<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
PROSOURCE, INC.
(Name of Issuer)
CLASS A COMMON STOCK
(Title of Class of Securities)
743479 10 7
(CUSIP Number)
ONEX CORPORATION
CANADA TRUST TOWER
161 BAY STREET - 49TH FLOOR
TORONTO, ONTARIO M5J 2S1 CANADA
ATTENTION: EWOUT R. HEERSINK
(416) 362-7711
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
COPIES TO:
JOEL I. GREENBERG, ESQ.
KAYE, SCHOLER, FIERMAN, HAYS & HANDLER, LLP
425 PARK AVENUE
NEW YORK, NEW YORK 10022
(212) 836-8000
NOVEMBER 15, 1996
(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Page 1 of 37 pages.
Exhibit Index on page 16.
<PAGE> 2
SCHEDULE 13D
<TABLE>
<S> <C>
- --------------------------------- -----------------------------------
CUSIP No. 743479 10 7 Page 2 of 37 Pages
----------------------- ------- -----
- --------------------------------- -----------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Onex DHC LLC
- -----------------------------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- -----------------------------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- -----------------------------------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- -----------------------------------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- -----------------------------------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Wyoming
- -----------------------------------------------------------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
- 0 -
SHARES -------------------------------------------------------------------------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY 5,072,000 shares of Class A Common Stock, including [i] 500,000 shares of Class A Common Stock
acquired on November 15, 1996, requiring filing of this Statement (the "Class A Shares"), and (ii) 4,572,000
OWNED BY shares of Class A Common Stock issuable upon conversion of Class B Common Stock of the Issuer; each share
of Class B Common Stock is presently convertible into a share of Class A Common Stock.
-------------------------------------------------------------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING - 0 -
-------------------------------------------------------------------------------------------------------------------
PERSON 10 SHARED DISPOSITIVE POWER
5,072,000 shares of Class A Common Stock, including [i] the 500,000 Class A Shares, and [ii] 4,572,000
WITH shares of Class A Common Stock issuable upon conversion of Class B Common Stock of the Issuer; each
share of Class B Common Stock is presently convertible into a share of Class A Common Stock.
- -----------------------------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,072,000 shares of Class A Common Stock, including [i] the 500,000 Class A Shares, and [ii] 4,572,000 shares of Class A
Common Stock issuable upon conversion of Class B Common Stock of the Issuer; each share of Class B
Common Stock is presently convertible into a share of Class A Common Stock.
- -----------------------------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
- -----------------------------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
63.6% of the Issuer's shares of Class A Common Stock, assuming conversion of all of the Reporting Person's shares of
Class B Common Stock into Class A Common Stock. 73.6% of the combined voting power of the Issuer's shares of Class A
Common Stock and Class B Common Stock; each share of Class A Common Stock is entitled to one vote and each share of
Class B Common Stock is entitled to ten votes.
- -----------------------------------------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
00
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*SEE INSTRUCTIONS BEFORE FILLING OUT
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
2 of 37
<PAGE> 3
Schedule 13D
<TABLE>
<S> <C>
- --------------------------------- -----------------------------------
CUSIP No. 743479 10 7 Page 3 of 37 Pages
----------------------- ------- -----
- --------------------------------- -----------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Onex Corporation
- -----------------------------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- -----------------------------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- -----------------------------------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
WC
- -----------------------------------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- -----------------------------------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Ontario, Canada
- -----------------------------------------------------------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
- 0 -
SHARES -------------------------------------------------------------------------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
5,736,956 shares of Class A Common Stock, including [i] the 500,000 Class A Shares, and [ii] 5,236,956
OWNED BY shares of Class A Common Stock issuable upon conversion of Class B Common Stock of the Issuer; each
share of Class B Common Stock is presently convertible into a share of Class A Common Stock.
-------------------------------------------------------------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING - 0 -
-------------------------------------------------------------------------------------------------------------------
PERSON 10 SHARED DISPOSITIVE POWER
WITH 5,736,956 shares of Class A Common Stock, including [i] the 500,000 Class A Shares, and [ii] 5,236,956
shares of Class A Common Stock issuable upon conversion of Class B Common Stock of the Issuer; each share
of Class B Common Stock is presently convertible into a share of Class A Common Stock.
- -----------------------------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,736,956 shares of Class A Common Stock, including [i] the 500,000 Class A Shares, and [ii] 5,236,956 shares of
Class A Common Stock issuable upon conversion of Class B Common Stock of the Issuer; each share of Class B
Common Stock is presently convertible into a share of Class A Common Stock.
- -----------------------------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
- -----------------------------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
66.4% of the Issuer's shares of Class A Common Stock, assuming conversion of all of the Reporting Person's
shares of Class B Common Stock into Class A Common Stock. 83.8% of the combined voting power of the Issuer's shares
of Class A Common Stock and Class B Common Stock; each share of Class A Common Stock is entitled to one vote and
each share of Class B Common Stock is entitled to ten votes.
- -----------------------------------------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*SEE INSTRUCTIONS BEFORE FILLING OUT
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
3 of 37
<PAGE> 4
SCHEDULE 13D
<TABLE>
<S> <C>
- --------------------------------- -----------------------------------
CUSIP No. 743479 10 7 Page 4 of 37 Pages
----------------------- ------- ------
- --------------------------------- -----------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Gerald W. Schwartz
- -----------------------------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- -----------------------------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- -----------------------------------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
WC
- -----------------------------------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- -----------------------------------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Ontario, Canada
- -----------------------------------------------------------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
- 0 -
SHARES -------------------------------------------------------------------------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
5,736,956 shares of Class A Common Stock, including [i] the 500,000 Class A Shares, and (ii) 5,236,956
OWNED BY shares of Class A Common Stock issuable upon conversion of Class B Common Stock of the Issuer; each
share of Class B Common Stock is presently convertible into a share of Class A Common Stock.
-------------------------------------------------------------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING - 0 -
-------------------------------------------------------------------------------------------------------------------
PERSON 10 SHARED DISPOSITIVE POWER
5,736,956 shares of Class A Common Stock, including [i] the 500,000 Class A Shares, and [ii] 5,236,956
WITH shares of Class A Common Stock issuable upon conversion of Class B Common Stock of the Issuer; each
share of Class B Common Stock is presently convertible into a share of Class A Common Stock.
- -----------------------------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,736,956 shares of Class A Common Stock, including (i) the 500,000 Class A Shares, and (ii) 5,236,956 shares of
Class A Common Stock issuable upon conversion of Class B Common Stock of the Issuer; each share of Class B
Common Stock is presently convertible into a share of Class A Common Stock.
- -----------------------------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
- -----------------------------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
66.4% of the Issuer's Class A Common Stock, assuming conversion of all of the Reporting Person's shares of
Class B Common Stock into Class A Common Stock. 83.8% of the combined voting power of the Issuer's shares of
Class A Common Stock and Class B Common Stock; each share of Class A Common Stock is entitled to one vote and
each share of Class B Common Stock is entitled to ten votes.
- -----------------------------------------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*SEE INSTRUCTIONS BEFORE FILLING OUT
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
4 of 37
<PAGE> 5
Item 1. Security and Issuer.
The securities to which this Statement on Schedule 13D relates
are the shares of Class A Common Stock, par value $.01 per share ("Class A
Common Stock"), of ProSource, Inc., a Delaware corporation (the "Issuer"). The
principal executive office of the Issuer is located at 550 Biltmore Avenue,
10th Floor, Coral Gables, Florida 33134.
Item 2. Identity and Background.
(a), (b), (c) and (f). This Statement on Schedule 13D is
being filed by Onex DHC LLC, a Wyoming limited liability company ("DHC"), Onex
Corporation, an Ontario, Canada corporation ("Onex"), and Mr. Gerald W.
