PROSOURCE INC, S-1/A, 1996-11-06

PROSOURCE INC
S-1/A, 1996-11-06
GROCERIES, GENERAL LINE

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 6, 1996

REGISTRATION NO. 333-11499
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 4

TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933

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

PROSOURCE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
DELAWARE 5141 65-0335019
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>

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

550 BILTMORE WAY, 10TH FLOOR
CORAL GABLES, FLORIDA 33134
(305) 529-2500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

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

DAVID R. PARKER
CHAIRMAN OF THE BOARD
PROSOURCE, INC.
550 BILTMORE WAY, 10TH FLOOR
CORAL GABLES, FLORIDA 33134
(305) 529-2500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------

Copies to:

<TABLE>
<S> <C>
JOEL I. GREENBERG, ESQ. WINTHROP B. CONRAD, JR., ESQ.
KAYE, SCHOLER, FIERMAN, HAYS & HANDLER, LLP DAVIS POLK & WARDWELL
425 PARK AVENUE 450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10017
(212) 836-8000 (212) 450-4000
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

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

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

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

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

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

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

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

PROSPECTUS (Subject to Completion)

Issued November 6, 1996

3,400,000 Shares

[PROSOURCE, INC LOGO]

CLASS A COMMON STOCK
------------------------

ALL OF THE SHARES OF CLASS A COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY
PROSOURCE, INC. (THE "COMPANY"). PRIOR TO THE OFFERING, THERE HAS BEEN NO
PUBLIC MARKET FOR THE CLASS A COMMON STOCK OF THE COMPANY. IT IS
CURRENTLY ESTIMATED THAT THE INITIAL OFFERING PRICE PER SHARE WILL BE
BETWEEN $14 AND $16. SEE "UNDERWRITERS" FOR A DISCUSSION OF THE
FACTORS TO BE CONSIDERED IN DETERMINING THE INITIAL PUBLIC
OFFERING PRICE.
------------------------

APPLICATION HAS BEEN MADE TO HAVE THE CLASS A COMMON STOCK APPROVED FOR
QUOTATION ON THE NASDAQ NATIONAL MARKET UNDER THE SYMBOL "PSDS."
------------------------

THE COMPANY HAS TWO CLASSES OF COMMON STOCK, THE CLASS A COMMON STOCK BEING
OFFERED HEREBY AND CLASS B COMMON STOCK. THE CLASS B COMMON STOCK IS IDENTICAL
TO THE CLASS A COMMON STOCK, EXCEPT WITH RESPECT TO VOTING POWER AND
CONVERSION RIGHTS. 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. EACH SHARE OF CLASS B COMMON STOCK IS CONVERTIBLE
INTO CLASS A COMMON STOCK ON A ONE-TO-ONE BASIS AT ANY TIME AT
THE OPTION OF THE HOLDER THEREOF AND IN CERTAIN OTHER
CIRCUMSTANCES. SEE "DESCRIPTION OF CAPITAL STOCK."
------------------------

THE OFFERING INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 10 HEREOF.
------------------------

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

PRICE $ A SHARE
------------------------

<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Per Share............................. $ $ $
Total (3)............................. $ $ $
</TABLE>

- ------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.

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

(3) The Company has granted to the Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to an aggregate of
510,000 additional Shares at the price to public less underwriting
discounts and commissions for the purpose of covering over-allotments,
if any. If the Underwriters exercise such option in full, the total
price to public, underwriting discounts and commissions and proceeds to
Company will be $ , $ and $ , respectively. See
"Underwriters."
------------------------

The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to approval of certain legal matters
by Davis Polk & Wardwell, counsel for the Underwriters. It is expected that
delivery of the Shares will be made on or about , 1996 at the office
of Morgan Stanley & Co. Incorporated, New York, N.Y., against payment therefor
in immediately available funds.
------------------------

MORGAN STANLEY & CO.
Incorporated
MERRILL LYNCH & CO.
SMITH BARNEY INC.
, 1996
<PAGE> 3

PROSOURCE IS THE NATION'S LEADING INDEPENDENT FOODSERVICE DISTRIBUTOR
SPECIALIZING IN DISTRIBUTION TO CHAIN RESTAURANTS.

ARTWORK DESCRIPTIONS

INSIDE FRONT COVER ARTWORK:

Picture of a Company truck on the top of the page. Map of the United States
showing the locations of the Company's distribution centers on the bottom of the
page.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A COMMON
STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
<PAGE> 4

NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS,
AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION TO
SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREBY
SHALL UNDER ANY CIRCUMSTANCE IMPLY THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------

Until , 1996 (25 days after the commencement of the offering),
all dealers effecting transactions in the securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This delivery requirement is in addition to the obligation of dealers to deliver
a Prospectus when acting as Underwriters and with respect to their unsold
allotments of subscriptions.
------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................................................................... 2
Risk Factors.......................................................................... 10
Use of Proceeds....................................................................... 15
Dividend Policy....................................................................... 15
Dilution.............................................................................. 16
Capitalization........................................................................ 17
Selected Consolidated Financial Data.................................................. 18
Management's Discussion and Analysis of Financial Condition and Results of
Operations.......................................................................... 20
Business.............................................................................. 29
Management............................................................................ 41
Executive Compensation and Other Matters.............................................. 44
Certain Transactions.................................................................. 51
Principal Stockholders................................................................ 54
Description of Capital Stock.......................................................... 56
Shares Available for Future Sale...................................................... 58
Underwriters.......................................................................... 59
Legal Matters......................................................................... 60
Experts............................................................................... 60
Additional Information................................................................ 60
Financial Statements.................................................................. F-1
</TABLE>

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

The Company intends to furnish its stockholders with annual reports
containing consolidated financial statements examined by an independent public
accounting firm and quarterly reports for the first three quarters of each
fiscal year containing unaudited financial information.
------------------------

1
<PAGE> 5

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements
(including the notes thereto) included elsewhere in this Prospectus. Unless the
context otherwise requires, as used in this Prospectus, (i) the terms "Company"
and "ProSource" mean ProSource, Inc., together with its direct and indirect
wholly-owned subsidiaries, (ii) the term "Common Stock" means, collectively, the
Class A Common Stock and Class B Common Stock to be outstanding immediately
following completion of the offering and (iii) the term "pro forma" or "on a pro
forma basis" with respect to financial information for the Company's fiscal year
ended December 30, 1995 means such information, as adjusted to give effect to
the acquisition by the Company of the National Accounts Division of The
Martin-Brower Company and to the consummation of the offering and the
application of the estimated net proceeds thereof (assuming an initial public
offering price of $15 per share, the midpoint of the range set forth on the
cover page of this Prospectus) as if such events had occurred on January 1,
1995. Except as otherwise noted, all information in this Prospectus (i) gives
effect to the conversion of all of the Company's outstanding shares of Common
Stock into Class B Common Stock and a 100-for-one stock split that will occur
prior to the commencement of the offering (the "Recapitalization") and (ii)
assumes that the Underwriters' over-allotment option is not exercised. The
Company's fiscal year consists of a 52- or 53-week period ending on the last
Saturday of each calendar year. Fiscal 1994 consisted of 53 weeks.

THE COMPANY

ProSource is the nation's leading independent foodservice distributor
specializing in distribution to chain restaurants and is one of the largest
foodservice distributors in the United States. The Company distributes a wide
variety of items, including fresh and frozen meat and poultry, seafood, frozen
foods, canned and dry goods, fresh and pre-processed produce, beverages, dairy
products, paper goods and cleaning and other supplies. The Company specializes
in providing food and food-related products to two segments of the restaurant
industry -- limited-menu quick service restaurants, including Burger King,
Arby's, Long John Silver's, Sonic, Chick-fil-A, TCBY and Wendy's, and casual
dining restaurants, including Red Lobster, Olive Garden, TGIFriday's and
Chili's. ProSource is an indirect subsidiary of Onex Corporation. See
"Business -- Controlling Stockholder" and "Risk Factors -- Control of the
Company; Benefit of the Offering to Controlling Stockholder."

The Company was formed in 1992 to acquire Burger King Distribution Services
("BKDS"), the "in-house" distributor for Burger King Corporation ("BKC"), which
serviced approximately 4,150 Burger King restaurants. In the four years since
the acquisition, ProSource has, through a combination of acquisitions and
internal growth, become a leading distributor to chain restaurants, servicing
approximately 14,450 restaurants within 18 different restaurant chains. Through
a series of acquisitions during 1993 and 1994, the Company added approximately
1,100 of the restaurants included in its current customer base. In March 1995,
the Company entered the casual dining segment of the restaurant industry and
further expanded its quick service business with the acquisition of the National
Accounts Division ("NAD") of The Martin-Brower Company ("Martin-Brower"), which
added a total of approximately 8,000 restaurants within 12 chains included in
the Company's current customer base. The Company has also been successful in
expanding through internally generated sales. For example, since its formation,
the Company has added approximately 400 of the Burger King restaurants included
in its current customer base through the growth of existing franchisee customers
and the addition of new customers. The Company has also added approximately 570
Jenny Craig Weight Loss Centres and 150 Sonic restaurants through internal
growth. Since the Company's formation in 1992, net sales have grown from $1.3
billion in 1993 (the first full year of operations) to $4.0 billion in 1995 on a
pro forma basis.

The Company is a "systems" distributor specializing in distribution to
chain restaurants. The Company believes the chain restaurant segment of the
foodservice distribution industry is particularly attractive due to (i) the high
growth rate of the restaurants in this segment, with compound annual growth of
7% over the past

2
<PAGE> 6

three years according to industry sources, primarily due to the growth of
existing chain restaurants and the introduction of new chain restaurant
concepts, (ii) the uniformity of product offerings and consistency of demand by
chain restaurant customers, (iii) the increasingly important focus by chain
restaurants on foodservice distributors that can provide consistent quality and
reliable service on a nationwide basis to maintain the chain's uniform standards
and (iv) the fragmented nature of the foodservice distribution segment serving
chain restaurants, with over 3,000 companies operating in the industry. The
Company believes that the consolidation in this industry will continue as larger
foodservice distributors with nationwide service are better able to meet the
need for consistent quality and reliable service by chain restaurants.

