reps Sales Statement") setting forth its computation of Estimated
New Reps Sales. Upon completion of the Estimated New Reps Sales Statement, HSI
will deliver the Estimated New Reps Sales Statement to SF. Following receipt of
the Estimated New Reps Sales Statement, SF will have a period of ten (10)
Business Days to review the Estimated New Reps Sales Statement. In connection
with such review, the authorized representatives of SF shall have the right at
reasonable times and on reasonable notice, at the sole expense of SF, to review
and/or audit the books and records of HSI relating to the Estimated New Reps
Sales Statement, as well as the work papers of its independent public
accountants,

<PAGE>
solely for the purpose of computing the Estimated New Reps Sales. If prior to
the end of such review periods SF in good faith disagrees with or disputes the
accuracy of the Estimated New Reps Sales, then Pattison shall deliver to HSI a
written statement and explanation of such disagreement or dispute which sets
forth in reasonable detail the good faith bases of any such disagreement or
dispute (a "New Reps Sale Dispute Statement" (and, to the extent Estimated New
Reps Sales are not subject to any New Reps Sales Dispute Statement, such
Estimated New Reps Sales re hereinafter referred to as "Undisputed New Reps
Sales")). If prior to the end of the above referenced ten (10) Business Day
review period following receipt of the Estimated New Reps Sales Statement, SF
shall fail to deliver a New Reps Sales Dispute Statement, then the Estimated New
Reps Sales shall be deemed to equal both the New Reps Sales and Undisputed New
Reps Sales. If, however, SF shall have delivered a New Reps Sales Dispute
Statement prior to the end of such review period, then HSI and SF will attempt
in good faith to resolve all differences with regard to the determination of New
Reps Sales during the next twenty (20) Business Day period commencing after the
end of such review period. If HSI and SF are unable to resolve such differences
prior to the expiration of such twenty (20) Business Day period (or such longer
period if so agreed by HSI and SF), the New Reps Sales shall be determined as
set forth in Section 2.5.1.1(c) of this Agreement.

(c) Written reports of disagreement or disputes with respect to
any amounts referred to in Section 2.5.1.1(b) shall be prepared in concise form
by HSI and SF and submitted, together with copies of any New Reps Sales Dispute
Statement, to the Third Accountants no later than ten (10) Business Days
following the last day of the twenty (20) Business Day period (or longer period
if so agreed) referred to in the last sentence of Section 2.5.1.1(b). Each of
HSI and SF shall also be entitled to make a brief supplemental oral presentation
to the Third Accountants regarding any such disagreement or dispute. The Third
Accountants shall be instructed by HSI and SF to deliver a written report
setting forth such Third Accountants' resolution of any difference or dispute
referred to it no later than thirty (30) Business Days following the earlier of
(i) such firm's receipt of the report of disagreement or disputes submitted to
it by HSI and SF pursuant to this Section 2.5.1.1(c) and (ii) the last day
permitted for the submission of such report as provided above. The
determination of the Third Accountants with respect to any disagreement or
dispute referred to it by HSI and SF as provided in this Section 2.5.1.1(c) will
be final, binding, non-appealable and uncontestable by the parties hereto and
will not be subject to collateral attack for any reason. Promptly after the
determination by the Third Accountants, HSI shall make the payment, if any,
referred to in Section 2.5.1.1(d) of this Agreement.

(d) Within ten (10) days after the determination of New Reps
Sales, HSI shall pay SF an amount equal to the product of (i) News Reps Sales
and (ii) 20%.

(e) Notwithstanding anything in this Agreement to the contrary,
HSI shall have the right to offset any amount otherwise due and payable by HSI
to FS

<PAGE>
pursuant to any provision of this Agreement against any amount due and payable
by SF to HSI.

2.5.2 Silverman's/Robin Related Adjusted Purchase Price.
-------------------------------------------------

(a) If Silverman's/Robin Sales exceed the Combined
Silverman's/Robin Net Sales Base by more than the Inflation Rate, then HSI shall
pay to SF an amount equal to the product of (i) Excess Silverman's/Robin Sales
and (ii) 20%, multiplied by 20%; provided, however, that in no event shall such
---------- -- -------- -------
amount exceed $1,000,000.

(b) If the Combined Silverman's/Robin Net Sales Base exceeds
Silverman's/Robin Sales by more than the Inflation Rate, then SF shall pay to
HSI an amount equal to the product of (i) Shortfall Silverman's/Robin Sales and
(ii) 50%, multiplied by 20%; provided, however, that in no event shall such
---------- -- -------- -------
amount exceed $1,000,000.

(c) HSI shall have the right to offset any amount otherwise due
and payable by HSI pursuant to Section 2.5.2(a) against any amount due and
payable by SF or Olson, as the case may be, to HSI (i) pursuant to this Section
2.5 or (ii) as a result of any Losses incurred by any Buyer Claimant in
connection with a breach of a representation, warranty or covenant contained in
this Agreement.

(d) Not more than three (3) months after the first anniversary
of the Closing Date, HSI shall prepare a statement, signed by its chief
financial officer, providing reasonable detail as to the computation of the
Estimated Silverman's/Robin Sales (such statement is hereinafter referred to as
the "Silverman's/Robin Sales Statement"). The authorized representatives of SF
shall have the right at reasonable times and on reasonable notice, at the sole
expense of SF, to review and/or audit the books and records of HSI relating to
the Estimated Silverman's/Robin Sales and the Silverman's/Robin Sales Statement,
as well as the work papers of HSI's independent public accountants, solely for
the purpose of verifying the amounts and computations set forth in the
Silverman's/Robin Sales Statement. Such right of review must be completed
within thirty (30) Business Days after receipt of such Statement by SF. If
prior to the end of such review period, SF in good faith disagrees with or
disputes the accuracy of the Estimated Silverman's/Robin Sales and/or the
Silverman's/Robin Sales Statement, then SF shall deliver to HSI a written
statement and explanation of such disagreement or dispute which sets forth in
reasonable detail the good faith bases of any such disagreement or dispute (a
"Silverman's/Robin Sales Dispute Statement"). If prior to the end of the above
referenced thirty (30) Business Day review period following the receipt of the
Silverman's/Robin Sales Statement, SF shall fail to deliver a Silverman's/Robin
Sales Dispute Statement, then the Silverman's/Robin Sales and the
Silverman's/Robin Sales Statement shall be deemed final and the Estimated
Silverman's/Robin Sales as set forth therein shall be deemed to equal the
Silverman's/Robin Sales. If, however, SF shall have delivered a
Silverman's/Robin Sales Dispute Statement prior to the end of such review
period, then HSI and SF will attempt

<PAGE>
in good faith to resolve all differences with regard to the determination of
Silverman's/Robin Sales during the next twenty (20) Business Day period
commencing after the end of such review period. If HSI and SF are unable to
resolve such differences prior to the expiration of such twenty (20) Business
Day period (or such longer period if so agreed by HSI and SF), the
Silverman's/Robin Sales shall be determined as set forth in Section 2.5.3 of
this Agreement.

(e) Notwithstanding anything herein to the contrary, the term
"Silverman's/Robin Sales" as used in this Section 2.5.2 shall not include Net
Sales attributable to any Overlapping Business acquired by HSI or any of the
Affiliates after the Closing Date.

2.5.3 Dispute Resolution. Written reports of disagreement or
------------------
disputes with respect to any amounts referred to in Section 2.5.1 or 2.5.2 shall
be prepared in concise form by HSI and SF and submitted, together with copies of
any Adjusted Purchase Price Dispute Statement, to the Third Accountants no later
than ten (10) Business Days following the last day of the twenty (20) Business
Day period (or longer period if so agreed) referred to in the last sentence of
Sections 2.5.1(d) or 2.5.2(d), as the case may be. Each of HSI and SF shall
also be entitled to make a brief supplemental oral presentation to the Third
Accountants regarding any such disagreement or dispute. The Third Accountants
shall be instructed by HSI and SF to deliver a written report setting forth such
Third Accountants' resolution of any difference or dispute referred to it no
later than thirty (30) Business Days following the earlier of (i) such firm's
receipt of the report of disagreement or disputes submitted to it by HSI and SF
pursuant to this Section 2.5.3 and (ii) the last day permitted for the
submission of such report as provided above. The determination of the Third
Accountants with respect to any disagreement or dispute referred to it by HSI
and SF as provided in this Section 2.5.3 will be final, binding, non-appealable
and uncontestable by the parties hereto and will not be subject to collateral
attack for any reason. Promptly after the determination by the Third
Accountants, HSI or SF, as the case may be, shall make the payments, if any,
required by Sections 2.5.1 and 2.5.2. The fees and expenses of the Third
Accountants shall be paid one-half by HSI and one-half by SF.

2.6 Options.
-------

2.6.1 Put Options. (a) At any time after the fifth
-----------
anniversary of the Closing Date, SF may, at its option, by written notice given
to HSI, elect to receive the balance of the purchase price for the SF Designated
Territory Related Business and the SF Designated Territory Assets for an amount
equal to the greater of (i) the product of (x) 30% and (y) HSI/SF Combined
Average Eligible Sales, multiplied by 25% and (ii)
---------- --

<PAGE>
the product of (x) HSI/SF Combined Average Eligible Sales and (y) the HSI Net
Margin Factor, multiplied by 30% minus, in either case, the SF Share of the
---------- -- -----
Overlapping Designated Territory Business Purchase Price; provided, however, if
-------- -------
HSI or any of its Affiliates shall hereafter acquire one or more Overlapping
Designated Territory Businesses and the Goodwill purchased as a result of any
such single acquisition or series of related acquisitions (or, in the case of
any acquisition structured as a "pooling," the amount of Goodwill which would
have resulted therefrom if the transaction was not structured as a "pooling")
equals or exceeds $1,000,000, then the foregoing clause (ii) shall not be
applicable.

(b) At any time after the fifth anniversary of the Closing
Date, SF may, at its option, by written notice given to HSI, elect to receive
the balance of the purchase price for the SF/Robin Business and the SF/Robin
Assets for an amount equal to the greater of (i) the product of (x) 20% and (y)
Silverman's/Robin Average Eligible Sales, multiplied by 20% and (ii) the product
---------- --
of (x) Silverman's/Robin Average Eligible Sales and (y) the HSI Net Margin
Factor, multiplied by 20% minus, in either case, the SF Share of the Overlapping
---------- -- -----
Business Purchase Price; provided, however, if HSI or any of its Affiliates
-------- -------
(including Silverman's) shall hereafter acquire one or more Overlapping
Businesses and the Goodwill purchased as a result of any such single acquisition
or series of related acquisitions (or, in the case of any acquisition structured
as a "pooling," the amount of Goodwill which would have resulted therefrom if
the transaction was not structured as a "pooling") equals or exceeds $1,000,000,
then the foregoing clause (ii) shall not be applicable.

2.6.2 Call Options. (a) At any time after the seventh
------------
anniversary of the Closing Date, provided the option under Section 2.6.1(a) has
not been exercised, HSI may, at its option, by written notice given to SF, elect
to pay the balance of the purchase price for the SF Designated Territory Related
Business and the SF Designated Territory Assets for an amount equal to the
greater of (i) the product of (x) 30% and (y) HSI/SF Average Eligible Sales,
multiplied by 25% and (ii) the product of (x) HSI/SF Average Eligible Sales and
- ---------- --
(y) the HSI Net Margin Factor, multiplied by 30% minus, in either case, the SF
---------- -- -----
Share of the Overlapping Designated Territory Business Purchase Price; provided,
--------
however, if HSI or any of its Affiliates shall hereafter acquire one or more
- -------
Overlapping Designated Territory Businesses and the Goodwill purchased as a
result of any such single acquisition or series of related acquisitions (or, in
the case of any acquisition structured as a "pooling," the amount of Goodwill
which would have resulted therefrom if the transaction was not structured as a
"pooling") equals or exceeds $1,000,000, then the foregoing clause (ii) shall
not be applicable.

(b) At any time after the seventh anniversary of the Closing
Date, provided the option under Section 2.6.1(b) has not been exercised, HSI
may, at its option, by written notice given to SF, elect to pay the balance of
the purchase price for the SF/Robin Business and the SF/Robin Assets for an
amount equal to the greater of (i) the product of (x) 20% and (y)
Silverman's/Robin Average Eligible Sales, multiplied by 20% and (ii) the product
---------- --
of (x) Silverman's/Robin Average Eligible Sales and (y) the HSI

<PAGE>
Net Margin Factor, multiplied by 20% minus, in either case, the SF Share of the
---------- -- -----
Overlapping Business Purchase Price; provided, however, if HSI or any of its
-------- -------
Affiliates (including Silverman's) shall hereafter acquire one or more
Overlapping Businesses and the Goodwill purchased as a result of any such single
acquisition or series of related acquisitions (or, in the case of any
acquisition structured as a "pooling," the amount of Goodwill which would have
resulted therefrom if the transaction was not structured as a "pooling") equals
or exceeds $1,000,000, then the foregoing clause (ii) shall not be applicable.

2.6.3 Determination of HSI/SF Average Sales, Silverman's/
---------------------------------------------------
Robin Average Eligible Sales, Goodwill, SF Share of the Overlapping Designated
- ------------------------------------------------------------------------------
Territory Business Purchase Price and the SF Share of the Overlapping Business
- ------------------------------------------------------------------------------
Purchase Price. Not more than three (3) months after the exercise of any option
- --------------
pursuant to Section 2.6.1 or 2.6.2, HSI shall prepare a statement, signed by its
chief financial officer, providing reasonable detail as to the computation of
the Estimated HSI/SF Average Eligible Sales or Estimated Silverman's/ Robin
Eligible Sales, as the case may be, and, if applicable, the Estimated Goodwill,
the Estimated SF Share of Overlapping Designated Territory Business Purchase
Price or the SF Share of the Overlapping Business Purchase Price, as the case
may be, (such statement is hereinafter referred to as the "Option Statement").
The authorized representatives of SF shall have the right at reasonable times
and on reasonable notice, at the sole expense of SF, to review and/or audit the
books and records of HSI relating to the Estimated HSI/SF Average Eligible Sales
and/or Estimated Silverman's/Robin Average Eligible Sales, and, if applicable,
the Estimated Goodwill, the Estimated SF Share of Overlapping Designated
Territory Business Purchase Price or the SF Share of the Overlapping Business
Purchase Price, as the case may be, and Option Statement, as well as the work
papers of HSI's independent public accountants, solely for the purpose of
verifying the amounts and computations set forth in the Option Statement. Such
right of review must be completed within thirty (30) Business Days after receipt
of such Statement by SF. If prior to the end of such review period, SF in good
faith disagrees with or disputes the accuracy of the Estimated HSI/SF Average
Eligible Sales, the Estimated Silverman's/Robin Average Eligible Sales, and, if
applicable, the Estimated Goodwill, the Estimated SF Share of Overlapping
Designated Territory Business Purchase Price or the SF Share of the Overlapping
Business Purchase Price, as the case may be, and/or the Option Statement, then
SF shall deliver to HSI a written statement and explanation of such disagreement
or dispute which sets forth in reasonable detail the good faith bases of any
such disagreement or dispute (an "Option Dispute Statement"). If prior to the
end of the above referenced thirty (30) Business Day review period following the
receipt of the Option Statement, SF shall fail to deliver an Option Dispute
Statement, then the Estimated HSI/SF Average Eligible Sales and/or the
Silverman's/Robin Average Eligible Sales, and, if applicable, the Estimated
Goodwill, the Estimated SF Share of Overlapping Designated Territory Business
Purchase Price or the SF Share of the Overlapping Business Purchase Price, as
the case may be, and the Option Statement shall be deemed final and the HSI/SF
Average Eligible Sales and the Estimated Silverman's/Robin Average Eligible
Sales and, if applicable, the Estimated Goodwill, the Estimated SF Share of the
Overlapping Designated Territory Business Purchase Price or

<PAGE>
the SF Share of the Overlapping Business Purchase Price, as the case may be, as
set forth therein shall be deemed to equal the HSI/SF Average Eligible Sales,
the Silverman's/Robin Average Eligible Sales, and, if applicable, the Goodwill,
the SF Share of the Overlapping Designated Territory Business Purchase Price or
the SF Share of the Overlapping Business Purchase Price, as the case may be.
If, however, SF shall have delivered an Option Dispute Statement prior to the
end of such review period, then HSI and SF will attempt in good faith to resolve
all differences with regard to the determination of HSI/SF Average Eligible
Sales and the Silverman's/Robin Average Eligible Sales, and, if applicable, the
Goodwill, during the next twenty (20) Business Day period commencing after the
end of such review period. If HSI and SF are unable to resolve such differences
prior to the expiration of such twenty (20) Business Day period (or such longer
period if so agreed by HSI and SF), the HSI/SF Average Eligible Sales and/or
Silverman's/Robin Average Eligible Sales, and, if applicable, the Goodwill, the
SF Share of the Overlapping Designated Territory Business Purchase Price or the
SF Share of the Overlapping Business Purchase Price, as the case may be, shall
be determined as set forth in Section 2.6.4 of this Agreement.

2.6.4 Dispute Resolution. Written reports of disagreement or
------------------
disputes with respect to any amounts referred to in Section 2.6.3 shall be
prepared in concise form by HSI and SF and submitted, together with copies of
any Option Dispute Statement, to the Third Accountants no later than ten (10)
Business Days following the last day of the twenty (20) Business Day period (or
longer period if so agreed) referred to in the last sentence of Section 2.6.3.
Each of HSI and SF shall also be entitled to make a brief supplemental oral
presentation to the Third Accountants regarding any such disagreement or
dispute. The Third Accountants shall be instructed by HSI and SF to deliver a
written report setting forth such Third Accountants' resolution of any
difference or dispute referred to it no later than thirty (30) Business Days
following the earlier of (i) such firm's receipt of the report of disagreement
or disputes submitted to it by HSI and SF pursuant to this Section 2.6.3 and
(ii) the last day permitted for the submission of such report as provided above.
The determination of the Third Accountants with respect to any disagreement or
dispute referred to it by HSI and SF as provided in this Section 2.6.3 will be
final, binding, non-appealable and uncontestable by the parties hereto and will
not be subject to collateral attack for any reason. Promptly after the
determination by the Third Accountants, HSI shall make the payments, if any,
required by Sections 2.6.1 and 2.6.2. The fees and expenses of the Third
Accountants shall be paid one-half by HSI and one-half by SF.

2.6.5 Closing under Section 2.6.1 or 2.6.2. If HSI or SF
------------------------------------
exercises an option under Section 2.6.1 or 2.6.2, HSI and SF shall consummate
the transactions contemplated thereby at HSI's offices at 10:00 a.m. (New York
time) on the Business Day HSI designates, by written notice given to SF, which
shall not be fewer than 10 days or more than 30 days after the determination of
HSI/SF Average Eligible Sales, Silverman's/Robin Average Eligible Sales or
Goodwill, as the case may be, pursuant to Section 2.6.3 above. At the closing,
(a) HSI shall pay the amount specified under Section 2.6.1 or 2.6.2, as the case
may be, by wire transfer of immediately available funds to an

<PAGE>
account designated by SF at least three Business Days before the closing and
(b) the balance of the purchase price payable by HSI in respect of the SF
Designated Territory Related Business or the SF/Robin Business, as the case may
be, shall be deemed paid in full by HSI and HSI shall have no further obligation
to SF relating thereto.

2.6.6 Mandatory Exercise of Put Options. Notwithstanding
---------------------------------
anything in this Section 2.6 to the contrary, if, as and when (x) the SF Note
shall become due and payable (whether at stated maturity, by acceleration or
otherwise), or (y) the Accounts Payable Default (as such term is defined in
Section 6.1(b)) has occurred, then, at HSI's sole option upon written notice to
SF, SF shall be deemed to have exercised its option under Section 2.6.1(a)
and/or (b), a closing with respect to such exercise shall occur in accordance
with Section 2.6.5 and at the closing HSI shall have the right to offset any
amount otherwise due and payable by HSI to SF pursuant to Section 2.6.1(a)
and/or (b) against any amount then due and payable by SF to HSI pursuant to the
SF Note or as a result of the Accounts Payable Default, as the case may be.

2.7 HSI Bridge Loan. (a) In order to facilitate all the payments
---------------
which have to be made by SF at the Closing, including without limitation, the
payments described on Schedule 7.9 hereto, HSI shall loan SF an aggregate of
$2,800,000 pursuant to, and in accordance with the terms of, a promissory note
in the form of Exhibit 2.7 hereto (the "SF Note"). SF shall use the proceeds of
the loan solely for purposes of making the payment described on Schedule 7.9 and
repayment of the Pattison Note.

(b) HSI shall have the right to offset any amount otherwise due
and payable by HSI to SF pursuant to any provision in this Agreement against any
amount due and payable by SF to HSI pursuant to the SF Note.

2.8 HSI Common Stock. Notwithstanding anything to the contrary in
----------------
Sections 2.5 or 2.6, at the option of HSI, in lieu of making any cash payment
required to be made by HSI in accordance with the terms of Sections 2.5 and 2.6,
HSI may tender payment by means of the delivery of one (1) or more certificates
representing shares of HSI Common Stock and any such payment shall be deemed to
satisfy any cash payment obligation of HSI; provided, however, that without the
-------- -------
prior consent of SF, fifty percent (50%) of any payment to be made by HSI in
accordance with the terms of Section 2.5 and/or 2.6 must be paid in cash. If
HSI shall so deliver any such shares of HSI Common Stock, such shares shall be
freely tradeable under the Securities Act or HSI shall cause such shares to be
registered for resale under the Securities Act within 180 days of the delivery
thereof. For purposes of determining the number of shares of HSI Common Stock
to be delivered in lieu of a cash payment, the HSI Common Stock so delivered
shall be valued at the average of the per share closing sales prices for the HSI
Common Stock on the NASDAQ-NMS (or any national exchange on which shares of HSI
Common Stock are then traded) for the ten (10) trading days immediately
preceding the date on which the HSI Common Stock is tendered as payment.

<PAGE>
2.9 Allocation of Purchase Price. The purchase price for the
----------------------------
Acquired Assets shall be allocated for federal, state, local and foreign tax
purposes by each party among the Acquired Assets sold, transferred and assigned
hereunder and the covenant contained in Article IX below as determined by HSI
and approved by Olson, acting on behalf of himself and SF (such approval not to
be unreasonably withheld or delayed), not later than three months after the
Closing Date. For all pertinent tax purposes each party hereto shall report the
purchase and sale and assignment provided for, and with the characterization
given these transactions, in this Agreement to taxing authorities on a basis
consistent with such allocation, and each party agrees not to take a position
inconsistent with such allocation. After the Closing, each of HSI and SF shall
timely file form 8594 with the IRS detailing this allocation. In the event that
HSI determines, subject to Olson's reasonable approval, that any adjustments to
such allocation are necessary, each of SF and Olson shall make such
modifications as are necessary reporting the same on form 8594 (if required) or
any tax report or return filed or to be filed by each of SF and Olson in order
to conform to HSI's allocation as adjusted.