Schwartz ("Mr. Schwartz"). DHC, Onex and Mr. Schwartz (together, the
"Reporting Persons") are filing the statement jointly, pursuant to the
provisions of Rule 13d-l(f)(l) under the Securities Exchange Act of 1934, as
amended, as separate persons and not as members of a group. See Exhibit 1 for
their Joint Filing Agreement.
DHC
DHC is a Wyoming limited liability company. DHC is a holding
company through which Onex holds certain interests in its businesses. The
address of the principal business and principal offices of DHC is 421 Leader
Street, Marion, Ohio 43302. Information relating to the directors and
executive officers of DHC is set forth on Schedule A hereto which is
incorporated herein by reference.
Onex
Onex is an Ontario, Canada corporation. It is a diversified
company that operates through autonomous subsidiaries, associated companies and
strategic partnerships. The address of the principal business and principal
offices of Onex is 161 Bay Street, P.O. Box 700, Toronto,
Page 5 of 37 pages.
<PAGE> 6
Ontario, CANADA M5J 2S1. Information relating to the directors and executive
officers of Onex is set forth on Schedule B hereto which is incorporated herein
by reference. Onex is the direct and indirect beneficial owner of approximately
99% of the equity of DHC.
Mr. Schwartz
The principal occupation of Mr. Schwartz is the Chairman of
the Board, President and Chief Executive Officer of Onex. The business address
of Mr. Schwartz is 161 Bay Street, P.O. Box 700, Toronto, Ontario, CANADA M5J
2S1. Mr. Schwartz is a citizen of Canada. Mr. Schwartz is the indirect
holder of all the issued and outstanding shares of Multiple Voting Shares of
Onex, ownership which entitles Mr. Schwartz to elect sixty percent (60%) of the
members of Onex's Board of Directors.
(d) and (e). No Reporting Person, nor to the best
knowledge of each Reporting Person, any of the persons identified in this Item
2 has, during the last five years, been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or was a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of which any such person was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
DHC purchased the 500,000 Class A Shares on November 15, 1996
for an aggregate purchase price of $7,000,000. DHC purchased 4,572,000 shares
of Class B Common Stock, par value $.01 per share ("Class B Common Stock"), of
the Issuer in several transactions between June 10, 1992 and February 1, 1996
for an aggregate purchase price of $45,720,000. Certain of such purchases were
effected through affiliates and the shares purchased subsequently transferred to
DHC. The source of funds for such purchases was the cash resources of DHC or
such affiliates. Onex acquired 379,242 shares of Class B Common Stock on
November 7, 1996 pursuant to conversion in full of approximately $3.8 million
in outstanding convertible indebtedness owed to it by the Issuer. OMI
Partnership Holdings, Ltd. ("OMI"), a
Page 6 of 37 pages.
<PAGE> 7
wholly-owned subsidiary of Onex, acquired 285,714 shares of Class B Common
Stock on November 15, 1996 for an aggregate purchase price of $4 million
representing consideration for the agreement of OMI to relinquish its right to
receive for an indefinite period an annual fee of approximately $800,000 for
management services rendered to the Issuer.
Item 4. Purpose of Transaction.
DHC acquired the Class A Shares for investment purposes. The
Reporting Persons may from time to time acquire additional shares of Class A
Common Stock or Class B Common Stock in the open market or in privately
negotiated transactions, subject to availability of such shares at prices
deemed favorable, the Issuer's business or financial condition and to other
factors and conditions the Reporting Persons deem appropriate. Alternatively,
the Reporting Persons may sell all or a portion of their shares of Class A
Common Stock or Class B Common Stock in the open market or in privately
negotiated transactions subject to the restrictions referred to in Item 6.
Except as set forth above in the immediately preceding
paragraph, no Reporting Person has any present plans or proposals that relate
to or would result in: (a) the acquisition by any person of additional
securities of the Issuer, or the disposition of securities of the Issuer; (b)
an extraordinary corporate transaction, such as a merger, reorganization or
liquidation, involving the Issuer or any of its subsidiaries; (c) a sale or
transfer of a material amount of assets of the Issuer or of any of its
subsidiaries; (d) any change in the present board of directors or management of
the Issuer, including any plans or proposals to change the number or term of
such directors or to fill any existing vacancies on such board; (e) any
material change in the present capitalization or dividend policy of the Issuer;
(f) any other material change in the Issuer's
Page 7 of 37 pages.
<PAGE> 8
business or corporate structure; (g) changes in the Issuer's charter, by-laws
or instruments corresponding thereto or other actions that may impede the
acquisition of control of the Issuer by any person; (h) causing a class of
securities of the Issuer to be delisted from a national securities exchange or
to cease to be authorized to be quoted in an inter-dealer quotation system of a
registered national securities association; (i) a class of equity securities of
the Issuer becoming eligible for termination of registration pursuant to
Section 12(g)(4) of the Securities Exchange Act of 1934; or (j) any action
similar to any of those enumerated above.
Item 5. Interest in Securities of the Issuer.
(a) and (b). As of the date hereof, DHC beneficially owns
5,072,000 shares of Class A Common Stock, including (i) the 500,000 Class A
Shares, and (ii) 4,572,000 shares of Class A Common Stock issuable upon
conversion of Class B Common Stock of the Issuer; each share of
Class B Common Stock is presently convertible into a share of
Class A Common Stock. Such shares represent approximately 63.6% of the
Issuer's shares of Class A Common Stock, assuming conversion of all of such
Reporting Person's shares of Class B Common Stock into Class A Common
Stock, and 73.6% of the combined voting power of the outstanding
shares of Class A Common Stock and Class B Common Stock.(1)
Onex, as the direct and indirect beneficial owner of
approximately 99% of the equity of DHC, may be deemed to own beneficially
5,072,000 shares of Class A Common Stock, including the 500,000
Class A Shares and 4,572,000 shares of Class A Common Stock issuable
upon conversion of Class B Common Stock referred to in the preceding
paragraph. In addition, Onex beneficially owns (i) 379,242 shares of Class A
Common Stock issuable upon conversion of Class B Common Stock acquired on
November 7, 1996 pursuant to conversion in full of approximately $3.8 million
in outstanding convertible indebtedness owed to it by the Issuer, and (ii)
285,714 shares of Class A Common Stock issuable upon conversion of Class B
Common Stock acquired by OMI on November 15, 1996. Each share of Class B
Common Stock is presently convertible into a share
__________________________________
(1) Each share of Class A Common Stock is entitled to one vote and each
share of Class B Common Stock is entitled to ten votes.
Page 8 of 37 pages.
<PAGE> 9
of Class A Common Stock. Such shares represent, in the aggregate,
approximately 66.4% of the Issuer's shares of Class A Common Stock,
assuming conversion of all of such Reporting Person's
shares of Class B Common Stock into Class A Common Stock, and 83.8% of the
combined voting power of outstanding shares of Class
A Common Stock and Class B Common Stock. Mr. Schwartz is the Chairman of the
Board, President and Chief Executive Officer of Onex and the indirect holder of
all the issued and outstanding shares of Multiple Voting Shares of Onex,
ownership which entitles Mr. Schwartz to elect sixty percent (60%) of the
members of Onex's Board of Directors, and therefore may also be deemed to own
beneficially such shares of Class A Common Stock and Class B Common Stock.
(c) Except as described herein, no Reporting Person nor,
to the best knowledge of each Reporting Person, any person identified in Item
2, has effected any transaction in shares of Class A Common Stock or Class B
Common Stock during the preceding 60 days.
(d) To the best knowledge of the Reporting Persons, no
person other than the Reporting Persons has the right to receive or the power
to direct the receipt of dividends from, or the proceeds from the sale of,
shares of Class A Common Stock or Class B Common Stock representing more than
5% of such classes of common stock.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to the Securities of the Issuer.
Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Smith Barney Inc., as representatives of the
several underwriters of the Issuer's initial public offering, entered into an
Agreement, dated as of November 15, 1996 (the "Lock-up Agreements"), with each
of DHC and Onex, see Exhibits 2 and 3, respectively, with respect to the shares
of Class A Common Stock and Class B Common Stock (including any securities
convertible into or exercisable or
Page 9 of 37 pages.
<PAGE> 10
exchangeable for such shares) held by the Reporting Persons. Pursuant to the
Lock-up Agreements, DHC and Onex agreed, subject to certain exceptions described
therein, not to transfer or dispose of such shares on or prior to May 10, 1997.
Certain persons named in Item 2 are subject to a shareholders
agreement restricting transfer of the shares of Class A Common Stock and Class B
Common Stock held by them. See Schedule B.
Item 7. Material to Be Filed as Exhibits.
1. Joint Filing Agreement, dated November 22, 1996,
between DHC, Onex and Mr. Schwartz.
2. Agreement, dated as of November 15, 1996, among
Morgan Stanley & Co. Incorporated, Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Smith Barney
Inc., as Representatives of the Several Underwriters,
and DHC.
3. Agreement, dated as of November 15, 1996, among
Morgan Stanley & Co. Incorporated, Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Smith Barney
Inc., as Representatives of the Several Underwriters,
and Onex.
4. Amended and Restated Director Shareholders Agreement,
dated as of November 15, 1996, among the Issuer, DHC
and the individuals party thereto from time to time.
5. Power of Attorney incorporated by reference to the
Amendment to Form 4 relating to Dura Automotive
Systems, Inc., filed with the Securities and Exchange
Commission by Onex on September 10, 1996.
6. Power of Attorney incorporated by reference to the
Amendment to Form 4 relating to Dura Automotive
Systems, Inc. filed with the Securities and Exchange
Commission by Mr. Schwartz on September 10, 1996.
Page 10 of 37 pages.
<PAGE> 11
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I hereby certify that the information set forth in this statement is
true, complete and correct.
Dated: November 25, 1996
ONEX DHC LLC
By: /s/ Donald F. West
----------------------------------
Name: Donald F. West
Title: Authorized Signatory
ONEX CORPORATION
By: /s/ Anthony Munk
----------------------------------
Name: Anthony Munk
Title: Authorized Signatory
/s/ Anthony Munk
-------------------------------------------
Authorized Signatory for
GERALD W. SCHWARTZ
Page 11 of 37 pages.
<PAGE> 12
SCHEDULE A
Directors and Executive Officers of
Onex DHC LLC ("DHC")
<TABLE>
<CAPTION>
PRESENT PRINCIPAL
NAME BUSINESS ADDRESS OCCUPATION OR EMPLOYMENT
- ---- ---------------- ------------------------
<S> <C> <C>
Donald F. West 421 Leader Street Representative, and President of
Marion, Ohio 43302 Skyaire, Inc.
John D. Kelly 421 Leader Street Representative, and President of
Marion, Ohio 43302 Na-Churs Plant Food Company
Ewout R. Heersink 161 Bay Street Representative, and Vice President
P.O. Box 700 of Onex Corporation
Toronto, Ontario
Canada M5J 2S1
</TABLE>
Page 12 of 37 pages.
<PAGE> 13
SCHEDULE B
1. Directors and Executive Officers of Onex Corporation ("Onex")
<TABLE>
<CAPTION>
PRESENT PRINCIPAL
NAME BUSINESS ADDRESS OCCUPATION OR EMPLOYMENT
---- ---------------- ------------------------
<S> <C> <C>
Gerald W. Schwartz 161 Bay Street Chairman of the Board,
P.O. Box 700 President, Chief Executive
Toronto, Ontario Officer and Director
Canada M5J 2S1
Ewout R. Heersink 161 Bay Street Vice President and Chief
P.O. Box 700 Financial Officer
Toronto, Ontario
Canada M5J 2S1
Mark L. Hilson 161 Bay Street Vice President
P.O. Box 700
Toronto, Ontario
Canada M5J 2S1
Anthony R. Melman 161 Bay Street Vice President
P.O. Box 700
Toronto, Ontario
Canada M5J 2S1
Anthony Munk 161 Bay Street Vice President
P.O. Box 700
Toronto, Ontario
Canada M5J 2S1
John S. Elder, Q.C. 161 Bay Street Secretary
P.O. Box 700
Toronto, Ontario
Canada M5J 2S1
Dan C. Casey Creson Corporation Director, Chairman and Chief
5255 Yonge Street Executive Officer of Creson
Suite 804 Corporation, an Ontario real
North York, Ontario estate company
Canada M2N 6P4
Donald H. Gales Ellesmere Britannia Director, Corporate Director
P.O. Box 1698GT, Villa 639
Grand Cayman Island
British West Indies
</TABLE>
Page 13 of 37 pages.
<PAGE> 14
<TABLE>
<CAPTION>
PRESENT PRINCIPAL
NAME BUSINESS ADDRESS OCCUPATION OR EMPLOYMENT
---- ---------------- ------------------------
<S> <C> <C>
Serge Gouin Le Groupe Videotron Ltee Director, President and Chief
300, ave Viger est Operating Officer of Le Groupe
Montreal, Quebec Videotron Ltee, a Canadian
Canada H2V 2T6 television company
Brian M. King 69 Sherwood Avenue Director, Corporate Director
Scarborough, Ontario
Canada M1R 1N6
J. William E. Mingo, Q.C. Stewart McKelvey Director, Partner at Stewart
Stirling Scales McKelvey Stirling Scales, a law
1959 Upper Water St. firm in Halifax, Nova Scotia
10th Floor
Halifax, Nova Scotia
Canada B3J 2X2
J. Robert S. Prichard, O.C. University of Toronto Director, President of the
Kings College Circle University of Toronto
Simcoe Hall, Room 206
Toronto, Ontario
Canada M5S 1A1
R. Geoffrey P. Styles* Royal Bank Plaza Director, Corporate Director
Suite 3115,
South Tower
Toronto, Ontario
Canada M5J 2J5
Arni C. Thorsteinson Shelter Canadian Properties Director, President of Shelter
Limited Canadian Properties Limited
2600-7 Evergreen Place
Winnipeg, Manitoba
Canada R3L 2T3
</TABLE>
__________________________________
* Shares of Class B Common Stock held by Mr. Styles are subject to
restrictions on transfer set forth in a Director Shareholders Agreement
described in Part 2 of this Schedule B.
Page 14 of 37 pages.
<PAGE> 15
2. Director Shareholders Agreement.
The following is a summary of certain provisions of the
Amended and Restated Director Shareholders Agreement among the Issuer, DHC and
certain directors ("Director Holders") of the Issuer (the "Director
Shareholders Agreement").
The Director Shareholders Agreement governs, among other
things, the manner and means by which Class B Common Stock (and Class A Common
Stock issuable upon conversion of such shares of Class B Common Stock) held by
the Director Holders at any time may be transferred. Pursuant to such Agreement,
the transfer of such shares, including shares received upon the conversion of
options, by Director Holders is prohibited except (i) to immediate family
members (or to trusts for the exclusive benefit of the transferor or his
immediate family members), or (ii) through the facilities of any securities
exchange, provided that such sales do not occur within 180 days of any public
offering of common stock of the Issuer.
The Director Shareholders Agreement terminates if Onex and
its affiliates cease to hold in the aggregate 20% of the outstanding voting
capital stock of the Issuer or if another person or group holds in the
aggregate a greater percentage of the outstanding voting capital stock of the
Issuer than Onex and its affiliates.