STRATEGIES

The Company believes that it has one of the most comprehensive distribution
networks of any independent distributor serving chain restaurants, based on
geographic coverage. With net sales of $4.0 billion in 1995 on a pro forma
basis, the Company believes, based on its estimates, that it has captured
approximately 10% of the $42 billion chain restaurant distribution market in the
United States. The Company estimates that the next largest independent systems
distributor has a market share of approximately 6%. The Company believes that
its size and scale give it an advantage over its competitors with respect to
purchasing power and lower distribution costs. The Company plans to strengthen
its position as a market leader by continuing to pursue the following strategies
for maximizing profitability and enhancing its long-term growth opportunities.

Pursue Internal and External Growth Opportunities. The Company intends to
continue to grow through a combination of adding new customers and products
within the chains that it currently serves, adding new chains and, where
appropriate, making selective acquisitions of other foodservice distributors.

- Selective Acquisitions. The Company believes the fragmented nature of
the industry and consolidation activity offer the Company opportunities
to supplement internal growth through selective acquisitions. The Company
intends to continue to focus its acquisition strategy on systems
specialists that distribute principally to limited-menu quick service and
casual dining chain restaurants which will expand its customer base or
improve geographic customer density.

Margin Improvement/Cost Reduction Programs. The Company is undertaking
several initiatives to increase margins and reduce its overall cost structure.

3
<PAGE> 7

for approximately 17% of its customers and expects to service
approximately 75% through this method within three years. The Company
estimates the capital investment required for implementation of the cart
delivery system will be approximately $8 million and, as a result
primarily of reduced labor costs associated with deliveries, is
projecting cost savings to the Company, when fully implemented, of
approximately $10 million annually compared to projected costs of
conventional delivery methods. The Company believes that cart delivery
will also benefit its customers by reducing the disruption caused by
deliveries and labor costs associated with unloading.

- Corporate Unification Program. The Company is in the process of
integrating its preexisting operations with the NAD operations acquired
from Martin-Brower into a new corporate support center located in Coral
Gables, Florida. The corporate support center will allow the Company to
centralize all purchasing, routing, in-bound transportation and
operations support functions. This process, which is expected to be
completed by mid-1997 at an estimated capital cost of approximately $3
million, should reduce overall personnel levels by 75 positions and, as a
result, is expected to yield aggregate cost savings of approximately $5-6
million annually.

There can be no assurance that any of the above programs will be completed
within the projected time periods or will not have costs or require investment
in excess of the amounts anticipated, or that the projected cost savings will be
realized. Anticipated capital investment requirements for, and projected cost
savings from, the margin improvement/cost reduction programs have been derived
from internal analyses prepared, in certain instances, with the assistance of
independent consultants. Cost savings estimates have been determined by assuming
current sales levels and cost structure and adjusting for savings attributable
to (i) projected reductions in miles driven, (ii) lower lease costs and labor
costs associated with reduced delivery time and (iii) reduced personnel levels.
Realization of such estimated net cost savings could be impacted by a number of
factors such as inflation and changes in volume or service levels. The Company
intends to finance these initiatives with cash provided from operations,
borrowings under its credit facility and through operating leases. Proceeds of
the offering will be used, in part, to repay $21.8 million of the $144.6 million
outstanding as of June 29, 1996 under the Company's credit facility. See "Risk
Factors -- Net Losses," "Risk Factors -- No Assurance of Achieving Anticipated
Cost Savings" and "Summary -- Future Non-recurring Charges to Earnings."

Establish Position as Preeminent Supply Chain Manager. The Company
believes that its size, scale and expertise in foodservice distribution and
transportation systems allow it to assist its customers in managing the entire
chain of supply, from the vendor location to the customer's storeroom. Emphasis
on supply chain management has allowed the Company to identify value-added
services (such as the purchasing of non-proprietary products and transportation
services from the vendor to the distribution center) which the Company can
provide to its customers, resulting in reduced costs for its customers and
improved margins for the Company.

Technological Leadership. The Company believes that it is a leader within
the industry in the application of information technology to its operations. The
Company currently has in place a variety of information technology systems,
including electronic ordering, inventory management, financial and routing
systems. The Company continues to invest in technology. It has budgeted
approximately $5 million per year for the next three to five years for new
systems and upgrades and intends to invest approximately $5 million to implement
radio frequency and bar code scanning technology in its new distribution center
management systems. The Company intends to finance these investments with cash
provided from operations, borrowings under its credit facility and through
operating leases. See "Business -- Strategies -- Technological Leadership,"
"Business -- Operations and Distribution -- Order Fulfillment" and "Risk
Factors -- Net Losses." Among a new generation of information technology being
installed are new systems in the area of electronic customer ordering, "order
optimization" to manage the Company's purchasing and inventory functions, and
freight management. In addition, in connection with its "network optimization"
program, the Company intends to put in place new customer ordering and warehouse
management systems.

4
<PAGE> 8

completeness of the order, the timeliness of delivery and the customer's
satisfaction. The Company believes it is a leader in the industry in quality and
reliability of service to its customers. By providing a high level of service
and reliability, the Company believes it can reduce the number of reorders and
redeliveries, reducing costs for both the Company and its customers and
improving customer loyalty.

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

Although the Company's net sales have grown from $1.3 billion in 1993 (the
first full year of operations) to $4.0 billion in 1995 on a pro forma basis, it
has sustained consistent losses during this time due to high interest expense,
competitive price pressures and costs associated with the addition of new
customers and the development of new products and services. In addition, due to
certain restructuring charges, losses on impairment in value of long-lived
assets and non-recurring charges to earnings, the Company expects to record a
net loss for 1996. As a result, the Company had an accumulated deficit of $2.5
million and $20.5 million as of December 30, 1995 and June 29, 1996,
respectively.

Set forth below are summarized unaudited operating results (in millions
except for per share data) of the Company for the three and nine month periods
ended September 30, 1995 and September 28, 1996.

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------- -----------------------------
SEPTEMBER 30, SEPTEMBER 28, SEPTEMBER 30, SEPTEMBER 28,
1995 1996 1995 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales.................................... $ 1,008.1 $ 1,053.5 $ 2,455.9 $ 3,068.0
Gross profit................................. 78.3 80.7 193.2 235.8
Loss on impairment of long-lived assets...... -- -- -- 15.7
Restructuring charges........................ 0.2 -- 0.3 10.9
Earnings (loss) from operations.............. 3.1 5.8 7.2 (15.5)
Net earnings (loss).......................... (0.7) 1.4 (2.7) (16.6)
Net earnings (loss) per share................ $ (0.14) $ 0.25 $ (0.64) $ (3.13)
Average outstanding shares used in
calculation
(in thousands)............................. 5,236 5,375 4,242 5,305
</TABLE>

5
<PAGE> 9

THE OFFERING

<TABLE>
<S> <C>
Class A Common Stock offered................. 3,400,000 shares
Common Stock to be outstanding after the
offering:
Class A Common Stock....................... 3,400,000 shares
Class B Common Stock(1).................... 5,652,400 shares
Total.............................. 9,052,400 shares
Use of Proceeds.............................. To prepay a portion of the Company's
outstanding indebtedness.
Nasdaq National Market Symbol................ "PSDS"
Voting Rights; Dividends..................... 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.
Except as otherwise required by law, the
Class A Common Stock and Class B Common Stock
will vote together on all matters submitted
to a vote of stockholders, including the
election of directors. Following the
offering, the outstanding shares of Class A
Common Stock will represent approximately six
percent of the combined voting power of the
outstanding Common Stock (seven percent if
the Underwriters' over-allotment option is
exercised in full). Each share of Class B
Common Stock is convertible into Class A
Common Stock on a one-to-one basis at any
time at the option of the holder thereof and
in certain other circumstances. Class A
Common Stock and Class B Common Stock will be
entitled to share ratably, as a single class,
in any dividends declared by the Company on
the Common Stock. See "Description of Capital
Stock."
</TABLE>

- ---------------
(1) Includes 350,100 shares of Class B Common Stock to be issued to Onex
Corporation (collectively with its affiliates, "Onex"), or an affiliate
thereof, upon conversion of $2.5 million of principal and $1.0 million of
accrued interest outstanding under a 10% convertible subordinated note due
2002 (the "Onex Convertible Note") immediately prior to the offering.
Excludes 1,208,625 shares of Class B Common Stock reserved for issuance (i)
upon the exercise of stock options granted under the Company's Amended
Management Option Plan (1995) (the "1995 Option Plan"), (ii) upon the
exercise of stock options granted under the Company's 1996 Stock Option Plan
and (iii) under an outstanding warrant and certain other indebtedness which
is convertible into shares of Class B Common Stock at the option of the
holder thereof at any time. Also excludes 266,667 shares of Class B Common
Stock (assuming an initial public offering price equal to the midpoint of
the range set forth on the cover page of this Prospectus) to be issued to
Onex in payment of $4 million as consideration for the agreement of Onex to
relinquish its right to receive for an indefinite period an annual fee of
$0.8 million (subject to an annual inflation adjustment) for management
services rendered to the Company. On a fully diluted basis using the
treasury stock method (and including the 266,667 shares of Class B Common
Stock to be issued to Onex), assuming an initial public offering price equal
to the midpoint of the range set forth on the cover page of this Prospectus,
the Company will have 6,082,438 shares of Class B Common Stock issued and
outstanding after the offering. See "Capitalization," "Executive
Compensation and Other Matters -- Option Plans" and "Certain Transactions."

