AQUAPENN SPRING WATER COMPANY INC, SC 14D9, 1998-11-06

AQUAPENN SPRING WATER COMPANY INC
SC 14D9, 1998-11-06
BOTTLED & CANNED SOFT DRINKS & CARBONATED WATERS

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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SCHEDULE 14D-9

SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934

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AQUAPENN SPRING WATER COMPANY, INC.

(Name of Subject Company)

AQUAPENN SPRING WATER COMPANY, INC.

(Name of Person Filing Statement)

COMMON STOCK, NO PAR VALUE

(Title of Class of Securities)

03838X109

(CUSIP Number of Class of Securities)

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EDWARD J. LAUTH, III
PRESIDENT AND CHIEF EXECUTIVE OFFICER
AQUAPENN SPRING WATER COMPANY, INC.
P.O. BOX 938
ONE AQUAPENN DRIVE
MILESBURG, PENNSYLVANIA 16853-0938
814-355-5556

(Name, Address and Telephone Number of Person Authorized to Receive
Notice and Communications on Behalf of the Person Filing the Statement)

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COPIES TO:

BRIAN D. DOERNER, ESQUIRE
BALLARD SPAHR ANDREWS & INGERSOLL, LLP
1735 MARKET STREET, 51ST FLOOR
PHILADELPHIA, PENNSYLVANIA 19103-7599
215-665-8500

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ITEM 1. SECURITY AND SUBJECT COMPANY

The name of the subject company is AquaPenn Spring Water Company, Inc., a
Pennsylvania corporation (the "Company"). The principal executive offices of the
Company are located at One AquaPenn Drive, Milesburg, Pennsylvania 16853-0938.
The title of the class of equity securities to which this
Solicitation/Recommendation Statement on Schedule 14D-9 relates is the common
stock, no par value, of the Company ("Common Stock").

ITEM 2. TENDER OFFER OF THE BIDDER

This Statement relates to the tender offer disclosed in the Tender Offer
Statement on Schedule 14D-1 dated November 6, 1998 (the "Schedule 14D-1") filed
by Groupe Danone, a French SOCIETE ANONYME ("Parent"), and Zoneo Acquisition
Corp., a Pennsylvania corporation and an indirect subsidiary of Parent
("Purchaser"), to purchase all of the outstanding shares of Common Stock (the
"Shares") at $13.00 per Share, net to the seller in cash, without interest and
less any required withholding taxes (the "Per Share Amount"), upon the terms and
subject to the conditions set forth in the Offer to Purchase (the "Offer to
Purchase") and the related Letter of Transmittal (which, together with any
amendments or supplements thereto, constitutes the "Offer"), copies of which are
filed as Exhibits hereto.

The Offer is being made pursuant to an Agreement and Plan of Merger, dated
November 2, 1998, among Parent, Purchaser and the Company (the "Merger
Agreement"), a copy of which is filed as an Exhibit hereto. The Offer is subject
to the conditions set forth in the Merger Agreement, including the condition
that there be validly tendered and not withdrawn prior to the expiration of the
Offer at least 80% of the issued and outstanding shares of Common Stock on a
fully diluted basis (the "Minimum Condition"). Parent may not decrease the
Minimum Condition without the prior written consent of the Company. In the event
all the conditions to the Offer have been satisfied or waived other than the
Minimum Condition, and in the event that Shares constituting at least 19.9% of
the outstanding Shares have been validly tendered and not withdrawn (which
amount should be tendered pursuant to the Shareholder Agreements referred to in
Item 6(b)), the Purchaser may, at its option, purchase any number of tendered
shares up to 19.9% of the then outstanding Shares on a pro rata basis.

Pursuant to the Merger Agreement, following the consummation of the Offer
and subject to the satisfaction of certain conditions, Purchaser will merge with
and into the Company, with the Company to continue as the surviving entity (the
"Merger"). At the effective time of the Merger, each Share issued and
outstanding immediately prior to such effective time (other than Shares held in
the treasury of the Company, owned by Purchaser, Parent or any direct or
indirect subsidiary of Parent or of the Company, and other than Shares held by
shareholders, if any, who shall have dissented and demanded the right to receive
the fair value of the Shares under Pennsylvania Law) will be canceled and
converted automatically into the right to receive $13.00 in cash, or any greater
amount per Share that may be paid pursuant to the Offer, without interest. The
terms of the Merger Agreement, incorporated herein by reference, are summarized
in the Introduction and Section 11 ("Purpose of the Offer; Plans for the Company
After the Offer and the Merger; the Merger Agreement; and Related Agreements")
and Section 14 ("Conditions to the Offer") of the Offer to Purchase. Capitalized
terms used but not defined herein have the meanings ascribed to them in the
Merger Agreement.

As set forth in the Schedule 14D-1, the principal executive offices of
Parent are located at 7 Rue de T eheran, 75381 Paris Cedex 08, France and the
principal executive offices of Purchaser are located at 208 Harbor Drive,
Stamford, CT 09902.

ITEM 3. IDENTITY AND BACKGROUND

(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.

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(b)(1) GENERAL.

The information set forth in the Introduction and Section 11 ("Purpose of
the Offer; Plans for the Company After the Offer and the Merger; the Merger
Agreement; and Related Agreements") and Section 14 ("Conditions to the Offer")
of the Offer to Purchase are incorporated herein by reference.

(b)(2) ARRANGEMENTS WITH DIRECTORS, OFFICERS AND EMPLOYEES.

In September 1994, the Company and Edward J. Lauth, III, President and Chief
Executive Officer of the Company, entered into an employment agreement pursuant
to which Mr. Lauth receives a salary, adjusted annually, and deferred
compensation in the amount of 15.0% of his annual salary. The initial term of
the employment agreement ended December 31, 1995, but the employment agreement
automatically renews for an unlimited number of successive one-year terms unless
either party gives six months written notice of termination. The employment
agreement contains a non-compete provision which extends for two years beyond
termination of the employment agreement. The Company and Mr. Lauth also entered
into a change in control agreement in September 1994, which provides that if,
within one year of a "change in control" (as defined in the agreement) of the
Company, Mr. Lauth is terminated or resigns because his responsibilities have
diminished or been significantly changed or his salary has been reduced by more
than 15.0%, Mr. Lauth shall be entitled to receive one year's salary and
benefits and all outstanding stock options held by Mr. Lauth shall become
immediately exercisable. The change in control agreement terminates if Mr. Lauth
ceases to be employed by the Company prior to a change in control. The Company
and Geoffrey F. Feidelberg, Chief Operating Officer and Chief Financial Officer
of the Company, also entered into an employment agreement and change in control
agreement in September 1994 on substantially the same terms as the employment
agreement (other than the annual salary) and the change in control agreement
entered into with Mr. Lauth. In addition, the Company executed a letter
agreement on December 29, 1995 with Matthew J. Suhey for the payment of certain
commissions in exchange for services performed for the Company.

Upon the consummation of the Offer and the Merger, all of the foregoing
agreements will be terminated. Thereafter, Messrs. Lauth and Feidelberg will be
employed pursuant to new employment agreements, and Mr. Suhey will be subject to
a consulting agreement. The terms of such new employment agreements and the
consulting agreement are described in Section 11 ("Purpose of the Offer; Plans
for the Company After the Offer and the Merger; the Merger Agreement; and
Related Agreements") of the Offer to Purchase, which is incorporated herein by
reference.

Mr. Feidelberg holds an option to purchase 135,360 Shares granted pursuant
to the Company's 1989 Stock Option Plan. In accordance with the terms of that
plan, the Company will cause such option to, immediately prior to the effective
time of the Merger, become exercisable regardless of the installment provisions
contained in the stock option plan and to be terminated at such time. With
respect to all other options and warrants for Shares, the Company will use its
reasonable best efforts to obtain the consent of the holders of such options and
warrants to their termination, immediately prior to the effective time of the
Merger, in exchange for certain consideration. The Introduction and Section 11
("Purpose of the Offer; Plans for the Company After the Offer and the Merger;
the Merger Agreement; and Related Agreements") of the Offer to Purchase describe
more fully the effect of the Offer and the Merger on the options and warrants to
purchase Shares and are incorporated herein by reference.

In addition, certain directors, officers and employees of the Company may be
deemed to have interests in the transactions contemplated by the Merger
Agreement that are in addition to their interests as shareholders of the Company
generally, including, as mentioned above, employment or consulting agreements
for senior management of the Company, and the right to indemnification after the
consummation of the Merger and to receive officers' and directors' liability
insurance coverage, subject to the terms of the Merger Agreement. The Company's
Board of Directors was aware of these interests when it considered and approved
the Merger Agreement and the transactions contemplated thereby. In considering
the recommendation of the Board in respect of the Offer, the shareholders of the
Company should be aware of these interests. The information concerning these
interests that is set forth in Section 11

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("Purpose of the Offer; Plans for the Company After the Offer and the Merger;
the Merger Agreement; and Related Agreements") of the Offer to Purchase is
incorporated herein by reference.

Except as set forth in this Schedule 14D-9 or in the Offer to Purchase, to
the knowledge of the Company, there are no material contracts, agreements,
arrangements or understandings and no actual or potential conflicts of interest
between (i) the Company or its affiliates and the Company's executive officers,
directors or affiliates or (ii) Parent or Purchaser and their respective
executive officers, directors or affiliates.

ITEM 4. THE SOLICITATION OR RECOMMENDATION

(a) RECOMMENDATION OF THE BOARD OF DIRECTORS

At a meeting held on November 1, 1998, at which all the directors were
present in person or by telephone, the Board of Directors of the Company
unanimously approved and adopted the Merger Agreement, including the Offer, the
Merger and the other transactions contemplated thereby. The Board of Directors
has determined that the Merger Agreement is fair to, and in the best interests
of, the Company and its shareholders. The Board recommends that shareholders
accept the Offer and tender their Shares pursuant to the Offer and if a meeting
of the Company's shareholders is required to be called and held in accordance
with applicable law, recommends that shareholders approve the Merger Agreement
and the transactions contemplated thereby, including the Merger. For a
discussion of the Board's reasons for its recommendation, see "Reasons for
Recommendation" below.

A press release announcing the Merger Agreement and related transactions and
a letter to the shareholders from the Company communicating the Board's
recommendation are filed as Exhibits to this Schedule 14D-9 and are incorporated
herein by reference.

(b) BACKGROUND TO THE OFFER; REASONS FOR THE RECOMMENDATION OF THE COMPANY'S
BOARD OF DIRECTORS

Background of the Offer

The information set forth in Section 10 ("Background of the Offer; Contacts
with the Company") of the Offer to Purchase is incorporated herein by reference.

Reasons for Recommendation

The Company's Board of Directors determined that the Merger Agreement and
the transactions contemplated thereby, including the Offer and the Merger, taken
together, are fair to, and in the best interests of, the Company and its
shareholders. In arriving at its decision regarding its recommendation set forth
above, the Board of Directors considered, among other things, the following:

(1) the terms and conditions of the Merger Agreement, the Offer and the
Merger, including the amount and form of the consideration being offered,
the parties' representations, warranties and covenants and the conditions to
their respective obligations;

(2) the financial condition, results of operations, cash flows and
prospects of the Company, as well as the Board of Directors' knowledge of
the business, operations, assets and properties of the Company on both a
historical and prospective basis;

(3) the recent and historical market prices and trading volume of the
Shares and the premium to such market prices represented by the Per Share
Amount;

(4) the current status of the industry in which the Company competes and
the Company's position in that industry;

(5) the financial condition and business reputation of Parent, and the
ability of Parent and Purchaser to complete the Offer and the Merger in a
timely manner;

(6) the extensive arms-length negotiations between the Company and the
Parent that resulted in the Merger Agreement and the Per Share Amount;

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(7) the process that resulted in the Merger Agreement and the
alternatives to the sale of the Company, including continuing to maintain
the Company as a public corporation and not engaging in any extraordinary
transaction;

(8) the fact that the Merger Agreement permits the Company's Board of
Directors, in the exercise of its fiduciary duties, to terminate the Merger
Agreement in favor of a Superior Proposal as described in the Merger
Agreement;

(9) the effect of the proposed transaction on the employees, customers,
creditors and suppliers of the Company and on the communities surrounding
the Company's facilities; and

(10) the separate presentations given by Lazard Freres & Co. LLC
("Lazard") and Parker/ Hunter, Incorporated ("Parker") to the Board of
Directors on November 1, 1998, in which Lazard and Parker each gave an oral
opinion, each later put into written opinions dated November 2, 1998, to the
effect that, as of the date of each such opinion and based upon and subject
to certain matters stated therein, the consideration to be received in the
Offer and the Merger by holders of Shares (other than Parent and its
affiliates) is fair, from a financial point of view, to such holders. The
full text of the written opinions of Lazard and Parker, which each set forth
the assumptions made, matters considered and limitations on the review
undertaken by each party, are attached hereto as Exhibits and are
incorporated herein by reference. Both opinions are directed only to the
fairness, from a financial point of view, of the consideration to be
received in the Offer and the Merger by holders of Shares (other than Parent
and its affiliates) and are not intended to constitute, and do not
constitute, a recommendation as to whether any shareholder should tender
their Shares pursuant to the Offer. HOLDERS OF SHARES ARE URGED TO CAREFULLY
READ BOTH SUCH OPINIONS IN THEIR ENTIRETY.

The foregoing discussion of factors considered by the Board of Directors is
not intended to be exhaustive. The Company's Board of Directors did not assign
relative weights to the above factors or determine that any factor was of
particular importance. Rather, the Board viewed its position and recommendations
as being based on the totality of the information presented and considered by
it. In addition, it is possible that different members of the Board assigned
different weights to the factors.

ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED

The Company retained Lazard and Parker as its financial advisors in
connection with the Offer and the Merger. Pursuant to the terms of Lazard's
engagement, the Company has agreed to pay Lazard for its services a fixed
financial advisory fee of $250,000 payable upon the execution of a definitive
agreement with respect to a merger or sale of assets or equity securities or
other interests, plus a fee equal to 1.5% of the consideration paid for the
Company in the Offer and the Merger (less the $250,000 fee payable upon the
execution of a definitive agreement described above) upon the consummation of
such transactions. The Company has agreed to pay Parker an opinion fee of
$175,000 plus a fee of $100,000 for each additional opinion requested by the
Company's Board of Directors with respect to amended or revised offers. The
Company also has agreed to reimburse Lazard and Parker for reasonable travel and
other out-of-pocket expenses, including the reasonable fees and disbursements of
their respective legal counsels, and to indemnify Lazard and Parker and certain
related parties against certain liabilities, including liabilities under the
federal securities laws, arising out of their respective engagements.

Lazard acted as the lead underwriter for the Parent's offer of American
Depository Shares on November 19, 1997 and has in the past provided, and is
currently providing, investment banking services to Parent, for which Lazard has
received customary fees. Further, Lazard's Chairman is a director of Parent and
a Director of the Eurafrance Group which beneficially owned 5.7% of Parent and
8.8% of the voting rights pertaining thereto as of November 13, 1997, and also
has an indirect economic interest in Lazard.

In the ordinary course of business, Lazard and Parker and their respective
affiliates may actively trade or hold the securities of the Company for their
own account or for the account of customers and, accordingly, may at any time
hold a long or short position in such securities.

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Except as set forth above, neither the Company nor any person acting on its
behalf has employed, retained or compensated any person to make solicitations or
recommendations to the shareholders with respect to the Offer.

ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES

(a) During the past 60 days, no transactions in Shares have been effected by
the Company or, to the best of the Company's knowledge, by any of its executive
officers, directors, affiliates or subsidiaries, except as set forth below:

1. Geoffrey F. Feidelberg, Chief Operating Officer and Chief Financial
Officer of the Company, was issued 901 Shares as Directors' compensation
on September 16, 1998 and was granted an option for 30,040 Shares on
October 1, 1998 pursuant to the terms of his employment agreement;

2. Richard F. DeFluri, a director of the Company, was issued 901 Shares on
September 16, 1998 as Directors' compensation;

3. Daniel J. Delligatti, a director of the Company, was issued 225 Shares
on September 16, 1998 as Directors' compensation;

4. John H. Gutfruend, a director of the Company, was issued 901 Shares on
September 16, 1998 as Directors' compensation;

5. Dr. James D. Hammond, a director of the Company, was issued 901 Shares
on September 16, 1998 as Directors' compensation and exercised a warrant
held by him on October 30,1998 for 9,012 Shares;

6. Timothy J. Healy, a director of the Company, was issued 225 Shares on
October 2, 1998 as Directors' compensation;

7. Edward J. Lauth, III, President and Chief Executive Officer of the
Company, was issued 901 Shares on September 16, 1998 as Directors'
compensation, was granted an option for 30,040 Shares on October 1, 1998
pursuant to the terms of his employment agreement and exercised all stock
options held by him (including the option granted October 1, 1998) for
120,160 Shares on October 30, 1998;

8. Alfred A. Piergallini, a director of the Company, was issued 225 Shares
on September 16, 1998 as Directors' compensation;

9. Robert E. Poole, a director of the Company, was issued 901 Shares on
September 16, 1998 as Directors' compensation;

10. Henry S. Shatkin, a director of the Company, was issued 901 Shares on
September 16, 1998 as Directors' compensation;

11. Matthew J. Suhey, a director of the Company, was issued 901 Shares on
September 16, 1998 as Directors' compensation, was granted an option for
30,040 Shares on October 1, 1998 pursuant to a resolution of the
Company's Board of Directors and exercised all stock options held by him
(including the option granted October 1, 1998) on October 30, 1998 for
360,480 Shares; and

12. Calvin J. Wagner, a director of the Company, was issued 901 Shares on
October 2, 1998 as Directors' compensation.

In addition, the Company repurchased 17,550 Shares pursuant to its Stock
Repurchase Program during the past 60 days.

(b) To the best of the Company's knowledge, all of its executive officers,
directors and affiliates currently intend to tender pursuant to the Offer all
Shares held of record or beneficially owned by such persons. Three of the
Company's shareholders, Edward J. Lauth, III, Geoffrey F. Feidelberg and Matthew
Suhey, have each entered into a Shareholder Agreement, the terms of which are
described in Section 11 of the Offer to Purchase which is incorporated herein by
reference, that provides that the applicable shareholder will (i) tender his
Shares into the Offer, (ii) vote his Shares in favor of the Merger, if

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applicable, and (iii) grant an option to the Purchaser to purchase his Shares at
the Per Share Amount, in each case subject to the conditions in the applicable
Shareholder Agreement.

ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY

(a) Except as set forth in this Statement, the Company is not engaged in any
negotiation in response to the Offer that relates to or would result in (i) an
extraordinary transaction, such as a merger or reorganization, involving the
Company or any subsidiary of the Company; (ii) a purchase, sale or transfer of a
material amount of assets by the Company or any subsidiary of the Company; (iii)
a tender offer for or other acquisition of securities by or of the Company; or
(iv) any material change in the present capitalization or dividend policy of the
Company.

(b) Except as described in Items 3(b) or 4, there are no transactions, Board
of Director resolutions, agreements in principle, or signed contracts in
response to the Offer, other than those agreements described (or whose
description is incorporated by reference) in Item 3(b) above, that relate to or
would result in one or more of the events referred to in Item 7(a) above.

ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED

The information set forth in Section 11 ("Purpose of the Offer; Plans for
the Company After the Offer and the Merger; the Merger Agreement; and Related
Agreements") and Section 15 ("Certain Legal Matters and Regulatory Approvals")
of the Offer to Purchase is incorporated herein by reference.

ITEM 9. MATERIAL TO BE FILED AS EXHIBITS

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99.1 Offer to Purchase dated November 6, 1998.*
99.2 Letter of Transmittal.*
99.3 Press Release issued by the Company on November 2, 1998.
99.4 Opinion of Lazard Freres & Co. LLC dated November 2, 1998.*
99.5 Opinion of Parker/Hunter, Incorporated dated November 2, 1998.*
99.6 Letter from the Company to each shareholder dated November 6, 1998.*
99.7 Agreement and Plan of Merger dated November 2, 1998 among Parent, Purchaser and
the Company.
99.8 Confidentiality Agreement dated September 11, 1998 between Parent and the
Company.
99.9 Employment Agreement dated November 2, 1998 between Great Brands of Europe, Inc.
and Edward J. Lauth, III.
99.10 Employment Agreement dated November 2, 1998 between Great Brands of Europe, Inc.
and Geoffrey F. Feidelberg.
99.11 Consulting Agreement dated November 2, 1998 between Great Brands of Europe, Inc.
and Matthew J. Suhey.
99.12 Registration Rights Agreement dated November 2, 1998 among Parent, Purchaser and
the Company.
99.13 Shareholder Agreement dated November 2, 1998 among Parent, Purchaser and Edward
J. Lauth, III.
99.14 Shareholder Agreement dated November 2, 1998 among Parent, Purchaser and Geoffrey
F. Feidelberg.
99.15 Shareholder Agreement dated November 2, 1998 among Parent, Purchaser and Matthew
J. Suhey.
</TABLE>

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* Included in materials mailed to shareholders.

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SIGNATURES

After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.

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DATE: November 6, 1998 AQUAPENN SPRING WATER COMPANY, INC.

By: /s/ EDWARD J. LAUTH, III
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Name: Edward J. Lauth, III
Title: President and Chief Executive
Officer
</TABLE>

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EXHIBIT INDEX

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<C> <S>
99.1 Offer to Purchase dated November 6, 1998.*
99.2 Letter of Transmittal.*
99.3 Press Release issued by the Company on November 2, 1998.
99.4 Opinion of Lazard Freres & Co. LLC dated November 2, 1998.*
99.5 Opinion of Parker/Hunter, Incorporated dated November 2, 1998.*
99.6 Letter from the Company to each shareholder dated November 6, 1998.*
99.7 Agreement and Plan of Merger dated November 2, 1998 among Parent, Purchaser and
the Company.
99.8 Confidentiality Agreement dated September 11, 1998 between Parent and the
Company.
99.9 Employment Agreement dated November 2, 1998 between Great Brands of Europe, Inc.
and Edward J. Lauth, III.
99.10 Employment Agreement dated November 2, 1998 between Great Brands of Europe, Inc.
and Geoffrey F. Feidelberg.
99.11 Consulting Agreement dated November 2, 1998 between Great Brands of Europe, Inc.
and Matthew Suhey.
99.12 Registration Rights Agreement dated November 2, 1998 among Parent, Purchaser and
the Company.
99.13 Shareholder Agreement dated November 2, 1998 among Parent, Purchaser and Edward
J. Lauth, III.
99.14 Shareholder Agreement dated November 2, 1998 among Parent, Purchaser and Geoffrey
F. Feidelberg.
99.15 Shareholder Agreement dated November 2, 1998 among Parent, Purchaser and Matthew
Suhey.
</TABLE>

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* Included in materials mailed to shareholders.

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OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
AQUAPENN SPRING WATER COMPANY, INC.
AT
$13.00 NET PER SHARE
BY
ZONEO ACQUISITION CORP.
AN INDIRECT SUBSIDIARY OF
GROUPE DANONE

THE OFFER, PRORATION PERIOD (IF APPLICABLE) AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, DECEMBER 7, 1998, UNLESS THE
OFFER IS EXTENDED.

THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST 80% OF
THE ISSUED AND OUTSTANDING SHARES OF COMMON STOCK, NO PAR VALUE (THE "SHARES"),
OF AQUAPENN SPRING WATER COMPANY, INC. (THE "COMPANY"), ON A FULLY DILUTED BASIS
(THE "MINIMUM CONDITION") AND (II) THE WAITING PERIOD UNDER THE HART-SCOTT-
RODINO ANTITRUST IMPROVEMENTS ACT OF 1976 APPLICABLE TO THE PURCHASE OF THE
SHARES PURSUANT TO THE OFFER HAVING EXPIRED OR BEEN TERMINATED. SEE "SECTION 14.
CONDITIONS TO THE OFFER," WHICH SETS FORTH IN FULL THE CONDITIONS TO THE OFFER.
IN THE EVENT ALL THE CONDITIONS TO THE OFFER HAVE BEEN SATISFIED OR WAIVED OTHER
THAN THE MINIMUM CONDITION, AND IN THE EVENT SHARES CONSTITUTING AT LEAST 19.9%
OF THE OUTSTANDING SHARES HAVE BEEN VALIDLY TENDERED AND NOT WITHDRAWN, THE
PURCHASER MAY, AT ITS OPTION, PURCHASE ANY NUMBER OF TENDERED SHARES UP TO 19.9%
OF THE THEN OUTSTANDING SHARES ON A PRO RATA BASIS.
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THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT EACH OF
THE OFFER AND THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE
SHAREHOLDERS OF THE COMPANY, AND RECOMMENDS THAT THE SHAREHOLDERS ACCEPT THE
OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
------------------------------

THE PARENT AND THE PURCHASER HAVE ENTERED INTO SHAREHOLDER AGREEMENTS WITH EACH
OF EDWARD J. LAUTH, III, GEOFFREY F. FEIDELBERG AND MATTHEW SUHEY (THE
"PRINCIPAL SHAREHOLDERS"), PURSUANT TO WHICH, AMONG OTHER THINGS, THE PRINCIPAL
SHAREHOLDERS HAVE GRANTED TO THE PURCHASER THE OPTION TO ACQUIRE THEIR SHARES AT
$13.00 PER SHARE (SO LONG AS SUCH PURCHASE DOES NOT CAUSE THE AGGREGATE NUMBER
OF SHARES ACQUIRED BY THE PURCHASER PURSUANT TO THE OFFER (ASSUMING THAT THE
MINIMUM CONDITION IS NOT SATISFIED) AND THE SHAREHOLDER AGREEMENTS TO EXCEED
19.9% OF THE THEN ISSUED AND OUTSTANDING SHARES), HAVE AGREED TO TENDER AND SELL
(AND NOT WITHDRAW PRIOR TO THE TERMINATION OR EXPIRATION OF THE OFFER OR THE
TERMINATION OF THE MERGER AGREEMENT) THEIR SHARES PURSUANT TO THE OFFER AND HAVE
GRANTED TO THE PURCHASER AN IRREVOCABLE PROXY TO VOTE THEIR SHARES, AMONG OTHER
THINGS, IN FAVOR OF THE LONG-FORM MERGER, IF APPLICABLE, IN EACH CASE UPON THE
TERMS AND SUBJECT TO THE CONDITIONS THEREOF. THE PRINCIPAL SHAREHOLDERS
BENEFICIALLY OWN AN AGGREGATE OF 1,851,313 SHARES (OR APPROXIMATELY 20.8% OF THE
COMPANY'S SHARES ON A FULLY DILUTED BASIS). SEE "SECTION 11. PURPOSE OF THE
OFFER; PLANS FOR THE COMPANY AFTER THE OFFER AND THE MERGER; THE MERGER
AGREEMENT; AND RELATED AGREEMENTS."
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IMPORTANT

Any shareholder desiring to tender all or any portion of such shareholder's
Shares should either (1) complete and sign the Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal and mail or deliver it together with the certificate(s) evidencing
tendered Shares, and any other required documents, to Harris Trust Company of
New York (the "Depositary") (at the Depositary's address set forth on the back
cover of this Offer to Purchase) or tender such Shares pursuant to the procedure
for book-entry transfer set forth in "Section 3. Procedures for Accepting the
Offer and Tendering Shares" or (2) request such shareholder's broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
such shareholder. Any shareholder whose Shares are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee must contact
such broker, dealer, commercial bank, trust company or other nominee if such
shareholder desires to tender such Shares.

A shareholder who desires to tender Shares and whose certificates evidencing
such Shares are not immediately available, or who cannot comply with the
procedure for book-entry transfer on a timely basis, may tender such Shares by
following the procedure for guaranteed delivery set forth in "Section 3.
Procedures for Accepting the Offer and Tendering Shares."

Questions or requests for assistance may be directed to MacKenzie Partners, Inc.
(the "Information Agent") or to J.P. Morgan Securities Inc. (the "Dealer
Manager") at their respective addresses and telephone numbers set forth on the
back cover of this Offer to Purchase. Additional copies of this Offer to
Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery and
other related materials may also be obtained from the Information Agent or from
brokers, dealers, commercial banks or trust companies.
------------------------------

THE DEALER MANAGER FOR THE OFFER IS:

J.P. MORGAN & CO.
<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<C> <S> <C>
INTRODUCTION.................................................................................................... 3
1. Terms of the Offer; Proration; Expiration Date....................................................... 5
2. Acceptance for Payment and Payment for Shares........................................................ 7
3. Procedures for Accepting the Offer and Tendering Shares.............................................. 8
4. Withdrawal Rights.................................................................................... 10
5. Certain Federal Income Tax Consequences.............................................................. 11
6. Price Range of Shares; Dividends..................................................................... 11
7. Certain Information Concerning the Company........................................................... 12
8. Certain Information Concerning the Purchaser and the Parent.......................................... 15
9. Financing of the Offer and the Merger................................................................ 20
10. Background of the Offer; Contacts with the Company................................................... 20
11. Purpose of the Offer; Plans for the Company After the Offer and the Merger; the Merger Agreement; and
Related Agreements................................................................................... 23
12. Dividends and Distributions.......................................................................... 38
13. Effect of the Offer on the Market for the Shares, Exchange Listing and Exchange Act Registration..... 38
14. Conditions to the Offer.............................................................................. 39
15. Certain Legal Matters and Regulatory Approvals....................................................... 41
16. Fees and Expenses.................................................................................... 45
17. Miscellaneous........................................................................................ 45

Schedule I Directors and Executive Officers of the Parent and the Purchaser.......................... I-1

Schedule II Sections 1930(a) and 1571-80 (Subchapter D of Chapter 15) of the Pennsylvania Business
Corporation Law...................................................................................... II-1
</TABLE>

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<PAGE>
To the Holders of Common Stock of
AquaPenn Spring Water Company, Inc.:

INTRODUCTION

Zoneo Acquisition Corp., a Pennsylvania corporation (the "Purchaser") and an
indirect subsidiary of Groupe Danone, a French SOCIETE ANONYME (the "Parent"),
hereby offers to purchase all outstanding shares of common stock, no par value
(the "Shares"), of AquaPenn Spring Water Company, Inc., a Pennsylvania
corporation (the "Company"), at a price of $13.00 per Share, net to the seller
in cash, without interest thereon, upon the terms and subject to the conditions
set forth in this Offer to Purchase and in the related Letter of Transmittal
(which, as amended from time to time, together constitute the "Offer").

Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the Letter of
Transmittal, stock transfer taxes with respect to the purchase of Shares by the
Purchaser pursuant to the Offer. The Purchaser will pay all charges and expenses
of J.P. Morgan Securities Inc. ("J.P. Morgan"), which is acting as Dealer
Manager for the Offer (in such capacity, the "Dealer Manager"), Harris Trust
Company of New York (the "Depositary") and MacKenzie Partners, Inc. (the
"Information Agent") incurred in connection with the Offer. See "Section 16.
Fees and Expenses."

THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") HAS UNANIMOUSLY
DETERMINED THAT EACH OF THE OFFER AND THE MERGER (AS DEFINED BELOW) IS FAIR TO,
AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF THE COMPANY, AND RECOMMENDS
THAT THE SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE
OFFER.

Each of Lazard Freres & Co. LLC ("Lazard") and Parker/Hunter Incorporated
("Parker"), financial advisors to the Company, has delivered to the Board its
written opinion that the consideration to be received by the shareholders of the
Company pursuant to each of the Offer and the Merger is fair to such
shareholders from a financial point of view. A copy of the opinion of each of
Lazard and Parker is contained in the Company's Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9"), which is being mailed to the
shareholders herewith.

THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST 80% OF
THE ISSUED AND OUTSTANDING SHARES OF THE COMPANY ON A FULLY DILUTED BASIS (THE
"MINIMUM CONDITION") AND (II) THE WAITING PERIOD UNDER THE HART-SCOTT-RODINO
ANTITRUST IMPROVEMENTS ACT OF 1976 APPLICABLE TO THE PURCHASE OF THE SHARES
PURSUANT TO THE OFFER HAVING EXPIRED OR BEEN TERMINATED. SEE "SECTION 14.
CONDITIONS TO THE OFFER," WHICH SETS FORTH IN FULL THE CONDITIONS TO THE OFFER.
IN THE EVENT ALL THE CONDITIONS TO THE OFFER HAVE BEEN SATISFIED OR WAIVED OTHER
THAN THE MINIMUM CONDITION, AND IN THE EVENT SHARES CONSTITUTING AT LEAST 19.9%
OF THE OUTSTANDING SHARES HAVE BEEN VALIDLY TENDERED AND NOT WITHDRAWN, THE
PURCHASER MAY, AT ITS OPTION, PURCHASE ANY NUMBER OF TENDERED SHARES UP TO 19.9%
OF THE THEN OUTSTANDING SHARES ON A PRO RATA BASIS.

3
<PAGE>
AGREED TO TENDER AND SELL (AND NOT WITHDRAW PRIOR TO THE TERMINATION OR
EXPIRATION OF THE OFFER OR THE TERMINATION OF THE MERGER AGREEMENT) THEIR SHARES
PURSUANT TO THE OFFER AND HAVE GRANTED TO THE PURCHASER AN IRREVOCABLE PROXY TO
VOTE THEIR SHARES IN FAVOR OF, AMONG OTHER THINGS, THE LONG-FORM MERGER, IF
APPLICABLE, IN EACH CASE UPON THE TERMS AND SUBJECT TO THE CONDITIONS THEREOF.
THE PRINCIPAL SHAREHOLDERS BENEFICIALLY OWN AN AGGREGATE OF 1,851,313 SHARES (OR
APPROXIMATELY 20.8% OF THE COMPANY'S SHARES ON A FULLY DILUTED BASIS). SEE
"SECTION 11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY AFTER THE MERGER; THE
MERGER AGREEMENT; AND RELATED AGREEMENTS."

The Offer is being made pursuant to an Agreement and Plan of Merger dated
November 2, 1998 (the "Merger Agreement") among the Parent, the Purchaser and
the Company. The Merger Agreement provides among other things, that, subject to
the satisfaction of the conditions set forth in the Merger Agreement and in
accordance with the relevant provisions of the Pennsylvania Business Corporation
Law of 1988, as amended ("Pennsylvania Law"), the Purchaser will be merged with
and into the Company (the "Merger"). The Merger will take place as soon as
practicable after either (i) the purchase of Shares pursuant to the Offer, so
long as, among other conditions, the Minimum Condition is satisfied (any such
Merger being the "Short-Form Merger"), or (ii) among other conditions, the
Merger Agreement is adopted by the affirmative vote of a majority of the votes
cast by all holders of Shares entitled to vote thereon (any such Merger being
the "Long-Form Merger"). Following consummation of the Merger, the Company will
continue as the surviving corporation (the "Surviving Corporation") and will
become an indirect subsidiary of the Parent. At the effective time of the Merger
(the "Effective Time"), each Share issued and outstanding immediately prior to
the Effective Time (other than Shares held in the treasury of the Company, owned
by the Purchaser, the Parent or any direct or indirect subsidiary of the Parent
or of the Company, and other than Shares held by shareholders, if any, who shall
have dissented and demanded the right to receive the fair value of their Shares
under Sections 1930 and 1571 through 1580 of the Pennsylvania Law) will be
canceled and converted automatically into the right to receive $13.00 in cash,
or any greater amount per Share that may be paid pursuant to the Offer, without
interest (the "Merger Consideration"). The Merger Agreement is more fully
described in "Section 11. Purpose of the Offer; Plans for the Company After the
Offer and the Merger; the Merger Agreement; and Related Agreements."

Under Pennsylvania Law, if the Purchaser acquires at least 80% of the then
outstanding Shares, the Purchaser will be able to adopt the Merger Agreement and
the transactions contemplated thereby, including the Merger, without a vote of
the Company's shareholders. In such event, the Parent, the Purchaser and the
Company have agreed to take all necessary and appropriate action to cause the
Merger to become effective as soon as practicable after such acquisition,
without approval of the Company's shareholders, in accordance with Pennsylvania
Law. See "Section 11. Purpose of the Offer; Plans for the Company After the
Offer and the Merger; the Merger Agreement; and Related Agreements." The
consummation of the Short-Form Merger is subject to the satisfaction or waiver
of certain conditions. See "Section 11. Purpose of the Offer; Plans for the
Company After the Offer and the Merger; the Merger Agreement and Related
Agreements."

If, however, the Purchaser does not acquire at least 80% of the then
outstanding Shares pursuant to the Offer, under Pennsylvania Law and the
Company's Articles of Incorporation, the Long-Form Merger must be approved by
the affirmative vote of a majority of the votes cast by all holders of Shares
entitled to vote on a proposal to approve the Long-Form Merger. The Long-Form
Merger would therefore require a longer period of time to effect than the
Short-Form Merger.

The consummation of the Long-Form Merger is subject to the satisfaction or
waiver of certain other conditions. See "Section 11. Purpose of the Offer; Plans
for the Company After the Offer and the Merger; the Merger Agreement; and
Related Agreements."

4
<PAGE>
Concurrently with the execution of the Merger Agreement, Edward J. Lauth,
III, Chief Executive Officer of the Company, Geoffrey F. Feidelberg, Chief
Operating Officer and Chief Financial Officer of the Company, and Matthew Suhey
each entered into a shareholder agreement, dated November 2, 1998, with the
Parent and the Purchaser (each a "Shareholder Agreement"). The Principal
Shareholders beneficially own 1,851,313 Shares, in the aggregate (or
approximately 20.8% of the outstanding Shares calculated on a fully diluted
basis). Pursuant to each Shareholder Agreement, each Principal Shareholder has
granted to the Purchaser the option to purchase the Principal Shareholder's
Shares for $13.00 per Share, so long as, among other conditions, the number of
Shares purchased by the Purchaser pursuant to the option does not cause the
aggregate number of Shares, including, without limitation, any Shares acquired
by the Purchaser pursuant to the Offer (assuming the Minimum Condition is not
satisfied) and the other Shareholder Agreements, to be held by the Purchaser
following such exercise to exceed 19.9% of the then issued and outstanding
Shares. In addition, pursuant to each Shareholder Agreement, the Principal
Shareholder thereunder has agreed to tender and sell (and not withdraw prior to
termination or expiration of the Offer or the termination of the Merger
Agreement) their Shares pursuant to the Offer, and has appointed the Purchaser
as such Shareholder's true and lawful attorney and proxy to vote such Principal
Shareholder's Shares in favor of, among other things, the adoption of the Merger
Agreement and the Long-Form Merger, if applicable.

The options under each Shareholder Agreement terminate upon the earlier of
the Effective Time and the close of business on the 30th day following
termination of the Merger Agreement. The Shareholder Agreements are more fully
described in "Section 11. Purpose of the Offer; Plans for the Company After the
Offer and the Merger; the Merger Agreement; and Related Agreements."

In addition, concurrently with the execution of the Merger Agreement, the
Purchaser, the Parent and the Company have entered into a Registration Rights
Agreement, and an indirect subsidiary of the Parent has entered into employment
agreements with Edward J. Lauth, III and Geoffrey F. Feidelberg and a consulting
agreement with Matthew Suhey, in each case to be effective as of the closing
date of the Merger and as more fully described in "Section 11. Purpose of the
Offer; Plans for the Company After the Offer and the Merger; the Merger
Agreement; and Related Agreements."

The Company has advised the Purchaser that as of November 2, 1998,
approximately 8,448,913 Shares were issued and outstanding, 35,095 Shares were
held in the treasury of the Company, 352,808 Shares were reserved for issuance
pursuant to certain employee stock options or otherwise, warrants for 75,100
Shares were issued and outstanding and 37,681 Shares had been subscribed for but
not purchased pursuant to the Company's 1996 Employee Stock Purchase Plan. As a
result, as of such date, the Minimum Condition would be satisfied if 7,131,602
Shares were tendered in the Offer.

THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.

1. TERMS OF THE OFFER; PRORATION; EXPIRATION DATE. Upon the terms and
subject to the conditions of the Offer (including, without limitation, the
Minimum Condition and, if the Offer is extended or amended, the terms and
conditions of such extension or amendment), the Purchaser will pay, as promptly
as practicable after the expiration of the Offer, for all Shares validly
tendered and not withdrawn prior to the Expiration Date (as hereinafter
defined), as permitted by "Section 4. Withdrawal Rights." The term "Expiration
Date" means 12:00 midnight, New York City time, on Monday, December 7, 1998,
unless and until the Purchaser, subject to the terms and conditions of the
Merger Agreement, shall have extended the period during which the Offer is open,
in which event the term "Expiration Date" shall mean the latest time and date at
which the Offer, as so extended by the Purchaser, shall expire PROVIDED that the
Offer may be extended without the consent of the Company only until January 4,
1998.

If all the conditions to the Offer are satisfied or waived, other than the
Minimum Condition, and the Purchaser exercises its right to purchase any number
of tendered Shares up to 19.9% of the then

5
<PAGE>
outstanding Shares, such Shares will be purchased on a pro rata basis (adjusted
to avoid the purchase of fractional shares). Because of the difficulty of
determining the precise number of Shares properly tendered, the Purchaser does
not expect to be able to announce the final proration factor until approximately
seven New York Stock Exchange ("NYSE") trading days after the Expiration Date.
Preliminary results of proration will be announced by press release as promptly
as practicable after the Expiration Date. Shareholders may obtain such
preliminary information from the Information Agent and may be able to obtain
such information from their brokers. The Purchaser will not pay for any Shares
accepted for payment pursuant to the Offer until the final proration factor is
known.

The Purchaser expressly reserves the right, subject to the terms and
conditions of the Merger Agreement, at any time and from time to time, to extend
for any reason the period of time during which the Offer is open, including the
occurrence of any of the conditions specified in "Section 14. Conditions to the
Offer," by giving oral or written notice of such extension to the Depositary;
PROVIDED that the Offer may be extended without the consent of the Company only
until January 4, 1999, and the Purchaser may not, without the prior written
consent of the Company, extend the Offer if the failure to satisfy any of the
conditions to the Offer was caused by or resulted from the failure of the Parent
or the Purchaser to perform in any material respect any material covenant or
agreement of either of them contained in the Merger Agreement or the material
breach by the Parent or the Purchaser of any material representation or warranty
of either of them contained in the Merger Agreement. During any such extension,
all Shares previously tendered and not withdrawn will remain subject to the
Offer, subject to the rights of a tendering shareholder to withdraw such
shareholder's Shares. See "Section 4. Withdrawal Rights."

Subject to the applicable regulations of the Securities and Exchange
Commission (the "Commission"), the Purchaser also expressly reserves the right,
subject to the terms and conditions of the Merger Agreement (i) to postpone the
acceptance for payment of, or payment for, any Shares tendered, pending receipt
of any regulatory approval specified in "Section 15. Certain Legal Matters and
Regulatory Approvals," (ii) to terminate the Offer upon the occurrence of any of
the conditions specified in "Section 14. Conditions to the Offer," and (iii) to
waive any condition or otherwise amend the Offer in any respect, by giving oral
or written notice of such delay, termination, waiver or amendment to the
Depositary and by making a public announcement thereof. The Merger Agreement
provides that, without the prior written consent of the Company, the Purchaser
will not (i) decrease the Minimum Condition, (ii) decrease the price per Share
payable in the Offer below $13.00 per Share (such amount, or any greater amount
per Share paid pursuant to the Offer, being the "Per Share Amount"), (iii)
change the form of consideration to be paid in the Offer, (iv) reduce the
maximum number of Shares to be purchased in the Offer, or (v) impose conditions
to the Offer in addition to those set forth in "Section 14. Conditions to the
Offer." The Purchaser acknowledges that (i) Rule 14e-1(c) under the Exchange Act
requires the Purchaser to pay the consideration offered or return the Shares
tendered promptly after the termination or withdrawal of the Offer and (ii) the
Purchaser may not delay acceptance for payment of, or payment for (except as
provided in clause (i) of the first sentence of this paragraph), any Shares upon
the occurrence of any of the conditions specified in "Section 14. Conditions to
the Offer" without extending the period of time during which the Offer is open.

Any such extension, delay, termination, waiver or amendment will be followed
as promptly as practicable by public announcement thereof, such announcement in
the case of an extension to be made no later than 9:00 a.m., New York City time,
on the next business day after the previously scheduled Expiration Date. Subject
to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act,
which require that material changes be promptly disseminated to shareholders in
a manner reasonably designed to inform them of such changes) and without
limiting the manner in which the Purchaser may choose to make any public
announcement, the Purchaser shall have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by issuing a press
release to the Dow Jones News Service.

6
<PAGE>
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, the Purchaser will extend the Offer to the extent required by Rules
l4d-4(c) and l4d-6(d) under the Exchange Act.

Subject to the terms of the Merger Agreement, if, prior to the Expiration
Date, the Purchaser should decide to decrease the number of Shares being sought
or to increase or decrease the consideration being offered in the Offer, such
decrease in the number of Shares being sought or such increase or decrease in
the consideration being offered will be applicable to all shareholders whose
Shares are accepted for payment pursuant to the Offer and, if at the time notice
of any such decrease in the number of Shares being sought or such increase or
decrease in the consideration being offered is first published, sent or given to
holders of such Shares, the Offer is scheduled to expire at any time earlier
than the period ending on the tenth business day from and including the date
that such notice is first so published, sent or given, the Offer will be
extended at least until the expiration of such ten business day period. For
purposes of the Offer, a "business day" means any day other than a Saturday,
Sunday or federal holiday and consists of the time period from 12:01 a.m.
through 12:00 midnight, New York City time.

The Company has provided the Purchaser with the Company's shareholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of Transmittal
will be mailed to record holders of Shares whose names appear on the Company's
shareholder list and will be furnished, for subsequent transmittal to beneficial
owners of Shares, to brokers, dealers, commercial banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
shareholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing.

2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and
subject to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any such extension or amendment), the
Purchaser will accept for payment, and will pay for, all Shares validly tendered
prior to the Expiration Date and not properly withdrawn as promptly as
practicable after the later to occur of (i) the Expiration Date, (ii) the
expiration or termination of the applicable waiting period under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and
(iii) the satisfaction or waiver of the conditions to the Offer set forth in
"Section 14. Conditions to the Offer." Subject to applicable rules of the
Commission, the Purchaser expressly reserves the right to delay acceptance for
payment of, or payment for, Shares pending receipt of any regulatory approvals
specified in "Section 15. Certain Legal Matters and Regulatory Approvals" or in
order to comply in whole or in part with any other applicable law.

In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i) the
certificates evidencing such Shares (the "Share Certificates") or timely
confirmation (a "Book-Entry Confirmation"), if such procedure is available, of
any book-entry transfer of such Shares into the Depositary's account at The
Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the
procedures set forth in "Section 3. Procedures for Accepting the Offer and
Tendering Shares," (ii) the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees or,
in the case of a book-entry transfer, an Agent's Message (as defined below) and
(iii) any other documents required under the Letter of Transmittal.

The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation that states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares that are the subject of such book-entry
confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that the Purchaser may enforce such
agreement against such participant.

7
<PAGE>
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance for payment of such Shares pursuant to
the Offer. Upon the terms and subject to the conditions of the Offer, payment
for Shares accepted for payment pursuant to the Offer will be made by deposit of
the purchase price therefor with the Depositary, which will act as agent for
tendering shareholders for the purpose of receiving payments from the Purchaser
and transmitting such payments to tendering shareholders whose Shares have been
accepted for payment. Under no circumstances will interest on the purchase price
for Shares be paid, regardless of any delay in making such payment.

If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Share Certificates are submitted
evidencing more Shares than are tendered, Share Certificates evidencing
unpurchased Shares will be returned, without expense to the tendering
shareholder (or, in the case of Shares tendered by book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility pursuant to the
procedure set forth in "Section 3. Procedures for Accepting the Offer and
Tendering Shares," such Shares will be credited to an account maintained at such
Book-Entry Transfer Facility), as promptly as practicable following the
expiration or termination of the Offer.

If, prior to the Expiration Date, the Purchaser increases the consideration
to be paid per Share pursuant to the Offer, the Depositary will pay such
increased consideration for all such Shares purchased pursuant to the Offer,
whether or not such Shares were tendered prior to such increase in
consideration.

The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to one or more of its affiliates, the right to purchase
all or any portion of the Shares tendered pursuant to the Offer, but any such
transfer or assignment will not relieve the Purchaser of its obligations under
the Offer and will in no way prejudice the rights of tendering shareholders to
receive payment for Shares validly tendered and accepted for payment pursuant to
the Offer.

3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES. In order for a
holder of Shares validly to tender Shares pursuant to the Offer, the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed,
together with any required signature guarantees, or any Agent's Message (in the
case of any book-entry transfer) and any other documents required by the Letter
of Transmittal, must be received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase and either (i) the Share
Certificates evidencing tendered Shares must be received by the Depositary at
such address or such Shares must be tendered pursuant to the procedure for
book-entry transfer described below and a Book-Entry Confirmation must be
received by the Depositary, in each case prior to the Expiration Date, or (ii)
the tendering shareholder must comply with the guaranteed delivery procedures
described below.

THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.

BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect
to the Shares at the Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in the system of the Book-Entry Transfer
Facility may make a book-entry delivery of Shares by causing the Book-Entry
Transfer Facility to transfer such Shares into the Depositary's account at the
Book-Entry Transfer Facility in accordance with the Book-Entry Transfer
Facility's procedures for such transfer. However, although delivery of Shares
may be effected through book-entry transfer at the Book-Entry Transfer Facility,
the Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, together with any required signature guarantees,

8
<PAGE>
or an Agent's Message in lieu of the Letter of Transmittal, and any other
required documents, must, in any case, be received by the Depositary at one of
its addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date, or the tendering shareholder must comply with the guaranteed
delivery procedure described below. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY
TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.

SIGNATURE GUARANTEES. Signatures on all Letters of Transmittal must be
guaranteed by a firm which is a member in good standing in the Security Transfer
Agent Medallion Signature Program, or by any other "eligible guarantor
institution", as such term is defined in Rule 17Ad-15 under the Exchange Act
(each of the foregoing being referred to as an "Eligible Institution"), except
in cases where Shares are tendered (i) by a registered holder of Shares who has
not completed either the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" on the Letter of Transmittal or (ii)
for the account of an Eligible Institution. If a Share Certificate is registered
in the name of a person other than the signer of the Letter of Transmittal, or
if payment is to be made, or a Share Certificate not accepted for payment or not
tendered is to be returned, to a person other than the registered holder(s),
then the Share Certificate must be endorsed or accompanied by appropriate stock
powers, in either case signed exactly as the name(s) of the registered holder(s)
appear(s) on the Share Certificate, with the signature(s) on such Share
Certificate or stock powers guaranteed by an Eligible Institution. See
Instructions 1 and 5 of the Letter of Transmittal.

GUARANTEED DELIVERY. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's Share Certificates evidencing such Shares are
not immediately available or such shareholder cannot deliver the Share
Certificates and all other required documents to the Depositary prior to the
Expiration Date, or such shareholder cannot complete the procedure for delivery
by book-entry transfer on a timely basis, such Shares may nevertheless be
tendered, provided that all the following conditions are satisfied:

(i) such tender is made by or through an Eligible Institution;

(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by the Purchaser, is
received prior to the Expiration Date by the Depositary as provided below;
and

(iii) the Share Certificates (or a Book-Entry Confirmation) evidencing
all tendered Shares, in proper form for transfer, in each case together with
the Letter of Transmittal (or a facsimile thereof), properly completed and
duly executed, with any required signature guarantees (or, in the case of
book-entry transfer, an Agent's Message), and any other documents required
by the Letter of Transmittal, are received by the Depositary within three
NYSE trading days after the date of execution of such Notice of Guaranteed
Delivery.

The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by telegram, telex or facsimile transmission to the Depositary and
must include a guarantee by an Eligible Institution in the form set forth in the
form of Notice of Guaranteed Delivery made available by the Purchaser.

In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of the
Share Certificates evidencing such Shares, or a Book-Entry Confirmation of the
delivery of such Shares, and the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees
(or, in the case of book-entry transfer, an Agent's Message), and any other
documents required by the Letter of Transmittal.

DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by the Purchaser in its sole discretion, which
determination shall be final and binding on all parties. The Purchaser reserves
the absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance for

9
<PAGE>
payment of which may, in the opinion of its counsel, be unlawful. The Purchaser
also reserves the absolute right to waive any condition of the Offer or any
defect or irregularity, in the tender of any Shares of any particular
shareholder, whether or not similar defects or irregularities are waived in the
case of other shareholders. No tender of Shares will be deemed to have been
validly made until all defects and irregularities have been cured or waived.
None of the Purchaser, the Parent, the Dealer Manager, the Depositary, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any liability
for failure to give any such notification. The Purchaser's interpretation of the
terms and conditions of the Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding.

OTHER REQUIREMENTS. By executing the Letter of Transmittal as set forth
above, a tendering shareholder irrevocably appoints designees of the Purchaser
as such shareholder's proxies, each with full power of substitution, in the
manner set forth in the Letter of Transmittal, to the full extent of such
shareholder's rights with respect to the Shares tendered by such shareholder and
accepted for payment by the Purchaser (and with respect to any and all other
Shares or other securities issued or issuable in respect of such Shares on or
after the date of this Offer to Purchase). All such proxies shall be considered
coupled with an interest in the tendered Shares. Such appointment will be
effective when, and only to the extent that, the Purchaser accepts such Shares
for payment. Upon such acceptance for payment, all prior proxies given by such
shareholder with respect to such Shares (and such other Shares and securities)
will be revoked without further action, and no subsequent proxies may be given
nor any subsequent written consent executed by such shareholder (and, if given
or executed, will not be deemed to be effective) with respect thereto. The
designees of the Purchaser will, with respect to the Shares for which the
appointment is effective, be empowered to exercise all voting and other rights
of such shareholder as they in their sole discretion may deem proper at any
annual or special meeting of the Company's shareholders or any adjournment or
postponement thereof, by written consent in lieu of any such meeting or
otherwise. The Purchaser reserves the right to require that, in order for Shares
to be deemed validly tendered, immediately upon the Purchaser's payment for such
Shares, the Purchaser must be able to exercise full voting rights with respect
to such Shares.

The acceptance for payment by the Purchaser of Shares pursuant to any of the
procedures described above will constitute a binding agreement between the
tendering shareholder and the Purchaser upon the terms and subject to the
conditions of the Offer.

TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT TO
CERTAIN SHAREHOLDERS OF THE PURCHASE PRICE OF SHARES PURCHASED PURSUANT TO THE
OFFER, EACH SUCH SHAREHOLDER WHO IS NOT OTHERWISE EXEMPT MUST PROVIDE THE
DEPOSITARY WITH SUCH SHAREHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND
CERTIFY THAT SUCH SHAREHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX
WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9 IN THE LETTER OF TRANSMITTAL.
IF BACKUP WITHHOLDING APPLIES WITH RESPECT TO A SHAREHOLDER, THE DEPOSITARY IS
REQUIRED TO WITHHOLD 31% OF ANY PAYMENTS MADE TO SUCH SHAREHOLDER. SEE
INSTRUCTION 9 OF THE LETTER OF TRANSMITTAL.

4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are
irrevocable except that such Shares may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment by the Purchaser
pursuant to the Offer, may also be withdrawn at any time after January 5, 1999.
If the Purchaser extends the Offer, is delayed in its acceptance for payment of
Shares or is unable to accept Shares for payment pursuant to the Offer for any
reason, then, without prejudice to the Purchaser's rights under the Offer, the
Depositary may, nevertheless, on behalf of the Purchaser, retain tendered
Shares, and such Shares may not be withdrawn except to the extent that tendering
shareholders are entitled to withdrawal rights as described in this "Section 4.
Withdrawal Rights." Any such delay will be by an extension of the Offer to the
extent required by law.

For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover page of this

10
<PAGE>
Offer to Purchase. Any such notice of withdrawal must specify the name of the
person who tendered the Shares to be withdrawn, the number of Shares to be
withdrawn and the name of the registered holder of such Shares, if different
from that of the person who tendered such Shares. If Share Certificates
evidencing Shares to be withdrawn have been delivered or otherwise identified to
the Depositary, then, prior to the physical release of such Share Certificates,
the serial numbers shown on such Share Certificates must be submitted to the
Depositary and the signature(s) on the notice of withdrawal must be guaranteed
by an Eligible Institution, unless such Shares have been tendered for the
account of an Eligible Institution. If Shares have been tendered pursuant to the
procedure for book-entry transfer as set forth in "Section 3. Procedures for
Accepting the Offer and Tendering Shares," any notice of withdrawal must specify
the name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Shares.

All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding. None of the
Purchaser, the Parent, the Dealer Manager, the Depositary, the Information Agent
or any other person will be under any duty to give notification of any defects
or irregularities in any notice of withdrawal or incur any liability for failure
to give any such notification.

Any Shares properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered at any time prior to the Expiration Date by following one of the
procedures described in "Section 3. Procedures for Accepting the Offer and
Tendering Shares."

5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash for Shares
pursuant to the Offer or in the Merger will be a taxable transaction for U.S.
federal income tax purposes and may also be a taxable transaction under
applicable state, local or foreign tax laws. In general, a shareholder will
recognize gain or loss for U.S. federal income tax purposes equal to the
difference between the amount of cash received in exchange for the Shares sold
and such shareholder's adjusted tax basis in such Shares. Assuming the Shares
constitute capital assets in the hands of the U.S. shareholder, such gain or
loss will be capital gain or loss and, in the case of an individual shareholder,
will be taxable at a minimum rate of 20% when the Shares tendered pursuant to
the Offer or converted pursuant to the Merger were held in excess of 12 months.
Gain or loss will be calculated separately for each block of Shares tendered
pursuant to the Offer or converted pursuant to the Merger. The deduction of
capital losses is subject to certain limitations. Prospective investors should
consult their own tax advisors in this regard.

In general, in order to prevent backup federal income tax withholding at a
rate of 31% on the cash consideration to be received in the Offer or pursuant to
the Merger, each shareholder who is not otherwise exempt from such requirements
must provide such shareholder's correct taxpayer identification number (and
certain other information) by completing the Substitute Form W-9 in the Letter
of Transmittal.

THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO CERTAIN TYPES OF
SHAREHOLDERS, SUCH AS FINANCIAL INSTITUTIONS, BROKER-DEALERS, PERSONS WHO
RECEIVED PAYMENT IN RESPECT OF OPTIONS TO ACQUIRE SHARES, SHAREHOLDERS WHO
ACQUIRED SHARES PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE
AS COMPENSATION, INDIVIDUALS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED
STATES AND FOREIGN CORPORATIONS.

THE U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION ONLY AND IS BASED UPON CURRENT LAW. SHAREHOLDERS ARE URGED
TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF
THE OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF THE
ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS
AND CHANGES IN SUCH TAX LAWS.

6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and principally
traded on the NYSE and quoted under the symbol "APN." The following table sets
forth, for the quarters indicated, the high and low sales prices per Share on
the NYSE as reported by the Dow Jones News Service. Since the Company's

11
<PAGE>
initial public offering of Shares pursuant to a prospectus dated January 29,
1998, the Company has not declared or paid dividends on its Common Stock.

<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
Fiscal Year 1998:
Second Quarter.... $13 7/16 $ 8 3/8
Third Quarter..... 12 1/8 8 1/2
Fourth Quarter.... 10 5 1/4
First Quarter
Fiscal Year 1999
(through November 5,
1998)............... 12 3/4 4 1/4
</TABLE>

On October 30, 1998, the last full trading day prior to the announcement of
the execution of the Merger Agreement and of the Purchaser's intention to
commence the Offer, the closing price per Share as reported on the NYSE was
$9.6875. On November 5, 1998, the last full trading day prior to the
commencement of the Offer, the closing price per Share as reported on the NYSE
was $12.625.

SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.

7. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise set
forth herein, the information concerning the Company contained in this Offer to
Purchase, including financial information, has been furnished by the Company or
has been taken from or based upon publicly available documents and records on
file with the Commission and other public sources. Neither the Purchaser nor the
Parent assumes any responsibility for the accuracy or completeness of the
information concerning the Company furnished by the Company or contained in such
documents and records or for any failure by the Company to disclose events which
may have occurred or may affect the significance or accuracy of any such
information but which are unknown to the Purchaser or the Parent.

GENERAL. The Company is a Pennsylvania corporation with its principal
executive offices located at One AquaPenn Drive, P.O. Box 938, Milesburg,
Pennsylvania 16853-0938. The Company bottles and distributes non-sparkling
natural spring water products to regional and national customers under
retailers' and other customers' private labels and under its proprietary brand
labels.

FINANCIAL INFORMATION. Set forth below is certain selected consolidated
financial information relating to the Company and its subsidiaries which has
been excerpted or derived from the audited financial statements contained in the
Company's Registration Statement on Form S-1 declared effective January 29, 1998
(the "Form S-1"), and the unaudited financial statements contained in the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 (the
"Form 10-Q"). The pro forma Statement of Operations data (which gives effect to
the acquisition of Dunsmuir Bottling Company, (d/b/a/ Castle Rock Spring Water)
("Castle Rock") as if it had occurred as of October 1, 1996) and the pro forma
Balance Sheet data (which gives effect to the acquisition of Castle Rock as if
it had occurred as of September 30, 1997) set forth below should be read in
conjunction with the Financial Statements of Castle Rock (Dunsmuir Bottling
Company) and the notes thereto and the Unaudited Pro Forma Combined Financial
Data and the notes thereto included in the Form S-1. The pro forma financial
data set forth below are not necessarily indicative of the financial position or
results of operations that would have been achieved had the acquisition of
Castle Rock been consummated as of such dates, or that may be achieved in the
future. More comprehensive financial information is included in the Form S-1,
the Form 10-Q and other documents filed by the Company with the Commission. The
financial information that follows is qualified in its entirety by reference to
such reports and other documents, including the financial statements and related
notes contained therein. Such reports and other documents may be examined and
copies may be obtained from the offices of the Commission in the manner set
forth below.

12
<PAGE>
AQUAPENN SPRING WATER COMPANY, INC.