Page 15 of 37 pages.
<PAGE> 16
Index to Exhibits
<TABLE>
<CAPTION>
PAGE NO. IN
SEQUENTIAL
EXHIBIT NUMBERING SYSTEM
------- ----------------
<S> <C>
1. Joint Filing Agreement, dated November 22, 1996 between 17
DHC, Onex and Mr. Schwartz.
2. Agreement, dated as of November 15, 1996, among Morgan 18
Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner
& Smith Incorporated and Smith Barney Inc., as Representatives
of the Several Underwriters, and DHC
3. Agreement, dated as of November 15, 1996, among Morgan 21
Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner &
Smith Incorporated and Smith Barney Inc., as Representatives
of the Several Underwriters, and Onex.
4. Amended and Restated Director Shareholders Agreement, dated 24
as of November 15, 1996, among the Issuer, DHC and the
individuals party thereto from time to time.
</TABLE>
Page 16 of 37 pages.
<PAGE> 1
Exhibit 1
AGREEMENT
JOINT FILING OF SCHEDULE 13D
The undersigned hereby agree to file jointly the Statement on
Schedule 13D (the "Statement") relating to the Class A Common Stock, $.01 par
value per share, of ProSource, Inc., and any amendments thereto which may be
deemed necessary pursuant to Regulation 13D or G promulgated under Section 13
of the Securities Exchange Act of 1934, as amended.
It is understood and agreed that a copy of this Agreement
shall be attached as an exhibit to the Statement, filed on behalf of each of
the parties hereto.
This Agreement may be executed in multiple counterparts, each
of which shall constitute an original, one and the same instrument.
IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement as of the 22nd day of November, 1996.
ONEX DHC LLC
By: /s/ Donald F. West
---------------------------------------
Name: Donald F. West
Title: Authorized Signatory
ONEX CORPORATION
By: /s/ Anthony Munk
---------------------------------------
Name: Anthony Munk
Title: Authorized Signatory
/s/ Anthony Munk
------------------------------------------
Authorized Signatory for
GERALD SCHWARTZ
Page 17 of 37 pages.
<PAGE> 1
Exhibit 2
November 15, 1996
Morgan Stanley & Co. Incorporated
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Smith Barney Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
The undersigned understands that you, as Representatives of
the several Underwriters, propose to enter into an Underwriting Agreement (the
"UNDERWRITING AGREEMENT") with ProSource, Inc., a Delaware corporation (the
"COMPANY") providing for the public offering (the "PUBLIC OFFERING") by the
several Underwriters, including yourselves, of 3,400,000 shares (the "SHARES")
of Class A Common Stock, par value $.01 per share of the Company (collectively
with the Class B Common Stock, par value $.01 per share of the Company, the
"COMMON STOCK").
To induce the Underwriters that may participate in the Public
Offering to continue their efforts in connection with the Public Offering, the
undersigned hereby agrees that, without the prior written consent of Morgan
Stanley & Co. Incorporated on behalf of the Underwriters, it will not, during
the period commencing on the date hereof and ending 180 days after the date of
the final prospectus relating to the Public Offering (the "PROSPECTUS"), (1)
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, directly or
Page 18 of 37 pages.
<PAGE> 2
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock (whether such shares or any such
securities are now owned by the undersigned or are hereafter acquired), (2)
enter into any swap or other arrangement that transfers to another, in whole or
in part, any of the economic consequences of ownership of the Common Stock,
whether any such transaction described in clause (1) or (2) above is to be
settled by delivery of Common Stock or such other securities, in cash or
otherwise. The foregoing sentence shall not apply to the sale of any Shares to
the Underwriters pursuant to the Underwriting Agreement or to any Permitted
Transferee (as defined below). In addition, the undersigned agrees that,
without the prior written consent of Morgan Stanley & Co. Incorporated on
behalf of the Underwriters, it will not, during the period commencing on the
date hereof and ending 180 days after the date of the Prospectus, make any
demand for or exercise any right with respect to, the registration of any
shares of Common Stock or any security convertible into or exercisable or
exchangeable for Common Stock. "PERMITTED TRANSFEREE" shall mean (i) any
pledgee of Common Stock as security for indebtedness existing on the date
hereof incurred in connection with financing the purchase of such Common Stock,
and any pledgee of such Common Stock in connection with any refinancing of such
indebtedness and (ii) any entity controlling, controlled by or under common
control with Onex Corporation provided that such entity agrees to be bound by
the terms of this agreement.
Whether or not the Public Offering actually occurs depends on
a number of factors, including market conditions. Any Public Offering will
only be made pursuant to an
Page 19 of 37 pages.
<PAGE> 3
Underwriting Agreement, the terms of which are subject to negotiation between
the Company and the Underwriters.
Very truly yours,
By: /s/ Donald F. West
------------------------------
Name: Donald F. West
Title: Representative
By: /s/ John D. Kelly
-----------------------------
Name: John D. Kelly
Title: Representative
Accepted as of the date first set forth above:
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Kent P. Hitchcock
-----------------------------------------
Name: Kent P. Hitchcock
Title: Vice President
Page 20 of 37 pages.
<PAGE> 1
Exhibit 3
November 15, 1996
Morgan Stanley & Co. Incorporated
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Smith Barney Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
The undersigned understands that you, as Representatives of the
several Underwriters, propose to enter into an Underwriting Agreement (the
"UNDERWRITING AGREEMENT") with ProSource, Inc., a Delaware corporation (the
"COMPANY") providing for the public offering (the "PUBLIC OFFERING") by the
several Underwriters, including yourselves, of 3,400,000 shares (the "SHARES")
of Class A Common Stock, par value $.01 per share of the Company (collectively
with the Class B Common Stock, par value $.01 per share of the Company, the
"COMMON STOCK").
To induce the Underwriters that may participate in the Public Offering
to continue their efforts in connection with the Public Offering, the
undersigned hereby agrees that, without the prior written consent of Morgan
Stanley & Co. Incorporated on behalf of the Underwriters, it will not, during
the period commencing on the date hereof and ending 180 days after the date of
the final prospectus relating to the Public Offering (the "PROSPECTUS"), (1)
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, directly or
Page 21 of 37 pages.
<PAGE> 2
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock (whether such shares or any such
securities are now owned by the undersigned or are hereafter acquired), (2)
enter into any swap or other arrangement that transfers to another, in whole or
in part, any of the economic consequences of ownership of the Common Stock,
whether any such transaction described in clause (1) or (2) above is to be
settled by delivery of Common Stock or such other securities, in cash or
otherwise or (3) cause or permit any of its affiliates to do any of the
foregoing. The foregoing sentence shall not apply to the sale of any Shares to
the Underwriters pursuant to the Underwriting Agreement or to any Permitted
Transferee (as defined below). In addition, the undersigned agrees that,
without the prior written consent of Morgan Stanley & Co. Incorporated on
behalf of the Underwriters, it will not, during the period commencing on the
date hereof and ending 180 days after the date of the Prospectus, make any
demand for or exercise any right with respect to, the registration of any
shares of Common Stock or any security convertible into or exercisable or
exchangeable for Common Stock. "PERMITTED TRANSFEREE" shall mean (i) any
pledgee of Common Stock as security for indebtedness existing on the date
hereof incurred in connection with financing the purchase of such Common Stock,
and any pledgee of such Common Stock in connection with any refinancing of such
indebtedness and (ii) any entity controlling, controlled by or under common
control with Onex Corporation provided that such entity agrees to be bound by
the terms of this agreement.
Whether or not the Public Offering actually occurs depends on a number
of factors, including market conditions. Any Public Offering will only be made
pursuant to an
Page 22 of 37 pages.