6
<PAGE> 10

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE AND CERTAIN OTHER DATA)

<TABLE>
<CAPTION>
SIX MONTHS FISCAL YEARS ENDED SIX MONTHS ENDED
ENDED ------------------------------------------ ----------------------------
DECEMBER 31, DECEMBER 25, DECEMBER 31, DECEMBER 30, JULY 1, JUNE 29,
1992(a) 1993(b) 1994(c) 1995(d) 1995 1996
------------ ------------ ------------ ------------ ----------- --------------
(26 WEEKS) (52 WEEKS) (53 WEEKS) (52 WEEKS) (26 WEEKS) (26 WEEKS)

<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales..................... $618.4 $1,329.3 $1,598.1 $3,461.8 $ 1,447.8 $2,014.1
Cost of sales................. 560.0 1,210.9 1,464.5 3,193.3 1,332.9 1,859.0
------ -------- -------- -------- --------- --------
Gross profit.................. 58.4 118.4 133.6 268.5 114.9 155.1
Operating expenses............ 51.7 114.2 131.0 255.2 110.7 149.8
Loss on impairment of
long-lived assets(e)........ -- -- -- -- -- 15.7
Restructuring charges(e)...... -- -- -- 0.7 0.1 10.9
------ -------- -------- -------- --------- --------
Earnings (loss) from
operations.................. 6.7 4.2 2.6 12.6 4.1 (21.3)
Interest expense, net......... 3.0 5.5 6.6 13.3 6.3 7.3
------ -------- -------- -------- --------- --------
Earnings (loss) before income
taxes and extraordinary
charge...................... 3.7 (1.3) (4.0) (0.7) (2.2) (28.6)
Income tax (provision)
benefit..................... (1.5) 0.5 1.6 (0.1) 1.0 10.6
------ -------- -------- -------- --------- --------
Earnings (loss) before
extraordinary charge........ 2.2 (0.8) (2.4) (0.8) (1.2) (18.0)
Extraordinary charge, net..... -- -- -- (0.8) (0.8) --
------ -------- -------- -------- --------- --------
Net earnings (loss)........... $ 2.2 $ (0.8) $ (2.4) $ (1.6) $ (2.0) $ (18.0)
====== ======== ======== ======== ========= ========
PER SHARE DATA:
Earnings (loss) before
extraordinary
charge per share(f)......... $ 0.96 $ (0.34) $ (0.99) $ (0.17) $ (0.33) $ (3.39)
Net earnings (loss) per
share(f).................... $ 0.96 $ (0.34) $ (0.99) $ (0.35) $ (0.53) $ (3.39)
Average outstanding shares
used in calculation (in
thousands).................. 2,311 2,406 2,410 4,491 3,746 5,302
OTHER DATA:
EBITDA (g)...................... $ 10.2 $ 12.3 $ 10.8 $ 27.4 $ 10.3 $ 11.5
Net operating asset
turnover(h)................... 11.0x 13.6x 16.5x 18.3x 16.9x 18.3x
Depreciation and amortization... $ 3.4 $ 7.9 $ 8.0 $ 12.7 $ 5.6 $ 5.3
Capital expenditures............ $ 1.9 $ 3.5 $ 1.4 $ 5.7 $ 1.7 $ 8.0
Number of restaurants served
(at end of period)............ 4,184 5,113 6,752 14,562 14,700 14,451
</TABLE>

<TABLE>
<CAPTION>
AT JUNE 29, 1996
DECEMBER 31, DECEMBER 25, DECEMBER 31, DECEMBER 30, ----------------------------
1992 1993(B) 1994(C) 1995(D) ACTUAL AS ADJUSTED(I)
------------ ------------ ------------ ------------ ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............... $ 39.5 $ 42.7 $ 41.6 $ 115.9 $ 113.5 $ 113.9
Total assets.................. 158.1 200.0 218.3 489.2 502.0 501.7
Total debt.................... 61.1 68.5 65.6 163.2 173.4 123.3
Stockholders' equity.......... 24.7 25.3 22.5 49.4 32.7 83.0
</TABLE>

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

(a) The Company was formed to effect the acquisition of BKDS on June 30, 1992.

(b) Includes the acquisition of certain operating assets of McCabe's Quality
Foods, California, Inc. for $3.9 million on February 27, 1993 and the
acquisition of certain assets and the assumption of certain liabilities of
Valley Food Services, Inc. for $9.3 million on March 27, 1993.

(c) Includes the acquisition of certain assets and the assumption of certain
liabilities of Malone Products, Inc. for $3.8 million on October 31, 1994.

(d) Includes the acquisition of substantially all of the assets and the
assumption of certain liabilities of NAD for $170 million on March 31,
1995.

(e) Charges resulting from the corporate and network consolidation program,
primarily for termination of leases and losses on the sale of furniture,
equipment and leasehold improvements, loss on impairment in value of land
and owned buildings and certain capitalized software costs.

7
<PAGE> 11

(f) See Note 1 (j) in the Notes to Consolidated Financial Statements.

(g) EBITDA represents earnings (loss) before provision for interest expense,
income taxes, depreciation, amortization, extraordinary charges, loss on
impairment of long-lived assets and restructuring charges. EBITDA is
presented to provide additional information about the Company's ability to
meet its future debt service, capital expenditure and working capital
requirements. EBITDA is one of the measures which determines the Company's
ability to borrow under its credit facility. EBITDA should not be
considered in isolation or as a substitute for operating income, cash flows
from operating activities and other income or cash flow statement data
prepared in accordance with generally accepted accounting principles or as
a measure of the Company's profitability or liquidity.

(h) Annualized net sales divided by the average balance of stockholders' equity
plus long-term debt.

(i) Includes pro forma adjustments to give effect to (i) the consummation of
the offering and (ii) the application of the estimated net proceeds thereof
as described in "Use of Proceeds," assuming an initial public offering
price equal to the midpoint of the range set forth on the cover page of
this Prospectus.

FUTURE NON-RECURRING CHARGES TO EARNINGS

The Company expects to incur certain non-recurring charges in the quarter
in which the offering is consummated. These charges are summarized as follows:

Expenses (pre-tax) associated with the amendment or termination of various
agreements:

- A non-cash charge of $1.5 million, assuming an initial public offering
price equal to the midpoint of the range set forth on the cover page of
this Prospectus, to record the effect of an amendment to the 1995 Option
Plan prior to the offering under which unvested options will vest
according to a specified time schedule. Such charge will equal the
aggregate difference between the initial public offering price of the
Class A Common Stock and the exercise price for such options. Vested
options will be unaffected. See "Executive Compensation and Other
Matters -- Option Plans." This $1.5 million will be reflected as a charge
to operations with a corresponding increase in additional paid-in
capital.

- A charge of $1.3 million for the termination of a consulting agreement
between the Company and certain former owners of Valley Food Services,
Inc., which agreement was due to expire on March 28, 1998.

- Onex currently receives an annual fee for management services rendered to
the Company. Onex has agreed to relinquish its right to receive such fee
upon completion of the offering, in consideration for which Onex will
receive $4.0 million payable in Class B Common Stock valued at the
initial public offering price. See "Certain Transactions -- Onex
Management Fees." This $4.0 million will be reflected as a charge to
operations with a corresponding increase in Common Stock and additional
paid-in capital.

Extraordinary charges:

- A pre-tax charge of up to $10.0 million associated with prepayment
penalties and the write-off of deferred financing costs to the extent
that the Company replaces its revolving credit facility and term loans.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."

8
<PAGE> 12

SUMMARY PRO FORMA CONSOLIDATED FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FISCAL YEAR
ENDED SIX MONTHS ENDED
------------ -------------------------
DECEMBER 30, JULY 1, JUNE 29,
1995(a) 1995(a) 1996(b)
------------ ---------- ----------
<S> <C> <C> <C>
(52 WEEKS) (26 WEEKS) (26 WEEKS)
STATEMENT OF OPERATIONS DATA:
Net sales........................................... $ 3,993.4 $ 1,979.4 $ 2,014.1
Cost of sales....................................... 3,689.4 1,829.1 1,859.0
------------ ---------- ----------
Gross profit........................................ 304.0 150.3 155.1
Operating expenses.................................. 290.9 146.4 149.8
Loss on impairment of long-lived assets(c).......... -- -- 15.7
Restructuring charges(c)............................ 0.7 0.1 10.9
------------ ---------- ----------
Earnings (loss) from operations..................... 12.4 3.8 (21.3)
Interest expense, net............................... 11.0 6.4 4.9
------------ ---------- ----------
Earnings (loss) before income taxes and
extraordinary
charge........................................... 1.4 (2.6) (26.2)
Income tax (provision) benefit...................... (0.9) 1.1 9.4
------------ ---------- ----------
Earnings (loss) before extraordinary charge......... $ 0.5 $ (1.5) $ (16.8)
========== ========== ==========
PER SHARE DATA:
Earnings (loss) before extraordinary charge per
share(d)......................................... $ 0.05 $ (0.20) $ (1.86)
========== ========== ==========
Average outstanding shares used in calculation (in
thousands)....................................... 8,217 7,458 9,040
</TABLE>

- ---------------
(a) Includes pro forma adjustments to give effect to the acquisition of NAD and
the consummation of the offering and the application of the estimated net
proceeds thereof as described in "Use of Proceeds," assuming an initial
public offering price equal to the midpoint of the range set forth on the
cover page of this Prospectus, as if such events had occurred on January 1,
1995. For a detailed description, see Notes to Unaudited Pro Forma
Condensed Consolidated Financial Information.

(b) Includes pro forma adjustments to give effect to the consummation of the
offering and the application of the estimated net proceeds thereof as
described in "Use of Proceeds," assuming an initial public offering price
equal to the midpoint of the range set forth on the cover page of this
Prospectus, as if such events had occurred on January 1, 1996. For a
detailed description, see Notes to Unaudited Pro Forma Condensed
Consolidated Financial Information.

(d) See Note (f) to Summary Consolidated Financial Data.

9
<PAGE> 13

RISK FACTORS

In addition to the other information set forth in this Prospectus, the
following risk factors should be considered carefully in evaluating the Company
and its business before purchasing the shares of Class A Common Stock offered
hereby.