2.10 Nonassignable Contracts and Authorizations. To the extent that
------------------------------------------
the assignment of any Assumed Contract or Authorization to be assigned to HSI or
Silverman's pursuant to this Agreement shall require the consent of any other
party, this Agreement shall not constitute a contract to assign the same if an
attempted assignment would constitute a breach thereof. Each of SF and Olson
shall use all reasonable efforts, and HSI and/or Silverman's, as the case may
be, shall cooperate where appropriate, to obtain any consent necessary to any
such assignment where such consent is requested by HSI and/or Silverman's. If
any such consent is not obtained, each of SF and Olson shall cooperate with HSI
and/or Silverman's, as the case may be, in any reasonable arrangement designed
to provide for HSI and/or Silverman's, as the case may be, the benefit, monetary
or otherwise, of any such Assumed Contract or Authorization including
enforcement of any and all rights of SF, Olson or the SF Business, the Ex-
Territory Business, the SF Designated Territory Related Business or the SF/Robin
Business against the other party thereto arising out of a breach or cancellation
thereof by such other party or otherwise.

2.11 Control of Acquired Business During Adjustment Period. Each of
-----------------------------------------------------
SF and Olson acknowledges that, notwithstanding any other provision of this
Agreement (including, without limitation, Sections 2.5 and 2.6), HSI shall have
sole authority and control over the conduct of the Designated Territory Business
and the Silverman's/Robin Business during the 12-month period following the
Closing Date and thereafter, including, without limitation, all decisions
relating to products, pricing, sourcing and marketing programs. In addition,
HSI, in its absolute discretion, may determine to merge itself, Silverman's or
any subsidiaries of either of them into any Affiliate, to acquire the stock or
assets of another business or otherwise go into new businesses or undertake new
operations or activities, to consolidate all or part of the operations of HSI
with any Affiliate, or to liquidate or terminate all or part of the Designated
Territory Business and the Silverman's/Robin Business or to terminate any part
of its business, and liquidate its or any subsidiary's assets or any part
thereof. Any action referred to in this Section 2.11

<PAGE>
undertaken by HSI shall be without prejudice to any right of SF or Olson to seek
monetary damages as a result of such action.

2.12 Guarantee of Performance by SF. From and after the Closing
------------------------------
Date, Olson unconditionally and irrevocably guarantees the full payment and/or
performance of each obligation of SF under this Agreement, the SF Note, each of
the other SF Closing Documents and the Pattison Agreement. This guaranty
constitutes a guaranty of payment and performance when due and not of
collection, and Olson specifically agrees that it shall not be necessary or
required that HSI (or any other Buyer Claimant) exercise any right, assert any
claim or demand or enforce any remedy whatsoever against SF before or as a
condition to the obligations of Olson hereunder. At the Closing, Olson shall
execute and deliver a guaranty in the form of Exhibit 2.12 hereto (the "Olson
Guaranty").

ARTICLE III CLOSING
-------

3.1 The Closing. The Closing shall take place at 10:00 a.m. local
-----------
time on June 24, 1996 or on such other date as may be agreed upon in writing by
the parties hereto (the "Closing Date"), at the offices of counsel to HSI and
Silverman's, Proskauer Rose Goetz & Mendelsohn LLP ("Proskauer"), 1585 Broadway,
New York, New York.

3.2 Obligations of SF and Olson. At the Closing, SF and Olson shall
---------------------------
deliver to HSI and Silverman's the following:

(a) A Closing Inventory Report.

(b) An opinion of Hanaway, Ross, Hanaway, Weidner & Bachhuber,
S.C., counsel to SF and Olson, dated as of the Closing Date, in the form of
annexed hereto as Exhibit 3.2(b).

(d) Bills of Sale, duly executed by SF, in the forms annexed
hereto as Exhibits 3.2(d)-1 and 3.2(d)-2.

(e) In the case of Olson, the duly executed Guaranty.

(f) If applicable, the SF Closing Sales Payment Amount.

(g) If applicable, the Silverman's Closing Sales Payment Amount.

(h) Firstar Bank Milwaukee, N.A. (or its applicable affiliate)
shall have delivered to SF and HSI a duly executed release of all Encumbrances
against SF, the Acquired Assets, the SF Business, the Ex-Territory Business, the
SF Designated Territory

<PAGE>
Related Business and the SF/Robin Business, and all outstanding indebtedness
owed to Firstar Bank Milwaukee, N.A. (or its applicable affiliate) by SF shall
have been repaid.

(i) Each of First Bank National Association ("FBNA") (or its
applicable affiliate), Thompson-Schwinghammer, Inc. (d/b/a "FM Dental Supply")
and John Thompson (collectively, the "FM Dental Related Parties") shall have
advised SF and HSI in writing that it has no Encumbrances against SF, HSI, the
Acquired Assets, the SF Business, the Ex-Territory Business, the SF Designated
Territory Business, the SF/Robin Business, the Pattison Assets or the Pattison
Business, nor will it assert any purported Encumbrance in the future; provided,
--------
however, if the FM Dental Related Parties shall not have delivered a written
- -------
statement to the foregoing effect satisfactory to HSI, HSI and Silverman's may,
in their sole discretion, consummate the Closing, but HSI shall have the right
to withhold from the proceeds of the Closing Payments and/or the SF Note
$1,000,000 (the "FM Dental Claim Amount") to satisfy any claim made by (or which
could be made by) the FM Dental Related Parties against HSI, SF, the Acquired
Assets, the SF Business, the Ex-Territory Business, the SF Business, the Ex-
Territory Business, the SF-Designated Territory Business, the SF/Robin Business,
the Pattison Assets or the Pattison Business. If any such claim by the
FM Dental Related Parties shall not have been resolved within thirty (30) days
after the Closing Date, HSI shall be entitled on its own behalf and on behalf of
SF to compromise and settle any such claim directly with the FM Dental Related
Parties. Any payment of the FM Dental Claim Amount by HSI to the FM Dental
Related Parties shall be deemed for all purposes hereof to be a payment by HSI
to SF in an amount equal to the FM Dental Claim Amount so paid which SF shall be
deemed to have directed HSI to pay directly to the FM Dental Related Parties on
behalf of SF. If after HSI has paid the FM Dental Related Parties in respect of
any claim by the FM Dental Related Parties, there shall exist any surplus
FM Dental Claim Amount, HSI shall immediately pay such surplus to SF. Nothing
in this Section 3.2(i) shall relieve SF from the performance of any obligation
owed by SF to the FM Dental Related Parties or HSI, or impose any obligation on
HSI to perform any such obligation on SF's behalf.

(j) Such other instruments of assignment and conveyance as may
be necessary or appropriate to fully and effectively transfer the Acquired
Assets being transferred by SF in accordance with the terms of this Agreement.

3.3 Obligations of HSI and Silverman's. At the Closing, HSI and
----------------------------------
Silverman's shall deliver to SF and Olson the following:

(a) The SF Closing Inventory Payment.

(b) If applicable, the HSI Closing Sales Payment Amount.

(d) An opinion of Proskauer, dated as of the Closing Date, in
the form annexed hereto as Exhibit 3.3(d).

<PAGE>
(g) Assumption Agreement, duly executed by HSI and Silverman's,
in the form annexed hereto as Exhibits 3.3(e)-1 and 3.3(e)-2.

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
---------------------------------
SF AND OLSON
------------

SF and Olson hereby jointly and severally represent and warrant to HSI
and Silverman's as follows:

4.1 Organization and Qualification. SF is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
California with full corporate power and authority to own, lease and operate its
properties and assets and to conduct the SF Business, the Ex-Territory Business,
the SF Designated Territory Related Business and the SF/Robin Business
respectively, as it is now being conducted. SF is duly qualified as a foreign
corporation and is in good standing under the laws of each jurisdiction in which
the conduct of the business or the ownership of its assets requires such
qualification.

4.2 Authority. Olson has all requisite legal capacity, and SF has
---------
all requisite corporate power and authority, to execute and deliver this
Agreement and all documents, certificates, agreements, instruments and writings
related hereto (collectively, the "SF Closing Documents") to which he or it is a
party and to perform, carry out and consummate the transactions contemplated
hereby and thereby. The execution, delivery and performance of this Agreement
and the other SF Closing Documents have been duly authorized by all necessary
corporate action on the part of SF (including the unanimous approval of the
shareholders of SF). This Agreement does, and when executed by SF and Olson,
the other SF Closing Documents shall, constitute the legal, valid and binding
obligations of each of them, enforceable against SF and Olson in accordance with
their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency or similar laws and by equitable principles.

4.3 No Breach. Subject to Section 8.5(b) and except as set forth on
---------
Schedule 4.3 hereto, neither the execution and delivery of this Agreement or the
other SF Closing Documents by SF and Olson nor the consummation of the
transactions contemplated hereby or thereby will: (a) in the case of SF,
violate any provision of the Certificate of Incorporation or By-Laws or other
organizational documents of SF; (b) conflict with, result in a breach of or
constitute a default (or an event which, with or without notice, lapse of time
or both, would constitute a default) under any material agreement, document,
certificate or other instrument to which SF or Olson is a party or by which SF
or Olson or any of its or his properties or assets (including the Acquired
Assets) is subject or bound; (c) result in the creation of, or give any party
the right to create, any Encumbrance upon assets or properties of SF or Olson
(including the Acquired Assets); (d) conflict with, violate, result in a breach
of or constitute a default under any

<PAGE>
judgment, decree, order, or process of any court or governmental authority;
(e) conflict with or violate any material statute, law or regulation applicable
to the SF Business, the
Ex-Territory Business, the SF Designated Territory Related Business, the
SF/Robin Business, the Acquired Assets, SF or Olson; or (f) require SF or Olson
to obtain any authorization, consent, approval or waiver from, or to make any
filing with, any governmental or regulatory authority.

4.4 Financial Statements and Sales Information. (a) Prior to the
------------------------------------------
date hereof, SF has delivered to HSI the SF Financial Statements (to the extent
required by the definition thereof) attached hereto as Schedule 4.4A. Such
Financial Statements have been prepared from, and are in accordance with, the
books and records of SF, present fairly the financial position and results of
operations of the Acquired Assets, the SF Business, the Ex-Territory Business,
the SF Designated Territory Related Business and the SF/Robin Business as of and
for the periods set forth therein in accordance with GAAP and are true, correct
and complete in all material respects, except as set forth on Schedule 4.4B.

(b) The books and records of SF are accurate and complete and
have been maintained in accordance with good business practices.

4.5 Absence of Certain Changes or Events. Except as set forth on
------------------------------------
Schedule 4.5 hereto and the transactions contemplated by the Pattison Agreement,
since December 31, 1995:

(a) Each of the SF Business, the Ex-Territory Business, the SF
Designated Territory Related Business and the SF/Robin Business has been
conducted and the Acquired Assets have been acquired, owned and operated only in
the ordinary and usual course consistent with past practice.

(b) Neither the SF Business, the Ex-Territory Business, the SF
Designated Territory Related Business or the SF/Robin Business nor the Acquired
Assets have suffered any event or condition that has had a Material Adverse
Effect.

(c) Neither SF or Olson has become aware of any event or
condition that has occurred or would reasonably be expected to occur that could
result in a Material Adverse Effect.

4.6 Assets. SF has good and freely transferable title to all of the
------
Acquired Assets, free and clear of all Encumbrances (other than, in the case of
Acquired Assets which do not constitute Purchased Inventory, Permitted
Encumbrances), and has the complete and unrestricted power and right to sell
and/or transfer the Acquired Assets in accordance with the terms hereof. Each
item of equipment included in the Acquired Assets is and will when delivered be
adequate for the uses to which it is being put as of the Closing Date, is and
will when delivered be in good order and working condition, ordinary wear and
tear excepted, and have no material defects, and no condition exists

<PAGE>
or will when such equipment is delivered exist which interferes with the value
thereof or the use thereof in the manner used by SF, in connection with the
operations of the SF Business, the Ex-Territory Business, the SF Designated
Territory Related Business or the SF/Robin Business prior to the date hereof.
SF has maintained such equipment in accordance with good business practices.
Except as set forth on Schedule 4.6, the Acquired Assets constitute all of the
properties and assets used by SF and Olson in connection with the operations of
the SF Business, the Ex-Territory Business, the SF Designated Territory Related
Business or the SF/Robin Business and include all of the properties and assets
necessary to operate the SF Business, the Ex-Territory Business, the SF
Designated Territory Related Business and the SF/Robin Business as such
businesses have been operated immediately prior to the date hereof.

4.7 Real Property. Schedule 4.7 sets forth an accurate and complete
-------------
list of all Real Property owned by SF and all leases of Real Property used in
the SF Business, the Ex-Territory Business, the SF Designated Territory Related
Business or the SF/Robin Business.

4.8 Intellectual Property. Schedule 4.8 hereto lists all licenses of
---------------------
Intellectual Property to or from any of SF or Olson with respect to the SF
Business, the Ex-Territory Business, the SF Designated Territory Related
Business or the SF/Robin Business. No currently outstanding claims have been
asserted either orally or in writing to any of SF or Olson or the SF Business,
the Ex-Territory Business, the SF Designated Territory Related Business or the
SF/Robin Business, by any Person challenging the validity of or alleging
infringement by, or misuse of, any Intellectual Property used by SF or Olson or
the SF Business, the Ex-Territory Business, the SF Designated Territory Related
Business or the SF/Robin Business, or challenging or questioning the validity or
enforceability of any license or agreement referred to on Schedule 4.8, no such
claims have been asserted during the last five years, and there is no valid
basis for any such claim. Except as set forth on Schedule 4.8, none of SF or
Olson nor the SF Business, the Ex-Territory Business, the SF Designated
Territory Related Business or the SF/Robin Business has, nor has SF or Olson or
the SF Business, the Ex-Territory Business, the SF Designated Territory Related
Business or the SF/Robin Business been alleged to have, infringed upon or
violated any Intellectual Property right or misappropriated or misused any
invention, trade secret or other proprietary information entitled to legal
protection. None of SF or Olson nor the SF Business, the Ex-Territory Business,
the SF Designated Territory Related Business or the SF/Robin Business has
asserted any currently outstanding claim of infringement, misappropriation or
misuse of any Intellectual Property, nor has any of SF, Olson or the SF
Business, the Ex-Territory Business, the SF Designated Territory Related
Business or the SF/Robin Business asserted any such claims during the last five
years.

4.9 Contracts and Commitments. (a) The contracts listed on Schedule
-------------------------
4.9 are all of the leases, agreements, arrangements, contracts, commitments or
understandings, written or oral, and whether legally binding or otherwise
("SF/Robin Contracts"), that relate to the SF Business, the Ex-Territory
Business, the SF Designated

<PAGE>
Territory Related Business or the SF/Robin Business (excluding (i) any SF/Robin
Contract that involves a commitment by any of SF or Olson of less than $10,000
over the next 12 months and less than $50,000 over the balance of the term of
the SF/Robin Contract and (ii) customer sales orders entered into in the
ordinary course of business.)

(b) None of SF or Olson nor the SF Business, the Ex-Territory
Business, the SF Designated Territory Related Business or the SF/Robin Business
is in breach or default, nor is there any basis for any valid claim of breach or
default by any of SF, Olson or the SF Business, the Ex-Territory Business, the
SF Designated Territory Related Business or the SF/Robin Business, under any
SF/Robin Contract. Except as set forth on Schedule 4.9, all SF/Robin Contracts
are valid and in full force and effect, and neither the consummation of the
transactions contemplated by this Agreement nor the consummation of the
transactions contemplated by any other SF Closing Document will cause any
SF/Robin Contract to cease to be valid and in full force and effect. None of
the SF/Robin Contracts contain "change of control" provisions (i.e., provisions
----
which would create a right against, or obligation of, SF as a result of the
consummation of the transactions contemplated by this Agreement and the other SF
Closing Documents). Accurate and complete copies of all SF/Robin Contracts,
including all amendments thereto, have been heretofore delivered to HSI.

4.10 Accounts Receivable. Schedule 4.10 sets forth a complete and
-------------------
accurate list of all accounts receivable of SF, including an aging thereof as of
a date within five days of the date hereof. All of such accounts receivable (a)
represent sales actually made in the ordinary course of business for goods or
services delivered or rendered to unaffiliated customers in bona fide arm's-
length transactions, (b) constitute valid claims, (c) have not been and will not
be extended or rolled over in order to make them current and (d) are not and
will not be subject to counterclaims or setoffs. Not less than 95% of the
accounts receivable of SF will be collected in full within 90 days of the date
they were created.

4.11 Inventory. The Inventory of SF is described on Schedule 4.11.
---------
Such Inventory is of merchantable quality, free of defects in workmanship or
design and is usable and salable by SF at normal profit margins and in
accordance with historical sales practices in the ordinary course of the SF
Business, the Robin Business or the SF/Robin Business. Such Inventory does not
include any items which are obsolete, damaged, excessive, below standard quality
or slow moving (i.e., items that are for discontinued or expected to be
----
discontinued product lines, or have a stated expiration date of 6 months or less
from the Closing Date, or items that have not been used or sold within 6 months
prior to the date hereof, or items that have not been sold within the customary
inventory turnover cycle of SF, as the case may be, with respect to such item,
or items for which there is excess capacity (i.e., more products are on hand of
----
any such item than have been sold in the past nine (9) months).

4.12 Customers and Suppliers. There have been no adverse changes and
-----------------------
there are no facts known to SF or Olson which may reasonably be expected to
indicate

<PAGE>
that any adverse change may occur in the business relationship of the SF
Business, the Ex-Territory Business, the SF Designated Territory Related
Business or the SF/Robin Business with any Person who was one of the fifteen
largest customers or suppliers of any of the SF Business, the Ex-Territory
Business, the SF Designated Territory Related Business or the SF/Robin Business
as of the end of the 12-month period ending on December 31, 1995.

4.13 Litigation, Etc. Except as set forth on Schedule 4.13 hereto:
----------------

(a) There has not been in the three years prior to the date
hereof, nor is there currently, any claim, action, suit, inquiry, proceeding or,
to the best knowledge of SF and Olson, investigation of any kind or nature
whatsoever (including, but not limited to, products liability issues and
Environmental Liabilities), by or before any court or governmental or other
regulatory or administrative agency, commission or tribunal brought, asserted or
initiated by or against SF or Olson, or pending or, to the best knowledge of SF
and Olson, threatened against or involving the SF Business, the Ex-Territory
Business, the SF Designated Territory Related Business or the SF/Robin Business
and which is material, or which questions or challenges the validity of this
Agreement or any action taken or to be taken by SF or Olson pursuant to this
Agreement or in connection with the transactions contemplated hereby. There is
no valid basis for any such claim, action, suit, inquiry, proceeding or
investigation.

(b) None of SF or Olson is subject to any judgment, order or
decree which may have a Material Adverse Effect.

4.14 Employee Benefit Plans. Schedule 4.14 hereto contains a
----------------------
complete and accurate list of all Employee Benefit Plans. Each Employee Benefit
Plan complies and has been maintained and operated in all respects in accordance
with its terms and the terms and the provisions of applicable law, including,
without limitation, ERISA and the Code, except where the failure to so comply
would not cause a Material Adverse Effect.

4.15 Compliance with Law; Necessary Authorizations. (a) Except as
---------------------------------------------
listed or described on Schedule 4.15(a) hereto, SF is and has been conducting
the SF Business, the Ex-Territory Business, the SF Designated Territory Related
Business and the SF/Robin Business, marketing its products and owning and
operating all of the Acquired Assets, in compliance with all applicable laws,
rules, regulations, orders, building and other codes, zoning and other
ordinances, Authorizations, judgments and decrees, including all Environmental
Laws, of all federal, state, local, foreign or other governmental authorities,
except, in any such case, where the failure to so conduct the SF Business, Ex-
Territory Business, the SF Designated Territory Related Business or the SF/Robin
Business or comply with any such laws, rules or regulations would not cause a
Material Adverse Effect.

(b) Schedule 4.15(b) lists or describes the material Authoriza-
tions held or required by SF, the SF Business, the Ex-Territory Business, the SF
Designated

<PAGE>
Territory Related Business or the SF/Robin Business and, except as set forth in
that schedule, all such Authorizations are in full force and effect, SF is in
compliance with all such Authorizations and, to the best knowledge of SF and
Olson, there is no reasonable basis for the revocation or suspension of any
thereof. Except as set forth on Schedule 4.15(b), such Authorizations
constitute all the permits, licenses, approvals, qualifications or the like
issued by any regulatory authorities required for ownership of the Acquired
Assets and the operation of the SF Business, the Ex-Territory Business, the SF
Designated Territory Related Business and the SF/Robin Business, all of which
are transferable and will be transferred to HSI or Silverman's, as the case may
be, at Closing.

4.16 Finders. Neither SF or Olson, nor the SF Business, the Ex-
-------
Territory Business, the SF Designated Territory Related Business or the SF/Robin
Business or any of their respective Affiliates or any of their respective
directors or officers, has taken any action that, directly or indirectly, would
obligate HSI, Silverman's, or any of their respective Affiliates to anyone
acting as broker, finder, financial advisor or in any similar capacity in
connection with this Agreement or any of the transactions contemplated hereby.

4.17 Consents and Approvals of Governmental Authorities. Except as
--------------------------------------------------
set forth on Schedule 4.17, no consent, approval or authorization of, or
declaration, filing or registration with, or the giving of notice to, any
domestic or foreign governmental or regulatory authority is required in
connection with the execution, delivery and performance by SF or Olson of this
Agreement or the consummation by SF and Olson of the transactions contemplated
hereby.

4.18 Related Party Transactions; Intercompany Accounts. Except as
-------------------------------------------------
set forth on Schedule 4.18 hereto, there are no SF/Robin Contracts between any
of SF or Olson, on one hand, and any stockholder, director, officer or Affiliate
(including Olson) of SF (each, a "Related Party"), on the other; in each case,
other than routine employment agreements in the ordinary course of business (and
which are terminable without penalty in not more than 30 days). Set forth on
Schedule 4.18 is a true and complete list of each transaction during the prior
18 months between any of SF or Olson with respect to the SF Business, the Ex-
Territory Business, the SF Designated Territory Related Business or the SF/Robin
Business, on one hand, and any Related Party, on the other hand. No amounts are
owed by or to any of SF or Olson with respect to the SF Business, the Ex-
Territory Business, the SF Designated Territory Related Business or the SF/Robin
Business to or by any Related Party, and no amount is owed by or to the SF
Business, the Ex-Territory Business, the SF Designated Territory Related
Business or the SF/Robin Business to or by any of SF or Olson or any Related
Party.

<PAGE>
ARTICLE V REPRESENTATIONS AND WARRANTIES
------------------------------
OF HSI AND SILVERMAN'S
----------------------

HSI and Silverman's hereby, jointly and severally, represent and
warrant to SF and Olson as follows:

5.1 Organization and Qualification. HSI and Silverman's are
------------------------------
corporations duly organized, validly existing and in good standing under the
laws of Delaware and New York, respectively, with full corporate power and
authority to own, lease and operate its properties and assets and to conduct its
business as it is now being conducted. Each of HSI and Silverman's is duly
qualified as a foreign corporation and is in good standing under the laws of
such jurisdiction in which the conduct of the business or the ownership of its
assets requires such qualification.