<PAGE> 3
Underwriting Agreement, the terms of which are subject to negotiation between
the Company and the Underwriters.
Very truly yours,
ONEX CORPORATION
By: /s/ Ewout R. Heersink
--------------------------------------
Name: Ewout R. Heersink
Title: Vice President & Chief
Financial Officer
By: /s/ Anthony R. Melman
------------------------------------
Name: Anthony R. Melman
Title: Vice President
Accepted as of the date first set forth above:
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Kent P. Hitchcock
--------------------------------------------
Name: Kent P. Hitchcock
Title: Vice President
Page 23 of 37 pages.
<PAGE> 1
Exhibit 4
AMENDED AND RESTATED
DIRECTOR SHAREHOLDERS AGREEMENT
THIS DIRECTOR SHAREHOLDERS AGREEMENT dated as of November 15, 1996
amends and restates in its entirety the Director Shareholders Agreement dated
as of May 31, 1995 (the "Original Agreement"), among ProSource, Inc., a
Delaware corporation (the "Corporation"), Onex DHC LLC, a Wyoming limited
liability company ("Onex"), and the individuals named from time to time on
Schedule I to this Agreement (each a "Director Holder" and collectively the
"Director Holders").
RECITALS
A. The parties desire to amend and restate the Original Agreement
in contemplation of the proposed initial public offering (the "Offering") of
shares of the Corporation's Class A Common Stock (as hereinafter defined).
B. Prior to commencement of the Offering, (i) the Corporation
intends to file a restated certificate of incorporation (the "Restated
Certificate of Incorporation"), providing for, among other things, two classes
of authorized common stock, Class A Common Stock, par value $.01 per share
("Class A Common Stock"), and Class B Common Stock, par value $.01 per share
("Class B Common Stock"), and (ii) all of the Corporation's outstanding shares
of common stock, par value $.01 per share ("Common Stock"), will be converted
into shares of Class B Common Stock.
C. The powers, preferences, rights, limitations and restrictions
of the Class B Common Stock, including certain provisions with respect to
transfer thereof and conversion into shares of Class A Common Stock, are set
forth in the Restated Certificate of Incorporation.
D. Each of the Director Holders is a member of the Board of
Directors of the Corporation and purchased shares of Common Stock from the
Corporation prior to the date of this Agreement. As used herein, the term
"Shares" shall mean such shares of Common Stock, the shares of Class B Common
Stock issued or to be issued upon conversion of Common Stock, and any shares of
Class A Common Stock issued upon conversion of Class B Common Stock.
The parties hereby agree as follows:
Page 24 of 37 pages.
<PAGE> 2
8. RESTRICTIONS ON TRANSFER OF SHARES
1.1 REPRESENTATION. Each of the Director Holders represents and agrees
that the Director Shares owned by him were acquired for his own account and
will not be transferred in violation of this Agreement, the securities laws of
the United States, or any other applicable law.
1.2 RESTRICTIONS. A Director Holder may transfer Director Shares as a
whole or in part only if such transfer is permitted by and made in accordance
with the terms of this Agreement. Any purported transfer in any manner
contrary to the terms of this Agreement shall be null and void. For purposes
of this Agreement, the term "transfer" shall mean any sale, exchange,
assignment, gift, bequest, pledge, creation of a lien or security interest or
other disposition or encumbrance of any kind, whether voluntary or involuntary
or by operation of law, affecting title to or possession of the Director
Shares. The Corporation may refuse to register any transfer of Shares that
would violate this Agreement, the securities laws of the United States, or any
other applicable law, and may, as a condition to registration of such transfer,
require the transferor to furnish to the Corporation an opinion of counsel
reasonably acceptable to the Corporation as to compliance with the foregoing.
1.3 PLEDGE OF SHARES AS SECURITY. Each of the Director Holders may
finance up to 66 2/3% of the purchase price of such Director Holder's Shares
and may pledge such Shares to the lender to secure the financing or to any
affiliate of the Corporation that guarantees repayment of any loan made to
finance the purchase of Shares if the lender or guarantor agrees in writing to
be bound by this Agreement.
1.4 SALES FREE OF ENCUMBRANCES. Upon the transfer of Director Shares
pursuant to this Agreement, the Director Holder shall discharge any
indebtedness permitted by Section 1.3 and deliver to the purchaser the share
certificates representing such Director Shares free and clear of any pledge,
lien, security interest or other encumbrance of any kind. If the Director
Holder fails to comply with the preceding sentence, the purchaser may withhold
from the purchase price an amount equal to the indebtedness secured by any such
pledge, lien, security interest or other encumbrance or, if the amount of such
indebtedness is not known by the purchaser, an amount equal to the purchaser's
good faith estimate thereof (no limitation of any other remedy available to the
purchaser being intended) and apply such withheld amount to extinguish such
debt. Any such payment of such withheld amount shall discharge the purchaser's
obligation to make payment for the purchased shares to the extent of such
withheld amount. If a selling Director Holder fails to deliver certificates
representing Director Shares being sold as required at the closing of such
sale, the purchaser may deposit the purchase price therefor with the
Corporation and, upon such deposit, those certificates shall be deemed canceled
and of no effect (no limitation of any other remedy available to the purchaser
being intended).
Page 25 of 37 pages.
<PAGE> 3
9. SALE OR TRANSFER OF DIRECTOR SHARES
2.1 TRANSFER TO DIRECTOR HOLDER'S FAMILY. A Director Holder may transfer
Director Shares to his parents, siblings, spouse, or issue or to a trust or
custodianship for the exclusive benefit of himself or any of them (each a
"Family Group Member"); provided that any such transferee agrees in writing to
be bound by the provisions of this Agreement that bind the transferor Director
Holder.
2.2 SALE: CORPORATION IS A PUBLIC COMPANY. If the Corporation is a
Public Company, a Director Holder may sell any or all of his Shares through the
facilities of any securities exchange on which the Director Shares may then be
listed in a manner that complies with applicable securities law and
regulations, except that no such sales shall be made within 180 days after any
offering of securities registered under the 1933 Act that involves shares of
the same class as Director Shares.
2.3 SALE UPON CEASING TO BE A DIRECTOR; CORPORATION IS NOT A PUBLIC
COMPANY. (a) If a Director Holder ceases to be a member of the Board of
Directors of the Corporation at any time when the Corporation is not a Public
Company and elects, by notice to the Corporation within 10 days after ceasing
to be a member of the Board of Directors, to sell his Director Shares to the
Corporation, the Corporation shall purchase, and the Director Holder shall
sell, all of the Director Shares owned by such Director Holder for a purchase
price equal to Book Value Per Share multiplied by the number of Director Shares
owned by such Director Holder (the "Initial Section 2.3(a) Payment"). If the
Corporation purchased a Director Holder's Director Shares pursuant to the
preceding sentence and effects any offering of securities registered under the
1933 Act that involves an offering of shares of the same class as Director
Shares within four months after that Director Holder ceases to be a member of
the Board of Directors of the Corporation, the purchase price per Share shall
be increased by an amount equal to the excess, if any, of the public offering
price per Share (after deduction of any applicable underwriter's commissions or
discounts) over the Book Value Per Share used in calculating the original
purchase price, less interest at the Prime Rate on the portion of the purchase
price previously paid in cash (the "Additional Section 2.3(a) Payment").
Subject to the limitations set forth in Section 2.3(b), the Initial Section
2.3(a) Payments shall be paid in cash at the closing of the purchase and sale
and Additional Section 2.3(a) Payments shall be paid in cash within 60 days of
the closing of the registered offering.