SELECTED ANNUAL CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------------------------------
<S> <C> <C> <C> <C>
PRO FORMA
1995 1996 1997 1997
------------- ------------- ------------- -------------
STATEMENT OF OPERATIONS DATA:
Net revenues...................................... $ 22,956,053 $ 28,240,741 $ 38,015,315 $ 45,819,395
Cost of goods sold................................ 18,153,355 21,271,313 28,316,938 34,391,766
------------- ------------- ------------- -------------
Gross profit...................................... 4,802,698 6,969,428 9,698,377 11,427,629
Selling, general and administrative............... 3,290,609 4,313,480 5,126,583 7,276,731
------------- ------------- ------------- -------------
Income from operations............................ 1,512,089 2,655,948 4,571,794 4,150,898
Non-operating income (expense), net............... (738,739) (180,720) 119,713 (117,796)
------------- ------------- ------------- -------------
Income before income taxes and cumulative effect
of change in accounting principle............... 773,350 2,475,228 4,691,507 4,033,102
Income tax expense................................ 135,000 990,000 1,904,752 1,714,323
------------- ------------- ------------- -------------
Income before cumulative effect of change in
accounting principle............................ 638,350 1,485,228 2,786,755 2,318,779
Cumulative effect of change in accounting for
income taxes in accordance with FASB 109........ -- -- -- --
------------- ------------- ------------- -------------
Net income........................................ $ 638,350 $ 1,485,228 $ 2,786,755 $ 2,318,779
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Net income per common share(1).................... $ 0.16 $ 0.26 $ 0.47 $ 0.38
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Weighted average number of common shares
outstanding..................................... 3,884,708 5,620,741 5,951,844 6,110,745

OTHER OPERATIONS DATA:

EBITDA (2)........................................ $ 2,888,231 $ 4,613,823 $ 7,285,186 $ 7,158,553

PRO FORMA
1995 1996 1997 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>

CONSOLIDATED BALANCE SHEET DATA:
Working capital................................... $ 2,068,414 $ 2,304,684 $ 3,096,318 $ 644,984
Total assets...................................... 17,916,037 19,516,355 26,580,185 34,740,069
------------- ------------- ------------- -------------
Notes payable, including current portion.......... 2,830,872 1,808,464 4,817,467 9,536,121
Stockholders' equity.............................. 12,796,169 14,649,421 18,064,347 20,130,064
------------- ------------- ------------- -------------
</TABLE>

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

(1) For information concerning the number of shares used in the computation of
net income per common share, see Note 1 to the Consolidated Financial
Statements contained in Form S-1.

(2) "EBITDA" represents earnings before interest expense, income tax expense,
depreciation and amortization, including amortization of leasehold
improvements, acquisition and development costs, and debt expense and
discount or premium relating to any indebtedness. EBITDA is not presented
herein as an alternative measure of operating results (as determined in
accordance with GAAP) or cash flow (as determined in accordance with GAAP).
See the Consolidated Statements of Cash Flows of the Company for the amounts
of cash flows from each of investing, financing and operating activities for
fiscal 1995, 1996 and 1997.
------------------------

13
<PAGE>
SELECTED INTERIM CONSOLIDATED FINANCIAL INFORMATION

(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
<S> <C> <C> <C> <C>
1998 1997 1998 1997
----------- --------- ----------- ---------

<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
NET REVENUES..................................................... $ 17,356 $ 12,890 $ 36,401 $ 25,311
COST OF GOODS SOLD............................................... 12,614 9,210 28,170 18,947
----------- --------- ----------- ---------
GROSS PROFIT................................................... 4,742 3,680 8,231 6,364
SALES AND PROMOTION.............................................. 2,681 1,027 4,665 2,194
GENERAL AND ADMINISTRATIVE....................................... 735 478 2,011 1,305
----------- --------- ----------- ---------
3,416 1,505 6,676 3,499
----------- --------- ----------- ---------
INCOME FROM OPERATIONS........................................... 1,326 2,175 1,555 2,865
OTHER INCOME, (EXPENSE).......................................... 100 19 349 79
----------- --------- ----------- ---------
INCOME BEFORE INCOME TAX EXPENSE................................. 1,426 2,194 1,904 2,944
INCOME TAX EXPENSE............................................... 579 879 773 1,184
----------- --------- ----------- ---------
NET INCOME....................................................... $ 847 $ 1,315 $ 1,131 $ 1,760
----------- --------- ----------- ---------
----------- --------- ----------- ---------
INCOME PER COMMON SHARE BASIC.................................... $ 0.11 $ 0.30 $ 0.17 $ 0.41
----------- --------- ----------- ---------
----------- --------- ----------- ---------
DILUTED........................................................ $ 0.10 $ 0.22 $ 0.15 $ 0.30
----------- --------- ----------- ---------
----------- --------- ----------- ---------
SHARES USED IN COMPUTING INCOME
PER COMMON SHARE
BASIC.......................................................... 7,822 4,418 6,842 4,320
----------- --------- ----------- ---------
----------- --------- ----------- ---------
DILUTED........................................................ 8,409 5,920 7,445 5,821
----------- --------- ----------- ---------
----------- --------- ----------- ---------
</TABLE>

14
<PAGE>
The Company is subject to the informational filing requirements of the
Exchange Act and, in accordance therewith, is required to file periodic reports,
proxy statements and other information with the Commission relating to its
business, financial condition and other matters. Information as of particular
dates concerning the Company's directors and officers, their remuneration, stock
options granted to them, the principal holders of the Company's securities and
any material interest of such persons in transactions with the Company is
required to be disclosed in proxy statements distributed to the Company's
shareholders and filed with the Commission. Such reports, proxy statements and
other information should be available for inspection at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and also should be available for inspection at the Commission's
regional offices located at Seven World Trade Center, 13th Floor, New York, New
York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Information regarding the public reference facilities may
be obtained from the Commission by telephoning 1-800-SEC-0330. The Commission
also maintains an Internet site on the World Wide Web at http://www.sec.gov that
contains reports, proxy statements and other information. Copies of such
materials may also be obtained by mail, upon payment of the Commission's
customary fees, by writing to its principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549.

8. CERTAIN INFORMATION CONCERNING THE PURCHASER AND THE PARENT. The
Purchaser is a newly incorporated Pennsylvania corporation organized in
connection with the Offer and the Merger and has not carried on any activities
other than in connection with the Offer and the Merger. The principal offices of
the Purchaser are located at 208 Harbor Drive, Stamford, Connecticut 09902. The
Purchaser is an indirect subsidiary of the Parent.

Until immediately prior to the time that the Purchaser will purchase Shares
pursuant to the Offer, it is not anticipated that Purchaser will have any
significant assets or liabilities or engage in activities other than those
incidental to its formation and capitalization and the transactions contemplated
by the Offer and the Merger. Because the Purchaser is newly formed and has
minimal assets and capitalization, no meaningful financial information regarding
the Purchaser is available.

The Parent is a SOCIETE ANONYME organized under the laws of the Republic of
France. Its principal offices are located at 7, rue de Teheran, 75008 Paris,
France. The Parent believes it is one of the world's leading producers of
packaged foods and beverages.

The name, citizenship, business address, principal occupation or employment,
and five-year employment history for each of the directors and executive
officers of the Purchaser and the Parent and certain other information are set
forth on Schedule I hereto.

Set forth below is certain selected consolidated financial information
relating to the Parent and its subsidiaries for the Parent's last three fiscal
years, which has been excerpted or derived from the audited consolidated
financial statements contained in the Parent's Annual Report on Form 20-F for
the fiscal year ended December 31, 1997, and from the unaudited summary
financial statements contained in the Parent's Report on Form 6-K for the month
of September, 1998, in each case filed with or furnished by the Parent to the
Commission. Such financial information was prepared in accordance with generally
accepted accounting principles in France ("French GAAP"), which differ in
certain respects from accounting principles generally accepted in the United
States ("US GAAP"). More comprehensive financial information is included in such
reports and other documents filed by the Parent with the Commission, and the
following financial information is qualified in its entirety by reference to
such reports and other documents, including the financial information and
related notes contained therein. Such reports and other documents may be
inspected and copies may be obtained from the offices of the Commission in the
same manner (other than from the World Wide Web) as set forth with respect to
information about the Company in "Section 7. Certain Information Concerning the
Company."

15
<PAGE>
GROUPE DANONE
SELECTED ANNUAL CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
<S> <C> <C> <C> <C>
1997(1) 1997 1996 1995
--------- ------------ ------------ ------------

<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA:
AMOUNTS IN ACCORDANCE WITH FRENCH GAAP:
Net sales................................................ $ 14,699 FF 88,476 FF 83,940 FF 79,450
Cost of goods sold....................................... (8,137) (48,975) (47,523) (45,494)
Selling expenses......................................... (3,959) (23,831) (21,896) (20,235)
General and administrative expenses...................... (900) (5,419) (5,005) (4,655)
Research and development expenses........................ (126) (758) (667) (625)
Other income and expense (2)............................. (243) (1,464) (1,371) (1,423)
--------- ------------ ------------ ------------
Operating income (1)..................................... 1,334 8,029 7,478 7,018
Non-recurring items (1).................................. 7 40 -- (1,800)
Interest expense (net)................................... (185) (1,116) (1,245) (1,254)
Provision for income taxes............................... (492) (2,962) (2,395) (1,496)
Minority interests....................................... (89) (538) (614) (437)
Equity in net earnings of affiliated companies........... 35 211 158 102
--------- ------------ ------------ ------------
Net income............................................... $ 609 FF 3,664 FF 3,382 FF 2,133
Earnings per Share (basic) (4)........................... $ 8.58 FF 51.62 FF 47.55 FF 30.59
Earnings per Share (diluted) (4)......................... 8.32 50.07 46.33 30.96
Earnings per ADS (diluted) (4)(5)........................ 1.66 10.01 9.27 6.19
Dividends per Share (including the "avoir fiscal")....... 4.61 27.75 25.50 24.00
Dividends per ADS (4)(5) (including the "avoir
fiscal")............................................... 0.92 5.55 5.10 4.80

APPROXIMATE AMOUNTS IN ACCORDANCE WITH
U.S. GAAP: (6)
Net income............................................... $ 558 FF 3,361 FF 3,093 FF 1,874
Earnings per Share (basic)............................... 7.87 47.35 43.49 26.88
Earnings per Share (diluted) (4)......................... 7.68 46.24 42.68 26.88
Earnings per ADS (diluted) (4)(5)........................ 1.54 9.25 8.53 5.38
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
<S> <C> <C> <C> <C>
1997(1) 1997 1996 1995
--------- ------------ ------------ ------------

<CAPTION>
(IN MILLIONS)
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA
AMOUNTS IN ACCORDANCE WITH FRENCH GAAP:
Marketable securities, cash and cash equivalents......... $ 1,052 FF 6,344 FF 5,681 FF 7,025
Current assets........................................... 4,903 29,509 32,056 31,855
Total assets............................................. 16,379 98,588 100,871 93,168
Net debt (7)............................................. 3,000 18,054 21,575 16,995
Stockholders' equity..................................... 7,097 42,717 40,383 36,254

APPROXIMATE AMOUNTS IN ACCORDANCE WITH
U.S. GAAP: (6)
Stockholders' equity..................................... 6,685 40,239 37,643 33,109
Total assets............................................. 16,218 97,616 99,409 90,768
</TABLE>

16
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
<S> <C> <C> <C> <C>
1997(1) 1997 1996 1995
--------- ----------- ------------ -----------

<CAPTION>
(IN MILLIONS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C>
CASH FLOW STATEMENT DATA:
AMOUNTS IN ACCORDANCE WITH FRENCH GAAP:
Cash flow from operating activities........................ $ 1,454 FF 8,754 FF 7,947 FF 7,146
Cash flow from investing activities:
Capital expenditures..................................... (868) (5,226) (4,484) (4,103)
Investments in companies (net of divestitures)........... 596 3,585 (6,690) (3,599)
--------- ----------- ------------ -----------
(273) (1,641) (11,174) (7,702)
Cash flow from financing activities........................ (1,100) (6,619) 3,306 1,067

OTHER DATA
EBITDA(8).................................................. 2,136 12,855 11,922 11,283
Depreciation and amortization.............................. 802 4,826 4,444 4,265
Cost of goods sold as a percentage of net sales............ -- 55.4% 56.6% 57.3%
Operating income as a percentage of net sales.............. -- 9.1% 8.9% 8.8%
</TABLE>

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

(1) Translated solely for convenience into dollars at the Noon Buying Rate on
December 31, 1997, of FF 6.0190 per $1.00.

(2) Other income and expense includes the amortization of goodwill which
amounted to FF 616 million, FF 513 million and FF 466 million, in the years
ended December 31, 1997, 1996 and 1995, respectively.

(3) Beginning in 1994, gains and losses on disposals of companies, restructuring
costs and certain other exceptional items have been shown separately as
non-recurring items. See Note 1.Q to the Consolidated Financial Statements
in the Form 20-F. In 1995, the FF 1,800 million of non-recurring items
related entirely to restructuring costs. The effect of this charge on net
income, after taxes and minority interests, was FF 997 million. In 1997, the
FF 40 million non-recurring profit had a negative impact of FF 32 million on
net income after taxes and minority interests. See Note 2 of the
accompanying Consolidated Financial Statements in the Form 20-F.

(4) Basic Earnings per Share is based on an average number of shares of
70,979,870, 71,120,542 and 69,717,356 as of December 31, 1997, 1996 and
1995, respectively. Diluted Earnings per Share and ADS are based on the
average number of Shares outstanding during the year assuming full
conversion of all common stock equivalents and convertible bonds and taking
into account the related reduction in interest charges, net of tax. Such
average number of shares was 79,092,534, 79,076,442 and 78,239,580 for the
years ending December 31, 1997, 1996 and 1995, respectively.

(5) Data given per ADS reflects the ratio of one fifth of one share per ADS.

(6) For a description of the reconciliation to U.S. GAAP, see Note 2 to the
Consolidated Financial Statements in the Form 20-F and "Differences between
French GAAP and U.S. GAAP" below.

(7) Net debt is defined as long-term debt (including convertible bonds) plus
short term debt and bank overdrafts less marketable securities, cash and
cash equivalents.

(8) Earnings before Interest, Tax, Depreciation and Amortization where earnings
are operating income. The Group has included EBITDA because it is commonly
requested and used by investors and analysts to provide a consistent measure
to analyze and compare companies on the basis of operating performance.
EBITDA should not be considered as an alternative to net income (determined
in accordance with generally accepted accounting principles) as an
indication of the Group's financial performance or to cash flow from
operating activities (determined in accordance with generally

17
<PAGE>
accepted accounting principles) as a measure of the Group's liquidity set
forth below is a table reconciling EBITDA to net income.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
<S> <C> <C> <C> <C>
1997(A) 1997 1996 1995
--------- ----------- ----------- -----------

<CAPTION>
(IN MILLIONS)
<S> <C> <C> <C> <C>
Net income................................. $ 609 FF 3,664 FF 3,382 FF 2,133
Equity in net earnings of affiliated
companies................................ (35) (211) (158) (102)
Minority interests......................... 89 538 614 437
Provision for income taxes................. 492 2,962 2,395 1,496
Interest expense (net)..................... 185 1,116 1,245 1,254
Non-recurring items........................ (7) (40) -- 1,800
Depreciation and Amortization.............. 802 4,826 4,444 4,265
--------- ----------- ----------- -----------
EBITDA..................................... $ 2,136 FF 12,855 FF 11,922 FF 11,283
</TABLE>

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

(a) Translated solely for convenience into dollars at the Noon
Buying Rate on December 31, 1997 of FF 6.0190 per $1.00.

SELECTED INTERIM UNAUDITED CONSOLIDATED FINANCIAL INFORMATION

SEPTEMBER 15, 1998
(FF MILLIONS)

<TABLE>
<CAPTION>
FIRST HALF FIRST HALF
1997 1998 CHANGE/ACTUAL LIKE FOR LIKE
------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
SALES...................................... 43,808 43,157 -1.5% +6.6%
OPERATING INCOME........................... 3,839 4,206 +9.6% +16.0%
OPERATING MARGIN........................... 8.8% 9.7% +90bp
EXCEPTIONALS............................... -- (100)
NET INTEREST EXPENSES...................... (502) (503)
INCOME BEFORE TAXES........................ 3,337 3,603
TAXES...................................... (1,298) (1,446)
NET INCOME................................. 1,857 1,968
</TABLE>

DIFFERENCES BETWEEN FRENCH GAAP AND US GAAP

The financial statements have been prepared in accordance with French GAAP
which differs in certain significant respects from US GAAP.

These differences have been reflected in the financial statements and mainly
relate to the following items.

BRAND NAMES AMORTIZATION

Under French GAAP, the brand names which have been separately identified on
the acquisition of subsidiaries are not amortized. Under US GAAP, intangible
assets such as brand names must be amortized over the period estimated to be
benefitted, which may not exceed forty years. For the purpose of reconciliation
to US GAAP, brand names are amortized over a forty-year period.

GOODWILL RELATING TO THE ACQUISITION OF FOREIGN SUBSIDIARIES

Goodwill relating to the acquisition of foreign subsidiaries are translated
in the Parent's or any of its Subsidiaries' accounts using an historical
exchange rate when US GAAP requires the use of the closing

18
<PAGE>
exchange rate. Under US GAAP, the difference is part of the "Translation
adjustments" component of stockholders' equity. Amortization of goodwill is
computed on the basis of gross values translated at the historical exchange
rate. Under US GAAP, the annual amortization charge is translated at the average
exchange rate during the year.

STOCK OPTIONS

The Parent generally grants to its or any of its subsidiaries' eligible
employees a discount from the market price for shares subscribed for pursuant to
share subscription or share purchase plans. Accounting for this discount is not
addressed by French GAAP and these transactions have no effect on the statement
of income. Under US GAAP, the discount, measured at the date of grant, is
considered as compensation to employees. The effect of the decrease to retained
earnings and increase to stockholders' equity for the amount of compensation
expense is reflected as a US GAAP adjustment.

AVAILABLE-FOR-SALE SECURITIES

Under French GAAP, the unrealized gains and losses on available-for-sale
securities are neither recorded by companies fully integrated, nor by equity
investors. Under US GAAP, available-for-sale securities are carried at market
value, with the unrealized result recorded directly in equity.

DEFERRED INCOME TAXES ON BRAND NAMES

Deferred income taxes on brand names are not recorded, while the goodwill
arising on the acquisition of the related subsidiaries is not increased by the
amount of such deferred tax liability. Under US GAAP, a deferred tax liability
computed at the local rate applicable to long-term capital gains is recorded,
and goodwill is increased by the same amount. The deferred tax liability is
reversed to profit as the related intangible asset is amortized, whereas the
amortization charge of the additional goodwill matches this profit.

Had US GAAP been applied, deferred income taxes (long-term liabilities) and
goodwill would be increased by FF 2,782 million as of December 31, 1997 (FF
2,839 million as of December 31, 1996).

Goodwill amortization, offset by an equal amount of deferred tax benefit of
FF 84 million, FF 99 million and FF 94 million for 1997, 1996 and 1995,
respectively, exists under US GAAP.

PURCHASE ACCOUNTING--FAIR VALUE

Purchase accounting, applied to a less than wholly owned subsidiary, results
in all of the assets and liabilities of the purchased subsidiary being recorded
at fair values when the parent purchases its majority interest, and the minority
interests in the subsidiary net assets are adjusted to reflect its share of the
revalued net assets (excluding goodwill).

Under US GAAP, no write-up in fair value of the net assets of the subsidiary
related to the minority interest should occur. Accordingly, the write-up of fair
values in brand names related to the minority interest should be reversed, thus
decreasing brand names and minority interests by FF 1,490 million as of December
31, 1997 (FF 1,864 million as of December 31, 1996). The remainder of the
write-ups to fair value in other net assets related to the minority interests
are not considered material.

Except as described in this Offer to Purchase, (i) none of the Purchaser,
the Parent or, to the best knowledge of the Purchaser and the Parent, any of the
persons listed in Schedule I to this Offer to Purchase or any associate or
majority-owned subsidiary of the Purchaser, the Parent or any of the persons so
listed beneficially owns or has any right to acquire, directly or indirectly,
any Shares and (ii) none of the Purchaser, the Parent or, to the best knowledge
of the Purchaser and the Parent, any of the persons or entities referred to
above or any director, executive officer or subsidiary of any of the foregoing
has effected any transaction in the Shares during the past 60 days.

19
<PAGE>
Except as provided in the Merger Agreement and as otherwise described in
this Offer to Purchase, none of the Purchaser, the Parent or, to the best
knowledge of the Purchaser and the Parent, any of the persons listed in Schedule
I to this Offer to Purchase, has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Company, including, but not limited to, any contract, arrangement, understanding
or relationship concerning the transfer or voting of such securities, joint
ventures, loan or option arrangements, puts or calls, guaranties of loans,
guaranties against loss or the giving or withholding of proxies. Except as set
forth in this Offer to Purchase, since October 1, 1995, neither the Purchaser
nor Parent nor, to the best knowledge of the Purchaser and the Parent, any of
the persons listed on Schedule I hereto, has had any business relationship or
transaction with the Company or any of its executive officers, directors or
affiliates that is required to be reported under the rules and regulations of
the Commission applicable to the Offer. Except as set forth in this Offer to
Purchase, since October 1, 1995, there have been no contacts, negotiations or
transactions between any of the Purchaser, the Parent, or any of their
respective subsidiaries or, to the best knowledge of the Purchaser and the
Parent, any of the persons listed in Schedule I to this Offer to Purchase, on
the one hand, and the Company or its affiliates, on the other hand, concerning a
merger, consolidation or acquisition, tender offer or other acquisition of
securities, an election of directors or a sale or other transfer of a material
amount of assets.

9. FINANCING OF THE OFFER AND THE MERGER. The total amount of funds
required by the Purchaser to consummate the Offer and the Merger and to pay
related fees and expenses is estimated to be approximately $120,000,000. The
Purchaser will obtain all of such funds from the Parent. The Parent will provide
such funds from available cash.

10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY.

BACKGROUND OF THE OFFER. Ever since its launch of a spring water product on
the US market in 1996 through its indirect US subsidiaries, Great Brands of
Europe, Inc. ("Great Brands") and Dannon International Brands, Inc. ("DIB"),
under the brand name "Dannon", the Parent has observed rapid, steady growth of
its sales in this business. In response to this growth, the Parent began seeking
a means of expanding its production capacity for the US and other markets in the
Spring of 1998. Over the course of the Spring and Summer of 1998, several
strategic options were considered by the management of Great Brands and DIB,
including greenfield expansion, joint-ventures, co-packing agreements and
acquisitions. During that period, the concept of some form of transaction with
the Company emerged as a possible alternative. Great Brands and DIB had
previously entered into a short-term co-packing arrangement with the Company
starting in 1997, pursuant to which Great Brands and DIB paid the Company
approximately $2,266,000 for co-packing services. At that point, Great Brands'
and DIB's management considered a range of possible transactions, including
another co-packing agreement with the Company, an acquisition or joint venture
with respect to one of the Company's production facilities, a minority
shareholding position or an outright acquisition of the Company. In late August
1998, management discussions among the Parent, Great Brands and DIB took place,
all of which concluded that these strategic alternatives should be pursued
further.

On August 31, 1998, a representative of the Parent contacted a
representative of Lazard to discuss the Parent's assessment of the industrial
and strategic opportunities that might be represented by a possible acquisition
of or industrial joint venture with the Company. In the course of that
discussion, the Parent's representative inquired as to the Company's probable
level of interest in a strategic transaction and was informed that, although the
Lazard representative had no first-hand basis for speculating about the
Company's likely reaction to an approach by the Parent, there was no reason to
believe that the Company would not be interested in hearing the Parent's views
on possible strategic transactions. Such representatives of the Parent and
Lazard also had a general discussion about the Company, including its share
price since its initial public offering on January 29, 1998. In early September,
the Company engaged Lazard as its financial advisor, and subsequently entered
into an engagement letter with Lazard on September 11, 1998.

20
<PAGE>
On September 1, 1998, a representative of the Parent met with
representatives of Lazard at Lazard's offices in New York City. At that meeting,
the parties went over the same issues as were discussed in the telephone
conversation of August 31, 1998. During that meeting, the Parent's
representative also asked questions related to the process that would be
involved in a possible acquisition of or joint venture with the Company,
including the level of due diligence that could be performed with respect to a
public company and whether special arrangements could be entered into with
significant shareholders of the Company. After that discussion, management of
Great Brands and the Parent determined that Mr. Mark Rodriguez, CEO of Great
Brands and DIB, should approach the Company about the possibility of pursuing a
strategic transaction.

On September 6, 1998, Mr. Rodriguez met with Mr. Edward J. Lauth, III,
President and CEO of the Company. During this preliminary discussion, Mr.
Rodriguez indicated that a business combination between the Company and the
Parent could make strong business sense. Mr. Lauth indicated that he thought an
acquisition of the Company by the Parent should be considered by the Company's
management and Board. Mr. Rodriguez and Mr. Lauth had very preliminary
discussions on price during which Mr. Lauth stated that no transaction could be
agreed upon if the value of the transaction were to be based on the Company's
then current share price which, in Mr. Lauth's view, did not represent the real
long-term value of the Company. The parties concluded that negotiations focused
on a possible transaction between the Company and the Parent should proceed, and
that the Company would not engage in similar discussions with other parties for
a period of approximately 30 days. Mr. Rodriguez reported the substance of this
discussion to management of the Parent on September 7, 1998.

On September 8, 1998, a representative of the Parent had a telephone
conversation with a Lazard representative during which the two parties continued
their discussion of a possible transaction with the Company. There was a further
telephone conversation between Lazard and the Parent on September 10, 1998. In
that conversation, Lazard stressed that the Company was not, in fact, "for sale"
and that the Company was only interested in pursuing a strategic combination
with the Parent as a result of the significant synergies represented by such a
transaction. Lazard suggested that the Parent would have to act quickly if it
was interested in a business combination with the Company. The Parent's
representative indicated that the Parent was willing to act quickly and was
prepared to proceed with a due diligence review of the Company. Shortly
thereafter, representatives of Lazard, the Company and the Parent began
negotiating the terms of the confidentiality and standstill agreement which was
executed on September 11, 1998. The Parent and the Company agreed that the
Parent would complete its due diligence investigation by October 15, 1998, with
a view to submitting a proposal for the acquisition of the Company on such date.

21
<PAGE>
On September 15, 1998, a meeting was held at Lazard's New York office
between Lazard and representatives of the Parent and the Company. The purpose of
the meeting was to hear Mr. Lauth's view of the business and prospects of the
Company, to agree on the next steps to be taken by the parties, to discuss the
due diligence process and to arrange meetings with the Company's Chief Financial
Officer and Chief Operating Officer to gain a more detailed understanding of the
Company's business.

On September 18, 1998, the Parent retained J.P. Morgan as its financial
advisor with respect to the possible acquisition by the Parent of the Company.
Over the next few weeks, a number of meetings, on-site visits to the Company's
facilities, calls and other activities took place between the Parent, Great
Brands, DIB, the Company, Lazard, J.P. Morgan, counsel to the Company (Ballard
Spahr Andrews & Ingersoll, LLP) and counsel to the Parent (Shearman & Sterling)
in furtherance of the Parent's due diligence efforts.

On October 8, 1998, a meeting between management of the Parent and Great
Brands was held in New York City to review progress on the transaction made to
date. The preliminary conclusion reached at this meeting was that, while no
information had emerged from the due diligence process that might prevent an
acquisition from being pursued, it appeared that some capital expenditures might
be required if the Parent were to acquire the Company. Management contacted
representatives of Lazard on October 9, 1998 to discuss the Parent's views
regarding the capital expenditures that it believed would be required. In
addition, the parties determined that the October 15, 1998 meeting, which had
been scheduled for discussion of the Parent's formal acquisition proposal, would
instead be used to discuss the parties' business models and valuation
assumptions.

On October 15, 1998, representatives of the Parent and the Company and their
respective financial advisors met in Lazard's New York offices to discuss
various matters, including the valuation of the Company, issues surrounding
general competition trends in the US market for bottled spring water and the
Company's medium term business plans developed in response to these competition
issues. At the end of the meeting, the parties agreed that the Parent would
communicate its final position to the Company on October 22, 1998.

Between October 15, 1998 and October 22, 1998, several telephone
conversations took place between all of the parties involved, in the course of
which various issues were discussed. Management of the Parent, Great Brands and
DIB continued to hold internal meetings to discuss the Parent's potential
acquisition of the Company, and concluded, among other things, that the capital
expenditures that would be required if the Parent acquired the Company would be
lower than originally estimated, and, in any event, would be substantially lower
than the capital expenditures that the Parent would be required to make if it
did not acquire the Company. On October 22, 1998, the Parent indicated to Lazard
that it might be prepared to pay $13 per share if the Company would be willing
to agree to certain conditions, including, among other things, negotiation of an
acceptable acquisition agreement, negotiation of a facility investment agreement
between the Company and the Parent, the execution of a registration rights
agreement between the Parent and the Company, the execution of shareholder
agreements with the Company's principal shareholders, and the negotiation of
satisfactory employment or consulting agreements by employees of or consultants
to the Company following the acquisition of the Company by the Parent. In
addition, the Parent indicated that it needed to complete its financial,
operational and legal due diligence investigation of the Company. On October 24,
1998, Lazard contacted the Parent and reported that, after a number of informal
conversations among Company management and a meeting with the Board, the Company
would be willing to attempt to negotiate a transaction based on a share price of
$13 and satisfactory resolution of the other conditions outlined above.

On October 25, 1998, the Parent's legal advisors delivered to the Company
and its advisors an initial draft of the Merger Agreement. On Monday, October
26, 1998, representatives of the Parent, the Company and their respective
advisors met in the offices of Lazard to discuss a number of topics, including
the terms of the draft Merger Agreement and the status of the Parent's due
diligence. During the course of the week of October 26, 1998, the parties
negotiated the terms of the Merger Agreement, agreed on the

22
<PAGE>
basic terms of the proposed Facility Investment Agreement and negotiated the
terms of the Registration Rights Agreement. In addition, the Parent and Messrs.
Lauth, Feidelberg and Suhey negotiated the terms of employment or consulting
contracts, respectively, and agreed on the terms of the Shareholder Agreements.

Following approval by the Board on November 1, 1998 and approval of the
Board of Directors of the Purchaser and final approval by Parent management, the
Merger Agreement was executed and delivered on November 2, 1998. The Employment
Agreements, the Suhey Agreement, the Registration Rights Agreement and the
Shareholder Agreements referred to above were also executed and delivered at
such time. The transaction was publicly announced by both the Company and the
Parent through press releases issued before the opening of the financial markets
in the United States on November 2, 1998.

11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY AFTER THE OFFER AND THE
MERGER; THE MERGER AGREEMENT; AND RELATED AGREEMENTS.

PURPOSE OF THE OFFER. The purpose of the Offer and the Merger is for the
Parent to acquire control of, and the entire equity interest in, the Company.
The purpose of the Merger is for Parent to acquire all Shares not purchased
pursuant to the Offer. Upon consummation of the Merger, the Company will become
an indirect subsidiary of the Parent. The Offer is being made pursuant to the
Merger Agreement.

Under Pennsylvania Law, if the Purchaser acquires, pursuant to the Offer or
otherwise, at least 80% of the outstanding Shares, the Purchaser will be able to
approve the Merger without a vote of the Company's shareholders. In such event,
the Parent, the Purchaser and the Company have agreed in the Merger Agreement to
take all necessary and appropriate action to cause the Merger to become
effective as soon as reasonably practicable after such acquisition, without
approval of the Company's shareholders. If, however, the Purchaser does not
acquire at least 80% of the then outstanding Shares pursuant to the Offer, under
Pennsylvania Law and the Company's Articles of Incorporation, the Long-Form
Merger must be approved by the affirmative vote of holders of a majority of the
votes cast by all holders of Shares entitled to vote on a proposal to approve
the Long-Form Merger. The Long-Form Merger would therefore require a longer
period of time to effect than the Short-Form Merger.

If on the initial scheduled Expiration Date of the Offer, the Minimum
Condition has not been satisfied, at the Parent's request, the Company has
agreed, in the Merger Agreement, to convene a meeting of its shareholders as
soon as practicable after such request for the purpose of considering and taking
action on the Merger Agreement and the transactions contemplated thereby, in
accordance with Pennsylvania Law.

PLANS FOR THE COMPANY. It is expected that, initially following the Merger,
the business and operations of the Company will, except as set forth in this
Offer to Purchase, be continued by the Company substantially as they are
currently being conducted.

Except as indicated in this Offer to Purchase, the Parent does not have any
present plans or proposals which relate to or would result in an extraordinary
corporate transaction, such as a merger, reorganization or liquidation,
involving the Company or any Subsidiary, a sale or transfer of a material amount
of assets of the Company or any Subsidiary or any material change in the
Company's capitalization or dividend policy or any other material changes in the
Company's corporate structure or business, or the composition of the Board or
the Company's management. However, the Parent has been and will continue to
evaluate the business and operations of the Company during the pendency of the
Offer and after the consummation of the Offer and the Merger, and will take such
actions as it deems appropriate under the circumstances then existing. The
Parent intends to seek additional information about the Company during this
period. Thereafter, the Parent intends to review such information as part of a
comprehensive review of the Company's business, operations, capitalization and
management with a view to optimizing exploitation of the Company's potential in
conjunction with the Parent's businesses. It is expected that the business and

23
<PAGE>
operations of the Company would form an important part of the Parent's future
business plans in the United States.

DISSENTERS RIGHTS. NO DISSENTERS RIGHTS ARE AVAILABLE IN CONNECTION WITH
THE OFFER. However, if the Merger is consummated, shareholders who do not sell
their Shares pursuant to the Offer and who fully comply with the statutory
dissenters procedures set forth in Pennsylvania Law, the relevant portions of
which are attached to this Offer to Purchase as Schedule II, will be entitled to
receive in connection with the Merger, instead of the Merger Consideration, cash
for the fair value of their Shares (which may be more than, equal to, or less
than the Merger Consideration) as determined pursuant to the procedures
prescribed by Pennsylvania Law. Merely voting against the Merger Agreement (if a
vote of the Company's shareholders is required to effect the Merger under
Pennsylvania Law) will not perfect a shareholder's dissenters rights.
Shareholders are urged to review carefully the dissenting shareholders' rights
provisions of Pennsylvania Law, a description of which is provided below and the
full text of which is attached to this Offer to Purchase as Schedule II and
incorporated herein by reference. SHAREHOLDERS WHO FAIL TO COMPLY STRICTLY WITH
THE APPLICABLE PROCEDURES WILL FORFEIT THEIR DISSENTERS RIGHTS IN CONNECTION
WITH THE MERGER. See Schedule II to this Offer to Purchase.

Sections 1571-80 of Pennsylvania Law ("Subchapter D") and 1930(a) of
Pennsylvania Law, copies of which are attached to this Offer to Purchase as
Schedule II, entitle any holder of record of Shares who objects to the Merger,
in lieu of receiving the consideration for such Shares provided under the Merger
Agreement, to demand in writing that such shareholder be paid in cash the fair
value of such shareholder's Shares. Section 1572 of Pennsylvania Law defines
"fair value" as: "The fair value of shares immediately before the effectuation
of the corporate action to which the dissenter objects, taking into account all
relevant factors, but excluding any appreciation or depreciation in anticipation
of the corporate action."

Any shareholder contemplating making demand for fair value is urged to
review carefully the provisions of Subchapter D, particularly the procedural
steps required to perfect such shareholder's dissenters rights thereunder.
DISSENTERS RIGHTS WILL BE LOST IF THE PROCEDURAL REQUIREMENTS OF SUBCHAPTER D
ARE NOT FULLY AND PRECISELY SATISFIED. The following summary does not purport to
be a complete statement of the provisions of Subchapter D of Pennsylvania Law
and is qualified in its entirety by reference to Schedule II to this Offer to
Purchase and Pennsylvania Law.

FILING NOTICE OF INTENTION TO DEMAND FAIR VALUE

Before the vote of the shareholders is taken on the Long-Form Merger, the
dissenting shareholder must deliver to the Company a written notice of intention
to demand that he be paid the fair value of such shareholder's Shares if the
Long-Form Merger is effected. Such written notice must be sent to the Secretary
of the Company at P.O. Box 938, One AquaPenn Drive, Milesburg, Pennsylvania
16853-0938. Neither the tendering of Shares in the Offer, nor a vote against the
Merger, is sufficient to satisfy the requirement of delivering a written notice
to the Company. In addition, the shareholder must not effect any change in the
beneficial ownership of such shareholder's Shares from the date of filing the
notice with the Company through the consummation of the Long-Form Merger, and
Shares for which payment of fair value is sought must not be voted in favor of
the Long-Form Merger, and the shareholder must vote against, or abstain from
voting in favor of, the Long-Form Merger. Failure of a dissenting shareholder to
comply with any of the foregoing will result in the forfeiture of any right to
payment of fair value for such shareholder's Shares.

RECORD OWNERS AND BENEFICIAL OWNERS

A record holder of Shares held in whole or in part for the benefit of
another person may assert dissenters rights as to fewer than all of the Shares
registered in such shareholder's name only if such shareholder dissents with
respect to all the Shares beneficially owned by any one person and discloses the
name and address of the person or persons on whose behalf such shareholder
dissents. A beneficial owner

24
<PAGE>
of Shares who is not the record holder may assert dissenters rights with respect
to Shares held on such shareholder's behalf if such shareholder submits to the
Company the written consent of the record holder not later than the time of
assertion of dissenters rights. A beneficial owner may not dissent with respect
to fewer than all of the Shares owned by such shareholder whether or not such
Shares are registered in such shareholder's name.

NOTICE TO DEMAND PAYMENT

If the Long-Form Merger is approved at a meeting of the Company's
shareholders, the Company shall mail to all dissenters who gave due notice of
their intention to demand payment of fair value and who refrained from voting in
favor of the Long-Form Merger a notice stating where and when a demand for
payment must be sent and certificates for Shares deposited in order to obtain
payment. The notice shall be accompanied by a copy of Subchapter D of
Pennsylvania Law and a form for demanding payment. The time set for the receipt
of demands and the deposit of certificates shall not be less than 30 days from
the mailing of the notice. Failure by a shareholder to demand payment or deposit
certificates pursuant to such notice will cause such shareholder to lose all
right to the payment of the fair value of such shareholder's Shares. If the
Long-Form Merger has not been effected within 60 days after the date set for
demanding payment and depositing certificates, the Company shall return any
certificates that have been deposited. The Company, however, may at any later
time send a new notice regarding demand for payment and deposit of certificates
with like effect.

If the Merger is effected as a Short-Form Merger, without a vote of the
Company's shareholders, the Company shall mail to all shareholders who are
entitled to dissent and demand payment of the fair value of their Shares, a
notice of the adoption of the plan of merger effecting the Short-Form Merger.
The notice shall also state where and when a demand for payment must be sent and
certificates for Shares deposited in order to obtain payment and must be
accompanied by a copy of Subchapter D of Pennsylvania Law and a form for
demanding payment. The time set for the receipt of demands and the deposit of
certificates shall not be less than 30 days from the mailing of the notice.
Failure by a shareholder to demand payment or deposit certificates pursuant to
such notice will cause such shareholder to lose all right to the payment of the
fair value of such shareholder's Shares. If the Merger has not been effected
within 60 days after the date set for demanding payment and depositing
certificates, the Company shall return any certificates that have been
deposited. The Company, however, may at any later time send a new notice
regarding demand for payment and deposit of certificates with like effect.

PAYMENT OF FAIR VALUE OF SHARES

Promptly after the consummation of the Merger or upon timely receipt of
demand for payment if the Merger has already been effected, the Company shall
either remit to dissenters who have made timely demand and deposited their
certificates the amount the Company estimates to be the fair value of their
Shares or give written notice that no remittance will be made under Section 1577
of Pennsylvania Law. Such remittance or notice will be accompanied by (i) the
closing balance sheet and statement of income of the Company for a fiscal year
ending not more than 16 months prior to the date of remittance or notice
together with the latest available interim financial statements, (ii) a
statement of the Company's estimate of the fair value of the Shares, and (iii) a
notice of the right of the dissenting shareholder to demand payment or
supplemental payment, as the case may be, accompanied by a copy of Subchapter D
of Pennsylvania Law. If the Company does not remit the amount of its estimate of
the fair value of the Shares, it shall return all certificates that have been
deposited and may make a notation thereon that a demand for payment has been
made.

If Shares with respect to which notation has been so made shall be
transferred, each new certificate issued therefor shall bear a similar notation
together with the name of the original dissenting holder or owner of such
Shares. A transferee of such Shares shall not acquire by such transfer any
rights in the

25
<PAGE>
Company other than those that the original dissenter had after making demand for
payment of fair value for such Shares.

ESTIMATE BY DISSENTER OF FAIR VALUE OF SHARES

If a dissenting shareholder believes that the amount estimated or paid by
the Company for such dissenting shareholder's Shares is less than their fair
value, the shareholder may send to the Company such shareholder's own estimate
of the fair value which shall be deemed a demand for payment of the amount or
the deficiency. If the dissenter does not file such dissenter's own estimate of
fair value within 30 days after the mailing by the Company of its remittance or
estimate of fair value, the dissenter shall be entitled to no more than the
amount remitted to such shareholder or estimated by the Company.

VALUATION PROCEEDINGS

Within 60 days after the latest of (i) the consummation of the Merger, (ii)
timely receipt of any demands for payment and (iii) timely receipt of any
shareholder estimates of fair value, if any demands for payment remain
unsettled, the Company may file in court an application for relief requesting
that the fair value of the Shares be determined by the court. Each dissenter
whose demands have not been settled shall be made a party to the proceeding and
shall be entitled to recover the amount by which the fair value of such
Shareholder's Shares is found to exceed the amount, if any, previously remitted,
plus interest. Such dissenter shall also be entitled to interest on such amount
from consummation of the Merger until the date of payment at such rate as is
fair and equitable under the circumstances, taking into account all relevant
factors including the average rate currently paid by the Company on its
principal bank loans. If the Company fails to file an application within the
60-day period, any dissenter who has not settled such dissenter's claim may do
so in the name of the Company within 30 days after the expiration of this 60-day
period. If no dissenter files an application within such 30-day period, each
dissenter who has not settled such dissenter's claim shall be paid no more than
the Company's estimate of the fair value of such dissenter's Shares and may
bring an action to recover any amount not previously remitted.

COSTS AND EXPENSES OF VALUATION PROCEEDINGS

The costs and expenses of any valuation proceedings, including the
reasonable compensation and expenses of any appraiser appointed by the court,
shall be determined by the court and assessed against the Company except that
any part of such costs and expenses may be assessed as the court deems
appropriate against all or some of the dissenters whose action in demanding
supplemental payment is found by the court to be dilatory, obdurate, arbitrary,
vexatious or in bad faith. The court may also assess the fees and expenses of
counsel and experts for any or all of the dissenters against the Company if the
Company fails to comply substantially with Subchapter D of Pennsylvania Law or
acts in bad faith or in a dilatory, obdurate, arbitrary or vexatious manner. The
court can also assess any such fees or expenses incurred by the Company against
a dissenter if such dissenter is found to have acted in bad faith or in a
dilatory, obdurate, arbitrary or vexatious manner. If the court finds that the
services of counsel for any dissenter were of substantial benefit to the other
dissenters and should not be assessed against the Company, it may award to such
counsel reasonable fees to be paid out of the amounts awarded to the dissenters
who were benefitted.

OTHER

In addition to the appraisal rights discussed above, shareholders also have
certain rights ("Subchapter 25E Rights") under Subchapter 25E of the
Pennsylvania Law ("Subchapter 25E") which will become applicable prior to the
Effective Time in the event that the Purchaser (or a group of related persons,
or any other person or group of related persons) were to acquire Shares
representing at least 20% of the voting power of the Company, in connection with
the Offer or otherwise (a "Control Transaction"). In such event, shareholders of
the Company would have the right to demand "fair value" of such shareholders'
Shares

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and to be paid such fair value upon compliance with the requirements of
Subchapter 25E. Under Subchapter 25E, "fair value" may not be less than the
highest price per share paid by the controlling person or group at any time
during the 90-day period ending on and including the date of the Control
Transaction, plus an increment, if any, representing any value, including,
without limitation, any proportion of value payable for acquisition of control
of the Company, that may not be reflected in such price. The Purchaser believes
that the Offer Price represents the fair value of the Shares within the meaning
of Subchapter 25E. Subchapter 25E Rights would attach immediately upon
consummation of a Control Transaction and require that any shareholder seeking
such appraisal must make a demand for fair value within a reasonable time after
the notice to shareholders that a Control Transaction has occurred is given by
the controlling person or group in accordance with Subchapter 25E, which time
period may be specified in such notice, as well as comply with the other
procedures of Subchapter 25E. Subchapter 25E Rights are available only with
respect to shares of a registered corporation held by a shareholder after the
occurrence of a Control Transaction; accordingly, Subchapter 25E Rights would
not be available with respect to any Shares tendered in the Offer and accepted
for payment.

Section 1712 of Pennsylvania Law provides that a director of a Pennsylvania
corporation stands in a fiduciary relation to such corporation and must perform
such director's duties as a director in good faith, in a manner he or she
reasonably believes to be in the best interests of the corporation and with such
care, including reasonable inquiry, skill and diligence, as a person of ordinary
prudence would use under similar circumstances. Section 1105 of Pennsylvania Law
provides in substance that a shareholder of a Pennsylvania corporation shall not
have any right to obtain, in the absence of fraud or fundamental unfairness, an
injunction against any proposed merger, nor any right to claim the right to
valuation and payment of the fair value of such shareholder's Shares because of
the merger, except that such shareholder may dissent and claim such payment if
and to the extent provided in Subchapter D of Pennsylvania Law Chapter 15,
described above. Absent fraud or fundamental unfairness, such dissenters rights
are the exclusive remedy of such shareholders. However, the United States Court
of Appeals, Third Circuit, interpreting the predecessor statute to Section 1105
of Pennsylvania Law in HERSKOWITZ V. NUTRISYSTEM, INC., concluded that
dissenters rights co-exist with common law causes of action, such as rescission
or money damages, in the context of an action for breach of fiduciary duty or
misrepresentation in a cash-out merger. Shareholders should be aware that due to
the enactment of Pennsylvania Law in 1988 it is unclear whether the decision in
Herskowitz remains applicable to dissenters rights. IN VIEW OF THE COMPLEXITIES
OF THESE PROVISIONS OF PENNSYLVANIA LAW, SHAREHOLDERS WHO ARE CONSIDERING
DISSENTING FROM THE MERGER SHOULD CONSULT THEIR OWN LEGAL COUNSEL.

SEE SCHEDULE II ATTACHED HERETO FOR A REPRODUCTION OF THE TEXT OF THE
RELEVANT SECTIONS OF PENNSYLVANIA LAW.

THE MERGER AGREEMENT

The following is a summary of the Merger Agreement, a copy of which is filed
as an Exhibit to the Tender Offer Statement on Schedule 14D-1 (the "Schedule
14D-1") filed by the Purchaser and the Parent with the Commission in connection
with the Offer. Such summary is qualified in its entirety by reference to the
Merger Agreement.

THE OFFER. The Merger Agreement provides that the Purchaser will commence
the Offer as promptly as reasonably practicable after the date thereof, but in
no event later than five business days after the initial public announcement of
the Purchaser's intention to commence the Offer. The obligation of the Purchaser
to accept for payment and pay for Shares tendered pursuant to the Offer shall be
subject to the Minimum Condition and certain other conditions described in
"Section 14. Conditions to the Offer." In the event that Shares constituting at
least 19.9% of the then outstanding Shares have been validly tendered and not
withdrawn prior to the expiration of the Offer, and all the conditions to the
Offer have been satisfied other than the Minimum Condition, the Purchaser may,
at its option, purchase for the Per Share Amount any number of such Shares
constituting in the aggregate no more than 19.9% of the then

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outstanding Shares, on a pro rata basis if a greater number of Shares shall have
been tendered into the Offer by the holders of the Shares. The Purchaser
expressly reserves the right to waive any condition to the Offer, to increase
the price per Share payable in the Offer, and to make any other changes in the
terms and conditions of the Offer. However, no change may be made, without the
prior written consent of the Company that (i) decreases the Minimum Condition,
(ii) decreases the price per Share payable in the Offer below the Per Share
Amount, (iii) changes the form of consideration to be paid in the Offer, (iv)
reduces the maximum number of Shares to be purchased in the Offer or (v) imposes
conditions to the Offer in addition to those described on "Section 14.
Conditions to the Offer." The Per Share Amount will, subject to applicable
withholding of taxes, be net to the seller in cash, upon the terms and subject
to the conditions of the Offer. Subject to the terms and conditions of the Offer
(including, without limitation, the Minimum Condition), the Purchaser will pay,
as promptly as practicable after expiration of the Offer, for all Shares validly
tendered and not withdrawn. If on the initial scheduled expiration date (which
will be twenty business days after the date of the commencement of the Offer) of
the Offer, all the conditions to the Offer have not been satisfied or waived,
the Offer may be extended from time to time until January 4, 1999, without the
consent of the Company. However, the Purchaser may not, without the prior
written consent of the Company, extend the Offer if the failure to satisfy any
of the conditions to the Offer was caused by or resulted from the failure of the
Parent or the Purchaser to perform in any material respect any material covenant
or agreement of either of them contained in the Merger Agreement or the material
breach by the Parent or the Purchaser of any material representation or warranty
of either of them contained in the Merger Agreement.

THE MERGER. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof and in accordance with Pennsylvania Law, at the
Effective Time, the Purchaser will be merged with and into the Company and the
Company will continue as the Surviving Corporation and will become an indirect
subsidiary of Parent. Upon consummation of the Merger, each issued and
outstanding Share (other than any Shares held in the treasury of the Company,
owned by the Purchaser, the Parent or any direct or indirect subsidiary of
Parent or of the Company and any outstanding Shares which are held by
shareholders who have demanded the right to receive the fair value of their
Shares under Pennsylvania Law) will be canceled and converted automatically into
the right to receive an amount equal to the Per Share Amount (the "Merger
Consideration"). Pursuant to the Merger Agreement, each share of common stock,
par value $0.01 per share, of the Purchaser issued and outstanding immediately
prior to the Effective Time will be converted into and exchanged for one validly
issued, fully paid and nonassessable share of common stock, par value $0.01 per
share, of the Surviving Corporation.

CHARTER DOCUMENTS; INITIAL DIRECTORS AND OFFICERS. The Merger Agreement
provides that, at the Effective Time, the Articles of Incorporation of the
Company, as in effect immediately prior to the Effective Time, will be the
Articles of Incorporation of the Surviving Corporation. The Merger Agreement
also provides that the By-laws of the Company, as in effect immediately prior to
the Effective Time, will be the By-laws of the Surviving Corporation until
thereafter amended as provided by law, the Articles of Incorporation of the
Surviving Corporation and such By-laws. Pursuant to the Merger Agreement, the
directors of the Purchaser immediately prior to the Effective Time will be the
initial directors of the Surviving Corporation and the officers of the Company
immediately prior to the Effective Time will be the initial officers of the
Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified in accordance with the Articles of
Incorporation and By-laws of the Surviving Corporation.

SHAREHOLDERS' MEETING. The Merger Agreement provides that, in the event
that at the initial Expiration Date, the Minimum Condition shall not have been
satisfied, at the request of the Parent, the Company, acting through the Board,
will, in accordance with applicable law and the Company's Articles of
Incorporation and Bylaws, duly call, give notice of, convene and hold a special
meeting of its shareholders as soon as practicable following such request for
the purpose of considering and taking action on the Long-Form Merger in
accordance with the terms and conditions of the Merger Agreement. In the event
that the

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Parent, the Purchaser or any of their assignees acquire Shares pursuant to the
Offer constituting at least 80% of the then outstanding Shares, the parties have
agreed, subject to the terms and conditions of the Merger Agreement, to take all
necessary and appropriate action to cause the Short-Form Merger to become
effective as soon as practicable after such acquisition, without approval of the
Company's shareholders, in accordance with Section 1924(b)(1)(ii) of
Pennsylvania Law.

FILINGS. The Merger Agreement provides that the Company will, as soon as
practicable following the commencement of the Offer, file the proxy statement to
be sent to the shareholders in connection with the Long-Form Merger (the "Proxy
Statement") with the Commission, and will use its best efforts to have the Proxy
Statement cleared by the Commission as promptly as practicable following such
filing. The Company has agreed that the Proxy Statement will include the
unanimous recommendation of the Board that the holders of the Shares adopt the
Merger Agreement and the Long-Form Merger.

CONDUCT OF BUSINESS PENDING THE MERGER. Pursuant to the Merger Agreement,
the Company has agreed that, between the date of the Merger Agreement and the
Effective Time, unless the Parent will otherwise agree in writing, the
businesses of the Company and its subsidiaries will be conducted only in, and
the Company and its subsidiaries will not take any action except in, the
ordinary course of business and in a manner consistent with past practice; and
the Company will use its reasonable best efforts to preserve substantially
intact the business organization of the Company and its subsidiaries, to
maintain adequate insurance coverage, to keep available the services of the
current officers, employees and consultants of the Company and its subsidiaries
and to preserve the current relationships of the Company and its subsidiaries
with customers, suppliers and other persons with which the Company or any of its
subsidiaries has significant business relations. By way of amplification and not
limitation of the foregoing, except as expressly contemplated by the Merger
Agreement, neither the Company nor any subsidiary thereof will, between the date
of the Merger Agreement and the Effective Time, directly or indirectly do, or
propose to do, any of the following without the prior written consent of the
Parent:

(a) amend or otherwise change its Articles of Incorporation or By-laws
or equivalent organizational documents;

(b) issue, sell, pledge, dispose of, grant, encumber, or authorize the
issuance, sale, pledge, disposition, grant or encumbrance of, (i) any shares
of capital stock of any class of the Company or any of its subsidiaries, or
any options, warrants, convertible securities or other rights of any kind to
acquire any shares of such capital stock, or any other ownership interest
(including, without limitation, any phantom interest), of the Company or any
of its subsidiaries or (ii) any assets of the Company or any of its
subsidiaries, except in the ordinary course of the business consistent with
past practice;

(c) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock;

(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;

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<PAGE>
or less, in an aggregate amount of less than U.S. $250,000; (iv) terminate,
cancel or request any material change in, or agree to any material change
in, any material contract set forth in Section 3.17 of the Disclosure
Schedule attached to the Merger Agreement; (v) authorize one or more capital
expenditures that are, in the aggregate, in excess of U.S. $75,000 for the
Company and any of its subsidiaries taken as a whole, other than capital
expenditures with respect to projects that have commenced prior to the date
of the Merger Agreement, or with respect to which equipment has been ordered
prior to the date of the Merger Agreement, so long as, with respect to such
projects, the Parent has been informed in writing thereof prior to the date
of the Merger Agreement and, with respect to such orders, the Company
discusses with the Parent or its representatives, promptly after the date of
the Merger Agreement, such orders and the intended uses of the equipment the
subject thereof, PROVIDED that the Company shall report on the progress of
any such project in accordance with Section 5.02 of the Merger Agreement; or
(vi) enter into or amend any contract, agreement, commitment or arrangement
with respect to any matter set forth in this paragraph (e);

(f) increase the compensation payable or to become payable to its
officers, employees or consultants, except for increases in accordance with
past practices in salaries or wages of employees of the Company or any of
its subsidiaries who are not officers of the Company, or grant any severance
or termination pay to, or enter into any employment or severance agreement
with, any director, officer or other employee of the Company or any of its
subsidiaries, or establish, adopt, enter into or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or employee;

(g) take any action, other than reasonable and usual actions in the
ordinary course of business and consistent with past practice, with respect
to accounting policies or procedures (including, without limitation,
procedures with respect to the payment of accounts payable and collection of
accounts receivable);

(h) make any tax election or settle or compromise any material federal,
state, local or foreign income tax liability;

(i) pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction, in the ordinary course of
business and consistent with past practice, of liabilities reflected or
reserved against in the Company's balance sheet dated June 30, 1998, or
subsequently incurred in the ordinary course of business and consistent with
past practice;

(j) make any material alterations or modifications to any of the water
sources used by the Company, including, without limitation, any new
boreholes or any new wells; or

(k) announce an intention, enter into any formal or informal agreement,
or otherwise make a commitment, to do any of the foregoing.

NO SOLICITATION. Neither the Company nor any Subsidiary will, directly or
indirectly, through any officer, director, agent or otherwise, solicit, initiate
or encourage the submission of any proposal or offer from any person relating to
any acquisition or purchase of all or any material portion of the assets of, or
any equity interest in, the Company or any Subsidiary or any business
combination with the Company or any Subsidiary (a "Takeover Proposal") or
participate in any negotiations regarding, or furnish to any other person any
information with respect to, or otherwise cooperate in any way with, or assist
or participate in, facilitate or encourage, any effort or attempt by any other
person to do or seek any of the foregoing. However, if the Board determines in
good faith, after consultation with and based on the written advice of
independent legal counsel, that it is necessary to do so in order to comply with
its fiduciary duties under Pennsylvania law, the Company may, in response to a
Superior Proposal (as defined below) that was not solicited by it or that did
not otherwise result from a breach of its obligations described above, and
subject

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to providing prior written notice of its decision to take such action to the
Parent and compliance with the second following paragraph, (i) furnish
information with respect to the Company and its subsidiaries to any person
making a Superior Proposal pursuant to a confidentiality agreement no less
favorable to the Company than the Confidentiality Agreement dated September 11,
1998, between the Parent and the Company, and (ii) participate in discussions or
negotiations regarding such Superior Proposal.

For purposes of the Merger Agreement, "Superior Proposal" means any proposal
made by a third party (A) to acquire, directly or indirectly, more than 50% of
the combined voting power of the Shares then outstanding or all or substantially
all the assets of the Company and its subsidiaries, (B) that is otherwise on
terms that the Board determines in its good faith judgment (after consultation
with, and based upon the written advice of, a financial advisor of nationally
recognized reputation and independent legal counsel) to be more favorable to the
Company and its shareholders than the transactions contemplated by the Merger
Agreement, (C) for which financing, to the extent required, is then committed,
and (D) for which, in the good faith judgment of the Board, no regulatory
approvals, including antitrust approvals, are required that could not reasonably
be expected to be obtained.

The Merger Agreement also provides that the Company will notify the Parent
promptly if any Takeover Proposal, or any inquiry or contact with any person
with respect thereto, is made and will, in the notice, indicate the identity of
the person making the Takeover Proposal, offer, inquiry or contact and the terms
and conditions of the Takeover Proposal, inquiry or contact. The Company will
keep the Parent reasonably informed of the status and details, including
amendments or proposed amendments to any request or Takeover Proposal. The
Company has agreed not to release any third party from, or waive any provision
of, any confidentiality or standstill agreement to which the Company is a party.

The Merger Agreement also provides that the Board will not (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to the Parent or
the Purchaser its approval and recommendation of the Merger Agreement and the
transactions contemplated in the Merger Agreement, (ii) approve or recommend or
propose to approve or recommend any Takeover Proposal that is not a Superior
Proposal approved or recommended in accordance with the provisions set forth
above, or (iii) enter into any agreement with respect to any Takeover Proposal.
Notwithstanding the foregoing, if the Board determines in good faith, after
consultation with and based on the written advice of independent legal counsel,
that it is necessary to do so in order to comply with its fiduciary duties under
Pennsylvania law, the Board may withdraw or modify its approval and
recommendation of the Merger Agreement and the transactions contemplated in the
Merger Agreement, approve or recommend a Superior Proposal or enter into an
agreement with respect to a Superior Proposal, at any time after midnight on the
fifth business day following the Parent's receipt of written notice that the
Board has received a Superior Proposal, specifying the terms and conditions of
the Superior Proposal and the identity of the person making the Superior
Proposal.

DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. The Merger
Agreement provides that the Articles of Incorporation and Bylaws of the
Surviving Corporation will contain provisions no less favorable with respect to
indemnification than are set forth in Article VII of the Bylaws of the Company,
which provisions will not be amended, repealed or otherwise modified for a
period of six years from the Effective Time in any manner that would affect
adversely the rights thereunder of individuals who at the Effective Time were
directors, officers, employees, fiduciaries or agents of the Company, unless
such modification is required by law.

The Merger Agreement also provides that the Company will, to the fullest
extent permitted by law, indemnify and hold harmless, and, after the Effective
Time, the Surviving Corporation will indemnify and hold harmless, each current
and former director, officer, employee, fiduciary and agent of the Company and
each Subsidiary against all costs and expenses (including reasonable attorneys'
fees), judgments, fines, losses, claims, damages, liabilities and settlement
amounts paid in connection with any claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), whether
civil, criminal,

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administrative or investigative, arising out of or pertaining to any action or
omission in their capacity as an officer, director, employee, fiduciary or
agent, whether occurring before or after the Effective Time, for a period of six
years after the date hereof. In the event of any such claim, action, suit,
proceeding or investigation, (i) the Company or the Surviving Corporation, as
the case may be, will pay the reasonable fees and expenses of counsel selected
by the indemnified parties, which counsel will be reasonably satisfactory to the
Company or the Surviving Corporation and (ii) the Company and the Surviving
Corporation will cooperate in the defense of any such matter.

The Surviving Corporation will use its reasonable best efforts to maintain
in effect for three years from the Effective Time, if available, the current
directors' and officers' liability insurance policies maintained by the Company
(provided that the Surviving Corporation may substitute policies of at least the
same coverage containing terms and conditions that are not materially less
favorable) with respect to matters occurring prior to the Effective Time.
However, in no event will the Surviving Corporation be required to expend more
than an amount per year equal to 150% of current annual premiums paid by the
Company for such insurance.

The Merger Agreement provides that, in accordance with the terms of the
Company's stock option plans, the Company will cause each outstanding option to
purchase Shares granted under the stock option plans to, immediately prior to
the Effective Time, become exercisable regardless of the installment provisions
contained in the stock option plans and to be terminated at the Effective Time.

Furthermore, the Company will use its reasonable best efforts to obtain the
consent of other holders of options to purchase Shares, to the termination,
immediately prior to the Effective Time, of the stock options held by them
pursuant to their respective option agreements. Each such option holder will be
paid by the Company, at or immediately prior to the Effective Time with respect
to each stock option, in consideration of such termination, an amount in cash
determined by multiplying (i) the excess, if any, of the Per Share Amount over
the applicable exercise price under the option by (ii) the number of Shares the
option holder could have purchased if he or she had exercised the options in
full immediately prior to the Effective Time.

The Merger Agreement provides that the Company will use its reasonable best
efforts to obtain the consent of Edward J. Lauth, III, James D. Hammond and
Marion I. Hammond, and Nancy J. Davis to the termination, immediately prior to
the Effective Time, of the warrants held by each of them pursuant to the
Warrants dated as of April 6, 1995, the Warrant dated as of November 21, 1995,
and the Warrant dated as of August 28, 1996, respectively. Each such holder of
warrants will be paid by the Company, at or immediately prior to the Effective
Time with respect to each warrant, in consideration of termination, an amount in
cash determined by multiplying (i) the excess, if any, of the Per Share Amount
over the applicable exercise price under the warrant by (ii) the number of
Shares the holder could have purchased had he or she exercised the warrant in
full immediately prior to the Effective Time.

REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties of the parties thereto including
representations concerning the Company's corporate organization and
qualification, subsidiaries, Articles of Incorporation and By-laws,
capitalization, authority, shareholder vote required under Pennsylvania Law, no
conflicts, filings with the Commission and other governmental authorities,
compliance with law, financial statements (including a representation that the
Company's audited financial statements for the year ended September 30, 1998, to
be delivered to the Parent will not be "materially less favorable" (as defined
in the Merger Agreement) than the preliminary year-end financial statements),
absence of certain changes or events, litigation, employment benefit matters,
labor matters, intellectual property, tangible property, real property, taxes,
insurance, environmental matters, material contracts, brokers, financial
advisors and Pennsylvania Law.