5.2 Authority. Each of HSI and Silverman's has all requisite
---------
corporate power and authority to execute and deliver this Agreement and all
documents, certificates, agreements, instruments and writings relating hereto
(collectively, the "HSI Closing Documents") to which it is a party and to
perform, carry out and consummate the transactions contemplated hereby and
thereby. The execution, delivery and performance of this Agreement and the
other HSI Closing Documents have been duly authorized by all necessary corporate
action on the part of HSI and Silverman's. This Agreement does, and when
executed by HSI and Silverman's, the other HSI Closing Documents shall,
constitute the legal, valid and binding obligations of each of them enforceable
against HSI and Silverman's in accordance with their respective terms, except as
such enforceability may be limited by bankruptcy, insolvency or similar laws and
by equitable principles.

5.3 No Breach. Subject to Sections 7.5(b) and 7.6(b) hereof, neither
---------
the execution and delivery of this Agreement by HSI or Silverman's nor the
consummation of the transactions contemplated herein will: (i) violate any
provision of the Certificate of Incorporation or By-laws of HSI or Silverman's;
(ii) conflict with, result in a breach of or constitute a default (or an event
which, with or without notice, lapse of time or both, would constitute a
default) under, or give any third party the right to terminate or modify, any
material agreement or other instrument to which HSI or Silverman's is a party or
by which it or any of its assets is bound; (iii) result in the creation of, or
give any party the right to create, any Encumbrance, upon assets or properties
of HSI, Silverman's, the HSI Designated Territory Related Assets or the
Silverman's Assets; (iv) conflict with, violate, result in a breach of or
constitute a default under any judgment, decree, order or process of any court
or governmental authority; (v) conflict with or violate any material statute,
law or regulation applicable to the business of HSI or Silverman's; or
(vi) require HSI or Silverman's to obtain any authorization, consent, approval
or waiver from, or to make any filing with, any governmental or regulatory
authority.

5.4 HSI Financial Statements and Sales Information. Prior to the
----------------------------------------------
date hereof, HSI delivered to SF and Olson the HSI Financial Statements (to the
extent

<PAGE>
required by the definition thereof) attached hereto as Schedule 5.4A. Such HSI
Financial Statements have been prepared from, and are in accordance with, the
books and records of HSI, present fairly the financial position and results of
operations of the HSI Designated Territory Related Assets, the Silverman's
Assets, the HSI Designated Territory Related Business and the Silverman's
Business as of and for the periods set forth therein in accordance with GAAP and
are true, correct and complete in all material respects, except as set forth on
Schedule 5.4B.

5.5 Absence of Certain Changes or Events. Except as set forth on
------------------------------------
Schedule 5.5 hereto, since December 31, 1995:

(a) The HSI Designated Territory Related Business and the
Silverman's Business has been conducted and the HSI/Silverman's Assets have been
acquired, owned and operated only in the ordinary and usual course consistent
with past practice.

(b) Neither the HSI Designated Territory Related Business or the
Silverman's Business nor the HSI Designated Territory Related Assets or the
Silverman's Assets have suffered any event or condition that has had a HSI
Material Adverse Effect.

(c) Neither HSI nor Silverman's has become aware of any event or
condition that has occurred or would reasonably be expected to occur that could
result in a HSI Material Adverse Effect.

5.6 Customers and Suppliers. There has not been any adverse change
-----------------------
and there are no facts known to HSI or Silverman's which may reasonably be
expected to indicate that any adverse change may occur in the business
relationship of HSI, the HSI Designated Territory Related Business or
Silverman's Business with any material customer.

5.7 Litigation, Etc. Except as set forth on Schedule 5.7 hereto:
----------------

(a) There has not been in the three years prior to the date
hereof, nor is there currently, any claim, action, suit, inquiry, proceeding or,
to the best knowledge of HSI and Silverman's, investigation of any kind or
nature whatsoever (including, but not limited to, products liability issues), by
or before any court or governmental or other regulatory or administrative
agency, commission or tribunal brought or asserted or initiated by or against
HSI or Silverman's, or pending or, to the best knowledge of HSI and Silverman's,
threatened against or involving the HSI Designated Territory Related Business or
the Silverman's Business which is material, or which questions or challenges the
validity of this Agreement or any action taken or to be taken by HSI or
Silverman's pursuant to this Agreement or in connection with the transaction
contemplated hereby. There is no valid basis for any such claim, action, suit,
inquiry, proceeding or investigation.

<PAGE>
(b) Neither HSI nor Silverman's is subject to any judgment,
order or decree which may have a material adverse effect on the HSI Designated
Territory Related Business, the Silverman's Business, the HSI Designated
Territory Related Assets or the Silverman's Assets.

5.8 Finders. None of HSI or Silverman's, any of their respective
-------
Affiliates or any of their respective directors or officers, has taken any
action that, directly or indirectly, would obligate SF or Olson or any of their
Affiliates to anyone acting as a broker, finder, financial advisor or in any
similar capacity in connection with this Agreement or any of the transactions
contemplated hereby.

ARTICLE VI COVENANTS
---------

6.1 Certain Covenants of SF and Olson. SF and Olson, jointly and
---------------------------------
severally hereby covenant that (unless HSI otherwise gives its written approval
in its sole discretion) SF and Olson shall at their sole cost and expense take
the actions set forth below:

(a) At the Closing, SF and Olson shall pay or otherwise
discharge all the amounts set forth on Schedule 7.9 which are then due and owing
and SF and Olson shall thereafter pay or otherwise discharge in full all the
Excluded Liabilities relating to the SF Business, the Ex-Territory Business, the
SF Designated Territory Related Business and/or the SF/Robin Business as such
amounts shall become due in accordance with their terms.

(b) Prior to the Closing, SF and Olson shall operate the SF
Business, the Ex-Territory Business, the SF Designated Territory Related
Business and the SF/Robin Business in the ordinary course of business as
historically conducted, and maintain the Acquired Assets in good operating
condition and both prior to and after the Closing pay those debts and accounts
payable relating to the SF Business, the Ex-Territory Business, the SF
Designated Territory Related Business or the SF/Robin Business and the Acquired
Assets (other than, after the Closing, those debts which constitute Assumed
Liabilities) that are incurred by SF in the ordinary course of business and on a
timely basis. Without limitation to the generality of the foregoing, SF and
Olson shall use the proceeds of the Closing Payments and the HSI Loan for the
purposes set forth on Schedule 7.9, including the payment of all accounts
payable in full within 30 days after the Closing Date. If (i) SF shall not have
paid and otherwise satisfied all such accounts payable by that date, (ii) the
failure to so pay such accounts payable has caused, in the good faith
determination of HSI, adverse consequences to any of the HSI Business, the
Silverman's Business, the Acquired Assets, the SF Business, the Ex-Territory
Business, the SF Designated Territory Related Business or the SF/Robin Business
and (iii) the Trade Creditor Payment Amount (as such term is defined in Section
7.9) is zero (the occurrence of the events described in the foregoing clauses
(i) through (iii) is hereinafter referred to as the "Accounts Payable Default"),
then HSI, in its sole and absolute discretion, may (x)

<PAGE>
pay all or any portion of such accounts payable on behalf of SF, which shall
promptly reimburse HSI for any such payment, plus interest thereon at the Prime
Rate or (y) upon prior written notice to Olson, pay all or any portion of such
accounts payable on behalf of SF and, as a consequence of any such payment by
HSI, SF shall be deemed to have effected a mandatory exercise of its option
under Section 2.6.1(a) and/or (b) in accordance with Section 2.6.6.

(c) Prior to the Closing and after the Closing, SF and Olson
shall afford HSI, its attorneys, accountants, consultants and representatives,
free and full access to the SF Business, the Ex-Territory Business, the SF
Designated Territory Related Business and the SF/Robin Business, and prior to
and after the Closing Date, SF and Olson shall afford HSI, its attorneys,
accountants, consultants and representatives free and full access to the
Acquired Assets to be sold, transferred or assigned by either of them pursuant
to this Agreement, the books and records of SF relating thereto and employees of
SF who are familiar with the SF Business, the Ex-Territory Business, the SF
Designated Territory Related Business and the SF/Robin Business and the Acquired
Assets, at all reasonable times upon reasonable notice and during normal
business hours, and shall provide to HSI and its representatives such additional
financial and operating data and other information as to the SF Business, the
Ex-Territory Business, the SF Designated Territory Related Business and/or the
SF/Robin Business and the Acquired Assets pursuant to this Agreement as HSI
shall from time to time reasonably request.

(d) Prior to and after the Closing, SF and Olson shall use their
respective reasonable efforts to preserve for HSI the goodwill of the customers
and suppliers of the SF Business, the Ex-Territory Business, the SF Designated
Territory Related Business and the SF/Robin Business, and others having business
relations with SF and Olson with respect to the SF Business, the Ex-Territory
Business, the SF Designated Territory Related Business and the SF/Robin Business
and Acquired Assets, and prior to and after the Closing shall do all things
reasonably requested by HSI for such purpose.

(e) Prior to the Closing, SF and Olson shall promptly advise HSI
in writing of the commencement or threat against SF or Olson of any suit,
litigation or legal proceeding that relates to or might affect the SF Business,
the Ex-Territory Business, the SF Designated Territory Related Business or the
SF/Robin Business or the Acquired Assets.

(f) Prior to the Closing, neither SF or Olson shall give its
permission to or authorize any officer, director, employee or representative to,
solicit or enter into negotiations with any party, other than HSI and
Silverman's, for the purchase and sale of any of the SF Business, the Ex-
Territory Business, the SF Designated Territory Related Business or the SF/Robin
Business or any of the Acquired Assets.

<PAGE>
(g) Prior to the Closing Date, none of SF or Olson shall
dispose, encumber or cause any Encumbrance to be placed on the Acquired Assets
(other than the disposition of Inventory in the ordinary course of business).

(h) Prior to the Closing Date, neither SF or Olson shall amend
or terminate any Assumed Contract.

(i) Prior to the Closing Date, SF and Olson shall use their
respective best efforts to take any action where the failure or omission to take
such action would cause (i) any representation or warranty in Article IV hereof
(but excluding any representation or warranty which specifically relates to an
earlier date) to be untrue or incorrect as of the Closing or (ii) any of the
conditions to the Closing not to be satisfied.

6.2 Obtaining Consents. Prior to and after the Closing, SF and Olson
------------------
shall use all reasonable efforts to obtain all consents to the assignment to HSI
or Silverman's, as the case may be, of all of the Assumed Contracts and
Authorizations of SF, in each case without any condition or qualification
adverse to HSI or Silverman's, as the case may be. Prior to and after the
Closing, HSI and Silverman's, on the one hand, and SF and Olson, on the other
hand, shall use all reasonable efforts to obtain all consents, approvals and
waivers from, and give all notices to, and make all declarations, filings and
registrations with, any governmental and regulatory agencies that are required
to consummate the transactions contemplated hereby and to permit the continued
operation of the SF Business, the Ex-Territory Business, the SF Designated
Territory Related Business or the SF/Robin Business and the HSI/Silverman's
Business after the Closing Date as herein provided. HSI and Silverman's, on the
one hand, and SF and Olson, on the other hand, shall coordinate and cooperate
with one another and supply such assistance as may be reasonably requested by
each in connection with the foregoing.

6.3 Publicity. Prior to the Closing, none of SF, Olson, HSI or
---------
Silverman's shall issue or make, or cause to have issued or made, the
publication or dissemination of any press release or other announcement to
divulge the existence of this Agreement or with respect to the transactions
contemplated hereby, except after consultation with and prior approval of the
other party hereto, which approval shall not be unreasonably withheld, and
except as may be required by applicable law.

6.4 Transfer and Retention of Records. After the Closing Date,
---------------------------------
except as may be required for tax purposes, other regulatory purposes or
Permitted Activities, none of SF or Olson nor any of their respective successors
and assigns will retain any document, databases or other media embodying any
confidential or proprietary information relating to the SF Business, the Ex-
Territory Business, the SF Designated Territory Related Business or the SF/Robin
Business which constitutes a part of the Acquired Assets or use, publish or
disclose to any third person any such confidential or proprietary information
relating to the SF Business, the Ex-Territory Business, the SF Designated
Territory Related Business or the SF/Robin Business; provided, however, that SF
-------- -------
and Olson shall be entitled to retain copies of any of the foregoing to the
extent

<PAGE>
necessary in connection with prosecuting of defending any matter not expressly
assumed by HSI or Silverman's pursuant to this Agreement. SF and Olson shall
take all actions requested by HSI to transfer records relating to the SF
Business, the Ex-Territory Business, the SF Designated Territory Related
Business or the SF/Robin Business to HSI or Silverman's which may include making
duplicate copies of any records retained by SF and Olson in the form of papers
or computer media.

6.5 Product Replacement and Repairs. After the Closing Date, HSI or
-------------------------------
Silverman's will, subject to the following sentence, honor all outstanding
warranties and guaranties and other claims for replacements, repairs and
credits, relating to products or services of the SF Business, the Ex-Territory
Business, the SF Designated Territory Related Business or the SF/Robin Business
shipped, sold or furnished by SF prior to the Closing Date, or relating to
Purchased Inventory. Any claims in respect of returned or damaged products
accepted by HSI or Silverman's shall be for the account of SF, which shall
promptly reimburse HSI or Silverman's, as the case may be, for the cost thereof.

6.6 Employee Matters. (a) HSI may, but shall not be required to,
----------------
offer employment to employees employed by SF in connection with the operations
of the SF Business, the Ex-Territory Business, the SF Designated Territory
Related Business or the SF/Robin Business on such terms as HSI in its sole
discretion deems appropriate. Any such offers shall be on terms which HSI
customarily hires new employees (e.g., without assumption of seniority).
Alternatively, at HSI's request, SF shall continue its employment of all or a
portion of its employees engaged in the operations of the SF Business, the Ex-
Territory Business, the SF Designated Territory Related Business or the SF/Robin
Business to assist HSI in its conduct of HSI Business or Silverman's Business,
as the case may be, after the Closing date on an interim basis not exceeding 90
days. HSI shall reimburse SF for all actual payroll costs and related
incidental costs incurred by it for continuing the employment of such employees
for HSI's benefit.

(b) Neither HSI nor Silverman's shall assume or be responsible
in any way for the obligations, liabilities or responsibilities (i) of any
Employee Benefit Plan of SF, (ii) of SF, any Affiliate or any fiduciary under,
arising from, or with respect to any Employee Benefit Plan of SF or (iii) to any
of SF's officers, directors, employees and agents, arising from or related to
the transactions contemplated by this Agreement, including, without limitation,
obligations, liabilities or responsibilities under the WARN Act. Neither HSI
nor Silverman's shall be deemed to be a successor employer with respect to the
employment of any employee of SF or with respect to any of Employee Benefit
Plans of SF.

6.7 Further Assurances. After the Closing, HSI and Silverman's, on
------------------
the one hand, and SF and Olson, on the other hand, shall, and shall cause their
respective Affiliates to, at the request and the expense of the other, execute
and deliver such other instruments of conveyance and transfer and assumption and
take such other action as may be reasonably requested so as to consummate the
transactions contemplated hereby or otherwise to consummate the intent of this
Agreement.

<PAGE>
6.8 Name Change. SF hereby covenants and agrees that, promptly after
-----------
the Closing, it shall file a certificate of amendment of certificate of
incorporation of SF, and file appropriate documentation in those jurisdictions
in which it is qualified to do business as a foreign corporation, changing its
name from "San Francisco Dental Supply, Inc.", to a name that does not include
any of the Intellectual Property.

6.9 Certain Leased Property Related Matters. Solely for the purpose
---------------------------------------
of facilitating the orderly transfer of the conduct of the SF Business, the Ex-
Territory Business, the SF Designated Territory Related Business and the
SF/Robin Business from SF to HSI, and Silverman's respectively, HSI shall
reimburse SF for its actual out-of-pocket rental obligations incurred by it for
continuing the rental of the following leased premises for the benefit of HSI
and the Silverman's: (i) warehouse space under lease at 2201 S. Oneida Street,
Green Bay, Wisconsin; (ii) warehouse space under lease at 3180 Coronet Way,
Green Bay, Wisconsin; and (iii) facilities space under lease at Darby Commons
Court, Georgetown Building, Bays 107 and 108, Folcroft West Business Park,
Folcroft, Pennsylvania. Notwithstanding anything in the immediately preceding
sentence to the contrary, unless otherwise requested by HSI, HSI shall have no
obligation to reimburse SF in respect of any rental obligations incurred by it
with respect to the leased premises referred to (x) in the foregoing clauses (i)
and (ii) for any period beyond October 31, 1996 and (y) in the foregoing clause
(iii) for any period beyond August 31, 1996.

ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS
-----------------------------------
OF HSI AND SILVERMAN'S
----------------------

The obligation of HSI and Silverman's under this Agreement to consum-
mate the transactions contemplated hereby at the Closing shall be subject to the
satisfaction, at or prior to the Closing, of all of the following conditions,
any one or more of which may be waived in writing by HSI and Silverman's:

7.1 Representations and Warranties Accurate. All representations and
---------------------------------------
warranties of SF and Olson contained in this Agreement and the other SF Closing
Documents shall be true and accurate in all material respects on and as of the
Closing Date as if made again at and as of such date.

7.2 Performance by SF and Olson. SF and Olson shall have performed
---------------------------
and complied with all agreements required by this Agreement and the other SF
Closing Documents to be performed and complied with by each of them prior to or
on the Closing Date.

7.3 Certificate. HSI and Silverman's shall have received a
-----------
certificate, dated the Closing Date, signed on behalf of SF by a principal
corporate officer of SF, and by Olson, in his individual capacity, to the effect
that the conditions set forth in Sections 7.1 and 7.2 have been satisfied.

<PAGE>
7.4 Opinions of Counsel for SF and Olson. HSI and Silverman's shall
------------------------------------
have received from counsel to SF and Olson a written opinion, dated the Closing
Date, in the form annexed hereto as Exhibit 3.2(b).

7.5 Authorization; Legal Prohibition. (a) SF and Olson shall have
--------------------------------
delivered to HSI and Silverman's copies of the resolutions of the Board of
Directors of SF and the stockholders of SF, in each case certified by the
secretary or assistant secretary of SF, which resolutions shall unanimously
approve and authorize the execution and delivery of this Agreement, the other SF
Closing Documents and the consummation of the transactions contemplated hereby
and thereby.

(b) No suit, action, investigation, inquiry or other proceeding
by any governmental body or other person shall have been instituted or
threatened which (i) could reasonably be expected to result in a material
adverse change in the SF Business, the Ex-Territory Business, the SF Designated
Territory Related Business or the SF/Robin Business; (ii) arises out of or
relates to this Agreement or the transactions contemplated hereby; or (iii)
questions the validity hereof or seeks to obtain substantial damages in respect
thereof. On the date of the Closing, there shall be no effective permanent or
preliminary injunction, writ, temporary restraining order or any order of any
nature issued by a court of competent jurisdiction directing that the
transactions provided for herein not be consummated as so provided.

7.6 Consents. (a) All notices to, and declarations, filings and
--------
registrations with, and consents, approvals and waivers from, governmental and
regulatory agencies (including, without limitation, the FTC and DOJ) required to
consummate the transactions contemplated hereby and to permit the continued
operation by HSI or Silverman's, as the case may be, of the SF Business, the Ex-
Territory Business, the SF Designated Territory Related Business or the SF/Robin
Business after the Closing Date, shall have been obtained and all consents to
the assignment to HSI or Silverman's, as the case may be, of each of the
Acquired Assets and Authorizations of SF shall have been obtained, in each case
without any condition or qualification adverse to HSI or Silverman's, as the
case may be.

(b) On or prior to the Closing Date, HSI and Silverman's shall
have obtained the consent of the Banks (as such term is defined in that certain
Amended and Restated Credit Agreement, dated as of July 5, 1995 (the "Credit
Agreement"), among Henry Schein, Inc., The Chase Manhattan Bank, N.A., Natwest
Bank N.A., Cooperative Centrale Raiffeisen-Boerenleenbank, B.A. "Rabobank
Nederland", New York Branch and European American Bank) to the transactions
contemplated by this Agreement.

7.7 Closing Deliveries. HSI and Silverman's shall have received all
------------------
deliveries to be made to it pursuant to Article III of this Agreement.

7.8 Absence of Adverse Changes. There shall not have occurred since
--------------------------
the date hereof (i) any material adverse change in the condition (financial or
otherwise)

<PAGE>
or results of operations of or prospects of the SF Business, the Ex-Territory
Business, the SF Designated Territory Related Business or the SF/Robin Business;
or (ii) any other event, loss, damage, condition or state of facts of any
character which can reasonably be expected materially and adversely to affect
the business, financial condition, prospects, earnings, assets, properties, net
worth or results of operations of the SF Business, the Ex-Territory Business,
the SF Designated Territory Related Business or the SF/Robin Business.

7.9 Payments by SF to Shareholders and Debtholders. SF shall use the
----------------------------------------------
proceeds of the Closing Payments to (i) repurchase all of its outstanding equity
securities (including, without limitation, any options, warrants or convertible
securities) other than those held by Olson and (ii) repay, satisfy and discharge
all outstanding indebtedness of SF, including, without limitation, all
indebtedness reflected on the SF/Robin Financial Statements, in each case, as
more particularly described on Schedule 7.9. Notwithstanding anything in this
Agreement to the contrary, none of the proceeds from the Closing Payments and/or
the SF Note shall be used by SF to make any payment referred to on Schedule 7.9
to be made to any shareholder of SF unless at and as of the Closing Date, HSI
shall be satisfied that Schedule 7.9 adequately provides for the payment by SF
of outstanding amounts owed to its trade creditors. If HSI shall not be so
satisfied, HSI shall have the right to withhold from the proceeds of the Closing
Payments and/or the SF Note an amount (the "Trade Creditor Payment Amount")
estimated in good faith by HSI to be required to ensure that all such trade
creditors are paid all amounts due and payable by SF, and HSI shall be entitled
to pay the trade creditors of SF on behalf of SF and such payments shall be
deemed for all purposes hereof to be a payment by HSI to SF in an amount equal
to the Trade Creditor Payment Amount which SF shall be deemed to have directed
HSI to pay directly to SF's trade creditors on behalf of SF. If after HSI has
paid all such SF trade creditors, there shall exist any surplus Trade Creditor
Payment Amount, HSI shall immediately pay such surplus to SF. Nothing in this
Section 7.9 shall relieve SF from the performance of any obligation owed by SF
to any of its trade creditors or HSI, or impose any obligation on HSI to perform
any such obligation on SF's behalf. In no event shall SF make any payment to
Thomas F. Novotny or Larry Olson in respect of any SF debt or equity securities
owned or held by either of them unless and until (i) all amounts due and payable
by SF to its trade creditors as of the Closing Date shall have been paid and
(ii) all claims by the FM Dental Related Parties against SF, HSI, the Acquired
Assets, the SF Business, the Ex-Territory Business, the SF/Robin Business, the
Pattison Assets or the Pattison Business shall have been finally resolved to the
satisfaction of HSI and, in connection with such resolution, HSI shall have
received a release from each of the FM Dental Related Parties satisfactory to
HSI.