(b) The amount of the purchase price payable by the Corporation to
any Director Holder pursuant to Section 2.3(a) shall be reduced by any amount
paid by the Corporation or any affiliate of the Corporation to NCNB National
Bank (or any successor bank) to discharge the principal portion of any
indebtedness incurred by such Director Shareholder to purchase the Director
Shares. If, as a result of restrictions in its loan agreement with NationsBank
of Georgia, N.A., ProSource Services Corporation ("PSC"), is unable to pay
sufficient dividends to the Corporation to enable the Corporation to pay the
amount of the purchase price required to be paid by it in cash either at the
closing of the sale or at any time thereafter in accordance with the terms set
forth in Sections 2.3(a), the Corporation shall be entitled to pay any unpaid
portion of
Page 26 of 37 pages.
<PAGE> 4
the payments required to be made under Sections 2.3(a), together with interest
thereon at the Prime Rate, at such time as it has received from PSC sufficient
dividends to enable it to do so.
2.4 SALE UPON DEFAULT ON INDEBTEDNESS. If a Director Holder defaults on
any indebtedness referred to in Section 1.3, the Corporation shall have the
option, exercisable upon notice to the Director Holder at any time following a
default, to purchase all or any portion of the Director Shares with respect to
which such debt was incurred at a purchase price equal to (i) 85% of Book Value
Per Share, if the Corporation is not a Public Company at the time of the
closing of the purchase or (ii) 85% of Market Price Per Share, if the
Corporation is a Public Company at the time of the closing of the purchase.
2.5 CLOSING OF SALE. The closing of any purchase and sale of Director
Shares pursuant to the exercise of a right under this Section 2 (other than
transfers made pursuant to Section 2.1 or sales made through the facilities of
any securities exchange pursuant to Sections 2.2 and 5) shall be held at the
principal offices of the Corporation on a date designated by the purchaser but
in any event not later than the last day upon which a purchase is permitted or
required to be made. At the closing, the Director Holder selling Shares shall
deliver to the purchaser the stock certificates and other instruments
representing such Shares, together with stock powers and other instruments
transferring such Shares, duly endorsed for transfer and free and clear of all
claims, liens, encumbrances and security interests, and the purchaser shall
deliver to the Director Holder the consideration payable upon closing.
10. OPTIONS TO PURCHASE SHARES
3.1 Shares received by a Director Holder upon the exercise or conversion
of any options, warrants, rights to purchase shares or securities convertible
into Shares, shall be subject to the terms and conditions of this Agreement and
may not be transferred except as permitted by this Agreement.
11. SALE OF SHARES BY ONEX AND THE CORPORATION
4.1 TAG ALONG. (a) If at any time any member of the Onex Group proposes
to sell any Shares except for (i) sales to another member of the Onex Group
that becomes bound by the terms of this Agreement (an "Onex Group Member"),
(ii) sales to a Director Holder or other management employee or director of the
Corporation or a subsidiary of the Corporation, (iii) sales of the 500 Shares
purchased by Onex on June 30, 1992 for later disposition to persons providing
services to the Corporation or any of the Corporation's subsidiaries (the "500
Shares"), (iv) sales effected on a national securities exchange in the regular
way or in the over-the-counter market, or (v) sales made pursuant to an
offering of securities registered under the 1933 Act (a "Tag Along
Disposition"), each of the Director Holders shall have the right to sell to the
proposed purchaser a number of his Director Shares equal to the total number of
his Director Shares multiplied by a ratio, the numerator of which is the number
of Shares to be sold by the Onex Group Member to the proposed purchaser and the
denominator of which is the total number of Shares then owned by the Onex
Group. Such ratio is referred to herein as the "Share
Page 27 of 37 pages.
<PAGE> 5
Ratio." A sale of Director Shares pursuant to this Section shall be made at
the same price, upon the same terms, and at the same time as the sale by the
Onex Group Member of its Shares.
(b) The Onex Group Member shall give notice (the "Tag Along
Notice") to each Director Holder of the proposed Tag Along Disposition at least
20 days prior to the same. The Tag Along Notice shall be in writing and shall
describe the terms of the Tag Along Disposition in reasonable detail, the
identity of the proposed purchaser, the proposed date of sale, the purchase
price per Share, and the Share Ratio and shall state that (i) the Director
Holder has the option to sell to the proposed purchaser a number of Director
Shares equal to the total number of Director Shares then owned by such Holder
multiplied by the Share Ratio, (ii) the sale, if made, shall be made at the
same price per share, upon the same terms, and at the same time as the sale by
the Onex Group Member of its Shares to the proposed purchaser, and (iii) the
sale by Director Holders will be conditioned upon a sale of Shares by the Onex
Group Member pursuant to this Section.
(c) A Director Holder may exercise his sale option pursuant to
Section 4.1 by delivering to the Onex Group Member, within ten days after such
Director Holder receives the Tag Along Notice, written notice of his offer to
sell Director Shares pursuant to this Section and indicating the number of
Director Shares offered for sale. If a Director Holder gives notice of his
election to sell, he shall be obligated to do so, but the sale and his
obligation to sell shall be conditioned upon the closing of the Tag Along
Disposition. If the purchaser specifies a limited number of Shares that it is
willing to purchase in the aggregate, each Director Holder and the Onex Group
Member shall have the right to sell its or his proportion of the number of
Shares that the purchaser is purchasing, i.e., the proportion that the number
of Shares owned by such Person bears to the aggregate number of Shares owned by
the shareholders who are selling Shares. For purposes of this Section 4.1, the
number of Shares owned by any Onex Group Member shall not be deemed to include
any portion of the 500 Shares then owned by any Onex Group Member.
(d) If a transferee of Onex Shares pursuant to this Section 4.1
acquires such Shares free of this Agreement, then such transferee shall also
take the Director Shares being sold by a Director Holder free of this
Agreement. If, however, any Onex Group Member is required to transfer any Onex
Shares subject to this Agreement, then the Director Holder shall also transfer
his Director Shares subject to this Agreement.
4.2 DRAG ALONG. Notwithstanding anything herein to the contrary, if any
Onex Group Member proposes to sell any Shares to any Person, except for (i)
sales of the 500 Shares, (ii) sales effected on a national securities exchange
in the regular way or in the over-the-counter market, and (iii) sales to any
other Onex Group Member (a "Drag Along Disposition"), it may, upon giving
notice to each Director Holder at least 20 days prior to the Drag Along
Disposition (the "Drag Along Notice") require the Director Holders to sell a
number of Director Shares equal to the total number of Director Shares then
owned by such Holder multiplied by the Share Ratio. The Drag Along Notice
shall be in writing and shall contain the same information as is required to be
set forth in the Tag Along Notice. A sale of Director Shares pursuant to this
Section shall be made at the same price, upon the same terms, and at the same
time as the sale by the Onex
Page 28 of 37 pages.
<PAGE> 6
Group Member of its Shares pursuant to this Section. Any transferee of Shares
owned by any Onex Group Member or of the Director Holders pursuant to this
Section 4.2 shall acquire such Shares free of this Agreement, unless the
agreement between the Onex Group Member and such transferee provides otherwise.
4.3 REPRESENTATIONS AND WARRANTIES ON A DISPOSITION. In connection with
any transfer described in this Section 4 in which Director Shares are to be
sold by a Director Holder, Onex and the selling Onex Group Member may require
the Director Holder to enter into agreements with the purchaser representing
and warranting that, except as specifically disclosed to the purchaser in
writing, such Director Holder at the time of the closing of such transfer, does
not have actual knowledge that any representation or warranty made by the
Corporation or any other shareholder in connection with the disposition was
untrue in any material respect when made or is untrue in any material respect
as of the closing; the liability of the selling Director Holder under such
representation and warranty shall be limited to the amount which he receives
from the sale of his Director Shares in connection with such transfer and shall
be pro rata in accordance with the number of Shares sold by the Director Holder
in relation to the Shares being sold by all holders.