CONDITIONS TO CONSUMMATION OF THE SHORT-FORM MERGER. The Merger Agreement
provides that the respective obligations of each party to effect the Short-Form
Merger are subject to the satisfaction at or prior to the Effective Time of the
following conditions: (a) no administrative, governmental or regulatory

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authority or body, domestic or foreign (a "Governmental Entity"), or foreign,
United States or state court of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any law, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) that is then in effect and has the effect of making the acquisition
of Shares by the Parent or the Purchaser or any affiliate of either of them or
the consummation of the Short-Form Merger illegal or otherwise restricting,
preventing or prohibiting consummation of the Transactions; and (b) the
Purchaser or its permitted assignee has purchased all Shares validly tendered
and not withdrawn pursuant to the Offer; PROVIDED, HOWEVER, that this condition
shall not be applicable to the obligations of the Parent or the Purchaser if, in
breach of the Merger Agreement or the terms of the Offer, the Purchaser or such
assignee fails to purchase any Shares validly tendered and not withdrawn
pursuant to the Offer.

CONDITIONS TO CONSUMMATION OF THE LONG-FORM MERGER. The Merger Agreement
provides that the respective obligations of each party to effect the Long-Form
Merger are subject to the satisfaction at or prior to the Effective Time of the
following conditions: (a) the Merger Agreement and the Long-Form Merger have
been adopted by the affirmative vote of a majority of the votes cast by all
holders of Shares entitled to vote thereon; (b) any waiting period (and any
extension thereof) applicable to the consummation of the Long-Form Merger under
the HSR Act has expired or been terminated; (c) no Governmental Entity or
foreign, United States or state court of competent jurisdiction has enacted,
issued, promulgated, enforced or entered any law, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) that is then in effect and has the effect of making the consummation
of the Long-Form Merger illegal or otherwise restricting, preventing or
prohibiting consummation of the Long-Form Merger.

Pursuant to the terms of the Merger Agreement, the obligations of the Parent
and the Purchaser to effect the Long-Form Merger are also subject to the
following conditions at or as of the Effective Time: (a) the representations and
warranties of the Company in the Merger Agreement and of each Shareholder in the
respective Shareholder Agreement that are qualified as to materiality are true
and correct and all such representations and warranties that are not so
qualified are true and correct in all material respects, in each case on or as
of the Effective Time (other than representations and warranties that address
matters only as of a certain date which shall be true and correct in the same
manner as of such certain date); (b) the Company has performed in all material
respects all obligations and complied in all material respects with each
agreement and covenant of the Company to be performed or complied with by it
under the Merger Agreement and each Shareholder has performed in all material
respects all obligations and complied in all material respects with each
agreement and covenant of such Shareholder to be performed or complied with by
such Shareholder under the applicable Shareholder Agreement; (c) all consents,
approvals and authorizations required to be obtained to consummate the Long-Form
Merger have been obtained from all Governmental Entities, except for such
consents, approvals and authorizations the failure of which to obtain would not
have a material adverse effect on the Parent or the Purchaser (assuming that the
Long-Form Merger shall have been effected); (d) no events set forth in paragraph
(a), (b), (j) or (k) of the conditions to the Offer set forth in "Section 14.
Conditions to the Offer" has occurred; and (e) no change, condition, event or
development that has a Material Adverse Effect (as defined in the Merger
Agreement) with respect to the Company has occurred since June 30, 1998.

The obligation of the Company to effect the Long-Form Merger is also subject
to the following conditions at or as of the Effective Time: (a) the
representations and warranties of the Parent and the Purchaser in the Merger
Agreement that are qualified as to materiality are true and correct and all such
representations and warranties that are not so qualified are true and correct in
all material respects, in each case on or as of the Effective Time (other than
representations and warranties which address matters only as of a certain date
which shall be true and correct in the same manner as of such certain date); and
(b) the Parent and the Purchaser have performed in all material respects all
obligations and complied in all material respects with each agreement and
covenant of the Parent and the Purchaser, respectively, to be

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performed or complied with by it under the Merger Agreement, and the Company has
received a certificate from a duly authorized officer of the Parent to such
effect.

TERMINATION. The Merger Agreement may be terminated and the Merger and the
other transactions contemplated thereby may be abandoned at any time prior to
the Effective Time, notwithstanding any requisite adoption of the Merger
Agreement and the transactions contemplated hereby by the shareholders of the
Company: (a) by mutual written consent duly authorized by the Boards of
Directors of the Parent, the Purchaser and the Company; or (b) by the Parent,
the Purchaser or the Company if (x) the Effective Time has not occurred on or
before March 31, 1999; PROVIDED, HOWEVER, that this right to terminate is not
available to any party whose failure to fulfill any obligation under the Merger
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date or (y) a Governmental Entity or foreign,
United States or state court of competent jurisdiction has enacted, issued,
promulgated, enforced or entered any law, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
that is then in effect and has the effect of making the consummation of the
Merger illegal or otherwise restricting, preventing or prohibiting consummation
of the Merger.

In addition, the Merger Agreement may be terminated, and the Merger and the
other transactions contemplated hereby may be abandoned at any time prior to the
earlier of the expiration or termination of the Offer without the Minimum
Condition having been satisfied and the Effective Time, notwithstanding any
requisite approval and adoption of the Merger Agreement and the transactions
contemplated hereby by the shareholders of the Company: (a) by the Parent, upon
approval of its Board of Directors, if due to a failure to satisfy any of the
conditions set forth in "Section 14. Conditions to the Offer," the Purchaser has
(1) failed to commence the Offer within five business days following the date of
the Merger Agreement, (2) terminated the Offer without having accepted any
Shares for payment or (3) failed to pay for Shares pursuant to the Offer within
90 days following the commencement of the Offer; unless such action or inaction
under (1), (2) or (3) was caused by or resulted from the failure of the Parent
or the Purchaser to perform in any material respect any material covenant or
agreement of either of them contained in the Merger Agreement or the material
breach by the Parent or the Purchaser of any material representation or warranty
of either of them contained in the Merger Agreement; (b) by the Company, upon
approval of the Board, if due to a failure to satisfy any of the conditions set
forth in "Section 14. Conditions to the Offer," the Purchaser has (1) failed to
commence the Offer within five business days following the date of the Merger
Agreement, (2) terminated the Offer without having accepted any Shares for
payment or (3) failed to pay for Shares pursuant to the Offer within 90 days
following the commencement of the Offer, unless such action or inaction under
(1), (2) or (3) was caused by or resulted from the failure of the Company to
perform in any material respect any material covenant or agreement of it
contained in the Merger Agreement or the material breach by the Company of any
material representation or warranty of it contained in the Merger Agreement; (c)
by the Company, in connection with entering into a definitive agreement with
respect to a Superior Proposal in accordance with the "No Solicitation"
provisions described above; PROVIDED that the Company has complied with its
obligations under such provisions, and that it makes simultaneous payment of the
Fee and Expenses discussed below; or (d) by the Parent, if the Board shall have
modified or withdrawn in a manner adverse to the Parent and the Purchaser its
approval and recommendation of the Merger Agreement and the transactions
contemplated thereby or shall have approved or recommended to the Company's
shareholders a Superior Proposal.

The Merger Agreement may be terminated and the Long-Form Merger may be
abandoned at any time prior to the Effective Time but after the expiration or
termination of the Offer without the Minimum Condition having been satisfied,
notwithstanding any requisite approval and adoption of the Merger Agreement and
the transactions contemplated thereby by the shareholders of the Company: (a) by
the Parent in the event of a breach by the Company of any representation,
warranty, covenant or other agreement contained in the Merger Agreement that (A)
would give rise to the failure of the condition relating to the Company's
representations and warranties or covenants set forth above and (B) cannot be

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or has not been cured within 20 days after the giving by the Parent of written
notice to the Company or upon the occurrence of any of the events set forth in
paragraph (a), (b) or (c) of the conditions to the offer set forth in "Section
14. Conditions to the Offer"; (b) by the Company in the event of a breach by the
Parent or the Purchaser of any of their respective representations, warranties,
covenants or other agreements contained in the Merger Agreement that (A) would
give rise to the failure of a condition relating to the Parent's and the
Purchaser's representations and warranties or covenants set forth above and (B)
cannot be or has not been cured within 20 days after the giving by the Company
of written notice to the Parent and the Purchaser; or (c) by the Parent or the
Company if the shareholders of the Company do not approve the Merger Agreement
at the shareholders' meeting convened for such purpose, or any adjournment or
postponement thereof.

FEES AND EXPENSES. The Merger Agreement provides that in the event that (i)
the Merger Agreement is terminated pursuant to clause (c) or (d) of the second
preceding paragraph or (ii) any person has commenced, or publicly announced and
not withdrawn its intention to commence, a tender or exchange offer for 20% or
more (or which, assuming the maximum amount of securities that could be
purchased, would result in any person beneficially owning 20% or more) of the
then outstanding Shares or otherwise for the direct or indirect acquisition of
the Company or all or a substantial portion of its assets and (A) the Offer has
remained open for at least 20 business days, (B) the Minimum Condition has not
been satisfied, (C) the Merger Agreement has been terminated pursuant to clause
(c) of the preceding paragraph and (D) within six months following the date of
termination of the Merger Agreement, a Takeover Proposal between the Company and
such other person shall have been consummated, then, in any such event, the
Company will pay the Parent promptly (but in no event later than one business
day after the first of such events has occurred) a fee of U.S.$3,400,000 (the
"Fee"), payable in immediately available funds, plus all Expenses up to
U.S.$750,000 in the aggregate. The term "Expenses" means all out-of-pocket
expenses and fees of each of the Parent, the Purchaser and their respective
shareholders and affiliates (including, without limitation, fees and expenses
payable to all banks, investment banking firms, other financial institutions and
other persons and their respective agents and counsel for arranging, committing
to provide or providing any financing for the transactions contemplated by the
Merger Agreement or structuring the transactions contemplated by the Merger
Agreement and all fees of counsel, accountants, experts and consultants to the
Parent and the Purchaser, and all printing and advertising expenses and all
costs and expenses incurred by or on behalf of the Parent and the Purchaser in
connection with the collection under and enforcement of this Fee and Expenses
provision) actually incurred or accrued by any of them or on their behalf in
connection with the transactions contemplated by the Merger Agreement,
including, without limitation, the financing thereof, and actually incurred or
accrued by banks, investment banking firms, other financial institutions and
other persons and assumed by the Parent and the Purchaser in connection with the
negotiation, preparation, execution and performance of the Merger Agreement, the
structuring and financing of the Transactions and any financing commitments or
agreements relating thereto.

Except as set forth above, all costs and expenses incurred in connection
with the Merger Agreement and the transactions contemplated by the Merger
Agreement will be paid by the party incurring such expenses, whether or not any
transaction is consummated.

FACILITY INVESTMENT AGREEMENT. Pursuant to the terms of the Merger
Agreement, the Company has agreed to enter into, as promptly as practicable but
in no event more than twenty days from the date of the Merger Agreement, at the
Parent's request, an agreement with the Parent on terms and conditions annexed
to the Merger Agreement, which provide, among other things, for the construction
of a new PET bottling production line at the Company's facility in Florida.

THE SHAREHOLDER AGREEMENTS

The Parent, the Purchaser and each Shareholder have also entered into a
Shareholder Agreement pursuant to which the Shareholder has agreed to tender
irrevocably to the Purchaser pursuant to the Offer

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the Shares held by such Shareholder and any Shares acquired by such Shareholder
pursuant to the exercise of any options or warrants held by such Shareholder
(collectively, the "Option Shares") at the Per Share Amount (as of November 2,
1998, Edward J. Lauth, III, owned 1,022,854 Shares and options or warrants for
the purchase of 75,100 Shares, constituting approximately 12.32% of the
outstanding Shares on a fully diluted basis; Geoffrey F. Feidelberg owned
149,727 Shares and options or warrants for the purchase of 225,480 Shares,
constituting approximately 4.21% of the outstanding Shares on a fully diluted
basis; and Matthew Suhey owned 378,152 Shares, constituting approximately 4.24%
of the outstanding Shares on a fully diluted basis). Each Shareholder also has
granted to the Purchaser an irrevocable option to purchase, upon the termination
of the Merger Agreement, all Option Shares at the Per Share Amount (each, an
"Option"). In addition, each Shareholder has appointed the Purchaser, or any
nominee of the Purchaser, during the term of the Option, as his attorney and
proxy to vote each of the Option Shares (i) in favor of the adoption of the
Merger Agreement and the Long-Form Merger and the other transactions
contemplated by the Merger Agreement, (ii) against any proposal for any
recapitalization, merger, sale of assets or other business combination between
the Company and any person (other than the Merger) or any other action or
agreement that would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of the Company under the Merger
Agreement or which could result in any of the conditions to the Company's
obligations under the Merger Agreement not being fulfilled and (iii) in favor of
any other matter relating to consummation of the transactions contemplated by
the Merger Agreement. The Purchaser also has the discretionary right to require
each Shareholder to exercise all of his vested options in the Shares, whereupon
all Shares resulting from such exercise shall automatically become Option Shares
subject to the Purchaser's Option. The Purchaser is entitled to exercise the
Stock Option at any time following the termination of the Merger Agreement until
the close of business on the 30th day following such termination.

The obligation of each Shareholder to deliver the Option Shares upon
exercise of the Option is subject to (i) any waiting periods under the HSR Act
applicable to such exercise of the Option having expired or been terminated,
(ii) there being no preliminary or permanent injunction or other order by any
court of competent jurisdiction prohibiting or otherwise restraining such
exercise of the Option, and (iii) the number of Shares to be purchased by the
Purchaser pursuant to the exercise of the Option does not cause the aggregate
number of Shares, including any Shares acquired by the Purchaser pursuant to
Section 1.01 of the Merger Agreement and the other Shareholder Agreements, to be
held by the Purchaser immediately following such exercise, to exceed 19.9% of
the then issued and outstanding Shares. Each Shareholder Agreement provides that
all payments made by the Purchaser to the respective Shareholder shall be made
by wire transfer in immediately available funds to an account designated by such
Shareholder and simultaneously therewith such Shareholder will deliver his
Option Shares at the applicable closing of such purchase.

THE EMPLOYMENT AGREEMENTS

On November 2, 1998, Great Brands entered into employment agreements with
each of Edward J. Lauth, III, and Geoffrey F. Feidelberg (the "Employment
Agreements") and a consulting agreement with Matthew Suhey (the "Suhey
Agreement"). The Employment Agreements each have a term of one year that will
commence at the Effective Time. Mr. Feidelberg's Employment Agreement is
automatically renewable for additional one-year terms unless either party gives
notice of its intent to terminate at least ninety days prior to the first
anniversary of the Effective Time (the "Anniversary Date"). Under the Employment
Agreements, Messrs. Lauth and Feidelberg (the "Executives") will receive annual
base salaries of $200,000 and $160,000, respectively, which may be increased,
but not decreased annually. Beginning calendar year 1999, the Executives will
also be entitled to participate in Great Brands' executive bonus program
pursuant to which each Executive may be awarded up to 35% of his base salary
based upon the results of Great Brands' North American operations as well as his
meeting certain personal objectives.

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Mr. Lauth's Employment Agreement provides for severance benefits in an
amount equal to one year's base salary, bonus, and benefits if Mr. Lauth resigns
for "good reason" (as defined in the Employment Agreements), or if his
employment is terminated by Great Brands other than for "cause" (as defined in
each of the Employment Agreements) or disability (an "Involuntary Termination").
Mr. Feidelberg's Employment Agreement provides for one year's base salary and
benefits if Mr. Feidelberg suffers an Involuntary Termination on or after the
Anniversary Date, and two year's base salary and benefits if he suffers an
Involuntary Termination prior to the Anniversary Date. The Employment Agreements
also provide that upon an Involuntary Termination, each Executive will receive,
in equal monthly installments, an amount equal to the Company's matching
contribution to the Company 401(k) Plan, for a one-year period based on the
Executive's contribution rate on the date of termination. In addition, each of
the Executives has agreed not to compete with Great Brands or its parent or
subsidiaries (the "Group") or to solicit the clients, prospective clients,
employees, consultants or independent contractors of the Group for a period of
up to two years following the termination of his employment, depending on the
circumstances of his departure. The Executives have also agreed that they will
not, at any time during or after their employment terms, disclose or otherwise
utilize any confidential or proprietary information obtained during their
employment other than in the performance of their duties on behalf of Great
Brands or with the prior consent of Great Brands.

Pursuant to the Employment Agreements, the Executives were granted, subject
to the approval of the Parent's Board of Directors, stock options (the
"Employment Stock Options") which will be exercisable for ordinary shares of the
Parent that will become 100% vested on the second anniversary of the date of
grant and Mr. Feidelberg was granted 1,500 Employment Stock Options that will
become 100% vested on the fifth anniversary of the date of grant. If the
Executives are terminated for "cause" or resign without "good reason", any
unvested Employment Stock Options will immediately lapse.

The Suhey Agreement has a term of one year and is automatically renewable
for an additional one-year period unless either party gives notice of its intent
to terminate at least ninety days prior to the Anniversary Date. Under the Suhey
Agreement, Mr. Suhey is entitled to an annual consulting fee of $250,000 per
year. Mr. Suhey is also entitled to a $50,000 lump sum bonus in the event that
on or before the end of the sixth month after the Effective Time (the "Bonus
Period"), the volume of Mr. Suhey's account base existing on November 2, 1998,
increases sufficiently so as to equal the "water category growth rate" based on
the most current available syndicated data. In addition, as soon as practicable
after the Effective Time, Mr. Suhey and the Company will agree upon a bonus
formula or determination method (the "Bonus Formula") to measure Mr. Suhey's
success in securing new accounts for Great Brands during the period prior to the
Anniversary Date. After the Anniversary Date, Mr. Suhey will be entitled to
receive a bonus of up to $50,000 pursuant to the Bonus Formula. The Suhey
Agreement may be terminated by either Great Brands or Mr. Suhey at any time, for
any reason or for no stated reason. If the Suhey Agreement is terminated by
Great Brands or by mutual agreement of the parties prior to the Anniversary
Date, Mr. Suhey is entitled to a lump sum amount equal to the portion of the
consulting fee that Mr. Suhey would have received for the period beginning on
the date of termination and ending on the Anniversary Date. In addition, Mr.
Suhey has agreed not to compete with the Group or to solicit the clients,
prospective clients, employees, consultants or independent contractors of the
Group for a period of one year following the termination of the Suhey Agreement.
Mr. Suhey has also agreed that he will not, at any time during or after the
consulting term, disclose or utilize any confidential or proprietary information
obtained during his consultancy other than in the performance of his duties on
behalf of Great Brands or with the prior written consent of Great Brands.

THE REGISTRATION RIGHTS AGREEMENT

The Purchaser, the Parent and the Company have entered into, concurrently
with the Merger Agreement, a Registration Rights Agreement (the "Registration
Rights Agreement"). Pursuant to the terms of the Registration Rights Agreement,
the Purchaser or its assignees under the Merger Agreement,

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at any time after it acquires Shares may, with respect to at least 20% of the
Shares which have been purchased by the Purchaser pursuant to the Merger
Agreement or any Shareholder Agreement (the "Registrable Shares") demand that
the Company file a registration statement under the Securities Act of 1933, as
amended ("Securities Act"), covering the registration of such Registrable
Shares. In addition, if at any time, the Company determines that it will file a
registration statement under the Securities Act (other than a registration
statement on a Form S-4 or S-8 as filed in connection with an exchange offer or
an offering of securities solely to the Company's existing shareholders) on any
form that would also permit the registration of the Registrable Shares and such
filing is to be on its behalf and/or on behalf of selling holders of its
securities for the general registration of its common stock to be sold for cash,
the Company will promptly give the Purchaser or its assignees under the Merger
Agreement written notice of such determination setting forth the date on which
the Company proposes to file such registration statement, which date shall be no
earlier than fifteen (15) days from the date of such notice, and advising the
Purchaser or its assignees under the Merger Agreement of their right to have
Registrable Shares included in such registration. Upon the written request of
any Purchaser or its assignees under the Merger Agreement received by the
Company no later than ten days after the date of receipt of the Company's
notice, the Company will use its reasonable efforts to cause to be registered
under the Securities Act all of the Registrable Shares that each such Holder has
so requested to be registered.

12. DIVIDENDS AND DISTRIBUTIONS. The Merger Agreement provides that the
Company shall not, between the date of the Merger Agreement and the Effective
Time, without the prior written consent of the Parent, (a) issue, sell, pledge,
dispose of, grant, encumber, or authorize the issuance, sale, pledge,
disposition, grant or encumbrance of any shares of capital stock of any class of
the Company or any subsidiary of the Company or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of such
capital stock, or any other ownership interest (including, without limitation,
any phantom interest), of the Company or any subsidiary of the Company, (b)
declare, set aside, make or pay any dividend or other distribution, payable in
cash, stock, property or otherwise, with respect to any of its capital stock, or
(c) reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock. See "Section 11.
Purpose of the Offer; Plans for the Company after the Offer and the Merger; the
Merger Agreement; and Related Agreements."

13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, EXCHANGE LISTING AND
EXCHANGE ACT REGISTRATION. The purchase of Shares by the Purchaser pursuant to
the Offer will reduce the number of Shares that might otherwise trade publicly
and will reduce the number of holders of Shares, which could adversely affect
the liquidity and market value of the remaining Shares held by the public.

The Purchaser intends to cause the Shares not to be listed for quotation on
the NYSE following consummation of the Offer.

Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the requirements of the NYSE for confirmed listing and
may be delisted from the NYSE. According to the NYSE's published guidelines, the
NYSE would consider delisting the Shares if, among other things, the number of
record holders of at least 100 Shares should fall below 1,200, the number of
publicly held Shares (exclusive of holdings of officers, directors and their
families and other concentrated holdings of 10% or more ("NYSE Excluded
Holdings")) should fall below 600,000, or the aggregate market value of publicly
held Shares (exclusive of NYSE Excluded Holdings) should fall below $5,000,000.
If, as a result of the purchase of Shares pursuant to the Offer, the Shares no
longer meet the requirements of the NYSE for continued listing and the listing
of Shares is discontinued, the market for the Shares could be adversely
affected. If the NYSE were to delist the Shares, it is possible that the Shares
would continue to trade on another securities exchange or in the
over-the-counter market and that price or other quotations would be reported by
such exchange or other sources. The extent of the public market for such and the
availability of such quotations would depend, however, upon such factors as the
number of shareholders and/or the aggregate market value of such securities
remaining at such time, the interest in maintaining a market in the Shares on
the part of securities firms, the possible termination of registration under the
Exchange Act

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as described below, and other factors. The Parent and the Purchaser cannot
predict whether the reduction in the number of Shares that might otherwise trade
publicly would have an adverse or beneficial effect on the market price for, or
marketability of, the Shares of whether it would cause future market prices to
be greater or lesser than the Per Share Amount.

The Shares are currently "margin securities," as such term is defined under
the rules of the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), which has the effect, among other things, of allowing brokers
to extend credit on the collateral of such securities. Depending upon factors
similar to those described above regarding listing and market quotations,
following the Offer it is possible that the Shares might no longer constitute
"margin securities" for purposes of the margin regulations of the Federal
Reserve Board, in which event such Shares could no longer be used as collateral
for loans made by brokers.

The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application by the Company to the Commission
if the Shares are not listed on a national securities exchange and there are
fewer than 300 record holders. The termination of the registration of the Shares
under the Exchange Act would substantially reduce the information required to be
furnished by the Company to holders of Shares and to the Commission and would
make certain provisions of the Exchange Act, such as the short-swing profit
recovery provisions of Section 16(b), the requirement of furnishing a proxy
statement in connection with shareholders' meetings and the requirements of Rule
13e-3 under the Exchange Act with respect to "going private" transactions, no
longer applicable to the Shares. In addition, "affiliates" of the Company and
persons holding "restricted securities" of the Company may be deprived of the
ability to dispose of such securities pursuant to Rule 144 promulgated under the
Securities Act of 1933, as amended. If registration of the Shares under the
Exchange Act were terminated, the Shares would no longer be "margin securities"
or be eligible for reporting on the National Association of Securities Dealers
Automated Quotation System. The Purchaser currently intends to seek to cause the
Company to terminate the registration of the Shares under the Exchange Act as
soon after consummation of the Offer as the requirements for termination of
registration are met.

14. CONDITIONS TO THE OFFER. Notwithstanding any other provision of the
Offer, the Purchaser will not be required to accept for payment or, subject to
any applicable rules and regulations of the Commission, pay for any Shares
tendered pursuant to the Offer, and may terminate or amend the Offer and may
postpone the acceptance for payment of and payment for Shares tendered, if (i)
the Minimum Condition is not satisfied, (ii) any applicable waiting period under
the HSR Act has not expired or been terminated prior to the expiration of the
Offer or (iii) at any time on or after the date of the Merger Agreement, and
prior to the acceptance for payment of Shares, any of the following conditions
exists:

(a) there has been instituted or is pending any action or proceeding
(other than actions or proceedings which, in the good faith reasonable
judgment of the Parent, after consultation with independent legal counsel,
do not have any basis in fact or a reasonable likelihood of success on the
merits) before any court or Governmental Entity, (i) challenging or seeking
to make illegal, materially delay or otherwise directly or indirectly
restrain or prohibit or make materially more costly the making of the Offer,
the acceptance for payment of, or payment for, any Shares by the Parent, the
Purchaser or any other affiliate of the Parent, the purchase of Shares
pursuant to any Shareholder Agreement, or the consummation of any other
transaction contemplated by the Merger Agreement, or seeking to obtain
material damages in connection with any transaction contemplated by the
Merger Agreement; (ii) seeking to prohibit or limit materially the ownership
or operation by the Company, the Parent or any of their subsidiaries of all
or any material portion of the business or assets of the Company, the Parent
or any of their subsidiaries, or to compel the Company, the Parent or any of
their subsidiaries to dispose of or hold separate all or any material
portion of the business or assets of the Company, the Parent or any of their
subsidiaries, as a result of the transactions contemplated by the Merger
Agreement; (iii) seeking to impose or confirm limitations on the ability of
the Parent, the Purchaser or any other affiliate of the Parent to exercise
effectively full rights of ownership of any Shares, including,

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without limitation, the right to vote any Shares, except as specifically
provided in Pennsylvania Law, acquired by the Purchaser pursuant to the
Offer, any Shareholder Agreement or otherwise on all matters properly
presented to the Company's shareholders, including, without limitation, the
approval and adoption of the Merger Agreement and the transactions
contemplated hereby; (iv) seeking to require divestiture by the Parent, the
Purchaser or any other affiliate of the Parent of any Shares; or (v) which
otherwise has a Material Adverse Effect (as defined in the Merger Agreement)
or which would materially adversely affect the business, operations,
properties, condition (financial or otherwise), assets or liabilities
(including, without limitation, contingent liabilities) or prospects of the
Parent;

(b) there has been any action taken, or any statute, rule, regulation,
legislation, interpretation, judgment, order or injunction enacted, entered,
enforced, promulgated, amended, issued or deemed applicable to (i) the
Parent, the Company or any subsidiary or affiliate of the Parent or the
Company or (ii) any transaction contemplated by the Merger Agreement, by any
legislative body, court, Governmental Entity, other than the routine
application of the waiting period provisions of the HSR Act to the Offer,
any Shareholder Agreement or the Merger, that is reasonably likely to
result, directly or indirectly, in any of the consequences referred to in
clauses (i) through (v) of paragraph (a) above; PROVIDED, HOWEVER, that the
Parent shall have used reasonable efforts to cause any such judgment, order
or injunction to be vacated or lifted;

(c) there has occurred, since June 30, 1998, any change, condition,
event or development that has a Material Adverse Effect (as defined in the
Merger Agreement) with respect to the Company;

(d) there has occurred (i) any general suspension of, or limitation on
prices for, trading in securities of the Company on the New York Stock
Exchange for a period in excess of 2 hours (excluding emergencies or
limitations resulting solely from physical damage, interference with such
exchange not related to market conditions, or any trading halt triggered
solely as a result of a specified decrease in a market index) (ii) a
declaration of a banking moratorium or any suspension of payments in respect
of banks in the United States or France, (iii) any limitation (whether or
not mandatory) by any government or governmental, administrative or
regulatory authority or agency, domestic or foreign, on, or other event
that, in the reasonable judgment of the Purchaser, affects, the extension of
credit by banks or other lending institutions, (iv) a commencement of a war
or armed hostilities or other national or international calamity directly or
indirectly involving the United States or (v) in the case of any of the
foregoing existing on the date hereof, a material acceleration or worsening
thereof;

(e) it has publicly disclosed or the Parent or the Purchaser has
otherwise learned that beneficial ownership (determined for the purposes of
this paragraph as set forth in Rule 13d-3 promulgated under the Exchange
Act) of 20% or more of the then outstanding Shares has been acquired by any
person, other than the Parent or any of its affiliates;

(f) any representation or warranty of the Company in the Merger
Agreement or of any Shareholder in the respective Shareholder Agreement that
is qualified as to materiality is not true and correct or any such
representation or warranty that is not so qualified is not true and correct
in any material respect, in each case when made on or immediately following
the expiration of the Offer as though made on or as of such date, except
those representations and warranties that address matters only as of a
certain date which shall not be true and correct as of such certain date;

(g) the Company has failed to perform in any material respect any
material obligation or to comply in any material respect with any agreement
or covenant of the Company to be performed or complied with by it under the
Merger Agreement or the Shareholders have failed to perform in any material
respect any obligation or to comply in any material respect with any
agreement or covenant of any Shareholder to be performed or complied with by
such Shareholder under the respective Shareholder Agreement;

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(h) the Merger Agreement has been terminated in accordance with its
terms;

(i) the Purchaser and the Company have agreed that the Purchaser
terminate the Offer or postpone the acceptance for payment of or payment for
Shares thereunder;

(j) any Option Consent or Warrant Consent have not been obtained
immediately prior to the expiration of the Offer; or

(k) the Parent and the Purchaser have not received immediately prior to
the expiration of the Offer the opinions of Ballard Spahr Andrews &
Ingersoll, LLP, as to the matters set forth in Sections 3.04 and 3.21 of the
Merger Agreement, and of McQuaide Blasko, as to the matters set forth in
Section 3.01 of the Merger Agreement, in each case in form and substance
satisfactory to the Parent and the Purchaser;

which, in the sole judgment of the Purchaser, in any such case, and regardless
of the circumstances (including any action or inaction by the Parent or any of
its affiliates) giving rise to any such condition, makes it inadvisable to
proceed with the Offer and with such acceptance for payment or payment.

The foregoing conditions are for the sole benefit of the Purchaser and the
Parent and may be asserted by the Purchaser or the Parent regardless of the
circumstances giving rise to any such condition or may be waived by the
Purchaser or the Parent in whole or in part at any time and from time to time in
their sole discretion. The failure by the Parent or the Purchaser at any time to
exercise any of the foregoing rights is not deemed a waiver of any such right;
the waiver of any such right with respect to particular facts and other
circumstances is not deemed a waiver with respect to any other facts and
circumstances; and each such right is deemed an ongoing right that may be
asserted at any time and from time to time.

15. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS.

GENERAL. Based upon its examination of publicly available information with
respect to the Company and the review of certain information furnished by the
Company to the Parent and discussions of representatives of Parent with
representatives of the Company during Parent's investigation of the Company (see
"Section 10. Background of the Offer; Contacts with the Company"), neither the
Purchaser nor the Parent is aware of any license or other regulatory permit that
appears to be material to the business of the Company and the Subsidiaries,
taken as a whole, which might be adversely affected by the acquisition of Shares
by the Purchaser pursuant to the Offer, or, except as set forth below, of any
approval or other action by any domestic (federal or state) or foreign
governmental, administrative or regulatory authority or agency which would be
required prior to the acquisition of Shares by the Purchaser pursuant to the
Offer. Should any such approval or other action be required, it is the
Purchaser's present intention to seek such approval or action. The Purchaser
does not currently intend, however, to delay the purchase of Shares tendered
pursuant to the Offer pending the outcome of any such action or the receipt of
any such approval (subject to the Purchaser's right to decline to purchase
Shares if any of the conditions in "Section 14. Conditions to the Offer" shall
have occurred). There can be no assurance that any such approval or other
action, if needed, would be obtained without substantial conditions or that
adverse consequences might not result to the business of the Company, the
Purchaser or the Parent or that certain parts of the businesses of the Company,
the Purchaser or the Parent might not have to be disposed of or held separate or
other substantial conditions complied with in order to obtain such approval or
other action or in the event that such approval was not obtained or such other
action was not taken. The Purchaser's obligation under the Offer to accept for
payment and pay for Shares is subject to certain conditions, including
conditions relating to the legal matters discussed in this "Section 15. Certain
Legal Matters and Regulatory Approvals." See "Section 14. Conditions to the
Offer."

STATE TAKEOVER LAWS. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable to
attempts to acquire securities of corporations that are incorporated or have
assets, shareholders, executive offices or places of business in such states. In
EDGAR V. MITE CORP., the Supreme Court of the United States held that the
Illinois Business Takeover Act,

41
<PAGE>
which involved state securities laws that made the takeover of certain
corporations more difficult, imposed a substantial burden on interstate commerce
and therefore was unconstitutional. In CTS CORP. V. DYNAMICS CORP. OF AMERICA,
however, the Supreme Court of the United States held that a state may, as a
matter of corporate law and, in particular, those laws concerning corporate
governance, constitutionally disqualify a potential acquiror from voting on the
affairs of a target corporation without prior approval of the remaining
shareholders, provided that such laws were applicable only under certain
conditions.

The Pennsylvania Takeover Disclosure Law ("PTDL") purports to regulate
certain attempts to acquire a corporation which (1) is organized under the laws
of Pennsylvania or (2) has its principal place of business and substantial
assets located in Pennsylvania. In CRANE CO. V. LAM, 509 F. SUPP. 782 (E.D. PA.
1981), the United States District Court for the Eastern District of Pennsylvania
preliminarily enjoined, on grounds arising under the United States Constitution,
enforcement of at least the portion of the PTDL involving the pre-offer waiting
period thereunder. Section 8(a) of the PTDL provides an exemption for any offer
to purchase securities as to which the board of directors of the target company
recommends acceptance to its shareholders, if at the time such recommendation is
first communicated to shareholders the offeror files with the Pennsylvania
Securities Commission ("PSC") a copy of the Schedule 14D-1 and certain other
information and materials, including an undertaking to notify security holders
of the target company that a notice has been filed with the PSC which contains
substantial additional information about the offer and which is available for
inspection at the PSC's principal office during business hours. The Board has
unanimously approved the transactions contemplated by the Merger Agreement and
recommended acceptance of the Offer and the Merger to the Company's
shareholders. While reserving and not waiving its right to challenge the
validity of the PTDL or its applicability to the Offer, the Purchaser is making
a Section 8(a) filing with the PSC in order to qualify for the exemption from
the PTDL. Pursuant to Section 10 of the PTDL, the Purchaser will submit the
appropriate $100 notice filing fee along with the Section 8(a) filing.
Additional information about the Offer has been filed with the Pennsylvania
Securities Commission pursuant to the Pennsylvania Takeover Disclosure Law and
is available for inspection at the Pennsylvania Securities Commission's office
at Eastgate Office Building, 1010 North 7th Street, Harrisburg, PA 17102-1410,
during business hours.

Chapter 25 of Pennsylvania Law contains other provisions relating generally
to takeovers and acquisitions of certain publicly owned Pennsylvania
corporations such as the Company that have a class or series of shares entitled
to vote generally in the election of directors registered under the Exchange Act
(a "registered corporation"). The following discussion is a general and highly
abbreviated summary of certain features of such chapter, is not intended to be
complete or to completely address potentially applicable exceptions or
exemptions, and is qualified in its entirety by reference to the full text of
Chapter 25 of Pennsylvania Law.

In addition to other provisions not applicable to the Offer or the Merger,
Subchapter 25D of Pennsylvania Law includes provisions requiring approval of a
merger of a registered corporation with an "interested shareholder" in which the
"interested shareholder" is treated differently from other shareholders, by the
affirmative vote of the shareholders entitled to cast at least a majority of the
votes that all shareholders other than the interested shareholder are entitled
to cast with respect to the transaction without counting the votes of the
interested shareholders. This disinterested shareholder approval requirement is
not applicable to a transaction (i) approved by a majority of disinterested
directors, (ii) in which the consideration to be received by shareholders is not
less than the highest amount paid by the interested shareholder in acquiring
such shareholder's shares, or (iii) effected without submitting the Merger to a
vote of shareholders as permitted in Section 1924(b)(1)(ii) of the Pennsylvania
Law. The Purchaser currently believes that the disinterested shareholders
approval requirement of Subchapter 25D will not be applicable to the
contemplated Merger because of prior disinterested Board approval. The Company
has represented to the Purchaser that Subchapter 25D is not applicable to the
contemplated Merger.

Subchapter 25E of Pennsylvania Law, which addresses "control transactions,"
requires under certain circumstances any person who acquires at least 20% of the
voting power of a registered corporation to

42
<PAGE>
offer to purchase up to the balance of the voting shares of the corporation at
the price determined under the statute, which may not be less than the highest
price per share paid by the controlling person or group at any time during the
90-day period ending on and including the date of the control transaction, plus
an increment representing any value, including without limitation, any
proportion of value payable for any acquisition of control of the corporation,
that may not be reflected in such price. A "control transaction" will occur if
the Purchaser acquires voting power over 20% or more of the Shares of the
Company by purchasing Shares pursuant to the Offer. See "Section 11. Purpose of
the Offer; Plans for the Company After the Offer and the Merger; the Merger
Agreement; and Related Agreements."

Subchapter 25F of Pennsylvania Law prohibits under certain circumstances
certain "business combinations," including mergers and sales of pledges of
significant assets, of a registered corporation with an "interested shareholder"
for a period of five years. Subchapter 25F exempts, among other things, business
combinations approved by the board of directors prior to a shareholder becoming
an interested shareholder, transactions with interested shareholders who
beneficially owned shares with at least 15% of the total voting power of a
corporation on March 23, 1988 and remain so, and transactions involving a
company whose bylaws or articles of incorporation provide that Subchapter F
shall not be applicable to such corporation. The Company has represented to the
Purchaser that the Merger has been duly and validly authorized by all necessary
corporate action pursuant to Subchapter 25F.

Subchapter 25G of Pennsylvania Law, relating to "control-share
acquisitions," prevents under certain circumstances the owner of a control-share
block of shares of a registered corporation from voting such shares unless a
majority of the "disinterested" shares approve the restoration of such voting
rights. Failure to obtain such approval may result in a forced sale by the
control-share owner of the control-share block to the corporation at a possible
loss. The purchase by the Purchaser of Shares may be deemed to constitute a
control-share acquisition, with the result that the Purchaser would not have
voting rights with respect to such control-shares unless the voting rights are
restored by a disinterested shareholder vote.

Subchapter 25H of Pennsylvania Law, relating to disgorgement by certain
controlling shareholders of a registered corporation, provides that under
certain circumstances any profit realized by a controlling person from the
disposition of shares of the corporation to any person (including to the
corporation under Subchapter 25G or otherwise) will be recoverable by the
corporation.

Subchapter 25I of Pennsylvania Law entitles "eligible employees" of a
registered corporation to a lump sum payment of severance compensation under
certain circumstances if the employee is terminated, other than for willful
misconduct connected with the work of the employee, within 90 days before voting
rights lost as a result of a control-share acquisition are restored by a vote of
disinterested shareholders. Subchapter 25J of Pennsylvania Law provides
protection against termination or impairment under certain circumstances of
"covered labor contracts" of a registered corporation as a result of a "business
combination transaction" if the business operation to which the covered labor
contract relates was owned by the registered corporation at the time voting
rights are restored by shareholder vote after a control-share acquisition. The
Company has represented to the Purchaser that Subchapters 25I and 25J are not
applicable to the transactions contemplated by the Merger Agreement.

Section 2504 of Pennsylvania Law provides that the applicability of Chapter
25 of Pennsylvania Law to a registered corporation having a class or series of
shares entitled to vote generally in the election of directors registered under
the Exchange Act or otherwise satisfying the definition of a registered
corporation under Section 2502(1) of Pennsylvania Law shall terminate
immediately upon the termination of the status of the corporation as a
registered corporation. The Purchaser intends to seek to cause the Company to
terminate the registration of the Shares under the Exchange Act as soon after
consummation of the Offer as the requirements for termination of the
registration of the Shares are met.

Except for the filing pursuant to section 8(a) of the PTDL described above,
neither the Purchaser nor the Parent has currently complied with any state
takeover statute or regulation; however the Purchaser intends to comply with
Subchapter 25E to the extent it is applicable upon consummation of the Offer.
The

43
<PAGE>
Purchaser reserves the right to challenge the applicability or validity of any
state law purportedly applicable to the Offer or the Merger and nothing in this
Offer to Purchase or any action taken in connection with the Offer or the Merger
is intended as a waiver of such right. If it is asserted that any state takeover
statute is applicable to the Offer or the Merger and an appropriate court does
not determine that it is inapplicable or invalid as applied to the Offer or the
Merger, the Purchaser might be required to file certain information with, or to
receive approvals from, the relevant state authorities, and the Purchaser might
be unable to accept for payment or pay for Shares tendered pursuant to the
Offer, or be delayed in consummating the Offer or the Merger. In such case,
Purchaser may not be obliged to accept for payment or pay for any Shares
tendered pursuant to the Offer.

ANTITRUST. Under the HSR Act and the rules that have been promulgated
thereunder by the FTC, certain acquisition transactions may not be consummated
unless certain information has been furnished to the Antitrust Division and the
FTC and certain waiting period requirements have been satisfied. The acquisition
of Shares by the Purchaser pursuant to the Offer are subject to such
requirements. See "Section 2. Acceptance for Payment and Payment for Shares."

Pursuant to the HSR Act, promptly after the date hereof, the Parent will
file a Premerger Notification and Report Form in connection with the purchase of
Shares pursuant to the Offer with the Antitrust Division and the FTC. Under the
provisions of the HSR Act applicable to the Offer, the purchase of Shares
pursuant to the Offer may not be consummated until the expiration of a
15-calendar day waiting period following the filing by the Parent. Accordingly,
the waiting period under the HSR Act applicable to the purchase of Shares
pursuant to the Offer will expire at 11:59 p.m., New York City time, on the day
that is fifteen calendar days from the date of such filing, unless such waiting
period is earlier terminated by the FTC and the Antitrust Division or extended
by a request from the FTC or the Antitrust Division for additional information
or documentary material prior to the expiration of the waiting period. Pursuant
to the HSR Act, the Parent intends to request early termination of the waiting
period applicable to the Offer. There can be no assurance, however, that the
15-day HSR Act waiting period will be terminated early. Thereafter, the waiting
period could be extended only by court order. If the acquisition of Shares is
delayed pursuant to a request by the FTC or the Antitrust Division for
additional information or documentary material pursuant to the HSR Act, the
Offer may, but need not, be extended and, in any event, the purchase of and
payment for Shares will be deferred until 10 days after the request is
substantially complied with, unless the extended period expires on or before the
date when the initial 15-day period would otherwise have expired, or unless the
waiting period is sooner terminated by the FTC and the Antitrust Division. Only
one extension of such waiting period pursuant to a request for additional
information is authorized by the HSR Act and the rules promulgated thereunder,
except by court order. Any such extension of the waiting period will not give
rise to any withdrawal rights not otherwise provided for by applicable law. See
"Section 4. Withdrawal Rights." It is a condition to the Offer that the waiting
period applicable under the HSR Act to the Offer expire or be terminated. See
"Section 2. Acceptance for Payment and Payment for Shares" and "Section 14.
Conditions to the Offer."

The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
the Purchaser pursuant to the Offer. At any time before or after the purchase of
Shares pursuant to the Offer by the Purchaser, the FTC or the Antitrust Division
could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or seeking the divestiture of Shares purchased by
the Purchaser or the divestiture of substantial assets of the Parent, the
Company or their respective subsidiaries. Private parties and state attorneys
general may also bring legal action under federal or state antitrust laws under
certain circumstances. Based upon an examination of information available to
Parent relating to the businesses in which the Parent, the Company and their
respective subsidiaries are engaged, the Parent and the Purchaser believe that
the Offer will not violate the antitrust laws. Nevertheless, there can be no
assurance that a challenge to the Offer on antitrust grounds

44
<PAGE>
will not be made or, if such a challenge is made, what the result would be. See
"Section 15. Conditions to the Offer" for certain conditions to the Offer,
including conditions with respect to litigation.

16. FEES AND EXPENSES. Except as set forth below, the Purchaser will not
pay any fees or commissions to any broker, dealer or other person for soliciting
tenders of Shares pursuant to the Offer.

J.P. Morgan is acting as Dealer Manager in connection with the Offer and has
provided certain financial advisory services in connection with the acquisition
of the Company. Pursuant to an engagement letter dated September 18, 1998, the
Parent has agreed to pay J.P. Morgan a fee of $500,000 upon the public
announcement of the signing of the Merger Agreement, and a fee of $500,000 upon
the completion of the Merger. The Parent has also agreed to reimburse J.P.
Morgan for all reasonable out-of-pocket expenses incurred by J.P. Morgan,
including reasonable fees and expenses of legal counsel, and to indemnify J.P.
Morgan against certain liabilities and expenses in connection with its
engagement.

The Purchaser and Parent have retained MacKenzie Partners, Inc., as the
Information Agent, and Harris Trust Company of New York, as the Depositary, in
connection with the Offer. The Information Agent may contact holders of Shares
by mail, telephone, telex, telecopy, telegraph and personal interview and may
request banks, brokers, dealers and other nominee shareholders to forward
materials relating to the Offer to beneficial owners.

As compensation for acting as Information Agent in connection with the
Offer, the Information Agent will be paid a fee of $7,000 and will also be
reimbursed for certain out-of-pocket expenses and may be indemnified against
certain liabilities and expenses in connection with the Offer, including certain
liabilities under the federal securities laws. The Purchaser will pay the
Depositary reasonable and customary compensation for its services in connection
with the Offer, plus reimbursement for out-of-pocket expenses, and will
indemnify the Depositary against certain liabilities and expenses in connection
therewith, including under federal securities laws. Brokers, dealers, commercial
banks and trust companies will be reimbursed by the Purchaser for customary
handling and mailing expenses incurred by them in forwarding material to their
customers.

17. MISCELLANEOUS. The Purchaser is not aware of any jurisdiction where
the making of the Offer is prohibited by any administrative or judicial action
pursuant to any valid state statute. If the Purchaser becomes aware of any valid
state statute prohibiting the making of the Offer or the acceptance of Shares
pursuant thereto, the Purchaser will make a good faith effort to comply with any
such state statute. If, after such good faith effort, the Purchaser cannot
comply with any such state statute, the Offer will not be made to (nor will
tenders be accepted from or on behalf of) the holders of Shares in such state.
In any jurisdiction where the securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be
made on behalf of the Purchaser by the Dealer Manager or by one or more
registered brokers or dealers licensed under the laws of such jurisdiction.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR THE COMPANY NOT CONTAINED IN THIS
OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.

Pursuant to Rule 14d-3 of the General Rules and Regulations under the
Exchange Act, Parent and the Purchaser have filed with the Commission the
Schedule 14D-1, together with exhibits, furnishing certain additional
information with respect to the Offer. The Schedule 14D-1 and any amendments
thereto, including exhibits, may be inspected at, and copies may be obtained
from, the same places and in the same manner as set forth in "Section 7. Certain
Information Concerning the Company" (except that they will not be available at
the regional offices of the Commission).

ZONEO ACQUISITION CORP.

November 6, 1998

45
<PAGE>
SCHEDULE I

DIRECTORS AND EXECUTIVE OFFICERS OF
THE PARENT AND THE PURCHASER

1. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARENT. Set forth below is the
name, current residence or business address, citizenship and the present
principal occupation or employment and material occupations, positions, offices
or employments and business addresses thereof for the past five years of each
director and executive officer of the Parent.

<TABLE>
<CAPTION>
PRESENT PRINCIPAL OR EMPLOYMENT
NAME AND FIVE YEAR EMPLOYMENT HISTORY
- ------------------------------------------ ---------------------------------------------------------------------
<S> <C>

Frank Riboud.............................. Chairman and Chief Executive Officer of Groupe Danone since 1996;
Groupe Danone Director of Groupe Danone since 1992; Director of Victoire (17, rue
7, rue de Teheran de la Banque, 75002 Paris, France) since 1995; Director of Abi
75008 Paris Holdings Limited (1London Bridge (c/o Price Waterhouse) SE1 9QL,
France London, United Kingdom) since 1995; Director of Associated Biscuits
Citizen of France International Ltd (United Kingdom--Food Production) since 1995;
Director of Star S.p.A (Via Matteotti 142, 2004 Agragate Brianza
Milano, Italy) since 1995; Director of Fiat (Via Nizza 250, 10121
Turin, Italy--Car Manufacturer); Director of Clover Holdings Limited
(219, Golf Club Terrace, Roodeport 1709, South Africa) since 1996;
Director of Aguas Minerales (Av, Juan b. Justo 1015, Buenos Aires,
Argentina--Water Production) since 1996; Director of Strauss Dairies
Ltd (Lohamei Ha'getaot, Israel) since 1996; Director of Starlux S.A.
(Via Congost, S/N, 08160 Montmelo, Spain) from 1995 until 1997;
Director of Semoulerie de Bellevue (4, rue de Boileau, 69006 Volvic,
France) from 1995 until 1997; Director of Clover S.A. Limited (219,
Golf Club Terrace, Roodeport 1709, South Africa) from 1996 until
1998.
</TABLE>

I-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OR EMPLOYMENT
NAME AND FIVE YEAR EMPLOYMENT HISTORY
- ------------------------------------------ ---------------------------------------------------------------------
<S> <C>
Michel David-Weill........................ Vice-Chairman and Director of Groupe Danone; Chairman of the
6, place d'Alleray Compensation Committee of Groupe Danone; Chairman of Maison Lazard
75015 Paris International (France--Finance); Chairman of Lazard Freres & Co. LLC
France (USA--Finance); General Partner and Chairman of Lazard Partners LP
Citizen of France (USA-- Finance); Chairman of Eurafrance (France); Vice-Chairman of
Lazard Brothers & Co. Ltd (England--Finance); Managing Partner of
Lazard Freres & Cie. (France--Finance); Managing Partner of Maison
Lazard & Cie. (France--Finance); Managing Partner of Partena
(France); Managing Partner of Partemiel (France); Manager of Parteger
(France); Manager of Parteman (France); Member of the Supervisory
Board of Publicis (France--Advertising); Director of Maison Lazard
S.A. (France--Finance); Director of La France Vie (France); Director
of La France Participation et Gestion (France) since 1997; Director
of S.A. de la rue imperiale de Lyon (France); Director of F.P.G.
(France); Director of Pearson plc (England); Director of Euralux
(Luxembourg); Director of Exor Group (Luxembourg); Director of ITT
Industries (USA); Director of I.F.I. S.p.A. (Italy), Permanent
Representative of Lazard Freres & Cie. to the Board of Cie. de Credit
(France); Chairman of the Supervisory Board of SOVAC (France--
Banking) from 1982 until 1995; Director of Instituto Finanziario
Industriale Internatianal S.A. (Luxembourg) from 1973 until 1994.

Philippe Lenain........................... Director of Groupe Danone since 1991; President of Copart
Groupe Danone B.V.-Cokoladovny Partners (Amsteldijk 166, 1079 LH Amsterdam,
7, rue de Teheran Netherlands) since 1995; Director of Eco- Emballages (44, avenue
75008 Paris Georges Pompidou, 92300 Levallois- Perret, France--Packaging) since
France 1995; Director of Nord Est (10, rue d'Athenes, 75009 Paris); Director
Citizen of France of Egidio Galbani S.p.A. (25 Via Fabio Filzi, 20124 Milano, Italy)
since 1990; Director of San Miguel (Urgel 240, 08036 Barcelona,
Spain) since 1992; Permanent representative of Finalim IV to the
Board of Spacecode since 1996; President of Lyon Air (8, avenue
Condorcet, 69100 Villeurbanne, France) since 1994.
</TABLE>

I-2
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OR EMPLOYMENT
NAME AND FIVE YEAR EMPLOYMENT HISTORY
- ------------------------------------------ ---------------------------------------------------------------------
<S> <C>
Umberto Agnelli........................... Director of Groupe Danone; Member of the Strategy and Nomination
Italy Advisory Committee of Groupe Danone; Chairman of IFIL S.p.A. (Italy)
Citizen of Italy since 1983; Chairman of CARFIN S.r.l. (Italy) since 1983; Co-Chairman
of Business Group Italia- Giappone (Italy); Vice-Chairman of Giovanni
Agnelle e C. Sapaz (Italy) since 1995; Vice-Chairman and Director of
IFI S.p.A. (Italy) since 1981; Director of Piaggio S.p.A.
(Italy--Automobile Manufacturer) since 1988; Director of Universite
Luiss (Italy); Member of the Supervisory Board and Member of the
Strategy Committee of Worms & Cie. (France--Banking) since 1997;
Member of the Advisory Committee of Allianz Versicherungs A.G.
(Germany) since 1980; Member of the International Advisory Board of
Fiat S.p.A. (Italy--Car Manufacturer); Member of the Strategy and
Financial Committee of Groupe Danone from 1988 until 1996; Director
of Worms & Cie. from 1990 until 1997; Member of the International
Advisory Committee of U.A.P. (France-- Insurance) from 1991 until
1994;

Dominique Auburtin........................ Director of Groupe Danone; Chairman of Worms & Cie. (France--Banking)
France since 1998; Chairman of the Supervisory Board of Saint Louis Sucre
Citizen of France S.A. (France--Sugar Production); Director of Athena Immobilier
(France--Real Estate); Director of CAR S.A. (France); Director of La
Boetie & Associes (France); Director of Les Petites Affiches
(France-- Publishing); Director of Permal Group (France); Director of
Arjo Wiggins Appleton (England); Member of the Supervisory Board of
Worms & Cie. Developpement (France--Finance); Permanent
Representative of Societe Fermiere et de Participations to the Board
of Societe Fonciere de Joyenval (France--Real Estate); Permanent
Representative of W Participations to the Boards of Antonin Rodet,
Pechel Industries and Societe Fermiere et de Participations;
Permanent Representative of Worms & Cie. to the Boards of Espace
Expansion (France) and Arjomari-Prioux (France); Manager of Worms &
Cie. before 1998; Chairman of Athena Immobilier before 1998; Chairman
of S.A. de Transactions Immobileres et Commerciales (France--Real
Estate) before 1998; Chairman of Societe Fermiere et de
Participations before 1998; Chairman of W Participations before 1998;
Vice-Chairman of Saint Louis before 1998; Director of Cie. Nationale
de Navigation Foncina before 1998; Director of Worms Voyage before
1998; Director of La Rinascente before 1998; Executive Officer of
SOMEAL before 1998.
</TABLE>

I-3
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OR EMPLOYMENT
NAME AND FIVE YEAR EMPLOYMENT HISTORY
- ------------------------------------------ ---------------------------------------------------------------------
<S> <C>
Yves Boel................................. Director of Groupe Danone since 1972; Chairman of S.A Sofina
c/o Sofina S.A. (Belgium) since 1988; Chairman, Managing Director of S.A. Union
38, rue de Naples Financiere Boel (Belgium--Finance) since 1973; Vice-Chairman of S.A.
B 1050 Brussels Tractebel (Belgium) since 1987; Director of S.A. Societe de
Belgium Participations Industrielles (Belgium--Investment) since 1988;
Citizen of Belgium Director of Eurafrance, France, since 1988; Director of S.A. Royale
Belge (Belgium) since 1984; Director of S.A. Gib (Belgium) since
1974; Director of S.A. Mecaniver (Belgium) since 1989; Director of
S.A. Petrofina, (Belgium) since 1986; Member of the Strategy and
Nomination Advisory Committee of Groupe Danone from 1982 until 1996;
President of Sidro S.A. from 1968 until 1996; Vice-Chairman of
General de Banque (Belgium--Banking) from 1977 until 1997; Director
of United Meridan Corporation from 1987 to 1994; Chairman of Sovay
S.A. from 1991 to 1996.

Yves Cannac............................... Director of Groupe Danone; Member of the Audit Committee of Groupe
CEGOS Danone; Counsel to CEGOS (France) since 1998; Director of Caisse des
204, Rond Point du Pont de Sevres Depots-Developpement (France) since 1995; Director of Societe
92516 Boulogne Cedex Generale (France--Banking) since 1997; Director of AGF
France (France--Insurance) since 1996; Director of Die Akademie (Germany)
Citizen of France since 1997; Member of the Strategy and Nomination Advisory Committee
of Groupe Danone from 1985 until 1996; Chief Executive Officer of
CEGOS from 1994 until 1998.

Philippe Corbiere......................... Director of Groupe Danone; Chairman of Les Receptions de France S.A.
Les Receptions de France SA Scott Traiteur Scott Traiteur since 1981; Chairman of Societe Michel-Prie S.A.
60 rue Anatole France (France) since 1987; Director of Societe Antillaise de Production de
92300 Levallois-Perret Yaourts (France) since 1985; Director of Intrama S.A. (France) since
France 1989; Member of the Advisory Board of Agro Industrie Consultant
Citizen of France (France) until 1994.
</TABLE>

I-4
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OR EMPLOYMENT
NAME AND FIVE YEAR EMPLOYMENT HISTORY
- ------------------------------------------ ---------------------------------------------------------------------
<S> <C>
Luca Fossati.............................. Director of Groupe Danone since 1996; Chairman of Dafofin Holding
Findim Investment-Gradinata Forge 2 S.A. (50 Val Fleuri-L 1526 Luxembourg) since 1995; Chairman of Findim
6900 Massagno Finanziaria Industrial Immobiliare Mobiliare S.p.A
Switzerland (Italy--Investment) since 1995; Chairman of Foodfin S.A. Luxembourg,
Citizen of Italy Luxembourg, since 1995; Chairman of Sirim S.p.A., (Italy) since 1995;
Chairman of Star Stabilimento Alimentare S.p.A. (Italy) since 1995;
Director of Consortium S.p.A. (Italy) since October 1995; Director of
Estrella Limited (United Kingdom) since December 1986; Director of
Egidio Galbani S.p.A (Italy) since April 1995; Director of IFIL
Finanziaria di Partccipazioni S.p.A (Italy-- Investment) since June
1995; Director of Sofimpi S.p.A. (Italy) since 1982; Director of
Iberfindim S.A (Spain) since October 1997; Member of the Strategic
and Financial Committee of Groupe Danone from 1995 to 1996; Chairman
of Findim Sviluppo S.p.A from 1995 to 1996; Chairman of Cassinassa
S.r.l. (Italy) until 1995; Chairman of Crosina S.r.l. (Italy) until
1995; Chairman of Estados S.r.l. (Italy) until 1994; Director of
Starlux S.A. (Spain) from 1989 until 1993 and from 1995 until 1997;
Director of Euro Findim B.V. (Netherlands) from 1991 to 1994;
Director of Stella S.r.l. (Italy) until 1995.

Jean Gandois.............................. Director of Groupe Danone; Chairman of the Board of Cockerill-Sambre
Cockerill-Sambre Group S.A. (Belgium) since 1987; Director of Banque Nationale de Paris
187, chaussee de la Hulpe (France--Banking); Director of Eurafrance; Director of Societe
1170 Bruxelles Generale de Belgique (Belgium); Director of Frecolux (Luxembourg);
Belgium Director of Air Liquide Espana (Spain--Gas); Director of Sogepa Spa
Citizen of France (Italy) since April 1996; Director of Air Liquide Italia (Italy--
Gas); Member of the Supervisory Board of Peugeot S.A. (France--Car
Manufacturer), Compagnie Financiere de Paribas (France--Banking),
Suez-Lyonnaise des Eaux (France--Utilities), Vallourec (France-Steel
tubing), Akzo Nobel (Netherlands), and Siemens A.G (Germany--
Electronics); President of Pechiney International S.A. from 1989 to
1994; Director of Compagnie Francaise Philips (France--Electronics);
Director of Forges de Clabecq (Belgium); Director of American
National Can (USA-- Packaging) from 1991 until 1994; Director of
Europa Metalli (Italy) from 1988 to 1994; Director of Howmet
Corporation (USA) from 1986 to 1994; Director of Pechiney Corporation
(USA--Packaging) from 1986 to 1994.

Xavier Gardinier.......................... Director of Groupe Danone; Chairman of Gepag (France) since 1981;
61, rue de Berri Director of Cortambert S.A. (France) since 1987; Director of GFC
75008 Paris (USA); Member of the Strategic and Financial Committee of Groupe
France Danone from 1984 until 1986; Director of Compagnie de Naviguation
Citizen of France Mixte from 1978 until 1995.
</TABLE>

I-5
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OR EMPLOYMENT
NAME AND FIVE YEAR EMPLOYMENT HISTORY
- ------------------------------------------ ---------------------------------------------------------------------
<S> <C>
Francis Gautier........................... Director of Groupe Danone; Chairman of Saint-Honore Vie et Sante (47,
Groupe Danone rue du Faubourg Saint Honore, 75008 Paris, France) since 1992;
7, rue de Teheran Director of Groupement des Industries Agricoles Alimentaires et de
75008 Paris Grande Consommation (30, avenue Roosvelt, 75008 Paris, France--Food
France Production) since 1976; Member of the Surpervisory Board of Dauphin
Citizen of France OTA (15, rue de Milan, 75009 Paris, France) since 1990; Vice-Chairman
of Font Vella (324 Gran Via Las Cortes Catalanas, 08004 Barcelona,
Spain) from 1984 until 1997; Director of Compagnie Europeenne de
Publication (20, avenue Hoche, 75008 Paris, France--Publishing) from
1979 until 1997; Director of Italaquae Spa (Via Appia Nuova 700, 0178
Roma, Italy) from 1993 until 1996; Director of Metrologie
International (Tour d'Asnieres-4, avenue Laurent Cely, 92606
Asnieres, France) from 1997 until July 1998; Director of Scia Spa
(Via Nicolo Porpora 9, 0198 8 Roma, Italy) from 1987 until 1997;
Director of Sifit (Via Appia Nuova 700, Roma, Italy) from 1989 until
1995.

Jean-Claude Haas.......................... Director of Groupe Danone; General Partner of Lazard Freres & Cie
121, boulevard Haussmann (Banking); Managing Director of Lazard Brothers & Co Ltd (Banking);
75008 Paris Director of Pathe (France-- Movie Production); Director of Fonds
France Partenaires-Gestion (France--Finance); Director of Eurafrance;
Citizen of France Managing Partner of Lazard Instruments Financiers & Cie
(France--Derivative) from 1986 until 1995; Managing Partner of Maison
Lazard Developpement from 1990 until 1996; Director of Corning France
from 1979 until 1995; Director of Pearson plc from 1990 to 1996;
Permanent Representative of Lazard Freres & Cie to the Board of
Gemofim from 1986 until 1997.