7.10 Satisfactory Completion of Due Diligence. HSI and its
----------------------------------------
representatives (including, without limitation, its attorneys and accountants)
shall have completed their due diligence review relating to the SF Business, the
Ex-Territory Business, the SF Designated Territory Related Business, the
SF/Robin Business, SF and the Acquired Assets, and the results of such review
shall be satisfactory to HSI.

<PAGE>
7.11 Confirmation of Agreed Upon Ex-Territory Business Value. HSI
-------------------------------------------------------
shall have determined, following a review and/or audit of the books and records
of SF, that the Agreed Upon Ex-Territory Business Value is not less than
$2,383,231.

7.12 Distribution Agreement. HSI and SF shall have entered into a
----------------------
distribution agreement relating to the distribution of oats based medical and
dental products, such agreement to be in form and substance mutually
satisfactory to HSI and SF.

7.13 Actions by SF. SF shall have executed Bills of Sale in the form
-------------
of Exhibits 3.2(d)-1 and 3.2(d)-2.

7.14 Additional Documents, Etc. SF and Olson shall have delivered to
--------------------------
HSI and Silverman's such other documents, instruments and certificates as shall
be reasonably requested by HSI or Silverman's or counsel to HSI and Silverman's
for the purpose of effecting the transactions provided for and contemplated by
this Agreement and the other HSI Closing Documents.

ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF
--------------------------------------
SF AND OLSON
-------------

The obligations of SF and Olson under this Agreement shall be subject
to the satisfaction, at or prior to the Closing, of all of the following
conditions, any one or more of which may be waived in writing by SF and Olson.

8.1 Representations and Warranties Accurate. All representations and
---------------------------------------
warranties of HSI and Silverman's contained in this Agreement and the other HSI
Closing Documents shall be true and accurate in all material respects on and as
of the Closing Date as if made again at and as of such date.

8.2 Performance by Buyer. HSI and Silverman's shall have performed
--------------------
and complied with all agreements required by this Agreement and the other HSI
Closing Documents to be performed and complied with by it prior to or on the
Closing Date.

8.3 Certificate. SF and Olson shall have received a certificate,
-----------
dated the Closing Date, signed on behalf of HSI and Silverman's by a principal
corporate officer of HSI and Silverman's, to the effect that the conditions set
forth in Sections 8.1 and 8.2 have been satisfied.

8.4 Opinion of Counsel for HSI and Silverman's. SF and Olson shall
------------------------------------------
have received from Proskauer a written opinion, dated the Closing Date, in the
form annexed hereto as Exhibit 3.3(d).

<PAGE>
8.5 Authorizations; Legal Prohibition. (a) HSI and Silverman's
---------------------------------
shall have delivered to SF and Olson copies of the resolutions of the Board of
Directors of each of HSI and Silverman's and, if necessary in the case of
Silverman's, resolutions of HSI, in its capacity as sole shareholder of
Silverman's, certified by the secretary or assistant secretary of each of HSI
and Silverman's, which resolutions shall approve and authorize the execution and
delivery of this Agreement, the other HSI Closing Documents and the consummation
of the transactions contemplated hereby and thereby.

(b) No suit, action, investigation, inquiry or other proceeding
by any governmental body or other person shall have been instituted which arises
out of or relates to this Agreement or the transactions contemplated hereby or
questions the validity hereof or seeks to obtain substantial damages in respect
thereof. On the date of the Closing, there shall be no effective permanent or
preliminary injunction, writ, temporary restraining order or any order of any
nature issued by a court of competent jurisdiction directing that the
transactions provided for herein not be consummated as so provided.

8.6 Closing Deliveries. SF and Olson shall have received all
------------------
deliveries to be made to each of them pursuant to Article III of this Agreement.

8.7 Actions by HSI and Silverman's. HSI shall have executed a
------------------------------
counterpart to the Employment Agreement. HSI and Silverman's shall have
executed Assumption Agreements in the form of Exhibits 3.3(e)-1 and 3.3(e)-2.

8.8 Additional Documents, Etc. HSI and Silverman's shall have
--------------------------
delivered to SF and Olson such other documents, instruments and certificates as
shall be reasonably requested by any of them or their counsel for the purpose of
effecting the transactions provided for and contemplated by this Agreement and
the other SF Closing Documents.

ARTICLE IX RESTRICTIVE COVENANTS
---------------------

9.1 Non-Competition. None of SF or Olson nor any of their
---------------
respective Affiliates shall, until the later of a (x) period of five years after
the date hereof and (y) two (2) years after the cessation of Olson's employment
pursuant to the Employment Agreement, directly or indirectly, engage, anywhere
in the world, in the sale or offering or promoting for sale of any product,
process, good or service which is the same as, is functionally similar to, or
competes with, any product, process, good or service which any of HSI,
Silverman's or SF has sold or offered or promoted for sale within the three
years preceding the date hereof in connection with their respective businesses.
Notwithstanding anything in the immediately preceding sentence to the contrary,
nothing herein shall preclude (i) Olson from performing his duties pursuant to
the Employment Agreement; (ii) SF from collecting existing receivables or
satisfying their respective payables or any action reasonably related thereto,
(iii) SF selling or offering for sale within six (6) months after the date
hereof any Non-Matching Inventory or Ineligible

<PAGE>
Inventory not purchased by HSI pursuant to the terms of this Agreement or (iv)
subject to the Employment Agreement, SF and Olson from engaging in the Oats
Business (collectively, the "Permitted Activities").

9.2 Non-Solicitation of Employees. None of SF or Olson nor any of
-----------------------------
their respective Affiliates shall directly or indirectly, for itself or himself
or on behalf of any other Person, hire any employee of HSI (or any of its
Affiliates), including, without limitation, any employees of SF that HSI (or any
of its Affiliates) has hired in its sole discretion, or induce nor attempt to
induce any such employee to leave his or her employment with HSI (or any of its
Affiliates) at any time until the later of (x) five years from the date hereof
and (y) two (2) years after the cessation of Olson's employment pursuant to the
Employment Agreement.

9.3 Non-Solicitation or Interference with Customers and Suppliers.
-------------------------------------------------------------
None of SF or Olson nor any of their respective Affiliates shall, directly or
indirectly, for itself or on behalf of any other Person, solicit, divert, take
away or attempt to take away any customers of HSI (or any of its Affiliates) or
suppliers or the business or patronage of any such customers or suppliers or in
any way interfere with, disrupt or attempt to disrupt any then existing
relationships between HSI (or any of its Affiliates) and any of its customers or
suppliers or other Persons with whom it deals or contact for business purposes
or enter into any business transaction with any such customers or suppliers or
other Persons for any purpose at any time until the later of (x) five years from
the date hereof and (y) two (2) years after the cessation of Olson's employment
pursuant to the Employment Agreement. Notwithstanding anything in the
immediately preceding sentence to the contrary, nothing herein shall preclude
Olson from engaging in any of the Permitted Activities.

9.4 Acknowledgements. Each of SF and Olson acknowledges that, in
----------------
view of the nature of the SF Business, the Ex-Territory Business, the SF
Designated Territory Related Business and the SF/Business and the business
objectives of HSI in acquiring such business (or portions thereof) as herein
provided, and the consideration paid to each of SF and Olson therefor, the
restrictions contained in this Article IX are reasonably necessary to protect
the legitimate business interests of HSI and that any violation of such
restrictions will result in irreparable injury to HSI and the business HSI has
acquired hereunder for which damages will not be an adequate remedy. Each of SF
and Olson therefore acknowledges that, if any such restrictions are violated,
HSI shall be entitled to preliminary and injunctive relief as well as to an
equitable accounting of earnings, profits and other benefits arising from such
violation.

<PAGE>
ARTICLE X INDEMNIFICATION
---------------

10.1 Survival of Representations and Warranties. All representations
------------------------------------------
and warranties contained in Articles IV and V of this Agreement shall survive
until the third anniversary of the Closing Date.

10.2 Indemnification by SF and Olson. From and after the Closing,
-------------------------------
each of SF and Olson shall jointly and severally indemnify and save HSI and its
Affiliates (including, for this purpose, Silverman's), their respective
directors, officers, employees, agents and representatives and all of their
successors and assigns (collectively "Buyer Claimants" and individually "Buyer
Claimant") harmless from and defend each of them from and against any and all
demands, claims, actions, liabilities, losses, costs, damages or expenses
whatsoever (including any reasonable attorneys' fees) (collectively, "Losses")
asserted against, imposed upon or incurred by the Buyer Claimants resulting from
or arising out of (a) any inaccuracy or breach of any representation or warranty
of SF or Olson contained herein; (b) any breach of any covenant or obligation of
SF or Olson contained herein; (c) any liability of SF or Olson or the SF
Business, the Ex-Territory Business, the SF Designated Territory Related
Business or the SF/Robin Business, except for the Assumed Liabilities; (d)
noncompliance with any applicable bulk sales or similar laws (including laws
which may impose transferee liability on HSI or an Affiliate (including, for
this purpose, Silverman's) or create Encumbrances on any Acquired Assets
relating to the liability of SF or Olson for sales, use or other taxes or
withholdings arising out of the operations of the SF Business, the Ex-Territory
Business, the SF Designated Territory Related Business or the SF/Robin Business
by SF or Olson); (e) any personal injuries, death or property damage arising
from products sold by SF or Olson prior to the Closing Date; (f) any liability
arising out of or related to the SF Business, the Ex-Territory Business, the SF
Designated Territory Related Business or the SF/Robin Business prior to Closing,
other than the Assumed Liabilities or the assertion against a Buyer Claimant of
a claim which, if valid, would constitute a liability arising out of or related
to the SF Business, the Ex-Territory Business, the SF Designated Territory
Related Business or the SF/Robin Business, other than the Assumed Liabilities;
(g) any claim made against HSI or Silverman's by Above the Rest, Inc. or any of
its Affiliates as a result of the transactions contemplated hereby or otherwise;
(h) any claim made against HSI or Silverman's by any FM Dental Related Party or
any of their respective Affiliates as a result of the consummation of the
transactions contemplated hereby, including, without limitation, the sale and
purchase of the Purchased Inventory; and (i) any liability of SF or Olson under
the WARN Act or any state equivalent.

10.3 Indemnification by HSI and Silverman's. From and after the
--------------------------------------
Closing, HSI and Silverman's shall indemnify and save SF and Olson and their
respective Affiliates and their respective directors, officers, employees,
agents and representatives (collectively "Seller Claimants" and individually
"Seller Claimant") harmless from and defend each of them from and against any
and all Losses asserted against, imposed upon or incurred by the Seller
Claimants resulting from or arising out of (a) any inaccuracy or breach of any
representation or warranty of HSI and Silverman's contained herein;

<PAGE>
(b) any breach of any covenant or obligation of HSI and Silverman's contained
herein; (c) except as described in clause 10.2(e) above, HSI or Silverman's
ownership of Acquired Assets and operation of their respective businesses from
and after the Closing Date or any liability of HSI or Silverman's arising after
the Closing Date under any Assumed Contract; (d) any personal injuries, death or
property damage arising from products sold by HSI or Silverman's prior to the
Closing Date; (e) any liability arising out of or related to the HSI Business or
the Silverman's Business prior to Closing or the assertion against a Seller
Claimant of a claim which, if valid, would constitute a liability arising out of
or related to the HSI Business or the Silverman's Business; and (f) any
liability of HSI or Silverman's under the WARN Act or any state equivalent.

10.4 Indemnification Procedures.
--------------------------

(a) The rights and obligations of each party claiming a right
to indemnification hereunder ("Indemnitee") from the other party ("Indemnitor")
shall be governed by the following rules:

(i) The Indemnitee shall give prompt written notice to the
Indemnitor of any state of facts which Indemnitee determines will give rise
to a claim by the Indemnitee against the Indemnitor based on the indemnity
agreements contained herein, stating the nature and basis of said claims
and the amount thereof, to the extent known. No failure to give such
notice shall affect the indemnification obligations of Indemnitor
hereunder, except to the extent such failure materially prejudices such
Indemnitor's ability successfully to defend the matter giving rise to the
indemnification claim.

(ii) In the event any action, suit or proceeding is brought
against the Indemnitee, with respect to which the Indemnitor may have
liability under the indemnity agreements contained herein, then upon the
written acknowledgment by the Indemnitor within thirty (30) days of the
bringing of such action, suit or proceeding that it is undertaking and will
prosecute the defense of the claim under such indemnity agreements and
confirming that the claim is one with respect to which the Indemnitor is
obligated to indemnify and that it will be able to pay the full amount of
potential liability in connection with any such claim, the action, suit or
proceeding (including all proceedings on appeal or for review which counsel
for the Indemnitee shall deem appropriate) may be defended by the
Indemnitor. However, in the event the Indemnitor shall not offer
reasonable assurances as to its financial capacity to satisfy any final
judgment or settlement, the Indemnitee may assume the defense and dispose
of the claim, after 30 days' prior written notice to the Indemnitor. The
Indemnitee shall have the right to employ its own counsel in any such case,
but the fees and expenses of such counsel shall be at the Indemnitee's own
expense unless (a) the employment of such counsel and the payment of such
fees and expenses both shall have been specifically authorized by the
Indemnitor in connection with the defense of such action, suit or
proceeding or (b) the Indemnitee shall have reasonably concluded

<PAGE>
and specifically notified the Indemnitor that there may be specific
defenses available to it which are different from or additional to those
available to the Indemnitor, or that such action, suit or proceeding
involves or could have an effect upon matters beyond the scope of the
indemnity agreements contained herein.

(iii) In addition, in any event specified in clause (b) of
the second sentence of subparagraph (ii) above, the Indemnitor, to the
extent made necessary by such different or additional defenses, shall not
have the right to direct the defense of such action, suit or proceeding on
behalf of the Indemnitee. If Indemnitor and Indemnitee cannot agree on a
mechanism to separate the defense of matters extending beyond the scope of
indemnification, such matters shall be defended on the basis of joint
consultation.

(iv) The Indemnitee shall be kept fully informed by the
Indemnitor of such action, suit or proceeding at all stages thereof,
whether or not it is represented by counsel. The Indemnitor shall, at the
Indemnitor's expense, make available to the Indemnitee and its attorneys
and accountants all books and records of the Indemnitor relating to such
proceedings or litigation, and the parties hereto agree to render to each
other such assistance as they may reasonably require of each other in order
to ensure the proper and adequate defense of any such action, suit or
proceeding.

(c) In the event any claim of a right to indemnification is
made by HSI or another indemnified party hereunder, such party may, at its sole
option, satisfy all or a portion of its Losses by way of setoff against any
payments due SF or Olson. Such right to setoff is without prejudice to any
right of SF or Olson, as the case may be, to challenge its liability hereunder.
This Section in no way constitutes a limitation on rights hereunder and HSI and
each other indemnified party hereunder may seek full indemnification for all
damages suffered and may pursue all rights and remedies available to it, at law
or in equity, against any party hereto, jointly with other parties hereto or
severally, without seeking recourse against any other party and without
exercising any right of offset.

<PAGE>
ARTICLE XI MISCELLANEOUS
-------------

11.1 Termination. (a) This Agreement may be terminated at any time
-----------
prior to the Closing Date:

(i) by mutual consent of the parties hereto;

(ii) by HSI, by written notice given to SF and Olson, if
(A) any of the conditions set forth in Section 3.2 shall have become
incapable of fulfillment and shall not have been waived by HSI and/or
Silverman's or (B) there has been a material violation or breach by SF or
Olson of any agreement, representation or warranty contained in this
Agreement which has rendered the satisfaction of any condition to the
obligations of HSI or Silverman's impossible and such violation or breach
has not been waived by HSI or Silverman's, as the case may be; or

(iii) by Olson, acting on behalf of SF and himself, by
written notice given to HSI and Silverman's, if (A) any of the conditions
set forth in Section 3.3 shall have become incapable of fulfillment and
shall not have been waived by SF and Olson or (B) there has been a material
violation or breach by HSI or Silverman's of any agreement, representation
or warranty contained in this Agreement which has rendered the satisfaction
of any condition to the obligations of SF or Olson impossible and such
violation or breach has not been waived by Olson, acting on behalf of SF
and himself;

(iv) by any of the parties hereto:

(A) if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action (which order, decree
or ruling the parties hereto shall use their best efforts to vacate), in each
case permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree, ruling or
other action shall have become final and nonappealable; or

(B) if the Closing Date shall not have occurred on or
before June 30, 1996; provided, however, that the right to terminate this
-------- -------
Agreement shall not be available to any party whose breach of this Agreement has
been the cause of, or resulted in, the failure of the Closing to occur on or
before such date.

(b) In the event of termination pursuant to Section 11.1(a) of
this Agreement, written notice thereof shall forthwith be given as therein
provided and this Agreement shall terminate, without further action by any of
the parties hereto. If this Agreement is terminated as provided herein:

<PAGE>
(i) Upon request therefor, each party will redeliver all
documents, work papers and other material of any other party relating to
the transactions contemplated hereby, whether obtained before or after the
execution hereof, to the party furnishing the same; and

(ii) no party hereto shall have any liability or further
obligation to any other party to this Agreement resulting from such
termination except (A) that the provision of this Section 11.1(b) and the
proviso of Section 11.1(a)(iv)(B) of this Agreement shall remain in full
force and effect and (B) no party waives any claim or right against a
breaching party to the extent that such termination results from the breach
by a party hereto of any of its representations, warranties, covenants or
agreements set forth in this Agreement; and

(iii) no party hereto shall use any confidential or
proprietary information of any other party hereto which information was
acquired solely in connection with the transactions contemplated hereby for
the use in such party's business.

11.2 Expenses. Each party hereto shall pay its own expenses incurred
--------
in connection with this Agreement, except as otherwise specified in this
Agreement and except that all sales, transfer and other similar taxes, levies
and charges that may be imposed, levied or assessed in connection with the
consummation of the transactions contemplated hereby shall be borne by SF and
Olson with respect to the Acquired Assets.

11.3 Amendment. This Agreement may not be terminated, amended,
---------
altered or supplemented except by a written agreement executed by the parties
hereto.

11.4 Entire Agreement. This Agreement, including the schedules and
----------------
exhibits hereto, and the instruments and other documents delivered pursuant to
this Agreement contains the entire agreement of the parties relating to the
subject matter of this Agreement and supersedes all prior agreements and
understandings of any kind between the parties respecting such subject matter.
Each and every representation, warranty and covenant shall be deemed to include
the information contained in the schedules thereto.

11.5 Waivers. Waiver by either party of either breach of or failure
-------
to comply with any provision of this Agreement by the other party shall not be
construed as, or constitute, a continuing waiver of such provision, or a waiver
of any other breach of, or failure to comply with, any other provision of this
Agreement. No waiver of any such breach or failure or of any term or condition
of this Agreement shall be effective unless in a written notice signed by the
waiving party and delivered, in the manner required for notices generally, to
each affected party.

<PAGE>
11.6 Notices. All notices, consents, directions, approvals,
-------
instructions, requests and other communications required or permitted by the
terms of this Agreement to be given to any Person shall be in writing, and any
such communication shall become effective five Business Days after being
deposited in the United States mails, certified or registered, with appropriate
postage prepaid for first class mail or, if delivered by hand or courier service
or in the form of a telex, telecopy or telegram, when received (if received
during normal business hours on a Business Day, or if not, then on the next
Business Day thereafter), and shall be directed to the following address or
telex or telecopy number:

If to SF or Olson:

San Francisco Dental Supply, Inc.
2201 South Oneida Street
Green Bay, Wisconsin 54304
Attention: Larry Olson
Telecopier: (414) 494-3386

With copies to:

Hanaway, Ross, Hanaway,
Weidner & Bachhuber, S.C.
345 S. Jefferson Street
Green Bay, Wisconsin 54301-4522
Attention: William S. Woodward, Esq.
Telecopier: (414) 432-4037

If to HSI or Silverman's:

Henry Schein, Inc.
135 Duryea Road
Melville, New York 11747
Attention: Mark E. Mlotek, Esq.
Telecopier: (516) 843-5675

With copies to:

Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
Attention: Richard L. Goldberg, Esq.
Telecopier: (212) 969-2900

or to such other address as a party may have furnished to the other parties in
writing in accordance herewith, except that notices of change of address shall
only be effective upon

<PAGE>
receipt. Any notice which is so mailed shall be deemed delivered on the fourth
Business Day (or Days) after mailing; any notice which is transmitted by
telecopier shall be deemed delivered when transmitted to the telecopier number
specified above and acknowledgement of receipt of such facsimile is received.

11.7 Counterparts. This Agreement may be executed in two or more
------------
counterparts, and by the different parties hereto in separate counterparts each
of which when executed shall be deemed to be an original, but all of which
together shall constitute one and the same document.

11.8 Governing Law; Submission to Jurisdiction. This Agreement shall
-----------------------------------------
be governed by, and construed in accordance with, the law of the State of New
York, without regard to applicable principles of conflict of laws that might
otherwise govern. Each of SF and Olson hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any New York State Court sitting in New York City for the
purposes of all legal proceedings arising out of or relating to this Agreement
or the transactions contemplated hereby. Each of SF and Olson irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such proceeding brought in
such a court and any claim that any such proceeding brought in such a court has
been brought in an inconvenient forum.

11.9 Binding Effect; Assignment. This Agreement shall be binding
--------------------------
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, that none of SF or Olson shall assign or
--------
transfer this Agreement nor any right or obligation hereunder by operation of
law or otherwise; further provided, that either HSI or Silverman's, in their
------- --------
sole discretion, may (a) prior to the Closing Date, assign all or a portion of
its rights hereunder to an Affiliate or Affiliates without the consent of SF or
Olson and (b) after the Closing Date, may assign all or a portion of its rights
hereunder to any Person without the consent of SF or Olson; further provided,
------- --------
that no assignment shall relieve HSI or Silverman's of its obligations
hereunder.

11.10 Severability. Any provision of this Agreement that shall be
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions thereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties to such instrument waive any provision of law
that renders any provision thereof prohibited or unenforceable in any respect.

11.11 Headings. The headings contained in this Agreement (including
--------
the exhibits and schedules) are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.

<PAGE>
11.12 No Partnership; Etc. Nothing contained in this Agreement
--------------------
shall constitute or be deemed a representation, agreement or understanding that
the parties hereto are members of any partnership, joint venture, association,
syndicate or other entity, and each of the parties hereto expressly disclaims
the existence of any such relationship or arrangement.

11.13 Third Parties. Nothing herein is intended or shall be
-------------
construed to confer upon or give to any person other than the parties hereto any
rights or remedies under or by reason of this Agreement.

<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first above written.

SAN FRANCISCO DENTAL SUPPLY, INC.

By:__________________________________
Authorized Officer

_____________________________________
Larry Olson

HENRY SCHEIN, INC.

By:__________________________________
Authorized Officer

SILVERMAN'S DENTAL SUPPLY CORP.