Net Losses. Although the Company was profitable in its first six months of
operation in 1992, the Company had net losses of $0.8 million, $2.4 million and
$0.8 million (before an extraordinary charge in 1995 of $0.8 million related to
the write-off of certain deferred debt issuance costs) in 1993, 1994 and 1995,
respectively, due to (i) high interest expense associated with financing
incurred in connection with the formation of the Company and the Company's
subsequent acquisitions, (ii) competitive price pressures resulting in lower
gross margins and (iii) costs associated with the addition of new customers
(both internally and through acquisitions) and the development of new products
and services. In addition, the Company incurred a net loss of $18.0 million in
the six months ended June 29, 1996 due to restructuring charges and losses on
impairment in value of long-lived assets and expects to reflect certain
non-recurring charges to earnings in the quarter in which the offering is
consummated. See "Selected Consolidated Financial Data -- Future Non-recurring
Charges to Earnings." As a result, the Company had an accumulated deficit of
$2.5 million and $20.5 million as of December 30, 1995 and June 29, 1996,
respectively, and expects to record a net loss for 1996. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations." While
the Company intends to use the net proceeds of the offering to reduce
outstanding indebtedness, there can be no assurance that the Company will not
increase the outstanding indebtedness after the offering in connection with
future capital expenditures or acquisitions, or that price pressures and costs
associated with the addition of new customers and the development of new
products and services will not continue to have an adverse effect on the
Company's operating results. Furthermore, there can be no assurance that the
Company will not sustain net losses in the future. See "-- No Assurance of
Achieving Anticipated Cost Savings" and "-- Competition." The Company expects to
make capital investments aggregating approximately $76 million over the next
five years in connection with several initiatives to increase margins and reduce
its overall cost structure, including the development of a new national
distribution network, the implementation of an innovative cart delivery system
and the integration of operations into a new corporate support center located in
Coral Gables, Florida, as well as new management information systems and
upgrades and implementation of radio frequency and bar code scanning technology
in its new distribution center management systems. See
"Business -- Strategies -- Margin Improvement/Cost Reduction Programs,"
"Business -- Strategies -- Technological Leadership" and "Business -- Operations
and Distribution -- Order Fulfillment." Such costs are expected to be
capitalized and depreciated or amortized over periods ranging from three to ten
years. The Company expects such increase in depreciation and amortization to be
fully offset in each year by cost savings and productivity improvements
resulting from such initiatives.

Future Non-recurring Charges to Earnings. The Company expects to incur
certain non-recurring charges in the quarter in which the offering is
consummated. These pre-tax charges include (i) a non-cash charge of $1.5
million, assuming an initial public offering price equal to the midpoint of the
range set forth on the cover page of this Prospectus, to record the effect of an
amendment to the 1995 Option Plan prior to the offering under which unvested
options will vest according to a specified time schedule, (ii) a charge of $1.3
million for the termination of a consulting agreement between the Company and
certain former owners of Valley Food Services, Inc., which agreement was due to
expire on March 28, 1998, representing all remaining payments under such
agreement, (iii) a non-cash charge of $4.0 million, resulting from the issuance
of Class B Common Stock to Onex in consideration for the termination of a
management services agreement, and (iv) a charge of up to $10.0 million
associated with prepayment penalties and the write-off of deferred financing
costs to the extent and at the time that the Company replaces its revolving
credit facility and term loans. Such pre-tax charges will result in an aggregate
after-tax charge of approximately $10.4 million. As a result of such charges and
certain restructuring charges and losses on impairment in value of long-lived
assets reflected in the six month period ended June 29, 1996, the Company
expects to record a net loss for 1996. See "Selected Consolidated Financial
Data -- Future Non-recurring Charges to Earnings" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

10
<PAGE> 14

Low Margin Business; Inflation. The foodservice distribution industry in
general, and the chain restaurant segment of the industry in which the Company
operates in particular, are characterized by low profit margins and high asset
turnover. As a result, the Company's results of operations are sensitive to, and
may be materially adversely impacted by, among other things, competitive price
pressures, unexpected increases in fuel or other transportation related costs,
severe weather conditions, difficulties with the collectibility of accounts
receivable and inventory losses. There can be no assurance that one or more of
such factors will not adversely affect the Company's operating results. In
addition, a majority of the restaurants served by the Company purchase products
from the Company based on product cost plus a negotiated fixed dollar amount per
unit of measure. Accordingly, while increases in the cost of food and other
products do not reduce the Company's gross profit, such increases do result in a
lower gross profit percentage. Furthermore, inflation in operating expenses
without corresponding productivity increases could adversely affect the
Company's operating results. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

Dependence on Certain Chains and Customers. The Company derives
substantially all of its net sales from certain limited-menu quick service and
casual dining chains. The largest chains serviced by the Company are Burger
King, Red Lobster and Arby's, representing 38%, 15% and 10% of 1995 net sales,
respectively, on a pro forma basis. Adverse developments affecting such chains
or a decision by a corporate owner or franchisor to revoke its approval of the
Company as a distributor could have a material adverse effect on the Company's
operating results.

The Company's customers are generally individual franchisees or
corporate-owned restaurants within such restaurant chains. Although the
corporate owner or franchisor of a chain generally reserves the right to approve
the distributors for its franchisees, each customer makes its selection of a
foodservice distributor from an approved group of distributors. The Company's
largest customer is Darden Restaurants, Inc. (owner of all Olive Garden and Red
Lobster restaurants), representing 21% of the Company's 1995 net sales on a pro
forma basis. No other customer accounted for more than 10% of the Company's pro
forma net sales in 1995. Adverse events affecting any of the Company's largest
customers, a material decrease in sales to any of such customers or the loss of
a major customer through the acquisition thereof by a company with an internal
foodservice distribution business or otherwise could have a material adverse
effect on the Company's operating results. In addition, the Company's continued
growth is dependent in part on the continued growth and expansion of its
customers.

In connection with the acquisition of BKDS in 1992, the Company entered
into an exclusive distributor agreement and related distribution agreements with
BKC, pursuant to which, through 2002, (i) the Company is designated as the
exclusive distributor to BKC's company-owned and operated Burger King
restaurants in the United States (which accounted for 3.9% of 1995 net sales on
a pro forma basis), (ii) the Company is one of ten companies approved as
regional distributors to franchised Burger King restaurants in the United
States, and (iii) the Company is the only company approved by BKC to service
Burger King restaurants on a national basis. The Company has also entered into
distribution agreements through 1998 with Olive Garden and Red Lobster pursuant
to which the Company is the primary distributor to the restaurants owned by
Olive Garden and Red Lobster operating in the United States. All Olive Garden
and Red Lobster restaurants are currently company-owned. Such contracts may be
terminated at the option of BKC, Olive Garden or Red Lobster, as the case may
be, upon a material breach by the Company and under certain other circumstances.
See "Business -- Customers."

Ability to Integrate Acquisitions; No Assurance of Future
Acquisitions. The Company has achieved a significant portion of its growth
since 1992 through acquisitions. Although each of the acquired companies has a
significant operating history, the Company has a limited history of owning and
operating these businesses on a consolidated basis. The Company was formed in
1992 to acquire BKDS. Through a series of acquisitions during 1993 and 1994, the
Company added approximately 1,100 of the restaurants included in its current
customer base. In March 1995, the Company entered the casual dining segment of
the restaurant industry and further expanded its quick service business with the
acquisition of NAD from Martin-Brower, its largest acquisition to date, adding
approximately 8,000 of the restaurants included in the Company's current
customer base. While the Company believes that the acquisition of NAD provides
significant opportunities to increase

11
<PAGE> 15

margins and reduce costs through among other things, the realization of
economies of scale through corporate integration, there can be no assurance that
the Company's expectations for the performance of the combined companies will be
met or that management will be able to successfully implement such integration
on a timely, cost-efficient basis without disruption in the quality and
reliability of service to its customers or diversion of management resources.
The integration of such businesses will also require improvements in the
Company's management information systems which are currently in progress. There
can be no assurance, however, that such improvements will be realized on a
timely, cost-efficient basis.

As part of the Company's growth strategy, the Company will continue to
review acquisition opportunities in the future. There can be no assurance,
however, that the Company will be able to continue to acquire businesses on
satisfactory terms or that it will be able to integrate successfully any such
acquired businesses into existing operations.

No Assurance of Achieving Anticipated Cost Savings. The Company is
undertaking several initiatives to reduce its overall cost structure (the "Cost
Savings Initiatives"). These include (i) a "network optimization" process under
which it intends to consolidate and integrate its existing distribution network
of 34 centers into 23 centers, (ii) a cart delivery system intended to reduce
the time and labor associated with restaurant deliveries and (iii) integration
of its preexisting operations with the NAD operations acquired from Martin-
Brower into a corporate support center. Management estimates that the Cost
Savings Initiatives will result in significant net cost savings for the Company.
See "Business -- Strategies -- Margin Improvement/Cost Reduction Programs" for
an estimate of such savings. Cost savings estimates have been determined by
assuming current sales levels and cost structure and adjusting for savings
attributable to (i) projected reductions in miles driven, (ii) lower lease costs
and labor costs associated with reduced delivery time and (iii) reduced
personnel levels. Management believes that such assumptions are reasonable in
light of existing business conditions and prospects. However, any actual net
costs savings which might be realized by the Company could vary from the
estimates contained herein. Realization of such estimated net cost savings could
be impacted by a number of factors such as inflation and changes in volume or
service levels. There also can be no assurance that unforeseen costs and
expenses or other factors will not offset the projected net cost savings in
whole or in part or that such net cost savings will be achieved. See " -- Net
Losses" and " -- Future Non-recurring Charges to Earnings."

Capacity Constraints; Ability to Implement Network Optimization
Program. The Company's continued growth has created and will continue to create
the need for the expansion and improvement of its facilities. As the Company
nears maximum utilization of a given facility, operations may be constrained and
inefficiencies may be created which could adversely affect operating results
until such time as either such facility is expanded or volume is shifted to
another facility. Conversely as the Company implements its network optimization
program, excess capacity may also create certain inefficiencies and adversely
affect operating results. In addition, there can be no assurance that management
will be able to successfully implement its network optimization program on a
timely, cost-effective basis without disruption in the quality and reliability
of service to its customers or diversion of management resources. See
"Business -- Strategies -- Margin Improvement/Cost Reduction Programs -- Network
Optimization."

Customers. Approximately 25% of the Company's net sales are derived from
customers with which the Company does not have contracts. These customers are
thus not restricted by contract from ceasing to do business with the Company on
little or no notice. In addition, the Company's contracts with its other
customers are subject to termination by the customer prior to expiration of the
stated term under circumstances specified in each contract, including in some
cases failure to comply with performance reliability standards. The Company
believes that from time to time it may not have been in strict compliance with
all of the performance reliability standards in certain of its customer
contracts. Although the Company is not aware of any issues of non-compliance
which could reasonably be expected to result in termination of any such
contracts prior to expiration of the stated term, and has not been notified by
any customer that it intends to terminate its contract with the Company, there
can be no assurance that historic levels of business from any customer of the
Company will be maintained in the future. See "Business -- Customers."