4.4 PRE-EMPTIVE RIGHTS. If, prior to the time when the Corporation
becomes a Public Company, the Corporation intends to sell shares of its capital
stock or options, warrants, rights to purchase, or securities convertible into,
or exchangeable for, shares of its capital stock to any member of the Onex
Group for cash, the Corporation shall give notice thereof (the "Sale Notice")
to each of the Director Holders. The Sale Notice shall be in writing, shall
describe the securities to be offered, the price of such securities, and other
terms of the offer in reasonable detail. Each Director Holder shall have the
right, subject to applicable law and exercisable by notice to the Corporation
within 45 days after his receipt of the Sale Notice, to purchase his Pro Rata
Share (as defined in this Section 4.4) of the securities offered for the same
price per unit and on the same terms as the securities are offered to Onex and
as are described in the Sale Notice. As used in this Section 4.4, the term
"Pro Rata Share" shall mean the product of (x) the total number of securities
referred to in the Sale Notice as proposed to be sold to members of the Onex
Group and (y) a fraction, the numerator of which is the number of Director
Shares of all classes held by the Director Holder on the date the Sale Notice
is given and the denominator of which is the sum of the number of Shares of all
classes of the Corporation's stock of the same class or classes as Director
Shares outstanding on such date (including the Director Shares). Any
securities acquired by a Director Holder pursuant to this Section 4.4 shall be
subject to the terms of this Agreement. The provisions of this Section 4.4
shall not apply to the issuance of securities, with or without consideration,
to officers and employees of the Corporation and its subsidiaries or plans for
the benefit of such employees, by the Corporation from time to time and shall
not require the Corporation to offer securities under circumstances that could
require registration under the 1933 Act.
12. PIGGY-BACK REGISTRATION RIGHTS
Page 29 of 37 pages.
<PAGE> 7
5.1 If the Corporation proposes to effect a registration under the 1933
Act involving an offering of securities of the same class as the Director
Shares, it shall give written notice of its intention to do so (the "Public
Offering Notice") to each Director Holder.
5.2 Upon the written request of a Director Holder (the "Director Holder's
Request") delivered to the Corporation within ten days after such Holder's
receipt of the Public Offering Notice, the Corporation shall use its best
efforts to cause the registration under the 1933 Act of the number of Director
Shares stated in the Director Holder's Request for disposition in accordance
with the intended method of disposition as stated in the Director Holder's
Request; provided, that:
(a) if, the number of Director Shares stated in the Director
Holder's request represents a greater proportion of the total number of
Director Shares owned by such Director Holder than the number of Shares
proposed to be sold and distributed by the Onex Group pursuant to the public
offering bears to the total number of Shares owned by the Onex Group, the
Corporation shall not be obligated to effect the registration of such excess
number of Director Shares of such Director Holder;
(b) if, at any time after giving such written notice of its
intention to register any of its securities and prior to the effective date of
the registration statement filed in connection with such registration, the
Corporation determines for any reason not to effect such registration or to
delay such registration, it may, at its election, give written notice of such
determination to each Director Holder and thereupon the Corporation (i) in the
case of a determination not to effect registration, shall be relieved of its
obligation to register any Director Shares in connection with such registration
or (ii) in the case of a determination to delay registration, shall be entitled
to delay the registration of the Director Shares for the same period as the
delay in the registration of its securities;
(c) if (i) the registration involves an underwritten offering of
the securities being registered (in which case the Director Holder shall be
required to make its offering through the underwriters selected by the
Corporation and to sign the same underwriting agreement), whether or not for
sale for the account of the Corporation and (ii) the managing underwriter of
such underwritten offering advises the Corporation that the number of Shares
that members of the Onex Group, the Director Holders and other selling
stockholders wish to sell exceeds the number thereof that, in the sole
discretion of the underwriter, is the maximum number thereof that may be
included in the offering without adversely affecting the offering, then the
Corporation shall not be required to include in the offering the excess number
of Shares requested to be sold by the members of the Onex Group and each
Director Holder above such maximum number (the Shares so included to be
apportioned pro rata among the members of the Onex Group, each Director Holder
and other selling stockholders so that each member of the Onex Group, each
Director Holder and each other selling stockholder shall be entitled to have
included in the offering a number of Shares that is proportionate to his or its
respective ownership of Shares); and
Page 30 of 37 pages.
<PAGE> 8
(d) the Corporation shall not be obligated to effect any
registration of Director Holder's Shares under this Section 5 incidental to the
registration of any of its securities in connection with mergers, acquisitions,
exchange offers, dividend reinvestment plans or stock options or other employee
benefit plans or incidental to the registration of any nonequity securities not
convertible into equity securities.
5.3 Except as otherwise prohibited by applicable law or regulations, the
Corporation shall pay all expenses incurred in connection with the registration
of Director Holder's Shares pursuant to this Section 5, including all
registration and filing fees, printing expenses, blue sky fees and expenses and
accountant expenses to the extent permitted by law, but not including
commissions and expenses payable to underwriters in respect of Director Shares
and the fees of any counsel or other advisers retained by Director Holders.
13. LEGEND
All certificates representing Director Shares held by any Director Holder
(and held by a transferee of Director Shares, except (i) as set forth in
Section 4, (ii) with respect to Shares transferred to Onex, and (iii) with
respect to a transferee pursuant to Section 2.2 or pursuant to a registration
statement in accordance with Section 5) shall bear the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 and the transfer and
voting of such shares is subject to conditions specified in the
Amended and Restated Director Shareholders Agreement, dated as of
November 15, 1996, between the Corporation, Onex DHC LLC and the
holder hereof, among others, and no transfer of such shares shall be
valid or effective until such conditions have been fulfilled with
respect to such transfer. A copy of such Agreement will be furnished
by the Corporation to the holder of this Certificate upon written
request and without charge."
14. INTENTIONALLY OMITTED
15. CERTAIN PROHIBITED TRANSACTIONS AND REQUIRED ACTIONS
The Corporation shall not merge, consolidate, or amalgamate with another
corporation, or sell all or substantially all of its assets to another Person,
if pursuant thereto any member of the Onex Group is to receive equity
securities as full or partial consideration for its Shares unless all Director
Holders have the right to receive the same securities in proportion to their
respective holdings of Shares.
Page 31 of 37 pages.
<PAGE> 9
16. INTENTIONALLY OMITTED
17. CERTAIN DEFINITIONS
10.1 The term "BOOK VALUE PER SHARE" as of any date shall mean
the quotient obtained by dividing (X) consolidated stockholders' equity of the
Corporation and its subsidiaries as at the end of the fiscal quarter
immediately preceding the date of the event that entitled the Director Holder
to require the purchase and sale pursuant to Section 2.3 determined in
accordance with generally accepted accounting principles in effect in the
United States on June 30, 1992 by (Y) the number of shares of common stock of
the Corporation outstanding on such date; in making calculations for purposes
of clauses (X) and (Y), (i) the number of Shares into which the Subordinated
Note are convertible shall be excluded and (ii) it shall be assumed that all
Options (as defined in this Section 10.1) outstanding on the date as of which
the calculation is being made had been exercised to the extent that the
exercise price does not exceed Book Value Per Share (determined without regard
to this clause) and any purchase price for Shares payable upon such exercise
had been paid. The determination of Book Value Per Share shall be based upon
the audited (in the case of the end of the last quarter of a fiscal year) or
unaudited (in the case of the end of any of the first three quarters of a
fiscal year) balance sheet of the Corporation as at the end of the fiscal
quarter in question. Notwithstanding the foregoing, Book Value Per Share shall
be equitably adjusted by the Board of Directors of the Corporation if a stock
dividend, recapitalization or other material event occurs outside of the
ordinary course of business after the end of such fiscal quarter and before the
closing of the sale in respect of which the determination is being made. As
used in this Section 10.1, the term "Options" shall mean those options that, in
accordance with the terms of the Corporation's Option Plans, have become
exercisable as of the date of the closing of the sale.