By:__________________________________
Authorized Officer

<PAGE>
Schedule 2.3(c)
(SF Excluded Liabilities)
-------------------------

1. Legal, accounting, brokerage, finder's fees, taxes or other
expenses incurred by SF, Olson or any of their respective Affiliates in
connection with this Agreement or the consummation of the transactions
contemplated hereby;

2. Any intercompany debt or other liability or obligation of any
nature between Olson and any past or present Affiliate, on the one hand, or SF
and any past or present Affiliate, on the other hand;

3. Liabilities or obligations incurred by SF after the Closing;

4. Any obligation or liability relating to any litigation or any
claim arising out of any dispute, whether or not listed on any schedule hereto
and regardless of whether accruing prior or subsequent to the Closing;

5. Any liability for any federal, state, local or foreign income or
other Taxes accrued to or incurred by Olson or SF or any of their respective
Affiliates or relating to the SF/Robin Business, the SF Designated Territory
Related Business or the Ex-Territory Business, operations, products or assets of
Olson or SF or any of their respective Affiliates, or as a consequence of the
transactions contemplated hereby;

6. Any liability or costs (including, without limitation, costs of
remediation) arising out of or relating to a Hazardous Discharge or the release,
discharge or disposal of any solid wastes or the handling, storage, use,
transportation or disposal of any of the foregoing, as these terms are defined
by the Environmental Laws in, on, under or from facilities of SF at any time
prior to the Closing regardless of whether such liability or costs arise before
or after Closing and whether or not in breach of any representation or warranty
under this Agreement;

7. Any liability or obligation to employees, government agencies or
other third parties in connection with any Employee Benefit Plan, option plan,
pension plan or any other ERISA plan, or other Employee Benefit Plan and any
health, dental or life insurance benefits, whether or not insured and whether or
not disclosed on any schedule hereto;

8. Any liability or obligation under any contract or commitment that
is not an Assumed Contract or under any SF/Robin Contract which relates to any
default in respect of such contract or other commitment or obligation of SF
prior to the Closing Date;

<PAGE>
9. Any liability or obligation to employees in the nature of
workmen's compensation relating to the period prior to the Closing, whether or
not listed on any Schedule hereto and regardless of whether accruing prior or
subsequent to the Closing;

10. Any accounts payable, notes payable, bank debts, and/or debt to
any officer, director or stockholder of SF;

11. Any liability or obligation of any nature of SF or any of its
Affiliates owed or claimed by any FM Dental Related Party relating to the
Purchased Inventory or otherwise.

12. Any liability or obligation of any nature of SF or any of its
Affiliates owned or claimed by Above the Rest, Inc. or any of its Affiliates
relating to the transactions contemplated by the Agreement or otherwise.

13. Any other liability not expressly included as an Assumed
Contract.

EXHIBIT 10.95

ACQUISITION AGREEMENT

dated as of May 23, 1996

Between

HENRY SCHEIN, INC.,

and

PATTISON-MCGRATH COMPANY DENTAL SUPPLIES

<PAGE>
TABLE OF CONTENTS

PAGE

ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE II SALE AND PURCHASE OF INVENTORY; SALE AND PURCHASE OF
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . 9

2.1 Purchase of Inventory . . . . . . . . . . . . . . . . . 9
2.2 Purchase of the Business. . . . . . . . . . . . . . . . 10
2.3 Allocation of Purchase Price . . . . . . . . . . . . . 12
2.4 Nonassignable Contracts and Authorizations . . . . . . 12
2.5 Guarantee of Performance by Pattison . . . . . . . . . 13
2.6 Pattison Bridge Loan . . . . . . . . . . . . . . . . . 13

ARTICLE III CLOSING . . . . . . . . . . . . . . . . . . . . . . . . 13

3.1 The Closing . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Obligations of Pattison . . . . . . . . . . . . . . . . 13
3.3 Obligations of HSI . . . . . . . . . . . . . . . . . . 15

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PATTISON . . . . . . 15

4.1 Organization and Qualification . . . . . . . . . . . . 15
4.2 Authority . . . . . . . . . . . . . . . . . . . . . . . 15
4.3 No Breach . . . . . . . . . . . . . . . . . . . . . . . 16
4.4 Financial Statements and Sales Information . . . . . . 16
4.5 Absence of Certain Changes or Events . . . . . . . . . 16
4.6 Assets . . . . . . . . . . . . . . . . . . . . . . . . 17
4.7 Real Property . . . . . . . . . . . . . . . . . . . . . 17
4.8 Intellectual Property . . . . . . . . . . . . . . . . . 17
4.9 Contracts and Commitments . . . . . . . . . . . . . . . 17
4.10 Accounts Receivable . . . . . . . . . . . . . . . . . . 18
4.11 Inventory . . . . . . . . . . . . . . . . . . . . . . . 18
4.12 Customers and Suppliers . . . . . . . . . . . . . . . . 18
4.13 Litigation, Etc. . . . . . . . . . . . . . . . . . . . 18
4.14 Employee Benefit Plans . . . . . . . . . . . . . . . . 19
4.15 Compliance with Law; Necessary Authorizations . . . . . 19
4.16 Finders . . . . . . . . . . . . . . . . . . . . . . . . 19
4.17 Consents and Approvals of Governmental Authorities . . 19
4.18 Related Party Transactions; Intercompany Accounts . . . 20

(i)

<PAGE>
PAGE

ARTICLE V REPRESENTATIONS AND WARRANTIES OF HSI . . . . . . . . . . 20

5.1 Organization and Qualification . . . . . . . . . . . . 20
5.2 Authority . . . . . . . . . . . . . . . . . . . . . . . 20
5.3 No Breach . . . . . . . . . . . . . . . . . . . . . . . 20
5.4 HSI Financial Statements and Sales Information . . . . 21
5.5 Finders . . . . . . . . . . . . . . . . . . . . . . . . 21

ARTICLE VI COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 21

6.1 Certain Covenants of Pattison . . . . . . . . . . . . . 21
6.2 Obtaining Consents . . . . . . . . . . . . . . . . . . 22
6.3 Transfer and Retention of Records . . . . . . . . . . . 22
6.4 Product Replacement and Repairs . . . . . . . . . . . . 22
6.5 Employee Matters . . . . . . . . . . . . . . . . . . . 22
6.6 Further Assurances . . . . . . . . . . . . . . . . . . 23
6.7 Name Change . . . . . . . . . . . . . . . . . . . . . . 23
6.8 Use of Facilities . . . . . . . . . . . . . . . . . . . 23
6.9 No Encumbrance on Premises . . . . . . . . . . . . . . 23

ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF HSI . . . . . . . . . 23

7.1 Representations and Warranties Accurate . . . . . . . . 23
7.2 Performance by SF and Pattison . . . . . . . . . . . . 23
7.3 Certificate . . . . . . . . . . . . . . . . . . . . . . 24
7.4 Opinions of Counsel for Pattison . . . . . . . . . . . 24
7.5 Authorization; Legal Prohibition . . . . . . . . . . . 24
7.6 Consents . . . . . . . . . . . . . . . . . . . . . . . 24
7.7 Closing Deliveries . . . . . . . . . . . . . . . . . . 24
7.8 Absence of Adverse Changes . . . . . . . . . . . . . . 24
7.9 Actions by Pattison . . . . . . . . . . . . . . . . . . 24
7.10 Additional Documents, Etc. . . . . . . . . . . . . . . 25

ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF PATTISON . . . 25

8.1 Representations and Warranties Accurate . . . . . . . . 25
8.2 Performance by Buyer . . . . . . . . . . . . . . . . . 25
8.3 Certificate . . . . . . . . . . . . . . . . . . . . . . 25
8.4 Legal Prohibition . . . . . . . . . . . . . . . . . . . 25
8.5 Closing Deliveries . . . . . . . . . . . . . . . . . . 25
8.6 Additional Documents, Etc. . . . . . . . . . . . . . . 25

(ii)

<PAGE>
PAGE

ARTICLE IX RESTRICTIVE COVENANTS . . . . . . . . . . . . . . . . . . . 26

9.1 Non-Solicitation of Employees . . . . . . . . . . . . . 26
9.2 Non-Solicitation or Interference with Customers
and Suppliers . . . . . . . . . . . . . . . . . . . . . 26
9.3 Acknowledgements . . . . . . . . . . . . . . . . . . . 26

ARTICLE X INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 26

10.1 Survival of Representations and Warranties . . . . . . 26
10.2 Indemnification by Pattison . . . . . . . . . . . . . . 26
10.3 Indemnification by HSI . . . . . . . . . . . . . . . . 27
10.4 Indemnification Procedures . . . . . . . . . . . . . . 27

ARTICLE XI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 29

11.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . 29
11.2 Amendment . . . . . . . . . . . . . . . . . . . . . . . 29
11.3 Entire Agreement . . . . . . . . . . . . . . . . . . . 29
11.4 Waivers . . . . . . . . . . . . . . . . . . . . . . . . 29
11.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . 29
11.6 Counterparts . . . . . . . . . . . . . . . . . . . . . 30
11.7 Governing Law; Submission to Jurisdiction . . . . . . . 31
11.8 Binding Effect; Assignment . . . . . . . . . . . . . . 31
11.9 Severability . . . . . . . . . . . . . . . . . . . . . 31
11.10 Headings . . . . . . . . . . . . . . . . . . . . . 31
11.11 No Partnership; Etc. . . . . . . . . . . . . . . . 31
11.12 Third Parties . . . . . . . . . . . . . . . . . . 31

(iii)

<PAGE>
EXHIBITS AND SCHEDULES

Exhibits

1.57 Pattison Specified Contracts
2.5 SF Guaranty
2.6 Pattison Note
3.2(a) Opinion of Counsel for Pattison and Olson
3.2(b) Bill of Sale to HSI
3.2(c) Assignment Agreement
3.2(j) Security Agreement
3.2(l) Acknowledgement and Waiver Letters
3.3(c) Assumption Agreement in favor of Pattison from HSI

Schedules

1.6(a) Pattison Contracts
1.6(b) Pattison Excluded Assets
2.2(e) Pattison Excluded Liabilities
2.6(b) Life Insurance Policies
4.3 No Breach
4.4A Pattison Financial Statements
4.4B Pattison Financial Statements - Exceptions to Generally Accepted
Accounting Principles
4.5 Absence of Certain Changes or Events
4.6 Certain Excluded Assets
4.7 Real Property
4.8 Intellectual Property
4.9 Pattison/Robin Contracts
4.10 Accounts Receivable
4.11 Inventory
4.12 Customers and Suppliers - Adverse Change, etc.
4.13 Litigation, etc.
4.14 Employee Benefit Plans
4.15(a) Compliance with Law
4.15(b) Authorizations
4.17 Consents and Approvals of Governmental Authorities
4.18 Related Party Transactions
5.4A HSI Financial Statements
5.4B HSI Financial Statements - Exceptions to Generally Accepted
Accounting Principles

(iv)
<PAGE>
ACQUISITION AGREEMENT

ACQUISITION AGREEMENT, dated as of May 23, 1996 (the "Agreement"), by
and between Henry Schein, Inc., a Delaware corporation ("HSI"), and Pattison-
McGrath Company Dental Supplies, a Missouri corporation ("Pattison").

WITNESSETH

WHEREAS, Pattison owns and operates the Business (as hereinafter
defined); and

WHEREAS, Pattison is a wholly-owned subsidiary of San Francisco Dental
Supply, Inc., a California corporation ("SF"), and will be merged with and into
SF as soon as practicable after the date hereof (the "Merger"); and

WHEREAS, Pattison desires to sell and transfer, and HSI desires to
purchase and acquire, certain of Pattison's assets used in connection with the
Business, all on the terms and conditions set forth herein; and

WHEREAS, the parties hereto and certain of their respective affiliates
have concurrently entered into that certain Acquisition Agreement, dated of even
date herewith (the "HSI/SF Agreement"), pursuant to which, among other things,
HSI shall acquire certain specified assets and businesses from SF; and

NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the parties hereto have
agreed, and do hereby agree, as follows:

ARTICLE I DEFINITIONS
-----------

<PAGE>
The terms defined in this Article I, whenever used herein (including
the exhibits and schedules hereto, unless otherwise defined therein), shall have
the following meanings.

1.1 "Acquired Assets" shall mean, collectively, the Purchased
----------------
Inventory and the Pattison Assets.

1.2 "Affiliate" shall mean any Person that directly or indirectly
---------
controls, is controlled by or is under common control with another Person.

1.3 "Agreement" shall mean this Acquisition Agreement, including all
---------
Schedules and Exhibits hereto, in each case, as the same may be amended from
time to time.

1.4 "Agreement Date" shall mean May 23, 1996 which is the date on
--------------
which this Agreement shall be effective.

1.5 "Authorizations" shall mean all licenses, permits, approvals,
--------------
authorizations, qualifications, concessions or the like, issued by any federal,
state, local or foreign regulatory or governmental authorities.

1.6 "Business" shall mean all of Pattison's right, title and interest
--------
in and to all of the assets (wherever located, tangible and intangible
(including goodwill), real, personal or mixed of Pattison, whether known or
unknown and whether or not carried on the books and records of Pattison) and the
Business as a going concern (excluding only the assets specified in the proviso
below), including, but not limited to, the following (the "Pattison Assets"):

(a) all of Pattison's rights under agreements, arrangements,
commitments, and understandings ("Pattison Contracts") relating to the Business
as a going concern as conducted and which are set forth on schedule 1.6(a);

(b) all of Pattison's records, files and other data relating to
the Business as a going concern;

(c) all of Pattison's copyrights and all of Pattison's rights
in the trademarks, service marks, trade names and logos now or previously used
by Pattison in the Business as a going concern;

(d) all of Pattison's inventions, computer software, trade
secrets and confidential data relating to the Business as a going concern;

(e) all rights to the name "Pattison" and all names derivative
therefrom (the "Pattison Name");

<PAGE>
(f) all of Pattison's equipment (including office equipment),
computers, furniture, fixtures, leasehold improvements, stationery, forms,
labels, promotional materials and similar supplies used by Pattison in the
Business as a going concern;

(g) all other tangible assets owned by Pattison wherever
located;

(h) customer lists, customer sales orders and sales leads,
customer shipping labels and forms, customer sales and vendor purchase
histories, catalogs, brochures, mailing lists, advertising materials, records,
files, computer software, and other information pertaining to Pattison or the
Business or the customers and suppliers thereto;

(i) to the extent transferable, all manufacturer's warranties
with respect to any of the foregoing;

(j) all Authorizations relating to the Business;

(k) all "800 numbers"; and

(l) all claims against third parties;

provided, however, that the term "Business" shall not include (i) the minute
- -------- -------
books and stock ledger of Pattison; (ii) cash and cash equivalents on hand or in
banks and debt and equity securities; (iii) Pattison's accounts receivable or
Non-Matching Inventory which is not designated as Optional Pattison Inventory,
(iv) the assets specifically listed on Schedule 1.6(b) hereto or (v) life
insurance policies.

1.7 "Business Day" shall mean any day other than a Saturday, Sunday
------------
or other day on which banks are closed or are authorized to be closed in New
York, New York.

1.8 "Buyer Claimant" shall have the meaning set forth in Section 10.2
--------------
of this Agreement.

1.9 "Closing" shall mean the closing of the purchase and sale of the
-------
Acquired Assets and the Business as contemplated by this Agreement.

1.10 "Closing Date" shall have the meaning set forth in Section 3.1 of
------------
this Agreement.

1.11 "Closing Inventory Report" shall have the meaning set forth in
------------------------
Section 2.1.3(a) of this Agreement.

<PAGE>
1.12 "Closing Pattison Inventory Value" shall mean the Inventory
-----------------------------------
Purchase Price of all Purchased Inventory as of the Closing Date as determined
in accordance with Section 2.1.3(b).

1.13 "Code" shall mean the Internal Revenue Code of 1986, as amended.
----

1.14 "Employee Benefit Plan" means any "employee benefit plan" within
----------------------
the meaning of Section 3(3) of ERISA, and any other bonus, profit sharing,
compensation, pension, severance, deferred compensation, fringe benefit,
insurance, welfare, medical, post-retirement health or welfare benefit, medical
reimbursement, health, life, stock option, stock purchase, tuition refund,
service award, company car, scholarship, relocation, disability, accident, sick
pay, sick leave, vacation, termination, individual employment, executive
compensation, incentive, bonus, commission, payroll practices, retention or
other plan, agreement, policy, trust fund or arrangement, whether written or
unwritten, and whether maintained, sponsored or contributed to by Pattison or
any entity that would be deemed a "single employer" with Pattison under Section
414(b), (c), (m) or (o) of the Code or Section 4001(a)(14) of ERISA (an "ERISA
Affiliate") on behalf of any of the current, former or retired employees of
Pattison or their beneficiaries or with respect to which Pattison or any ERISA
Affiliate of Pattison has or has had any obligation on behalf of any such
employee or beneficiary.

1.15 "Employment Agreement" shall mean the Employment Agreement, dated
--------------------
as of the Agreement Date, by and between HSI and Tom McGrath.

1.16 "Encumbrance" shall mean any lien, charge, restriction, encum-
-----------
brance, option, right of first refusal, security interest, easement, obligation
or claim or other third party right of any kind.

1.17 "Environment" shall mean any surface or subsurface physical
-----------
medium or natural resource, including, air, land, soil, surface waters, ground
waters, stream and river sediments, and biota.

1.18 "Environmental Laws" shall mean any federal, state, local or
-------------------
foreign law, rule, regulation, ordinance, code, order or judgment (including the
common law and any judicial or administrative interpretations, guidances,
directives or opinions) relating to the injury to, or the pollution or
protection of human health and safety or the Environment.

1.19 "Environmental Liabilities" shall mean any claims, judgments,
--------------------------
damages (including punitive damages), losses, penalties, fines, liabilities,
encumbrances, liens, violations, costs and expenses (including attorneys' and
consultants' fees) of investigation, remediation or defense of any matter
relating to human health, safety or the Environment of whatever kind or nature
by any party, entity or authority, (a) which are incurred as a result of (i) the
existence of Hazardous Substances in, on, under, at or

<PAGE>
emanating from any real property presently or formerly owned or operated by
Pattison or any of its Affiliates, (ii) the offsite transportation, treatment,
storage or disposal of Hazardous Substances generated by Pattison or any of its
Affiliates, or (iii) the violation of any Environmental Laws or (b) which arise
under the Environmental Laws.

1.20 "ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as amended, and the regulations thereunder.

1.21 "ERISA Affiliate" shall have the meaning set forth in Section
---------------
1.15 of this Agreement.

1.22 "Estimated Closing Pattison Inventory Value" shall mean an
----------------------------------------------
estimate of the Inventory Purchase Price of all Purchased Inventory as of the
Closing Date prepared in good faith by Pattison in accordance with Section
2.1.3(a).

1.23 "Estimated Pattison Sales" shall mean an estimate of the Pattison
------------------------
Sales prepared in good faith by HSI in accordance with Section 2.2(d).

1.24 "Estimated Pattison Sales Statement" shall have the meaning set
-----------------------------------
forth in Section 2.2(d).

1.25 "Excluded Liabilities" shall mean all liabilities or obligations
--------------------
of SF, Pattison or the Business of any kind whatsoever, except the HSI Assumed
Liabilities.

1.26 "Final Value" shall mean the sum of (i) the Closing Pattison
------------
Inventory Value and (ii) the product of (x) Pattison Sales and (y) 25%.

1.27 "Financial Statements" shall mean, in the case of Pattison, its
--------------------
unaudited compiled financial statements as of February 29, 1996, February 28,
1995 and February 28, 1994.

1.28 "GAAP" shall mean generally accepted accounting principles
----
consistently applied.

1.29 "Hazardous Discharge" shall mean any releasing, spilling,
--------------------
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, migrating, disposing or dumping (including the movement of any
material through or in air, soil, surface or groundwater) of Hazardous
Substances, whether on, off, under or from the Real Property or any other real
property owned, operated, leased or used at any time by Pattison or any of its
predecessors.

1.30 "Hazardous Substances" shall mean petroleum, petroleum products,
--------------------
petroleum-derived substances, radioactive materials, hazardous wastes,
polychlorinated biphenyls, lead based paint, urea formaldehyde, asbestos or any
materials containing

<PAGE>
asbestos, and any materials, wastes or substances regulated or defined as or
included in the definition of "hazardous substances," "hazardous materials,"
"hazardous constituents," "toxic substances," "pollutants," "contaminants" or
any similar denomination intended to classify substances by reason of toxicity,
carcinogenicity, ignitability, corrosivity or reactivity under any Environmental
Laws.

1.31 "HSI" shall mean Henry Schein, Inc., a Delaware corporation.
---

1.32 "HSI Assumed Liabilities" shall have the meaning set forth in
------------------------
Section 2.2(b).

1.33 "HSI Closing Documents" shall have the meaning set forth in
----------------------
Section 5.2.

1.34 "HSI Financial Statements" shall mean the audited consolidated
-------------------------
financial statements of HSI as of December 25, 1993, December 31, 1994 and
December 30, 1995, and for each of the fiscal years then ended.

1.35 "HSI Material Adverse Effect" shall mean any material adverse
----------------------------
effect, individually or in the aggregate, on the condition (financial or
otherwise), business, assets, operations or prospects of HSI and its
subsidiaries, taken as a whole.

1.36 "HSI/Pattison Closing Sales Payment Amount" shall have the
---------------------------------------------
meaning set forth in Section 2.2(d).

1.37 "Indemnitee" and "Indemnitor" shall have the meanings set forth
---------- ----------
in Section 10.4(a) of this Agreement.

1.38 "Ineligible Inventory" shall mean all Inventory which is
---------------------
obsolete, damaged, excessive, below standard quality or slow moving (i.e., items
----
that are for discontinued or expected to be discontinued product lines, or have
a stated expiration date of 6 months or less from the Closing Date, or items
that have not been used or sold within 6 months prior to the date hereof, or
items that have not been sold within the customary inventory turnover cycle of
Pattison with respect to such item, or items for which there is excess capacity
(i.e., more products are on hand of any such item than have been sold in the
----
past nine (9) months)).

1.39 "Intellectual Property" shall mean all United States and foreign
----------------------
patents and pending patent applications, unpatented inventions, trademarks,
service marks and trade names, including, without limitation, the marks and
patents described on Schedule 4.8 of this Agreement, and copyrights, and
registrations and pending applications therefor, and all trade secrets, trade
names, computer programs and software, research and development, know-how,
customer lists, manufacturing, engineering and other drawings and blueprints,
technology, technical information, engineering data,

<PAGE>
design and engineering specifications, inventions and other proprietary
processes and information of any kind owned by Pattison or in which Pattison has
a proprietary or ownership or usage right, and all software necessary or
desirable to operate equipment included in the Acquired Assets, all as set forth
on Schedule 4.8 of this Agreement.

1.40 "Inventory" shall mean all inventory and related items (including
---------
all production, shipping and packaging supplies) relating to or used or useful
in connection with the Business.

1.41 "Inventory Dispute Statement" shall have the meaning set forth in
---------------------------
Section 2.1.3(b) of this Agreement.

1.42 "Inventory Disputed Items" shall have the meaning set forth in
------------------------
Section 2.1.3(b) of this Agreement.

1.43 "Inventory Purchase Price" shall mean the lower of (x) the
--------------------------
Invoice Price or (y) market price of all Purchased Inventory goods and products
other than Ineligible Inventory, minus an inventory reserve computed in
accordance with GAAP.