12
<PAGE> 16

Competition. The foodservice distribution industry is highly competitive.
The Company competes with other systems foodservice distribution companies
focused on chain restaurants and with broadline foodservice distributors which
distribute to a wide variety of customers. The Company believes that
distributors in the foodservice industry compete on the basis of price and the
quality and reliability of service. The Company believes that its size,
centralized purchasing operations and ability to offer broad market coverage
through a wide network of distribution centers give it a competitive advantage
over smaller regional and local distributors. However, in light of the
consolidation in the foodservice distribution industry, the Company could face
increased competition to the extent that there is an increase in the number of
foodservice distributors specializing in distribution to chain restaurants on a
nationwide basis. See "Business -- Competition."

Reduction in Distribution Fees. Distribution fees received from a number
of the Company's customers decreased significantly in 1993 and 1994 as a result
of competitive pricing pressures. While distribution fees have stabilized in
1995 and the first six months of 1996, and management expects such stabilization
to continue through 1996, there can be no assurance that competitive pricing
pressure will not recur in the future. See "Business -- Competition" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Dependence on Key Personnel. The Company's success is substantially
dependent upon the continued services of its senior management, particularly
David R. Parker, Chairman of the Board, and Thomas C. Highland, President and
Chief Executive Officer, of the Company. The loss of the services of one or more
of such senior management could adversely affect the Company's operating
results. The Company has entered into employment agreements with Messrs. Parker
and Highland and other members of senior management, and has obtained key-man
life insurance in the amount of $4.0 million on each of Messrs. Parker and
Highland. In addition, the Company's continued growth depends on the ability to
attract and retain skilled operating managers and employees and the ability of
its key personnel to manage the Company's growth and consolidate and integrate
its operations. See "Management."

Control of the Company; Benefit of the Offering to Controlling
Stockholder. Upon completion of the offering, Onex will beneficially own 87% of
the outstanding shares of Class B Common Stock. Each share of Class B Common
Stock entitles the holder thereof to ten votes as compared to one vote for the
holder of each share of Class A Common Stock. Consequently, Onex will control
82% of the combined voting power of the outstanding Common Stock after
completion of the offering and will be able to control the vote on all matters
submitted to a vote of the holders of Common Stock, including the election of
directors and approval of significant corporate transactions such as amendments
to the Company's Restated Certificate of Incorporation and mergers and sales of
all or substantially all of the Company's assets. Such consolidation of voting
power could have the effect of delaying, deterring or preventing a change in
control of the Company that might be otherwise beneficial to stockholders. Onex
Corporation, based in Toronto, Canada, is a publicly listed (on The Toronto
Stock Exchange and The Montreal Exchange) diversified company that operates
through autonomous subsidiaries and strategic partnerships. Onex had
consolidated revenues of Cdn.$6.5 billion for 1995 and consolidated assets of
Cdn.$2.8 billion at June 30, 1996. In addition to its interests in ProSource, as
of September 30, 1996, Onex had investments in a broad range of companies,
including Onex Food Services, Inc. (which, through its subsidiaries, Sky Chefs,
Inc. and Caterair International Inc., is engaged in the airline catering
business), Dura Automotive Systems Inc., Tower Automotive, Inc., Phoenix
Pictures Inc., Vencap, Inc. and Imperial Parking Limited. None of Onex's current
businesses competes with or is a customer of the Company. Mr. Gerald W.
Schwartz, the Chairman, President and Chief Executive Officer of Onex and a
director of the Company, owns a controlling interest in Onex, and, therefore,
effectively controls the affairs of the Company. See "Business -- Controlling
Stockholder" and "Principal Stockholders." Approximately $15 million of the
proceeds of the offering will be used to retire subordinated indebtedness
payable to Onex. See "Use of Proceeds." In addition, Onex currently receives an
annual fee for management services rendered to the Company. Onex has agreed to
relinquish its right to receive such fee upon completion of the offering, in
consideration for which Onex will receive $4.0 million payable in Class B Common
Stock valued at the initial public offering price. See "Certain Transactions."

Shares Available for Future Sale. Sales of substantial amounts of Class A
Common Stock, or the perception that such sales could occur, after the offering
could adversely affect prevailing market prices for the

13
<PAGE> 17

Class A Common Stock. Of the 3,400,000 shares of Class A Common Stock to be
outstanding upon completion of the offering, all of such shares will be freely
tradeable without restriction or further registration under the Securities Act
of 1933, as amended (the "Securities Act"), unless such shares are acquired by
an "affiliate" of the Company as that term is defined under Rule 144 under the
Securities Act ("Rule 144"). The shares of Class B Common Stock to be
outstanding upon completion of the offering are convertible into shares of Class
A Common Stock on a one-to-one basis at the option of the holder and in certain
other circumstances. Shares of Class A Common Stock issuable upon conversion of
Class B Common Stock have not been registered under the Securities Act and may
not be sold unless they are registered or unless an exemption from registration,
such as the exemption provided by Rule 144, is available. Certain holders of
Class B Common Stock have registration rights with respect to an aggregate of
1,080,500 shares of Class A Common Stock (assuming exercise of existing options)
issuable upon conversion thereof, and the holder of a warrant to purchase shares
of Class B Common Stock has registration rights with respect to the 283,425
shares of Class A Common Stock issuable upon conversion of such Class B Common
Stock. Pursuant to certain "lock up" agreements described herein, all shares of
Class A Common Stock issuable upon conversion of Class B Common Stock held by
the Company's existing stockholders will be eligible for sale beginning 180 days
from the date of this Prospectus, subject to certain limitations under Rule 144.
See "Shares Available for Future Sale."

Absence of Public Market; Volatility of Market Price for Stock. Prior to
the offering, there has been no public market for the Class A Common Stock, and
there can be no assurance that an active trading market for the Class A Common
Stock will develop or continue after the offering. The initial public offering
price of the Class A Common Stock will be determined by negotiations between the
Company and the Underwriters and may not be indicative of the market price of
the Class A Common Stock after the offering. See "Underwriters." From time to
time after the offering, there may be significant volatility in the market price
for the Class A Common Stock. Quarterly operating results of the Company or
other foodservice distributors, changes in general conditions in the economy,
the financial markets or the food distribution or foodservice industries,
announcements of proposed acquisitions and failure to complete announced
acquisitions, unusual weather conditions, failure to meet the projections of
securities analysts or other developments affecting the Company or its
competitors could cause the market price of the Class A Common Stock to
fluctuate substantially. In addition, in recent years the stock market has
experienced extreme price and volume fluctuations. This volatility has had a
significant effect on the market prices of securities issued by many companies
for reasons unrelated to their operating performance.

Dilution; Dividend Policy. Investors in the offering will experience
immediate and substantial dilution, and current stockholders will receive a
material increase in the net tangible book value of their shares. See
"Dilution." The Company does not anticipate paying dividends on the Class A
Common Stock in the foreseeable future. The Company's ability to pay cash
dividends is restricted by the terms of its credit agreement.

Forward-Looking Statements. This Prospectus includes forward-looking
statements, including statements concerning the Company's business strategy,
operations, cost savings initiatives, economic performance, financial condition
and liquidity and capital resources. Such statements are subject to various
risks and uncertainties. The Company's actual results may differ materially from
the results discussed in such forward-looking statements because of a number of
factors, including those identified in this "Risk Factors" section and elsewhere
in this Prospectus. See "Prospectus Summary," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business." The
forward-looking statements are made as of the date of this Prospectus, and the
Company assumes no obligation to update the forward-looking statements, or to
update the reasons why actual results could differ from those projected in the
forward-looking statements.

14
<PAGE> 18

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 3,400,000 shares of
Class A Common Stock offered hereby are estimated to be $46.4 million, assuming
an initial public offering price equal to the midpoint of the range set forth on
the cover page of this Prospectus, and after deducting underwriting discounts
and commissions and estimated offering expenses payable by the Company. The
Company intends to use the net proceeds of the offering as follows:

- to prepay $15 million in outstanding principal and $0.4 million in
accrued interest under a subordinated note payable to Onex which bears
interest at 12% and matures on April 1, 2005, and to prepay, at a
discount, $10 million in outstanding principal and $0.1 million in
accrued interest under a subordinated note payable to Martin-Brower for a
total payment of $9.2 million, which note bears interest at an effective
rate of approximately 9% per annum over the life of such note and matures
on March 31, 2002 (collectively, the "Subordinated Notes"); and

- to repay $21.8 million of outstanding indebtedness under the Company's
revolving credit facility, which bore interest as of June 29, 1996 at
prime plus 0.5% or the Eurodollar rate plus 2.75% per annum, and matures
on March 31, 2000. On a weighted average basis the interest rate was
9.06% for 1995. As of June 29, 1996, there was $144.6 million outstanding
under the revolving credit facility. See "Certain Transactions -- Onex
Subordinated Notes," "Note 6 in the Notes to Consolidated Financial
Statements" and "Summary -- Strategies."

DIVIDEND POLICY

The Company has not paid any cash dividends on its Common Stock since
inception. The current policy of the Company's Board of Directors is to retain
all earnings to provide funds for the operation and expansion of the Company's
business. The Company does not anticipate declaring or paying cash dividends on
the Common Stock in the foreseeable future. Future cash dividends, if any, will
be at the discretion of the Board of Directors and will depend upon, among other
things, future earnings, capital requirements and surplus, the general financial
condition of the Company, restrictive covenants and agreements to which the
Company may be subject, and such other factors as the Board of Directors may
deem relevant. The terms of the Company's credit agreement prohibit it from
paying dividends to its stockholders without the approval of the lending group.
The Company's Restated Certificate of Incorporation provides that the holders of
Class A Common Stock and Class B Common Stock share ratably in any dividend
declared by the Board of Directors, subject to the preferential rights of any
outstanding Preferred Stock. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Description of Capital Stock."