Philippe Jaeckin.......................... Director and Executive Vice-President of Groupe Danone; Chairman of
Groupe Danone GB Glico (4-6, rue Edouard Vaillant, 91200 Athis-Mons, France) since
7, rue de Teheran 1987; Chairman of Boshevik (Russia) since 1997; Chairman of Saiwa
75008 Paris (Via Cecchi 6, 16131 Genonva, Italy) since 1989; Chairman of
France L'Alsacienne (France--Food Production) from 1987 to 1994.
Citizen of France
</TABLE>

I-6
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OR EMPLOYMENT
NAME AND FIVE YEAR EMPLOYMENT HISTORY
- ------------------------------------------ ---------------------------------------------------------------------
<S> <C>
Christian Laubie.......................... Director, Senior Executive Vice-President and Chief Financial Officer
Groupe Danone of Groupe Danone; Member of the Strategy and Nomination Advisory
7, rue de Teheran Board of Groupe Danone; Chairman of Cie Financiere Belin (avenue
75008 Paris Ambroise Croizat-Bois de l'Epine, 91130 Ris Orangis, France) since
France 1998; Director of Mecaniver (avenue de Broqueville 12 bte 3, B1150
Citizen of France Bruxelles, Belgium) since 1986; Director of Slivam (168, rue de
Rivoli, 75001 Paris, France); Director of Victoire (17, rue de la
Banque, 75002 Paris); Director of ABI Ltd. and ABI Holdings Ltd. (No.
1 London Bridge (c/o Price Waterhouse) SE1 9QL London, England) since
1995; Director of Star S.p.A. (Via Matteoti 142, 20041 Agrate Brianza
Milan, Italy) since 1998; Director of Lodahlim B.V. (Nachtwachtlaan
20, 1058 EA Amsterdam, Netherlands) since 1990; Director of San
Miguel (Urgel 240, 08036 Barcelona, Spain) since 1994; Director of
Wadia BSN India Ltd. (Neville House, Cursimbhoy Road, Ballard Es,
India) since 1993; Director of BIL--Britannia Industries Ltd. (5/1 A
Hungerford Street, 700017 Calcutta, India) since 1995; Member of the
Supervisory Board of NV Vereenigde Glasfabrieken and NBAVG-Nationaal
Bezit (Buitenhavenweg 114-116, PO BOX 46-3100AA Scieda, Netherlands)
since 1990; Permanent Representative of Groupe Danone to the Board of
Heudebert (4, rue Edouard Vaillant, 91207 Athis Mons, France--Food
Production) since 1988; Permanent Representative of S.A. des Biscuits
Belin to the Board of LU (avenue Ambroise Croizat-Bois de l'Epine,
91130 Ris Orangis, France) since 1995; Vice-Executive Officer of
Groupe Danone from 1994 until 1996; Director of VMC (41, rue Pierre
Maitre, 51100 Reims, France) from 1985 until 1994; Director of W&R
Jacob PLC (Belgard Road-Tallaght, Dublin, Ireland) from 1990 until
1995; Executive Officer of Cie. Financiere Belin from 1990 until
1998.

Georges Lecallier......................... Director of Groupe Danone; Chairman of Chateau La Haye; Director of
Groupe Danone Bil-Britannia Industries Ltd (51 A Hungerford Street, 700 017
7, rue de Teheran Calcutta, India) since 1995; Director of Mecaniver (Av de Broqueville
75008 Paris 12 bte 3, B 1150 Bruxelles, Belgium) since 1984; Member of
France Surpervisory Board of NV Vereenigde Glasfabrieken (Buitenhavenweg
Citizen of France 114-116, PO Box 46-3100 AA Schienda, Netherlands) since 1989;
Director of NV National Bezit Van Aandeelen Vereenigde Glasfabrieken
(Netherlands) since 1989; Permanent Representative of Groupe Danone
to the Boards of Alfabanque (France-- Banking) since November 1998,
Brasseries Kronenbourg (France--Brewery) since March 1989, and of
Saeme (France) since 1989.
</TABLE>

I-7
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OR EMPLOYMENT
NAME AND FIVE YEAR EMPLOYMENT HISTORY
- ------------------------------------------ ---------------------------------------------------------------------
<S> <C>
Jacques Nahmias........................... Director of Groupe Danone; Managing Director of Petrofrance S.A. (42,
c/o Petrofrance avenue Raymond Poincare, 75116 Paris, France--Oil, Gas,
42, avenue Raymond Poincare Petrochemicals); Chairman of Propetrol S.A.(France--Oil, Gas,
75116 Paris Petrochemicals) since 1982; Chairman of Promife S.A. (France) from
France 1984 to December 1997; Chairman of Casas Altas S.A. (Spain) from
Citizen of France March 1993 to March 1998; Director of Petrofrance S.A. from 1979
until 1997; Director of S.F.I. Petrofrance S.A. from 1987 until 1997.

Antoine Riboud............................ Director and Honorary Chairman of Groupe Danone; Chairman of the
Groupe Danone Strategy and Nomination Advisory Committee of Groupe Danone;
7, rue de Teheran Vice-Chairman of Mahou S.A. (Paseo Imperial 32, 28005 Madrid, Spain)
75008 Paris since 1980; Director of Pathe (5, boulevard Malesherbes, 75008 Paris,
France France) since Avril 1996; Director of Eurafrance (12, avenue Percier,
Citizen of France 75008 Paris, France) since 1972; Director of S.A.I.P. (11, rue
Beranger, 75003 Paris, France) from July 1996 to June 1998; Director
of L'Air Liquide (France--Gas) since 1991; Director of Renault (34,
quai du Rond Point du Jour, 92100 Boulogne Billancour, France--Car
Manufacturer) since March 1995; Chairman and Chief Executive Officer
of Groupe Danone from 1966 until 1996; Director of Chargeurs Reunis
(5, boulevard Malesherbes, 75008 Paris, France) from 1982 until 1996;
Director of Pechiney (Immeuble Balzac, 92048 Paris-La Defense 5-Cedex
68, France) from 1987 until 1994; Director of Vmc (41, rue Pierre
Maitre, 51100 Reims, France) from 1984 until 1995.

Edouard de Royeres........................ Director and Honorary Chairman of Groupe Danone; Member of the
France Strategy and Nomination Advisory Committee of Groupe Danone; Chairman
Citizen of France of Fondation du Patrimoine (France); Director of Air Liquide S.A.
(France--Energy); Director of L'Oreal (France--Cosmetics); Director
of Sodexho (France-Catering); Director of Solvay (Belgium); Chairman
of Air Liquide S.A. before 1998; Chairman of La Soudure Autogene
Francaise (France) before 1998; Director of Banque de Gestion
Prive-SIB (France--Banking) before 1998; Director of Pechiney
Internationale (France--Aluminium Manufacturing) before 1998;
Director of Banque Nationale de Paris (France--Banking) before 1998.
</TABLE>

I-8
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OR EMPLOYMENT
NAME AND FIVE YEAR EMPLOYMENT HISTORY
- ------------------------------------------ ---------------------------------------------------------------------
<S> <C>
Jerome Seydoux............................ Director of Groupe Danone; Member of the Strategy and Nomination
Pathe Advisory Board of Groupe Danone; Chairman and Chief Executive Officer
5, boulevard Malesherbes of Pathe; Chairman of Financiere de la Vallee Blanche
75008 Paris (France--Finance) since 1992; Chairman of Financiere du Mont-Blanc
France (France--Finance) since 1992; Chairman of British Sky Broadcasting
Citizen of France (England) since 1998; Chairman of the Supervisory Board of Le Cezanne
(France) since 1992; Executive Officer of Fornier S.A. (France) since
1982; Executive Officer of Chargeurs (France) since 1996; Member of
the Supervisory Board of Accor (France-- Tourism) since 1997;
Receiver of France 5 and S.E.P.C. (France) since 1997 and until 2000;
Director of Chargeurs since 1996; Director of Cie. Deutsch (France)
since 1968; Director of Fornier S.A. since 1982; Director of Renn
Productions (France) since 1987; Permanent Representative of
Financiere du Mont-Blanc to the Board of Societe Touristique du
Mont-Blanc (France--Tourism) since 1993; Permanent Representative of
Pathe to the Board of Pricel (France) since 1997; Permanent
Representative of Pathe to the Board of AMLF (France) since 1996;
Permanent Representative of Pathe to the Board of Chargetex 6
(France) since 1996; Permanent Representative of Pathe to the Board
of Alphatex (France) since 1996; Chairman of Chargeurs until 1996;
Chairman of S.E.P.C. until 1996; Chairman of France 5 until 1996;
Chairman of Pathe Cinema until 1994; Chairman of Pathe palace until
1997; Director of BSN until 1994; Director of Heljer S.A. until 1995;
Director of BSB Holdings until 1996; Director of BskyB Ltd. from 1994
until 1998.

Yves Theves............................... Director of Groupe Danone; Chairman of IB S.A. (France) since 1992;
France Chairman of ESAL S.A. (France) since 1983; Executive Officer and
Citizen of France Director of Convergences Gestion S.A. (France) since 1988; Director
of SIPAREX (France) since 1988; Director of Groupe Saint-Jean
(France) since 1991; Director of ETC (France) from 1992 until 1996.
</TABLE>

I-9
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OR EMPLOYMENT
NAME AND FIVE YEAR EMPLOYMENT HISTORY
- ------------------------------------------ ---------------------------------------------------------------------
<S> <C>
Jacques Vincent........................... Vice-Chairman, Senior Executive Vice-President and Chief Operating
Groupe Danone Officer of Groupe Danone; Vice-Chairman of Clover S.A. (219 Golf Club
7, rue de Teheran Terrace, Roodepoort 1709, South Africa) since 1996; Director of
75008 Paris Brasseries Kronenbourg (68 route d'Oberhausbergen-BP-37, 67037
France Strasbourg Cedex, France--Brewery) since 1997; Director of SAEME (22,
Citizen of France avenue des Sources BP 87, 74503 Evian Cedex, France) since 1997;
Director of ABI Ltd. and ABI Holdings Ltd. (No. 1 London Bridge (c/o
Price Waterhouse), SE1 9QL London, England) since 1995; Director of
Egidio Galbani S.p.A. (25 Via Fabio Fitzi, 20124 Milano, Italy) since
1991; Director of Delta Dairy SA (3 Kerkyras Str., Tavros, Greece)
since 1993; Director of Strauss Dairies Ltd (Lohamei Ha'gataot,
Israel) since 1996; Director of BIL--Britannia Industries Ltd. (5/1 A
Hungerford Street, 700017 Calcutta, India) since 1995; Director of
Villa Alpina (Morganti 8180--1557 Loma Herrnosa, Buenos Aires,
Argentina); Director of Aguas Minerales (Av. Juan B. Justo 1015,
Buenos Aires, Argentina--Water Production) since 1998; Director of
Birra Peroni Industriale (Via Birolli 8, 00155 Rome, Italy) since
1998; Director of Aguas Minerales from 1996 until 1998; Director of
LVSA (32730 Villecomtal sur Arrois, France) from 1989 until 1996;
Director of Continental Biscuits Ltd. (PIDC House Dr. Ziauddi,
Karrachi 4, Pakistan) from 1995 until 1996; Director of Wadia BSN
India Ltd. (Neville House, Cursimbhoy Road, Ballard Es, India) from
1995 until 1996; Member of the Supervisory Board of Mildes Sp. Z.O.O.
(Ui Swierczyniecka 85431501 Bierun, Poland) from 1995 until 1995;
Member of the Supervisory Board of Wola Sp. Z.O.O. (9/23 Redutowa
Street, 01 103 Warsaw, Poland) from 1994 until 1998.

Paul Lepercq.............................. Honorary Director of Groupe Danone; Chairman of Lepercq Group
Lepercq International Ltd Bermuda; Director of Groupe Danone from June 1970 to May 1992; Member
Sterling House Penthouse of Groupe Danone Audit Committee since January 1997.
16 Wesley Street
Hamilton HM11
Citizen of France

Daniel Carasso............................ Honorary Chairman of Groupe Danone; Director of Danone S.A. since
Groupe Danone 1988.
7, rue de Teheran
75008 Paris
France
Citizen of Spain
</TABLE>

I-10
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OR EMPLOYMENT
NAME AND FIVE YEAR EMPLOYMENT HISTORY
- ------------------------------------------ ---------------------------------------------------------------------
<S> <C>
Geoffroy Pinoncely........................ Member of the Executive Committee of Groupe Danone; Chairman of the
Groupe Danone Supervisory Board of BSB--Birkel Sonnen Bassermann (Postfach 1220,
7, rue de Teheran Birkelstasse, Germany) since 1997; Member of the Supervisory Board of
75008 Paris Danone Holding A.G. (Heindrich Wieland Strasse 170, 8000 Munchen
France 83-Post 830 354, Germany) since 1997; Director of Cie. Gervais Danone
Citizen of France (126/130, rue Jules Guesde, 92300 Levallois-Perret, France); Director
of Editions Beausejour (16, rue Camille Pelletan, 92300
Levallois-Perret, France--Publisher); Director of Cabinet Remy
(France); Director of Lea and Perrins of America (1209 Orange Street,
Wilmington, DE 198001, USA) since 1988; Director of Lea and Perrins
Inc. (15-01 Pollitt Drive, Fair Lawn, NJ 07140, USA) since 1988;
Director of Gelax S.p.A. (Piazza della Chiesa-Pontetetto, Lucca,
Italy); Permanent Representative of Cie. Gervais Danone to the Board
of Marie Surgeles France (29, rue Eugene Henaff, 94400 Vitry sur
Seine, France--Food Production) since 1998; Chairman of Segma Liebig
Maille (4, avenue Laurent Cely-Tour d'Asnieres, 92600 Asnieres,
France--Food Production) from 1988 until 1996; Chairman of Liebig
Benelux (Liebiglaan 11, 2900 Schoten, Belgium--Food Production) from
1989 until 1995; Chairman of Stoeffler (Z.I. Boulevard de l'Europe,
67210 Obernai, France) from 1992 until 1996; Chairman of Semoulerie
de Bellevue (4, rue Boileau, 69006 Lyon, France) from March 1997
until December 1997; Director of Starlux Espagne (Via Congost, S/N,
08160 Montmelo, Spain) from 1992 until 1997; Director of Liebig
Maille Amora (France-- Food Production) from 1980 until 1997;
Director of Liebig Benelux until 1997; Director of Panzani William
Saurin (4, rue Boileau BP 6452, 69413 Lyon Cedex 06, France);
Director of Bledina (383, rue Philippe Heron, 69654 Villefranche-sur-
Saone, France--Food Production) from 1989 until 1998; Director of
Gallia from 1987 until 1998; Director of Star S.p.A. (Via Matteotti
142, 20041 Agrate Brianza Milano, Italy) from 1992 until 1998;
Director of Pycasa la Cocinera (Torrejon de Ardoz, Cita de Loeches,
49 Madrid) from 1995 until 1998; Director of B.E. International Foods
(Grafton House-1371 Mollison Avenue, EN3 7JZ Enfield, England) from
1993 until 1997.

Jan Bennink............................... Senior Vice-President, Dairy Worlwide of Groupe Danone; Chairman of
Groupe Danone Bledina S.A. (France) since 1998; Director of Egidio Galbini S.p.A.
7, rue de Teheran (25 Via Fabio Filzi 25, 20124 Milan,Italy) since 1995; Director of
75008 Paris Clover S.A. Ltd. (219 Golf Club Terrace race, Roodepport 1709, South
France Africa) since 1996; Permanent Representative of Vilcontal Alimentaire
Citizen of the Netherlands (rue des Pyrenees, 64110 Rontignon, France); Director of LVSA from
1996 until 1997; Member of the Supervisory Board of MILDES from 1995
until 1998.
</TABLE>

I-11
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OR EMPLOYMENT
NAME AND FIVE YEAR EMPLOYMENT HISTORY
- ------------------------------------------ ---------------------------------------------------------------------
<S> <C>
Jean-Rene Buisson......................... Senior Vice-President and Member of the Executive Committee of Groupe
Groupe Danone Danone; Executive Officer in charge of Human Ressources of Groupe
7, rue de Teheran Danone; Chairman of SEAT (France) since 1997; Director and Executive
75008 Paris Officer of Brasseries Kronenbourg (France--Brewery) from1992 until
France 1996; Director and Chief Executive Officer of Kanterbrau
Citizen of France (France--Brewery) from 1995 until 1996; Director of Tepral (France)
from 1993 until 1997.

Simon Israel.............................. Senior Vice-President Asia Pacific of Groupe Danone; Chairman of
1 Temasek Avenue #34-02 Wahaha Joint-Ventures (China) since 1988; Chairman of Wuhan Dongda
Millenia Tower Brewery Co. L (China) since 1988; Chairman of Wuhan Euro Dongxihu
Singapore 039192 Brewery (China) since 1988; Chairman of Wuhan Xingyinge Brewery
Citizen of New Zealand Co.(China) since 1988; Commissioner of Tirta Investama (GP AQUA)
(Indonesia) since 1996; Commissioner of PT Tirta Investama
(Indonesia) since 1998; Director of Jinja Investments Pte. Ltd.
(Singapore) since 1988; Director of Griffin's Foods Limited since
1988; Director of Br. Brands (Malaysia) SDN since 1988; Director of
Best Corporation Limited (New Zealand) since 1988; Chairman of Amoy
Trading Ltd. (Hong Kong) since 1997; Chairman of Amoy Food Ltd. (Hong
Kong) since 1997; Regional Vice-President of Sara Lee (152 Beach Road
#28-01, The Gate Way East, Singapore 189721) from 1991 until March
1996.
</TABLE>

2. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER. Set forth below is
the name, business address, citizenship and the present principal occupation or
employment, and material occupations, positions, offices or employments and
business addresses thereof for the past five years of each director and
executive officer of the Purchaser.

<TABLE>
<CAPTION>
NAME, CITIZENSHIP AND PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD
CURRENT BUSINESS ADDRESS DURING THE PAST FIVE YEARS AND BUSINESS ADDRESSES THEREOF
- ------------------------------------------ ---------------------------------------------------------------------
<S> <C>

Marina Menu............................... Officer of Groupe Danone; Division Sales Manager for Danone Dairy
Groupe Danone from December 1991 to January 1995; International Marketing Director
7, rue de Teheran for the Biscuit Division from February 1996 until September 1996;
75008 Paris General Manager Minute Maid Danone from October 1996 to March 1998;
France General Manager Water International since April 1998.
Citizen of Venezuela

Mark S. Rodriguez......................... Chief Executive Officer of Great Brands of Europe, Inc.
208 Harbor Drive
Stamford, CT 06902
Citizen of the United States of America
</TABLE>

I-12
<PAGE>
<TABLE>
<CAPTION>
NAME, CITIZENSHIP AND PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD
CURRENT BUSINESS ADDRESS DURING THE PAST FIVE YEARS AND BUSINESS ADDRESSES THEREOF
- ------------------------------------------ ---------------------------------------------------------------------
<S> <C>
Michel Botbol............................. V.P. Finance and Customer Relations of Great Brands of European and
208 Harbor Drive Danone International Brands; Division Sales Manager for Belin
Stamford, CT 06902 Biscuits (France) from January 1994 until December 1994; Strategic
Citizen of France Business Manager for the Export Division of Groupe Danone (26, rue
Treilhard, 75008 Paris, France) from January 1995 to December 1997;
V.P. Finance and Customer Relations for Great Brands of Europe, Inc.
since January 1998.

Marc R. Charpentier....................... Vice-President General Manager Industrial Operations for Dannon
Great Brands of Europe, Inc. Natural Spring Water; Purchasing Director for the Beverage Division
208 Harbor Drive of Danone Group from September 1997 to May 1998; General Manager and
Stamford, CT 06902 Chief Executive Officer of Sources du Mont Dore from January 1995
Citizen of France until August 1997; Industrial Operation Manager for Evian Company
from February 1991 until December 1994.
</TABLE>

I-13
<PAGE>
SCHEDULE II

SECTIONS 1930(A) AND 1571-80
(SUBCHAPTER D OF CHAPTER 15)
OF THE PENNSYLVANIA BUSINESS CORPORATION LAW

SECTION 1930. DISSENTERS RIGHTS

(a) GENERAL RULE.--If any shareholder of a domestic business corporation
that is to be a party to a merger or consolidation pursuant to a plan of merger
or consolidation objects to the plan of merger or consolidation and complies
with the provisions of Subchapter D of Chapter 15 (relating to dissenters
rights), the shareholder shall be entitled to the rights and remedies of
dissenting shareholders therein provided, if any. See also section 1906(c)
(relating to dissenters rights upon special treatment).

CHAPTER 15
SUBCHAPTER D.--DISSENTERS RIGHTS

SECTION 1571. APPLICATION AND EFFECT OF SUBCHAPTER

(a) GENERAL RULE.--Except as otherwise provided in subsection (b), any
shareholder of a business corporation shall have the right to dissent from, and
to obtain payment of the fair value of his shares in the event of, any corporate
action, or to otherwise obtain fair value for his shares, where this part
expressly provides that a shareholder shall have the rights and remedies
provided in this subchapter. See:

Section 1906(c) (relating to dissenters rights upon special treatment).

Section 1930 (relating to dissenters rights).

Section 1931(d) (relating to dissenters rights in share exchanges).

Section 1932(c) (relating to dissenters rights in asset transfers).

Section 1952(d) (relating to dissenters rights in division).

Section 1962(c) (relating to dissenters rights in conversion).

Section 2104(b) (relating to procedure).

Section 2324 (relating to corporation option where a restriction on
transfer of a security is held invalid).

Section 2325(b) (relating to minimum vote requirement).

Section 2704(c) (relating to dissenters rights upon election).

Section 2705(d) (relating to dissenters rights upon renewal of
election).

Section 2907(a) (relating to proceedings to terminate breach of
qualifying conditions).

Section 7104(b)(3) (relating to procedure).

(b) EXCEPTIONS.--

(1) Except as otherwise provided in paragraph (2), the holders of the
shares of any class or series of shares that, at the record date fixed to
determine the shareholders entitled to notice of and to vote at the meeting
at which a plan specified in any of section 1930, 1931(d), 1932(c) or
1952(d) is to be voted on, are either:

(i) listed on a national securities exchange; or

II-1
<PAGE>
(ii) held of record by more than 2,000 shareholders; shall not have
the right to obtain payment of the fair value of any such shares under
this subchapter.

(2) Paragraph (1) shall not apply to and dissenters rights shall be
available without regard to the exception provided in that paragraph in the
case of:

(i) Shares converted by a plan if the shares are not converted solely
into shares of the acquiring, surviving, new or other corporation or
solely into such shares and money in lieu of fractional shares.

(ii) Shares of any preferred or special class unless the articles,
the plan or the terms of the transaction entitle all shareholders of the
class to vote thereon and require for the adoption of the plan or the
effectuation of the transaction the affirmative vote of a majority of the
votes cast by all shareholders of the class.

(iii) Shares entitled to dissenters rights under section 1906(c)
(relating to dissenters rights upon special treatment).

(3) The shareholders of a corporation that acquires by purchase, lease,
exchange or other disposition all or substantially all of the shares,
property or assets of another corporation by the issuance of shares,
obligations or otherwise, with or without assuming the liabilities of the
other corporation and with or without the intervention of another
corporation or other person, shall not be entitled to the rights and
remedies of dissenting shareholders provided in this subchapter regardless
of the fact, if it be the case, that the acquisition was accomplished by the
issuance of voting shares of the corporation to be outstanding immediately
after the acquisition sufficient to elect a majority or more of the
directors of the corporation.

(c) GRANT OF OPTIONAL DISSENTERS RIGHTS.--The bylaws or a resolution of the
board of directors may direct that all or a part of the shareholders shall have
dissenters rights in connection with any corporate action or other transaction
that would otherwise not entitle such shareholders to dissenters rights.

(d) NOTICE OF DISSENTERS RIGHTS.--Unless otherwise provided by statute, if
a proposed corporate action that would give rise to dissenters rights under this
subpart is submitted to a vote at a meeting of shareholders, there shall be
included in or enclosed with the notice of meeting:

(1) a statement of the proposed action and a statement that the
shareholders have a right to dissent and obtain payment of the fair value of
their shares by complying with the terms of this subchapter; and

(2) a copy of this subchapter.

(e) OTHER STATUTES.--The procedures of this subchapter shall also be
applicable to any transaction described in any statute other than this part that
makes reference to this subchapter for the purpose of granting dissenters
rights.

(f) CERTAIN PROVISIONS OF ARTICLES INEFFECTIVE.--This subchapter may not be
relaxed by any provision of the articles.

(g) CROSS REFERENCES.--See sections 1105 (relating to restriction on
equitable relief), 1904 (relating to a de facto transaction doctrine abolished)
and 2512 (relating to dissenters rights procedure).

SECTION 1572. DEFINITIONS

The following words and phrases when used in this subchapter shall have the
meanings given to them in this section unless the context clearly indicates
otherwise:

"CORPORATION." The issuer of the shares held or owned by the dissenter
before the corporate action or the successor by merger, consolidation, division,
conversion or otherwise of that issuer. A plan of

II-2
<PAGE>
division may designate which of the resulting corporations is the successor
corporation for the purposes of this subchapter. The successor corporation in a
division shall have sole responsibility for payments to dissenters and other
liabilities under this subchapter except as otherwise provided in the plan of
division.

"FAIR VALUE." The fair value of shares immediately before the effectuation
of the corporate action to which the dissenter objects, taking into account all
relevant factors, but excluding any appreciation or depreciation in anticipation
of the corporate action.

"INTEREST." Interest from the effective date of the corporate action until
the date of payment at such rate as is fair and equitable under all the
circumstances, taking into account all relevant factors, including the average
rate currently paid by the corporation on its principal bank loans.

SECTION 1573. RECORD AND BENEFICIAL HOLDERS AND OWNERS

(a) RECORD HOLDERS OF SHARES.--A record holder of shares of a business
corporation may assert dissenters rights as to fewer than all of the shares
registered in his name only if he dissents with respect to all the shares of the
same class or series beneficially owned by any one person and discloses the name
and address of the person or persons on whose behalf he dissents. In that event,
his rights shall be determined as if the shares as to which he has dissented and
his other shares were registered in the names of different shareholders.

(b) BENEFICIAL OWNERS OF SHARES.--A beneficial owner of shares of a
business corporation who is not the record holder may assert dissenters rights
with respect to shares held on his behalf and shall be treated as a dissenting
shareholder under the terms of this subchapter if he submits to the corporation
not later than the time of the assertion of dissenters rights a written consent
of the record holder. A beneficial owner may not dissent with respect to some
but less than all shares of the same class or series owned by the owner, whether
or not the shares so owned by him are registered in his name.

SECTION 1574. NOTICE OF INTENTION TO DISSENT

If the proposed corporate action is submitted to a vote at a meeting of
shareholders of a business corporation, any person who wishes to dissent and
obtain payment of the fair value of his shares must file with the corporation,
prior to the vote, a written notice of intention to demand that he be paid the
fair value for his shares if the proposed action is effectuated, must effect no
change in the beneficial ownership of his shares from the date of such filing
continuously through the effective date of the proposed action and must refrain
from voting his shares in approval of such action. A dissenter who fails in any
respect shall not acquire any right to payment of the fair value of his shares
under this subchapter. Neither a proxy nor a vote against the proposed corporate
action shall constitute the written notice required by this section.

SECTION 1575. NOTICE TO DEMAND PAYMENT

(a) GENERAL RULE.--If the proposed corporate action is approved by the
required vote at a meeting of shareholders of a business corporation, the
corporation shall mail a further notice to all dissenters who gave due notice of
intention to demand payment of the fair value of their shares and who refrained
from voting in favor of the proposed action. If the proposed corporate action is
to be taken without a vote of shareholders, the corporation shall send to all
shareholders who are entitled to dissent and demand payment of the fair value of
their shares a notice of the adoption of the plan or other corporate action. In
either case, the notice shall:

(1) State where and when a demand for payment must be sent and
certificates for certificated shares must be deposited in order to obtain
payment.

(2) Inform holders of uncertificated shares to what extent transfer of
shares will be restricted from the time that demand for payment is received.

II-3
<PAGE>
(3) Supply a form for demanding payment that includes a request for
certification of the date on which the shareholder, or the person on whose
behalf the shareholder dissents, acquired beneficial ownership of the
shares.

(4) Be accompanied by a copy of this subchapter.

(b) TIME FOR RECEIPT OF DEMAND FOR PAYMENT.--The time set for receipt of
the demand and deposit of certificated shares shall be not less than 30 days
from the mailing of the notice.

SECTION 1576. FAILURE TO COMPLY WITH NOTICE TO DEMAND PAYMENT, ETC.

(a) EFFECT OF FAILURE OF SHAREHOLDER TO ACT.--A shareholder who fails to
timely demand payment, or fails (in the case of certificated shares) to timely
deposit certificates, as required by a notice pursuant to section 1575 (relating
to notice to demand payment) shall not have any right under this subchapter to
receive payment of the fair value of his shares.

(b) RESTRICTION ON UNCERTIFICATED SHARES.--If the shares are not
represented by certificates, the business corporation may restrict their
transfer from the time of receipt of demand for payment until effectuation of
the proposed corporate action or the release of restrictions under the terms of
section 1577(a) (relating to failure to effectuate corporate action).

(c) RIGHTS RETAINED BY SHAREHOLDER.--The dissenter shall retain all other
rights of a shareholder until those rights are modified by effectuation of the
proposed corporate action.

SECTION 1577. RELEASE OF RESTRICTIONS OR PAYMENT FOR SHARES

(a) FAILURE TO EFFECTUATE CORPORATE ACTION.--Within 60 days after the date
set for demanding payment and depositing certificates, if the business
corporation has not effectuated the proposed corporate action, it shall return
any certificates that have been deposited and release uncertificated shares from
any transfer restrictions imposed by reason of the demand for payment.

(b) RENEWAL OF NOTICE TO DEMAND PAYMENT.--When the uncertificated shares
have been released from transfer restrictions and deposited certificates have
been returned, the corporation may at any later time send a new notice
conforming to the requirements of section 1575 (relating to notice to demand
payment), with like effect.

(c) PAYMENT OF FAIR VALUE OF SHARES.--Promptly after effectuation of the
proposed corporate action, or upon timely receipt of demand for payment if the
corporate action has already been effectuated, the corporation shall either
remit to dissenters who have made demand and (if their shares are certificated)
have deposited their certificates the amount that the corporation estimates to
be the fair value of the shares, or give written notice that no remittance under
this section will be made. The remittance or notice shall be accompanied by:

(1) The closing balance sheet and statement of income of the issuer of
the shares held or owned by the dissenter for a fiscal year ending not more
than 16 months before the date of remittance or notice together with the
latest available interim financial statements.

(2) A statement of the corporation's estimate of the fair value of the
shares.

(3) A notice of the right of the dissenter to demand payment or
supplemental payment, as the case may be, accompanied by a copy of this
subchapter.

(d) FAILURE TO MAKE PAYMENT.--If the corporation does not remit the amount
of its estimate of the fair value of the shares as provided by subsection (c),
it shall return any certificates that have been deposited and release
uncertificated shares from any transfer restrictions imposed by reason of the
demand for payment. The corporation may make a notation on any such certificate
or on the records of the

II-4
<PAGE>
corporation relating to any such uncertificated shares that such demand has been
made. If shares with respect to which notation has been so made shall be
transferred, each new certificate issued therefor or the records relating to any
transferred uncertificated shares shall bear a similar notation, together with
the name of the original dissenting holder or owner of such shares. A transferee
of such shares shall not acquire by such transfer any rights in the corporation
other than those that the original dissenter had after making demand for payment
of their fair value.

SECTION 1578. ESTIMATE BY DISSENTER OF FAIR VALUE OF SHARES

(a) GENERAL RULE.--If the business corporation gives notice of its estimate
of the fair value of the shares, without remitting such amount, or remits
payment of its estimate of the fair value of a dissenter's shares as permitted
by section 1577(c) (relating to payment of fair value of shares) and the
dissenter believes that the amount stated or remitted is less than the fair
value of his shares, he may send to the corporation his own estimate of the fair
value of the shares, which shall be deemed a demand for payment of the amount or
the deficiency.

(b) EFFECT OF FAILURE TO FILE ESTIMATE.--Where the dissenter does not file
his own estimate under subsection (a) within 30 days after the mailing by the
corporation of its remittance or notice, the dissenter shall be entitled to no
more than the amount stated in the notice or remitted to him by the corporation.

SECTION 1579. VALUATION PROCEEDINGS GENERALLY

(a) GENERAL RULE.--Within 60 days after the latest of:

(1) Effectuation of the proposed corporate action;

(2) Timely receipt of any demands for payment under section 1575
(relating to notice to demand payment); or

(3) Timely receipt of any estimates pursuant to section 1578 (relating
to estimate by dissenter of fair value of shares);

if any demands for payment remain unsettled, the business corporation may file
in court an application for relief requesting that the fair value of the shares
be determined by the court.

(b) MANDATORY JOINDER OF DISSENTERS.--All dissenters, wherever residing,
whose demands have not been settled shall be made parties to the proceeding as
in an action against their shares. A copy of the application shall be served on
each such dissenter. If a dissenter is a nonresident, the copy may be served on
him in the manner provided or prescribed by or pursuant to 42 Pa.C.S. Ch. 53
(relating to bases of jurisdiction and interstate and international procedure).

(c) JURISDICTION OF THE COURT.--The jurisdiction of the court shall be
plenary and exclusive. The court may appoint an appraiser to receive evidence
and recommend a decision on the issue of fair value. The appraiser shall have
such power and authority as may be specified in the order of appointment or in
any amendment thereof.

(d) MEASURE OF RECOVERY.--Each dissenter who is made a party shall be
entitled to recover the amount by which the fair value of his shares is found to
exceed the amount, if any, previously remitted, plus interest.

(e) EFFECT OF CORPORATION'S FAILURE TO FILE APPLICATION.--If the
corporation fails to file an application as provided in subsection (a), any
dissenter who made a demand and who has not already settled his claim against
the corporation may do so in the name of the corporation at any time within 30
days after the expiration of the 60-day period. If a dissenter does not file an
application within the 30-day period, each

II-5
<PAGE>
dissenter entitled to file an application shall be paid the corporation's
estimate of the fair value of the shares and no more, and may bring an action to
recover any amount not previously remitted.

SECTION 1580. COSTS AND EXPENSES OF VALUATION PROCEEDINGS

(a) GENERAL RULE.--The costs and expenses of any proceeding under section
1579 (relating to valuation proceedings generally), including the reasonable
compensation and expenses of the appraiser appointed by the court, shall be
determined by the court and assessed against the business corporation except
that any part of the costs and expenses may be apportioned and assessed as the
court deems appropriate against all or some of the dissenters who are parties
and whose action in demanding supplemental payment under section 1578 (relating
to estimate by dissenter of fair value of shares) the court finds to be
dilatory, obdurate, vexatious or in bad faith.

(b) ASSESSMENT OF COUNSEL FEES AND EXPERT FEES WHERE LACK OF GOOD FAITH
APPEARS.--Fees and expenses of counsel and of experts for the respective parties
may be assessed as the court deems appropriate against the corporation and in
favor of any or all dissenters if the corporation failed to comply substantially
with the requirements of this subchapter and may be assessed against either the
corporation or a dissenter, in favor of any other party, if the court finds that
the party against whom the fees and expenses are assessed acted in bad faith or
in a dilatory, obdurate, arbitrary or vexatious manner in respect to the rights
provided by this subchapter.

(c) AWARD OF FEES FOR BENEFITS TO OTHER DISSENTERS.--If the court finds
that the services of counsel for any dissenter were of substantial benefit to
other dissenters similarly situated and should not be assessed against the
corporation, it may award to those counsel reasonable fees to be paid out of the
amounts awarded to the dissenters who were benefitted.

II-6
<PAGE>
Facsimiles of the Letter of Transmittal will be accepted. The Letter of
Transmittal and certificates evidencing Shares and any other required documents
should be sent or delivered by each shareholder or his or her broker, dealer,
commercial bank, trust company or other nominee to the Depositary at one of its
addresses set forth below.

THE DEPOSITARY FOR THE OFFER IS:

HARRIS TRUST COMPANY OF NEW YORK

<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND:

Wall Street Station (201) 222-4720 Receive Window
P.O. Box 1023 or Wall Street Plaza
New York, New York (201) 222-4721 88 Pine Street, 19th Floor
10268-1023 New York, New York 10005

CONFIRM BY TELEPHONE:

(201) 222-4707
</TABLE>

Questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
listed below. Additional copies of this Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent. A shareholder may also contact brokers, dealers, commercial
banks or trust companies for assistance concerning the Offer.

THE INFORMATION AGENT FOR THE OFFER IS:

abcdef

156 Fifth Avenue
New York, New York 10010
Tel.: (212) 929-5916
Fax: (212) 675-0918

THE DEALER MANAGER FOR THE OFFER IS:

J.P. MORGAN & CO.
60 Wall Street
New York, New York 10260
Tel.: (800) 576-8401

<PAGE>
LETTER OF TRANSMITTAL

TO TENDER SHARES OF COMMON STOCK
OF

AQUAPENN SPRING WATER COMPANY, INC.

PURSUANT TO THE OFFER TO PURCHASE
DATED NOVEMBER 6, 1998
OF
ZONEO ACQUISITION CORP.
AN INDIRECT SUBSIDIARY OF

GROUPE DANONE
-----------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD (IF APPLICABLE) AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON DECEMBER 7, 1998, UNLESS THE
OFFER IS EXTENDED.
- --------------------------------------------------------------------------------

THE DEPOSITARY FOR THE OFFER IS:

HARRIS TRUST COMPANY OF NEW YORK

<TABLE>
<S> <C>
BY MAIL: BY HAND/OVERNIGHT DELIVERY:

Wall Street Station Receive Window
P.O. Box 1023 Wall Street Plaza
New York, New York 10268-1023 88 Pine Street, 19(th) Floor
New York, New York 10005
</TABLE>

BY FACSIMILE:
(212) 701-7636

CONFIRM BY TELEPHONE:
(212) 701-7624

DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE, WILL NOT
CONSTITUTE A VALID DELIVERY.

THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.

This Letter of Transmittal is to be completed by shareholders either if
certificates evidencing Shares (as defined below) are to be forwarded herewith
or if delivery of Shares is to be made by book-entry transfer to the
Depositary's account at The Depository Trust Company ("DTC" or the "Book-Entry
Transfer Facility") pursuant to the book-entry transfer procedure described in
"Section 3. Procedures for Accepting the Offer and Tendering Shares" of the
Offer to Purchase (as defined below). DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY
TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.

A shareholder who desires to tender Shares and whose certificates evidencing
such Shares ("Share Certificates") are not immediately available, or who cannot
deliver their Share Certificates and all other documents required hereby to the
Depositary prior to the Expiration Date (as defined in "Section 1. Terms of the
Offer; Proration; Expiration Date" of the Offer to Purchase) or who cannot
comply with the procedure for delivery by book-entry transfer on a timely basis,
may tender such Shares by following the procedure for guaranteed delivery set
forth in "Section 3. Procedures for Accepting the Offer and Tendering Shares" of
the Offer to Purchase. See Instruction 2.
<PAGE>
/ / CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution __________________________________________________
Account Number _________________________________________________________________
Transaction Code Number ________________________________________________________

/ / CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s) ________________________________________________
Window Ticket No. (if any) _____________________________________________________
Date of Execution of Notice of Guaranteed Delivery _____________________________
Name of Institution that Guaranteed Delivery ___________________________________

If delivery is by book-entry transfer, give the following:
DTC Account Number _____________________________________________________________
Transaction Code Number ________________________________________________________

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- ----------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) (ATTACH ADDITIONAL LIST, IF NECESSARY)
APPEAR(S)
ON SHARE CERTIFICATE(S))
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
TOTAL NUMBER OF
SHARES EVIDENCED
SHARE BY NUMBER OF
CERTIFICATE SHARE SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
- -----------------------------------------------------------------------------------------------------

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

----------------------------------------------------
TOTAL SHARES

- -----------------------------------------------------------------------------------------------------
* Need not be completed by shareholders delivering Shares by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced by each Share
Certificate delivered to the Depositary are being tendered hereby. See Instruction 4.

- ----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY

Ladies and Gentlemen:

The undersigned hereby tenders to Zoneo Acquisition Corp., a Pennsylvania
corporation (the "Purchaser") and an indirect subsidiary of Groupe Danone, a
French SOCIETE ANONYME the ("Parent"), the above-described shares of Common
Stock, no par value, of AquaPenn Spring Water Company, Inc., a Pennsylvania
corporation (the "Company") (all shares of such Common Stock from time to time
outstanding being, collectively, the "Shares"), pursuant to the Purchaser's
offer to purchase all Shares, at $13.00 per Share, net to the seller in cash,
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated November 6, 1998 (the "Offer to Purchase"), receipt of which is hereby
acknowledged, and in this Letter of Transmittal (which, together with the Offer
to Purchase, constitute the "Offer"). The undersigned understands that the
Purchaser reserves the right to transfer or assign, in whole or from time to
time in part, to one or more of its affiliates, the right to purchase all or any
portion of the Shares tendered pursuant to the Offer.

Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, the Purchaser all
right, title and interest in and to all the Shares that are being tendered
hereby and all dividends, distributions (including, without limitation,
distributions of additional Shares) and rights declared, paid or distributed in
respect of such Shares on or after November 2, 1998 (collectively,
"Distributions") and irrevocably appoints the Depositary the true and lawful
agent and attorney-in-fact of the undersigned with respect to such Shares and
all Distributions, with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (i) deliver
Share Certificates evidencing such Shares and all Distributions, or transfer
ownership of such Shares and all Distributions on the account books maintained
by the Book-Entry Transfer Facility, together, in either case, with all
accompanying evidences of transfer and authenticity, to or upon the order of
Purchaser, (ii) present such Shares and all Distributions for transfer on the
books of the Company and (iii) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Shares and all Distributions, all in
accordance with the terms of the Offer.

The undersigned hereby irrevocably appoints Mark Rodriguez and Emmanuel
Faber and each of them, as the attorneys and proxies of the undersigned, each
with full power of substitution, to vote in such manner as each such attorney
and proxy or his substitute shall, in his sole discretion, deem proper and
otherwise act (by written consent or otherwise) with respect to all the Shares
tendered hereby which have been accepted for payment by the Purchaser prior to
the time of such vote or other action and all Shares and other securities issued
in Distributions in respect of such Shares, which the undersigned is entitled to
vote at any meeting of shareholders of the Company (whether annual or special
and whether or not an adjourned or postponed meeting) or consent in lieu of any
such meeting or otherwise. This proxy and power of attorney is coupled with an
interest in the Shares tendered hereby, is irrevocable and is granted in
consideration of, and is effective upon, the acceptance for payment of such
Shares by the Purchaser in accordance with other terms of the Offer. Such
acceptance for payment shall revoke all other proxies and powers of attorney
granted by the undersigned at any time with respect to such Shares (and all
Shares and other securities issued in Distributions in respect of such Shares),
and no subsequent proxy or power of attorney shall be given or written consent
executed (and if given or executed, shall not be effective) by the undersigned
with respect thereto. The undersigned understands that, in order for Shares to
be deemed validly tendered, immediately upon the Purchaser's acceptance of such
Shares for payment, the Purchaser must be able to exercise full voting and other
rights with respect to such Shares, including, without limitation, voting at any
meeting of the Company's shareholders then scheduled.

The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby and all Distributions, that when such Shares are accepted for payment by
the Purchaser, the Purchaser will acquire good, marketable and unencumbered
title thereto and to all Distributions, free and clear of all liens,
restriction, charges and encumbrances, and that none of such Shares and
Distributions will be subject to any adverse claim. The undersigned, upon
request, shall execute and deliver all additional documents deemed by the
Depositary or the Purchaser to be necessary or desirable to complete the sale,
assignment and transfer of the Shares tendered hereby and all Distributions. In
addition, the undersigned shall remit and transfer promptly to the Depositary
for the account of the Purchaser all Distributions in respect of the Shares
tendered hereby, accompanied by appropriate documentation of transfer, and
pending such remittance and transfer or appropriate assurance thereof, the
Purchaser shall be entitled to all rights and privileges as owner of each such
Distribution and may withhold the entire purchase price of the Shares tendered
hereby, or deduct from such purchase price, the amount or value of such
Distribution as determined by the Purchaser in its sole discretion.
<PAGE>
No authority herein conferred or agreed to be conferred shall be affected
by, and all such authority shall survive, the death or incapacity of the
undersigned. All obligations of the undersigned hereunder shall be binding upon
the heirs, personal representatives, successors and assigns of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.

The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in "Section 3. Procedures for Accepting the Offer and
Tendering Shares" in the Offer to Purchase and in the instructions hereto will
constitute the undersigned's acceptance of the terms and conditions of the
Offer. The Purchaser's acceptance of such Shares for payment will constitute a
binding agreement between the undersigned and the Purchaser upon the terms and
subject to the conditions of the Offer. The undersigned further understands that
any Shares held prior to January 28, 1998 are subject to the 0.6008-for-one
reverse stock split that was effective on January 28, 1998.

Unless otherwise indicated herein in the box entitled "Special Payment
Instructions," please issue the check for the purchase price of all Shares
purchased, and return all Share Certificates evidencing Shares not purchased or
not tendered in the name(s) of the registered holder(s) appearing above under
"Description of Shares Tendered." Similarly, unless otherwise indicated in the
box entitled "Special Delivery Instructions," please mail the check for the
purchase price of all Shares purchased and all Share Certificates evidencing
Shares not tendered or not purchased (and accompanying documents, as
appropriate) to the address(es) of the registered holder(s) appearing above
under "Description of Shares Tendered." In the event that the boxes entitled
"Special Payment Instructions" and "Special Delivery Instructions" are both
completed, please issue the check for the purchase price of all Shares purchased
and return all Share Certificates evidencing Shares not purchased or not
tendered in the name(s) of, and mail such check and Share Certificates to, the
person(s) so indicated. Unless otherwise indicated herein in the box entitled
"Special Payment Instructions," please credit any Shares tendered hereby and
delivered by book-entry transfer, but which are not purchased by crediting the
account at DTC. The undersigned recognizes that Purchaser has no obligation,
pursuant to the Special Payment Instructions, to transfer any Shares from the
name of the registered holder(s) thereof if Purchaser does not purchase any of
the Shares tendered hereby.
<PAGE>
- ------------------------------------------------

SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)

To be completed ONLY if the check for the purchase price of Shares or
Share Certificates evidencing Shares not tendered or not purchased are to be
issued in the name of someone other than the undersigned, or if Shares
tendered hereby and delivered by book-entry transfer which are not purchased
are to be returned by credit to an account at the Book-Entry Transfer
Facility other than that designated above.
Issue / / Check / / Share Certificate(s) to:

Name: ______________________________________________________________________
(PLEASE PRINT)
Address: ___________________________________________________________________

____________________________________________________________________________
(ZIP CODE)

__________________________________________________________________________
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)

/ / Credit Shares delivered by book-entry transfer and not purchased to the
account set forth below:

DTC Account Number: ________________________________________________________
----------------------------------------------------
----------------------------------------------------

SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)

To be completed ONLY if the check for the purchase price of Shares
purchased or Share Certificates evidencing Shares not tendered or not
purchased are to be mailed to someone other than the undersigned, or the
undersigned at an address other than that shown under "Description of Shares
Tendered."

Issue / / Check / / Share Certificate(s) to:

Name: ______________________________________________________________________
(PLEASE PRINT)

Address: ___________________________________________________________________

____________________________________________________________________________
(ZIP CODE)

__________________________________________________________________________
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)

- ------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------

IMPORTANT

SHAREHOLDERS: SIGN HERE

(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)

____________________________________________________________________________

____________________________________________________________________________
SIGNATURE(S) OF HOLDER(S)
Dated: ______________,199_

(Must be signed by registered holder(s) exactly as name(s) appear(s) on
Share Certificates or on a security position listing by a person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other person acting
in a fiduciary or representative capacity, please provide the following
information and see Instruction 5).

Name(s): ___________________________________________________________________

____________________________________________________________________________
PLEASE PRINT

Capacity (full title): _____________________________________________________

Address: ___________________________________________________________________

____________________________________________________________________________

____________________________________________________________________________
INCLUDE ZIP CODE

Area Code and Telephone No.: ( )__________________________________________

Taxpayer Identification or Social Security No.: ____________________________

(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)

GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTIONS 1 AND 5)

FOR USE BY FINANCIAL INSTITUTION ONLY.
FINANCIAL INSTITUTIONS: PLACE MEDALLION
GUARANTEE IN SPACE BELOW.

----------------------------------------------------------------------------
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER

1. GUARANTEE OF SIGNATURES. All signatures on this Letter of Transmittal
must be guaranteed by a firm which is a member in good standing of the Security
Transfer Agent Medallion Signature Guarantee Program, or by any other "eligible
guarantor institution," as such term is defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended (each of the foregoing being
referred to as an "Eligible Institution"), unless (i) this Letter of Transmittal
is signed by the registered holder(s) of the Shares (which term, for purposes of
this document, shall include any participant in the Book-Entry Transfer Facility
whose name appears on a security position listing as the owner of Shares)
tendered hereby and such holder(s) has (have) completed neither the box entitled
"Special Payment Instructions" nor the box entitled "Special Delivery
Instructions" on the reverse hereof or (ii) such Shares are tendered for the
account of an Eligible Institution. See Instruction 5.

2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES. This Letter of
Transmittal is to be used either if Share Certificates are to be forwarded
herewith or if Shares are to be delivered by book-entry transfer pursuant to the
procedure set forth in "Section 3. Procedures for Accepting the Offer and
Tendering Shares" of the Offer to Purchase. Share Certificates evidencing all
physically tendered Shares, or a confirmation of a book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility of all Shares delivered
by book-entry transfer as well as a properly completed and duly executed Letter
of Transmittal (or facsimile thereof) and any other documents required by this
Letter of Transmittal, must be received by the Depositary at one of its
addresses set forth on the reverse hereof prior to the Expiration Date (as
defined in "Section 1. Terms of the Offer; Proration; Expiration Date" of the
Offer to Purchase). If Share Certificates are forwarded to the Depositary in
multiple deliveries, a properly completed and duly executed Letter of
Transmittal must accompany each such delivery. Shareholders whose Share
Certificates are not immediately available, who cannot deliver their Share
Certificates and all other required documents to the Depositary prior to the
Expiration Date or who cannot complete the procedure for delivery by book-entry
transfer on a timely basis may tender their Shares pursuant to the guaranteed
delivery procedure described in "Section 3. Procedures for Accepting the Offer
and Tendering Shares" of the Offer to Purchase. Pursuant to such procedure: (i)
such tender must be made by or through an Eligible Institution; (ii) a properly
completed and duly executed Notice of Guaranteed Delivery, substantially in the
form made available by Purchaser, must be received by the Depositary prior to
the Expiration Date; and (iii) the Share Certificates evidencing all physically
delivered Shares in proper form for transfer by delivery, or a confirmation of a
book-entry transfer into the Depositary's account at the Book-Entry Transfer
Facility of all Shares delivered by book-entry transfer, in each case together
with a Letter of Transmittal (or a facsimile thereof), properly completed and
duly executed, with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message (as defined in "Section 3. Procedures
for Accepting the Offer and Tendering Shares" of the Offer to Purchase)), and
any other documents required by this Letter of Transmittal, must be received by
the Depositary within three New York Stock Exchange, Inc. ("NYSE") trading days
after the date of execution of such Notice of Guaranteed Delivery, all as
described in "Section 3. Procedure for Accepting the Offer and Tendering Shares"
of the Offer to Purchase.

THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.

No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. By execution of this Letter of Transmittal
(or a facsimile hereof), all tendering shareholders waive any right to receive
any notice of the acceptance of their Shares for payment.

3. INADEQUATE SPACE. If the space provided herein under "Description of
Shares Tendered" is inadequate, the Share Certificate numbers, the number of
Shares evidenced by such Share Certificates and the number of Shares tendered
should be listed on a separate schedule and attached hereto.

4. PARTIAL TENDERS (NOT APPLICABLE TO SHAREHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If fewer than all the Shares evidenced by any Share Certificate
delivered to the Depositary herewith are to be tendered hereby, fill in the
number of Shares which are to be tendered in the box entitled "Number of Shares
Tendered." In such cases, new Share Certificate(s) evidencing the remainder of
the Shares that were evidenced by the Share Certificates delivered to the
Depositary herewith will be sent to the person(s) signing this Letter of
Transmittal, unless otherwise provided in the box entitled "Special Delivery
Instructions" on the reverse hereof, as soon as practicable after the expiration
or termination of the Offer. All Shares evidenced by Share Certificates
delivered to the Depositary will be deemed to have been tendered unless
otherwise indicated.
<PAGE>
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the Share Certificates evidencing such Shares without alteration,
enlargement or any other change whatsoever.

If any Share tendered hereby is owned of record by two or more persons, all
such persons must sign this Letter of Transmittal.

If any of the Shares tendered hereby are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
Shares.

If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificates or separate stock
powers are required, unless payment is to be made to, or Share Certificates
evidencing Shares not tendered or not purchased are to be issued in the name of,
a person other than the registered holder(s), in which case, the Share
Certificate(s) evidencing the Shares tendered hereby must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on such Share Certificate(s).
Signatures on such Share Certificate(s) and stock powers must be guaranteed by
an Eligible Institution.

If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signatures on such
Share Certificate(s) and stock powers must be guaranteed by an Eligible
Institution.

If this Letter of Transmittal or any Share Certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to Purchaser of such person's authority so to act must be
submitted.

6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction 6,
the Purchaser will pay all stock transfer taxes with respect to the sale and
transfer of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price of any Shares purchased is to be made to, or Share
Certificate(s) evidencing Shares not tendered or not purchased are to be issued
in the name of, a person other than the registered holder(s), the amount of any
stock transfer taxes (whether imposed on the registered holder(s), such other
person or otherwise) payable on account of the transfer to such other person
will be deducted from the purchase price of such Shares purchased, unless
evidence satisfactory to the Purchaser of the payment of such taxes, or
exemption therefrom, is submitted. Except as provided in this Instruction 6, it
will not be necessary for transfer tax stamps to be affixed to the Share
Certificates evidencing the Shares tendered hereby.

7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Share Certificate(s)
evidencing Shares not tendered or not purchased are to be issued, in the name of
a person other than the person(s) signing this Letter of Transmittal or if such
check or any such Share Certificate is to be sent to someone other than the
person(s) signing this Letter of Transmittal or to the person(s) signing this
Letter of Transmittal but at an address other than that shown in the box
entitled "Description of Shares Tendered" on the reverse hereof, the appropriate
boxes on the reverse of this Letter of Transmittal must be completed.
Shareholders delivering Shares tendered hereby by book-entry transfer may
request that Shares not purchased be credited to such account maintained at DTC
as such shareholder may designate in the box entitled "Special Payment
Instructions" on the reverse hereof. If no such instructions are given, all such
Shares not purchased will be returned by crediting the account at DTC designated
on the reverse hereof as the account from which such Shares were delivered.

8. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and
requests for assistance may be directed to the Information Agent or the Dealer
Manager at its addresses or telephone numbers set forth below. Additional copies
of the Offer to Purchase, this Letter of Transmittal and the Notice of
Guaranteed Delivery may be obtained from the Information Agent or the Dealer
Manager.
<PAGE>
9. SUBSTITUTE FORM W-9. Each tendering shareholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on the
Substitute Form W-9 which is provided under "Important Tax Information" below,
and to certify, under penalty of perjury, that such number is correct and that
such shareholder is not subject to backup withholding of federal income tax. If
a tendering shareholder has been notified by the Internal Revenue Service that
such shareholder is subject to backup withholding, such shareholder must cross
out item (2) of the Certification box of the Substitute Form W-9, unless such
shareholder has since been notified by the Internal Revenue Service that such
shareholder is no longer subject to backup withholding. Failure to provide the
information on the Substitute Form W-9 may subject the tendering shareholder to
31% federal income tax withholding on the payment of the purchase price of all
Shares purchased from such shareholder. If the tendering shareholder has not
been issued a TIN and has applied for one or intends to apply for one in the
near future, such shareholder should write "Applied For" in the space provided
for the TIN in Part I of the Substitute Form W-9, and sign and date the
Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is
not provided with a TIN within 60 days, the Depositary will withhold 31% on all
payments of the purchase price to such shareholder until a TIN is provided to
the Depositary.

IMPORTANT: THIS LETTER OF TRANSMITTAL OR FACSIMILE HEREOF, PROPERLY
COMPLETED AND DULY EXECUTED (TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES
(OR, IN THE CASE OF A BOOK-ENTRY TRANSFER, AN AGENT'S MESSAGE) AND SHARE
CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED
DOCUMENTS) OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED
DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE (AS
DEFINED IN THE OFFER TO PURCHASE).

IMPORTANT TAX INFORMATION

Under the federal income tax law, a shareholder whose tendered Shares are
accepted for payment is required by law to provide the Depositary (as payer)
with such shareholder's correct TIN on Substitute Form W-9 below. If such
shareholder is an individual, the TIN is such shareholder's social security
number. If the Depositary is not provided with the correct TIN, the shareholder
may be subject to a $50 penalty imposed by the Internal Revenue Service and
payments that are made to such shareholder with respect to Shares purchased
pursuant to the Offer may be subject to backup withholding of 31%. In addition,
if a shareholder makes a false statement that results in no imposition of backup
withholding, and there was no reasonable basis for making such statement, a $500
penalty may also be imposed by the Internal Revenue Service.

Certain shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit a statement (Internal Revenue Service
Form W-8), signed under penalties of perjury, attesting to such individual's
exempt status. Forms of such statements can be obtained from the Depositary. See
the enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional instructions. A shareholder should consult
his or her tax advisor as to such shareholder's qualification for exemption from
backup withholding and the procedure for obtaining such exemption.

If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the shareholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained from the Internal Revenue Service.

PURPOSE OF SUBSTITUTE FORM W-9

To prevent backup withholding on payments that are made to a shareholder
with respect to Shares purchased pursuant to the Offer, the shareholder is
required to notify the Depositary of such shareholder's correct TIN by
completing the form below certifying that the TIN provided on Substitute Form
W-9 is correct (or that such shareholder is awaiting a TIN), and that (i) such
shareholder has not been notified by the Internal Revenue Service that he or she
is subject to backup withholding as a result of a failure to report all interest
or dividends or (ii) the Internal Revenue Service has notified such shareholder
that such shareholder is no longer subject to backup withholding.

WHAT NUMBER TO GIVE THE DEPOSITARY

The shareholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares
tendered hereby. If the Shares are in more than one name or are not in the name
of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional guidance on
which number to report. If the tendering shareholder has not been issued a TIN
and has applied for a number or intends to apply for a number in the near
future, the shareholder should write "Applied For" in the space provided for the
TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN within 60 days,
the Depositary will withhold 31% of all payments of the purchase price to such
shareholder until a TIN is provided to the Depositary.
<PAGE>
PAYER'S NAME: HARRIS TRUST COMPANY OF NEW YORK

<TABLE>
<C> <S> <C>
- ---------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1--Taxpayer Identification ----------------
FORM W-9 Number--For all accounts, enter Social Security Number
Payer's Request for Taxpayer your taxpayer identification OR ----------------
Identification Number (TIN) number in the box at right. Employer Identification Number
(For most individuals, this is (If awaiting TIN write
your social security number. If "Applied For")
you do not have a number, see
Obtaining a Number in the
enclosed Guidelines.) Certify
by signing and dating below.
Note: If the account is in more
than one name, see the chart in
the enclosed Guidelines to
determine which number to give
the payer.
- ---------------------------------------------------------------------------------------------------
PART II--For Payees Exempt from Backup Withholding, see the
enclosed Guidelines and complete as instructed therein.
-----------------------------------------------------------------
CERTIFICATION--Under penalty of perjury, I certify that:
(1) the number shown on this form is my correct Taxpayer Identification Number (or I am waiting
for a number to be issued to me), and
(2) I am not subject to backup withholding either because I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure
to report all interest or dividends, or the IRS has notified me that I am no longer subject to
backup withholding.

CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been notified by the IRS
that you are subject to backup withholding because of underreporting interest or dividends on your
tax return. However, if after being notified by the IRS that you were subject to backup
withholding you received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item (2). (Also see instructions in the enclosed GUIDELINES.)
- ---------------------------------------------------------------------------------------------------

SIGNATURE -------------------------------------------------------- DATE-------------------- ,199
- ---------------------------------------------------------------------------------------------------
</TABLE>

NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THIS OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE>
1
<PAGE>
THE DEPOSITARY FOR THE OFFER IS:

HARRIS TRUST COMPANY OF NEW YORK

<TABLE>
<S> <C>
BY MAIL: BY HAND/OVERNIGHT DELIVERY:
Wall Street Station Receive Window
P.O. Box 1023 Wall Street Plaza
New York, New York 10268-1023 88 Pine Street, 19(th) Floor
New York, New York 10005
</TABLE>

BY FACSIMILE:
(212) 701-7636

CONFIRM BY TELEPHONE:
(212) 701-7624

Questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
listed below. Additional copies of this Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent or Dealer Manager. A shareholder may also contact brokers,
dealers, commercial banks or trust companies for assistance concerning the
Offer.

THE INFORMATION AGENT FOR THE OFFER IS:

[LOGO]

156 Fifth Avenue
New York, NY 10010

(212) 929-5500

Call Toll Free: (800) 322-2885

THE DEALER MANAGER FOR THE OFFER IS:

J.P. MORGAN & CO.
60 Wall Street
New York, NY 10260

(212) 648-7957

Call Toll Free: (800) 576-8401

<PAGE>
Exhibit 99.3

November 2, 1998

PRESS RELEASE

GROUPE DANONE TO ACQUIRE AQUAPENN

MILESBURG, PA, November 2, 1998 - AquaPenn Spring Water Company, Inc. (NYSE:
APN) today announced that it has entered into a definitive merger agreement with
Groupe Danone (NYSE: DA), one of the world's leading producers of packaged food
and beverages with over $15.5 billion in sales in 1997. Groupe Danone would
purchase, for cash, all outstanding common shares of AquaPenn at a price of $13
per share, or a total of approximately $112 million for the 8.6 million common
shares outstanding. Under the agreement, a subsidiary of Groupe Danone will
shortly commence a tender offer for all outstanding common shares of AquaPenn
followed by a merger in which each of the remaining shares of AquaPenn will be
exchanged for $13 in cash.

The AquaPenn Board of Directors unanimously approved the definitive merger
agreement with Groupe Danone. Certain shareholders of AquaPenn have granted
Groupe Danone an option to purchase 19.9% of AquaPenn's shares under certain
conditions at the offer price and these same shareholders have agreed to tender
their shares in the offer and to vote in favor of the merger if a vote of
shareholders is necessary.

Groupe Danone is ranked second in the worldwide bottled water market and it is
present in North America with its Evian and Dannon Natural Spring Water brands.
AquaPenn is one of the fastest growing bottled spring water companies in the
United States with manufacturing sites in Milesburg, Pennsylvania, High Springs,
Florida and Dunsmuir, California. AquaPenn and Groupe Danone have also agreed
to begin implementing an agreement for the production of convenience still
natural spring water for Groupe Danone.

Edward J. Lauth, III, Founder, Chairman and President of AquaPenn stated: "This
is obviously a tremendous opportunity for our shareholders, employees and
customers. Groupe Danone, in my opinion, is the premier bottled water company
in the world and AquaPenn will be a great addition for them. Groupe Danone is
committed to spending the necessary capital to market and build the
infrastructure to compete long-term in this category. We look forward to taking
advantage of the opportunities presented by this merger."