1.44 "Invoice Price" shall mean, in the case of Purchased Inventory,
-------------
finished goods and products other than Ineligible Inventory, the last actual
purchase price in accordance with Pattison's customary accounting principles
(after giving effect to any actual discounts or allowances (including cash
discounts and vendor rebates)) immediately prior to the Closing Date at which
Pattison purchased such Inventory from a non-Related Party.

1.45 "IRS" shall mean the Internal Revenue Service (or any successor
---
agency thereto).

1.46 "Losses" shall have the meaning set forth in Section 10.2 of this
------
Agreement.

1.47 "Material Adverse Effect" shall mean any material adverse effect,
-----------------------
individually or in the aggregate, on the condition (financial or otherwise),
business, assets, operations or prospects of the Business or the Acquired
Assets.

1.48 "Net Sales" shall mean net sales (as determined in accordance
----------
with GAAP, taking into account any returns and allowances) of dental supplies
and equipment (other than software).

1.49 "Non-Compete Agreement" shall mean the Noncompete Agreement,
----------------------
dated as of the Agreement Date, by and among HSI, and Thomas McGrath and Donald
McGrath.

<PAGE>
1.50 "Non-Matching Inventory" shall mean any Inventory owned or held
----------------------
by Pattison which is not Pattison Like Kind Inventory or Ineligible Inventory.

1.51 "Optional Pattison Inventory" shall mean all Inventory owned by
---------------------------
Pattison which is not Pattison Like Kind Inventory; provided, however, that the
-------- -------
Optional Pattison Inventory shall not include any Ineligible Inventory.

1.52 "Pattison" shall mean Pattison-McGrath Company Dental Supplies, a
--------
Missouri corporation.

1.53 "Pattison Contracts" shall have the meaning set forth in Section
------------------
4.9.

1.54 "Pattison Closing Documents" shall have the meaning set forth in
--------------------------
Section 4.2.

1.55 "Pattison Like Kind Inventory" shall mean all Inventory owned by
----------------------------
Pattison relating to or useful in connection with the Business which (i) matches
a stock keeping unit currently sold by HSI and/or (ii) is large dental
equipment, and which is not, in either case, Ineligible Inventory.

1.56 "Pattison Sales" shall mean the sum of the Net Sales of Pattison
--------------
to non-Related Parties for the 12-month period ending February 29, 1996.

1.57 "Pattison Specified Contracts" shall mean, collectively, the
------------------------------
promissory notes attached to, or referred to in, Exhibit 1.57.

1.58 "Permitted Encumbrances" means mechanics', carriers', workmen's,
----------------------
repairmen's and other similar liens arising or incurred in the ordinary course
of business, purchase money liens arising in the ordinary course of business and
liens for taxes, assessments and other governmental charges not due and payable
or that may be paid without penalty.

1.59 "Person" shall mean any natural person, corporation, limited or
------
limited liability partnership, general partnership, joint venture, association,
joint-stock company, limited liability company, company, trust, bank, trust
company, land trust, business trust or other organization, whether or not a
legal entity, and any governmental unit or agency or political subdivision
thereof.

1.60 "Prime Rate" shall mean the fluctuating prime or base rate
-----------
publicly announced from time to time by The Chase Manhattan Bank, N.A. (or any
successor thereto).

1.61 "Purchased Inventory" shall mean all Inventory purchased by HSI
-------------------
pursuant to Section 2.1.1.

<PAGE>
1.62 "Real Property" shall mean the real property and interest in real
-------------
property described on Schedule 4.7 held by Pattison and the plants, buildings,
structures, storage tanks, erections and improvements of all kinds made to,
located on or forming a part of the real property and interests in real property
(including, without limitation, all fixtures), together with all easements,
rights-of-way, appurtenances and tenements to, on or otherwise beneficial to the
use of such real property or interests in real property or in the operation of
the Business.

1.63 "Related Party" shall have the meaning set forth in Section 4.18
-------------
of this Agreement.

1.64 "Securities Act" shall mean the Securities Act of 1933, together
--------------
with the rules and regulations promulgated thereunder.

1.65 "Seller Claimant" shall have the meaning set forth in Section
---------------
10.3 of this Agreement.

1.66 "SF" shall mean San Francisco Dental Supply, Inc., a California
--
corporation.

1.67 "SF Business" shall mean the distribution of dental supplies and
-----------
equipment by SF.

1.68 "Stock Purchase Agreement" shall mean the Stock Purchase
---------------------------
Agreement, dated as of April 30, 1996, among SF and the shareholders of
Pattison.

1.69 "Taxes" (or "Tax" where the context requires) shall mean all
-----
federal, state, local, foreign or other taxes, duties, or similar charges
(including, without limitation, income (whether net or gross), profits, premium,
estimated, excise, sales, use, environmental (including taxes under Code Section
59A), occupancy, franchise, license, value added stamp, windfall profits, social
security, gross receipts, franchise, ad valorem, severance, capital levy,
production, transfer, gains, withholding, occupation, employment and payroll
related and property taxes, alternative or add-on, minimum or estimated, import
and export duties and other governmental charges and assessments) imposed by any
taxing or governmental authority on or payable by Pattison or any other party
with respect to the income, operations, products, assets or properties of
Pattison, whether attributable to statutory or nonstatutory rules and whether or
not measured in whole or in part by net income, and including interest,
additions to tax or interest, and penalties with respect thereto, and including
expenses associated with contesting any proposed adjustment related to any of
the foregoing.

1.70 "Undisputed Pattison Sales" shall have the meaning set forth in
-------------------------
Section 2.2(e).

<PAGE>
ARTICLE II SALE AND PURCHASE OF INVENTORY; SALE AND PURCHASE OF
------------------------------------------------------
BUSINESS
--------

2.1 Purchase of Inventory.
---------------------

2.1.1 Purchased Inventory. (a) Upon terms and subject to the
-------------------
conditions hereof, upon the basis of the agreements, representations and
warranties contained in, and the schedules and exhibits to, this Agreement, at
the Closing, Pattison shall sell, transfer, assign, convey, and deliver to HSI,
and HSI shall purchase and acquire from Pattison, all of the Pattison Like Kind
Inventory, free and clear of all Encumbrances.

(b) At the Closing, at the option of HSI (the exercise of which
shall be in the sole and absolute discretion of HSI), HSI may purchase and
acquire from Pattison, and, if HSI exercises such option, Pattison shall sell,
transfer, assign, convey and deliver to HSI, all or such portion of the Optional
Pattison Inventory as shall be designated by HSI, free and clear of all
Encumbrances.

2.1.2 Closing Inventory. (a) Within twenty (20) Business Days
------------------
after the Closing Date, Pattison shall complete preparation of an inventory
report (by SKU number, quantity and Invoice Price) setting forth the Estimated
Closing Pattison Inventory Value (such inventory report is hereinafter referred
to as the "Closing Inventory Report").

(b) Upon completion of the Closing Inventory Report, Pattison
will deliver the Closing Inventory Report to HSI. Following receipt of the
Closing Inventory Report, HSI will have a period of thirty (30) Business Days
after the receipt thereof to review the Closing Inventory Report. At or before
the end of such review period, HSI will either (i) accept the Closing Inventory
Report in its entirety, in which case the Closing Pattison Inventory Value shall
be deemed to be equal to the Estimated Closing Pattison Inventory Value as set
forth in the Closing Inventory Report or (ii) deliver to Pattison a written
explanation (the "Inventory Dispute Statement") of those items in the Closing
Inventory Report which HSI in good faith disputes (the "Inventory Disputed
Items"), in which case the Estimated Closing Pattison Inventory Value not
affected by Inventory Disputed Items shall be deemed to be as set forth in the
Closing Inventory Report. Within a further period of thirty (30) Business days
from the date on which the Inventory Dispute Statement is delivered by HSI, the
parties will attempt to resolve in good faith any Inventory Disputed Items. In
the absence of such resolution by the last day of such thirty (30) Business Day
period, the unresolved Inventory Disputed Items will be referred for final
binding resolution by the Third Accountants. Each of HSI and Pattison shall be
entitled to make a brief supplemental oral presentation to the Third
Accountants. The Closing Pattison Inventory Value affected by any Inventory
Disputed Items will be determined by the Third Accountants within thirty (30)
days of such reference based upon the definitions of Inventory, Closing Pattison
Inventory Value, Inventory Purchase Price, Invoice Price, and Ineligible
Inventory as set forth herein. The

<PAGE>
determination of such firm will be final, binding, non-appealable and
uncontestable by the parties hereto and will not be subject to collateral attack
for any reason. Promptly after the determination by the Third Accountants, the
Pattison Note (as such term is defined in Section 2.6) shall be adjusted as set
forth in Section 2.6. The fees and expenses of the Third Accountants shall be
paid one-half by HSI and one-half by Pattison.

2.2 Purchase of the Business. (a) At the Closing, and in accordance
------------------------
with the terms and provisions of this Agreement, Pattison will assign, transfer,
convey and deliver to HSI, and HSI will acquire from Pattison, all of Pattison's
right, title and interest in and to the Pattison Assets and the Business as a
going concern, free and clear of all Encumbrances (other than Permitted
Encumbrances). Notwithstanding anything in this Agreement to the contrary,
Pattison is not assigning, transferring, conveying or delivering to HSI any of
the Pattison Excluded Assets.

(b) At the closing, and in accordance with the terms and
provisions of this Agreement, HSI is assuming and agreeing to pay, perform and
discharge only the following obligations and liabilities of Pattison relating to
the Business (the "HSI Assumed Liabilities"): all liabilities and obligations
of Pattison arising after the Closing Date under the Pattison Specified
Contracts.

(c) Except as specifically provided in Section 2.2(b), HSI is
not assuming, and shall not have any liability for, any liabilities or
obligations of Pattison or any liabilities or obligations which arose or may
arise out of the operations of the Acquired Assets or the Business or otherwise
prior to the Closing Date, and Pattison shall pay, perform and discharge all
such liabilities and obligations when due in the ordinary course of business.
Without limitation to the generality of the foregoing, HSI is not assuming, and
shall not have any liability, (a) for any income, franchise, sales, payroll,
withholding or other taxes of Pattison, (b) for any expenses of Pattison related
to the negotiation, preparation and execution of this Agreement or the
consummation of the transactions contemplated hereby, (c) as a "successor-in-
interest" to Pattison with respect to the Business, (d) for any accounts payable
of Pattison, or (e) for any matter or thing set forth on Schedule 2.2(e).

(d) As total consideration for the Purchased Inventory, and the
other assets and business being sold, transferred, conveyed and delivered to HSI
by Pattison pursuant to Sections 2.1 and 2.2, (i) HSI shall, at the Closing, pay
SF $500,000 (the "HSI/Pattison Closing Sales Payment Amount"), and assume the
HSI Assumed Liabilities and (ii) in connection with the assumption by HSI of the
HSI Assumed Liabilities, Pattison shall issue, execute and deliver the Pattison
Note (as such term hereinafter defined) and, within ten (10) days after the
determination of Pattison Sales and Closing Pattison Inventory Value, the
Pattison Note shall be adjusted as set forth in Section 2.6.

(e) Within thirty (30) Business Days after the Closing Date,
HSI shall prepare a statement (the "Estimated Pattison Sales Statement") setting
forth its

<PAGE>
computation of Estimated Pattison Sales. In connection with the preparation of
such report, the authorized representatives of HSI shall have the right at
reasonable times and on reasonable notice, at the sole expense of HSI, to review
and/or audit the books and records of Pattison relating to the Estimated
Pattison Sales, as well as the work papers of its independent public
accountants, in each case solely for the purpose of computing the Estimated
Pattison Sales. Upon completion of the Estimated Pattison Sales Statement, HSI
will deliver the Estimated Pattison Sales Statement to SF. Following receipt of
the Estimated Pattison Sales Statement, Pattison will have a period of twenty
(20) Business Days to review the Estimated Pattison Sales Statement. If prior
to the end of such review period, Pattison in good faith disagrees with or
disputes the accuracy of the Estimated Pattison Sales, then Pattison shall
deliver to HSI a written statement and explanation of such disagreement or
dispute which sets forth in reasonable detail the good faith bases of any such
disagreement or dispute (a "HSI/Pattison Sales Dispute Statement" (and, to the
extent Estimated Pattison Sales are not subject to any HSI/Pattison Sales
Dispute Statement, such Estimated Pattison Sales are hereinafter referred to as
"Undisputed Pattison Sales")). If prior to the end of the above referenced
twenty (20) Business Day review period following receipt of the Estimated
Pattison Sales Statement, Pattison shall fail to deliver a HSI/Pattison Sales
Dispute Statement, then the Estimated Pattison Sales shall be deemed to equal
both the Pattison Sales and Undisputed Pattison Sales. If, however, Pattison
shall have delivered an HSI/Pattison Sales Dispute Statement prior to the end of
such review period, then HSI and Pattison will attempt in good faith to resolve
all differences with regard to the determination of Pattison Sales during the
next twenty (20) Business Day period commencing after the end of such review
period. If HSI and Pattison are unable to resolve such differences prior to the
expiration of such twenty (20) Business Day period (or such longer period if so
agreed by HSI and Pattison), the Pattison Sales shall be determined as set forth
in Section 2.2(f) of this Agreement.

(f) Written reports of disagreement or disputes with respect to
any amounts referred to in Section 2.3(d) shall be prepared in concise form by
HSI and Pattison and submitted, together with copies of any HSI/Pattison Sales
Dispute Statement, to the Third Accountants no later than ten (10) Business Days
following the last day of the twenty (20) Business Day period (or longer period
if so agreed) referred to in the last sentence of Section 2.2(e). Each of HSI
and Pattison shall also be entitled to make a brief supplemental oral
presentation to the Third Accountants regarding any such disagreement or
dispute. The Third Accountants shall be instructed by HSI and Pattison to
deliver a written report setting forth such Third Accountants' resolution of any
difference or dispute referred to it no later than thirty (30) Business Days
following the earlier of (i) such firm's receipt of the report of disagreement
or disputes submitted to it by HSI and Pattison pursuant to this Section 2.2(g)
and (ii) the last day permitted for the submission of such report as provided
above. The determination of the Third Accountants with respect to any
disagreement or dispute referred to it by HSI and Pattison as provided in this
Section 2.2(f) will be final, binding, non-appealable and uncontestable by the
parties hereto and will not be subject to collateral attack for any

<PAGE>
reason. Promptly after the determination by the Third Accountants, the Pattison
Note shall be adjusted as set forth in Section 2.6.

2.3 Allocation of Purchase Price. The purchase price for the
-------------------------------
Acquired Assets shall be allocated for federal, state, local and foreign tax
purposes by each party among the Acquired Assets sold, transferred and assigned
hereunder and the covenant contained in the Non-Compete Agreement as determined
by HSI and approved by Pattison, acting on (such approval not to be unreasonably
withheld or delayed), not later than six (6) months after the Closing Date. For
all pertinent tax purposes each party hereto shall report the purchase and sale
and assignment provided for, and with the characterization given these
transactions, in this Agreement to taxing authorities on a basis consistent with
such allocation, and each party agrees not to take a position inconsistent with
such allocation. After the Closing, each of HSI and Pattison shall timely file
form 8594 with the IRS detailing this allocation. In the event that HSI
determines, subject to Pattison's reasonable approval, that any adjustments to
such allocation are necessary, Pattison shall make such modifications as are
necessary reporting the same on form 8594 (if required) or any tax report or
return filed or to be filed by Pattison in order to conform to HSI's allocation
as adjusted.

2.4 Nonassignable Contracts and Authorizations. To the extent that
-------------------------------------------
the assignment of any Pattison Contract or Authorization to be assigned to HSI
pursuant to this Agreement shall require the consent of any other party, this
Agreement shall not constitute a contract to assign the same if an attempted
assignment would constitute a breach thereof. Pattison shall use all reasonable
efforts, and HSI shall cooperate where appropriate, to obtain any consent
necessary to any such assignment where such consent is requested by HSI. If any
such consent is not obtained, Pattison shall cooperate with HSI in any
reasonable arrangement designed to provide for HSI the benefit, monetary or
otherwise, of any such Pattison Contract or Authorization including enforcement
of any and all rights of Pattison or the Business against the other party
thereto arising out of a breach or cancellation thereof by such other party or
otherwise.

2.5 Guarantee of Performance by Pattison. As a material inducement
-------------------------------------
to HSI to execute, deliver and perform its obligations under this Agreement,
from and after the Closing Date, SF unconditionally and irrevocably guarantees
the full payment and/or performance of each obligation of Pattison under this
Agreement (including, without limitation, the obligations of Pattison under
Section 10.2 hereof) and each of the other Pattison Closing Documents (including
the Pattison Note). This guaranty constitutes a guaranty of payment and
performance when due and not of collection, and SF specifically agrees that it
shall not be necessary or required that HSI (or any other Buyer Claimant)
exercise any right, assert any claim or demand or enforce any remedy whatsoever
against Pattison before or as a condition to the obligations of SF hereunder.
At the Closing, SF shall execute and deliver a guaranty in the form of
Exhibit 2.5 hereto (the "SF Guaranty"). SF further acknowledges that it is its
intention to cause the merger of Pattison with and into SF as soon as
practicable after the date hereof and thereby

<PAGE>
assume, and become liable for, all obligations of Pattison by law (including the
Pattison Note).

2.6 Pattison Bridge Loan. (a) At the Closing, Pattison shall
---------------------
execute and deliver its promissory note in the form of Exhibit 2.6 hereto (the
"Pattison Note") in an aggregate principal amount of $325,297.94; provided,
--------
however, that the original principal amount shall be subject to adjustment as
- -------
follows: (i) if the Final Value is greater than $1,450,000, then the face
amount of the Pattison Note shall be reduced by the amount by which the Final
Value exceeds such amount and (ii) if the Final Value is less than $1,450,000,
then the face amount of the Pattison Note shall be increased by the amount by
which the Final Value is less than such amount. If the event referred to in the
foregoing clause (i) is applicable, HSI hereby consents to any reduction of the
Pattison Note as a result thereof and if the event referred to in the foregoing
clause (ii) is applicable, Pattison hereby consents to an increase in the
Pattison Note as a result thereof, and, in either case, HSI and Pattison agree
to the exchange of a new promissory note to give effect to the applicable event.

(b) The Pattison Note shall be secured by an assignment in
favor of HSI of those certain life insurance policies listed on Schedule 2.6(b)
(the "Life Insurance Policies") and, at the election of HSI, an encumbrance on
the Real Property described on Schedule 4.7 hereto. If HSI elects to require
the imposition of an Encumbrance on such Real Property as additional security
for the Pattison Note, Pattison hereby agrees to execute such documentation as
shall be requested by HSI and its counsel to perfect such Lien.

ARTICLE III CLOSING
-------

3.1 The Closing. The Closing shall take place at 10:00 a.m. local
-----------
time on June 24, 1996 or on such other date as may be agreed upon in writing by
the parties hereto (the "Closing Date"), at the offices of counsel to HSI,
Proskauer Rose Goetz & Mendelsohn LLP ("Proskauer"), 1585 Broadway, New York,
New York.

3.2 Obligations of Pattison. At the Closing, Pattison shall deliver
-----------------------
to HSI the following:

(a) An opinion of Hanaway, Ross, Hanaway, Weidner & Bachhuber,
S.C., counsel to Pattison and SF, dated as of the Closing Date, in the form of
annexed hereto as Exhibit 3.2(a).

(b) Bill of Sale duly executed by Pattison, in the form annexed
hereto as Exhibit 3.2(b).

<PAGE>
(c) An assignment, duly executed by SF and each of the former
shareholders of Pattison, pursuant to which SF shall assign to HSI, all of SF's
rights under the Stock Purchase Agreement, such assignment to be in the form
annexed hereto as Exhibit 3.2(c).

(d) FirstStar Financial shall have consented to the
consummation of the transactions contemplated by this Agreement and the Stock
Purchase Agreement, and HSI shall have received satisfactory evidence of such
consent.

(e) SF shall have delivered the duly executed Guaranty.

(f) Thomas McGrath shall have executed and delivered the
Employment Agreement.

(g) Thomas McGrath and Donald McGrath shall have executed the
Non-Compete Agreement.

(h) Pattison shall have delivered the duly executed Pattison
Note.

(i) Mercantile Bank of Kansas City ("Mercantile Bank") shall
have delivered to Pattison and HSI a duly executed release of all Encumbrances
against the Business and the Pattison Assets, and all outstanding indebtedness
owed to Mercantile Bank by Pattison shall have been repaid.

(j) Security Agreement duly executed by Pattison, in the form
annexed hereto as Exhibit 3.2(j), covering the Life Insurance Policies.

(k) Each of First Bank National Association ("FBNA") (or its
applicable affiliates), Thompson-Schwinghammer, Inc. (d/b/a "FM Dental Supply")
and John Thompson (collectively, the "FM Dental Related Parties") shall have
advised Pattison, SF and HSI in writing that it has no Encumbrance relating to
the Business or the Pattison Assets nor will it assert any purported Encumbrance
in the future; provided, however, if the FM Dental Related Parties shall not
-------- -------
have delivered written agreements to the foregoing effect satisfactory to HSI,
HSI may, in its sole discretion, consummate the Closing, but HSI may exercise
all of its rights described in the proviso to Section 3.2(i) of the HSI/SF
Agreement. Nothing in this Section 3.2(k) shall relieve Pattison from the
performance of any obligation owed by Pattison or SF to any FM Dental Related
Party or HSI, or impose any obligation on HSI to perform any such obligation on
behalf of Pattison or SF.

(l) Each of Norman E. Shepard, Robert D. Cowell, Donald M.
Shortess and Thomas J. McGowan shall have executed and delivered acknowledgment
and waiver letters to Pattison and HSI in the form annexed hereto as Exhibit
3.2(l).

<PAGE>
(m) Such other instruments of assignment and conveyance as may
be necessary or appropriate to fully and effectively transfer the Acquired
Assets being transferred by Pattison in accordance with the terms of this
Agreement.

3.3 Obligations of HSI. At the Closing, HSI shall deliver to
--------------------
Pattison and SF the following (or cause the following to occur):

(a) The SF Closing Inventory Payment.

(b) The HSI/Pattison Closing Sales Payment Amount.

(d) HSI shall pay by wire transfer of funds to Mercantile Bank
the amount referred to in that certain pay-off letter included in the Pattison
Specified Contracts.

(e) HSI shall pay by wire transfer of funds to each of Thomas
McGrath, the amount of $45,882.46, the Estate of W.J. McGrath, the amount of
$31,415.48, Thomas McGrath, the amount of $28,000, Jack McGrath, the amount of
$10,000 and William McGrath, the amount of $10,000, in each case, in full
satisfaction of the promissory notes in such amounts included in the Pattison
Specified Contracts and HSI shall receive satisfactory receipts and releases
therefor. [SF Dental should obtain wire transfer instructions from the
McGraths.]