15
<PAGE> 19

DILUTION

At June 29, 1996, the net tangible book value (deficit) of the Company was
$(10.4) million or $(1.97) per share of Common Stock. After giving effect to the
sale of 3,400,000 shares of Class A Common Stock offered hereby by the Company
at an assumed initial public offering price equal to the midpoint of the range
set forth on the cover page of this Prospectus and the application of the
estimated net proceeds therefrom as described in "Use of Proceeds," the pro
forma net tangible book value of the Company at June 29, 1996 would have been
$36.4 million or $4.18 per share. This represents an immediate increase in pro
forma net tangible book value of $6.15 per share to existing stockholders and an
immediate dilution of $10.82 per share to new investors purchasing Class A
Common Stock in the offering. The following table illustrates this per share
dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................... $15.00
Net tangible book value (deficit) per share at June 29,
1996(1)....................................................... $(1.97)
Increase in net tangible book value per share attributable to the
offering...................................................... 6.15
Pro forma net tangible book value per share after the offering..... 4.18
------
Dilution per share to new investors(2)............................. $10.82
======
</TABLE>

- ---------------
(1) Net tangible book value (deficit) per share of Common Stock is determined by
dividing the Company's tangible net value (tangible assets less liabilities)
at June 29, 1996 by the number of shares of Common Stock that will be
outstanding prior to the offering.

(2) Dilution is computed by subtracting pro forma net tangible book value per
share of Common Stock after the offering from the assumed initial public
offering price per share.

The following table summarizes, on a pro forma basis at June 29, 1996, the
differences between the total consideration and the average price per share paid
by the existing stockholders and by the new investors purchasing shares of Class
A Common Stock in the offering.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- ---------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders........................ 5,652,400 62% $ 56,642,000 53% $ 10.02
New investors................................ 3,400,000 38% 51,000,000 47% 15.00
---------- --- ------------ ---
Total...................................... 9,052,400 100% $107,642,000 100%
========== === ============ ===
</TABLE>

The table assumes the issuance of 350,100 shares of Class B Common Stock to
be issued to Onex upon conversion of the Onex Convertible Note immediately prior
to the offering. Issuance of such shares will increase net tangible book value
by $0.23 per share. The table also assumes (i) no exercise of any outstanding
options or warrants to purchase Common Stock, (ii) no conversion of any other
outstanding indebtedness which is convertible into Common Stock and (iii) no
issuance of Class B Common Stock to Onex in consideration for the agreement of
Onex to relinquish its right to receive an annual fee for management services
rendered to the Company. See "Certain Transactions." Exercise of such options or
warrants, or conversion of such indebtedness would be anti-dilutive.

16
<PAGE> 20

CAPITALIZATION

The following table sets forth, on an unaudited basis, the capitalization
of the Company as of June 29, 1996, and the capitalization as of such date as
adjusted to give effect to (i) the consummation of the offering and (ii) the
application of the estimated net proceeds thereof as described in "Use of
Proceeds," assuming an initial offering price equal to the midpoint of the range
set forth on the cover page of this Prospectus. The data presented below should
be read in conjunction with the Company's financial statements and related notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and other information included elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
AS OF JUNE 29, 1996
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Total debt, including current maturities:
Senior debt......................................................... $144,594 $ 122,765
Subordinated notes payable.......................................... 24,832 --
Convertible subordinated notes payable(1)........................... 4,001 500
-------- --------
Total debt.................................................. $173,427 $ 123,265
Stockholders' equity:
Preferred stock, par value $.01 per share; 10,000,000 shares
authorized; no shares issued..................................... -- --
Class A Common Stock, par value $.01 per share; 50,000,000 shares
authorized; no shares issued and outstanding actual and 3,400,000
shares issued and outstanding as adjusted........................ -- 34
Class B Common Stock, par value $.01 per share; 10,000,000 shares
authorized; 5,302,300 shares issued and outstanding actual and
5,652,400 shares issued and outstanding as adjusted(2)........... 53 57
Additional paid-in capital.......................................... 53,088 102,981
Accumulated deficit................................................. (20,497) (20,081)
Accumulated foreign currency translation adjustment................. 68 68
-------- --------
Total stockholders' equity.................................. 32,712 83,059
-------- --------
Total capitalization.................................................. $206,139 $ 206,324
======== ========
</TABLE>

- ---------------
(1) On an actual basis, includes $2.5 million of principal and $1.0 million of
accrued interest outstanding under the Onex Convertible Note, which Onex
intends to convert into Common Stock immediately prior to the offering. See
"Certain Transactions -- Onex Subordinated Notes."

(2) On an adjusted basis, includes 350,100 shares of Class B Common Stock to be
issued to Onex upon conversion of the Onex Convertible Note immediately
prior to the offering. Excludes 1,208,625 shares of Class B Common Stock
reserved for issuance (i) upon the exercise of stock options granted under
the Company's 1995 Option Plan, (ii) upon the exercise of stock options
granted under the Company's 1996 Stock Option Plan and (iii) under an
outstanding warrant and certain other indebtedness which is convertible into
shares of Class B Common Stock at the option of the holder thereof at any
time. Also excludes 266,667 shares of Class B Common Stock (assuming an
initial public offering price equal to the midpoint of the range set forth
on the cover page of this Prospectus) to be issued to Onex in payment of $4
million as consideration for the agreement of Onex to relinquish its right
to receive for an indefinite period an annual fee of $0.8 million (subject
to an annual inflation adjustment) for management services rendered to the
Company. On a fully diluted basis using the treasury stock method (and
including the 266,667 shares of Class B Common Stock to be issued to Onex),
assuming an initial public offering price equal to the midpoint of the range
set forth on the cover page of this Prospectus, the Company will have
6,082,438 shares of Class B Common Stock issued and outstanding after the
offering. See "Executive Compensation and Other Matters -- Option Plans" and
"Certain Transactions."

17
<PAGE> 21

SELECTED CONSOLIDATED FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE AND CERTAIN OTHER DATA)

The historical selected consolidated financial data presented below as of
and for the six months ended December 31, 1992 (the Company began operations in
July 1992) and the years ended December 25, 1993, December 31, 1994 and December
30, 1995, are derived from, and are qualified by reference to, the Company's
financial statements that have been audited by KPMG Peat Marwick LLP,
independent auditors. The selected consolidated financial data presented below
for the six months ended July 1, 1995 and June 29, 1996 have been derived from
unaudited financial information prepared by the Company. In the opinion of
management, the income statement and balance sheet data for the six months ended
July 1, 1995 and June 29, 1996 reflect all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of results of
interim periods. Operating results for the six months ended June 29, 1996 are
not necessarily indicative of results to be expected for the full fiscal year.
The data presented below should be read in conjunction with the Company's
financial statements and related notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and other information
included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS FISCAL YEARS ENDED SIX MONTHS ENDED
ENDED ------------------------------------------ -----------------------
DECEMBER 31, DECEMBER 25, DECEMBER 31, DECEMBER 30, JULY 1, JUNE 29,
1992(a) 1993(b) 1994(c) 1995(d) 1995 1996
------------ ------------ ------------ ------------ ---------- ----------
(26 WEEKS) (52 WEEKS) (53 WEEKS) (52 WEEKS) (26 WEEKS) (26 WEEKS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................. $618.4 $1,329.3 $1,598.1 $3,461.8 $1,447.8 $2,014.1
Cost of sales......................... 560.0 1,210.9 1,464.5 3,193.3 1,332.9 1,859.0
------ ------ ------ ------- ------ ------
Gross profit.......................... 58.4 118.4 133.6 268.5 114.9 155.1
Operating expenses.................... 51.7 114.2 131.0 255.2 110.7 149.8
Loss on impairment of long-lived
assets(e)........................... -- -- -- -- -- 15.7
Restructuring charges(e).............. -- -- -- 0.7 0.1 10.9
------ ------ ------ ------- ------ ------
Earnings (loss) from operations....... 6.7 4.2 2.6 12.6 4.1 (21.3)
Interest expense, net................. 3.0 5.5 6.6 13.3 6.3 7.3
------ ------ ------ ------- ------ ------
Earnings (loss) before income taxes
and extraordinary charge............ 3.7 (1.3) (4.0) (0.7) (2.2) (28.6)
Income tax (provision) benefit........ (1.5) 0.5 1.6 (0.1) 1.0 10.6
------ ------ ------ ------- ------ ------
Earnings (loss) before extraordinary
charge.............................. 2.2 (0.8) (2.4) (0.8) (1.2) (18.0)
Extraordinary charge, net............. -- -- -- (0.8) (0.8) --
------ ------ ------ ------- ------ ------
Net earnings (loss)................... $ 2.2 $ (0.8) $ (2.4) $ (1.6) $ (2.0) $ (18.0)
====== ====== ====== ======= ====== ======
PER SHARE DATA:
Earnings (loss) before extraordinary
charge per share(f)................. $ 0.96 $ (0.34) $ (0.99) $ (0.17) $ (0.33) $ (3.39)
Net earnings (loss) per share(f)...... $ 0.96 $ (0.34) $ (0.99) $ (0.35) $ (0.53) $ (3.39)
Average outstanding shares used in
calculation (in thousands).......... 2,311 2,406 2,410 4,491 3,746 5,302
BALANCE SHEET DATA (at end of period):
Working capital(g).................... $ 39.5 $ 42.7 $ 41.6 $ 115.9 $ 95.9 $ 113.5
Total assets.......................... 158.1 200.0 218.3 489.2 483.2 502.0
Total debt (g)........................ 61.1 68.5 65.6 163.2 142.8 173.4
Stockholders' equity ................. 24.7 25.3 22.5 49.4 48.9 32.7
OTHER DATA:
EBITDA (h)............................ $ 10.2 $ 12.3 $ 10.8 $ 27.4 $ 10.3 $ 11.5
Net operating asset turnover (i)...... 11.0x 13.6x 16.5x 18.3x 16.9x 18.3x
Depreciation and amortization......... $ 3.4 $ 7.9 $ 8.0 $ 12.7 $ 5.6 $ 5.3
Capital expenditures.................. $ 1.9 $ 3.5 $ 1.4 $ 5.7 $ 1.7 $ 8.0
Number of restaurants served (at end
of period).......................... 4,184 5,113 6,752 14,562 14,700 14,451
</TABLE>

- ---------------
(a) The Company was formed to effect the acquisition of BKDS on June 30, 1992.

18
<PAGE> 22

(c) Includes the acquisition of certain assets and the assumption of certain
liabilities of Malone Products, Inc. for $3.8 million on October 31, 1994.