Lazard Freres & Co. LLC and Parker/Hunter Incorporated represented AquaPenn in
this transaction.

The tender offer will be made pursuant to separate offering documents to be
prepared, distributed and filed pursuant to federal and state securities laws.
The tender offer will be conditioned on the tender of at least 80% of the
outstanding shares of common stock on a fully diluted basis, the expiration or
termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and certain other customary closing conditions for
transactions of this type. This release 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
such State.

<PAGE>

Exhibit 99.4

November 2, 1998

The Board of Directors
AquaPenn Spring Water Company, Inc.
P.O. Box 938
Milesburg, PA 16853-0938

Dear Members of the Board:

We understand that AquaPenn Spring Water Company, Inc. (the "Company") and
Groupe Danone (the "Acquiror") and a wholly-owned subsidiary of Acquiror (the
"Merger Subsidiary") have entered into an Agreement dated November 2, 1998 (the
"Agreement"), pursuant to which the Acquiror will make a tender offer (the
"Offer") for any and all shares of the Company's common stock, no par value (the
"Shares"), at $ 13.00 per Share in cash. The Agreement also provides that,
following consummation of the Offer, Merger Subsidiary will be merged with and
into the Company in a transaction (the "Merger") in which each remaining Share
will be converted into the right to receive $13.00 in cash.

You have requested our opinion as to the fairness, from a financial point
of view, of the proposed cash consideration to be received by the holders of the
Shares (other than the Acquiror and its affiliates) in the Offer and the Merger.
In connection with this Opinion, we have:

(i) Reviewed the financial terms and conditions of the Agreement;

(ii) Analyzed certain historical business and financial information
relating to the Company;

(iii) Reviewed certain financial forecasts and other data provided to us
by the Company relating to its businesses and prospects (such
forecasts being limited to fiscal 1999, the Company having informed
us that no longer term forecasts are available);

(iv) Conducted discussions with members of the senior management of the
Company with respect to the businesses and prospects;

(v) Reviewed public information with respect to certain other companies
in lines of business we believe to be generally comparable to the
business of the Company;

(vi) Reviewed the financial terms of certain business combinations
involving companies in lines of business we believe to be generally
comparable to those of the Company;

(vii) Reviewed the historical stock prices and trading volumes of the
Shares; and

(viii) Conducted such other financial studies, analyses and investigations
as we deemed appropriate.

We have relied upon the accuracy and completeness of the foregoing
information, and have not assumed any responsibility for any independent
verification of such information or any independent

<PAGE>

LAZARD FRERES & CO. LLC

valuation or appraisal of any of the assets or liabilities of the Company, or
concerning the solvency or fair value of the Company. With respect to financial
forecasts referred to above, we have assumed that they have been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of management of the Company as to the future financial performance of
the Company. We assume no responsibility for and express no view as to such
forecasts or the assumptions on which they are based.

Further, our opinion is necessarily based on economic, monetary, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof.

In rendering our opinion, we have assumed that the Offer and the Merger
will be consummated on the terms described in the Agreement, without any waiver
of any material terms or conditions by the Company. We were not requested to,
and did not, solicit third party indications of interest in acquiring the
Company.

We acted as the lead underwriter for the Acquiror's offer of American
Depository Shares on November 19, 1997. We have in the past provided, and are
currently providing, investment banking services to the Acquiror, for which we
have received customary fees. Our Chairman is a director of the Acquiror and a
Director of the Eurafrance Group which beneficially owned 5.7% of the Acquiror
and 8.8% of the voting rights pertaining thereto as of November 13, 1997, and
also has an indirect economic interest in Lazard Freres & Co. LLC.

Lazard Freres & Co. LLC is acting as investment banker to the Company in
connection with the Offer and the Merger and will receive a fee for our
services, a substantial portion of which is contingent upon the consummation of
the Offer. We also have performed investment banking services for the Company
in the past and have received customary fees for such services.

Our engagement and the opinion expressed herein are for the benefit of the
Company's Board of Directors and our opinion is rendered to the Company's Board
of Directors in connection with its consideration of the transaction. This
opinion is not intended to and does not constitute a recommendation to any
holder of Shares as to whether such holder should tender such Shares in the
Offer or vote for the Merger. It is understood that this letter may not be
disclosed or otherwise referred to without our prior consent, except as may
otherwise be required by law or by a court of competent jurisdiction.

Based on and subject to the foregoing, we are of the opinion that the cash
consideration to be paid to the holders of the Shares (other than Acquiror and
its affiliates) pursuant to the Offer and the Merger is fair to such
shareholders from a financial point of view.

Very truly yours,

LAZARD FRERES & CO. LLC

By /s/ Jeffrey Golman
----------------------------
Jeffrey A. Golman
Managing Director

<PAGE>

Exhibit 99.5

[PARKER/HUNTER LETTERHEAD]

November 2, 1998

The Board of Directors
AquaPenn Spring Water Company, Inc.
1 AquaPenn Drive
Milesburg, PA 16853

Members of the Board:

You have requested our opinion as to the fairness, from a financial point of
view, to the holders of common stock, no par value per share (the "Common
Stock"), of AquaPenn Spring Water Company, Inc. ("AquaPenn" or the "Company") of
the consideration to be received by such holders in connection with the
Agreement and Plan of Merger dated November 2, 1998 (the "Agreement") among
AquaPenn, Groupe Danone (the "Acquiror") and Zoneo Acquisition Corp., an
indirect wholly owned subsidiary of the Acquiror (the "Merger Subsidiary"). The
Agreement provides for the commencement of a tender offer (the "Offer") by the
Merger Subsidiary to purchase all shares of Common Stock of the Company at a
price of $13.00 per share in cash (the "Offer Price") for each share of Common
Stock of the Company. The Agreement also provides that, following consummation
of the Offer, the Merger Subsidiary will be merged into the Company (the
"Merger") in a transaction in which each remaining share of Common Stock will be
converted into the right to receive an amount equal to the Offer Price.

Parker/Hunter Incorporated, as part of its investment banking business, is
regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, the purchase
and sale of listed and unlisted securities, private placements and valuations
for corporate, estate and other purposes. Further, we have provided investment
banking services to the Company in the past and have received customary fees for
such services.

In connection with our opinion, we have reviewed, among other things, the
following: (i) the Agreement; (ii) the Company's audited financial statements
and its unaudited financial statements as of June 30, 1998 and June 30, 1997 and
for the six month periods then ended; (iii) certain other publicly available and
internal information, primarily financial in nature, including financial
projections for the Company prepared by the management of the Company; (iv)
certain publicly available information concerning the trading of, and the
trading markets for, the Common Stock; (v) the nature and financial terms of
certain recent business combinations which we believe to be relevant; and (vi)
certain publicly available

<PAGE>

[PARKER/HUNTER LOGO] AquaPenn Spring Water Company, Inc.
November 2, 1998
Page 2

information regarding companies that we believe to be comparable to the Company
as well as trading market information for certain of such other companies'
securities. We have also discussed with certain senior officers of the Company
the foregoing matters as well as the operations, financial condition, history
and prospects of the Company and other matters we believe to be relevant. We
have taken into account our assessment of general economic, market and financial
conditions and our experience in securities valuation generally. We have also
considered such other information, financial studies, analyses, investigations
and financial, economic, market and trading criteria that we deemed relevant.
We have not been requested to and did not solicit third party indications of
interest in acquiring all or any part of the Company.

In rendering this opinion, we relied, without independent verification, on the
accuracy and completeness of all financial and other information that was
publicly available or furnished or otherwise communicated to us by the Company.
We have not made an independent evaluation or appraisal of the assets or
liabilities of the Company, nor have we been furnished with any such evaluations
or appraisals. With respect to the Company's financial projections, we have
assumed that they have been reasonably prepared on bases reflecting the best
currently available estimates and good faith judgments of the Company's
management and we express no opinion with respect to such projections or the
assumptions on which they are based. Our opinion is necessarily based upon the
business, market, monetary, economic, and other conditions as they exist on, and
can be evaluated as of, the date of this letter and does not predict or take
into account any changes which may occur, or information which may become
available, after the date hereof. Further, our opinion does not address the
relative merits of the Offer and any other potential transactions or business
strategies considered by the Board of Directors of the Company, and does not
constitute a recommendation to any holder of the common stock of the Company as
to whether such holder should tender its shares in the Offer or as to how such
holder should vote with respect to the Merger.

Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the consideration to be received by the holders of Common Stock pursuant
to the Offer and the Merger is fair to such holders from a financial point of
view.

Very truly yours,

PARKER/HUNTER INCORPORATED

By: /s/ Craig A. Wolfanger
--------------------------------
Craig A. Wolfanger
Senior Managing Director

<PAGE>
[LOGO]

November 6, 1998

Dear Shareholder:

We are pleased to advise you that on November 2, 1998, AquaPenn Spring Water
Company, Inc. entered into an Agreement and Plan of Merger with Groupe Danone
and one of its subsidiaries, Zoneo Acquisition Corp., which provides for the
acquisition of all of the outstanding Common Stock of AquaPenn at a price of
$13.00 per share in cash. Under the terms of the proposed transaction, Zoneo
Acquisition Corp. has today commenced a tender offer for all of the outstanding
shares of AquaPenn at $13.00 per share. Following the completion of the tender
offer, and any approvals required by law, Zoneo Acquisition Corp. will be merged
with and into AquaPenn and all shares of Common Stock not purchased in the
tender offer (other than those owned by Groupe Danone or by shareholders who
have perfected appraisal rights) will be converted into the right to receive
$13.00 net per share in cash in the merger. If, however, Zoneo Acquisition Corp.
does not acquire at least 80% of the then outstanding shares, the Merger
Agreement and the Merger must be approved by the shareholders of AquaPenn.

YOUR BOARD OF DIRECTORS (I) HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE TENDER OFFER AT THE
OFFER PRICE AND THE MERGER, (II) HAS DETERMINED THAT THE TERMS OF THE TENDER
OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND
ITS SHAREHOLDERS, AND (III) RECOMMENDS THAT SHAREHOLDERS ACCEPT THE TENDER
OFFER, TENDER THEIR SHARES TO ZONEO ACQUISITION CORP. AND APPROVE AND ADOPT THE
MERGER AGREEMENT AND THE MERGER, IF REQUIRED.

In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors more fully described in the accompanying
materials. The Board of Directors has received the written opinions, each dated
November 2, 1998, of Lazard Freres & Co. LLC and Parker/Hunter, Incorporated,
AquaPenn's financial advisors, to the effect that, as of such date and based
upon and subject to certain matters stated therein, the $13.00 per share cash
consideration to be received in the Offer and the Merger by the holders of
Common Stock (other than Groupe Danone and its affiliates) was fair, from a
financial point of view, to such holders.

Accompanying this letter is a copy of AquaPenn's Solicitation/Recommendation
Statement on Schedule 14D-9. Also enclosed is Groupe Danone's Offer to Purchase
and related materials, including a Letter of Transmittal for use in tendering
shares. These documents set forth the terms and conditions of the Offer and
provide instructions as to how to tender your Shares. We urge you to read the
enclosed materials carefully.

The management and directors of AquaPenn thank you for the support you have
given the Company and encourage you to tender your shares in the manner
described in the materials accompanying this letter.

<TABLE>
<S> <C>
On behalf of the Board of Directors,
[LOGO]
Edward J. Lauth, III
Chairman of the Board of Directors,
President and Chief Executive Officer
</TABLE>

<PAGE>

EXECUTION COPY

================================================================================

AGREEMENT AND PLAN OF MERGER

Among

GROUPE DANONE,

ZONEO ACQUISITION CORP.

and

AQUAPENN SPRING WATER COMPANY, INC.

Dated November 2, 1998

================================================================================

<PAGE>

TABLE OF CONTENTS

ARTICLE I THE OFFER

SECTION 1.01. The Offer . . . . . . . . . . . . . . . . . . . . . . . . . . .2
SECTION 1.02. Company Actions . . . . . . . . . . . . . . . . . . . . . . . .3

ARTICLE II THE MERGER

SECTION 2.01. The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . .5
SECTION 2.02. Effective Time; Closing . . . . . . . . . . . . . . . . . . . .5
SECTION 2.03. Effect of the Merger. . . . . . . . . . . . . . . . . . . . . .5
SECTION 2.04. Articles of Incorporation; Bylaws . . . . . . . . . . . . . . .5
SECTION 2.05. Directors and Officers. . . . . . . . . . . . . . . . . . . . .6
SECTION 2.06. Conversion of Securities. . . . . . . . . . . . . . . . . . . .6
SECTION 2.07. Stock Options; Warrants. . . . . . . . . . . . . . . . . . . . .6
SECTION 2.08. Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . .7
SECTION 2.09. Surrender of Shares; Stock Transfer Books . . . . . . . . . . .8
SECTION 2.10. Merger Without Approval of Company Shareholders. . . . . . . . .9

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

SECTION 3.01. Organization and Qualification; Subsidiaries. . . . . . . . . 10
SECTION 3.02. Articles of Incorporation and Bylaws. . . . . . . . . . . . . 10
SECTION 3.03. Capitalization. . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.04. Authority Relative to this Agreement; Vote Required . . . . . 11
SECTION 3.05. No Conflict; Required Filings and Consents. . . . . . . . . . 12
SECTION 3.06. Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.07. SEC Filings; Financial Statements . . . . . . . . . . . . . . 13
SECTION 3.08. Absence of Certain Changes or Events. . . . . . . . . . . . . 14
SECTION 3.09. Absence of Litigation . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.10. Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . 15
SECTION 3.11. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.12. Offer Documents; Schedule 14D-9; Proxy Statement. . . . . . . 18
SECTION 3.13. Tangible Property; Real Property and Leases . . . . . . . . . 18
SECTION 3.14. Trademarks, Patents and Copyrights. . . . . . . . . . . . . . 19
SECTION 3.15. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.16. Environmental Matters . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.17. Material Contracts. . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.18. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.19. Opinion of Financial Advisors . . . . . . . . . . . . . . . . 22
SECTION 3.20. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.21. Pennsylvania Law. . . . . . . . . . . . . . . . . . . . . . . 23

i
<PAGE>

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE PURCHASER

SECTION 4.01. Corporate Organization. . . . . . . . . . . . . . . . . . . . 23
SECTION 4.02. Authority Relative to This Agreement. . . . . . . . . . . . . 23
SECTION 4.03. No Conflict; Required Filings and Consents. . . . . . . . . . 24
SECTION 4.04. Financing . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.05. Offer Documents; Proxy Statement. . . . . . . . . . . . . . . 25
SECTION 4.06. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 4.07. Ownership of Purchaser; No Prior Activities . . . . . . . . . 25

ARTICLE V

CONDUCT OF BUSINESS PENDING THE MERGER

SECTION 5.01. Conduct of Business by the Company Pending the Merger . . . . 26
SECTION 5.02. Consultation and Cooperation. . . . . . . . . . . . . . . . . 28

ARTICLE VI

ADDITIONAL AGREEMENTS

SECTION 6.01. Special Shareholders' Meeting . . . . . . . . . . . . . . . . 29
SECTION 6.02. Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 6.03. Access to Information; Confidentiality. . . . . . . . . . . . 30
SECTION 6.04. No Solicitation of Transactions . . . . . . . . . . . . . . . 30
SECTION 6.05. Employee Benefits Matters . . . . . . . . . . . . . . . . . . 31
SECTION 6.06. Directors' and Officers' Indemnification and Insurance. . . . 32
SECTION 6.07. Notification of Certain Matters . . . . . . . . . . . . . . . 33
SECTION 6.08. Further Action; Reasonable Best Efforts . . . . . . . . . . . 33
SECTION 6.09. Public Announcements. . . . . . . . . . . . . . . . . . . . . 34
SECTION 6.10. Confidentiality Agreement . . . . . . . . . . . . . . . . . . 34
SECTION 6.11. Facility Investment Agreement . . . . . . . . . . . . . . . . 34
SECTION 6.12. 1998 Financial Statements . . . . . . . . . . . . . . . . . . 34

ARTICLE VII

CONDITIONS TO THE MERGER

SECTION 7.01. Conditions to the Merger. . . . . . . . . . . . . . . . . . . 34
SECTION 7.02. Conditions to the Long-Form Merger. . . . . . . . . . . . . . 35

ARTICLE VIII

TERMINATION, AMENDMENT AND WAIVER

SECTION 8.01. Termination . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 8.02. Effect of Termination . . . . . . . . . . . . . . . . . . . . 39
SECTION 8.03. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 8.04. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 8.05. Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

ARTICLE IX

GENERAL PROVISIONS

SECTION 9.01. Non-Survival of Representations, Warranties and Agreements. . 41
SECTION 9.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

ii
<PAGE>

SECTION 9.03. Certain Definitions . . . . . . . . . . . . . . . . . . . . . 42
SECTION 9.04. Severability. . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 9.05. Entire Agreement; Assignment. . . . . . . . . . . . . . . . . 43
SECTION 9.06. Parties in Interest . . . . . . . . . . . . . . . . . . . . . 43
SECTION 9.07. Specific Performance. . . . . . . . . . . . . . . . . . . . . 44
SECTION 9.08. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 9.09. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 9.10. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 45

iii
<PAGE>

ANNEX A Conditions to the Offer
ANNEX B Facility Investment Agreement Terms
ANNEX C Form of Short-Form Plan of Merger

Disclosure Schedule

Schedule 3.07(b)

iv
<PAGE>

Glossary of Defined Terms

Location of
Defined Term Definition
------------ -----------

affiliate . . . . . . . . . . . . . . . . . . . . . . . . Section 9.03(a)
Agreement . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Articles of Merger. . . . . . . . . . . . . . . . . . . . Section 2.02
Assignee. . . . . . . . . . . . . . . . . . . . . . . . . Section 9.05
beneficial owner. . . . . . . . . . . . . . . . . . . . . Section 9.03(b)
Blue Sky Laws . . . . . . . . . . . . . . . . . . . . . . Section 3.05(b)
Board . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
business day. . . . . . . . . . . . . . . . . . . . . . . Section 9.03(c)
Certificates. . . . . . . . . . . . . . . . . . . . . . . Section 2.09(b)
Code . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.10(a)
Company . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Confidentiality Agreement . . . . . . . . . . . . . . . . Section 6.03(b)
Consents. . . . . . . . . . . . . . . . . . . . . . . . . Section 2.07
control . . . . . . . . . . . . . . . . . . . . . . . . . Section 9.03(d)
controlled by . . . . . . . . . . . . . . . . . . . . . . Section 9.03(d)
Disclosure Schedule . . . . . . . . . . . . . . . . . . . Section 3.01
Dissenting Shares . . . . . . . . . . . . . . . . . . . . Section 2.08(a)
Effective Time. . . . . . . . . . . . . . . . . . . . . . Section 2.02
Environmental Claims. . . . . . . . . . . . . . . . . . . Section 3.16(a)
Environmental Law . . . . . . . . . . . . . . . . . . . . Section 3.16(a)
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.10(a)
Exchange Act. . . . . . . . . . . . . . . . . . . . . . . Section 1.02(b)
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . Section 8.03(a)
Expiration Date . . . . . . . . . . . . . . . . . . . . . Section 6.01
Fee . . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.03(a)(iii)
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.07(b)
Governmental Entity . . . . . . . . . . . . . . . . . . . Section 3.09
Hazardous Materials . . . . . . . . . . . . . . . . . . . Section 3.16(a)
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.05(b)
Indemnified Parties . . . . . . . . . . . . . . . . . . . Section 6.06(b)
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.10(a)
Lazard. . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.02
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.13(b)
Long-Form Merger. . . . . . . . . . . . . . . . . . . . . Section 6.01
Material Adverse Effect . . . . . . . . . . . . . . . . . Section 3.01(a)

<PAGE>

Material Contracts. . . . . . . . . . . . . . . . . . . . Section 3.17
Merger. . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Merger Consideration. . . . . . . . . . . . . . . . . . . Section 2.06(a)
Minimum Condition . . . . . . . . . . . . . . . . . . . . Section 1.01(a)
1998 Financial Statements . . . . . . . . . . . . . . . . Section 6.12
Offer . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Offer Documents . . . . . . . . . . . . . . . . . . . . . Section 1.01(b)
Offer to Purchase . . . . . . . . . . . . . . . . . . . . Section 1.01(b)
Option Consents . . . . . . . . . . . . . . . . . . . . . Section 2.07(b)
Option Holders. . . . . . . . . . . . . . . . . . . . . . Section 2.07(b)
Parent. . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Paying Agent. . . . . . . . . . . . . . . . . . . . . . . Section 2.09(a)
Pennsylvania Law. . . . . . . . . . . . . . . . . . . . . Recitals
Per Share Amount. . . . . . . . . . . . . . . . . . . . . Recitals
Permitted Liens . . . . . . . . . . . . . . . . . . . . . Section 3.13(b)
person . . . . . . . . . . . . . . . . . . . . . . . . . Section 9.03(e)
Plans . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.10(a)
Proxy Statement . . . . . . . . . . . . . . . . . . . . . Section 3.12
Purchaser . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Schedule 14D-1. . . . . . . . . . . . . . . . . . . . . . Section 1.01(b)
Schedule 14D-9. . . . . . . . . . . . . . . . . . . . . . Section 1.02(b)
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.01(b)
SEC Reports . . . . . . . . . . . . . . . . . . . . . . . Section 3.07(a)
Securities Act. . . . . . . . . . . . . . . . . . . . . . Section 3.07(a)
Shares. . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Shareholders. . . . . . . . . . . . . . . . . . . . . . . Recitals
Shareholder Agreements. . . . . . . . . . . . . . . . . . Recitals
Short-Form Plan of Merger . . . . . . . . . . . . . . . . Section 4.02
Special Shareholders' Meeting . . . . . . . . . . . . . . Section 6.01
Stock Option Plans. . . . . . . . . . . . . . . . . . . . Section 2.07
Stock Purchase Plan . . . . . . . . . . . . . . . . . . . Section 6.05
Subsidiary. . . . . . . . . . . . . . . . . . . . . . . . Section 3.01
subsidiary. . . . . . . . . . . . . . . . . . . . . . . . Section 9.03(f)
Superior Proposal . . . . . . . . . . . . . . . . . . . . Section 6.04(a)
Surviving Corporation . . . . . . . . . . . . . . . . . . Section 2.01
Takeover Proposal . . . . . . . . . . . . . . . . . . . . Section 6.04(a)
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.15
Transactions. . . . . . . . . . . . . . . . . . . . . . . Section 1.02
under common control with . . . . . . . . . . . . . . . . Section 9.03(d)
WARN . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.10(f)
Warrant Consents. . . . . . . . . . . . . . . . . . . . . Section 2.07(c)

<PAGE>

AGREEMENT AND PLAN OF MERGER, dated November 2, 1998 (this
"AGREEMENT"), among GROUPE DANONE, a French SOCIETE ANONYME (the "PARENT"),
ZONEO ACQUISITION CORP., a Pennsylvania corporation and an indirect wholly owned
subsidiary of the Parent (the "PURCHASER"), and AQUAPENN SPRING WATER COMPANY,
INC., a Pennsylvania corporation (the "COMPANY").

WHEREAS, the Boards of Directors of the Parent, the Purchaser and the
Company have each determined that it is in the best interests of their
respective corporations and shareholders for the Parent to acquire the Company
upon the terms and subject to the conditions set forth herein;

WHEREAS, in furtherance of such acquisition, it is proposed that the
Purchaser shall make a cash tender offer (the "OFFER") to acquire all the issued
and outstanding shares of common stock, no par value, of the Company (the
"SHARES") for U.S. $13.00 per Share (such amount, or any greater amount per
Share paid pursuant to the Offer, being hereinafter referred to as the "PER
SHARE AMOUNT") net to the seller in cash, upon the terms and subject to the
conditions of this Agreement and the Offer;

WHEREAS, the Board of Directors of the Company (the "BOARD"),
including all the disinterested directors on the Board, has unanimously approved
the making of the Offer and resolved and agreed to recommend that holders of
Shares tender their Shares pursuant to the Offer;

WHEREAS, also in furtherance of such acquisition, the Boards of
Directors of the Parent, the Purchaser and the Company have each approved the
merger (the "MERGER") of the Purchaser with and into the Company in accordance
with the Pennsylvania Business Corporation Law of 1988, as amended
("PENNSYLVANIA LAW"), following either the consummation of the Offer or approval
of the holders of Shares and upon the terms and subject to the conditions set
forth herein, whereby each Share, except Shares held by each person who objects
to the Merger and complies with all the provisions of Pennsylvania Law
concerning the right of holders of Shares to dissent from the Merger and demand
the right to receive the fair value of their Shares, will be converted into the
right to receive the Per Share Amount in cash;

<PAGE>
2

WHEREAS, the Parent, the Purchaser and certain shareholders of the
Company (the "SHAREHOLDERS"), concurrently with the execution and delivery
hereof, have entered into Shareholder Agreements (the "SHAREHOLDER AGREEMENTS"),
providing that, among other things, the Shareholders will (i) tender their
Shares into the Offer, (ii) vote their Shares in favor of the Merger, if
applicable, and (iii) grant an option to the Purchaser to purchase their Shares
at the Per Share Amount, in each case subject to the conditions set forth
therein;

WHEREAS, the Parent, the Purchaser and the Company, concurrently with
the execution and delivery hereof, have entered into a Registration Rights
Agreement, pursuant to which the Company has granted to the Purchaser or its
assignees certain registration rights with respect to Shares acquired pursuant
to the third sentence of Section 1.01 of this Agreement or any Shareholder
Agreement; and

WHEREAS, concurrently with the execution and delivery hereof, Great
Brands of Europe, Inc., an indirect wholly owned subsidiary of the Parent, and
each of Edward J. Lauth and Geoffrey F. Feidelberg have entered into employment
agreements, and Great Brands of Europe, Inc., and Matthew Suhey have entered
into a consulting agreement.

NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the Parent, the Purchaser and the Company hereby agree as follows:

ARTICLE I

THE OFFER

SECTION 1.01. THE OFFER. (a) Provided that this Agreement shall not
have been terminated in accordance with Section 8.01 and none of the events set
forth in Annex A hereto shall have occurred or be existing, the Purchaser shall
commence the Offer as promptly as reasonably practicable after the date hereof,
but in no event later than five business days after the initial public
announcement of the Purchaser's intention to commence the Offer, which
announcement shall occur on the date hereof or on the following day. The
obligation of the Purchaser to accept for payment and pay for Shares tendered
pursuant to the Offer shall be subject to the condition (the "MINIMUM
CONDITION") that Shares constituting at least 80% of the then outstanding Shares
on a fully diluted basis (including, without limitation, all Shares issuable
upon the conversion of any convertible securities or upon the exercise of any
options, warrants or rights) shall have been validly tendered and not withdrawn
prior to the expiration of the Offer and also shall be subject to the
satisfaction of the other conditions set forth in Annex A hereto. In the event
that Shares constituting at least 19.9% of the then outstanding Shares shall
have been validly tendered and not withdrawn prior to the expiration of the
Offer, and all the conditions set forth in Annex A thereto shall have been
satisfied other than the Minimum Condition, the Purchaser may, at its option,
purchase for the Per Share Amount any number of such Shares constituting in the
aggregate no more than 19.9% of the then outstanding Shares, on a pro rata basis
if a greater number of Shares shall have been tendered into the Offer by the
holders thereof. The Purchaser expressly reserves the right to waive any such
condition, to increase the price per Share payable in the Offer, and to make any
other

<PAGE>
3

changes in the terms and conditions of the Offer; PROVIDED, HOWEVER, that no
change may be made without the prior written consent of the Company that
decreases the Minimum Condition, that decreases the price per Share payable in
the Offer below the Per Share Amount, that changes the form of consideration to
be paid in the Offer, that reduces the maximum number of Shares to be purchased
in the Offer or that imposes conditions to the Offer in addition to those set
forth in Annex A hereto. The Per Share Amount shall, subject to applicable
withholding of taxes, be net to the seller in cash, upon the terms and subject
to the conditions of the Offer. Subject to the terms and conditions of the
Offer (including, without limitation, the Minimum Condition), the Purchaser
shall pay, as promptly as practicable after expiration of the Offer, for all
Shares validly tendered and not withdrawn; PROVIDED that if on the initial
scheduled expiration date (which will be twenty business days after the date of
the commencement of the Offer) of the Offer, all the conditions to the Offer
have not been satisfied or waived, the Offer may be extended from time to time
until January 4, 1999, without the consent of the Company. Notwithstanding the
foregoing, the Purchaser may not, without the prior written consent of the
Company, extend the Offer pursuant to the foregoing sentence if the failure to
satisfy any of the conditions to the Offer was caused by or resulted from the
failure of the Parent or the Purchaser to perform in any material respect any
material covenant or agreement of either of them contained in this Agreement or
the material breach by the Parent or the Purchaser of any material
representation or warranty of either of them contained in this Agreement.

(b) As soon as reasonably practicable on the date of commencement of
the Offer, the Purchaser shall file with the Securities and Exchange Commission
(the "SEC") a Tender Offer Statement on Schedule 14D-1 (together with all
amendments and supplements thereto, the "SCHEDULE 14D-1") with respect to the
Offer and the other Transactions (as hereinafter defined). The Schedule 14D-1
shall contain or shall incorporate by reference an offer to purchase (the "OFFER
TO PURCHASE") and forms of the related letter of transmittal and any related
summary advertisement (the Schedule 14D-1, the Offer to Purchase and such other
documents, together with all supplements and amendments thereto, being referred
to herein collectively as the "OFFER DOCUMENTS"). The Parent, the Purchaser and
the Company agree to correct promptly any information provided by any of them
for use in the Offer Documents that shall have become false or misleading, and
the Parent and the Purchaser further agree to take all steps necessary to cause
the Schedule 14D-1 as so corrected to be filed with the SEC and the other Offer
Documents as so corrected to be disseminated to holders of Shares, in each case
as and to the extent required by applicable federal securities laws.

SECTION 1.02. COMPANY ACTIONS. (a) The Company hereby approves of
and consents to the Offer and represents that (i) the Board, at a meeting duly
called and held on November 1, 1998, has unanimously (A) determined that this
Agreement and the transactions contemplated hereby, including each of the Offer
and the Merger (collectively, the "TRANSACTIONS"), are fair to and in the best
interests of the Company and the shareholders of

<PAGE>
4

the Company, (B) approved this Agreement and the Transactions, (C) taken all
action required to (1) render inapplicable to the Transactions the provisions of
Section 2538 of Pennsylvania Law and (2) approve the Transactions pursuant to
the provisions of Subchapter F of Chapter 25 and Section 2539 of Pennsylvania
Law and (D) recommended that the shareholders of the Company accept the Offer
and, in the event of a shareholder vote, approve and adopt this Agreement and
the Transactions and (ii) Lazard Freres & Co. LLC ("LAZARD") and Parker/Hunter
Incorporated ("PARKER") have each delivered to the Board a written opinion to
the effect that the consideration to be received by the holders of Shares
pursuant to each of the Offer and the Merger is fair to the holders of Shares
from a financial point of view. The Company hereby consents to the inclusion in
the Offer Documents of the recommendation of the Board described in the
immediately preceding sentence, and, except as set forth in Section 6.04(c),
agrees not to withdraw or modify or propose to withdraw or modify such
recommendation in a manner adverse to the Parent or the Purchaser. The Company
has been advised by each of its directors and executive officers that they
intend to tender or cause to be tendered all Shares beneficially owned by them
to the Purchaser pursuant to the Offer, to sell such Shares to the Purchaser
pursuant to the respective Shareholder Agreement, if applicable, and to vote
such Shares in favor of the approval and adoption of this Agreement and the
Transactions.

(b) As soon as reasonably practicable on the date of commencement of
the Offer, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 (together with all amendments and supplements
thereto, the "SCHEDULE 14D-9") containing the recommendation of the Board
described in Section 1.02(a) and shall disseminate the Schedule 14D-9 to the
extent required by Rule 14d-9 promulgated under the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), and any other applicable federal
securities laws. The Company, the Parent and the Purchaser agree to correct
promptly any information provided by any of them for use in the Schedule 14D-9
which shall have become false or misleading, and the Company further agrees to
take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed
with the SEC and disseminated to holders of Shares, in each case as and to the
extent required by applicable federal securities laws.

(c) The Company shall promptly furnish the Purchaser with mailing
labels containing the names and addresses of all record holders of Shares and
with security position listings of Shares held in stock depositories, each as of
a recent date, together with all other available listings and computer files
containing names, addresses and security position listings of record holders and
beneficial owners of Shares. The Company shall furnish the Purchaser with such
additional information, including, without limitation, updated listings and
computer files of shareholders, mailing labels and security position listings,
and such other assistance as the Parent, the Purchaser or their agents may
reasonably request. Subject to the requirements of applicable law, and except
for such steps as are necessary to disseminate the Offer

<PAGE>
5

Documents and any other documents necessary to consummate the Offer or the
Merger, the Parent and the Purchaser shall hold in confidence until the
Effective Time the information contained in such labels, listings and files,
shall use such information only in connection with the Offer and the Merger and,
if this Agreement shall be terminated in accordance with Section 8.01, shall
deliver to the Company all copies of such information then in their possession.

ARTICLE II

THE MERGER

SECTION 2.01. THE MERGER. Upon the terms and subject to the
conditions set forth in Article VII, and in accordance with Pennsylvania Law
(including, without limitation, Section 1906 thereof), at the Effective Time,
the Purchaser shall be merged with and into the Company. As a result of the
Merger, the separate corporate existence of the Purchaser shall cease and the
Company shall continue as the surviving corporation of the Merger (the
"SURVIVING CORPORATION"), and shall continue to be governed by the laws of the
Commonwealth of Pennsylvania.

SECTION 2.02. EFFECTIVE TIME; CLOSING. As promptly as practicable
after the satisfaction or, if permissible, waiver of the conditions set forth in
Article VII, the parties hereto shall cause the Merger to be consummated by
filing articles of merger (the "ARTICLES OF MERGER"), together with any required
tax certificates or statements, with the Department of State of the Commonwealth
of Pennsylvania, in such form as is required by, and executed in accordance
with, the relevant provisions of Pennsylvania Law (the date and time of such
filing being the "EFFECTIVE TIME"). Prior to such filings, a closing shall be
held at the offices of Shearman & Sterling, 599 Lexington Avenue, New York, New
York 10022, or such other place as the parties shall agree, for the purpose of
confirming the satisfaction or waiver, as the case may be, of the conditions set
forth in Article VII.

SECTION 2.03. EFFECT OF THE MERGER. At the Effective Time, the
effect of the Merger shall be as provided in the applicable provisions of
Pennsylvania Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the property, rights, privileges, powers and
franchises of the Company and the Purchaser shall vest in the Surviving
Corporation, and all debts, liabilities, obligations, restrictions, disabilities
and duties of the Company and the Purchaser shall become the debts, liabilities,
obligations, restrictions, disabilities and duties of the Surviving Corporation.

<PAGE>
6

SECTION 2.04. ARTICLES OF INCORPORATION; BYLAWS. (a) The Articles
of Incorporation of the Company, as in effect immediately prior to the Effective
Time, shall be the Articles of Incorporation of the Surviving Corporation until
thereafter amended as provided by applicable law and such Articles of
Incorporation.

(b) The Bylaws of the Company, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended as provided by law, the Articles of Incorporation of the
Surviving Corporation and such Bylaws.

SECTION 2.05. DIRECTORS AND OFFICERS. The directors of the Purchaser
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.

SECTION 2.06. CONVERSION OF SECURITIES. At the Effective Time, by
virtue of the Merger and without any action on the part of the Purchaser, the
Company or the holders of any of the Shares:

(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than any Shares to be canceled pursuant to Section
2.06(b) and any Dissenting Shares) shall be canceled and shall be converted
automatically into the right to receive an amount equal to the Per Share
Amount in cash (the "MERGER CONSIDERATION"), payable, without interest, to
the holder of such Share, upon surrender, in the manner provided in Section
2.09, of the certificate that formerly evidenced such Share;

(b) Each Share owned by the Purchaser, the Parent or any direct or
indirect wholly owned subsidiary of the Parent or of the Company
immediately prior to the Effective Time shall be canceled and retired
without any conversion thereof and no payment or distribution shall be made
with respect thereto; and

(c) Each share of Common Stock, par value U.S. $0.01 per share, of
the Purchaser issued and outstanding immediately prior to the Effective
Time shall be converted into and exchanged for one validly issued, fully
paid and nonassessable share of Common Stock, par value U.S. $0.01 per
share, of the Surviving Corporation.

SECTION 2.07. STOCK OPTIONS; WARRANTS. (a) In accordance with the
terms of the Company's 1989 Stock Option Plan and 1992 Stock Option Plan (the
"STOCK OPTION PLANS"), the Company shall cause each outstanding option to
purchase Shares granted under

<PAGE>
7

the Stock Option Plans to, immediately prior to the Effective Time, become
exercisable regardless of the installment provisions contained in the Stock
Option Plans and to be terminated at the Effective Time. Section 2.07(a) of the
Disclosure Schedule lists all options outstanding under the Stock Option Plans.

(b) The Company shall use its reasonable best efforts to obtain the
consent (the "OPTION CONSENTS") of the persons listed on Section 2.07(b) of the
Disclosure Schedule (the "OPTION HOLDERS"), to the termination, immediately
prior to the Effective Time, of the stock options held by each Option Holder
pursuant to the respective option agreements listed on Section 2.07(b) of the
Disclosure Schedule. Each such Option Holder shall be paid by the Company, at
or immediately prior to the Effective Time with respect to each stock option, in
consideration of such termination, an amount in cash determined by multiplying
(i) the excess, if any, of the Per Share Amount over the applicable exercise
price under such option by (ii) the number of Shares such Option Holder could
have purchased had such holder exercised such options in full immediately prior
to the Effective Time.

(c) The Company shall use its reasonable best efforts to obtain the
consent of Edward J. Lauth, James D. Hammond and Marion I. Hammond and Nancy J.
Davis to the termination, immediately prior to the Effective Time, of the
warrants held by each of them pursuant to the Warrants dated as of April 6,
1995, the Warrant dated as of November 21, 1995, and the Warrant dated as of
August 28, 1996, respectively (the "WARRANT CONSENTS"). Each such holder of
warrants shall be paid by the Company, at or immediately prior to the Effective
Time with respect to each such warrant, in consideration of such termination, an
amount in cash determined by multiplying (i) the excess, if any, of the Per
Share Amount over the applicable exercise price under such warrant by (ii) the
number of Shares such holder could have purchased had such holder exercised such
warrant in full immediately prior to the Effective Time.

SECTION 2.08. DISSENTING SHARES. (a) Notwithstanding any provision
of this Agreement to the contrary, in the event that this Agreement is submitted
to a vote at the Special Shareholders' Meeting, Shares that are outstanding
immediately prior to the Effective Time and that are held by shareholders who
shall have dissented and demanded the right to receive the fair value of their
Shares in accordance with, and otherwise complied in all respects with, Sections
1930 and 1571 through 1580 of Pennsylvania Law (collectively, the "DISSENTING
SHARES") shall be canceled but not be converted into or represent the right to
receive the Merger Consideration. Such shareholders shall be entitled instead
to receive payment of the fair value of such Shares (which may be more than,
equal to, or less than the Merger Consideration) in accordance with the
provisions of such Sections 1930 and 1571 through 1580, except that all
Dissenting Shares held by shareholders who shall fail to perfect or who
effectively shall withdraw or lose their rights to be paid the fair value for
such Shares under such Sections 1930 and 1571 through 1580 shall thereupon be
deemed to have been

<PAGE>
8

converted into and to have become exchangeable for, as of the Effective Time,
the right to receive the Merger Consideration, without any interest thereon,
upon surrender, in the manner provided in Section 2.09, of the certificate or
certificates that formerly evidenced such Shares.

(b) Notwithstanding any provision of this Agreement to the contrary,
in the event that the Merger is effected as provided in Section 2.10 without a
shareholders' meeting, Shares that are outstanding immediately prior to the
Effective Time shall be canceled and the holders thereof shall be entitled to a
notice to demand payment in accordance with the provisions of Sections 1930 and
1575 of Pennsylvania Law, and those shareholders who make a timely demand for
payment in accordance with, and otherwise comply in all respects with, Sections
1575 through 1580 of Pennsylvania Law shall be entitled to receive, instead of
the Merger Consideration, payment of the fair value of such Shares (which may be
more than, equal to, or less than the Merger Consideration) in accordance with
the provisions of such Sections 1930 and 1575 through 1580, except that all
Dissenting Shares held by shareholders who shall fail to perfect or who
effectively shall withdraw or lose their rights to be paid the fair value for
such Shares under such Sections 1930 and 1575 through 1580 shall thereupon be
deemed to have been converted into and to have become exchangeable for, as of
the Effective Time, the right to receive the Merger Consideration, without any
interest thereon, upon surrender, in the manner provided in Section 2.09, of the
certificate or certificates that formerly evidenced such Shares.

SECTION 2.09. SURRENDER OF SHARES; STOCK TRANSFER BOOKS. (a) Prior
to the Effective Time, the Purchaser shall designate a bank or trust company to
act as agent (the "PAYING AGENT") for the holders of Shares in connection with
the Merger to receive the funds to which holders of Shares shall become entitled
pursuant to Section 2.06(a). Such funds shall be invested by the Paying Agent
as directed by the Surviving Corporation, provided that such investments shall
be in obligations of or guaranteed by the United States of America or of any
agency thereof and backed by the full faith and credit of the United States of
America, in commercial paper obligations rated A-1 or P-1 or better by Moody's
Investors Service, Inc. or Standard & Poor's Corporation, respectively, or in
deposit accounts, certificates of deposit or banker's acceptances of, repurchase
or reverse repurchase agreements with, or Eurodollar time deposits purchased
from, commercial banks with capital, surplus and undivided profits aggregating
in excess of U.S. $500 million (based on the most recent financial statements of
such bank which are then publicly available at the SEC or otherwise).

<PAGE>
9

Certificates pursuant to such letter of transmittal. Upon surrender to the
Paying Agent of a Certificate, together with such letter of transmittal, duly
completed and validly executed in accordance with the instructions thereto, and
such other documents as may be required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange therefor the
Merger Consideration for each Share formerly evidenced by such Certificate, and
such Certificate shall then be canceled. No interest shall accrue or be paid on
the Merger Consideration payable upon the surrender of any Certificate for the
benefit of the holder of such Certificate. If payment of the Merger
Consideration is to be made to a person other than the person in whose name the
surrendered Certificate is registered on the stock transfer books of the
Company, it shall be a condition of payment that the Certificate so surrendered
shall be endorsed properly or otherwise be in proper form for transfer and that
the person requesting such payment shall have paid all transfer and other taxes
required by reason of the payment of the Merger Consideration to a person other
than the registered holder of the Certificate surrendered or shall have
established to the satisfaction of the Surviving Corporation that such taxes
either have been paid or are not applicable.

(c) At any time following the sixth month after the Effective Time,
the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any funds which had been made available to the Paying Agent and
not disbursed to holders of Shares (including, without limitation, all interest
and other income received by the Paying Agent in respect of all funds made
available to it) and, thereafter, such holders shall be entitled to look to the
Surviving Corporation (subject to abandoned property, escheat and other similar
laws) only as general creditors thereof with respect to any Merger Consideration
that may be payable upon due surrender of the Certificates held by them.
Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying
Agent shall be liable to any holder of a Share for any Merger Consideration
delivered in respect of such Share to a public official pursuant to any
abandoned property, escheat or other similar law.

(d) At the Effective Time, the stock transfer books of the Company
shall be closed and, thereafter, there shall be no further registration of
transfers of Shares on the records of the Company. From and after the Effective
Time, the holders of Shares outstanding immediately prior to the Effective Time
shall cease to have any rights with respect to such Shares except as otherwise
provided herein or by applicable law.

SECTION 2.10. MERGER WITHOUT APPROVAL OF COMPANY SHAREHOLDERS.
Notwithstanding any other provision of this Agreement, in the event that the
Parent, the Purchaser or any of their Assignees acquire Shares pursuant to the
Offer constituting at least 80% of the then outstanding Shares, the parties
hereby agree, subject to Article VII hereof, to take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after such acquisition, without approval of the Company's
shareholders, in accordance with Section 1924(b)(1)(ii) of Pennsylvania Law,
including, without limitation,

<PAGE>
10

adoption by the Board of Directors of the Purchaser or the Assignee acquiring
the Shares pursuant to the Offer of the Short-Form Plan of Merger.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to the Parent and the
Purchaser that:

SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of
the Company and each subsidiary of the Company (a "SUBSIDIARY") is a corporation
duly organized, validly existing and in good standing or validly subsisting
(with respect to jurisdictions which recognize such concept) under the laws of
the jurisdiction of its incorporation and has the requisite power and authority
and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing or in good standing or to have
such power, authority and governmental approvals would not, individually or in
the aggregate, have a Material Adverse Effect (as defined below). The Company
and each Subsidiary is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except for such failures to be
so qualified or licensed and in good standing that would not, individually or in
the aggregate, have a Material Adverse Effect. When used in connection with the
Company or any Subsidiary, the term "MATERIAL ADVERSE EFFECT" means any change
or effect that is or would be materially adverse to the business, operations,
properties, condition, assets or liabilities (including, without limitation,
contingent liabilities) of the Company and the Subsidiaries taken as a whole. A
true and complete list of all the Subsidiaries, together with the jurisdiction
of incorporation of each Subsidiary and the percentage of the outstanding
capital stock of each Subsidiary owned by the Company and each other Subsidiary,
is set forth in Section 3.01 of the Disclosure Schedule, which has been
delivered prior to the date of this Agreement by the Company to the Parent (the
"DISCLOSURE SCHEDULE"). Except as disclosed in such Section 3.01, the Company
does not directly or indirectly own any equity or similar interest in, or any
interest convertible into or exchangeable or exercisable for any equity or
similar interest in, any corporation, partnership, joint venture or other
business association or entity.

SECTION 3.02. ARTICLES OF INCORPORATION AND BYLAWS. The Company has
heretofore furnished to the Parent a complete and correct copy of the Articles
of Incorporation and the Bylaws or equivalent organizational documents, each as
amended to date, of the

<PAGE>
11

Company and each Subsidiary. Such Articles of Incorporation, Bylaws and
equivalent organizational documents are in full force and effect. Neither the
Company nor any Subsidiary is in violation of any provision of its Articles of
Incorporation, Bylaws or equivalent organizational documents.

SECTION 3.03. CAPITALIZATION. The authorized capital stock of the
Company consists of 100,000,000 Shares and 2,000,000 shares of preferred stock,
par value $1.00 per share. As of the date hereof, (i) 8,448,913 Shares are
issued and outstanding, all of which are validly issued, fully paid and
nonassessable, and no shares of preferred stock are issued and outstanding, (ii)
35,095 Shares are held in the treasury of the Company, (iii) no Shares are held
by the Subsidiaries, (iv) 352,808 Shares are reserved for issuance pursuant to
stock options granted pursuant to the Company's Stock Option Plans or otherwise,
(v) warrants for 75,100 Shares are issued and outstanding and (vi) 37,681 Shares
have been subscribed for but not yet purchased pursuant to the Stock Purchase
Plan. Except as set forth in this Section 3.03, there are no options, warrants
or other rights, agreements, arrangements or commitments of any character
relating to the issued or unissued capital stock of the Company or any
Subsidiary or obligating the Company or any Subsidiary to issue or sell any
shares of capital stock of, or other equity interests in, the Company or any
Subsidiary. All Shares subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and nonassessable.
There are no outstanding contractual obligations of the Company or any
Subsidiary to repurchase, redeem or otherwise acquire any Shares or any capital
stock of any Subsidiary or to provide funds to, or make any investment (in the
form of a loan, capital contribution or otherwise) in, any Subsidiary or any
other person. Each outstanding share of capital stock of each Subsidiary is
duly authorized, validly issued, fully paid and nonassessable and each such
share owned by the Company or another Subsidiary is free and clear of all
security interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on the Company's or such Subsidiary's voting rights,
charges and other encumbrances of any nature whatsoever.

SECTION 3.04. AUTHORITY RELATIVE TO THIS AGREEMENT; VOTE REQUIRED.
The Company has all necessary power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
Transactions. The execution and delivery of this Agreement by the Company and
the consummation by the Company of the Transactions have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the Transactions (other than, with respect to the Long-Form Merger,
the approval and adoption of this Agreement by the affirmative vote of the
shareholders of the Company in accordance with Pennsylvania Law and the
Company's Articles of Incorporation), and no further corporate proceedings are
necessary to (i) render inapplicable to the Transactions the provisions of
Section 2538 of Pennsylvania Law regarding

<PAGE>
12

approval of transactions with interested shareholders and (2) approve the
Transactions pursuant to the provisions of Subchapter F of Chapter 25 and
Section 2539 of Pennsylvania Law regarding business combinations. This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by the Parent and the
Purchaser, constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms. If the Parent,
the Purchaser or any of their Assignees acquires Shares pursuant to the Offer
constituting at least 80% of the then outstanding Shares, no vote of the holders
of Shares shall be required to effect the Merger in accordance with Sections
1924(b)(1)(ii) and 2539 of Pennsylvania Law; PROVIDED that the corporation
merging with and into the Company owns, directly or indirectly, at least 80% of
the then outstanding Shares. Otherwise, the Long-Form Merger must be approved
by the affirmative vote of holders of a majority of the Shares voted on a
proposal to approve the Long-Form Merger at a duly convened annual or special
meeting of the shareholders of Company.

SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company will not, (i) conflict with or
violate the Articles of Incorporation or Bylaws or equivalent organizational
documents of the Company or any Subsidiary, (ii) conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to the Company or
any Subsidiary or by which any property or asset of the Company or any
Subsidiary is bound or subject or (iii) result in any breach of or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance of any nature on any property or asset of the Company or any
Subsidiary pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any Subsidiary is a party or by which the Company or any
Subsidiary or any property or asset of the Company or any Subsidiary is bound or
subject, except, in the case of (ii) or (iii), for any such conflicts,
violations, breaches, defaults or other occurrences that would not, individually
or in the aggregate, have a Material Adverse Effect.

(b) The execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with, or notification
to, any governmental, administrative or regulatory authority or agency, domestic
or foreign, except (i) for applicable requirements, if any, of the Exchange Act,
state securities or "blue sky" laws ("BLUE SKY LAWS") and state takeover laws,
the pre-merger notification requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder (the "HSR ACT"), the rules of the New York Stock Exchange and filing
and recordation of appropriate merger documents as required by

<PAGE>
13

Pennsylvania Law, and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay consummation of the Offer or the Merger, or otherwise prevent
the Company from performing its obligations under this Agreement, and would not,
individually or in the aggregate, have a Material Adverse Effect.

SECTION 3.06. COMPLIANCE. Neither the Company nor any Subsidiary is
in conflict with, or in default or violation of, (i) any law, rule, regulation,
order, judgment or decree applicable to the Company or any Subsidiary or by
which any property or asset of the Company or any Subsidiary is bound or subject
or (ii) any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Company or any Subsidiary is a party or by which the Company or any Subsidiary
or any property or asset of the Company or any Subsidiary is bound or subject,
except for any such conflicts, defaults or violations that would not,
individually or in the aggregate, have a Material Adverse Effect.

SECTION 3.07. SEC FILINGS; FINANCIAL STATEMENTS. (a) The Company
has filed all forms, reports and documents required to be filed by it with the
SEC since January 29, 1998, and has heretofore made available to the Parent, in
the form filed with the SEC, (i) its Quarterly Reports on Form 10-Q for the
periods ended December 31, 1997, March 31, 1998 and June 30, 1998, (ii) all
proxy statements relating to the Company's meetings of shareholders (whether
annual or special) held since January 29, 1998, if any, and (iii) all other
forms, reports and other registration statements filed by the Company with the
SEC since January 29, 1998 (the forms, reports and other documents referred to
in clauses (i), (ii) and (iii) above being referred to herein, collectively, as
the "SEC REPORTS"). The SEC Reports (i) were prepared in accordance with the
requirements of the Securities Act of 1933, as amended (the "SECURITIES ACT"),
and the Exchange Act, as the case may be, and the rules and regulations
promulgated thereunder and (ii) did not, at the time they were filed, or, if
amended, as of the date of such amendment, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. No Subsidiary is
required to file any form, report or other document with the SEC.

(b) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the SEC Reports, the audited consolidated
balance sheets of the Company dated September 30, 1997, and September 30, 1996,
and the audited statements of operations, shareholders' equity and cash flows
for the years ending September 30, 1995, 1996 and 1997, the unaudited
consolidated balance sheet dated September 30, 1998, and the unaudited statement
of income for the year ended September 30, 1998, copies of which are attached
hereto as Schedule 3.07(b), was, and the 1998 Financial Statements, to be
delivered

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14

by the Company to the Parent pursuant to Section 6.12 hereof will be, prepared
in accordance with United States generally accepted accounting principles
applied on a consistent basis ("GAAP") throughout the periods indicated (except
as may be indicated in the notes thereto and except for (i) interim periods
after September 30, 1997, which did not include any year-end adjustments and
(ii) the unaudited consolidated balance sheet dated September 30, 1998, and the
unaudited statement of income for the year ended September 30, 1998, which did
not include notes thereto as required by GAAP and are subject to adjustment
based on year-end inventory count) and each fairly presents, or will present, as
the case may be, the consolidated financial position, results of operations and
changes in shareholders' equity and cash flows of the Company and the
consolidated Subsidiaries as at the respective dates thereof and for the
respective periods indicated therein except as otherwise noted therein.

(c) The 1998 Financial Statements will not be materially less
favorable than the financial statements attached hereto as Schedule 3.07(b).
For purposes of this subsection (c) "materially less favorable" means that the
earnings per share, on a fully diluted basis, reflected in the 1998 Financial
Statements is less than $0.27, the operating income reflected in the 1998
Financial Statements is less than $3,800,000 and net debt reflected in the 1998
Financial Statements is more than $3,000,000.

(d) Except as and to the extent specifically disclosed in any SEC
Report filed prior to the date of this Agreement, neither the Company nor any
Subsidiary has any liability or obligation of any nature (whether accrued,
absolute, contingent or otherwise), except for liabilities and obligations
incurred in the ordinary course of business consistent with past practice since
June 30, 1998, that would not, individually or in the aggregate, have a Material
Adverse Effect.

(e) The Company has heretofore furnished to the Parent complete and
correct copies of all amendments and modifications that have not been filed by
the Company with the SEC to all agreements, documents and other instruments that
previously had been filed by the Company with the SEC and are currently in
effect.

SECTION 3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September
30, 1997, except as expressly contemplated by this Agreement or specifically
disclosed in any SEC Report filed prior to the date of this Agreement, the
Company and the Subsidiaries have conducted their businesses only in the
ordinary course and in a manner consistent with past practice and, since
September 30, 1997, except as specifically disclosed in any SEC Report filed
prior to the date of this Agreement, or in the Company's Registration Statement
on Form S-1 dated January 29, 1998, there has not been (i) any change in the
business, operations, properties, condition, assets or liabilities (including,
without limitation, contingent liabilities) of the Company or any Subsidiary
having, individually or in the aggregate, a Material Adverse Effect, (ii) any
damage, destruction or loss (whether or not covered by insurance) with respect

<PAGE>
15

to any property or asset of the Company or any Subsidiary having, individually
or in the aggregate, a Material Adverse Effect, (iii) any change by the Company
in its accounting methods, principles or practices, (iv) any revaluation by the
Company of any asset (including, without limitation, any writing down of the
value of inventory or writing off of notes or accounts receivable), other than
in the ordinary course of business consistent with past practice, (v) any
failure by the Company to revalue any asset in accordance with GAAP consistent
with past practice, (vi) any entry by the Company or any Subsidiary into any
commitment or transaction material to the Company and the Subsidiaries taken as
a whole, (vii) any declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of the Company or any redemption,
purchase or other acquisition of any of its securities, (viii) other than
pursuant to the contracts referred to in Section 3.10 and the increase in
compensation for the directors approved by the Board on May 12, 1998, any
increase in or establishment of any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option (including,
without limitation, the granting of stock options, stock appreciation rights,
performance awards or restricted stock awards), stock purchase or other employee
benefit plan, or any other increase in the compensation payable or to become
payable to any officers or key employees of the Company or any Subsidiary,
except in the ordinary course of business consistent with past practice, (ix)
any entering into, renewal, modification or extension of, any contract,
arrangement or agreement with any other party except for contracts, arrangements
or agreements in the ordinary course of business consistent with past practice
or (x) any other change, condition, event or development that has had or is
reasonably likely to have a Material Adverse Effect.

SECTION 3.09. ABSENCE OF LITIGATION. Except as specifically
disclosed in any SEC Report filed prior to the date of this Agreement, there is
no claim, action, proceeding or investigation pending or, to the best knowledge
of the Company, threatened against the Company or any Subsidiary, or any
property or asset of the Company or any Subsidiary, before any court, arbitrator
or administrative, governmental or regulatory authority or body, domestic or
foreign (each a "GOVERNMENTAL ENTITY"), which (i) alleges damages of $250,000 or
more or (ii) seeks to, or is reasonably likely to, delay or prevent the
consummation of any Transaction. Neither the Company nor any Subsidiary nor any
property or asset of the Company or any Subsidiary is subject to any order,
writ, judgment, injunction, decree, determination or award enjoining or
requiring the Company or any Subsidiary to take any action with respect to its
business, assets or properties.

SECTION 3.10. EMPLOYEE BENEFIT PLANS. (a) Section 3.10 of the
Disclosure Schedule contains a true and complete list of all employee benefit
plans (within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) and all bonus, stock option, stock
purchase, restricted stock, incentive, deferred compensation, retiree medical or
life insurance, supplemental retirement, severance or other benefit plans,
programs or arrangements, and all employment, termination, severance, change

<PAGE>
16

in control, stock option or other contracts, arrangements or agreements to which
the Company or any Subsidiary is a party, with respect to which the Company or
any Subsidiary has any obligation or which are maintained, contributed to or
sponsored by the Company or any Subsidiary for the benefit of any current or
former employee, officer or director of the Company or any Subsidiary
(collectively, the "PLANS"). No Plan is a "defined benefit plan" within the
meaning of Section 3(35) of ERISA and no Plan is subject to Title IV of ERISA
and neither the Company nor any Subsidiary has ever maintained or contributed to
an employee benefit plan subject to Title IV of ERISA. Each Plan is in writing
and the Company has previously furnished the Parent with a true and complete
copy of: (i) each material document setting forth the terms of such Plan, (ii)
each trust or other funding arrangement, (iii) each summary plan description and
summary of material modifications, (iv) the most recently filed Internal Revenue
Service ("IRS") Form 5500, (v) the most recently received IRS determination
letter for each such Plan, and (vi) the most recently prepared actuarial report
and financial statement in connection with each such Plan. Neither the Company
nor any Subsidiary has any express or implied commitment (i) to create or incur
liability with respect to or cause to exist any other employee benefit plan,
program or arrangement, (ii) to enter into any other contract or agreement to
provide compensation or benefits to any individual or (iii) to modify, change or
terminate any Plan, other than with respect to a modification, change or
termination required by ERISA or the Internal Revenue Code of 1986, as amended
(the "CODE").

(b) Except as set forth in Section 3.10 of the Disclosure Schedule,
none of the Plans (i) provides for the payment of separation, severance,
termination or similar-type benefits to any person, (ii) obligates the Company
or any Subsidiary to pay separation, severance, termination or other benefits as
a result of any Transaction or (iii) obligates the Company or any Subsidiary to
make any payment or provide any benefit that could be subject to a tax under
Section 4999 of the Code. Except as set forth in Section 3.10 of the Disclosure
Schedule, none of the Plans provides for or promises retiree medical, disability
or life insurance benefits to any current or former employee, officer or
director of the Company or any Subsidiary, other than as required by Section 601
et seq. of ERISA (COBRA).

(c) Except as set forth in Section 3.10 of the Disclosure Schedule,
each Plan that is intended to be qualified under Section 401(a) or 401(k) of the
Code has received a favorable determination letter from the IRS that such Plan
is so qualified, and each trust established in connection with any Plan which is
intended to be exempt from federal income taxation under Section 501(a) of the
Code has received a determination letter from the IRS that such trust is so
exempt. To the best of the Company's knowledge, no fact or event has occurred
since the date of any such determination letter from the IRS that could
adversely affect the qualified status of any such Plan or the exempt status of
any such trust. Each trust maintained or contributed to by the Company or any
Subsidiary that is intended to be qualified as a voluntary employees'
beneficiary association exempt from federal income taxation under

<PAGE>
17

Sections 501(a) and 501(c)(9) of the Code has received a favorable determination
letter from the IRS that it is so qualified and so exempt, and no fact or event
has occurred since the date of such determination by the IRS that could
adversely affect such qualified or exempt status.

(d) There has been no prohibited transaction (within the meaning of
Section 406 of ERISA or Section 4975 of the Code) with respect to any Plan.
Neither the Company nor any Subsidiary is currently liable or has previously
incurred any liability for any tax or penalty arising under Section 4971, 4972,
4979, 4980 or, to the best of the Company's knowledge, 4980B of the Code or
Section 502(c) of ERISA, and, to the Company's knowledge, no fact or event
exists that could give rise to any such liability. Neither the Company nor any
Subsidiary has incurred any liability under, arising out of or by operation of
Title IV of ERISA, and no fact or event exists which could give rise to any such
liability. No complete or partial termination has occurred within the five
years preceding the date hereof with respect to any Plan.

(e) Each Plan is now and has been operated in all respects in
accordance with the requirements of all applicable laws, including, without
limitation, ERISA and the Code, and the Company and each Subsidiary have
performed all obligations required to be performed by them under, are not in any
respect in default under or in violation of, and have no knowledge of any
default or violation by any party to, any Plan. All contributions, premiums or
payments required to be made with respect to any Plan are fully deductible for
income tax purposes and no such deduction previously claimed has been challenged
by any government entity. The Company's balance sheet dated September 30, 1998,
provided to the Parent prior to the date of this Agreement reflects an accrual
of all amounts of employer contributions and premiums accrued but unpaid with
respect to the Plans.

(f) The Company and the Subsidiaries have not incurred any liability
under, and have complied in all respects with, the Worker Adjustment Retraining
Notification Act and the regulations promulgated thereunder ("WARN") and do not
reasonably expect to incur any such liability as a result of actions taken or
not taken prior to the Effective Time. Section 3.10(f) of the Disclosure
Schedule lists (i) all the employees terminated or laid off by the Company or
any Subsidiary during the 90 days prior to the date hereof and (ii) all the
employees of the Company or any Subsidiary who have experienced a reduction in
hours of work of more than 50% during any month during the 90 days prior to the
date hereof and describes all notices given by the Company and the Subsidiaries
in connection with WARN. The Company will, by written notice to the Parent and
the Purchaser, update Section 3.10(f) of the Disclosure Schedule to include any
such terminations, layoffs and reductions in hours from the date hereof through
the Effective Time and will provide the Parent and the Purchaser with any
related information which they may reasonably request.