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PATTISON
------------------------------------------

Pattison hereby represents and warrants to HSI as follows:

4.1 Organization and Qualification. Pattison is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Missouri with full corporate power and authority to own, lease and operate its
properties and assets and to conduct the Business, as it is now being conducted.
Pattison is duly qualified as a foreign corporation and is in good standing
under the laws of each jurisdiction in which the conduct of the business or the
ownership of its assets requires such qualification.

4.2 Authority. Pattison has all requisite corporate power and
---------
authority, to execute and deliver this Agreement and all documents,
certificates, agreements, instruments and writings related hereto (collectively,
the "Pattison Closing Documents") to which it is a party and to perform, carry
out and consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance of this

<PAGE>
Agreement and the other Pattison Closing Documents have been duly authorized by
all necessary corporate action on the part of Pattison (including the unanimous
approval of SF, in its capacity as sole shareholder of Pattison). This
Agreement does, and when executed by Pattison, the other Pattison Closing
Documents shall, constitute the legal, valid and binding obligations of each of
Pattison, enforceable against Pattison in accordance with their respective
terms, except as such enforceability may be limited by bankruptcy, insolvency or
similar laws and by equitable principles.

4.3 No Breach. Subject to Section 8.5(b) and except as set forth on
---------
Schedule 4.3 hereto, neither the execution and delivery of this Agreement or the
other Pattison Closing Documents by Pattison nor the consummation of the
transactions contemplated hereby or thereby will: (a) violate any provision of
the Certificate of Incorporation or By-Laws or other organizational documents of
Pattison; (b) conflict with, result in a breach of or constitute a default (or
an event which, with or without notice, lapse of time or both, would constitute
a default) under any material agreement, document, certificate or other
instrument to which Pattison is a party or by which Pattison or any of its
properties or assets (including the Acquired Assets) is subject or bound;
(c) result in the creation of, or give any party the right to create, any
Encumbrance upon assets or properties of Pattison (including the Acquired
Assets); (d) conflict with, violate, result in a breach of or constitute a
default under any judgment, decree, order, or process of any court or
governmental authority; (e) conflict with or violate any material statute, law
or regulation applicable to the Business, the Acquired Assets or Pattison; or
(f) require Pattison to obtain any authorization, consent, approval or waiver
from, or to make any filing with, any governmental or regulatory authority.

4.4 Financial Statements and Sales Information. (a) Prior to the
-------------------------------------------
date hereof, Pattison has delivered to HSI the Financial Statements (to the
extent required by the definition thereof) attached hereto as Schedule 4.4A.
Such Financial Statements have been prepared from, and are in accordance with,
the books and records of Pattison, present fairly the financial position and
results of operations of the Acquired Assets and the Business as of and for the
periods set forth therein in accordance with GAAP and are true, correct and
complete in all material respects, except as set forth on Schedule 4.4B.

(b) The books and records of Pattison are accurate and complete
and have been maintained in accordance with good business practices.

4.5 Absence of Certain Changes or Events. Except as set forth on
--------------------------------------
Schedule 4.5 hereto, since February 29, 1996:

(a) The Business has been conducted, and the Acquired Assets
have been acquired, owned and operated only in the ordinary and usual course
consistent with past practice.

<PAGE>
(b) Neither the Business nor the Acquired Assets have suffered
any event or condition that has had a Material Adverse Effect.

(c) Pattison has not become aware of any event or condition
that has occurred or would reasonably be expected to occur that could result in
a Material Adverse Effect.

4.6 Assets. Pattison has good and freely transferable title to all
------
of the Acquired Assets, free and clear of all Encumbrances (other than, in the
case of Acquired Assets which do not constitute Purchased Inventory, Permitted
Encumbrances), and has the complete and unrestricted power and right to sell
and/or transfer the Acquired Assets in accordance with the terms hereof. Each
item of equipment included in the Acquired Assets is and will when delivered be
adequate for the uses to which it is being put as of the Closing Date, is and
will when delivered be in good order and working condition, ordinary wear and
tear excepted, and have no material defects, and no condition exists or will
when such equipment is delivered exist which interferes with the value thereof
or the use thereof, in connection with the operations of the Business prior to
the date hereof. Such equipment has been maintained in accordance with good
business practices. Except as set forth on Schedule 4.6, the Acquired Assets
constitute all of the properties and assets used in connection with the
operations of the Business and include all of the properties and assets
necessary to operate the Business as such business has been operated immediately
prior to the date hereof.

4.7 Real Property. Schedule 4.7 sets forth an accurate and complete
-------------
list of all Real Property owned by Pattison and all leases of Real Property used
in the Business.

4.8 Intellectual Property. Schedule 4.8 hereto lists all licenses of
---------------------
Intellectual Property to or from Pattison with respect to the Business. No
currently outstanding claims have been asserted either orally or in writing to
Pattison or the Business, by any Person challenging the validity of or alleging
infringement by, or misuse of, any Intellectual Property used by Pattison or the
Business, or challenging or questioning the validity or enforceability of any
license or agreement referred to on Schedule 4.8, no such claims have been
asserted during the last five years, and there is no valid basis for any such
claim. Except as set forth on Schedule 4.8, none of Pattison nor the Business,
nor has Pattison or the Business, been alleged to have, infringed upon or
violated any Intellectual Property right or misappropriated or misused any
invention, trade secret or other proprietary information entitled to legal
protection. None of Pattison nor the Business has asserted any currently
outstanding claim of infringement, misappropriation or misuse of any
Intellectual Property, nor has any of Pattison or the Business asserted any such
claims during the last five years.

4.9 Contracts and Commitments. (a) The contracts listed on Schedule
-------------------------
4.9 are all of the leases, agreements, arrangements, contracts, commitments or

<PAGE>
understandings, written or oral, and whether legally binding or otherwise
("Pattison Contracts"), that relate to the Business, (excluding (i) any Pattison
Contract that involves a commitment by Pattison of less than $10,000 over the
next 12 months and less than $25,000 over the balance of the term of the
Pattison Contract and (ii) customer sales orders entered into in the ordinary
course of business.)

(b) None of Pattison or the Business is in breach or default,
nor is there any basis for any valid claim of breach or default by any of
Pattison or the Business under any Pattison Contract. Except as set forth on
Schedule 4.9, all Pattison Contracts are valid and in full force and effect, and
neither the consummation of the transactions contemplated by this Agreement nor
the consummation of the transactions contemplated by any other Pattison Closing
Document will cause any Pattison Contract to cease to be valid and in full force
and effect. None of the Pattison Contracts contain "change of control"
provisions (i.e., provisions which would create a right against, or obligation
----
of, Pattison as a result of the consummation of the transactions contemplated by
this Agreement and the other Pattison Closing Documents). Accurate and complete
copies of all Pattison Contracts, including all amendments thereto, have been
heretofore delivered to HSI.

4.10 Accounts Receivable. Schedule 4.10 sets forth a complete and
--------------------
accurate list of all accounts receivable of Pattison, including an aging thereof
as of May 1, 1996. All of such accounts receivable (a) represent sales actually
made in the ordinary course of business for goods or services delivered or
rendered to unaffiliated customers in bona fide arm's-length transactions, (b)
constitute valid claims, (c) have not been and will not be extended or rolled
over in order to make them current and (d) are not and will not be subject to
counterclaims or setoffs.

4.11 Inventory. The Inventory of Pattison is described on Schedule
---------
4.11. Such Inventory is of merchantable quality, free of defects in workmanship
or design and is usable and salable by Pattison at normal profit margins and in
accordance with historical sales practices in the ordinary course of the
Business. Such Inventory does not include any items which are obsolete,
damaged, excessive, below standard quality or slow moving (i.e., items that are
----
for discontinued or expected to be discontinued product lines, or have a stated
expiration date of 6 months or less from the Closing Date, or items that have
not been used or sold within 6 months prior to the date hereof, or items that
have not been sold within the customary inventory turnover cycle of Pattison, as
the case may be, with respect to such item, or items for which there is excess
capacity (i.e., more products are on hand of any such item than have been sold
----
in the past nine (9) months).

4.12 Customers and Suppliers. There have been no adverse changes and
-----------------------
there are no facts known to Pattison which may reasonably be expected to
indicate that any adverse change may occur in the business relationship of the
Business with any Person who was one of the fifteen largest customers or
suppliers of the Business as of the end of the 12 month period ending on
February 29, 1996.

<PAGE>
4.13 Litigation, Etc. Except as set forth on Schedule 4.13 hereto:
----------------

(a) There has not been in the three years prior to the date
hereof, nor is there currently, any claim, action, suit, inquiry, proceeding or,
to the best knowledge of Pattison, investigation of any kind or nature
whatsoever (including, but not limited to, products liability issues and
Environmental Liabilities), by or before any court or governmental or other
regulatory or administrative agency, commission or tribunal brought, asserted or
initiated by or against Pattison, or pending or, to the best knowledge of
Pattison, threatened against or involving the Business and which is material, or
which questions or challenges the validity of this Agreement or any action taken
or to be taken by Pattison pursuant to this Agreement or in connection with the
transactions contemplated hereby. There is no valid basis for any such claim,
action, suit, inquiry, proceeding or investigation.

(b) Pattison is not subject to any judgment, order or decree
which may have a Material Adverse Effect.

4.14 Employee Benefit Plans. Schedule 4.14 hereto contains a complete
----------------------
and accurate list of all Employee Benefit Plans. Each Employee Benefit Plan
complies and has been maintained and operated in all respects in accordance with
its terms and the terms and the provisions of applicable law, including, without
limitation, ERISA and the Code, except where the failure to so comply would not
cause a Material Adverse Effect.

4.15 Compliance with Law; Necessary Authorizations. (a) Except as
----------------------------------------------
listed or described on Schedule 4.15(a) hereto, the Business has been conducted,
marketed its products and owned and operated all of the Acquired Assets, in
compliance with all applicable laws, rules, regulations, orders, building and
other codes, zoning and other ordinances, Authorizations, judgments and decrees,
including all Environmental Laws, of all federal, state, local, foreign or other
governmental authorities, except, in any such case, where the failure to so
conduct the Business or comply with any such laws, rules or regulations would
not cause a Material Adverse Effect.

(b) Schedule 4.15(b) lists or describes the material Authoriza-
tions held or required by the Business and, except as set forth in that
schedule, all such Authorizations are in full force and effect, Pattison is in
compliance with all such Authorizations and, to the best knowledge of Pattison,
there is no reasonable basis for the revocation or suspension of any thereof.
Except as set forth on Schedule 4.15(b), such Authorizations constitute all the
permits, licenses, approvals, qualifications or the like issued by any
regulatory authorities required for ownership of the Acquired Assets and the
operation of the Business, all of which are transferable and will be transferred
to HSI at Closing.

4.16 Finders. Neither Pattison nor the Business has taken any action
-------
that, directly or indirectly, would obligate HSI or any of its Affiliates to
anyone acting as

<PAGE>
broker, finder, financial advisor or in any similar capacity in connection with
this Agreement or any of the transactions contemplated hereby.

4.17 Consents and Approvals of Governmental Authorities. Except as
----------------------------------------------------
set forth on Schedule 4.17, no consent, approval or authorization of, or
declaration, filing or registration with, or the giving of notice to, any
domestic or foreign governmental or regulatory authority is required in
connection with the execution, delivery and performance by Pattison of this
Agreement or the consummation by Pattison of the transactions contemplated
hereby.

4.18 Related Party Transactions; Intercompany Accounts. Except as set
-------------------------------------------------
forth on Schedule 4.18 hereto, there are no Pattison Contracts between Pattison,
on one hand, and any stockholder, director, officer or Affiliate of Pattison
(each, a "Related Party"), on the other; in each case, other than routine
employment agreements in the ordinary course of business (and which are
terminable without penalty in not more than 30 days). Set forth on Schedule
4.18 is a true and complete list of each transaction during the prior 18 months
between any of Pattison or the Business, on one hand, and any Related Party, on
the other hand. No amounts are owed by or to Pattison with respect to the
Business to or by any Related Party, and no amount is owed by or to Pattison or
the Business to or by any Related Party.

ARTICLE V REPRESENTATIONS AND
-------------------
WARRANTIES OF HSI
-----------------

HSI hereby represents and warrants to Pattison as follows:

5.1 Organization and Qualification. HSI is a corporation duly
-------------------------------
organized, validly existing and in good standing under the laws of Delaware,
with full corporate power and authority to own, lease and operate its properties
and assets and to conduct its business as it is now being conducted. HSI is
duly qualified as a foreign corporation and is in good standing under the laws
of such jurisdiction in which the conduct of the business or the ownership of
its assets requires such qualification.

5.2 Authority. HSI has all requisite corporate power and authority
---------
to execute and deliver this Agreement and all documents, certificates,
agreements, instruments and writings relating hereto (collectively, the "HSI
Closing Documents") to which it is a party and to perform, carry out and
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and the other HSI Closing Documents
have been duly authorized by all necessary corporate action on the part of HSI.
This Agreement does, and when executed by HSI, the other HSI Closing Documents
shall, constitute the legal, valid and binding obligations of each of them
enforceable against HSI in accordance with their respective

<PAGE>
terms, except as such enforceability may be limited by bankruptcy, insolvency or
similar laws and by equitable principles.

5.3 No Breach. Subject to Section 7.5(b), neither the execution and
---------
delivery of this Agreement by HSI nor the consummation of the transactions
contemplated herein will: (i) violate any provision of the Certificate of
Incorporation or By-laws of HSI; (ii) conflict with, result in a breach of or
constitute a default (or an event which, with or without notice, lapse of time
or both, would constitute a default) under, or give any third party the right to
terminate or modify, any material agreement or other instrument to which HSI is
a party or by which it or any of its assets is bound; (iii) result in the
creation of, or give any party the right to create, any Encumbrance, upon assets
or properties of HSI; (iv) conflict with, violate, result in a breach of or
constitute a default under any judgment, decree, order or process of any court
or governmental authority; (v) conflict with or violate any material statute,
law or regulation applicable to the business of HSI; or (vi) require HSI to
obtain any authorization, consent, approval or waiver from, or to make any
filing with, any governmental or regulatory authority.

5.4 HSI Financial Statements and Sales Information. Prior to the
------------------------------------------------
date hereof, HSI delivered to Pattison the HSI Financial Statements (to the
extent required by the definition thereof) attached hereto as Schedule 5.4A.
Such HSI Financial Statements have been prepared from, and are in accordance
with, the books and records of HSI, present fairly the financial position and
results of operations of HSI as of and for the periods set forth therein in
accordance with GAAP and are true, correct and complete in all material
respects, except as set forth on Schedule 5.4B.

5.5 Finders. Neither HSI nor any of its respective Affiliates has
-------
taken any action that, directly or indirectly, would obligate Pattison or any of
its Affiliates to anyone acting as a broker, finder, financial advisor or in any
similar capacity in connection with this Agreement or any of the transactions
contemplated hereby.

ARTICLE VI COVENANTS
---------

6.1 Certain Covenants of Pattison. Pattison hereby covenants that
------------------------------
(unless HSI otherwise gives its written approval in its sole discretion)
Pattison shall at its sole cost and expense take the actions set forth below:

(a) Prior to and after the Closing Date, Pattison shall pay
those debts and accounts payable relating to the Business and the Acquired
Assets that are or have been incurred by Pattison in the ordinary course of
business and on a timely basis. If Pattison shall not pay and otherwise satisfy
all such accounts payable on a timely basis, then HSI, in its sole and absolute
discretion, may pay all or any portion of such accounts payable on behalf of
Pattison, which shall promptly reimburse HSI for any such payment, plus interest
thereon at the Prime Rate. Pattison shall thereafter pay or otherwise

<PAGE>
discharge in full all the Excluded Liabilities relating to the Business as such
amounts shall become due in accordance with their terms.

(b) Prior to and after the Closing Date, Pattison shall afford
HSI, its attorneys, accountants, consultants and representatives free and full
access to the Acquired Assets to be sold, transferred or assigned by Pattison
pursuant to this Agreement, the books and records of Pattison relating thereto
and employees of Pattison who are familiar with the Business and the Acquired
Assets, at all reasonable times upon reasonable notice and during normal
business hours, and shall provide to HSI and its representatives such additional
financial and operating data and other information as to the Business and the
Acquired Assets pursuant to this Agreement as HSI shall from time to time
reasonably request.

(c) Prior to and after the Closing, Pattison shall use its
reasonable efforts to preserve for HSI the goodwill of the customers and
suppliers of the Business, and others having business relations with Pattison
with respect to the Business and Acquired Assets, and prior to and after the
Closing shall do all things reasonably requested by HSI for such purpose.

6.2 Obtaining Consents. Prior to and after the Closing, Pattison and
------------------
Pattison shall use all reasonable efforts to obtain all consents to the
assignment to HSI of all of the HSI Assumed Liabilities and Authorizations of
Pattison, in each case without any condition or qualification adverse to HSI.
HSI, on the one hand, and Pattison, on the other hand, shall coordinate and
cooperate with one another and supply such assistance as may be reasonably
requested by each in connection with the foregoing.

6.3 Transfer and Retention of Records. After the Closing Date,
------------------------------------
except as may be required for tax purposes, other regulatory purposes neither
Pattison nor any of its successors and assigns will retain any document,
databases or other media embodying any confidential or proprietary information
relating to the Business which constitutes a part of the Acquired Assets or use,
publish or disclose to any third person any such confidential or proprietary
information relating to the Business; provided, however, that Pattison shall be
-------- -------
entitled to retain copies of any of the foregoing. Pattison shall take all
actions requested by HSI to transfer records relating to the Business to HSI
which may include making duplicate copies of any records retained by Pattison in
the form of papers or computer media.

6.4 Product Replacement and Repairs. After the Closing Date, HSI
---------------------------------
will, subject to the following sentence, honor all outstanding warranties and
guaranties and other claims for replacements, repairs and credits, relating to
products or services of the Business shipped, sold or furnished by Pattison
prior to the Closing Date, or relating to Purchased Inventory. Any claims in
respect of returned or damaged products accepted by HSI shall be for the account
of Pattison, which shall promptly reimburse HSI for the cost thereof.

<PAGE>
6.5 Employee Matters. (a) HSI may, but shall not be required to,
----------------
offer employment to employees employed by Pattison in connection with the
operations of the Business on such terms as HSI in its sole discretion deems
appropriate. Any such offers shall be on terms which HSI customarily hires new
employees (e.g., without assumption of seniority). Alternatively, at HSI's
request, Pattison shall continue its employment of all or a portion of its
employees engaged in the operations of the Business to assist HSI in its conduct
of the Business on an interim basis not exceeding 90 days. HSI shall reimburse
Pattison for all actual payroll costs and related incidental costs incurred by
it for continuing the employment of such employees for HSI's benefit.

(b) HSI shall not assume or be responsible in any way for the
obligations, liabilities or responsibilities (i) of any Employee Benefit Plan of
Pattison, (ii) of SF or Pattison, any Affiliate or any fiduciary under, arising
from, or with respect to any Employee Benefit Plan of Pattison or Pattison or
(iii) to any of SF's or Pattison's officers, directors, employees and agents,
arising from or related to the transactions contemplated by this Agreement,
including, without limitation, obligations, liabilities or responsibilities
under the WARN Act. HSI shall not be deemed to be a successor employer with
respect to the employment of any employee of Pattison or with respect to any of
Employee Benefit Plans of SF or Pattison.

6.6 Further Assurances. After the Closing, HSI, on the one hand, and
------------------
Pattison, on the other hand, shall, and shall cause their respective Affiliates
to, at the request and the expense of the other, execute and deliver such other
instruments of conveyance and transfer and assumption and take such other action
as may be reasonably requested so as to consummate the transactions contemplated
hereby or otherwise to consummate the intent of this Agreement.

6.7 Name Change. Pattison hereby covenants and agrees that, if the
-----------
Merger shall not occur within thirty (30) days of the Closing Date, it shall
file a certificate of amendment of certificate of incorporation of Pattison, and
file appropriate documentation in those jurisdictions in which it is qualified
to do business as a foreign corporation, changing its name from "Pattison-
McGrath Company Dental Supplies", to a name that does not include any of the
Intellectual Property.

6.8 Use of Facilities. In order to facilitate the orderly transition
-----------------
of the conduct of the Business from Pattison to HSI, Pattison hereby agrees to
permit HSI to operate and conduct the Business at the Pattison corporate
headquarters located at 1901 Baltimore, Kansas City, Missouri 64108 (the
"Premises") for a period not to exceed 90 days following the Closing Date. Such
occupancy of the Pattison corporate headquarters shall be at no cost to HSI.

6.9 No Encumbrance on Premises. For so long as the Pattison Note
---------------------------
shall be outstanding, Pattison shall not create or suffer to exist any
Encumbrance upon or with respect to the Premises, except an Encumbrance in favor
of HSI as contemplated by Section 2.6(b).

<PAGE>
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS
-----------------------------------
OF HSI
------

The obligation of HSI under this Agreement to consummate the
transactions contemplated hereby at the Closing shall be subject to the
satisfaction, at or prior to the Closing, of all of the following conditions,
any one or more of which may be waived in writing by HSI:

7.1 Representations and Warranties Accurate. All representations and
---------------------------------------
warranties of Pattison contained in this Agreement and the other Pattison
Closing Documents shall be true and accurate in all material respects on and as
of the Closing Date as if made again at and as of such date.

7.2 Performance by SF and Pattison. SF and Pattison shall have
--------------------------------
performed and complied with all agreements required by this Agreement and the
other SF Closing Documents to be performed and complied with by each of them
prior to or on the Closing Date.

7.3 Certificate. HSI shall have received a certificate, dated the
-----------
Closing Date, signed on behalf of Pattison by a principal corporate officer of
Pattison to the effect that the conditions set forth in Sections 7.1 and 7.2
have been satisfied.

7.4 Opinions of Counsel for Pattison. HSI shall have received from
---------------------------------
counsel to SF and Pattison a written opinion, dated the Closing Date, in the
form annexed hereto as Exhibit 3.2(a).

7.5 Authorization; Legal Prohibition. (a) Pattison shall have
----------------------------------
delivered to HSI copies of the resolutions of the Board of Directors of Pattison
and the stockholders of Pattison, in each case certified by the secretary or
assistant secretary of Pattison, which resolutions shall unanimously approve and
authorize the execution and delivery of this Agreement, the other Pattison
Closing Documents and the consummation of the transactions contemplated hereby
and thereby.

(b) No suit, action, investigation, inquiry or other proceeding
by any governmental body or other person shall have been instituted or
threatened which (i) could reasonably be expected to result in a material
adverse change in the Business; (ii) arises out of or relates to this Agreement
or the transactions contemplated hereby; or (iii) questions the validity hereof
or seeks to obtain substantial damages in respect thereof. On the date of the
Closing, there shall be no effective permanent or preliminary injunction, writ,
temporary restraining order or any order of any nature issued by a

<PAGE>
court of competent jurisdiction directing that the transactions provided for
herein not be consummated as so provided.

7.6 Consents. All notices to, and declarations, filings and
--------
registrations with, and consents, approvals and waivers from, governmental and
regulatory agencies (including, without limitation, the FTC and DOJ) required to
consummate the transactions contemplated hereby and to permit the continued
operation by HSI of the Business after the Closing Date, shall have been
obtained and all consents to the assignment to HSI of each of the Acquired
Assets and Authorizations of Pattison shall have been obtained, in each case
without any condition or qualification adverse to HSI.