10.2 The term "1933 ACT" shall mean the Securities Act of 1933,
as in force on the date in question, or any similar federal statute then in
force.
10.3 The term "DIRECTOR SHARES" shall mean the Shares owned at
any time by any Director Holder.
10.4 The term "MARKET PRICE PER SHARE" shall mean the average
closing price per Share on the principal securities exchange on which the
Shares are listed (or, if the Shares are not then listed on a securities
exchange, the mean between the closing bid and asked prices in the
over-the-counter market) for the ten trading days thereon immediately preceding
the closing of the sale pursuant to Section 2.4.
10.5 The term "ONEX GROUP" shall mean Onex Corporation, an
Ontario Corporation, and any Person controlled by, controlling or under common
control with, or a shareholder of, Onex Corporation. A Person ("Parent")
controls another Person if Persons controlled by it (within the meaning of this
sentence) own or have the right (by contract or otherwise) to vote or direct
the vote of securities or other interests having the power to elect a majority
of that Person's board of directors or similar governing body (other than
securities or interests having that power
Page 32 of 37 pages.
<PAGE> 10
only upon the happening of a contingency that has not occurred) or to otherwise
direct the management of such Person.
10.6 The term "ONEX SHARES" shall mean the Shares owned at any
time by the Onex Group.
10.7 The term "OPTION PLANS" shall mean the Corporation's Amended
and Restated Management Option Plan (1995) and the Corporation's 1996 Stock
Option Plan, as each may be amended, restated or modified from time to time.
10.8 The term "PERSON" shall mean an individual, a partnership, a
joint venture, a corporation, a limited liability company, a trust, an
unincorporated organization, and a government or any department or agency
thereof.
10.9 The term "PRIME RATE" shall mean the prime rate announced
from time to time by NationsBank of Georgia, N.A.
10.10 The Corporation is a "PUBLIC COMPANY" if shares of its
capital stock are registered under Section 12 or if the Corporation is subject
to reporting requirements under Section 15(d) of the Securities Exchange Act of
1934 or any similar federal statute in force.
10.11 The term "SUBORDINATED NOTE" shall mean the convertible
subordinated note, dated March 31, 1995, evidencing the Corporation's
indebtedness to Onex Ohio Holdings, Inc. in the principal amount of $3,500,000.
18. TERMINATION
This Agreement shall terminate when the Onex Group ceases to hold in
the aggregate 20% of the outstanding voting capital stock of the Corporation or
when another Person (as defined in Rule 144 of the 1933 Act) holds in the
aggregate a greater percentage of the outstanding voting capital stock of the
Corporation than the Onex Group (excluding the Corporation) owns, whichever is
earlier. This Agreement shall terminate as to any Director Holder when that
Director Holder no longer owns any Shares.
19. EFFECTIVE DATE
This Agreement shall become effective upon the consummation of the
Offering.
Page 33 of 37 pages.
<PAGE> 11
20. MISCELLANEOUS
13.1 NOTICES
All notices, consents and other communications under this Agreement
shall be in writing and shall be deemed to have been duly given when (a)
delivered by hand, (b) sent by telex or telecopier (with receipt confirmed),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by Express Mail, Federal Express or
other express delivery service (receipt requested), in each case to the
appropriate addresses, telex numbers and telecopier numbers set forth below (or
to such other addresses, telex numbers and telecopier numbers as a party may
designate as to itself by notice to the other parties):
1. if to the Corporation:
ProSource, Inc.
530 Biltmore Way, 10th Floor
Coral Gables, Florida 33134
Attention: President
Telecopy: (305) 529-2573
with a copy to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Attention: Joel I. Greenberg, Esq.
Telecopy: (212) 836-7149
2. if to Onex or any member of the Onex Group:
Onex Corporation
161 Bay Street, 49th Floor
P.O. Box 700
Toronto, Ontario
M5J 2S1
Canada
Attention: President and
Chief Executive Officer
Telephone: (416) 362-7911
Telecopy: (416) 362-5765
3. if to any Director Holder, to him at his address as
it appears on Schedule I attached hereto or as shown on the records of the
Corporation.
Page 34 of 37 pages.
<PAGE> 12
13.2 ASSIGNMENT
No party may assign any rights or delegate any of its duties under
this Agreement, but this Agreement shall be binding upon and inure to the
benefit of the successors to the business and assets of the Corporation, Onex
and the Director Holders.
13.3 NO WAIVER
The failure of a party to insist upon strict adherence to any term of
this Agreement on any occasion shall not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to that term or
any other term of this Agreement. Any waiver must be in writing.
13.4 EXCLUSIVE AGREEMENT AND AMENDMENT
This Agreement supersedes all prior agreements among the parties with
respect to its subject matter, is intended as a complete and exclusive
statement of the terms of the Agreement among the parties with respect thereto
and cannot be changed or terminated orally. This Agreement may only be amended
or altered by the mutual agreement of the parties hereto, such amendments or
alterations to become effective when reduced to writing and signed by Onex, the
Corporation and the holders of at least 75% of the Director Shares.
13.5 GOVERNING LAW
This Agreement and all amendments hereof and waivers and consents
hereunder shall be governed by the internal law of the State of Delaware
without regard to the conflicts of law principles thereof.
13.6 CAPTIONS
The captions in this Agreement are for convenience of reference only
and shall not be given any effect in the interpretation of this Agreement.
13.7 JURISDICTION
Any action or proceeding seeking to enforce any provision of, or based
on any right arising out of, this Agreement may be brought against any of the
parties in the courts of the State of Delaware, or, if it has or can acquire
jurisdiction, in the United States District Court for Delaware, and each of the
parties hereby consents to the exclusive jurisdiction of such courts (and of
the appropriate appellate courts) in any such action or proceeding, and waives
any objection to venue laid therein. Process in any such action or proceeding
may be served anywhere in the world, whether within or without the State of
Delaware.
Page 35 of 37 pages.
<PAGE> 13
13.8 COUNTERPARTS
This Agreement may be executed in counterparts, each of which shall be
considered an original, but all of which together shall constitute one and the
same instrument.
13.9 SEVERABILITY
The provisions of this Agreement are intended to be and shall be
deemed severable. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
ONEX DHC LLC
By: /s/ Donald F. West
-------------------------------------
Name: Donald F. West
Title: Representative
PROSOURCE, INC.
By: /s/ David R. Parker
--------------------------------------
Name: David R. Parker
Title: Chairman of the Board
DIRECTOR HOLDERS
/s/ Michael Carpenter
-------------------------------------------
Michael Carpenter
/s/ C. Lee Johnson
-------------------------------------------
C. Lee Johnson
/s/ R. Geoffrey P. Styles
-------------------------------------------
R. Geoffrey P. Styles
/s/ Michael Treacy
-------------------------------------------
Michael Treacy
Page 36 of 37 pages.
<PAGE> 14
Schedule I
List of Director Holders
<TABLE>
<CAPTION>
Name Addresses Shares
- ---- --------- ------
<S> <C> <C>
Michael Carpenter 134 Otter Rock Drive 18,200
Greenwich, CT 06830
Advest, Inc., Custodian f/b/o 7384 Brandshire Lane 4,500
C. Lee Johnson Dublin, Ohio 43017
R. Geoffrey P. Styles 8 York Ridge Road 7,300
Willowdale, Canada M2P IR7
Michael Treacy 3 West Cedar Street 30,000
Boston, MA 02108
</TABLE>
Page 37 of 37 pages.