<PAGE>
18

SECTION 3.11. LABOR MATTERS. (i) There are no controversies pending
or, to the best knowledge of the Company, threatened between the Company or any
Subsidiary and any of their respective employees, which controversies have or
could have a Material Adverse Effect; (ii) neither the Company nor any
Subsidiary is a party to any collective bargaining agreement or other labor
union contract applicable to persons employed by the Company or any Subsidiary,
nor, to the best knowledge of the Company, are there any activities or
proceedings of any labor union to organize any such employees; (iii) neither the
Company nor any Subsidiary has breached or otherwise failed to comply with any
provision of any such agreement or contract and there are no grievances
outstanding against the Company or any Subsidiary under any such agreement or
contract; (iv) there are no unfair labor practice complaints pending against the
Company or any Subsidiary before the National Labor Relations Board or any
current union representation questions involving employees of the Company or any
Subsidiary; and (v) there is no strike, slowdown, work stoppage or lockout, or,
to the best knowledge of the Company, threat thereof, by or with respect to any
employees of the Company or any Subsidiary.

SECTION 3.12. OFFER DOCUMENTS; SCHEDULE 14D-9; PROXY STATEMENT.
Neither the Schedule 14D-9 nor any information supplied by the Company for
inclusion in the Offer Documents shall, at the respective times the Schedule
14D-9, the Offer Documents, or any amendments or supplements thereto are filed
with the SEC or are first published, sent or given to shareholders of the
Company, as the case may be, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they are made, not misleading. The proxy statement to be sent to the
shareholders of the Company in connection with the Special Shareholders' Meeting
(such proxy statement, as amended or supplemented, being referred to herein as
the "PROXY STATEMENT") shall not, at the date the Proxy Statement (or any
amendment or supplement thereto) is first mailed to shareholders of the Company,
at the time of the Special Shareholders' Meeting, if any, and at the Effective
Time, contain any untrue statement of a material fact, or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they are
made, not misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Special
Shareholders' Meeting, if any, which shall have become false or misleading.
Notwithstanding the foregoing, the Company makes no representation or warranty
with respect to any information supplied by the Parent, the Purchaser or any of
the Parent's or the Purchaser's representatives for inclusion in the foregoing
documents. The Schedule 14D-9 and the Proxy Statement shall comply in all
material respects as to form with the requirements of the Exchange Act and the
rules and regulations thereunder.

<PAGE>
19

SECTION 3.13. TANGIBLE PROPERTY; REAL PROPERTY AND LEASES. (a) The
Company and the Subsidiaries have sufficient title to all their tangible
properties and assets to conduct their respective businesses as currently
conducted or as contemplated to be conducted.

(b) Each parcel of real property owned or leased by the Company or
any Subsidiary (i) is owned or leased free and clear of all mortgages, pledges,
liens, security interests, conditional and installment sale agreements,
encumbrances, charges or other claims of third parties of any kind
(collectively, "LIENS"), other than (A) Liens for current taxes and assessments
not yet past due, (B) inchoate mechanics' and materialmen's Liens for
construction in progress, (C) workmen's, repairmen's, warehousemen's and
carriers' Liens arising in the ordinary course of business of the Company or
such Subsidiary consistent with past practice, (D) any matter disclosed on
Section 3.13(b) to the Disclosure Schedule and (E) all matters of record, Liens
and other imperfections of title and encumbrances that, individually or in the
aggregate, would not affect the Company's water sources or its use thereof or
materially affect the use of any other property subject to the foregoing
(collectively, "PERMITTED LIENS"), and (ii) is neither subject to any
governmental decree or order to be sold nor is being condemned, expropriated or
otherwise taken by any public authority with or without payment of compensation
therefor, nor, to the best knowledge of the Company, has any such condemnation,
expropriation or taking been proposed.

(c) All leases of real property leased for the use or benefit of the
Company or any Subsidiary to which the Company or any Subsidiary is a party
requiring rental payments in excess of U.S. $25,000 during the period of the
lease and all amendments and modifications thereto are in full force and effect
and have not been modified or amended, and there exists no default under any
such lease by the Company or any Subsidiary, nor any event which with notice or
lapse of time or both would constitute a default thereunder by the Company or
any Subsidiary, except as, individually or in the aggregate, would not
materially affect the use of such real property the subject of such lease.

SECTION 3.14. TRADEMARKS, PATENTS AND COPYRIGHTS. Except as set
forth in Section 3.14 of the Disclosure Schedule, the Company and the
Subsidiaries own or possess adequate licenses or other valid rights to use all
patents, patent rights, trademarks, trademark rights, trade names, trade dress,
trade name rights, copyrights, servicemarks, trade secrets, applications for
trademarks and for servicemarks, mask works, know-how and other proprietary
rights and information used or held for use in connection with the business of
the Company and the Subsidiaries, as currently conducted or as contemplated to
be conducted, and the Company is unaware of any assertion or claim challenging
the validity of any of the foregoing. The conduct of the business of the
Company and the Subsidiaries as currently conducted and as contemplated to be
conducted does not and will not conflict in any way with any patent, patent
right, license, trademark, trademark right, trade dress, trade name, trade name
right, service mark, mask work or copyright of any third party that,
individually or in

<PAGE>
20

the aggregate, could have a Material Adverse Effect. To the knowledge of the
Company, there are no infringements by any third party of any proprietary rights
owned by or licensed by or to the Company or any Subsidiary. Except as set
forth in Section 3.14 of the Disclosure Schedule, neither the Company nor any
Subsidiary has licensed or otherwise permitted the use by any third party of any
proprietary information.

SECTION 3.15. TAXES. (a) Except for such matters as would not have
a Material Adverse Effect, (i) the Company and its Subsidiaries have timely
filed or will timely file all returns and reports required to be filed by them
with any taxing authority with respect to Taxes for any period ending on or
before the earlier of the Effective Time or the date on which the terms and
conditions of the Offer (including, without limitation, the Minimum Condition)
have been satisfied, taking into account any extension of time to file granted
to or obtained on behalf of the Company and its Subsidiaries, (ii) all Taxes
that are due for any period ending on or before the earlier of the Effective
Time or the date on which the terms and conditions of the Offer (including,
without limitation, the Minimum Condition) have been satisfied have been paid or
will be paid (other than Taxes which (1) are not yet delinquent or (2) are being
contested in good faith and have not been finally determined), (iii) as of the
date hereof, no deficiency for any Tax has been asserted or assessed by a taxing
authority against the Company or any of its Subsidiaries which deficiency has
not been paid other than any deficiency being contested in good faith, (iv) the
Company and its Subsidiaries have provided adequate reserves (in accordance with
GAAP) in their financial statements for any Taxes that have not been paid,
whether or not shown as being due on any returns. As used in the Agreement,
"TAXES" shall mean any and all taxes, fees, levies, duties, tariffs, imposts and
other charges of any kind (together with any and all interest, penalties,
additions to tax and additional amounts imposed with respect thereto) imposed by
any Governmental Entity or taxing authority, including, without limitation:
taxes or other charges on or with respect to income, franchise, windfall or
other profits, gross receipts, property, sales, use, capital stock, payroll,
employment, social security, workers' compensation, unemployment compensation or
net worth; taxes or other charges in the nature of excise, withholding, ad
valorem, stamp, transfer, value-added or gains taxes; license, registration and
documentation fees; and customers' duties, tariffs and similar charges.

(b) To the best of the Company's knowledge, there are no material
disputes pending or claims asserted in writing for Taxes or assessments upon the
Company or any of its Subsidiaries, nor has the Company or any of its
Subsidiaries been requested in writing to give any currently effective waivers
extending the statutory period of limitation applicable to any federal or state
income tax return for any period which disputes, claims, assessments or waivers
are reasonably likely to have a Material Adverse Effect.

<PAGE>
21

(c) There are no Tax liens upon any property or assets of the Company
or any of its Subsidiaries except liens for current Taxes not yet due and except
for liens which have not had and are not reasonably likely to have a Material
Adverse Effect.

(d) Neither the Company nor any of its Subsidiaries has been required
to include in income any adjustment pursuant to Section 481 of the Code by
reason of a voluntary change in accounting method initiated by the Company or
any of its Subsidiaries, and the IRS has not initiated or proposed any such
adjustment or change in accounting method, in either case which adjustment or
change has had or is reasonably likely to have a Material Adverse Effect.

(e) Except as set forth in the financial statements describe in
Section 3.07, neither Company nor any of its Subsidiaries has entered into a
transaction which is being accounted for under the installment method of Section
453 of the Code, which would be reasonably likely to have a Material Adverse
Effect.

(f) Neither the Company nor any of its Subsidiaries has made an
election under Section 341(f) of the Code.

SECTION 3.16. ENVIRONMENTAL MATTERS. (a) For purposes of this
Agreement, the following terms shall have the following meanings: (i)
"HAZARDOUS MATERIALS" means (a) petroleum and petroleum products, by-products or
breakdown products, radioactive materials, asbestos-containing materials and
polychlorinated biphenyls and (b) any other chemicals, materials or substances
defined or regulated as toxic or hazardous or as a pollutant, contaminant or
waste under any applicable Environmental Law; (ii) "ENVIRONMENTAL LAW" means any
Law, now or hereafter in effect and as amended, and any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, relating to pollution or protection of the
environment, public or employee safety and health or natural resources,
including without limitation, those relating to the use, handling,
transportation, treatment, storage, disposal, release or discharge of Hazardous
Materials; (iii) "ENVIRONMENTAL CLAIMS" means any and all actions, suits,
demands, demand letters, claims, liens, notices of noncompliance or violation,
notices of liability or potential liability, investigations, proceedings,
consent orders or consent agreements relating in any way to any Environmental
Law, any environmental or water permit or any Hazardous Materials.

(b) (i) The Company has not violated and is not in violation of any
Environmental Law; (ii) the Company has all permits, licenses and other
authorizations required under any Environmental Law and the Company has always
been and is in compliance with their requirements; (iii) none of the properties
owned or leased by the Company (including, without limitation, soils and surface
and ground waters) are contaminated with any Hazardous Materials or have been
used for the treatment, storage or disposal of any

<PAGE>
22

Hazardous Materials; (iv) there are no Environmental Claims pending or, to the
knowledge of the Company, threatened against the Company or any of its
properties, and there are no circumstances that can reasonably be expected to
form the basis of any such Environmental Claim, including without limitation
with respect to any off-site disposal location presently or formerly used by the
Company or any of its predecessors or with respect to any previously owned or
operated facilities; and (v) the Company has not received any written notice of
violation with or liability under any Environmental Law and the Company is not
aware of any circumstances that could reasonably be expected to give rise to
such notice.

(c) The quality of the spring water from each water source used by
the Company meets all applicable state and federal standards and guidelines for
"spring water".

SECTION 3.17. MATERIAL CONTRACTS. Section 3.17 of the Disclosure
Schedule lists each contract or agreement to which the Company or any of the
Subsidiaries is a party that is material to the Company or any Subsidiary,
including, but not limited to, any material contracts or agreements (i)
pursuant to which the Company or any Subsidiary leases or otherwise procures or
obtains rights to water sources, (ii) pursuant to which the Company or any
Subsidiary sells, brokers or distributes bottled water having an annual
aggregate value for each such contract or agreement in excess of $100,000, (iii)
pursuant to which any third party supplies raw materials, supplies or other
goods or merchandise to the Company having an annual aggregate value for each
such contract or arrangement in excess of $100,000 or (iv) containing a
provision purporting to limit the ability of the Company to compete in any line
of business, with any person, in any geographic area or during any time,
excluding all such contracts that the Company may in its discretion terminate
within forty-five days without penalty thereunder (each, a "MATERIAL CONTRACT").
Each Material Contract is in full force and effect and is enforceable against
the parties thereto (other than the Company and the Subsidiaries) in accordance
with its terms and no condition or state of facts exists that, with notice or
the passage of time, or both, would constitute a material default by the Company
or any Subsidiary or, to the best knowledge of the Company, any third party
under such Material Contracts. The Company or the applicable Subsidiary has
duly complied in all material respects with the provision of each Material
Contract to which it is a party.

SECTION 3.18. BROKERS. No broker, finder or investment banker (other
than Lazard and Parker) is entitled to any brokerage, finder's or other fee or
commission in connection with the Transactions based upon arrangements made by
or on behalf of the Company. The Company has heretofore furnished to the Parent
a complete and correct copy of all agreements between the Company and each of
Lazard and Parker pursuant to which each such firm would be entitled to any
payment relating to the Transactions.

SECTION 3.19. OPINION OF FINANCIAL ADVISORS. The Board has received
the written opinion of each of Lazard and Parker to the effect that the
consideration to be received

<PAGE>
23

by the shareholders of the Company pursuant to the Offer and the Merger is fair
to such shareholders from a financial point of view, copies of which have been
provided to the Parent.

SECTION 3.20. INSURANCE. Section 3.20(a) of the Disclosure Schedule
lists each of the insurance policies relating to the Company or any of its
Subsidiaries which are currently in effect. The Company has provided to the
Parent and the Purchaser a true, complete and correct copy of each such policy
or the binder therefor. With respect to each such insurance policy or binder
none of the Company, any of its Subsidiaries or any other party to the policy is
in breach of or in default thereunder (including with respect to the payment of
premiums or the giving of notices), and the Company does not know of any
occurrence or event which (with notice or the lapse of time or both) would
constitute such a breach or default or permit termination, modification or
acceleration under the policy, except for such breaches or defaults which,
individually or in the aggregate, would not result in a Material Adverse Effect.
Section 3.20(b) of the Disclosure Schedule describes any self-insurance
arrangements affecting the Company or any of its Subsidiaries.

SECTION 3.21. PENNSYLVANIA LAW. Assuming that no "control-share
approval," as such term is defined in Subchapter I of Chapter 25 of Pennsylvania
Law, occurs in connection with the Transactions the provisions of Subchapters I
and J of Chapter 25 of Pennsylvania Law will not apply to the Transactions.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE PURCHASER

The Parent and the Purchaser hereby, jointly and severally, represent
and warrant to the Company that:

SECTION 4.01. CORPORATE ORGANIZATION. Each of the Parent and the
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has the requisite
power and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing or in good
standing or to have such power, authority and governmental approvals would not,
individually or in the aggregate, prevent or materially delay the performance by
the Parent or the Purchaser of any of their obligations under this Agreement or
the consummation of the Transactions.

<PAGE>
24

SECTION 4.02. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of the
Parent and the Purchaser has all necessary corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the Transactions. The execution and delivery of this Agreement by
the Parent and the Purchaser and the consummation by the Parent and the
Purchaser of the Transactions have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Parent or the Purchaser are necessary to authorize this Agreement or to
consummate the Transactions (other than, with respect to the Merger, the filing
and recordation of appropriate merger documents as required by Pennsylvania Law
and, if the Merger is effected as provided in Section 2.10, the adoption by the
Purchaser's Board of Directors, or by the Board of Directors of the Assignee
that acquires the Shares pursuant to the Offer, of the plan of merger attached
hereto as Annex D (the "SHORT-FORM PLAN OF MERGER")). This Agreement has been
duly and validly executed and delivered by the Parent and the Purchaser and,
assuming the due authorization, execution and delivery by the Company,
constitutes a legal, valid and binding obligation of each of the Parent and the
Purchaser enforceable against each of the Parent and the Purchaser in accordance
with its terms.

SECTION 4.03. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of this Agreement by the Parent and the Purchaser do not,
and the performance of this Agreement by the Parent and the Purchaser will not,
(i) conflict with or violate the Articles of Incorporation or Bylaws (or
equivalent organizational documents) of either the Parent or the Purchaser, (ii)
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to the Parent or the Purchaser or by which any property or asset of
either of them is bound or subject, or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or other encumbrance of any nature on any property or asset of the Parent or the
Purchaser pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Parent or the Purchaser is a party or by which the Parent or the Purchaser or
any property or asset of either of them is bound or subject, except, in the case
of (ii) and (iii), for any such conflicts, violations, breaches, defaults or
other occurrences which would not, individually or in the aggregate, prevent or
materially delay the performance by the Parent or the Purchaser of any of their
obligations under this Agreement or the consummation of the Transactions.

(b) The execution and delivery of this Agreement by the Parent and
the Purchaser do not, and the performance of this Agreement by the Parent and
the Purchaser will not, require any consent, approval, authorization or permit
of, or filing with or notification to, any Governmental Entity, except (i) for
applicable requirements, if any, of the Exchange Act, Blue Sky Laws and state
takeover laws, the HSR Act, and filing and recordation of appropriate merger
documents as required by Pennsylvania Law and (ii) where failure to obtain such

<PAGE>
25

consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or materially delay the performance by the
Parent or the Purchaser of any of their obligations under this Agreement or the
consummation of the Transactions.

SECTION 4.04. FINANCING. The Parent has or will have, prior to the
expiration of the Offer or the Effective Time, sufficient funds to permit the
Purchaser to acquire all the outstanding Shares in the Offer and the Merger and
to pay all related fees and expenses, and Parent will cause such funds to be
contributed to the Purchaser or any Assignee thereof participating in the Offer
and the Merger.

SECTION 4.05. OFFER DOCUMENTS; PROXY STATEMENT. The Offer Documents,
and the information supplied by the Parent or the Purchaser for inclusion in the
Schedule 14D-9, will not, at the time such documents are filed with the SEC or
are first published, sent or given to shareholders of the Company, as the case
may be, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they are
made, not misleading. The information supplied by the Parent for inclusion in
the Proxy Statement, if any, will not, on the date such Proxy Statement (or any
amendment or supplement thereto) is first mailed to shareholders of the Company,
at the time of the Special Shareholders' Meeting, if any, and at the Effective
Time, contain any untrue statement of a material fact which, at such time and in
light of the circumstances under which it is made, is false or misleading with
respect to any material fact, or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Special Shareholders'
Meeting, if any, which shall have become false or misleading. Notwithstanding
the foregoing, the Parent and the Purchaser make no representation or warranty
with respect to any information supplied by the Company or any of its
representatives which is contained in any of the foregoing documents or the
Offer Documents. The Offer Documents shall comply in all material respects as
to form with the requirements of the Exchange Act and the rules and regulations
thereunder.

SECTION 4.06. BROKERS. No broker, finder or investment banker (other
than J.P. Morgan Securities Inc.) is entitled to any brokerage, finder's or
other fee or commission in connection with the Transactions based upon
arrangements made by or on behalf of the Parent or the Purchaser.

SECTION 4.07. OWNERSHIP OF PURCHASER; NO PRIOR ACTIVITIES. (a)
Purchaser was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement.

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26

(b) As of the Effective Time, all of the outstanding capital stock of
the Purchaser will be owned directly by the Parent. As of the Effective Time,
there will be no options, warrants or other rights (including registration
rights), agreements, arrangements or commitments to which the Purchaser is a
party of any character relating to the issued or unissued capital stock of, or
other equity interests in, the Purchaser or obligating the Purchaser to grant,
issue or sell any shares of the capital stock of or equity interests in the
Purchaser, by sale, lease, license or otherwise. There are no obligations,
contingent or otherwise, of the Purchaser to repurchase, redeem or otherwise
acquire any shares of the capital stock of the Purchaser.

(c) As of the date hereof and the Effective Time, except for
obligations or liabilities incurred in connection with its incorporation or
organization and the Transactions the Purchaser has not and will not have
incurred, directly or indirectly, through any subsidiary or affiliate, any
obligations or liabilities or engaged in any business activities of any type or
kind whatsoever or entered into any agreements or arrangements with any person.

ARTICLE V

CONDUCT OF BUSINESS PENDING THE MERGER

SECTION 5.01. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER.
The Company covenants and agrees that, between the date of this Agreement and
the Effective Time, unless the Parent shall otherwise agree in writing, the
businesses of the Company and the Subsidiaries shall be conducted only in, and
the Company and the Subsidiaries shall not take any action except in, the
ordinary course of business and in a manner consistent with past practice; and
the Company shall use its reasonable best efforts to preserve substantially
intact the business organization of the Company and the Subsidiaries, to
maintain adequate insurance coverage, to keep available the services of the
current officers, employees and consultants of the Company and the Subsidiaries
and to preserve the current relationships of the Company and the Subsidiaries
with customers, suppliers and other persons with which the Company or any
Subsidiary has significant business relations. By way of amplification and not
limitation of the foregoing, except as expressly contemplated by this Agreement,
neither the Company nor any Subsidiary shall, between the date of this Agreement
and the Effective Time, directly or indirectly do, or propose to do, any of the
following without the prior written consent of the Parent:

(a) amend or otherwise change its Articles of Incorporation or Bylaws
or equivalent organizational documents;

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27

(b) issue, sell, pledge, dispose of, grant, encumber, or authorize
the issuance, sale, pledge, disposition, grant or encumbrance of (i) any
shares of capital stock of any class of the Company or any Subsidiary, or
any options, warrants, convertible securities or other rights of any kind
to acquire any shares of such capital stock, or any other ownership
interest (including, without limitation, any phantom interest), of the
Company or any Subsidiary or (ii) any assets of the Company or any
Subsidiary, except for sales in the ordinary course of business and in a
manner consistent with past practice;

(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock;

(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;

(e) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets or any other business
combination) any corporation, partnership, other business organization or
any division thereof or any assets; (ii) incur any indebtedness for
borrowed money or issue any debt securities or assume, guarantee or
endorse, pledge in respect of or otherwise as an accommodation become
responsible for the obligations of any person, or make any loans or
advances, except in the ordinary course of business and consistent with
past practice; (iii) enter into any contract or agreement with any direct
competitor of the Parent or any affiliate thereof, or any other contract or
agreement, except contracts or agreements entered into in the ordinary
course of business, consistent with past practice and that require payments
by or to the Company or the Subsidiaries (A) with respect to such contracts
or agreements with a term of more than one year, in an aggregate amount of
less than U.S. $100,000 and (B) with respect to such contracts or
agreements with a term of one year or less, in an aggregate amount of less
than U.S. $250,000; (iv) terminate, cancel or request any material change
in, or agree to any material change in, any Material Contract set forth in
Section 3.17 of the Disclosure Schedule; (v) authorize one or more capital
expenditures that are, in the aggregate, in excess of U.S. $75,000 for the
Company and the Subsidiaries taken as a whole, other than capital
expenditures with respect to projects that have commenced prior to the date
hereof, or with respect to which equipment has been ordered prior to the
date hereof, so long as, with respect to such projects, the Parent shall
have been informed in writing thereof prior to the date hereof and, with
respect to such orders, the Company discusses with the Parent or its
representatives, promptly after the date hereof, such orders and the
intended uses of the equipment the subject thereof, PROVIDED that the
Company shall report on the progress of any such project in accordance with
Section 5.02 hereof; or (vi) enter into or amend

<PAGE>
28

any contract, agreement, commitment or arrangement with respect to any
matter set forth in this Section 5.01(e);

(f) increase the compensation payable or to become payable to its
officers, employees or consultants, except for increases in accordance with
past practices in salaries or wages of employees of the Company or any
Subsidiary who are not officers of the Company, or grant any severance or
termination pay to, or enter into any employment or severance agreement
with, any director, officer or other employee of the Company or any
Subsidiary, or establish, adopt, enter into or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or employee;

(h) make any tax election or settle or compromise any material
federal, state, local or foreign income tax liability;

(j) make any material alterations or modifications to any of the
water sources used by the Company, including, without limitation, any new
boreholes or any new wells; or

(k) announce an intention, enter into any formal or informal
agreement, or otherwise make a commitment, to do any of the foregoing.

SECTION 5.02. CONSULTATION AND COOPERATION. The Company and each of
its Subsidiaries shall (a) report on a regular basis, at reasonable times, to
the Parent's representatives regarding material operational matters and
financial matters (including providing monthly unaudited financial information);
(b) promptly and regularly notify the Parent of any change in the normal course
or operation of its business or its properties or of

<PAGE>
29

any material development in the business or operations of the Company or the
Subsidiaries; and (iii) cooperate with the Parent and its affiliates and
representatives in arranging for an orderly transition in connection with the
transfer of control of the Company, including, without limitation, arranging for
meetings among the Company, its vendors, suppliers and customers and
representatives of the Parent and its affiliates.

ARTICLE VI

ADDITIONAL AGREEMENTS

SECTION 6.01. SPECIAL SHAREHOLDERS' MEETING. In the event that at
the initial scheduled expiration date of the Offer, the Minimum Condition shall
not have been satisfied (the date of such expiration without satisfaction of
such condition being the "EXPIRATION DATE") at the request of the Parent, the
Company, acting through the Board, shall, in accordance with applicable law and
the Company's Articles of Incorporation and Bylaws, (i) duly call, give notice
of, convene and hold a special meeting of its shareholders (the "SPECIAL
SHAREHOLDERS' MEETING") as soon as practicable following such request for the
purpose of considering and taking action on this Agreement and the transactions
contemplated hereby, other than the Offer (such transactions, including without
limitation the Merger, but excluding the Offer, being the "LONG-FORM MERGER")
and (ii) (A) include in the Proxy Statement the unanimous recommendation of the
Board that the shareholders of the Company adopt this Agreement and the
Long-Form Merger and (B) use its best efforts to obtain such adoption. At the
Special Shareholders' Meeting, the Parent and the Purchaser shall cause all
Shares then owned by them and their subsidiaries to be voted in favor of the
adoption of this Agreement and the Long-Form Merger.

SECTION 6.02. PROXY STATEMENT. As soon as practicable following the
commencement of the Offer, the Company shall file the Proxy Statement with the
SEC under the Exchange Act, and shall use its best efforts to have the Proxy
Statement cleared by the SEC as promptly as practicable following such filing.
The Parent, the Purchaser and the Company shall cooperate with each other in the
preparation of the Proxy Statement, and the Company shall notify the Parent of
the receipt of any comments of the SEC with respect to the Proxy Statement and
of any requests by the SEC for any amendment or supplement thereto or for
additional information and shall provide to the Parent promptly copies of all
correspondence between the Company or any representative of the Company and the
SEC. The Company shall give the Parent and its counsel the opportunity to
review the Proxy Statement prior to its being filed with the SEC and shall give
the Parent and its counsel the opportunity to review all amendments and
supplements to the Proxy Statement and all responses to requests for additional
information and replies to comments prior to their being

<PAGE>
30

filed with, or sent to, the SEC. Each of the Company, the Parent and the
Purchaser agrees to use its reasonable best efforts, after consultation with the
other parties hereto, to respond promptly to all such comments of and requests
by the SEC and to cause the Proxy Statement and all required amendments and
supplements thereto, subject to the occurrence of the Expiration Date, to be
mailed to the holders of Shares entitled to vote at the Special Shareholders'
Meeting at the earliest practicable time.

SECTION 6.03. ACCESS TO INFORMATION; CONFIDENTIALITY. (a) From the
date hereof to the Effective Time, the Company shall, and shall cause the
Subsidiaries and the officers, directors, employees, auditors and agents of the
Company and the Subsidiaries to, afford the officers, employees and agents of
the Parent and the Purchaser complete access at all reasonable times to the
officers, employees, agents, properties, offices, plants and other facilities,
books and records of the Company and each Subsidiary, and shall furnish the
Parent and the Purchaser with all financial, operating and other data and
information as the Parent or the Purchaser, through its officers, employees or
agents, may reasonably request.

(b) All information obtained by the Parent or the Purchaser pursuant
to this Section 6.03 shall be kept confidential in accordance with the
confidentiality agreement, dated September 11, 1998 (the "CONFIDENTIALITY
AGREEMENT"), between the Parent and the Company.

(c) No investigation pursuant to this Section 6.03 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.

SECTION 6.04. NO SOLICITATION OF TRANSACTIONS. (a) Neither the
Company nor any Subsidiary shall, directly or indirectly, through any officer,
director, agent or otherwise, solicit, initiate or encourage the submission of
any proposal or offer from any person relating to any acquisition or purchase of
all or any material portion of the assets of, or any equity interest in, the
Company or any Subsidiary or any business combination with the Company or any
Subsidiary (a "TAKEOVER PROPOSAL") or participate in any negotiations regarding,
or furnish to any other person any information with respect to, or otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any other person to do or seek any of the foregoing.
Notwithstanding the foregoing, if the Board determines in good faith, after
consultation with and based on the written advice of independent legal counsel,
that it is necessary to do so in order to comply with its fiduciary duties under
Pennsylvania law, the Company may, in response to a Superior Proposal that was
not solicited by it or that did not otherwise result from a breach of this
Section 6.04, and subject to providing prior written notice of its decision to
take such action to the Parent and compliance with subsection (b) of this
Section 6.04, (i) furnish information with respect to the Company and its
subsidiaries to any person making a Superior Proposal pursuant to a
confidentiality agreement no less favorable to the Company than the
Confidentiality Agreement, and (ii) participate in discussions or negotiations
regarding such Superior

<PAGE>
31

Proposal. For purposes of this Agreement, "SUPERIOR PROPOSAL" means any
proposal made by a third party (A) to acquire, directly or indirectly, more than
50% of the combined voting power of the Shares then outstanding or all or
substantially all the assets of the Company and its subsidiaries, (B) that is
otherwise on terms that the Board determines in its good faith judgment (after
consultation with, and based upon the written advice of, a financial advisor of
nationally recognized reputation and independent legal counsel) to be more
favorable to the Company and its shareholders than the Transactions, (C) for
which financing, to the extent required, is then committed, and (D) for which,
in the good faith judgment of the Board, no regulatory approvals, including
antitrust approvals, are required that could not reasonably be expected to be
obtained.

(b) In addition to the obligations set forth in subsections (a) and
(c) of this Section 6.04, the Company shall notify the Parent promptly if any
Takeover Proposal, or any inquiry or contact with any person with respect
thereto, is made and shall, in any such notice to the Parent, indicate the
identity of the person making such Takeover Proposal, offer, inquiry or contact
and the terms and conditions of such Takeover Proposal, inquiry or contact. The
Company will keep Parent reasonably informed of the status and details,
including amendments or proposed amendments of any such request or Takeover
Proposal. The Company agrees not to release any third party from, or waive any
provision of, any confidentiality or standstill agreement to which the Company
is a party.

(c) Except as set forth in this subsection (c), the Board shall not
(i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to
the Parent or the Purchaser its approval and recommendation of this Agreement
and the Transactions, (ii) approve or recommend or propose to approve or
recommend any Takeover Proposal that is not a Superior Proposal approved or
recommended in accordance with the provisions of this Section 6.04, or (iii)
enter into any agreement with respect to any Takeover Proposal. Notwithstanding
the foregoing, if the Board determines in good faith, after consultation with
and based on the written advice of independent legal counsel, that it is
necessary to do so in order to comply with its fiduciary duties under
Pennsylvania law, the Board may withdraw or modify its approval and
recommendation of this Agreement and the Transactions, approve or recommend a
Superior Proposal or enter into an agreement with respect to a Superior
Proposal, in each case at any time after midnight on the fifth business day
following the Parent's receipt of written notice that the Board has received a
Superior Proposal, specifying the terms and conditions of such Superior Proposal
and the identity of the person making such Superior Proposal.

(d) Nothing contained in this Section 6.04 shall prohibit the Company
from taking and disclosing to its shareholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act, or from making a disclosure to the
Company's shareholders if, in the good faith judgment of the Board, after
consultation with and based on the written advice of,

<PAGE>
32

independent legal counsel, failure to so disclose would be inconsistent with its
obligations under applicable law.

SECTION 6.05. EMPLOYEE BENEFITS MATTERS. From and after the
Effective Time the Company's 1996 Employee Stock Purchase Plan (the "STOCK
PURCHASE PLAN") shall terminate. Between the date of this Agreement and the
Effective Time, the Company agrees that the Board of Directors shall not fix an
offering date pursuant to Section 4 of the Stock Purchase Plan. Any amounts
remaining on an individual's account at the Effective Time pursuant to the Stock
Purchase Plan shall be returned to such individual together with interest
thereon at a rate equal to the rate announced publicly by Citibank, N.A. in New
York, New York, as its base rate.

SECTION 6.06. DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE.
(a) The Articles of Incorporation and Bylaws of the Surviving Corporation shall
contain provisions no less favorable with respect to indemnification than are
set forth in Article VII of the Bylaws of the Company, which provisions shall
not be amended, repealed or otherwise modified for a period of six years from
the Effective Time in any manner that would affect adversely the rights
thereunder of individuals who at the Effective Time were directors, officers,
employees, fiduciaries or agents of the Company, unless such modification shall
be required by law.

(b) The Company shall, to the fullest extent permitted by law,
indemnify and hold harmless, and, after the Effective Time, the Surviving
Corporation shall indemnify and hold harmless, each current and former director,
officer, employee, fiduciary and agent of the Company and each Subsidiary
(collectively, the "INDEMNIFIED PARTIES") against all costs and expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and settlement amounts paid in connection with any claim,
action, suit, proceeding or investigation (whether arising before or after the
Effective Time), whether civil, criminal, administrative or investigative,
arising out of or pertaining to any action or omission in their capacity as an
officer, director, employee, fiduciary or agent, whether occurring before or
after the Effective Time, for a period of six years after the date hereof. In
the event of any such claim, action, suit, proceeding or investigation, (i) the
Company or the Surviving Corporation, as the case may be, shall pay the
reasonable fees and expenses of counsel selected by the Indemnified Parties,
which counsel shall be reasonably satisfactory to the Company or the Surviving
Corporation, promptly after statements therefor are received and (ii) the
Company and the Surviving Corporation shall cooperate in the defense of any such
matter; PROVIDED, HOWEVER, that neither the Company nor the Surviving
Corporation shall be liable for any settlement effected without its written
consent (which consent shall not be unreasonably withheld); PROVIDED FURTHER
that neither the Company nor the Surviving Corporation shall be obligated
pursuant to this Section 6.06(b) to pay the fees and expenses of more than one
counsel for all Indemnified Parties in any single action except to the extent
that

<PAGE>
33

two or more of such Indemnified Parties shall have conflicting interests in the
outcome of such action; and PROVIDED FURTHER that, in the event that any claim
for indemnification is asserted or made within such six-year period, all rights
to indemnification in respect of such claim shall continue until the disposition
of such claim.

(c) The Surviving Corporation shall use its reasonable best efforts
to maintain in effect for three years from the Effective Time, if available, the
current directors' and officers' liability insurance policies maintained by the
Company (provided that the Surviving Corporation may substitute therefor
policies of at least the same coverage containing terms and conditions that are
not materially less favorable) with respect to matters occurring prior to the
Effective Time; PROVIDED, HOWEVER, that in no event shall the Surviving
Corporation be required to expend pursuant to this Section 6.06(c) more than an
amount per year equal to 150% of current annual premiums paid by the Company for
such insurance (which premiums the Company represents and warrants to be
approximately U.S. $72,500 in the aggregate).

(d) In the event the Company or the Surviving Corporation or any of
their respective successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving corporation or entity
of such consolidation or merger or (ii) transfers all or substantially all of
its properties and assets to any person, then, and in each such case, proper
provision shall be made so that the successors and assigns of the Company or the
Surviving Corporation, as the case may be, or, at the Parent's option, the
Parent, shall assume the obligations set forth in this Section 6.06.

SECTION 6.07. NOTIFICATION OF CERTAIN MATTERS. The Company shall
give prompt notice to the Parent, and the Parent shall give prompt notice to the
Company, of (i) the occurrence, or non-occurrence, of any event the occurrence,
or non-occurrence, of which would be likely to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect and (ii) any failure of the Company, the Parent or the Purchaser, 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 6.07 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.

SECTION 6.08. FURTHER ACTION; REASONABLE BEST EFFORTS. Upon the
terms and subject to the conditions hereof, each of the parties hereto shall (i)
make promptly its respective filings, and thereafter make any other required
submissions, under the HSR Act with respect to the Transactions and (ii) use its
reasonable best efforts to take, or cause to be taken, all appropriate 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, including, without limitation, using its reasonable best efforts
to obtain all

<PAGE>
34

licenses, permits (including, without limitation, environmental permits),
consents, approvals, authorizations, qualifications and orders of governmental
authorities and parties to contracts with the Company and the Subsidiaries as
are necessary for the consummation of the Transactions and to fulfill the
conditions to the Offer and the Merger. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each party to this
Agreement shall use their reasonable best efforts to take all such action.

SECTION 6.09. PUBLIC ANNOUNCEMENTS. The Parent and the Company shall
consult with each other before issuing any press release or otherwise making any
public statements with respect to this Agreement or any Transaction and shall
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by law or any listing agreement with a
national securities exchange or the New York Stock Exchange to which the Parent
or the Company is a party.

SECTION 6.10. CONFIDENTIALITY AGREEMENT. The Company hereby waives
the provisions of the Confidentiality Agreement as and to the extent necessary
to permit the consummation of each Transaction. Upon the consummation of the
Merger, the Confidentiality Agreement shall be deemed to have terminated without
further action by the parties thereto.

SECTION 6.11. FACILITY INVESTMENT AGREEMENT. As promptly as
practicable, but in no event more than twenty business days from the date
hereof, at the Parent's request, the Company shall enter into a Facility
Investment Agreement with the Parent, having substantially the terms and
conditions set forth on Annex C hereto.

SECTION 6.12. 1998 FINANCIAL STATEMENTS. As promptly as practicable,
but in no event more than twenty-two business days from the date hereof, the
Company shall deliver to the Parent an audited consolidated balance sheet for
the Company dated September 30, 1998, and audited statements of operations,
stockholders' equity and cash flows for the year ended September 30, 1998 (the
"1998 FINANCIAL STATEMENTS").

<PAGE>
35

ARTICLE VII

CONDITIONS TO THE MERGER

SECTION 7.01. CONDITIONS TO THE MERGER. If the Offer is consummated
and all terms and conditions thereof (including, without limitation, the Minimum
Condition) are satisfied, 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 following conditions:

(a) NO ORDER. No Governmental Entity or foreign, United States or
state court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) that is then in effect and has the effect of making the
acquisition of Shares by the Parent or the Purchaser or any affiliate of
either of them or the consummation of the Merger illegal or otherwise
restricting, preventing or prohibiting consummation of the Transactions;
and

(b) OFFER. The Purchaser or its permitted assignee shall have
purchased all Shares validly tendered and not withdrawn pursuant to the
Offer; PROVIDED, HOWEVER, that this condition shall not be applicable to
the obligations of the Parent or the Purchaser if, in breach of this
Agreement or the terms of the Offer, the Purchaser or such assignee fails
to purchase any Shares validly tendered and not withdrawn pursuant to the
Offer.

SECTION 7.02. CONDITIONS TO THE LONG-FORM MERGER. In all cases other
than those in which Section 7.01 is applicable,

(a) the respective obligations of each party to effect the Long-Form
Merger shall be subject to the satisfaction at or prior to the Effective
Time of the following conditions:

(i) SHAREHOLDER APPROVAL. This Agreement and the Long-Form
Merger shall have been adopted by the affirmative vote of a majority
of the votes cast by all holders of Shares entitled to vote thereon;

(ii) HSR ACT. Any waiting period (and any extension thereof)
applicable to the consummation of the Long-Form Merger under the HSR
Act shall have expired or been terminated; and

<PAGE>
36

(iii) NO ORDER. No Governmental Entity or foreign, United
States or state court of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any law, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) that is then in effect and has the effect of
making the consummation of the Long-Form Merger illegal or otherwise
restricting, preventing or prohibiting consummation of the Long-Form
Merger.

(b) The obligations of the Parent and the Purchaser to effect the
Long-Form Merger are also subject to the following conditions at or as of
the Effective Time:

(i) the representations and warranties of the Company in this
Agreement and of each Shareholder in the respective Shareholder
Agreement that are qualified as to materiality shall be true and
correct and all such representations and warranties that are not so
qualified shall be true and correct in all material respects, in each
case on or as of the Effective Time (other than representations and
warranties that address matters only as of a certain date which shall
be true and correct in the same manner as of such certain date), and
the Parent and the Purchaser shall have received a certificate from a
duly authorized officer of the Company and each Shareholder, as
applicable, to such effect;

(ii) the Company shall have performed in all material respects
all obligations and complied in all material respects with each
agreement and covenant of the Company to be performed or complied with
by it under this Agreement and each Shareholder shall have performed
in all material respects all obligations and complied in all material
respects with each agreement and covenant of such Shareholder to be
performed or complied with by such Shareholder under the applicable
Shareholder Agreement, and the Parent and the Purchaser shall have
received a certificate from a duly authorized officer of the Company
and each Shareholder, as applicable, to such effect;

(iii) all consents, approvals and authorizations required to be
obtained to consummate the Long-Form Merger shall have been obtained
from all Governmental Entities, except for such consents, approvals
and authorizations the failure of which to obtain would not have a
material adverse effect on the Parent or the Purchaser (assuming for
purposes of this paragraph (iii) that the Long-Form Merger shall have
been effected);

(iv) there shall not have occurred any of the events set forth
in paragraphs (a) (as adapted to apply MUTATIS MUTANDIS to the
Long-Form Merger

<PAGE>
37

rather than the purchase of Shares pursuant to the Offer), (b), (j) or
(k) of Annex A hereto; and

(v) there shall not have occurred, since June 30, 1998, any
change, condition, event or development that has a Material Adverse
Effect with respect to the Company.

(c) The obligation of the Company to effect the Long-Form Merger is
also subject to the following conditions at or as of the Effective Time:

(i) the representations and warranties of the Parent and the
Purchaser in this Agreement that are qualified as to materiality shall
be true and correct and all such representations and warranties that
are not so qualified shall be true and correct in all material
respects, in each case on or as of the Effective Time (other than
representations and warranties which address matters only as of a
certain date which shall be true and correct in the same manner as of
such certain date), and the Company shall have received a certificate
from a duly authorized officer of the Parent to such effect; and

(ii) the Parent and the Purchaser shall have performed in all
material respects all obligations and complied in all material
respects with each agreement and covenant of the Parent and the
Purchaser, respectively, to be performed or complied with by it under
this Agreement, and the Company shall have received a certificate from
a duly authorized officer of the Parent to such effect.

ARTICLE VIII

TERMINATION, AMENDMENT AND WAIVER

SECTION 8.01. TERMINATION. (a) This Agreement may be terminated and
the Merger and the other Transactions may be abandoned at any time prior to the
Effective Time, notwithstanding any requisite adoption of this Agreement and the
transactions contemplated hereby by the shareholders of the Company:

(i) By mutual written consent duly authorized by the Boards of
Directors of the Parent, the Purchaser and the Company; or

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38

(ii) By the Parent, the Purchaser or the Company if (x) the Effective
Time shall not have occurred on or before March 31, 1999; PROVIDED,
HOWEVER, that the right to terminate this Agreement under this Section
8.01(a)(ii) shall not be available to any party whose failure to fulfill
any obligation under this Agreement has been the cause of, or resulted in,
the failure of the Effective Time to occur on or before such date or (y) a
Governmental Entity or foreign, United States or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any law, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) that is then in effect
and has the effect of making the consummation of the Merger illegal or
otherwise restricting, preventing or prohibiting consummation of the
Merger.

(b) This Agreement may be terminated, and the Merger and the other
Transactions may be abandoned at any time prior to the earlier of the expiration
or termination of the Offer without the Minimum Condition having been satisfied
and the Effective Time, notwithstanding any requisite approval and adoption of
this Agreement and the transactions contemplated hereby by the shareholders of
the Company:

(i) By the Parent, upon approval of its Board of Directors, if due to
a failure to satisfy any condition set forth in (i)-(iii) of the preamble
of Annex A hereto or the existence of any condition set forth in paragraphs
(a) - (k) of Annex A hereto, the Purchaser shall have (1) failed to
commence the Offer within five business days following the date of this
Agreement, (2) terminated the Offer without having accepted any Shares for
payment thereunder or (3) failed to pay for Shares pursuant to the Offer
within 90 days following the commencement of the Offer; unless such action
or inaction under (1), (2) or (3) shall have been caused by or resulted
from the failure of the Parent or the Purchaser to perform in any material
respect any material covenant or agreement of either of them contained in
this Agreement or the material breach by the Parent or the Purchaser of any
material representation or warranty of either of them contained in this
Agreement;

(ii) By the Company, upon approval of the Board, if due to a failure
to satisfy any of the conditions set forth in (i)-(iii) of the preamble of
Annex A hereto or the existence of any condition set forth in paragraphs
(a) - (k) of Annex A hereto, the Purchaser shall have (1) failed to
commence the Offer within five business days following the date of this
Agreement, (2) terminated the Offer without having accepted any Shares for
payment thereunder or (3) failed to pay for Shares pursuant to the Offer
within 90 days following the commencement of the Offer, unless such action
or inaction under (1), (2), and (3) shall have been caused by or resulted
from the failure of the Company to perform in any material respect any
material covenant or agreement of

<PAGE>
39

it contained in this Agreement or the material breach by the Company of any
material representation or warranty of it contained in this Agreement;

(iii) By the Company, in connection with entering into a
definitive agreement with respect to a Superior Proposal in accordance with
Section 6.04; PROVIDED that the Company has complied with its obligations
under Section 6.04, and that it makes simultaneous payment of the Fee and
Expenses pursuant to Section 8.03; or

(iv) By the Parent, if the Board shall have modified or
withdrawn in a manner adverse to the Parent and the Purchaser its approval
and recommendation of this Agreement and the Transactions or shall have
approved or recommended to the Company's shareholders a Superior Proposal.

(c) This Agreement may be terminated and the Long-Form Merger may be
abandoned at any time prior to the Effective Time but after the expiration or
termination of the Offer without the Minimum Condition having been satisfied,
notwithstanding any requisite approval and adoption of this Agreement and the
transactions contemplated hereby by the shareholders of the Company:

(i) by the Parent in the event of a breach by the Company of
any representation, warranty, covenant or other agreement contained in this
Agreement that (A) would give rise to the failure of a condition set forth
in Section 7.02(b)(i) or (ii) and (B) cannot be or has not been cured
within 20 days after the giving by the Parent of written notice to the
Company or upon the occurrence of any of the events set forth in paragraphs
(a) (as adapted to apply MUTATIS MUTANDIS to the Long-Form Merger rather
than the purchase of Shares pursuant to the Offer), (b), or (c) of Annex A
hereto;

(ii) by the Company in the event of a breach by the Parent or
the Purchaser of any of their respective representations, warranties,
covenants or other agreements contained in this Agreement that (A) would
give rise to the failure of a condition set forth in Section 7.02(c)(i) or
(ii) and (B) cannot be or has not been cured within 20 days after the
giving by the Company of written notice to the Parent and the Purchaser; or

(iii) by the Parent or the Company if the shareholders of the
Company do not approve this Agreement at the Special Shareholders' Meeting
or any adjournment or postponement thereof.

SECTION 8.02. EFFECT OF TERMINATION. In the event of the termination
of this Agreement pursuant to Section 8.01, this Agreement shall forthwith
become void, and there

<PAGE>
40

shall be no liability on the part of any party hereto, except as set forth in
Sections 8.03 and 9.01, and nothing herein shall relieve any party from
liability for any breach hereof.

SECTION 8.03. FEES AND EXPENSES. (a) In the event that (i) this
Agreement is terminated pursuant to Section 8.01(b)(iii) or 8.01(b)(iv) or (ii)
any person shall have commenced, or publicly announced and not withdrawn its
intention to commence, a tender or exchange offer for 20% or more (or which,
assuming the maximum amount of securities that could be purchased, would result
in any person beneficially owning 20% or more) of the then outstanding Shares or
otherwise for the direct or indirect acquisition of the Company or all or a
substantial portion of its assets and (A) the Offer shall have remained open for
at least 20 business days, (B) the Minimum Condition shall not have been
satisfied, (C) this Agreement shall have been terminated pursuant to Section
8.01(c)(iii) and (D) within six months following the date of the termination of
this Agreement, a Takeover Proposal between the Company and such other person
shall have been consummated, then, in any such event, the Company shall pay the
Parent promptly (but in no event later than one business day after the first of
such events shall have occurred) a fee of U.S.$3,400,000 (the "FEE"), which
amount shall be payable in immediately available funds, plus all Expenses up to
U.S.$750,000 in the aggregate. For purposes of this Section 8.03, the term
"EXPENSES" shall mean all out-of-pocket expenses and fees of each of the Parent,
the Purchaser and their respective shareholders and affiliates (including,
without limitation, fees and expenses payable to all banks, investment banking
firms, other financial institutions and other persons and their respective
agents and counsel for arranging, committing to provide or providing any
financing for the Transactions or structuring the Transactions and all fees of
counsel, accountants, experts and consultants to the Parent and the Purchaser,
and all printing and advertising expenses and all costs and expenses incurred by
or on behalf of the Parent and the Purchaser in connection with the collection
under and enforcement of this Section 8.03) actually incurred or accrued by any
of them or on their behalf in connection with the Transactions, including,
without limitation, the financing thereof, and actually incurred or accrued by
banks, investment banking firms, other financial institutions and other persons
and assumed by the Parent and the Purchaser in connection with the negotiation,
preparation, execution and performance of this Agreement, the structuring and
financing of the Transactions and any financing commitments or agreements
relating thereto.

(b) Except as set forth in this Section 8.03, all costs and expenses
incurred in connection with this Agreement and the Transactions shall be paid by
the party incurring such expenses, whether or not any Transaction is
consummated.

SECTION 8.04. AMENDMENT. This Agreement may be amended by the
parties hereto by action taken by or on behalf of their respective Boards of
Directors at any time prior to the Effective Time; PROVIDED, HOWEVER, that,
after the adoption of this Agreement and the transactions contemplated hereby by
the shareholders of the Company, no amendment may be

<PAGE>
41

made that would reduce the amount or change the type of consideration into which
each Share shall be converted upon consummation of the Merger. This Agreement
may not be amended except by an instrument in writing signed by the parties
hereto.

SECTION 8.05. WAIVER. At any time prior to the Effective Time, any
party hereto may (i) extend the time for the performance of any obligation or
other act of any other party hereto, (ii) waive any inaccuracy in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any agreement or condition
contained herein. Any such extension or waiver shall be valid only if set forth
in an instrument in writing signed by the party or parties to be bound thereby.

ARTICLE IX

GENERAL PROVISIONS

SECTION 9.01. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 8.01, as the case may be, except that the agreements set
forth in Article II and this Article IX and Section 6.06 shall survive the
Effective Time indefinitely and those set forth in Sections 6.03(b), 6.11 and
8.03 and Article IX shall survive termination indefinitely.

SECTION 9.02. NOTICES. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice given in
accordance with this Section 9.02):

if to the Parent or the Purchaser:

Groupe Danone
7, rue de Teheran
75008 Paris
France
Fax: 011-33-1-44-35-20-97
Attention: M. Emmanuel Faber

<PAGE>
42

with a copy to:

Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Fax: 212-848-7179
Attention: Clare O'Brien, Esq.

if to the Company:

AquaPenn Spring Water Company, Inc.
One AquaPenn Drive
P.O. Box 938
Milesburg, Pennsylvania 16853
Fax: 814-353-9108
Attention: Mr. Geoffrey F. Feidelberg

with a copy to:

Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street
51st Floor
Philadelphia, PA 19103-7599
Fax: 215-864-8999
Attention: Brian D. Doerner, Esq.

SECTION 9.03. CERTAIN DEFINITIONS. For purposes of this Agreement,
the term:

(a) "AFFILIATE" of a specified person means a person who directly or
indirectly through one or more intermediaries controls, is controlled by,
or is under common control with, such specified person;

(b) "BENEFICIAL OWNER" with respect to any Shares means a person who
shall be deemed to be the beneficial owner of such Shares (i) which such
person or any of its affiliates or associates (as such term is defined in
Rule 12b-2 promulgated under the Exchange Act) beneficially owns, directly
or indirectly, (ii) which such person or any of its affiliates or
associates has, directly or indirectly, (A) the right to acquire (whether
such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of consideration rights, exchange rights, warrants or options, or
otherwise, or (B) the

<PAGE>

right to vote pursuant to any agreement, arrangement or understanding or
(iii) which are beneficially owned, directly or indirectly, by any other
persons with whom such person or any of its affiliates or associates or
person with whom such person or any of its affiliates or associates has any
agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any Shares;

(c) "BUSINESS DAY" means any day on which the principal offices of
the SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized to close in the City of New York;

(d) "CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of
voting securities, as trustee or executor, by contract or credit
arrangement or otherwise;

(e) "PERSON" means an individual, corporation, partnership, limited
partnership, syndicate, person (including, without limitation, a "person"
as defined in Section 13(d)(3) of the Exchange Act), trust, association or
entity or government, political subdivision, agency or instrumentality of a
government; and

(f) "SUBSIDIARY" or "SUBSIDIARIES" of the Company, the Surviving
Corporation, the Parent or any other person means an affiliate controlled
by such person, directly or indirectly, through one or more intermediaries.

SECTION 9.04. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions is not affected in any manner materially adverse
to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the Transactions be consummated as originally contemplated to the
fullest extent possible.

SECTION 9.05. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes, except as set forth in Sections 6.03(b) and 6.10,
all prior agreements and undertakings, both written and oral, among the parties,
or any of them, with respect to the subject matter hereof. This Agreement shall
not be assigned by operation of law or otherwise,

<PAGE>
44

except that the Parent and the Purchaser may assign all or any of their rights
and obligations hereunder to any affiliate of the Parent provided that no such
assignment shall relieve the assigning party of its obligations hereunder if
such assignee does not perform such obligations (any such assignee of the
Purchaser being an "ASSIGNEE").

SECTION 9.06. PARTIES IN INTEREST. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, other than Section 6.06 (which is intended to be for the
benefit of the persons covered thereby and may be enforced by such persons).

SECTION 9.07. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.

SECTION 9.08. GOVERNING LAW. Except to the extent that Pennsylvania
Law is mandatorily applicable to the Transactions and the rights of the
shareholders of the Company, this Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws.
All actions and proceedings arising out of or relating to this Agreement shall
be heard and determined in any New York state or federal court sitting in the
City of New York.

SECTION 9.09. HEADINGS. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.

<PAGE>
45

SECTION 9.10. COUNTERPARTS. This Agreement may be executed in one 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
taken together shall constitute one and the same agreement.

IN WITNESS WHEREOF, the Parent, the Purchaser and the Company have
caused this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.

GROUPE DANONE

By /s/ Emmanuel Faber
--------------------------------
Name: Emmanuel Faber
Title: Director of Corporate Development

ZONEO ACQUISITION CORP.

By /s/ Mark S. Rodriguez
--------------------------------
Name: Mark S. Rodriguez
Title: Chief Executive Officer

AQUAPENN SPRING WATER COMPANY, INC.

By /s/ Edward J. Lauth, III
--------------------------------
Name: Edward J. Lauth, III
Title: Chairman, President and Chief
Executive Officer

<PAGE>

ANNEX A

CONDITIONS TO THE OFFER

Notwithstanding any other provision of the Offer, the Purchaser shall
not be required to accept for payment or, subject to any applicable rules and
regulations of the SEC, pay for any Shares tendered pursuant to the Offer, and
may terminate or amend the Offer and may postpone the acceptance for payment of
and payment for Shares tendered, if (i) the Minimum Condition shall not have
been satisfied, (ii) any applicable waiting period under the HSR Act shall not
have expired or been terminated prior to the expiration of the Offer or (iii) at
any time on or after the date of this Agreement, and prior to the acceptance for
payment of Shares, any of the following conditions shall exist:

(a) there shall have been instituted or be pending any action or
proceeding (other than actions or proceedings which, in the good faith
reasonable judgment of the Parent, after consultation with independent
legal counsel, do not have any basis in fact or a reasonable likelihood of
success on the merits) before any court or Governmental Entity, (i)
challenging or seeking to make illegal, materially delay or otherwise
directly or indirectly restrain or prohibit or make materially more costly
the making of the Offer, the acceptance for payment of, or payment for, any
Shares by the Parent, the Purchaser or any other affiliate of the Parent,
the purchase of Shares pursuant to any Shareholder Agreement, or the
consummation of any other Transaction, or seeking to obtain material
damages in connection with any Transaction; (ii) seeking to prohibit or
limit materially the ownership or operation by the Company, the Parent or
any of their subsidiaries of all or any material portion of the business or
assets of the Company, the Parent or any of their subsidiaries, or to
compel the Company, the Parent or any of their subsidiaries to dispose of
or hold separate all or any material portion of the business or assets of
the Company, the Parent or any of their subsidiaries, as a result of the
Transactions; (iii) seeking to impose or confirm limitations on the ability
of the Parent, the Purchaser or any other affiliate of the Parent to
exercise effectively full rights of ownership of any Shares, including,
without limitation, the right to vote any Shares, except as specifically
provided in Pennsylvania Law, acquired by the Purchaser pursuant to the
Offer, any Shareholder Agreement or otherwise on all matters properly
presented to the Company's shareholders, including, without limitation, the
approval and adoption of this Agreement and the transactions contemplated
hereby; (iv) seeking to require divestiture by the Parent, the Purchaser or
any other affiliate of the Parent of any Shares; or (v) which otherwise has
a Material Adverse Effect or which would materially adversely affect the
business, operations, properties, condition (financial or otherwise),
assets or liabilities (including, without limitation, contingent
liabilities) or prospects of the Parent;

<PAGE>

(b) there shall have been any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or injunction
enacted, entered, enforced, promulgated, amended, issued or deemed
applicable to (i) the Parent, the Company or any subsidiary or affiliate of
the Parent or the Company or (ii) any Transaction, by any legislative body,
court, Governmental Entity, other than the routine application of the
waiting period provisions of the HSR Act to the Offer, any Shareholder
Agreement or the Merger, that is reasonably likely to result, directly or
indirectly, in any of the consequences referred to in clauses (i) through
(v) of paragraph (a) above; PROVIDED, HOWEVER, that the Parent shall have
used reasonable efforts to cause any such judgment, order or injunction to
be vacated or lifted;

(c) there shall have occurred, since June 30, 1998, any change,
condition, event or development that has a Material Adverse Effect with
respect to the Company;

(d) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities of the Company on the New
York Stock Exchange for a period in excess of 2 hours (excluding
emergencies or limitations resulting solely from physical damage,
interference with such exchange not related to market conditions, or any
trading halt triggered solely as a result of a specified decrease in a
market index) (ii) a declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States or France, (iii) any
limitation (whether or not mandatory) by any government or governmental,
administrative or regulatory authority or agency, domestic or foreign, on,
or other event that, in the reasonable judgment of the Purchaser, affects,
the extension of credit by banks or other lending institutions, (iv) a
commencement of a war or armed hostilities or other national or
international calamity directly or indirectly involving the United States
or (v) in the case of any of the foregoing existing on the date hereof, a
material acceleration or worsening thereof;

(e) it shall have been publicly disclosed or the Parent or the
Purchaser shall have otherwise learned that beneficial ownership
(determined for the purposes of this paragraph as set forth in Rule 13d-3
promulgated under the Exchange Act) of 20% or more of the then outstanding
Shares has been acquired by any person, other than the Parent or any of its
affiliates;

(f) any representation or warranty of the Company in the Agreement or
of any Shareholder in the respective Shareholder Agreement that is
qualified as to materiality shall not be true and correct or any such
representation or warranty that is not so qualified shall not be true and
correct in any material respect, in each case when made on or immediately
following the expiration of the Offer as though made on or as of such date,
except those representations and warranties that address matters only as of
a certain date which shall not be true and correct as of such certain date;

<PAGE>

(g) the Company shall have failed to perform in any material respect
any material obligation or to comply in any material respect with any
agreement or covenant of the Company to be performed or complied with by it
under the Agreement or the Shareholders shall have failed to perform in any
material respect any obligation or to comply in any material respect with
any agreement or covenant of any Shareholder to be performed or complied
with by such Shareholder under the respective Shareholder Agreement;

(h) the Agreement shall have been terminated in accordance with its
terms;

(i) the Purchaser and the Company shall have agreed that the
Purchaser shall terminate the Offer or postpone the acceptance for payment
of or payment for Shares thereunder;

(j) any Option Consent or Warrant Consent shall not have been
obtained immediately prior to the expiration of the Offer; or

(k) the Parent and the Purchaser shall not have received immediately
prior to the expiration of the Offer the opinions of Ballard Spahr Andrews
& Ingersoll, LLP, as to the matters set forth in Sections 3.04 and 3.21 of
the Agreement, and of McQuaide Blasko, as to the matters set forth in
Section 3.01 of the Agreement, in each case in form and substance
satisfactory to the Parent and the Purchaser;

The foregoing conditions are for the sole benefit of the Purchaser and
the Parent and may be asserted by the Purchaser or the Parent regardless of the
circumstances giving rise to any such condition or may be waived by the
Purchaser or the Parent in whole or in part at any time and from time to time in
their sole discretion. The failure by the Parent or the Purchaser at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right; the waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances; and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.

<PAGE>

ANNEX B

Facility Investment Agreement (the "Agreement")
Summary of Key Terms

Parties: AquaPenn Spring Water Company, Inc. (the "Company")
and Parent (the "Parent").

Effective Date: No later than 20 business days from the date of
execution of the Agreement and Plan of Merger
("Merger Agreement").

Purpose: Parent will finance and develop an extension of the
Company's existing production facility in south-east
Florida (the "Facility") to house a new PET bottle
production line, which will begin operating no later
than September 15, 1999.

Project Manager: Parent will act as Project Manager and have final
decision making authority over all aspects of the
Project.

Project: Completion of a 16,500 sq ft extension of the
Facility.

Relocation of the Company's existing one-gallon
blowing equipment to the building extension.

Installation of a new PET bottle production line at
the Facility.

Termination of all production of 2.5 gallon bottles
at the Facility and removal of the corresponding
equipment.

Equipment: Parent agrees to supply and install all equipment
required with respect to the installation of a new
PET bottle production line, including equipment used
for water treatment.

Responsibility for
Costs of the
Project: Parent agrees to finance the cost of installation of
the PET bottle production line.

In addition, Parent agrees to finance the cost of the
Project (other than the cost of the installation of
the PET bottle production line).

<PAGE>

2
ANNEX B
Timeline for
the Project: The parties agree that they shall each use
their reasonable best efforts to effect a target
start-up date of September 15, 1999. In addition, the
parties agree to target the following dates for
completion of the items set out below:

April 14, 1999 - finalization of the design for the
Project; approval of necessary permits; retention of
contractors and other professional services required
to execute the Project;

June 30, 1999 - completion of the construction of the
extension of the Facility and other modifications to
the Facility;

July 15, 1999 - relocation of the one-gallon blowing
equipment;

August 30, 1999 - installation of the new PET
bottling line equipment;

September 15, 1999 - completion of final testing of
newly installed equipment and start-up date.

Product: All bottles produced by the new PET bottle production
line will be purchased by the Parent for a price to
be determined.

Additional Terms: The Agreement shall also provide for the parties'
respective rights and obligations regarding quality
control procedures, the provision of packaging orders
and supplies, inventory reports, inspection rights,
orders and shipments, confidentiality, use of
trademarks, indemnification and insurance, as well as
other terms and conditions existing for similar
agreements.

Termination: Parent, at its option, may terminate the Agreement in
the event that the Merger Agreement is terminated.

<PAGE>

ANNEX C
FORM OF SHORT-FORM
PLAN OF MERGER

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

PLAN OF MERGER

merging

ZONEO ACQUISITION CORP.

with and into

AQUAPENN SPRING WATER COMPANY, INC.