(d) Includes the acquisition of substantially all of the assets and the
assumption of certain liabilities of NAD for $170 million on March 31,
1995.

(f) See Note 1(j) in the Notes to Consolidated Financial Statements.

(g) At July 1, 1995, working capital reflects $32.6 million payable to
Martin-Brower in connection with the acquisition of NAD. Total debt was
increased in August 1995 by borrowings incurred to pay such amount.

(h) EBITDA represents earnings (loss) before provision for interest expense,
income taxes, depreciation, amortization, extraordinary charges, loss on
impairment of long-lived assets and restructuring charges. EBITDA is
presented to provide additional information about the Company's ability to
meet its future debt service, capital expenditure and working capital
requirements. EBITDA is one of the measures which determines the Company's
ability to borrow under its credit facility. EBITDA should not be
considered in isolation or as a substitute for operating income, cash flows
from operating activities and other income or cash flow statement data
prepared in accordance with generally accepted accounting principles or as
a measure of the Company's profitability or liquidity.

(i) Annualized net sales divided by the average balance of stockholders' equity
plus long-term debt, assuming that the incurrence of debt referred to in
(g) above occurred on March 31, 1995.

FUTURE NON-RECURRING CHARGES TO EARNINGS

The Company expects to incur certain non-recurring charges in the quarter
in which the offering is consummated. These charges are summarized as follows:

Expenses (pre-tax) associated with the amendment or termination of various
agreements:

Extraordinary charges:

19
<PAGE> 23

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

The Company began operations in July 1992 following the acquisition of
certain assets and the assumption of certain liabilities of BKDS, the "in-house"
distributor for BKC, which serviced 4,150 Burger King restaurants. In the four
years since the acquisition, ProSource has, through a combination of
acquisitions and internal growth, become a leading distributor to chain
restaurants, servicing approximately 14,450 restaurants within 18 different
restaurant chains. Excluding the effect of acquisitions, the Company's net sales
increased at a compound annual rate of 9.8% from 1992 to 1995, compared to the
foodservice distribution industry's compound annual growth rate of approximately
2.4% over this period. The Company's acquisitions consisted of:

- The acquisition in February 1993 of certain operating assets of McCabe's
Quality Foods, California, Inc. ("McCabe's"), a regional systems
distributor based in California, for $3.9 million. Such acquisition
solidified the Company's market position in Northern California and
resulted in the addition of 127 of the Burger King restaurants included
in the Company's current customer base.

- The acquisition in March 1993 of certain assets and the assumption of
certain liabilities of Valley Food Services, Inc. ("Valley"), a regional
systems distributor based in Missouri, for $9.3 million. Such acquisition
resulted in the addition of 318 of the restaurants included in the
Company's current customer base, including certain Wendy's restaurants.

- The acquisition in October 1994 of certain assets and the assumption of
certain liabilities of Malone Products, Inc. ("Malone"), a regional
systems distributor based in Oklahoma, for $3.8 million. Such acquisition
resulted in the addition of 656 of the restaurants included in the
Company's current customer base, including certain Sonic and KFC
restaurants.

- The acquisition in March 1995 of substantially all of the assets and the
assumption of certain liabilities of NAD headquartered in Chicago,
Illinois, a national systems distributor operating eleven distribution
centers located throughout the United States and one center in Canada,
for $170 million. Such acquisition resulted in the addition of
approximately 8,000 of the restaurants included in the Company's current
customer base, including Arby's, Chick-fil-A, Chili's, Long John
Silver's, Olive Garden, Red Lobster, TCBY and TGIFriday's restaurants.

Primarily as a result of these acquisitions, the Company's net sales
increased from $1.3 billion in 1993 to $3.5 billion in 1995. The NAD
acquisition, funded primarily by debt, resulted in a substantial increase in net
interest expense from approximately $6.6 million in 1994 to approximately $13.3
million in 1995; however, net interest expense as a percentage of net sales
decreased during this period from 0.41% to 0.39%. All of the Company's
acquisitions were accounted for as purchases and are included in the Company's
consolidated financial statements from their respective dates of acquisition.

With the acquisition of NAD in March 1995, the Company initiated a program
of evaluating the profitability of its customer accounts which includes setting
target levels of profitability and developing procedures to attain these
targeted goals. Under this program, if the Company is not able to attain the
targeted level of profitability for a particular customer through price
increases, reduced operating costs or providing value-added services within a
reasonable period of time, the Company may discontinue its relationship with the
customer. The Company's decision to discontinue its relationship with such
customers has generally had a positive effect on operating results since the
Company has been able to reduce variable operating expenses and free capacity to
accommodate the growth of more profitable accounts. In addition, certain chains
decide from time to time to close restaurants or concepts which do not meet
their long-term profitability targets. The closing of restaurants by a customer
generally has a negative effect on short-term operating results until the lost
volume can be replaced with new sales. As a result of the Company's new customer
evaluation program and the decision of a certain customer to close a restaurant
concept, the Company no longer sells to 604 restaurants which accounted for
$74.0 million of net sales in 1995 on a pro forma basis.

20
<PAGE> 24

Although the Company was profitable for the first six months of operations
ended December 31, 1992, the Company had net losses of $0.8 million, $2.4
million and $0.8 million (before an extraordinary charge in 1995 of $0.8 million
related to the write-off of certain deferred debt issuance costs) in 1993, 1994
and 1995, respectively, due to (i) high interest expense associated with
financing incurred in connection with the formation of the Company and the
Company's subsequent acquisitions, (ii) competitive price pressures resulting in
lower gross margins and (iii) costs associated with the addition of new
customers (both internally and through acquisitions) and the development of new
products and services. In addition, the Company incurred a net loss of $18.0
million in the six months ended June 29, 1996 due to restructuring charges and
losses on impairment in value of long-lived assets, and expects to reflect
certain non-recurring charges to earnings in the quarter in which the offering
is consummated. See "Selected Consolidated Financial Data -- Future
Non-recurring Charges to Earnings." As a result, the Company had an accumulated
deficit of $2.5 million and $20.5 million as of December 30, 1995 and June 29,
1996, respectively, and expects to record a net loss for 1996. As the net
proceeds of the offering will be used to reduce the outstanding indebtedness of
the Company, management expects that interest expense will decrease following
the offering. See "Use of Proceeds." In addition, while distribution fees
received from a number of the Company's customers decreased significantly in
1993 and 1994 as a result of competitive pricing pressures, distribution fees
have stabilized in 1995 and the first six months of 1996. While management
expects such stabilization to continue through 1996, there can be no assurance
that competitive pricing pressure will not recur in the future. The Company is
also undertaking several initiatives to increase margins and reduce its overall
cost structure, including the development of a new national distribution
network, the implementation of an innovative cart delivery system and the
integration of operations into a new corporate support center located in Coral
Gables, Florida. For a description of certain projected cost savings and costs
to be incurred in connection with such programs, see
"Business -- Strategies -- Margin Improvement/Cost Reduction Programs" and "Risk
Factors -- No Assurance of Achieving Anticipated Cost Savings."

As of June 29, 1996 the Company had recorded net deferred tax assets of
$23.7 million. Management believes that it is more likely than not that the net
deferred tax assets will be realized through the reversal of net deductible
temporary differences during periods in which the Company generates taxable
income. In order to fully realize the net deferred tax assets, the Company will
need to generate future taxable income of approximately $56.1 million. The
Company anticipates that increases in taxable income will result primarily from
(i) future projected revenue growth through the addition of new restaurant
chains and the expansion of existing restaurant chains, (ii) a reduction in
interest expense due to a reduction in indebtedness, (iii) cost savings through
its corporate and network consolidation plan and (iv) other cost reduction
initiatives. The offering, and the concurrent issuance of shares of Common Stock
to Onex as described in this Prospectus, will have no effect on the utilization
of the Company's net deferred tax assets because those actions will not result
in an "ownership change" under Section 382 of the Internal Revenue Code of 1986,
as amended (the "Code").

As a result of a study to analyze, among other things, ways to integrate
the NAD operations, improve customer service, reduce operating costs and
increase existing warehouse capacity, the Company adopted a plan to consolidate
its corporate and network operations. As a result, in the first quarter of 1996,
the Company accrued restructuring charges and recorded a loss on impairment in
value of long-lived assets of $10.9 million and $15.7 million, respectively.
These are anticipated costs associated with the termination of leases on
existing facilities, losses on the sale of furniture, equipment, buildings and
leasehold improvements and write-off of certain capitalized software costs which
do not meet the long-term information technology strategy of the Company. In
1995 the Company incurred restructuring charges of $0.7 million primarily
related to the integration of the Company's preexisting operations with the NAD
operations acquired from Martin-Brower into a new corporate support center in
Coral Gables, Florida. As of June 29, 1996, the Company had approximately $10.5
million of accrued unpaid restructuring charges.

The Company derives its revenues primarily from the distribution of a wide
variety of items to chain restaurants, including fresh and frozen meat and
poultry, seafood, frozen foods, canned and dry goods, fresh and pre-processed
produce, beverages, dairy products, paper goods and cleaning and other supplies.
The foodservice distribution industry in general, and the chain restaurant
segment of the industry in which the Company operates in particular, is
characterized by high asset turnover and low profit margins. As a "systems"

21
<PAGE> 25

distributor specializing in distribution to chain restaurants, the Company
generally generates higher volume, lower gross margin sales requiring fewer but
larger deliveries than a broadline distributor which distributes to a wide
variety of customers, such as independent and chain restaurants, schools,
cafeterias and hospitals. In addition, systems distribution allows for more
efficient use of vehicles, facilities and personnel, resulting in lower
operating expenses as a percentage of net sales when compared to broadline
distribution. As a result, the Company believes systems distributors are better
able to service chain restaurants than broadline distributors because they can
offer their customers a higher quality of service at a lower cost. See
"Business -- Foodservice Distribution Industry."