7.7 Closing Deliveries. HSI shall have received all deliveries to be
------------------
made to it pursuant to Article III of this Agreement.

7.8 Absence of Adverse Changes. There shall not have occurred since
--------------------------
the date hereof (i) any material adverse change in the condition (financial or
otherwise) or results of operations of or prospects of the Business; or (ii) any
other event, loss, damage, condition or state of facts of any character which
can reasonably be expected materially and adversely to affect the business,
financial condition, prospects, earnings, assets, properties, net worth or
results of operations of the Business.

7.9 Actions by Pattison. Pattison shall have executed a Bill of Sale
-------------------
in the form of Exhibits 3.2(b).

7.10 Additional Documents, Etc. Pattison shall have delivered to HSI
--------------------------
such other documents, instruments and certificates as shall be reasonably
requested by HSI or counsel to HSI for the purpose of effecting the transactions
provided for and contemplated by this Agreement and the other HSI Closing
Documents.

ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS
-----------------------------------
OF PATTISON
-----------

The obligations of Pattison under this Agreement shall be subject to
the satisfaction, at or prior to the Closing, of all of the following
conditions, any one or more of which may be waived in writing by Pattison.

8.1 Representations and Warranties Accurate. All representations and
---------------------------------------
warranties of HSI contained in this Agreement and the other HSI Closing
Documents shall be true and accurate in all material respects on and as of the
Closing Date as if made again at and as of such date.

<PAGE>
8.2 Performance by Buyer. HSI shall have performed and complied with
--------------------
all agreements required by this Agreement and the other HSI Closing Documents to
be performed and complied with by it prior to or on the Closing Date.

8.3 Certificate. Pattison shall have received a certificate, dated
-----------
the Closing Date, signed on behalf of HSI by a principal corporate officer of
HSI, to the effect that the conditions set forth in Sections 8.1 and 8.2 have
been satisfied.

8.4 Legal Prohibition. No suit, action, investigation, inquiry or
------------------
other proceeding by any governmental body or other person shall have been
instituted which arises out of or relates to this Agreement or the transactions
contemplated hereby or questions the validity hereof or seeks to obtain
substantial damages in respect thereof. On the date of the Closing, there shall
be no effective permanent or preliminary injunction, writ, temporary restraining
order or any order of any nature issued by a court of competent jurisdiction
directing that the transactions provided for herein not be consummated as so
provided.

8.5 Closing Deliveries. Pattison and SF shall have received all
-------------------
deliveries to be made to each of them pursuant to Article III of this Agreement.

8.6 Additional Documents, Etc. HSI shall have delivered to SF and
---------------------------
Pattison such other documents, instruments and certificates as shall be
reasonably requested by any of them or their counsel for the purpose of
effecting the transactions provided for and contemplated by this Agreement and
the other Pattison Closing Documents.

ARTICLE IX RESTRICTIVE COVENANTS
---------------------

9.1 Non-Solicitation of Employees. Neither Pattison nor any of its
------------------------------
Affiliates shall directly or indirectly, for itself or himself or on behalf of
any other Person, hire any employee of HSI (or any of its Affiliates),
including, without limitation, any employees of Pattison that HSI (or any of its
Affiliates) has hired in its sole discretion, or induce nor attempt to induce
any such employee to leave his or her employment with HSI (or any of its
Affiliates) at any time until the later of five years from the date hereof.

9.2 Non-Solicitation or Interference with Customers and Suppliers.
----------------------------------------------------------------
Neither Pattison nor any of its respective Affiliates shall, directly or
indirectly, for itself or on behalf of any other Person, solicit, divert, take
away or attempt to take away any customers of HSI (or any of its Affiliates) or
suppliers or the business or patronage of any such customers or suppliers or in
any way interfere with, disrupt or attempt to disrupt any then existing
relationships between HSI (or any of its Affiliates) and any of its customers or
suppliers or other Persons with whom it deals or contact for business purposes
or enter into any business transaction with any such customers or suppliers or
other Persons for any purpose at any time until five years from the date hereof.

<PAGE>
9.3 Acknowledgements. Pattison acknowledges that, in view of the
----------------
nature of the Business and the business objectives of HSI in acquiring such
business (or portions thereof) as herein provided, and the consideration paid to
Pattison therefor, the restrictions contained in this Article IX are reasonably
necessary to protect the legitimate business interests of HSI and that any
violation of such restrictions will result in irreparable injury to HSI and the
business HSI has acquired hereunder for which damages will not be an adequate
remedy. Pattison therefore acknowledges that, if any such restrictions are
violated, HSI shall be entitled to preliminary and injunctive relief as well as
to an equitable accounting of earnings, profits and other benefits arising from
such violation.

ARTICLE X INDEMNIFICATION
---------------

10.1 Survival of Representations and Warranties. All representations
-------------------------------------------
and warranties contained in Articles IV and V of this Agreement shall survive
until the third anniversary of the Closing Date.

10.2 Indemnification by Pattison. From and after the Closing,
-----------------------------
Pattison shall jointly and severally indemnify and save HSI and its Affiliates,
their respective directors, officers, employees, agents and representatives and
all of their successors and assigns (collectively "Buyer Claimants" and
individually "Buyer Claimant") harmless from and defend each of them from and
against any and all demands, claims, actions, liabilities, losses, costs,
damages or expenses whatsoever (including any reasonable attorneys' fees)
(collectively, "Losses") asserted against, imposed upon or incurred by the Buyer
Claimants resulting from or arising out of (a) any inaccuracy or breach of any
representation or warranty of Pattison contained herein; (b) any breach of any
covenant or obligation of Pattison contained herein; (c) any liability of SF or
Pattison or the Business; (d) noncompliance with any applicable bulk sales or
similar laws (including laws which may impose transferee liability on HSI or an
Affiliate or create Encumbrances on any Acquired Assets relating to the
liability of SF or Pattison for sales, use or other taxes or withholdings
arising out of the operations of the Business by SF or Pattison); (e) any
personal injuries, death or property damage arising from products sold by SF or
Pattison prior to the Closing Date; (f) any liability arising out of or related
to the Business prior to Closing; (g) any claim made against HSI by any FM
Dental Related Party or any of their respective Affiliates as a result of the
consummation of the transactions contemplated hereby, including, without
limitation, the sale and purchase of the Purchased Inventory; and (h) any
liability of SF or Pattison under the WARN Act or any state equivalent.

10.3 Indemnification by HSI. From and after the Closing, HSI shall
-----------------------
indemnify and save Pattison and its respective Affiliates and its respective
directors, officers, employees, agents and representatives (collectively "Seller
Claimants" and individually "Seller Claimant") harmless from and defend each of
them from and against

<PAGE>
any and all Losses asserted against, imposed upon or incurred by the Seller
Claimants resulting from or arising out of (a) any inaccuracy or breach of any
representation or warranty of HSI contained herein; (b) any breach of any
covenant or obligation of HSI contained herein; (c) except as described in
clause 10.2(e) above, HSI's ownership of Acquired Assets and operation of its
businesses from and after the Closing Date; (d) any personal injuries, death or
property damage arising from products sold by HSI prior to the Closing Date; and
(e) any liability of HSI under the WARN Act or any state equivalent.

10.4 Indemnification Procedures. (a) The rights and obligations of
--------------------------
each party claiming a right to indemnification hereunder ("Indemnitee") from the
other party ("Indemnitor") shall be governed by the following rules:

(i) The Indemnitee shall give prompt written notice to the
Indemnitor of any state of facts which Indemnitee determines will give rise
to a claim by the Indemnitee against the Indemnitor based on the indemnity
agreements contained herein, stating the nature and basis of said claims
and the amount thereof, to the extent known. No failure to give such
notice shall affect the indemnification obligations of Indemnitor
hereunder, except to the extent such failure materially prejudices such
Indemnitor's ability successfully to defend the matter giving rise to the
indemnification claim.

(ii) In the event any action, suit or proceeding is brought
against the Indemnitee, with respect to which the Indemnitor may have
liability under the indemnity agreements contained herein, then upon the
written acknowledgment by the Indemnitor within thirty (30) days of the
bringing of such action, suit or proceeding that it is undertaking and will
prosecute the defense of the claim under such indemnity agreements and
confirming that the claim is one with respect to which the Indemnitor is
obligated to indemnify and that it will be able to pay the full amount of
potential liability in connection with any such claim, the action, suit or
proceeding (including all proceedings on appeal or for review which counsel
for the Indemnitee shall deem appropriate) may be defended by the
Indemnitor. However, in the event the Indemnitor shall not offer
reasonable assurances as to its financial capacity to satisfy any final
judgment or settlement, the Indemnitee may assume the defense and dispose
of the claim, after 30 days' prior written notice to the Indemnitor. The
Indemnitee shall have the right to employ its own counsel in any such case,
but the fees and expenses of such counsel shall be at the Indemnitee's own
expense unless (a) the employment of such counsel and the payment of such
fees and expenses both shall have been specifically authorized by the
Indemnitor in connection with the defense of such action, suit or
proceeding or (b) the Indemnitee shall have reasonably concluded and
specifically notified the Indemnitor that there may be specific defenses
available to it which are different from or additional to those available
to the

<PAGE>
Indemnitor, or that such action, suit or proceeding involves or could have
an effect upon matters beyond the scope of the indemnity agreements
contained herein.

(iv) The Indemnitee shall be kept fully informed by the
Indemnitor of such action, suit or proceeding at all stages thereof,
whether or not it is represented by counsel. The Indemnitor shall, at the
Indemnitor's expense, make available to the Indemnitee and its attorneys
and accountants all books and records of the Indemnitor relating to such
proceedings or litigation, and the parties hereto agree to render to each
other such assistance as they may reasonably require of each other in order
to ensure the proper and adequate defense of any such action, suit or
proceeding.

(c) In the event any claim of a right to indemnification is
made by HSI or another indemnified party hereunder, such party may, at its sole
option, satisfy all or a portion of its Losses by way of setoff against any
payments due Pattison. Such right to setoff is without prejudice to any right
of Pattison to challenge its liability hereunder. This Section in no way
constitutes a limitation on rights hereunder and HSI and each other indemnified
party hereunder may seek full indemnification for all damages suffered and may
pursue all rights and remedies available to it, at law or in equity, against any
party hereto, jointly with other parties hereto or severally, without seeking
recourse against any other party and without exercising any right of offset.

ARTICLE XI MISCELLANEOUS
-------------

<PAGE>
11.1 Expenses. Each party hereto shall pay its own expenses incurred
--------
in connection with this Agreement, except as otherwise specified in this
Agreement and except that all sales, transfer and other similar taxes, levies
and charges that may be imposed, levied or assessed in connection with the
consummation of the transactions contemplated hereby shall be borne by Pattison
with respect to the Acquired Assets.

11.2 Amendment. This Agreement may not be terminated, amended,
---------
altered or supplemented except by a written agreement executed by the parties
hereto.

11.3 Entire Agreement. This Agreement, including the schedules and
-----------------
exhibits hereto, and the instruments and other documents delivered pursuant to
this Agreement contains the entire agreement of the parties relating to the
subject matter of this Agreement and supersedes all prior agreements and
understandings of any kind between the parties respecting such subject matter.
Each and every representation, warranty and covenant shall be deemed to include
the information contained in the schedules thereto.

11.4 Waivers. Waiver by either party of either breach of or failure
-------
to comply with any provision of this Agreement by the other party shall not be
construed as, or constitute, a continuing waiver of such provision, or a waiver
of any other breach of, or failure to comply with, any other provision of this
Agreement. No waiver of any such breach or failure or of any term or condition
of this Agreement shall be effective unless in a written notice signed by the
waiving party and delivered, in the manner required for notices generally, to
each affected party.

11.5 Notices. All notices, consents, directions, approvals,
-------
instructions, requests and other communications required or permitted by the
terms of this Agreement to be given to any Person shall be in writing, and any
such communication shall become effective five Business Days after being
deposited in the United States mails, certified or registered, with appropriate
postage prepaid for first class mail or, if delivered by hand or courier service
or in the form of a telex, telecopy or telegram, when received (if received
during normal business hours on a Business Day, or if not, then on the next
Business Day thereafter), and shall be directed to the following address or
telex or telecopy number:

If to Pattison:

San Francisco Dental Supply, Inc.
2201 South Oneida Street
Green Bay, Wisconsin 54304
Attention: Larry Olson
Telecopier: (414) 494-3386

<PAGE>
With copies to:

Hanaway, Ross, Hanaway,
Weidner & Bachhuber, S.C.
345 S. Jefferson Street
Green Bay, Wisconsin 54301-4522
Attention: William S. Woodward, Esq.
Telecopier: (414) 432-4037

If to HSI:

Henry Schein, Inc.
135 Duryea Road
Melville, New York 11747
Attention: Mark E. Mlotek, Esq.
Telecopier: (516) 843-5675

With copies to:

Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
Attention: Richard L. Goldberg, Esq.
Telecopier: (212) 969-2900

or to such other address as a party may have furnished to the other parties in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt. Any notice which is so mailed shall be deemed
delivered on the fourth Business Day (or Days) after mailing; any notice which
is transmitted by telecopier shall be deemed delivered when transmitted to the
telecopier number specified above and acknowledgement of receipt of such
facsimile is received.

11.6 Counterparts. This Agreement may be executed in two or more
------------
counterparts, and by the different parties hereto in separate counterparts each
of which when executed shall be deemed to be an original, but all of which
together shall constitute one and the same document.

11.7 Governing Law; Submission to Jurisdiction. This Agreement shall
------------------------------------------
be governed by, and construed in accordance with, the law of the State of New
York, without regard to applicable principles of conflict of laws that might
otherwise govern. Pattison hereby submits to the nonexclusive jurisdiction of
the United States District Court for the Southern District of New York and of
any New York State Court sitting in New York City for the purposes of all legal
proceedings arising out of or relating to this Agreement or the transactions
contemplated hereby. Pattison irrevocably waives, to the

<PAGE>
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum.

11.8 Binding Effect; Assignment. This Agreement shall be binding upon
--------------------------
and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, that SF shall not assign or transfer this
--------
Agreement nor any right or obligation hereunder by operation of law or
otherwise; further provided, that HSI in its sole discretion, may assign all or
------- --------
a portion of its rights hereunder to an Affiliate or Affiliates without the
consent of Pattison and after the Closing Date, assign all or a portion of its
rights hereunder to any Person without the consent of Pattison; further
-------
provided, that no assignment shall relieve HSI of its obligations hereunder.
- --------

11.9 Severability. Any provision of this Agreement that shall be
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions thereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties to such instrument waive any provision of law
that renders any provision thereof prohibited or unenforceable in any respect.

11.10 Headings. The headings contained in this Agreement
--------
(including the exhibits and schedules) are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.

11.11 No Partnership; Etc. Nothing contained in this Agreement
--------------------
shall constitute or be deemed a representation, agreement or understanding that
the parties hereto are members of any partnership, joint venture, association,
syndicate or other entity, and each of the parties hereto expressly disclaims
the existence of any such relationship or arrangement.

11.12 Third Parties. Nothing herein is intended or shall be
--------------
construed to confer upon or give to any person other than the parties hereto any
rights or remedies under or by reason of this Agreement.

<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first above written.

PATTISON-MCGRATH COMPANY DENTAL SUPPLIES

By:__________________________________
Authorized Officer

HENRY SCHEIN, INC.

By:__________________________________
Authorized Officer

<PAGE>
Schedule 2.2(e)
(Pattison Excluded Liabilities)
-------------------------------

1. Legal, accounting, brokerage, finder's fees, taxes or other
expenses incurred by SF, Pattison, or any of their respective Affiliates in
connection with this Agreement or the consummation of the transactions
contemplated hereby;

2. Any intercompany debt or other liability or obligation of any
nature between Pattison and any past or present Affiliate, on the one hand, or
Pattison and any past or present Affiliate, on the other hand;

3. Liabilities or obligations incurred by Pattison after the
Closing;

5. Any liability for any federal, state, local or foreign income or
other Taxes accrued to or incurred by Pattison or SF any of their respective
Affiliates or relating to the Business, operations, products or assets of
Pattison or SF any of their respective Affiliates prior to the Closing, or as a
consequence of the transactions contemplated hereby;

6. Any liability or costs (including, without limitation, costs of
remediation) arising out of or relating to a Hazardous Discharge or the release,
discharge or disposal of any solid wastes or the handling, storage, use,
transportation or disposal of any of the foregoing, as these terms are defined
by the Environmental Laws in, on, under or from facilities of Pattison at any
time prior to the Closing regardless of whether such liability or costs arise
before or after Closing and whether or not in breach of any representation or
warranty under this Agreement;

8. Any liability or obligation under any contract or commitment that
is not an HSI Assumed Liability or under any Pattison Contract which relates to
any default in respect of such contract or other commitment or obligation of
Pattison;

10. Any accounts payable, notes payable, bank debts, and/or debt to
any officer, director or stockholder of Pattison;

11. Any deferred compensation agreements of Pattison or any insurance
policies relating thereto; and

12. Any liability or obligation of any nature of Pattison or SF or
any of their respective Affiliates owed or claimed by any FM Dental Related
Party relating to the Purchased Inventory or otherwise.

13. Any other liability not expressly included as an HSI Assumed
Liability.

EXHIBIT 11.1

HENRY SCHEIN, INC. AND SUBSIDIARIES
COMPUTATION OF PRO FORMA EARNINGS PER SHARE

Year Ended Three Months Ended
----------- ---------------------
December April March
30, 1995 1, 1995 30, 1996
---------- ------- ---------
Pro forma net income per
consolidated statements of $9,407 $936 $2484
operations (in thousands) . . . ============= =========== =============
Pro forma weighted average common
shares
outstanding:

Shares outstanding at December 11,390,544 11,390,544 11,390,544
25, 1993 . . . . . . . . . . .
1994 issuances:

Shares issued, in part, to
extinguish liability
under long-term executive 489,456 489,456 489,456
incentive compensation plan
128,257 128,257 128,257
Shares issued to ESOP trust
in 1994 . . . . . . . . . . . 237,897 237,897 221,397
Stock options granted at an 65,871 --- 408,400
exercise price of
$4.21 per share1 . . . . .
IPO Options (Class B) . . . .

1995 Issuances:
Shares issued as of September
1, 1995 in 418,984 --- 1,260,416
connection with an 811,044 --- 5,090,000
acquisition . . . . . . . . ---------- ---------- ----------
IPO Shares . . . . . . . . .

13,542,053 12,246,154 18,988,470
Less: Treasury stock . . . . (8,235) --- (51,679)
---------- --------- ----------
13,533,818 12,246,154 18,938,791

Less assumed repurchase of shares
under treasury stock method
based on an average price of
$27.96 per share2:
Stock options -- 221,397
shares
x $4.21 (42,313)3 (62,597)4 (33,336)5
-------
$932,081/$27.96
IPO options --- 408,400
shares
x $16.00 (44,527)3 --- (233,705)5
-------- ------------ ----------- -----------
$8,534,400/$27.96 .

Weighted average common shares 13,446,978 12,183,557 18,669,750
outstanding ============ ============ ============

Pro forma net income per common $0.70 $0.08 $0.13
share ============ ============ ============

--------------------
1 Considered cheap stock and treated as outstanding since January 1,
1995.
2 The treasury stock method was not used for the shares issued to settle
the long-term incentive plan liability and the compensatory portion of
the stock options granted because the related special compensation
shares have been excluded from net income and, therefore, were not
assumed to be proceeds.
3 Computed using the average closing value per share of $23.67 for
237,897 Stock options and 413,400 IPO options.
4 Computed using the IPO value per share of $16.00 for 237,897 Stock
options.
5 Computed using the average closing value per share for the three months
ended March 30, 1996.

EXHIBIT 21.1

List of Subsidiaries
--------------------

Subsidiary State of Incorporation
---------- ----------------------

Avamark, Inc. New York

BDG UK Holdings Limited* England
Budget Dental Supplies Ltd.* England

C E Seminars, Inc.* New York
Debmar, Inc. Arizona

Dental Express (Supplies) England
Limited*

Dental Instrument Sales & New York
Service LLC
Dental Plan, Inc. Texas

Dentisoft, Inc.* Delaware
Florida Doctor Supply, Inc. Indiana

Health and Safety Delaware
Communications, Inc.

Henry Schein Canada Ltd. Ontario, Canada
Henry Schein Dental Supply, New York
Inc.

Henry Schein - Dentina Gmbh* Konstanz, Germany
Henry Schein Espana, S.A.*

Henry Schein Europe B.V.* The Netherlands

Henry Schein Europe, Inc. Delaware
Henry Schein Financial Delaware
Services, Inc.

Henry Schein France Holdings, Delaware
Inc.*
Henry Schein France S.A.* Paris, France

HSI Acquisition, Inc. Delaware

Henry Schein Holland Holding The Netherlands
B.V.*
Henry Schein Van den The Netherlands
Braak,B.V.*

<PAGE>
Subsidiary State of Incorporation
---------- ----------------------

Henry Schein UK Holdings England
Limited*

HLH Acquisition Corp. Delaware
HSI Michigan Corp. Delaware

Jameson Management Inc. Delaware
JS Pacific LLC Delaware

Kent Dental Limited* England

Mayflower Healthcare Supply, New York
Inc.
Medenta International B.V.* The Netherlands

Precision Dental Specialties, Delaware
Inc.*
PRN Medical Inc. Indiana

PW Pharmacal, Inc. New York

Rockford Dental Mfg. Co.* Delaware
SSN Healthcare Supply, Inc. New York

Schein Creative Services, Inc. New York
Schein Dental Equipment Corp. New York

Schein Europe Marketing B.V.* The Netherlands

Schein Rexodent Limited* England
Silverman's Dental Supply New York
Corp.

South Jersey Medical Supply Delaware
Company Inc.*
Tri-State Medical Supply Co., New York
Inc.*

Universal Footcare Holdings Delaware
Corp.

Universal Footcare Products, Delaware
Inc.*
Zahn Dental Co., Inc.* Massachusetts

Zahn Dental Canada, Inc.* Ontario, Canada
Zahn Dental (Florida), Inc. Delaware

Zahn Dental (Illinois), Inc. Delaware

Zahn Dental Supplies, Limited* England

<PAGE>
Subsidiary State of Incorporation
---------- ----------------------

Zahn Holdings, Inc. Delaware
__________________
* Indirect subsidiary of the Company.

EXHIBIT 23.1

CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS

Henry Schein, Inc.
New York, New York

We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated February 23, 1996 relating to the
consolidated financial statements of Henry Schein, Inc. and Subsidiaries, our
report dated July 24, 1995 relating to the financial statements of Veratex (a
division of The Veratex Corporation) and our report dated February 16, 1996
relating to the consolidated financial statements of HS Pharmaceutical, Inc.
and Subsidiaries which are contained in that Prospectus, and of our report dated
February 23, 1996, relating to the schedule which is contained in Part II of
the Registration Statement.

We also consent to the reference to us under the caption "Experts" in the
Prospectus.

BDO SEIDMAN, LLP

New York, New York
June 17, 1996