Dated as of [____________], 199[_]

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

<PAGE>

PLAN OF MERGER, dated [____________], 199[_] (this "Plan of
Merger"), merging ZONEO ACQUISITION CORP., a Pennsylvania corporation (the
"Purchaser") and an indirect wholly-owned subsidiary of GROUPE DANONE, a French
societe anonyme (the "Parent"), with and into AQUAPENN SPRING WATER COMPANY,
INC., a Pennsylvania corporation (the "Company").

WHEREAS, the Parent, the Purchaser and the Company are parties
to an Agreement and Plan of Merger, dated as of November 2, 1998 (the "Merger
Agreement"), which provides for the adoption of this Plan of Merger;

WHEREAS, Purchaser owns [_______] shares of common stock, no
par value, of the Company (the "Shares"), representing more than 80% of the
outstanding Shares;

WHEREAS, at all times following the date hereof and prior to
the Effective Time (as defined below), Purchaser will own more than 80% of the
outstanding Shares;

WHEREAS, the Board of Directors of the Purchaser has (a)
determined that it is in the best interests of the Purchaser to merge the
Purchaser with and into the Company (the "Merger"), with the Company being the
surviving corporation, in accordance with the Pennsylvania Business Corporation
Law of 1988, as amended ("Pennsylvania Law"), and (b) voted to adopt this Plan
of Merger;

NOW, THEREFORE, the Board of Directors of the Purchaser hereby
adopts the following Plan of Merger:

ARTICLE I

THE MERGER

SECTION 1.01. The Merger. Upon the terms and subject to the
conditions set forth in this Plan of Merger, and in accordance with Pennsylvania
Law (including, without limitation, Section 1906 thereof), at the Effective
Time, the Purchaser shall be merged with and into the Company. As a result of
the Merger, the separate corporate existence of the Purchaser shall cease and
the Company shall continue as the surviving corporation of the Merger (the
"Surviving Corporation"), and shall continue to be governed by the laws of the
Commonwealth of Pennsylvania.

SECTION 1.02. Effective Time; Closing. As promptly as
practicable after the satisfaction or, if permissible, waiver of the conditions
set forth in Article II, the parties hereto shall cause the Merger to be
consummated by filing articles of merger (the "Articles of Merger"), together
with any required tax certificates or statements, with the Department of State
of the

C-1

<PAGE>

Commonwealth of Pennsylvania, in such form as is required by, and executed in
accordance with, the relevant provisions of Pennsylvania Law (the date and time
of such filing being the "Effective Time"). Prior to such filings, a closing
shall be held at the offices of Shearman & Sterling, 599 Lexington Avenue, New
York, New York 10022, or such other place as the parties shall agree, for the
purpose of confirming the satisfaction or waiver, as the case may be, of the
conditions set forth in Article II.

SECTION 1.03. Effect of the Merger. At the Effective Time, the
effect of the Merger shall be as provided in the applicable provisions of
Pennsylvania Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the property, rights, privileges, powers and
franchises of the Company and the Purchaser shall vest in the Surviving
Corporation, and all debts, liabilities, obligations, restrictions, disabilities
and duties of the Company and the Purchaser shall become the debts, liabilities,
obligations, restrictions, disabilities and duties of the Surviving Corporation.

SECTION 1.04. Articles of Incorporation; Bylaws. (a) The
Articles of Incorporation of the Company, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation until thereafter amended as provided by applicable law and such
Articles of Incorporation.

(b) The Bylaws of the Company, as in effect immediately prior
to the Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended as provided by law, the Articles of Incorporation of the
Surviving Corporation and such Bylaws.

SECTION 1.05. Directors and Officers. The directors of the
Purchaser immediately prior to the Effective Time shall be the initial directors
of the Surviving Corporation, each to hold office in accordance with the
Articles of Incorporation and Bylaws of the Surviving Corporation, and the
officers of the Company immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed and qualified.

SECTION 1.06. Conversion of Securities. At the Effective Time,
by virtue of the Merger and without any action on the part of the Purchaser, the
Company or the holders of any of the Shares:

(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than any Shares to be canceled pursuant to
Section 1.06(b) and any Dissenting Shares) shall be canceled and shall
be converted automatically into the right to receive an amount equal to
$13.00 (the "Per Share Amount") in cash (the "Merger Consideration"),
payable, without interest, to the holder of such Share, upon surrender,
in the manner provided in Section 1.09, of the certificate that
formerly evidenced such Share;

C-2

<PAGE>

(b) Each Share owned by the Purchaser, the Parent or any
direct or indirect wholly owned subsidiary of the Parent or of the
Company immediately prior to the Effective Time shall be canceled and
retired without any conversion thereof and no payment or distribution
shall be made with respect thereto; and

(c) Each share of Common Stock, par value U.S. $0.01 per
share, of the Purchaser issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly
issued, fully paid and nonassessable share of Common Stock, par value
U.S. $0.01 per share, of the Surviving Corporation.

SECTION 1.07. Stock Options; Warrants. (a) In accordance with
the terms of the Company's 1989 Stock Option Plan and 1992 Stock Option Plan
(the "Stock Option Plans"), the Company shall cause each outstanding option to
purchase Shares granted under the Stock Option Plans to, immediately prior to
the Effective Time, become exercisable regardless of the installment provisions
contained in the Stock Option Plans and to be terminated at the Effective Time.
Section 2.07(a) of the Disclosure Schedule to the Merger Agreement (the
"Disclosure Schedule") lists all options outstanding under the Stock Option
Plans.

(b) The Company shall use its reasonable best efforts to
obtain the consent (the "Option Consents") of the persons listed on Section
2.07(b) of the Disclosure Schedule (the "Option Holders"), to the termination,
immediately prior to the Effective Time, of the stock options held by each
Option Holder pursuant to the respective option agreements listed on Section
2.07(b) of the Disclosure Schedule. Each such Option Holder shall be paid by the
Company, at or immediately prior to the Effective Time with respect to each
stock option, in consideration of such termination, an amount in cash determined
by multiplying (i) the excess, if any, of the Per Share Amount over the
applicable exercise price under such option by (ii) the number of Shares such
Option Holder could have purchased had such holder exercised such options in
full immediately prior to the Effective Time.

(c) The Company shall use its reasonable best efforts to
obtain the consent of Edward J. Lauth, James D. Hammond and Marion I. Hammond
and Nancy J. Davis to the termination, immediately prior to the Effective Time,
of the warrants held by each of them pursuant to the Warrants dated as of April
6, 1995, the Warrant dated as of November 21, 1995, and the Warrant dated as of
August 28, 1996, respectively (the "Warrant Consents"). Each such holder of
warrants shall be paid by the Company, at or immediately prior to the Effective
Time with respect to each such warrant, in consideration of such termination, an
amount in cash determined by multiplying (i) the excess, if any, of the Per
Share Amount over the applicable exercise price under such warrant by (ii) the
number of Shares such holder could have purchased had such holder exercised such
warrant in full immediately prior to the Effective Time.

SECTION 1.08. Dissenting Shares. Notwithstanding any provision
of this Agreement to the contrary, Shares that are outstanding immediately prior
to the Effective Time shall be canceled and the holders thereof shall be
entitled to a notice to demand payment in

C-3

<PAGE>

accordance with the provisions of Sections 1930 and 1575 of Pennsylvania Law,
and those shareholders who make a timely demand for payment in accordance with,
and otherwise comply in all respects with, Sections 1575 through 1580 of
Pennsylvania Law shall be entitled to receive, instead of the Merger
Consideration, payment of the fair value of such Shares (the Dissenting Shares")
(which may be more than, equal to, or less than the Merger Consideration) in
accordance with the provisions of such Sections 1930 and 1575 through 1580,
except that all the Shares held by shareholders who shall fail to perfect or who
effectively shall withdraw or lose their rights to be paid the fair value for
such Shares under such Sections 1930 and 1575 through 1580 shall thereupon be
deemed to have been converted into and to have become exchangeable for, as of
the Effective Time, the right to receive the Merger Consideration, without any
interest thereon, upon surrender, in the manner provided in Section 1.09, of the
certificate or certificates that formerly evidenced such Shares.

SECTION 1.09. Surrender of Shares; Stock Transfer Books. (a)
Prior to the Effective Time, the Purchaser shall designate a bank or trust
company to act as agent (the "Paying Agent") for the holders of Shares in
connection with the Merger to receive the funds to which holders of Shares shall
become entitled pursuant to Section 1.06(a). Such funds shall be invested by the
Paying Agent as directed by the Surviving Corporation, provided that such
investments shall be in obligations of or guaranteed by the United States of
America or of any agency thereof and backed by the full faith and credit of the
United States of America, in commercial paper obligations rated A-1 or P-1 or
better by Moody's Investors Service, Inc. or Standard & Poor's Corporation,
respectively, or in deposit accounts, certificates of deposit or banker's
acceptances of, repurchase or reverse repurchase agreements with, or Eurodollar
time deposits purchased from, commercial banks with capital, surplus and
undivided profits aggregating in excess of U.S. $500 million (based on the most
recent financial statements of such bank which are then publicly available at
the SEC or otherwise).

(b) Promptly after the Effective Time, the Surviving
Corporation shall cause to be mailed to each person who was, at the Effective
Time, a holder of record of Shares entitled to receive the Merger Consideration
pursuant to Section 1.06(a) a form of letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the certificates
evidencing such Shares (the "Certificates") shall pass, only upon proper
delivery of the Certificates to the Paying Agent) and instructions for use in
effecting the surrender of the Certificates pursuant to such letter of
transmittal. Upon surrender to the Paying Agent of a Certificate, together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto, and such other documents as may be required
pursuant to such instructions, the holder of such Certificate shall be entitled
to receive in exchange therefor the Merger Consideration for each Share formerly
evidenced by such Certificate, and such Certificate shall then be canceled. No
interest shall accrue or be paid on the Merger Consideration payable upon the
surrender of any Certificate for the benefit of the holder of such Certificate.
If payment of the Merger Consideration is to be made to a person other than the
person in whose name the surrendered Certificate is registered on the stock
transfer books of the Company, it shall be a condition of payment that the
Certificate so

C-4

<PAGE>

surrendered shall be endorsed properly or otherwise be in proper form for
transfer and that the person requesting such payment shall have paid all
transfer and other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such taxes either have been paid or are not applicable.

(c) At any time following the sixth month after the Effective
Time, the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any funds which had been made available to the Paying Agent and
not disbursed to holders of Shares (including, without limitation, all interest
and other income received by the Paying Agent in respect of all funds made
available to it) and, thereafter, such holders shall be entitled to look to the
Surviving Corporation (subject to abandoned property, escheat and other similar
laws) only as general creditors thereof with respect to any Merger Consideration
that may be payable upon due surrender of the Certificates held by them.
Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying
Agent shall be liable to any holder of a Share for any Merger Consideration
delivered in respect of such Share to a public official pursuant to any
abandoned property, escheat or other similar law.

(d) At the Effective Time, the stock transfer books of the
Company shall be closed and, thereafter, there shall be no further registration
of transfers of Shares on the records of the Company. From and after the
Effective Time, the holders of Shares outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such Shares except
as otherwise provided herein or by applicable law.

ARTICLE II

CONDITIONS TO THE MERGER

SECTION 2.01. Conditions to the Merger. If the Offer is
consummated and all terms and conditions thereof are satisfied, 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 following conditions:

(a) No Order. No Governmental Entity or foreign, United States
or state court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, executive
order, decree, injunction or other order (whether temporary,
preliminary or permanent) that is then in effect and has the effect of
making the acquisition of Shares by the Parent or the Purchaser or any
affiliate of either of them or the consummation of the Merger illegal
or otherwise restricting, preventing or prohibiting consummation of the
Transactions; and

C-5

<PAGE>

(b) Offer. The Purchaser or its permitted assignee shall have
purchased all Shares validly tendered and not withdrawn pursuant to the
Offer; provided, however, that this condition shall not be applicable
to the obligations of the Parent or the Purchaser if, in breach of this
Agreement or the terms of the Offer, the Purchaser or such assignee
fails to purchase any Shares validly tendered and not withdrawn
pursuant to the Offer.

* * * * *

IN WITNESS WHEREOF, the Purchaser has caused this Plan of
Merger to be duly executed as of the date first written above.

ZONEO ACQUISITION CORP.

By
--------------------------------
Name:
Title:

C-6

<PAGE>

September 11, 1998

Groupe Danone
7, rue de Teheran
75381 Paris Cedex 08

In connection with your consideration of a possible negotiated transaction
with AquaPenn Spring Water Company, Inc. and/or its subsidiary corporations
(collectively "AquaPenn"), AquaPenn is prepared to make available to you certain
information concerning the business, financial condition, operations, assets and
liabilities of AquaPenn. As a condition to such information being furnished to
you and your directors, officers, employees, agents or advisors (including,
without limitation, attorneys, accountants, consultants, financing sources,
bankers and financial advisors) (collectively "Representatives"), you agree to
treat any information concerning AquaPenn (whether prepared by AquaPenn, its
advisors or otherwise and irrespective of the form of communication) which has
been or is furnished to you or to your Representatives previously, now or in the
future by or on behalf of AquaPenn (herein collectively referred to as the
"Evaluation Material") in accordance with the provisions of this letter
agreement, and to take or abstain from taking certain other actions hereinafter
set forth.

The term "Evaluation Material" also shall be deemed to include all notes,
analyses, compilations, studies, interpretations or other documents prepared by
you or your Representatives which contain, reflect or are based upon, in whole
or in part, the information furnished to you or your Representatives pursuant
hereto. The term "Evaluation Material" does not include information which (i) is
or becomes generally available to the public other than as a result of a
disclosure by you or your Representatives, (ii) was within your possession prior
to its being furnished to you by or on behalf of AquaPenn pursuant hereto,
provided that the source of such information was not known by you to be bound by
a confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to AquaPenn or any other party with respect to
such information or (iii) becomes available to you on a non-confidential basis
from a source other than AquaPenn or any of its Representatives, provided that
such source is not bound by a confidentiality agreement with or other
contractual, legal, or fiduciary obligation of confidentiality to AquaPenn or
any other party with respect to such information.

You hereby agree that you and your Representatives shall use the Evaluation
Material solely for the purpose of evaluating a possible negotiated transaction
between AquaPenn and you, that the Evaluation Material will be kept confidential
and that you and your Representatives will not disclose any of the Evaluation
Material in any manner whatsoever; provided, however, that (i) you may make any
disclosure of such information to which AquaPenn gives its prior written consent
and (ii) any of such information may be disclosed to your Representatives who
need to know such information for the sole purpose of evaluating a possible
negotiated transaction with AquaPenn, who agree to keep such information
confidential and who are provided with a copy of this letter agreement and agree
to be bound by the terms hereof to the same extent as if they were parties
hereto. In any event, you shall be responsible for any breach

<PAGE>

of this letter agreement by any of your Representatives.

In addition, you agree that, without the prior written consent of AquaPenn,
you and your Representatives will not disclose to any other person the fact that
the Evaluation Material has been made available to you, that discussions or
negotiations are taking place concerning a possible transaction involving
AquaPenn or any of the terms, conditions or other facts with respect thereto
(including the status thereof) provided, that you may make such disclosure if
such disclosure is requested pursuant to, or required by, applicable law or
regulation or any legal process and you give prior notice to AquaPenn of such
disclosure. Without limiting the generality of the foregoing, you further agree
that, without the prior written consent of AquaPenn, you will not, directly or
indirectly, enter into any agreement, arrangement or understanding, or any
discussions which might lead to such agreement, arrangement or understanding,
with any person regarding a possible transaction involving AquaPenn other than
your Representatives. The term "Person" as used in this letter agreement shall
be broadly interpreted to include the media and any corporation, partnership,
group, individual or other entity.

In the event that you or any of your Representatives are requested or
required (by oral questions, interrogatories, requests for information or
documents in legal proceedings, subpoena, civil investigative demand or other
similar process) to disclose any of the Evaluation Material, you shall provide
AquaPenn with prompt written notice of any such request or requirement so that
AquaPenn may seek a protective order or other appropriate remedy and/or waive
compliance with the provisions of this letter agreement. If, in the absence of a
protective order or other remedy or the receipt of a waiver by AquaPenn, you or
any of your Representatives are nonetheless, legally required to disclose
Evaluation Material to any tribunal or else stand liable for contempt or suffer
other censure or penalty, you or your Representative may, without liability
hereunder, disclose to such tribunal only that portion of the Evaluation
Material which such counsel advises you is legally required to be disclosed,
provided that you exercise all reasonable efforts to preserve the
confidentiality of the Evaluation Material, including, without limitation, by
cooperating with AquaPenn to obtain an appropriate protective order or other
reliable assurance that confidential treatment will be accorded the Evaluation
Material by such tribunal.

If you decide that you do not wish to proceed with a transaction with
AquaPenn, you will promptly inform AquaPenn of that decision. In that case, or
at any time upon the request of AquaPenn for any reason, you will promptly
deliver to AquaPenn all Evaluation Material (and all copies thereof) furnished
to you or your Representatives by or on behalf of AquaPenn pursuant hereto. In
the event of such a decision or request, all other Evaluation Material prepared
by you or your Representatives shall be destroyed and no copy thereof shall be
retained. Notwithstanding the return or destruction of the Evaluation Material,
you and your Representatives will continue to be bound by your obligations of
confidentiality and other obligations hereunder.

<PAGE>

You understand and acknowledge that neither AquaPenn nor any of its
Representatives (including without limitation any of AquaPenn's directors,
officers, employees, or agents) make any representation or warranty, express or
implied, as to the accuracy or completeness of the Evaluation Material. You
agree that neither AquaPenn nor any of its Representatives (including without
limitation any of AquaPenn's directors, officers, employees, or agents) shall
have any liability to you or to any of your Representatives relating to or
resulting from the use of the Evaluation Material or any errors therein or
omissions therefrom. Only those representations or warranties which are made in
a final definitive agreement regarding any transactions contemplated hereby,
when, as and if executed, and subject to such limitations and restrictions as
may be specified therein, will have any legal effect.

You agree that, for a period commencing on the date hereof and for a period
ending on the earlier of (i) the second anniversary of the date of this
agreement, and (ii) the occurrence of a Terminating Event (as defined below),
unless such shall have been specifically invited in writing by AquaPenn, neither
you nor any of your affiliates (as such term is defined under the Securities
Exchange Act of 1934, as amended (the "1934 Act")) or Representatives will in
any manner, directly or indirectly, (a) effect or seek, offer or propose
(whether publicly or otherwise) to effect, or cause or participate in or in any
way assist any other person to effect or seek, offer or propose (whether
publicly or otherwise) to effect or participate in, (i) any acquisition of any
securities (or beneficial ownership thereof) or assets of AquaPenn or any of its
subsidiaries; (ii) any tender or exchange offer, merger or other business
combination involving AquaPenn or any of its subsidiaries; (iii) any
recapitalization, restructuring, liquidation, dissolution or other extraordinary
transaction with respect to AquaPenn or any of its subsidiaries; or (iv) any
"solicitation" of "proxies" (as such terms are used in the proxy rules of the
Securities and Exchange Commission) or consents to vote any voting securities of
AquaPenn; (b) form, join or in any way participate in a "group" (as defined
under the 1934 Act); (c) otherwise act, alone or in concert with others, to seek
to control or influence the management, Board of Directors or policies of
AquaPenn; (d) take any action which might force AquaPenn to make a public
announcement regarding any of the types of matters set forth in (a) above; or
(e) enter into any discussions or arrangements with any third party with respect
to any of the foregoing. You also agree during such period not to request
AquaPenn (or its directors, officers, employees or agents), directly or
indirectly, to amend or waive any provision of this paragraph (including this
sentence). For purposes hereof a Terminating Event shall mean (a) the
commencement of a tender offer by any person or "group" (as defined above) under
which beneficial ownership of voting securities of AquaPenn representing more
than 50% of the aggregate voting power of AquaPenn would be acquired; (b)
AquaPenn enters into a definitive agreement to effect a merger, consolidation or
other business combination (including a sale of all or substantially all of the
assets of AquaPenn), if immediately after giving effect to such transaction, any
person or "group" would beneficially own voting securities of the surviving
company representing more than 50% of the aggregate voting power of the
surviving corporation.

You hereby agree that neither you nor any of your Representatives shall
contact any officer, director or employee of AquaPenn other than Messieurs Lauth
or Feidelberg with

<PAGE>

respect to the Transaction without AquaPenn's prior consent. You also agree that
for a period of two (2) years from the date of this letter agreement you will
not, directly or indirectly, solicit for employment or hire any employee or
officer of AquaPenn; provided that the foregoing will not prevent you from
employing any such person who contacts you on his or her own initiative or
conducting a general solicitation of employees.

You understand and agree that no contract or agreement providing for any
transaction involving AquaPenn shall be deemed to exist between you and AquaPenn
unless and until a final definitive agreement has been executed and delivered,
and you hereby waive, in advance, any claims (including, without limitation,
breach of contract), except with respect to AquaPenn's agreements set forth in
this Letter Agreement, in connection with any transaction involving AquaPenn
unless and until you and AquaPenn shall have entered into a final definitive
agreement. You also agree that unless and until a final definitive agreement
regarding a transaction between AquaPenn and you has been executed and
delivered, neither AquaPenn nor you will be under any legal obligation of any
kind whatsoever with respect to such a transaction by virtue of this letter
agreement except for the matters specifically agreed to herein. You further
acknowledge and agree that AquaPenn reserves the right, in its sole discretion,
to reject any and all proposals made by you or any of your Representatives with
regard to a transaction between AquaPenn and you, and to terminate discussions
and negotiations with you at any time. You further understand that, except as
otherwise provided in this Letter Agreement (i) AquaPenn and its Representatives
shall be free to conduct any process for any action involving AquaPenn, if and
as they in their sole discretion shall determine (including, without limitation,
negotiating with any other interested parties and entering into a definitive
agreement without prior notice to you or any other person), (ii) any procedures
relating to such process or transaction may be changed at any time without
notice to you or any other person, and (iii) except with respect to AquaPenn's
agreements set forth in this Letter Agreement, you shall not have any claims
whatsoever against AquaPenn, its Representatives or any of their respective
directors, officers, stockholders, owners, affiliates or agents arising out of
or relating to any transaction involving AquaPenn (other than those as against
the parties to a definitive agreement with you in accordance with the terms
thereof) nor, unless a definitive agreement is entered into with you, against
any third party with whom a transaction is entered into. Neither this paragraph
nor any other provision in this agreement can be waived or amended except by
written consent of AquaPenn, and you (regarding AquaPenn's obligations
hereunder) which consent shall specifically refer to this paragraph (or such
provision) and explicitly make such waiver or amendment.

It is understood and agreed that no failure or delay by AquaPenn or you in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
future exercise thereof or the exercise of any other right, power or privilege
hereunder.

It is further understood and agreed that money damages would not be a
sufficient remedy for any breach of this letter agreement by you or any of your
Representatives or AquaPenn or

<PAGE>

any AquaPenn Representatives and that the non-breaching party hereto shall be
entitled to equitable relief, including injunction and specific performance, as
a remedy for any such breach. Such remedies shall not be deemed to be the
exclusive remedies for a breach by any party of this letter agreement but shall
be in addition to all other remedies available at law or equity to such party.
In the event of litigation relating to this letter agreement, if a court of
competent jurisdiction determines that you or any of your Representatives or
AquaPenn or any AquaPenn Representatives have breached this letter agreement,
then such breaching party shall be liable and pay to the non-breaching party
hereto the reasonable legal fees incurred by such non-breaching party in
connection with such litigation, including any appeal therefrom.

This letter agreement is for the benefit of AquaPenn and their directors,
officers, stockholders, owners, affiliates, and agents, and shall be governed by
and construed in accordance with the laws of the State of Delaware. Each party
hereto hereby irrevocably and unconditionally consents to submit to the
exclusive jurisdiction of the courts of the State of Delaware and of the United
States of America located in the State of Delaware for any actions, suits or
proceedings arising out of or relating to this agreement and the transactions
contemplated hereby (and each such party agrees not to commence any action, suit
or proceeding relating thereto except in such courts), and further agrees that
service of any process, summons, notice or document by U.S. registered mail (i)
with respect to you, to your address set forth above and (ii) with respect to
us, to our address set forth below, in each case shall be effective service of
process for any action, suit or proceeding brought against you or us,
respectively in any such suit. Each party hereto irrevocably and unconditionally
waives any objection to the laying of venue of any action, suit or proceeding
arising out of this agreement or the transactions contemplated hereby, in the
courts of the State of Delaware or the United States of America located in the
State of Delaware, and hereby further irrevocably and unconditionally waives and
agrees not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient forum.

Please confirm your agreement with the foregoing by signing and returning
one copy of this letter to the undersigned, whereupon this letter agreement
shall become a binding agreement between you and AquaPenn.

Very truly yours,

/s/ Edward J. Lauth, III
------------------------
Edward J. Lauth, III
Chairman, President and Chief Executive Officer
AquaPenn Spring Water Company, Inc.
P.O. Box 938
One AquaPenn Drive
Milesburg, PA 16853-0938

<PAGE>

Accepted and agreed as of the date
first written above:

By: /s/ Emmanuel Faber
-------------------
Name: Emmanuel Faber
Title: Director of Corporate
Development and Strategy

<PAGE>

GREAT BRANDS OF EUROPE, INC.

November 2, 1998

Edward J. Lauth, III
President
Aqua Penn Spring Water Company, Inc.
One Aqua Penn Drive
Milesburg, Pennsylvania 16853-0938

EMPLOYMENT AGREEMENT

Dear Mr. Lauth:

This is to confirm our desire to engage in a continuing employment
relationship with you following the closing of the pending acquisition (the
"TRANSACTION") of AquaPenn Spring Water Company, Inc., a Pennsylvania
corporation ("AQUAPENN"), by Groupe Danone, a company incorporated under the law
of the Republic of France, the parent company of Great Brands of Europe, Inc.
(the "COMPANY"). The following sets forth the agreement between the Company and
you regarding the terms of your employment as an employee of AquaPenn and the
Company (the "AGREEMENT"). Capitalized terms not otherwise defined in the text
of this Agreement are defined in Section 6 hereof.

1. TERM OF EMPLOYMENT. The term of your employment with the
Company pursuant to this Agreement shall commence on the "Closing Date" of the
Transaction (as such term is defined in the Agreement and Plan of Merger dated
November 2, 1998 (the "EFFECTIVE DATE"), and shall continue for a period of up
to one year thereafter (the "TERM").

2. POSITION, REPORTING AND RESPONSIBILITIES. During the Term,
you shall be employed as the President of AquaPenn and you will be based in
Milesburg, Pennsylvania. You will report directly to the Chief Executive
Officer of the Company. Your duties and responsibilities shall at all times be
commensurate with your position and reporting responsibilities. During the
Term, you shall devote all of your business time, attention, skills and efforts
exclusively to the business and affairs of the Company, other than DE MINIMIS
amounts of time devoted by you to the management of your personal finances or to
engaging in charitable or community services. You understand and agree that you
will be required to travel from time to time for business purposes.

<PAGE>

3. COMPENSATION AND BENEFITS.

(a) BASE SALARY. During the Term as compensation to you for all
services rendered to the Company, the Company will pay you a base salary (the
"SALARY") at the rate of $200,000 per annum, which will be reviewed annually by
the Company and may be increased but not decreased on the basis of such review.
Your Salary will be paid to you in accordance with the Company's payroll
practices as established from time to time, but no less frequently than monthly.

(b) BONUS. In addition to the Salary, beginning in calendar year
1999 you will participate in the Company's executive bonus program, which is
offered by the Company to similarly situated executives of the Company, pursuant
to which you may be awarded up to thirty-five percent of the Salary for each
annual bonus period (the "ANNUAL BONUS"). The amount of your Annual Bonus will
be determined based upon the achievement by you of personal objectives and the
business results for the Company's North American operations during each bonus
period and will be paid to you in a lump sum amount as soon as practicable after
the business results for the bonus period have been determined. In the event
that your employment hereunder terminates prior to the end of the 1999 bonus
period, you will receive a pro rated portion of the Annual Bonus for such
period; PROVIDED, HOWEVER, that in the event that prior to the end of the 1999
bonus period, your employment hereunder is terminated by the Company for Cause
or you resign without Good Reason, you will forfeit any and all rights to the
Annual Bonus.

(d) BUSINESS EXPENSES. The Company shall pay or reimburse you for
the reasonable expenses incurred by you in connection with the performance of
your employment obligations to the Company, subject to your delivery to the
Company of appropriate documentation of such expenses.

<PAGE>

which will be exercisable for 750 ordinary shares of Groupe Danone, nominal
value FF10 per share (the "STOCK OPTIONS"). Subject to the terms of Section
4(a) and 4(b) below, the Stock Options will become 100% vested on the second
anniversary of the date of grant.

4. TERMINATION OF EMPLOYMENT. Subject to the provisions of this
Agreement, the Company shall have the right to terminate your employment, and
you shall have the right to resign from your employment with the Company, for
any reason or for no stated reason.

(a) TERMINATION OR RESIGNATION OF EMPLOYMENT - ALL CIRCUMSTANCES.
In the event of your termination or resignation of employment for any reason
during the Term, the Company shall pay you (or in the event of your death, your
Beneficiary) (i) the full amount of the accrued but unpaid Salary you have
earned through the Date of Termination (as defined in Section 4(g) below), (ii)
a cash amount for any accrued but unused vacation (based on the highest rate of
Salary in effect during the twelve months prior to the Date of Termination), and
(iii) any earned but unpaid Annual Bonus for any bonus period ended prior to the
Date of Termination (together, the "ACCRUED AMOUNTS"). The Accrued Amounts
shall be paid to you in a lump sum cash payment as soon as practicable following
the Date of Termination (but in no event later than thirty days following such
date). All unvested Stock Options shall immediately lapse and become void
either (i) on the Date of Termination other than in the event of an Involuntary
Termination or (iii) the last day of the Term.

(b) INVOLUNTARY TERMINATION. (i) In addition to the Accrued
Amounts, in the event of your Involuntary Termination during the Term, the
Company will provide you the payments and benefits set forth in this Section
4(b). The Company shall continue to pay to you an amount equal to the monthly
portion of your Salary, as in effect on the Date of Termination (the "SEVERANCE
PAYMENT"), for a period of one year after the Date of Termination (the
"SEVERANCE PERIOD") and a pro rated portion of the Annual Bonus. In addition to
the Severance Payment, you will receive in equal monthly payments during the
Severance Period, an amount equal to AquaPenn's matching contribution to the
AquaPenn Salary Savings Plan for a one-year period based on your contribution
rate to the on the Date of Termination, subject to applicable limitation set
forth in the Internal Revenue Code of 1986, as amended.

(ii) As soon as practicable after the Date of Termination, the
Company shall pay you a lump sum cash amount equal to the fair market value of
the unvested Stock Options less the exercise price of such Stock Options (the
"CASH-OUT AMOUNT"). Immediately upon payment to you of the Cash-Out Amount, the
Stock Options shall lapse and become void.

(iii) You and your dependents shall continue to be eligible to
participate during the Benefit Continuation Period in the medical, dental and
health insurance plans (but not the disability plans) applicable to you
immediately prior to your Involuntary Termination

<PAGE>

on the same terms and conditions in effect for you and your dependents
immediately prior to such Involuntary Termination.

(c) TERMINATION DUE TO DEATH OR DISABILITY. In addition to the
Accrued Amounts, in the event that the Company terminates your employment during
the Term as a result of your Disability or in the event of your death, the
Company will provide you, of your Beneficiary, as the case may be, the payments
and benefits set forth in this Section 4(c). The Company shall pay to you, or
your Beneficiary, the Severance Payment during the Severance Period and a pro
rated portion of the Annual Bonus; PROVIDED, HOWEVER, that the Severance Payment
shall be reduced by any amounts you receive from other disability benefits
including disability pension benefits, death benefits or life insurance
proceeds. In addition, you and your dependents shall continue to be eligible to
participate during the Benefit Continuation Period in the medical, dental and
health insurance plans (but not the disability plans) applicable to you
immediately prior to your termination on the same terms and conditions in effect
for you and your dependents immediately prior to such termination, subject to
payment of your share of all applicable premiums.

(d) YOUR VOLUNTARY RESIGNATION. In the event that you resign from
your employment hereunder during the Term for reasons that do not constitute
Good Reason, you must provide the Company with at least thirty days notice of
such resignation. The Company may, in its sole discretion, continue to pay your
Salary for the thirty day period and request that you refrain from coming to the
Company offices, which request you hereby agree to honor. On the Date of
Termination, other than payment of the Accrued Amounts in accordance with
Section 4(a) and as required by law, all obligations of the Company to you,
other than as required by law, shall cease.

(e) TERMINATION BY THE COMPANY FOR CAUSE. In the event that
during the Term, your employment hereunder is terminated by the Company for
Cause, the Company will pay you the Accrued Amount in accordance with the terms
of Section 4(a) and, except for the payment by the Company to you of the Accrued
Amount, on the Date of Termination all obligations of the Company to you, other
than as required by law, shall cease.

(f) NO OTHER PAYMENTS OR BENEFITS. On the Date of Termination,
other than the payments and benefits expressly provided for in this Section 4,
all obligations of the Company to you, other than as required by law, shall
cease.

<PAGE>

employment under the provision so indicated. The date of your termination of
employment with the Company (the "DATE OF TERMINATION") shall be determined as
follows: (i) if your employment is terminated for Disability, thirty days after
a Notice of Termination is given (PROVIDED that you shall not have returned to
the full-time performance of your duties during such thirty-day period), (ii) if
your employment is terminated by the Company in an Involuntary Termination, the
date specified in the Notice of Termination (or if no date is specified in the
Notice of Termination, the date the Notice of Termination is delivered to you)
and (iii) if your employment is terminated by the Company for Cause, the later
of the date specified in the Notice of Termination or ten days following the
date such notice is received by you. If the basis for your termination is your
resignation for Good Reason, the Date of Termination shall be, subject to the
applicable cure provisions, ten days after the date your Notice of Termination
is received by the Company. The Date of Termination for a resignation of
employment other than for Good Reason shall be the date set forth in the Notice
of Termination, which shall be no earlier than thirty days after the date such
notice is received by the Company. The Date of Termination in the event of your
death shall be the date of your death.

(i) NO MITIGATION. You shall have no obligation or duty to
mitigate any severance or other amounts payable to you under this Agreement and
the amount of such payments shall not be subject to any right of setoff or
offset by the Company.

5. PROTECTIVE AND RESTRICTIVE COVENANTS.

(a) RESTRICTIONS ON COMPETITIVE ENGAGEMENTS. During the
Restricted Period, you will not, directly or indirectly, as a sole proprietor,
member of a partnership, stockholder or investor (other than a stockholder or
investor owning not more than a 5% interest of a publicly traded company),
officer or director of a corporation, or as an employee, associate, consultant
or agent of any person, partnership, corporation or other business organization
or entity, other than the Company or any parent or subsidiary of the Company
(both individually and together, the "COMPANY GROUP"), render any service to or
in any way be affiliated with a competitor (or any person or entity that is
reasonably anticipated to become a competitor) of the Company Group.

(b) NON-SOLICITATION. During the Restricted Period, you shall
not, directly or indirectly, without the prior written consent of the Company:

(i) solicit business from, entice away from, accept orders
involving or otherwise interfere with the relationships of the Company
Group with any client or prospective client (including any person or entity
who, during the most recent twelve months, was a client of any member of
the Company Group); or

<PAGE>

(ii) solicit the services of any individual who is employed by any
member of the Company Group (or who was employed by any member of the
Company Group during the then most recent twelve-month period) or who is
retained by any member of the Company Group as an independent contractor
or consultant (or who was retained by any member of the Company Group in
such capacity in the most recent twelve-month period), or take any action
that results, or might reasonably result, in any employee, independent
contractor or consultant ceasing to perform services for any member of the
Company Group.

(c) NON-DISCLOSURE. You shall not at any time during the Term or
thereafter in perpetuity, directly or indirectly, other than in the performance
of your duties on behalf of the Company or with the prior written consent of the
Company:

(i) disclose any confidential or other proprietary information
pertaining to the client accounts of the Company Group, including, but not
limited to, contracts, client lists, systems, procedures, manuals,
confidential reports and financial information concerning the Company
Group's services, products or businesses;

(ii) use any confidential or other proprietary information
pertaining to the clients of any member of the Company Group (including,
but not limited to, client lists, client contacts, client profiles and
statistical or demographic analysis of any member of the Company Group's
clients) in order to contact, solicit, accept or refer business from, or
otherwise do business or deal with, any client of any member of the Company
Group (including any person or entity who, during the most recent twelve
months, was a client of any member of the Company Group) in connection with
the provision of any product or service similar to any provided by the
Company Group; or

(iii) disclose the terms of this Agreement, other than to your
legal, financial or tax advisors or as necessary to enforce the terms of
this Agreement or as otherwise required by law.

(d) RETURN OF COMPANY PROPERTY. Upon any termination or
resignation of your employment hereunder, you shall immediately return to the
Company all property and material in your possession that belongs or relates to
the Company (the "COMPANY PROPERTY") unless the Company expressly agrees in
writing that you may retain possession of any such property or material. Company
Property shall include all originals and copies of files, writings, reports,
memoranda, diaries, notebooks, nots of meetings or presentations, data, computer
tapes or diskettes, drawings charts, photographs, slides, patents, or an other
form of record which contains information created or produced for or at the
direction of any member of the Company Group, or any employee or agent thereof.
All Company Property shall be returned undamaged and intact.

<PAGE>

(e) APPLICATION OF COVENANTS. The activities described in this
Section 5 shall be prohibited regardless of whether undertaken by you in an
individual or representative capacity, and regardless of whether performed for
your own account or for the account of any other individual, partnership, firm,
corporation or other business organization (other than the Company).

(f) INJUNCTIVE RELIEF. Without limiting the remedies available to
the Company, you acknowledge that a breach of any of the covenants contained in
this Section 5 may result in material irreparable injury to the Company for
which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of such a
breach or threat thereof, the Company shall be entitled to obtain a temporary
restraining order or a preliminary or permanent injunction restraining you from
engaging in activities prohibited by this Section 5 or such other relief as may
be required to specifically enforce any of the covenants in this Section 5.

(g) VIOLATION AND REMEDY. If the Company reasonably determines
that you have breached any of the provisions of this Section 5, in addition to
any other remedies available to the Company in law or equity, the Company shall
be entitled to immediately suspend as of the date of such breach the provision
to you of any payments or benefits under this Agreement.

(h) THIRD-PARTY BENEFICIARY. The parties hereto acknowledge and
agree that the subsidiary and parent companies of the Company are third-party
beneficiaries to the terms of this Section 5 and may enforce the terms of this
Agreement as they pertain to Section 5 to the full extent permitted by law and
equity.

6. DEFINITIONS. For purposes of this Agreement, the following
capitalized words shall have the meanings set forth below:

"BENEFICIARY" shall mean the person or persons designated by you in
writing to receive any benefits payable to you hereunder in the event of
your death or, if no such persons are so designated, your estate. No
Beneficiary designation shall be effective unless it is in writing and
received by the Company prior to the date of your death.

"BENEFIT CONTINUATION PERIOD" shall mean the period beginning on the
Date of Termination and ending on the earlier to occur of (i) the end of
the Severance Period and (ii) the date you are eligible and elect to be
covered under the comparable benefit plans of a subsequent employer.

"CAUSE" shall mean a termination of your employment which is a result
of any of the following: (i) your felony conviction or your plea of "no
contest" to a felony;

<PAGE>

(ii) any fraud by you in connection with the performance of your duties as
an employee of the Company; (iii) any act of intentional gross misconduct
by you in the performance of your duties as an employee of the Company; or
(iv) your continued and repeated neglect of your duties as an officer or
employee of the Company (other than any such neglect resulting from your
incapacity due to physical or mental illness); PROVIDED, HOWEVER, that an
event described in clauses (ii), (iii) and (iv) shall not constitute Cause
unless it is communicated to you by the Company in writing within thirty
days of the date the Company knows or has reason to know of such event and
is not corrected by you in a manner which is reasonably satisfactory to the
Company within thirty days of your receipt of such written notice from the
Company. No act or omission shall constitute Cause unless such act or
omission was undertaken by you without the good faith belief that it was in
furtherance of Company business or interests of the Company.

"DISABILITY" shall mean (i) your incapacity due to physical or mental
illness which causes you to be absent from the full-time performance of
your duties with the Company for three consecutive months and (ii) your
failure to return to full-time performance of your duties with the Company
within thirty days after written Notice of Termination due to Disability is
given to you. Any question as to the existence of your Disability upon
which you and the Company cannot agree shall be determined by a qualified
independent physician selected by the Company and approved by you (or, if
you are unable to provide such approval, such approval shall be provided by
any adult member of your immediate family), which approval shall not be
unreasonably withheld. The determination of such physician made in writing
to the Company and to you shall be final and conclusive for all purposes of
this Agreement.

"GOOD REASON" shall mean a resignation of your employment as a result
of any of the following: (i) the failure of the Company to renew the Term,
(ii) the failure of the Company to pay you any material amount of
compensation or to provide you with any material benefit when due, (iii) a
significant and adverse change in your position or duties, (iv) any
decrease in your Salary or (v) notice by the Company to you of the
relocation of your principal place of business to a location more than
fifty miles from Milesburg, Pennsylvania unless you consent to such
relocation; PROVIDED, HOWEVER, that an event described in clauses (ii),
(iii), (iv) or (v) of this sentence shall not constitute Good Reason unless
it is communicated by you to the Company in writing within thirty days of
the date you know or have reason to know of such event and is not corrected
by the Company in a manner which is reasonably satisfactory to you
(including full retroactive correction with respect to any monetary matter)
within thirty days of the Company's receipt of such written notice from
you.

<PAGE>

"INVOLUNTARY TERMINATION" shall mean (i) your termination of
employment by the Company other than for Cause or Disability or (ii) your
resignation for Good Reason.

"RESTRICTED PERIOD" shall mean the period beginning on the Effective
Date and ending on the later of (i) the second anniversary of the Date of
Termination or (ii) the last day of the Severance Period; PROVIDED,
HOWEVER, that in the event that your employment continues until the last
day of the Term, the Restricted Period shall mean the period beginning on
the Effective Date and ending on the second anniversary of the last day of
the Term.

7. NOTICE. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, if to the Company,
to its offices at Groupe Danone, 7, rue de Teheran, 75381 Paris Cedex 08 France,
and if to you at your last address of record, or to such other address as any
party may have furnished to the other parties hereto in writing in accordance
herewith, except that notice of change of address shall be effective only upon
receipt.

8. BINDING ARBITRATION. Except for the relief provided for in
Section 5(f), any controversy or claim arising out of or relating to this
Agreement (including any claims relating to employment or the termination of
employment, whether arising under federal, state, or local law and whether in
contract or in tort and including any discrimination or common law claims, but
excluding workers' compensation and unemployment insurance) shall be settled by
arbitration under the auspices of the American Arbitration Association ("AAA")
in New York, New York, in accordance with the National Rules for the Resolution
of Employment Disputes of the AAA. The dispute shall be submitted to a single
arbitrator to be mutually agreed upon by the parties. If the parties cannot
agree on a single arbitrator, each party shall appoint one arbitrator who shall
then jointly appoint a single arbitrator. The arbitrator shall give effect to
applicable statutes of limitations. Any controversy concerning whether an issue
is arbitrable shall be determined by the arbitrator. Judgment upon the
arbitration award may be entered in any court having jurisdiction. The
prevailing party in any arbitration proceeding, as determined by the arbitrator,
or in any proceeding with respect thereto as determined by the person presiding,
shall be entitled to receive from the non-prevailing party reasonable attorneys'
fees and costs incurred by such prevailing party in connection therewith. In
the event that there is no prevailing party, reasonable attorneys' fees and
costs incurred by the parties shall be allocated between them by the arbitrator.

<PAGE>

9. MISCELLANEOUS.

(a) AMENDMENTS, WAIVERS, ETC. No provision of this Agreement may
be modified, waived or discharged unless such waiver, modification or discharge
is agreed to in writing. No waiver by any party hereto at any time of any
breach by the other party hereto of, or of compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
any party which are not expressly set forth in this Agreement and this Agreement
shall supersede all prior agreements, negotiations, correspondence, undertakings
and communications of the parties, oral or written, with respect to the subject
matter hereof and, unless otherwise expressly provided and incorporated into
this Agreement, shall supercede all prior agreements, negotiations,
correspondence, undertakings and communications, oral or written, with respect
to your employment with AquaPenn prior to the Effective Date, including, without
limitation, the Change in Control Agreement dated September 16, 1994, the
Employment Agreement dated September 16, 1994, as amended by Amendment No. 1 to
the Employment Agreement dated October 27, 1997, and all other prior agreements
between you and AquaPenn; PROVIDED, HOWEVER, that the parties hereto acknowledge
and agree that you will not forfeit any rights or benefits pursuant to the
Non-Qualified Deferred Compensation Agreement between you and AquaPenn dated
October 1, 1994 that had accrued to you prior to the Effective Date.

(b) VALIDITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect. The
parties intend that any offending provision shall be enforced to the fullest
extent to which it is enforceable, that any unenforceable portion thereof be
severed from this Agreement, and that this Agreement, as modified to sever any
such unenforceable portion, will be enforced to the fullest extent permitted by
law.

(c) COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

(d) WITHHOLDING. Amounts paid to you hereunder shall be subject
to all applicable federal, state and local tax withholdings.

(e) HEADINGS. The headings contained in this Agreement are
intended solely for convenience of reference and shall not affect the rights of
the parties to this Agreement.

<PAGE>

(f) GOVERNING LAW. The validity, interpretation, construction,
and performance of this Agreement shall be governed by the laws of the State of
New York applicable to contracts entered into and performed in such State
without regard to the choice of law provisions thereof.

<PAGE>

If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter, which
will then constitute our agreement on this subject.

Sincerely,

GREAT BRANDS OF EUROPE, INC.

By: /s/ Mark S. Rodriguez
--------------------------------
Name: Mark S. Rodriguez
Title: Chief Executive Officer

UNDERSTOOD, ACCEPTED
AND AGREED:

/s/ Edward J. Lauth, III
- ------------------------------
Edward J. Lauth, III

<PAGE>

GREAT BRANDS OF EUROPE, INC.

November 2, 1998

Geoffrey F. Feidelberg
Chief Operating Officer and
Chief Financial Officer
AquaPenn Spring Water Company, Inc.
One AquaPenn Drive
Milesburg, Pennsylvania 16853-0938

EMPLOYMENT AGREEMENT

Dear Mr. Feidelberg:

1. TERM OF EMPLOYMENT. The term of your employment with the
Company pursuant to this Agreement (the "TERM") shall commence on the "Closing
Date" (the "EFFECTIVE DATE") of the Transaction (as such term is defined in the
Agreement and Plan of Merger (the "MERGER AGREEMENT") dated November 2, 1998),
and shall continue until the first anniversary of the Effective Date; PROVIDED
that the Term shall automatically renew for additional one-year periods on each
anniversary of the Effective Date (each, a "RENEWAL DATE") until either (a) your
employment hereunder is terminated in accordance with the terms set forth in
Section 4 below or (b) you or the Company give the other such party written
notice of the intent not to so extend the Term at least ninety days prior to
such Renewal Date.

2. POSITION, REPORTING AND RESPONSIBILITIES. Until you are
relocated to Stamford, Connecticut, you shall be employed as (a) the Chief
Operating Officer and Chief Financial Officer of AquaPenn and (b) the project
manager with respect to the transitional period after the acquisition of
AquaPenn by Groupe Danone. During the period that you are employed in the
positions set forth above, you will be based in Milesburg, Pennsylvania and you
will report directly to the Chief Executive Officer of the Company, which
position was held by Mark

<PAGE>

Rodriguez on the date the Merger Agreement was signed. You and the Company
acknowledge and agree that you will thereafter be transferred to the Company's
offices in Stamford, Connecticut where you will be employed in a position of
Vice President and you will serve on the Executive Committee. Your duties and
responsibilities shall at all times be commensurate with your position and
reporting responsibilities. During the Term, you shall devote all of your
business time, attention, skills and efforts exclusively to the business and
affairs of the Company, other than DE MINIMIS amounts of time devoted by you to
the management of your personal finances or to engaging in charitable or
community services. You understand and agree that you will be required to travel
from time to time for business purposes.

3. COMPENSATION AND BENEFITS.

(a) BASE SALARY. During the Term as compensation to you for all
services rendered to the Company, the Company will pay you a base salary (the
"SALARY") at the rate of $160,000 per annum, which will be reviewed annually by
the Company and may be increased but not decreased on the basis of such review.
Your Salary will be paid to you in accordance with the Company's payroll
practices as established from time to time, but no less frequently than monthly.

(b) BONUS. In addition to the Salary, beginning in calendar year
1999, you will participate in the Company's executive bonus program, which is
offered by the Company to similarly situated executives of the Company, pursuant
to which you may be awarded up to thirty-five percent of the Salary for each
annual bonus period (the "ANNUAL BONUS"). The amount of your Annual Bonus will
be determined based upon the achievement by you of personal objectives and the
business results for the Company's North American operations during each bonus
period; PROVIDED, HOWEVER, that you will forfeit any right to receive the Annual
Bonus or any prorated portion thereof in the event your employment with the
Company terminates prior to December 31 of any bonus period during the Term.

(c) BENEFITS. During the Term, you and your dependants shall be
eligible to participate in such retirement, medical and other welfare benefit
plans, programs and arrangements that are offered by the Company to similarly
situated employees from time to time which benefits will be at least as
favorable to you as those you enjoyed prior to the Effective Date. Such
benefits will include your participation in the Company's relocation program,
including any mortgage assistance for which you may qualify under the terms of
the relocation program.

<PAGE>

(e) AUTOMOBILE. During the Term, the Company will provide you
with an automobile pursuant to a program that is at least as favorable to you as
the automobile program in which you participated immediately prior to the
Effective Date. After your transfer to Stamford, Connecticut, you shall
participate in the Company's Executive Committee Car Program, which provides a
gross monthly automobile allowance of $1,300.

(f) RELOCATION EXPENSES. The Company shall pay or reimburse you,
in accordance with the Company's relocation policy, for the reasonable expenses
incurred by you in connection with the relocation of you and your family from
Milesburg, Pennsylvania to Stamford, Connecticut.

(g) EQUITY COMPENSATION. Subject to approval by the Board of
Directors of Groupe Danone at its next meeting which is scheduled to take place
in December 1998, as soon as practicable after the Effective Date, Groupe Danone
shall grant you stock options which will be exercisable for 1,500 ordinary
shares of Groupe Danone, nominal value FF10 per share (the "STOCK OPTIONS").
Subject to Section 4(a) below, the Stock Options will become 100% vested on the
fifth anniversary of the date of grant and shall be exercisable during the two
year period following the date that the Stock Options become vested.

(a) TERMINATION OR RESIGNATION OF EMPLOYMENT - ALL CIRCUMSTANCES.
In the event of your termination or resignation of employment for any reason
during the Term, the Company shall pay you (or in the event of your death, your
Beneficiary) (i) the full amount of the accrued but unpaid Salary you have
earned through the Date of Termination (as defined in Section 4(g) below), (ii)
a cash amount for any accrued but unused vacation (based on the highest rate of
Salary in effect during the twelve months prior to the Date of Termination), and
(iii) any earned but unpaid bonus for any calendar year ended prior to the Date
of Termination (together, the "ACCRUED AMOUNTS"). The Accrued Amounts shall be
paid to you in a lump sum cash payment as soon as practicable following the Date
of Termination (but in no event later than thirty days following such date).
You will not be entitled to receive the Annual Bonus or any prorated portion
thereof for any partial calendar year during the Term during which your
employment terminates. Furthermore, all unvested Stock Options shall immediately
lapse and become void on the Date of Termination or at the time you cease to be
employed by the Company or AquaPenn at the end of the Term.

<PAGE>

(b) INVOLUNTARY TERMINATION. In the event of your Involuntary
Termination during the Term, in addition to the Accrued Amounts the Company will
provide you the payments and benefits set forth in this Section 4(b).

(i) In the event of your Involuntary Termination on or after the
first anniversary of the Effective Date, the Company shall continue to pay
to you an amount equal to the monthly portion of your Salary, as in effect
on the Date of Termination (the "SEVERANCE PAYMENT"), for a period of one
year after the Date of Termination (the "SEVERANCE PERIOD").

(ii) In the event of your Involuntary Termination prior to the
first anniversary of the Effective Date, the Company shall continue to pay
to you the Severance Payment for a period of two years after the Date of
Termination (the "EXTENDED SEVERANCE PERIOD").

(iii) In addition to the Severance Payment, you will receive in
equal monthly payments during the Severance Period, an amount equal to
AquaPenn's matching contribution to the AquaPenn Salary Savings Plan for a
one-year period based on your contribution rate to the on the Date of
Termination, subject to applicable limitation set forth in the Internal
Revenue Code of 1986, as amended.

(iv) You and your dependents shall continue to be eligible to
participate during the Benefit Continuation Period in the medical, dental
and health insurance plans (but not the disability plans) applicable to you
immediately prior to your Involuntary Termination on the same terms and
conditions in effect for you and your dependents immediately prior to such
Involuntary Termination.

(c) TERMINATION DUE TO DEATH OR DISABILITY. In addition to the
Accrued Amounts, in the event that the Company terminates your employment during
the Term as a result of your Disability or in the event of your death, the
Company will provide you, of your Beneficiary, as the case may be, the payments
and benefits set forth in this Section 4(c). The Company shall pay to you, or
your Beneficiary, the Severance Payment during the Severance Period; PROVIDED,
HOWEVER, that the Severance Payment shall be reduced by any amounts you receive
from other disability benefits including disability pension benefits, death
benefits or life insurance proceeds. In addition, you and your dependents shall
continue to be eligible to participate during the Benefit Continuation Period in
the medical, dental and health insurance plans (but not the disability plans)
applicable to you immediately prior to your termination on the same terms and
conditions in effect for you and your dependents immediately prior to such
termination, subject to payment of your share of all applicable premiums.

<PAGE>

(d) YOUR VOLUNTARY RESIGNATION. In the event that you resign from
your employment hereunder during the Term for reasons that do not constitute
Good Reason, you must provide the Company with at least ninety days notice of
such resignation. The Company may, in its sole discretion, continue to pay your
Salary for the ninety day period and request that you refrain from coming to the
Company offices, which request you hereby agree to honor. On the Date of
Termination, other than payment of the Accrued Amounts in accordance with
Section 4(a) and as required by law, all obligations of the Company to you,
other than as required by law, shall cease.

(g) DATE AND NOTICE OF TERMINATION. Any termination of your
employment by the Company or by you shall be communicated by a notice of
termination to the other parties hereto (the "NOTICE OF TERMINATION"). The
Notice of Termination shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of your employment
under the provision so indicated. The date of your termination of employment
with the Company (the "DATE OF TERMINATION") shall be determined as follows:
(i) if your employment is terminated for Disability, thirty days after a Notice
of Termination is given (PROVIDED that you shall not have returned to the
full-time performance of your duties during such thirty-day period), (ii) if
your employment is terminated by the Company in an Involuntary Termination, the
date specified in the Notice of Termination (or if no date is specified in the
Notice of Termination, the date the Notice of Termination is delivered to you)
and (iii) if your employment is terminated by the Company for Cause, the later
of the date specified in the Notice of Termination or ten days following the
date such notice is received by you. If the basis for your termination is your
resignation for Good Reason, the Date of Termination shall be, subject to the
applicable cure provisions, ten days after the date your Notice of Termination
is received by the Company. The Date of Termination for a resignation of
employment other than for Good Reason shall be the date set forth in the Notice
of Termination, which shall be no earlier than ninety days after the date such
notice is received by the Company. The Date of Termination in the event of your
death shall be the date of your death.

<PAGE>

(h) NO MITIGATION. You shall have no obligation or duty to
mitigate any severance or other amounts payable to you under this Agreement and
the amount of such payments shall not be subject to any right of setoff or
offset by the Company.

5. PROTECTIVE AND RESTRICTIVE COVENANTS.

(a) RESTRICTIONS ON COMPETITIVE ENGAGEMENTS. During the
Restricted Period, you will not, directly or indirectly, as a sole proprietor,
member of a partnership, stockholder or investor (other than a stockholder or
investor owning not more than a 5% interest of a publicly traded company),
officer or director of a corporation, or as an employee, associate, consultant
or agent of any person, partnership, corporation or other business organization
or entity, other than the Company or any parent or subsidiary of the Company
(both individually and together, the "COMPANY GROUP"), render any service to or
in any way be affiliated with the bottled water business or a bottled water
brand.

(b) NON-SOLICITATION. During the Restricted Period, you shall
not, directly or indirectly, without the prior written consent of the Company:

<PAGE>

(iii) disclose the terms of this Agreement, other than to your
legal, financial or tax advisors or as necessary to enforce the terms of
this Agreement or as otherwise required by law.

(g) VIOLATION AND REMEDY. If the Company reasonably determines
that you have breached any of the provisions of this Section 5, in addition to
any other remedies

<PAGE>

available to the Company in law or equity, the Company shall be entitled to
immediately suspend as of the date of such breach the provision to you of any
payments or benefits under this Agreement.

6. DEFINITIONS. For purposes of this Agreement, the following
capitalized words shall have the meanings set forth below:

"BENEFIT CONTINUATION PERIOD" shall mean the period beginning on the
Date of Termination and ending on the earliest to occur of (i) the end of
the Severance Period, (ii) the end of the Extended Severance Period, if
any, and (iii) the date you are eligible and elect to be covered under the
comparable benefit plans of a subsequent employer.

"CAUSE" shall mean a termination of your employment which is a result
of any of the following: (i) your felony conviction or your plea of "no
contest" to a felony; (ii) any fraud by you in connection with the
performance of your duties as an employee of the Company; (iii) any act of
intentional gross misconduct by you in the performance of your duties as an
employee of the Company; or (iv) your continued and repeated neglect of
your duties as an officer or employee of the Company (other than any such
neglect resulting from your incapacity due to physical or mental illness);
PROVIDED, HOWEVER, that an event described in clauses (ii), (iii) and (iv)
shall not constitute Cause unless it is communicated to you by the Company
in writing within thirty days of the date the Company knows or has reason
to know of such event and is not corrected by you in a manner which is
reasonably satisfactory to the Company within thirty days of your receipt
of such written notice from the Company. No act or omission shall
constitute Cause unless such act or omission was undertaken by you without
the good faith belief that it was in furtherance of Company business or
interests of the Company.

<PAGE>

performance of your duties with the Company within thirty days after
written Notice of Termination due to Disability is given to you. Any
question as to the existence of your Disability upon which you and the
Company cannot agree shall be determined by a qualified independent
physician selected by the Company and approved by you (or, if you are
unable to provide such approval, such approval shall be provided by any
adult member of your immediate family), which approval shall not be
unreasonably withheld. The determination of such physician made in writing
to the Company and to you shall be final and conclusive for all purposes of
this Agreement.

"GOOD REASON" shall mean a resignation of your employment as a result
of any of the following: (i) the failure of the Company to renew the Term,
(ii) the failure of the Company to pay you any material amount of
compensation or to provide you with any material benefit when due, (iii) a
significant and adverse change in your position or duties, (iv) any
decrease in your Salary or (v) if, during the Term, Groupe Danone sells or
otherwise disposes of the portion of its U.S. operations that engage in the
bottled water business; PROVIDED, HOWEVER, that an event described in
clauses (ii), (iii) or (iv) of this sentence shall not constitute Good
Reason unless it is communicated by you to the Company in writing within
thirty days of the date you know or have reason to know of such event and
is not corrected by the Company in a manner which is reasonably
satisfactory to you (including full retroactive correction with respect to
any monetary matter) within thirty days of the Company's receipt of such
written notice from you.

"INVOLUNTARY TERMINATION" shall mean (i) your termination of
employment by the Company other than for Cause or Disability or (ii) your
resignation for Good Reason.

"RESTRICTED PERIOD" shall mean the period beginning on the Effective
Date and ending on the latest of (i) the second anniversary of the Date of
Termination, (ii) the last day of the Severance Period or (iii) the last
day of the Extended Severance Period; PROVIDED, HOWEVER, that in the event
that your employment continues until the last day of the Term, the
Restricted Period shall mean the period beginning on the Effective Date and
ending on the second anniversary of the last day of the Term.

<PAGE>

9. MISCELLANEOUS.

<PAGE>

HOWEVER, that the parties hereto acknowledge and agree that you will not forfeit
any rights or benefits pursuant to the Non-Qualified Deferred Compensation
Agreement between you and AquaPenn dated October 1, 1994 that had accrued to you
prior to the Effective Date.

(c) COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

(d) WITHHOLDING. Amounts paid to you hereunder shall be subject
to all applicable federal, state and local tax withholdings.

(e) HEADINGS. The headings contained in this Agreement are
intended solely for convenience of reference and shall not affect the rights of
the parties to this Agreement.

<PAGE>

If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter, which
will then constitute our agreement on this subject.

Sincerely,

GREAT BRANDS OF EUROPE, INC.

By: /s/ Mark S. Rodriguez
--------------------------------
Name: Mark S. Rodriguez
Title: Chief Executive Officer

UNDERSTOOD, ACCEPTED
AND AGREED:

/s/ Geoffrey F. Feidelberg
- ------------------------------
Geoffrey F. Feidelberg

<PAGE>

GREAT BRANDS OF EUROPE, INC.

November 2, 1998

Matthew Suhey
Aqua Penn Spring Water Company, Inc.
One Aqua Penn Drive
Milesburg, Pennsylvania 16853-0938

CONSULTING AGREEMENT
--------------------

Dear Mr. Suhey:

This is to confirm our desire to engage in a continuing consulting
relationship with you following the closing of the pending acquisition (the
"TRANSACTION") of Aqua Penn Spring Water Company, Inc., a Pennsylvania
corporation ("AQUAPENN"), by Groupe Danone, a company incorporated under the law
of the Republic of France, and the parent company of Great Brands of Europe,
Inc. (the "COMPANY"). The following sets forth the agreement between the
Company and you regarding the terms of your consulting arrangement with the
Company (the "AGREEMENT").

1. TERM. The term of your consulting arrangement with the Company
pursuant to this Agreement (the "TERM") shall commence on the Closing Date of
the Transaction (as such term is defined in the Agreement and Plan of Merger
dated November 2, 1998 (the "EFFECTIVE DATE") and shall end on the first
anniversary of the Effective Date; PROVIDED that the Term shall automatically
renew for one additional one-year period on the first anniversary of the
Effective Date unless you or the Company give the other party written notice of
the intent not to so extend the Term for an additional year at least ninety days
prior to the first anniversary of the Effective Date.

2. RESPONSIBILITIES. During the Term, you shall provide such
consulting services as the Company reasonably requests with regard to assisting
in the transitions that the Transaction will precipitate, identifying additional
key accounts and developing strategies for securing such additional key
accounts. You will report to the Director of National Accounts of the Company,
or his designee.

3. CONSULTING FEE AND BONUSES. (a) During the Term as compensation
to you for all services rendered to the Company, the Company will pay you a
consulting fee (the

<PAGE>
2

"CONSULTING FEE") of $250,000 per annum, payable in equal installments no less
frequently than monthly.

(b) In the event that on or before the end of the sixth month after
the Effective Date (the "BONUS PERIOD"), the volume of your current account base
in the existing format (which includes value, convenience and jug) increases
sufficiently so as to equal the water category growth rate as measured based on
the most current available syndicated data, the Company shall pay you a bonus of
$50,000 in a lump sum cash payment as soon as practicable after the Bonus Period
(but in no event prior to July 31, 1999.

(c) As soon as practicable after the Effective Date, you and the
Company shall, in good faith, approve in writing a categorized list of potential
new key accounts (the "NEW KEY ACCOUNTS"). In addition, you and the Company
shall, in good faith, mutually agree upon a bonus formula or determination
method (the "BONUS FORMULA") which will measure your success in securing New Key
Accounts for the Company during the period prior to the first anniversary of the
Effective Date. The approval of the New Key Accounts and agreement with respect
to the formula or determination method may not be unreasonably withheld by
either party. As soon as practicable after the first anniversary of the
Effective Date, the Company shall pay you an additional bonus of up to $50,000
based on the application of the Bonus Formula to the one-year period following
the Effective Date.

(d) Your entitlement to either of the bonuses set forth in Sections
3(b) and 3(c) above shall be determined in the discretion of the Company based
on a fair evaluation of the factors upon which such bonuses are based. The
decision of the Company shall be final and binding on the parties hereto.

4. EXPENSES. The Company shall pay or reimburse you for the
reasonable expenses incurred by you in connection with the performance of your
consulting obligations to the Company, subject to your delivery to the Company
of appropriate documentation of such expenses.

5. TERMINATION OF CONSULTING ARRANGEMENT. Subject to the provisions
of this Agreement, each of you and the Company shall have the right to terminate
the consulting arrangement, for any reason or for no stated reason.

(a) TERMINATION GENERALLY. In the event of the termination of the
consulting arrangement for any reason during the Term, the Company shall pay you
the full amount of the accrued but unpaid Consulting Fee you have earned and
unreimbursed business expenses you have incurred through the Date of Termination
(the "ACCRUED AMOUNTS"). The Accrued Amounts shall be paid to you in a lump sum
cash payment as soon as practicable following the Date of Termination (but in no
event later than thirty days following such date). "DATE OF TERMINATION"

<PAGE>
3

shall mean either (i) the date on which the consulting arrangement set forth
hereunder is terminated either by you, by the Company or by mutual agreement of
both parties hereto or (ii) if the consulting arrangement continues until the
end of the Term, the last day of the Term.

(b) TERMINATION BY MUTUAL AGREEMENT; TERMINATION BY THE COMPANY. In
addition to the Accrued Amounts, in the event that the Consulting Arrangement is
terminated either by the Company or by mutual agreement of the parties prior to
the first anniversary of the Effective Date, as liquidated damages, the Company
shall pay you a lump sum amount equal to the portion of the Consulting Fee that
you would have received for the period beginning on the Date of Termination and
ending on the first anniversary of the Effective Date.

(c) NO OTHER PAYMENTS. On the Date of Termination, other than the
payments expressly provided for in this Section 5, all obligations of the
Company to you shall cease.

6. PROTECTIVE AND RESTRICTIVE COVENANTS.

(a) RESTRICTIONS ON COMPETITIVE ENGAGEMENTS. Beginning on the
Effective Date and continuing until the first anniversary of the Date of
Termination, you will not, directly or indirectly, as a sole proprietor, member
of a partnership, stockholder or investor (other than a stockholder or investor
owning not more than a 1% interest of a publicly traded company), officer or
director of a corporation, or as an employee, associate, consultant or agent of
any person, partnership, corporation or other business organization or entity,
other than the Company or any parent or subsidiary of the Company (together, the
"COMPANY GROUP"), render any service to or in any way be affiliated with a
competitor (or any person or entity that is reasonably anticipated to become a
competitor) of the Company Group.

(b) NON-SOLICITATION. Beginning on the Effective Date and continuing
until the second anniversary of the Date of Termination, you shall not, directly
or indirectly, without the prior written consent of the Company:

(i) solicit business from, entice away from, accept orders involving
or otherwise interfere with the relationships of the Company Group with any
client or prospective client (including any person or entity who, during
the most recent twelve months, was a client of any member of the Company
Group); or

<PAGE>
4

independent contractor or consultant ceasing to perform services for any
member of the Company Group.

(iii) disclose the terms of this Agreement, other than to your
legal, financial or tax advisors or as necessary to enforce the terms of
this Agreement or as otherwise required by law.

(d) RETURN OF COMPANY PROPERTY. Upon the termination of the
consulting arrangement, you shall immediately return to the Company all property
and material in your possession that belongs or relates to the Company (the
"COMPANY PROPERTY") unless the Company expressly agrees in writing that you may
retain possession of any such property or material. Company Property shall
include all originals and copies of files, writings, reports, memoranda,
diaries, notebooks, notes of meetings or presentations, data, computer tapes or
diskettes, drawings, charts, photographs, slides, patents, or an other form of
record which contains information created or produced for or at the direction of
any member of the Company Group, or any employee or agent thereof. All Company
Property shall be returned undamaged and intact.

(e) APPLICATION OF COVENANTS. The activities described in this
Section 6 shall be prohibited regardless of whether undertaken by you in an
individual or representative capacity, and regardless of whether performed for
your own account or for the account of any other individual, partnership, firm,
corporation or other business organization (other than the Company).

<PAGE>
5

(f) INJUNCTIVE RELIEF. Without limiting the remedies available to
the Company, you acknowledge that a breach of any of the covenants contained in
this Section 6 may result in material irreparable injury to the Company for
which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of such a
breach or threat thereof, the Company shall be entitled to obtain a temporary
restraining order or a preliminary or permanent injunction restraining you from
engaging in activities prohibited by this Section 6 or such other relief as may
be required to specifically enforce any of the covenants in this Section 6.

(g) VIOLATION AND REMEDY. If the Company reasonably determines
that you have breached any of the provisions of this Section 6, in addition to
any other remedies available to the Company in law or equity, the Company shall
be entitled to immediately suspend as of the date of such breach the provision
to you of any payments or benefits under this Agreement.

(h) THIRD-PARTY BENEFICIARY. The parties hereto acknowledge and
agree that the subsidiary and parent companies of the Company are third-party
beneficiaries to the terms of this Section 6 and may enforce the terms of this
Agreement as they pertain to Section 6 to the full extent permitted by law and
equity.

8. BINDING ARBITRATION. Except for the relief provided for in
Section 6(f), any controversy or claim arising out of or relating to this
Agreement, whether arising under federal, state, or local law and whether in
contract or in tort and including any discrimination or common law claims, shall
be settled by arbitration under the auspices of the American Arbitration
Association ("AAA") in New York, New York. The dispute shall be submitted to a
single arbitrator to be mutually agreed upon by the parties. If the parties
cannot agree on a single arbitrator, each party shall appoint one arbitrator who
shall then jointly appoint a single arbitrator. The arbitrator shall give
effect to applicable statutes of limitations. Any controversy concerning
whether an issue is arbitrable shall be determined by the arbitrator. Judgment
upon the arbitration award may be entered in any court having jurisdiction. The
prevailing party in any arbitration proceeding, as determined by the arbitrator,
or in any proceeding with respect thereto as determined by the person presiding,
shall be entitled to receive from the non-prevailing party reasonable attorneys'
fees and costs incurred by such prevailing party in connection

<PAGE>
6

therewith. In the event that there is no prevailing party, reasonable
attorneys' fees and costs incurred by the parties shall be allocated between
them by the arbitrator.

9. MISCELLANEOUS.

(a) AMENDMENTS, WAIVERS, ETC. No provision of this Agreement may
be modified, waived or discharged unless such waiver, modification or discharge
is agreed to in writing by both parties hereto. No waiver by any party hereto
at any time of any breach by the other party hereto of, or of compliance with,
any condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by any party which are not expressly set forth in this Agreement
and this Agreement shall supersede all prior agreements, negotiations,
correspondence, undertakings and communications of the parties, oral or written,
with respect to the subject matter hereof and shall supercede all prior
agreements, negotiations, correspondence, undertakings and communications, oral
or written, with respect to your employment and/or consulting arrangement with
AquaPenn prior to the Effective Date.

(c) COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

(d) INDEPENDENT CONTRACTOR STATUS. The parties hereto acknowledge
and agree that you will be an independent contractor and not an employee of the
Company and that the amounts paid to you hereunder are not subject to federal,
state or local tax withholdings. You will be responsible for all taxes incurred
by you as a result of the consulting arrangement.

(e) HEADINGS. The headings contained in this Agreement are
intended solely for convenience of reference and shall not affect the rights of
the parties to this Agreement.

<PAGE>
7

If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter, which
will then constitute our agreement on this subject.

Sincerely,

GREAT BRANDS OF EUROPE, INC.

By: /s/ Mark S. Rodriguez
-----------------------------
Name: Mark S. Rodriguez
Title: Chief Executive Officer

UNDERSTOOD, ACCEPTED
AND AGREED:

/s/ Matthew Suhey
- -----------------------------
Matthew Suhey

<PAGE>

REGISTRATION RIGHTS AGREEMENT

REGISTRATION RIGHTS AGREEMENT dated November 2, 1998 (this
"AGREEMENT") among AquaPenn Spring Water Company, Inc., a Pennsylvania
corporation (the "COMPANY"), Groupe Danone, a French societe anonyme (the
"PARENT"), and Zoneo Acquisition Corp., a Pennsylvania corporation and an
indirect wholly owned subsidiary of the Parent (the "PURCHASER").

WHEREAS, the Purchaser, the Parent, and the Company have, on the date
hereof, entered into an Agreement and Plan of Merger pursuant to which the
Purchaser will acquire the Company on the terms and subject to the conditions
set forth therein (the "MERGER AGREEMENT");

WHEREAS, in furtherance of such acquisition, the Purchaser will make a
cash tender offer to acquire all the issued and outstanding shares of common
stock, no par value, of the Company ("COMMON STOCK"), and, if all the conditions
to such offer are not satisfied or waived, may, at its option and in accordance
with Section 1.01 of the Merger Agreement, acquire shares of Common Stock
constituting up to 19.9% of the issued and outstanding shares of Common Stock
(the "OFFER SHARES");

WHEREAS, the Purchaser, the Parent and certain shareholders of the
Company have on the date hereof entered into Shareholders' Agreements pursuant
to which, under certain circumstances, among other things, such shareholders
have granted to the Purchaser an option to acquire their shares of Common Stock
constituting, together with any Offer Shares, not more than 19.9% of the issued
and outstanding shares of Common Stock (the "OPTION SHARES", and, together with
the Offer Shares, the "SHARES");

WHEREAS, as a condition to the willingness of the Parent and the
Purchaser to enter into the Merger Agreement, the Parent and the Purchaser have
requested that the Company agree, and, in order to induce the Parent and the
Purchaser to enter into the Merger Agreement the Company has agreed, to grant
the Purchaser the registration rights with respect to the Shares set forth
herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:

1. CERTAIN DEFINITIONS. The following terms, as used herein, have
the following meanings:

"AFFILIATE" of a specified person means a person who directly or
indirectly through one or more intermediaries controls, is controlled by,
or is under common control with, such specified person.

<PAGE>
2

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute, as the same shall be in effect at the time.

"HOLDER" means the Purchaser or any assignee thereof to whom the
rights under this Agreement are assigned in accordance with the provisions
of Section 13.

"PERSON" means an individual, corporation, partnership, limited
partnership, syndicate, person (including, without limitation, a "person"
as defined in Section 13(d)(3) of the Exchange Act), trust, association or
entity or government, political subdivision, agency or instrumentality of a
government.

"REGISTER," "REGISTERED" and "REGISTRATION" refer to a registration
effected by preparing and filing a registration statement or similar
document in compliance with the Securities Act and the declaration or
ordering of effectiveness of such registration statement or document.

<PAGE>
3

"REGISTRABLE STOCK" means (a) the Shares, (b) any shares of Common
Stock issued as (or issuable upon the conversion or exercise of any
warrant, right, option or other convertible security which is issued) a
dividend or other distribution with respect to, or in exchange for, or in
replacement of, the Shares, and (c) any shares of Common Stock issued by
way of a stock split of the Common Stock referred to in clause (a) or (b)
above. For purposes of this Agreement, any Registrable Stock shall cease
to be Registrable Stock when (1) a registration statement covering such
Registrable Stock has been declared effective and the earlier to occur of
(x) such Registrable Stock having been disposed of pursuant to such
effective registration statement, and (y) the date that is six months after
such effective date; (2) such Registrable Stock is sold by a Person in a
transaction in which the rights under the provisions of this Agreement are
not assigned or (3) such Registrable Stock can be sold pursuant to
Rule 144(k) (or any similar provision then in force under the Securities
Act) without registration under the Securities Act.

"SEC" means the Securities and Exchange Commission.

"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar federal statute, as the same shall be in effect at the time.

2. NOTICE OF PROPOSED TRANSFER. Prior to any proposed transfer of
any Registrable Stock (other than under the circumstances described in Section 3
or 4), the Holder thereof shall have given written notice to the Company of its
intention to effect such transfer. Each such notice shall describe the manner
of the proposed transfer and, if requested by the Company, shall be accompanied
by an opinion of counsel reasonably satisfactory to the Company to the effect
that the proposed transfer may be effected without registration under the
Securities Act, whereupon the Holder of such stock shall be entitled to transfer
such stock in accordance with the terms of its notice. Each certificate for
Registrable Stock transferred as provided above shall bear the following
legends:

"THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED BY AN AGREEMENT ON FILE AT THE OFFICES OF THE CORPORATION."

"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF
ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN APPLICABLE

<PAGE>
4

EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS."

Such certificate, however, shall not be required to bear the above
legends if (i) such transfer is in accordance with the provisions of Rule 144
(or any other rule permitting public sale without registration under the
Securities Act) or (ii) the opinion of counsel referred to above is to the
further effect that the transferee and any subsequent transferee (other than an
Affiliate of the Company) would be entitled to transfer such securities in a
public sale without registration under the Securities Act.

3. DEMAND FOR REGISTRATION.

(a) At any time after the Holders acquire the Shares, the Holders
(the "INITIATING HOLDERS") of at least 20% of the Registrable Stock (the
"MINIMUM DEMAND AMOUNT") may demand in a written notice (the "DEMAND
NOTICE") that the Company file a registration statement under the
Securities Act (or a similar document pursuant to any other statute then in
effect corresponding to the Securities Act) covering the registration of
any or all Registrable Stock held by such Initiating Holders in the manner
specified in the Demand Notice, PROVIDED that the amount of Registrable
Stock included in such registration shall be equal to at least the Minimum
Demand Amount. Following receipt of a Demand Notice, the Company shall
provide written notification of such Demand Notice to all other Holders
within twenty (20) days of the receipt thereof. Thereafter, the Company
shall use its reasonable best efforts to cause the prompt registration
under the Securities Act of all Registrable Stock with respect to which
registration has been demanded pursuant to the Demand Notice. The Company
shall also use its reasonable best efforts to cause the prompt registration
under the Securities Act of all Registrable Stock with respect to which all
other Holders have made a demand for registration (such demand having been
made no later than fifteen (15) days after the Company has given notice of
its receipt of the Demand Notice from the Initiating Holders).

(b) If the Initiating Holders intend to have the Registrable Stock
distributed by means of an underwritten offering, the Company shall include
such information in the written notice to all other Holders referred to in
Section 3(a). In such event, the right of any Holder to include its
Registrable Stock in such registration shall be conditioned upon such
Holder's participation in such underwritten offering and the inclusion of
such Holder's Registrable Stock in the underwritten offering (unless
otherwise mutually agreed upon by a majority in interest of the Initiating
Holders and such Holder) on the terms provided below. All Holders
proposing to distribute Registrable Stock through such underwritten
offering shall enter into an underwriting agreement in customary form with
the underwriter or underwriters. Such underwriter or

<PAGE>
5

underwriters shall be selected by a majority in interest of the Initiating
Holders and shall be approved by the Company, which approval shall not be
unreasonably withheld, PROVIDED that (i) all of the representations and
warranties by, and the other agreements on the part of, the Company to and
for the benefit of such underwriters shall also be made to and for the
benefit of such Holders of Registrable Stock, (ii) any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement shall be conditions precedent to the obligations of
such Holders of Registrable Stock, and (iii) no Holder shall be required to
make any representations or warranties to or agreements with the Company or
the underwriters other than representations, warranties or agreements
regarding such Holder, the Registrable Stock of such Holder and such
Holder's intended method of distribution and any other representations
required by law or reasonably required by the underwriter. If any Holder
of Registrable Stock disapproves of the terms of the underwriting, such
Holder may elect to withdraw all its Registrable Stock by written notice to
the Company, the managing underwriter and the Initiating Holders. The
Registrable Stock so withdrawn shall also be withdrawn from registration.
If, as a result of such withdrawal, the amount of Registrable Stock to be
included in the offering is less than the Minimum Demand Amount, the
Company shall not be required to proceed with such offering.

(i) the Company shall not be required to effect a registration
pursuant to this Section 3 during the period starting with
the date of filing by the Company of, and ending on a date
one hundred twenty (120) days following the effective date
of, a registration statement pertaining to a public offering
of securities for the account of the Company or on behalf of
the Holders under any other registration rights agreement
which the Holders have been entitled to join pursuant to
Section 4; PROVIDED that the Company shall actively employ
in good faith all reasonable efforts to cause such
registration statement to become effective as soon as
possible; and

(ii) if the Company shall furnish to such Holders a certificate
signed by the president of the Company stating that in the
good faith opinion of the board of directors of the Company
such registration would interfere with any material
transaction then being pursued by the Company (a "DELAY
NOTICE"), then the Company's obligation to use its
reasonable best efforts to file such registration statement
shall be deferred for a period not to exceed one hundred and
twenty (120) days (the "DELAY PERIOD");

<PAGE>
6

PROVIDED that (i) any Delay Period shall earlier terminate
upon public disclosure of any such material transaction and
(ii) in no event may the Company furnish more than one Delay
Notice to the Holders during any twelve (12) month period.

(d) The Company shall not be obligated to effect and pay for more
than two registrations pursuant to this Section 3; PROVIDED that a
registration demanded pursuant to this Section 3 shall not be deemed to
have been effected for purposes of this Section 3(d) unless (i) it has been
declared effective by the SEC, (ii) it has remained effective for the
period set forth in Section 6(a) and (iii) the offering of Registrable
Stock pursuant to such registration is not subject to any stop order,
injunction or other order or requirement of the SEC (other than any such
stop order, injunction, or other requirement of the SEC prompted by any act
or omission of Holders of Registrable Stock).

4. PIGGYBACK REGISTRATION. Subject to Section 9, if at any time the
Company determines that it shall file a registration statement under the
Securities Act (other than a registration statement on a Form S-4 or S-8 or
filed in connection with an exchange offer or an offering of securities solely
to the Company's existing shareholders) on any form that would also permit the
registration of the Registrable Stock and such filing is to be on its behalf
and/or on behalf of selling holders of its securities for the general
registration of its Common Stock to be sold for cash, the Company shall each
such time promptly give each Holder written notice of such determination setting
forth the date on which the Company proposes to file such registration
statement, which date shall be no earlier than fifteen (15) days from the date
of such notice, and advising each Holder of its right to have Registrable Stock
included in such registration. Upon the written request of any Holder received
by the Company no later than ten (10) days after the date of receipt of the
Company's notice, the Company shall use its reasonable efforts to cause to be
registered under the Securities Act all of the Registrable Stock that each such
Holder has so requested to be registered. If, in the opinion of the managing
underwriter (or, in the case of a non-underwritten offering, in the opinion of
the Company), the total amount of such securities to be so registered, including
such Registrable Stock, will exceed the maximum amount of the Company's
securities which can be marketed (a) at a price reasonably related to the then
current market value of such securities, or (b) without otherwise materially and
adversely affecting the entire offering, then the Company shall be entitled
either (i) to reduce the number of shares of Registrable Stock to be registered
or (ii) to elect not to register any shares of Registrable Stock in such
offering. Any reduction made pursuant to the immediately preceding sentence
shall be allocated among all such Holders in proportion (as nearly as
practicable) to the amount of Registrable Stock owned by each Holder at the time
of filing the registration statement.

<PAGE>
7

5. REGISTRATION ON FORM S-3. If at any time (i) any Holder of
Registrable Stock requests in writing that the Company file a registration
statement on Form S-3 or any successor thereto for a public offering of all or
any portion of the Registrable Stock held by such requesting Holder, the
reasonably anticipated aggregate price to the public of which would exceed
$1,000,000, and (ii) the Company is a registrant entitled to use Form S-3 or any
successor thereto to register such shares, then the Company shall use its
reasonable best efforts to register under the Securities Act on Form S-3 or any
successor thereto, for public sale in accordance with the method of disposition
specified in such request, the number of shares of Registrable Stock specified
in such request. Whenever the Company is required by this Section 5 to use its
reasonable best efforts to effect the registration of Registrable Stock, each of
the procedures and requirements of Section 3(b), (c) and (d) shall apply to such
registration.

6. OBLIGATIONS OF THE COMPANY. Whenever required under Section 3 to
use its reasonable efforts to effect the registration of any Registrable Stock,
the Company shall, as expeditiously as is reasonably possible:

(a) prepare and file with the SEC a registration statement signed,
pursuant to Section 6(a) of the Securities Act, by the officers and
directors of the Company with respect to such Registrable Stock and use its
reasonable best efforts to cause such registration statement to become and
remain effective for the period of the distribution contemplated thereby,
to be determined as hereinafter provided;

(b) prepare and file with the SEC such amendments and supplements to
such registration statement signed, pursuant to Section 6(a) of the
Securities Act, by the officers and directors of the Company and the
prospectus used in connection therewith as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of all
Registrable Stock covered by such registration statement;

(c) furnish to the Holders such numbers of copies of the registration
statement and the prospectus included therein (including each preliminary
prospectus and any amendments or supplements thereto in conformity with the
requirements of the Securities Act) and such other documents and
information as they may reasonably request;

(d) use its reasonable best efforts to register or qualify the
Registrable Stock covered by such registration statement under such other
securities or blue sky laws of such jurisdiction within the United States
and Puerto Rico as shall be reasonably appropriate for the distribution of
the Registrable Stock covered by the registration statement; PROVIDED,
HOWEVER, that the Company shall not be required in connection therewith or
as a condition thereto to qualify to do business in or to file a general
consent to service of process in any jurisdiction wherein it would not but
for the requirements of this paragraph (d) be obligated to do so; and
PROVIDED, FURTHER, that the

<PAGE>
8

Company shall not be required to qualify such Registrable Stock in any
jurisdiction in which the securities regulatory authority requires that any
Holder submit any shares of its Registrable Stock to the terms, provisions
and restrictions of any escrow, lockup or similar agreement(s) for consent
to sell Registrable Stock in such jurisdiction unless such Holder agrees to
do so;

(e) promptly notify each Holder for whom such Registrable Stock is
covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of
the happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made, and at
the request of any such Holder promptly prepare and furnish, subject to
Section 3(c), to such Holder a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under which
they were made;

(f) furnish, at the request of any Holder demanding registration of
Registrable Stock pursuant to Section 3, if the method of distribution is
by means of an underwriting, on the date that the shares of Registrable
Stock are delivered to the underwriters for sale pursuant to such
registration, or if such Registrable Stock is not being sold through
underwriters, on the date that the registration statement with respect to
such shares of Registrable Stock becomes effective, (i) a signed opinion,
dated such date, of the independent legal counsel representing the Company
for the purpose of such registration, addressed to the underwriters, if
any, and if such Registrable Stock is not being sold through underwriters,
then to the Holders making such request, as to such matters as such
underwriters or the Holders holding a majority of the Registrable Stock
included in such registration, as the case may be, may reasonably request
and as would be customary in such a transaction; and (ii) letters dated
such date and the date the offering is priced from the independent
certified public accountants of the Company, addressed to the underwriters,
if any, and if such Registrable Stock is not being sold through
underwriters, then to the Holders making such request and, if such
accountants refuse to deliver such letters to such Holders, then to the
Company (A) stating that they are independent certified public accountants
within the meaning of the Securities Act and that, in the opinion of such
accountants, the financial statements and other financial data of the
Company included in the registration statement or the prospectus, or any
amendment or supplement thereto, comply as to form in all material respects
with the applicable accounting requirements of the Securities Act and

<PAGE>
9

(B) covering such other financial matters (including information as to the
period ending not more than five (5) business days prior to the date of
such letters) with respect to the registration in respect of which such
letter is being given as such underwriters or the Holders holding a
majority of the Registrable Stock included in such registration, as the
case may be, may reasonably request and as would be customary in such a
transaction;

(g) enter into customary agreements (including, if the method of
distribution is by means of an underwriting, an underwriting agreement in
customary form) and take such other actions as are reasonably required in
order to expedite or facilitate the disposition of the Registrable Stock to
be so included in the registration statement;

(h) otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, but not later than
eighteen (18) months after the effective date of the registration
statement, an earnings statement which satisfies the provisions of
Section 11(a) of the Securities Act; and

(i) provide reasonable cooperation to the selling Holders of
Registrable Stock and the managing or sole underwriter, if any, to
facilitate the timely preparation and delivery of certificates representing
Registrable Stock to be sold, which certificates shall not bear any
restrictive legends and shall be in a form eligible for deposit with The
Depository Trust Registrant; and enable such Registrable Stock to be in
such denominations and registered in such names as the managing or sole
underwriter, if any, or Holders may reasonably request in writing at least
two business days prior to any sale of Registrable Stock in a firm
commitment underwritten public offering, or at least ten business days
prior to any other such sale.

For purposes of Sections 6(a) and 6(b), the period of distribution of
Registrable Stock in a firm commitment underwritten public offering shall be
deemed to extend until each underwriter has completed the distribution of all
securities purchased by it, and the period of distribution of Registrable Stock
in any other registration shall be deemed to extend until the earlier of the
sale of all Registrable Stock covered thereby and six (6) months after the
effective date thereof.

7. FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement that
the Holders shall furnish to the Company such information regarding themselves,
the Registrable Stock held by them, and the intended method of disposition of
such securities as the Company shall reasonably request and as shall be required
in connection with the action to be taken by the Company.

<PAGE>
10

8. EXPENSES OF REGISTRATION. All expenses incurred in connection
with each registration pursuant to Section 3, Section 4 and Section 5 of this
Agreement, excluding underwriters' discounts and commissions, but including
without limitation all registration, filing and qualification fees, word
processing, duplicating, printers' and accounting fees (including the expenses
of any special audits or "cold comfort" letters required by or incident to such
performance and compliance), fees of the New York Stock Exchange or listing
fees, messenger and delivery expenses, all fees and expenses of complying with
state securities or blue sky laws, fees and disbursements of counsel for the
Company, and the fees and disbursements of one counsel for the selling Holders
(which counsel shall be selected by the Holders holding a majority in interest
of the Registrable Stock being registered), shall be shared equally by the
Company, on the one hand, and the selling Holders, on the other hand; PROVIDED,
HOWEVER, that if a registration request pursuant to Section 3 of this Agreement
is subsequently withdrawn at the request of the Holders of a number of shares of
Registrable Stock such that the remaining Holders requesting registration would
not have been able to request registration under the provisions of Section 3 or
Section 5 of this Agreement, such withdrawing Holders shall bear such expenses.
The Holders shall bear and pay the underwriting commissions and discounts
applicable to securities offered for their account in connection with any
registrations, filings and qualifications made pursuant to this Agreement.

9. UNDERWRITING REQUIREMENTS. In connection with any underwritten
offering, the Company shall not be required under Section 4 to include shares of
Registrable Stock in such underwritten offering unless the Holders of such
shares of Registrable Stock accept the terms of the underwriting of such
offering that have been reasonably agreed upon between the Company and the
underwriters selected by the Company; PROVIDED, HOWEVER, that in no event shall
any Holder be required to make the representations and warranties to, or
agreements with, the Company and its representatives other than as contemplated
by Section 3(b)(iii).

10. RULE 144 INFORMATION. With a view to making available the
benefits of certain rules and regulations of the SEC which may at any time
permit the sale of the Registrable Stock to the public without registration,
(a) at all times after ninety (90) days after any registration statement
covering a public offering of securities of the Company under the Securities Act
shall have become effective, the Company agrees to:

(i) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;

(ii) use its best efforts to file with the SEC in a timely manner all
reports and other documents required of the Company under the Securities
Act and the Exchange Act; and

<PAGE>
11

(iii) furnish to each Holder of Registrable Stock forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of such Rule 144 and of the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed by the Company as
such Holder may reasonably request in availing itself of any rule or
regulation of the SEC allowing such Holder to sell any Registrable Stock
without registration; and

(b) at all times during which the Company is neither subject to the
reporting requirements of Section 13 nor 15(d) of the Exchange Act, it will
provide, upon the written request of any Holder of Registrable Stock in written
form (as promptly as practicable and in any event within 15 business days), to
any prospective buyer of such stock designated by such Holder, all information
required by Rule 144A(d)(4)(i) of the General Regulations promulgated by the SEC
under the Securities Act. Upon written request of any Holder and if the
Registrable Stock shall cease to be listed on the New York Stock Exchange, the
Company will cooperate with and assist any Holder of Registrable Stock or any
member of the National Association of Securities Dealers, Inc. system for
Private Offerings Resales and Trading through Automated Linkage ("PORTAL") in
applying to designate and thereafter maintain the eligibility of the Registrable
Stock for trading through PORTAL.

11. INDEMNIFICATION. In the event any Registrable Stock is included
in a registration statement under this Agreement:

(a) The Company shall indemnify and hold harmless each Holder, such
Holder's directors and officers, each Person who participates in the
offering of such Registrable Stock, including underwriters (as defined in
the Securities Act), and each Person, if any, who controls such Holder or
participating Person within the meaning of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, to which they may
become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or proceedings in respect thereof)
arise out of or are based on any untrue or alleged untrue statement of any
material fact contained in such registration statement on the effective
date thereof (including any prospectus filed under Rule 424 under the
Securities Act or any amendments or supplements thereto) or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and shall reimburse each such Holder, such Holder's
directors and officers, such participating person or controlling person for
any legal or other expenses reasonably incurred by them (but not in excess
of expenses incurred in respect of one counsel for all of them unless, in
the reasonable judgment of an indemnified party there is a conflict of
interest with another indemnified party, in which case the indemnified
parties may be represented by separate counsel) in connection with

<PAGE>
12

investigating or defending any such loss, claim, damage, liability or
action; PROVIDED, HOWEVER, that the indemnity agreement contained in this
Section 11(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld); PROVIDED FURTHER, that the Company shall not be liable to any
Holder, such Holder's directors and officers, participating Person or
controlling Person in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
omission made in connection with such registration statement, preliminary
prospectus, final prospectus or amendments or supplements thereto, in
reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any such Holder,
such Holder's directors and officers, participating Person or controlling
Person or in the event that such Holder shall have failed to deliver, or
caused to be delivered, a final prospectus and any supplements thereto
(provided that such Holder shall have been obligated or shall have assumed
an obligation to so deliver, or caused to be delivered, such prospectus or
supplement). Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of any such Holder,
such Holder's directors and officers, participating Person or controlling
Person, and shall survive the transfer of such securities by such Holder.

(b) The Holders demanding or joining in a registration severally and
not jointly shall indemnify and hold harmless the Company, each of its
directors and officers, each Person, if any, who controls the Company
within the meaning of the Securities Act, and each agent and any
underwriter for the Company (within the meaning of the Securities Act)
against any losses, claims, damages or liabilities, joint or several, to
which the Company or any such director, officer, controlling Person, agent
or underwriter may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or proceedings in
respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in such
registration statement on the effective date thereof (including any
prospectus filed under Rule 424 under the Securities Act or any amendments
or supplements thereto) or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in such
registration statement, preliminary or final prospectus, or amendments or
supplements thereto, in reliance upon and in conformity with written
information furnished by or on behalf of such Holder expressly for use in
connection with such registration or due to Holder's failure to deliver a
prospectus and any supplements thereto (provided that Holder shall have
been obligated or assumed an

<PAGE>
13

obligation to do so); and each such Holder shall reimburse any legal or
other expenses reasonably incurred by the Company or any such director,
officer, controlling Person, agent or underwriter (but not in excess of
expenses incurred in respect of one counsel for all of them unless, in the
reasonable judgment of an indemnified party, there is a conflict of
interest with another indemnified party, in which case the indemnified
parties may be represented by separate counsel) in connection with
investigating or defending any such loss, claim, damage, liability or
action; PROVIDED, HOWEVER, that the indemnity agreement contained in this
Section 11(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected
without the consent of such Holder (which consent shall not be unreasonably
withheld), and PROVIDED, FURTHER, that the liability of each Holder
hereunder shall be limited to the proportion of any such loss, claim,
damage, liability or expense which is equal to the proportion that the net
proceeds from the sale of the shares sold by such Holder under such
registration statement bears to the total net proceeds from the sale of all
securities sold thereunder, but not in any event to exceed the net proceeds
received by such Holder from the sale of Registrable Stock covered by such
registration statement.

(c) Promptly after receipt by an indemnified party under this Section
11(c) of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against any indemnifying
party under this Section, notify the indemnifying party in writing of the
commencement thereof and the indemnifying party shall have the right to
participate in and assume the defense thereof with counsel selected by the
indemnifying party and reasonably satisfactory to the indemnified party;
PROVIDED, HOWEVER, that an indemnified party shall have the right to retain
its own counsel, with all fees and expenses thereof to be paid by such
indemnified party (except as provided in paragraph (a) and (b) above), and
to be apprised of all progress in any proceeding the defense of which has
been assumed by the indemnifying party. The failure to notify an
indemnifying party promptly of the commencement of any such action shall
only release the indemnifying party from any of its obligations under this
Section 11 if, and only to the extent that, such indemnifying party is
materially prejudiced by such failure, but the omission to so notify the
indemnifying party will not relieve it of any liability that it may have to
any indemnified party otherwise than under this Section.

(d) To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims,
damages or liabilities in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified party in
connection with the actions which resulted in such losses, claims, damages
or

<PAGE>
14

liabilities, as well as any other relevant equitable considerations. The
relative fault of such indemnifying party and indemnified party shall be
determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of material fact
or omission or alleged omission to state a material fact, has been made by,
or relates to information supplied by, such indemnifying party or
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount
paid or payable by a party as a result of the losses, claims, damages or
liabilities referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding.

The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 11(d) were determined by pro rata
allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.

12. LIMITATION ON REGISTRATION RIGHTS. Notwithstanding any other
provisions of this Agreement to the contrary, the Company shall not be required
to register any Registrable Stock under this Agreement with respect to any
demand or demands made by any Holder after the fifth anniversary of the date of
this Agreement.

13. ASSIGNMENT OF REGISTRATION RIGHTS. The registration rights of
any Holder under this Agreement with respect to any Registrable Stock may be
assigned to an Affiliate of such Holder; PROVIDED, HOWEVER, that (a) the
assigning Holder shall give the Company written notice at or prior to the time
of such assignment stating the name and address of the assignee and identifying
the securities with respect to which the rights under this Agreement are being
assigned; (b) such assignee shall agree in writing, in form and substance
reasonably satisfactory to the Company, to be bound as a Holder by the
provisions of this Agreement; and (c) immediately following such assignment the
further disposition of such securities by such assignee is restricted under the
Securities Act. No assignment of the registration rights of any Holder with
respect to any Registrable Stock in accordance with this Section 13 shall cause
such Registrable Stock to lose such status.

14. BINDING EFFECT; BENEFIT. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement, expressed or
implied, is intended to confer on any Person other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.

<PAGE>
15

15. GOVERNING LAW; JURISDICTION AND SERVICE OF PROCESS. This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of New York, regardless of the laws that might otherwise govern under
applicable conflicts of laws. All actions and proceedings arising out of or
relating to this Agreement shall be heard and determined in and New York state
or federal court sitting in the City of New York.

16. COUNTERPARTS. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.

17. HEADINGS. The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.

18. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy upon written confirmation of receipt by the recipient, telegram or
telex or by registered or certified mail (postage prepaid, return receipt
requested) or overnight delivery to the respective parties at the following
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 18):

if to the Company:

AquaPenn Spring Water Company, Inc.
One AquaPenn Drive
P.O. Box 938
Milesburg, PA 16853-0938
Telecopier: (814) 353-9108
Attention: Geoffrey F. Feidelberg

<PAGE>
16

with a copy to:

Ballard, Spahr Andrews & Ingersoll
1735 Market Street (51st Floor)
Philadelphia, Pennsylvania 19103-7599
Telecopier: (215) 864-8999
Attention: Brian D. Doerner, Esq.

if to the Parent or the Purchaser:

Groupe Danone
7, rue de Teheran
75381 Paris Cedex 08 France
Telecopier: 33 1 44 35 20 97
Attention: Emmanuel Faber

with a copy to:

Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Telecopier: (212) 848-7179
Attention: Clare O'Brien, Esq.

19. AMENDMENTS AND WAIVERS. Any provision of this Agreement may be
amended or waived if such amendment or waiver is in writing and is signed, in
the case of an amendment, by each party to this Agreement, or in the case of a
waiver, by the party against whom the waiver is to be effective. No failure or
delay by any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.

20. SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions set forth in this Agreement is not affected in any manner
materially adverse to any party hereto. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions set

<PAGE>
17

forth in this Agreement be consummated as originally contemplated to the fullest
extent possible.

20. ENTIRE AGREEMENT. This Agreement (including the schedule hereto)
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all prior agreements and understandings among the
parties with respect thereto.

<PAGE>

IN WITNESS WHEREOF, the Parent, the Purchaser and the Company have
caused this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.

GROUPE DANONE

By /s/ Emmanuel Faber
--------------------------------
Name: Emmanuel Faber
Title: Director of Corporate Development

ZONEO ACQUISITION CORP.

By /s/ Mark S. Rodriguez
--------------------------------
Name: Mark S. Rodriguez
Title: Chief Executive Officer

AQUAPENN SPRING WATER COMPANY, INC.

By /s/ Edward J. Lauth, III
--------------------------------
Name: Edward J. Lauth, III
Title: Chairman, President and Chief
Executive Officer

<PAGE>

EXECUTION COPY

SHAREHOLDER AGREEMENT

SHAREHOLDER AGREEMENT, dated November 2, 1998, among GROUPE DANONE, a
French SOCIETE ANONYME (the "PARENT"), ZONEO ACQUISITION CORP., a Pennsylvania
corporation and an indirect wholly owned subsidiary of Parent (the "PURCHASER"),
and Edward J. Lauth (the "SHAREHOLDER").

WHEREAS, as of the date of this Agreement, Shareholder owns (either
beneficially or of record) the shares of common stock, no par value, of AquaPenn
Spring Water Company, Inc., a Pennsylvania corporation (the "COMPANY") set forth
on Exhibit A hereto (all such shares of the Company (the "SHARES") and any such
Shares hereafter acquired by Shareholder prior to the termination of this
Agreement being referred to herein as the "SHAREHOLDER'S SHARES");

WHEREAS, the Parent, the Purchaser and the Company propose to enter
into an Agreement and Plan of Merger, dated as of the date of this Agreement (as
the same may be amended from time to time, the "MERGER AGREEMENT"), which
provides, upon the terms and subject to the conditions thereof, for the
acquisition by Purchaser of all the outstanding Shares through either (a) (i) a
tender offer (the "OFFER") for any and all Shares for $13.00 per Share (such
amount, or any greater amount per Share paid pursuant to the Offer, being
hereinafter referred to as the "PER SHARE AMOUNT") net to the sellers in cash
and (ii) a second-step merger pursuant to which the Purchaser will merge with
and into the Company (the "MERGER") and all outstanding Shares other than the
Shares held by the Purchaser or the Parent (or any of their respective
affiliates) will be converted into the right to receive the Per Share Amount in
cash or (b) a merger pursuant to which, if approved by the holders of Shares in
accordance with the Pennsylvania Business Corporation Law of 1988, as amended
("PENNSYLVANIA LAW"), and the Articles of Incorporation of the Company, the
Purchaser will merge with and into the Company (the "LONG-FORM MERGER") and all
outstanding Shares other than the Shares held by the Purchaser or the Parent (or
any of their respective affiliates) will be converted into the right to receive
the Per Share Amount in cash, except with respect to the holders of Shares who
elect to exercise their dissenters' rights under Pennsylvania Law, who shall be
entitled to demand the right to receive the fair value of such Shares; and

WHEREAS, as a condition to the willingness of the Parent and the
Purchaser to enter into the Merger Agreement, the Parent and the Purchaser have
requested that the Shareholder agree, and, in order to induce the Parent and the
Purchaser to enter into the Merger Agreement, the Shareholder has agreed, to (i)
tender such Shareholder's Shares into the Offer, (ii) vote such Shareholder's
Shares in favor of the Long-Form Merger, if

<PAGE>
2

applicable, and (iii) grant the Purchaser an option to purchase such
Shareholder's Shares at the Per Share Amount, in each case upon the terms and
conditions set forth below;

NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants set forth herein and in the Merger Agreement, the
parties hereto agree as follows:

ARTICLE I

THE OFFER

SECTION 1.01. TENDER OF THE SHAREHOLDER'S SHARES PURSUANT TO THE
OFFER. The Shareholder agrees to tender and sell (and not withdraw prior to
termination or expiration of the Offer or the termination of the Merger
Agreement), pursuant to and in accordance with the terms of the Offer, as it may
be amended from time to time, all (but not less than all) the Shareholder's
Shares (provided that the consideration offered in any such amendment is in cash
and in an amount at least equal to the Per Share Amount). In the event the
Offer is not consummated or if the Offer price is not in cash or is less than
the Per Share Amount, the provisions of Article II shall apply.

ARTICLE II

THE OPTIONS

SECTION 2.01. GRANT OF OPTIONS. Shareholder hereby grants to the
Purchaser an irrevocable option ("OPTION") to purchase the Shareholder's Shares
at a price per Share equal to the Per Share Amount. The Option shall expire if
not exercised on the earlier of (i) the time the Merger or the Long-Form Merger
becomes effective and (ii) the close of business on the 30th day following
termination of the Merger Agreement.

SECTION 2.02. EXERCISE OF OPTION. Provided that (a) to the extent
necessary, any applicable waiting periods (and any extension thereof) under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder (the "HSR ACT") with respect to the
exercise of the Option shall have expired or been terminated, (b) no preliminary
or permanent injunction or other order, decree or ruling issued by any court or
governmental or regulatory authority, domestic or foreign, of competent
jurisdiction prohibiting the exercise of the Option or the delivery of Shares
shall be in effect, and (c) the number of Shares to be purchased by the
Purchaser pursuant to the exercise of the Option shall not cause the aggregate
number of Shares, including, without

<PAGE>
3

limitation, any Shares acquired by the Purchaser pursuant to (x) the third
sentence of Section 1.01 of the Merger Agreement and (y) the other Shareholder
Agreements (as defined in the Merger Agreement), to be held by the Purchaser
immediately following such exercise to exceed 19.9% of the then issued and
outstanding Shares, the Purchaser may exercise the Option at any time and from
time to time, with respect to all or part of the Shareholder's Shares, following
termination of the Merger Agreement until the expiration of such Option. In the
event that the Purchaser wishes to exercise the Option, the Purchaser shall give
written notice (the date of such notice being herein called the "NOTICE DATE"),
to the Shareholder specifying a place and date (not later than ten Business Days
(as defined below) and not earlier than two Business Days following the Notice
Date) for closing such purchase (the "CLOSING"). For the purposes of this
Agreement, the term "BUSINESS DAY" shall mean any day except (i) a Saturday, a
Sunday or (ii) a day on which national banks are required or authorized by law
or executive order to be closed in the City of New York.

SECTION 2.03. VESTED OPTIONS; WARRANTS. The Shareholder agrees to
exercise, upon written notice from the Purchaser, the Shareholder's vested
options in respect of the number of Shares granted under the Company's 1989
Stock Option Plan, 1992 Stock Option Plan, 1994 Incentive Option Plan and stock
option agreements with the Shareholder, each as amended (the "STOCK OPTION
PLANS") as may be specified in the Purchaser's written notice. In addition, the
Shareholder agrees to exercise, upon written notice from the Purchaser, the
Shareholder's warrant issued pursuant to the Warrant dated as of November 21,
1995, for the number of Shares as may be specified in the Purchaser's written
notice. All the Shareholder's Shares resulting from the exercise of such vested
options and such warrant automatically shall become subject to the Option which
may be exercised by the Purchaser pursuant to the terms of Section 2.02.
Nothing herein shall preclude the Shareholder from exercising the Shareholder's
vested options and warrant prior to receipt of notice from the Purchaser, and
the Shareholder's Shares resulting from such independent exercise automatically
shall become subject to the Option which may be exercised by Purchaser pursuant
to the terms of Section 2.02.

SECTION 2.04. PAYMENT FOR AND DELIVERY OF CERTIFICATES. At the
Closing, (a) the Purchaser shall pay the aggregate purchase price for the
Shareholder's Shares being purchased from the Shareholder by wire transfer in
immediately available funds to an account designated by the Shareholder by
written notice to Purchaser and (b) the Shareholder shall deliver to Purchaser a
certificate or certificates evidencing the Shareholder's Shares, and the
Shareholder agrees that such Shares shall be transferred free and clear of all
Liens (as defined below). All such certificates shall be duly endorsed in
blank, or with appropriate stock powers duly executed in blank attached thereto,
in proper form for transfer, with the signature of the Shareholder thereon
guaranteed, and with all applicable taxes paid or provided for.

<PAGE>
4

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF
SHAREHOLDER

The Shareholder hereby represents and warrants to the Parent and the
Purchaser as follows:

SECTION 3.01. DUE EXECUTION AND DELIVERY; ENFORCEABILITY. This
Agreement has been duly executed and delivered by the Shareholder and, assuming
its due authorization, execution and delivery by the Purchaser and the Parent,
constitutes a legal, valid and binding obligation of the Shareholder,
enforceable against the Shareholder in accordance with its terms.

SECTION 3.02. NO CONFLICTS; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of this Agreement by the Shareholder do not, and the
performance of this Agreement by the Shareholder will not, (i) conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to the
Shareholder or by which the Shareholder or any of the Shareholder's properties
is bound or affected, or (ii) result in any breach of or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the property or assets of the Shareholder pursuant to, any note, mortgage,
contract, agreement, lease, license, permit, or other instrument or obligation
to which the Shareholder is a party or by which the Shareholder or any of the
Shareholder's properties is bound or affected.

(b) The execution and delivery of this Agreement by the Shareholder
do not, and the performance of this Agreement by the Shareholder will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or foreign,
except (i) for applicable requirements, if any, of the Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder (the "EXCHANGE
ACT"), and the HSR Act and (ii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not prevent or delay the performance by the Shareholder of such
Shareholder's obligations under this Agreement.

SECTION 3.03. TITLE TO SHARES. At the Closing, the Shareholder will
deliver good and valid title to the Shareholder's Shares, free and clear of any
pledge, lien, security interest, charge, claim, equity, option, proxy, voting
restriction, right of first refusal or other limitation on disposition or
encumbrance of any kind ("LIENS"), other than pursuant to this Agreement. The
Shareholder has full right, power and authority to sell, transfer and deliver

<PAGE>
5

the Shareholder's Shares pursuant to this Agreement. Upon delivery of the
Shareholder's Shares and payment of the Purchase Price therefor as contemplated
herein, the Purchaser will receive good, valid, marketable and freely
transferable title to the Shareholder's Shares, free and clear of all Liens.
The Shareholder's Shares, including such Shareholder's options and warrants to
purchase Shares, are set forth on Exhibit A hereto and are all the securities of
the Company owned of record or beneficially by the Shareholder on the date of
this Agreement.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER AND THE PARENT

The Purchaser and the Parent hereby represent and warrant to the
Shareholder as follows:

SECTION 4.01. DUE ORGANIZATION, ETC. Each of the Purchaser and the
Parent is a corporation duly organized and validly existing under the laws of
the jurisdiction of its incorporation. Each of the Purchaser and the Parent has
all necessary corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby by the Purchaser and the Parent have been duly authorized by
all necessary corporate action on the part of the Purchaser and the Parent.
This Agreement has been duly executed and delivered by the Purchaser and the
Parent and, assuming its due authorization, execution and delivery by the
Shareholder, constitutes a legal, valid and binding obligation of the Purchaser
and the Parent, enforceable against the Purchaser and the Parent in accordance
with its terms.

SECTION 4.02. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of this Agreement by the Purchaser and the Parent do not,
and the performance of this Agreement by the Purchaser and the Parent will not,
(i) conflict with or violate the Articles of Incorporation or By-laws or
equivalent organizational documents of the Purchaser or the Parent,
(ii) conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to the Purchaser or the Parent or by which the Purchaser or
the Parent or any of their properties is bound or affected, or (iii) result in
any breach of or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the property or assets of the
Purchaser or the Parent pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Purchaser or the Parent is a party or by which they or
any of their properties is bound or affected.

<PAGE>
6

(b) The execution and delivery of this Agreement by the Purchaser and
the Parent do not, and the performance of this Agreement by the Purchaser and
the Parent will not, require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except (i) for applicable requirements, if any, of the
Exchange Act and the HSR Act and (ii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not prevent or delay the performance by the Purchaser or the Parent of
their obligations under this Agreement.

SECTION 4.03. INVESTMENT INTENT. The purchase of Shares from the
Shareholder pursuant to this Agreement is for the account of the Purchaser and
not with a view to the public distribution or resale thereof in any manner which
would be in violation of applicable United States securities laws.

ARTICLE V

TRANSFER AND VOTING OF SHARES

SECTION 5.01. TRANSFER OF SHARES. During the term of the Option, and
except as otherwise provided herein, the Shareholder shall not (a) sell, pledge,
hypothecate or otherwise dispose of any of the Shareholder's Shares, or any
options or warrants with respect thereto, (b) deposit the Shareholder's Shares,
or any options or warrants with respect thereto, into a voting trust or enter
into a voting agreement or arrangement with respect to the Shareholder's Shares
or grant any proxy with respect thereto or (c) enter into any contract, option
or other arrangement or undertaking with respect to the direct or indirect
acquisition or sale, assignment, transfer or other disposition of any
Shareholder's Shares.

SECTION 5.02. VOTING OF SHARES; FURTHER ASSURANCES. (a) The
Shareholder, by this Agreement, does hereby constitute and appoint the
Purchaser, or any nominee of the Purchaser, with full power of substitution,
during and for the term of the Option, as such Shareholder's true and lawful
attorney and proxy, for and in its name, place and stead, to vote each of the
Shareholder's Shares as such Shareholder's proxy, at every annual, special or
adjourned meeting of the shareholders of the Company (including the right to
sign its name (as shareholder) to any consent, certificate or other document
relating to the Company that Pennsylvania Law may permit or require) (i) in
favor of the adoption of the Merger Agreement and the Long-Form Merger, if
applicable, and the other transactions contemplated by the Merger Agreement,
(ii) against any proposal for any recapitalization, merger, sale of assets or
other business combination between the Company and any person or entity (other
than the Merger or the Long-Form Merger) or any other action or agreement that
would result

<PAGE>
7

in a breach of any covenant, representation or warranty or any other obligation
or agreement of the Company under the Merger Agreement or that could result in
any of the conditions to the Company's obligations under the Merger Agreement
not being fulfilled, and (iii) in favor of any other matter relating to
consummation of the transactions contemplated by the Merger Agreement. The
Shareholder further agrees to cause the Shareholder's Shares to be voted in
accordance with the foregoing. THIS PROXY AND POWER OF ATTORNEY IS IRREVOCABLE
AND COUPLED WITH AN INTEREST. The Shareholder acknowledges receipt and review
of a copy of the Merger Agreement.

(b) If the Purchaser shall exercise all or part of the Option in
accordance with the terms of this Agreement, and without additional
consideration, the Shareholder shall execute and deliver further transfers,
assignments, endorsements, consents and other instruments as the Purchaser may
reasonably request for the purpose of effectively carrying out the transactions
contemplated by this Agreement and the Merger Agreement, including the transfer
of any and all of the Shareholder's Shares to the Purchaser and the release of
any and all liens, claims and encumbrances covering the Shareholder's Shares.

(c) The Shareholder shall perform such further acts and execute such
further documents and instruments as may reasonably be required to vest in the
Purchaser and the Parent the power to carry out the provisions of this
Agreement, including, without limitation, causing all certificates representing
the Shareholder's Shares to bear, until the expiration of the Option granted
with respect to the Shareholder's Shares, in a conspicuous place the following
legend:

THE SHARES REPRESENTED BY THE WITHIN CERTIFICATE MAY NOT BE
SOLD, EXCHANGED OR OTHERWISE TRANSFERRED OR DISPOSED OF
EXCEPT IN COMPLIANCE WITH THE TERMS AND CONDITIONS OF THE
SHAREHOLDER AGREEMENT, DATED NOVEMBER 2, 1998, AMONG GROUPE
DANONE, ZONEO ACQUISITION CORP. AND THE REGISTERED HOLDER OF
THE WITHIN CERTIFICATE.

ARTICLE VI

GENERAL PROVISIONS

SECTION 6.01. NOTICES. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or

<PAGE>
8

by registered or certified mail (postage prepaid, return receipt requested) to
the respective parties at the following addresses (or at such other address for
a party as shall be specified in a notice given in accordance with this Section
6.01):

(a) If to Parent or Purchaser:

Groupe Danone
7, rue de Teheran
75008 Paris
France
Fax: 011-33-1-44-35-20-97
Attention: M. Emmanuel Faber

with a copy to:

Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Attention: Clare O'Brien, Esq.
Fax: (212) 848-7179

(b) If to the Shareholder:

c/o AquaPenn Spring Water Company, Inc.
One AquaPenn Drive/P.O. Box 938
Milesburg, Pennsylvania 16853
Fax: 814-353-9108
Attention: Mr. Edward J. Lauth

with a copy to:

Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street
51st Floor
Philadelphia, PA 19103-7599
Attention: Brian D. Doerner, Esq.
Fax: 215-864-8999

SECTION 6.02. HEADINGS. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.

<PAGE>
9

SECTION 6.03. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.

SECTION 6.04. ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement of the parties with respect to the subject matter hereof and
supersedes all prior agreements and undertakings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof.

SECTION 6.05. ASSIGNMENT. This Agreement shall not be assigned by
operation of law or otherwise, except that the Parent and the Purchaser may
assign any or all of their rights and obligations hereunder to any affiliate of
the Parent.

SECTION 6.06. PARTIES IN INTEREST. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any person
any right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.

SECTION 6.07. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.

SECTION 6.08. AMENDMENTS. This Agreement may not be amended except
by an instrument in writing signed by the Parent, the Purchaser and the
Shareholder.

SECTION 6.09. GOVERNING LAW; CONSENT TO JURISDICTION. Except to the
extent that Pennsylvania Law is mandatorily applicable to the voting of the
Shareholder's Shares and the related proxy, this Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York, regardless
of the laws that might otherwise govern under applicable principles of conflicts
of laws. All actions and proceedings arising out of or relating to this
Agreement shall be heard and determined in any New York State or federal court
sitting in the City of New York.

<PAGE>
10

SECTION 6.10. COUNTERPARTS. This Agreement may be executed in one 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
taken together shall constitute one and the same agreement.

IN WITNESS WHEREOF, the parties (with respect to the Parent and the
Purchaser, by duly authorized officers thereof) have executed this Agreement as
of the date first written above.

GROUPE DANONE

By /s/ Emmanuel Faber
--------------------------------
Name: Emmanuel Faber
Title: Director of Corporate Development

ZONEO ACQUISITION CORP.

By /s/ Mark S. Rodriguez
--------------------------------
Name: Mark S. Rodriguez
Title: Chief Executive Officer

/s/ Edward J. Lauth, III
-------------------------------------
By Edward J. Lauth III, in his individual
capacity

<PAGE>

EXECUTION COPY

SHAREHOLDER AGREEMENT

<PAGE>
2

applicable, and (iii) grant the Purchaser an option to purchase such
Shareholder's Shares at the Per Share Amount, in each case upon the terms and
conditions set forth below;

NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants set forth herein and in the Merger Agreement, the
parties hereto agree as follows:

ARTICLE I

THE OFFER

ARTICLE II

THE OPTIONS

<PAGE>
3

SECTION 2.03. VESTED OPTIONS; WARRANTS. (a) The Shareholder agrees
to exercise, upon written notice from the Purchaser, the Shareholder's vested
options in respect of the number of Shares granted under the Company's 1989
Stock Option Plan, 1992 Stock Option Plan, 1994 Incentive Option Plan and stock
option agreements with the Shareholder, each as amended (the "STOCK OPTION
PLANS") as may be specified in the Purchaser's written notice. All the
Shareholder's Shares resulting from the exercise of such vested options
automatically shall become subject to the Option which may be exercised by the
Purchaser pursuant to the terms of Section 2.02. Nothing herein shall preclude
the Shareholder from exercising the Shareholder's vested options prior to
receipt of notice from the Purchaser, and the Shareholder's Shares resulting
from such independent exercise automatically shall become subject to the Option
which may be exercised by Purchaser pursuant to the terms of Section 2.02.

(b) The Purchaser agrees that it will give the Shareholder the notice
referred to in Section 2.03(a) above only if the Purchaser agrees to promptly
thereafter purchase the Shares that thereby become subject to the Option.

<PAGE>
4

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF
SHAREHOLDER

The Shareholder hereby represents and warrants to the Parent and the
Purchaser as follows:

<PAGE>
5

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER AND THE PARENT

The Purchaser and the Parent hereby represent and warrant to the
Shareholder as follows:

<PAGE>
6

ARTICLE V

TRANSFER AND VOTING OF SHARES

<PAGE>
7

ARTICLE VI

GENERAL PROVISIONS

<PAGE>
8

(a) If to Parent or Purchaser:

Groupe Danone
7, rue de Teheran
75008 Paris
France
Fax: 011-33-1-44-35-20-97
Attention: M. Emmanuel Faber

with a copy to:

Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Attention: Clare O'Brien, Esq.
Fax: (212) 848-7179

(b) If to the Shareholder:

c/o AquaPenn Spring Water Company, Inc.
One AquaPenn Drive
P.O. Box 938
Milesburg, Pennsylvania 16853
Fax: 814-353-9108
Attention: Mr. Geoffrey F. Feidelberg

with a copy to:

Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street
51st Floor
Philadelphia, PA 19103-7599
Attention: Brian D. Doerner, Esq.
Fax: 215-864-8999

<PAGE>

SECTION 6.08. AMENDMENTS. This Agreement may not be amended except
by an instrument in writing signed by the Parent, the Purchaser and the
Shareholder.

<PAGE>
10

relating to this Agreement shall be heard and determined in any New York State
or federal court sitting in the City of New York.

IN WITNESS WHEREOF, the parties (with respect to the Parent and the
Purchaser, by duly authorized officers thereof) have executed this Agreement as
of the date first written above.

GROUPE DANONE

By /s/ Emmanuel Faber
--------------------------------
Name: Emmanuel Faber
Title: Director of Corporate Development

ZONEO ACQUISITION CORP.

By /s/ Mark S. Rodriguez
--------------------------------
Name: Mark S. Rodriguez
Title: Chief Executive Officer

/s/ Geoffrey F. Feidelberg
-------------------------------------
By Geoffrey F. Feidelberg, in his individual
capacity

<PAGE>
EXECUTION COPY

SHAREHOLDER AGREEMENT

NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants set forth herein and in the Merger Agreement, the
parties hereto agree as follows:

<PAGE>
2

ARTICLE I

THE OFFER

ARTICLE II

THE OPTIONS

<PAGE>
3

exceed 19.9% of the then issued and outstanding Shares, the Purchaser may
exercise the Option at any time and from time to time, with respect to all or
part of the Shareholder's Shares, following termination of the Merger Agreement
until the expiration of such Option. In the event that the Purchaser wishes to
exercise the Option, the Purchaser shall give written notice (the date of such
notice being herein called the "NOTICE DATE"), to the Shareholder specifying a
place and date (not later than ten Business Days (as defined below) and not
earlier than two Business Days following the Notice Date) for closing such
purchase (the "CLOSING"). For the purposes of this Agreement, the term
"BUSINESS DAY" shall mean any day except (i) a Saturday, a Sunday or (ii) a day
on which national banks are required or authorized by law or executive order to
be closed in the City of New York.

SECTION 2.03. VESTED OPTIONS. The Shareholder agrees to exercise,
upon written notice from the Purchaser, the Shareholder's vested options in
respect of the number of Shares granted under the Company's 1989 Stock Option
Plan, 1992 Stock Option Plan, 1994 Incentive Option Plan and stock option
agreements with the Shareholder, each as amended (the "STOCK OPTION PLANS") as
may be specified in the Purchaser's written notice. All the Shareholder's
Shares resulting from the exercise of such vested options automatically shall
become subject to the Option which may be exercised by the Purchaser pursuant to
the terms of Section 2.02. Nothing herein shall preclude the Shareholder from
exercising the Shareholder's vested options prior to receipt of notice from the
Purchaser, and the Shareholder's Shares resulting from such independent exercise
automatically shall become subject to the Option which may be exercised by
Purchaser pursuant to the terms of Section 2.02.

<PAGE>
4

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF
SHAREHOLDER

The Shareholder hereby represents and warrants to the Parent and the
Purchaser as follows:

<PAGE>
5

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER AND THE PARENT

The Purchaser and the Parent hereby represent and warrant to the
Shareholder as follows:

<PAGE>
6

ARTICLE V

TRANSFER AND VOTING OF SHARES

<PAGE>
7

ARTICLE VI

GENERAL PROVISIONS

<PAGE>
8

(a) If to Parent or Purchaser:

Groupe Danone
7, rue de Teheran
75008 Paris
France
Fax: 011-33-1-44-35-20-97
Attention: M. Emmanuel Faber

with a copy to:

Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Attention: Clare O'Brien, Esq.
Fax: (212) 848-7179

(b) If to the Shareholder:

c/o AquaPenn Spring Water Company, Inc.
One AquaPenn Drive/P.O. Box 938
Milesburg, Pennsylvania 16853
Fax: 814-353-9108
Attention: Mr. Matthew J. Suhey

with a copy to:

Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street
51st Floor
Philadelphia, PA 19103-7599
Attention: Brian D. Doerner, Esq.
Fax: 215-864-8999

<PAGE>
9

SECTION 6.08. AMENDMENTS. This Agreement may not be amended except
by an instrument in writing signed by the Parent, the Purchaser and the
Shareholder.

<PAGE>
10

IN WITNESS WHEREOF, the parties (with respect to the Parent and the
Purchaser, by duly authorized officers thereof) have executed this Agreement as
of the date first written above.

GROUPE DANONE

By /s/ Emmanuel Faber
--------------------------------
Name: Emmanuel Faber
Title: Director of Corporate Development

ZONEO ACQUISITION CORP.

By /s/ Mark S. Rodriguez
--------------------------------
Name: Mark S. Rodriguez
Title: Chief Executive Officer

/s/ Matthew J. Suhey
-------------------------------------
By Matthew J. Suhey, in his individual
capacity