A majority of the restaurants served by the Company purchase products from
the Company based on product cost plus a negotiated fixed dollar amount per unit
of measure. As a result, the Company's gross margin percentage may be positively
or negatively impacted as the product cost per unit of measure decreases or
increases, respectively. The Company's product mix changed substantially in 1995
as a result of the NAD acquisition because casual dining chain restaurants,
particularly those which serve seafood, have a higher average product cost per
unit of measure, thereby reducing gross margin as a percentage of sales.
Similarly, periods of inflation in food and other product prices result in
higher sales values and product costs per unit of measure. While such increases
do not affect the Company's gross profit, they do result in a lower gross profit
percentage. However, inflation in operating expenses without corresponding
productivity improvements can have a negative effect on the Company's operating
results as operating expenses increase while gross profit remains constant.
Conversely, periods of deflation can have a positive effect on the Company's
results.

The principal components of the Company's expenses include (i) cost of
sales, which represents the net amount paid to product vendors plus amounts paid
for in-bound freight, and (ii) operating expenses which include primarily labor
and equipment charges related to warehousing and delivery. Because warehousing
and delivery expenses can be relatively fixed in the short term, unexpected
changes in the Company's net sales, such as those resulting from adverse weather
or other events, can have a significant short-term impact on operating income.
See "-- Quarterly Results and Seasonality."

The Company's fiscal year ends on the Saturday closest to December 31.
Consequently, the Company will periodically have a 53 week fiscal year. 1995 and
1993 each consisted of 52 weeks, while 1994 consisted of 53 weeks.

RECENT OPERATING RESULTS

Set forth below are summarized unaudited operating results (in millions
except for per share data) of the Company for the three and nine month periods
ended September 30, 1995 and September 28, 1996.

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------- -----------------------------
SEPTEMBER 30, SEPTEMBER 28, SEPTEMBER 30, SEPTEMBER 28,
1995 1996 1995 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales.................................... $ 1,008.1 $ 1,053.5 $ 2,455.9 $ 3,068.0
Gross profit................................. 78.3 80.7 193.2 235.8
Loss on impairment of long-lived assets...... -- -- -- 15.7
Restructuring charges........................ 0.2 -- 0.3 10.9
Earnings (loss) from operations.............. 3.1 5.8 7.2 (15.5)
Net earnings (loss).......................... (0.7) 1.4 (2.7) (16.6)
Net earnings (loss) per share................ $ (0.14) $ 0.25 $ (0.64) $ (3.13)
Average outstanding shares used in
calculation (in thousands)................. 5,236 5,375 4,242 5,305
</TABLE>

Net sales in the three month period ended September 28, 1996 increased 4.5%
over the same period in 1995, primarily as a result of increased sales volume to
existing restaurants. Sales to restaurant chains served during both years
increased approximately 6.5%. Gross profit, expressed as a percentage of net
sales, was 7.7% for the three month period ended September 28, 1996 compared to
7.8% for the same period in 1995. The improvements in earnings from operations
in the third quarter of 1996 reflects the higher gross profit without a

22
<PAGE> 26

corresponding increase in operating expenses from the same three month period in
1995, primarily reflecting the favorable impact of the Company's continuing
focus on operating efficiencies.

RESULTS OF OPERATIONS

The following sets forth, for the periods indicated, the components of the
Company's consolidated statements of operations expressed as a percentage of net
sales.

<TABLE>
<CAPTION>
FISCAL YEARS ENDED SIX MONTHS ENDED
-------------------------------------------- -------------------
DECEMBER 25, DECEMBER 31, DECEMBER 30, JULY 1, JUNE 29,
1993 1994 1995 1995 1996
------------ ------------ ------------ ------- --------
<S> <C> <C> <C> <C> <C>
Net sales............................. 100.00% 100.00% 100.00% 100.00% 100.00%
Cost of sales......................... 91.09 91.64 92.24 92.07 92.30
------ ------ ------ ------ ------
Gross profit........................ 8.91 8.36 7.76 7.93 7.70
Operating expenses.................... 8.59 8.20 7.37 7.65 7.44
Loss on impairment of long-lived
assets.............................. -- -- -- -- 0.78
Restructuring charges................. -- -- 0.02 -- 0.54
------ ------ ------ ------ ------
Earnings (loss) from operations..... 0.32 0.16 0.37 0.28 (1.06)
Interest expense, net................. (0.42) (0.41) (0.39) (0.43) (0.36)
Earnings (loss) before income taxes
and extraordinary charge............ (0.10) (0.25) (0.02) (0.15) (1.42)
Income tax (provision) benefit........ 0.04 0.10 -- 0.06 0.53
------ ------ ------ ------ ------
Earnings (loss) before extraordinary
charge.............................. (0.06) (0.15) (0.02) (0.09) (0.89)
Extraordinary charge, net............. -- -- (0.02) (0.05) --
------ ------ ------ ------ ------
Net earnings (loss)................. (0.06)% (0.15)% (0.04)% (0.14)% (0.89)%
====== ====== ====== ====== ======
</TABLE>

SIX MONTHS ENDED JUNE 29, 1996 COMPARED TO SIX MONTHS ENDED JULY 1, 1995

Net sales increased 39.1% to $2,014.1 million in the six month fiscal
period ended June 29, 1996 (the "1996 fiscal period") from $1,447.8 million in
the six month fiscal period ended July 1, 1995 (the "1995 fiscal period"). The
increase in net sales is primarily attributable to the acquisition of NAD on
March 31, 1995. Net sales increased 1.8% in the 1996 fiscal period when compared
to net sales for the 1995 fiscal period presented on a pro forma basis. Sales in
the 1996 fiscal period were adversely impacted by the elimination of certain
customers, as well as the adverse winter weather conditions experienced in a
number of the Company's markets during the first quarter. Net sales to existing
customers in the 1996 fiscal period increased by $86.6 million or 4.5% when
compared to the 1995 fiscal period presented on a pro forma basis. This increase
in net sales is primarily due to increased sales to such customers as a result
of the addition of new restaurants and increased sales volume at existing
restaurants. Such increase was partially offset by $9.4 million in declining
sales volume at certain chains as they redesigned their menus and product
offerings for broader consumer appeal.

Gross profit increased 35.1% to $155.1 million in the 1996 fiscal period
compared to $114.9 million in the 1995 fiscal period. The gross profit
percentage decreased to 7.7% in the 1996 fiscal period compared to 7.9% in the
1995 fiscal period. The gross profit percentage decrease is primarily
attributable to the higher cost of the product mix purchased by customers added
through the acquisition of NAD (which customers had a 6.8% gross profit margin
for the 1996 fiscal period) and, to a lesser extent, negotiation of new
contracts with certain NAD customers which resulted in lower distribution fees.
In most cases, in consideration for the decrease in distribution fees, the
Company was able to secure a longer term contract and the right to provide
in-bound transportation and/or purchasing services for such customers. Gross
profit margin excluding the effect of the NAD acquisition increased to 8.7% in
the 1996 fiscal period compared to 8.6% in the 1995 fiscal period, primarily as
a result of improved inventory management which resulted in a reduction of
product cost.

23
<PAGE> 27

Operating expenses increased 35.3% to $149.8 million in the 1996 fiscal
period from $110.7 million in the 1995 fiscal period. As a percentage of net
sales, operating expenses declined to 7.4% in the 1996 fiscal period from 7.7%
in the 1995 fiscal period. This decrease is primarily a result of the
acquisition of NAD, which has a product mix with a higher unit sales value.
Operating expenses as a percentage of net sales, excluding the NAD acquisition,
were 8.4% in both fiscal periods. Operating expenses as a percentage of NAD
sales were 6.6% in the 1996 fiscal period compared to 6.4% in the 1995 fiscal
period, principally as a result of higher delivery costs due, in part, to the
start-up costs of the cart delivery program.

Losses from operations in the 1996 fiscal period were $21.3 million, as a
result of restructuring charges of $10.9 million and a loss on impairment in
value of long-lived assets of $15.7 million. Both the restructuring charges and
impairment losses are related to a plan to consolidate and integrate the
Company's corporate and network operations following the NAD acquisition. Of the
restructuring charges, approximately $7.9 million relates to the termination of
existing facility leases, $1.2 million represents costs to be incurred after
cessation of operations in the closed facilities and $1.8 million represents all
other costs. The application of Statement of Financial Accounting Standards No.
121, which became effective on January 1, 1996 and requires that long-lived
assets be reviewed for impairment (measured based on the fair value of the
assets), required the Company to recognize a loss of approximately $7.3 million
on land and owned buildings and $4.3 million on furniture and equipment and
leasehold improvements it intends to hold and use through the completion of the
plan and $4.1 million of capitalized software costs which do not meet the
long-term information technology strategy of the Company. Earnings from
operations excluding restructuring charges and impairment losses were $5.3
million in the 1996 fiscal period compared to $4.1 million in the 1995 fiscal
period.

Net interest expense increased 16.6% to $7.3 million in the 1996 fiscal
period from $6.3 million in the 1995 fiscal period, primarily attributable to
the additional borrowings associated with the acquisition of NAD. Net interest
expense as a percentage of net sales decreased 16.2% from 0.43% to 0.36% as a
result of improved net operating asset turnover. See "-- Liquidity and Capital
Resources."

The income tax benefit for the 1996 fiscal period increased $9.6 million
over the benefit for the 1995 fiscal period. The increase in the tax benefit was
attributable to the Company's greater pre-tax loss in the 1996 fiscal period.
The effective rates of the Company's income tax benefit (expressed as a
percentage of pre-tax loss) were 37.1% for the 1996 fiscal period and 44.1% for
the 1995 fiscal period, which reflect the anticipated annual effective rates for
the respective fiscal years.

The extraordinary charge in the 1995 fiscal period represents the write-off
of unamortized deferred debt issuance costs of $1.3 million, net of the related
tax benefit of $0.5 million, associated with debt that was refinanced as a
result of the NAD acquisition. See "-- Liquidity and Capital Resources."

YEAR ENDED DECEMBER 30, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

Net sales increased 116.6% to $3,461.8 million in 1995 from $1,598.1
million in 1994. The increase in net sales was primarily attributable to the
acquisition of NAD on March 31, 1995 and the full year effect of the Malone
acquisition on October 31, 1994. Net sales excluding the effect of the NAD and
Malone acquisitions in 1995 increased by $95.8 million or 6.1% when compared to
1994 net sales. The increase in net sales is primarily due to increased sales to
existing accounts as a result of the addition of new restaurants and increased
sales volume at existing restaurants, offset, in part, by an additional week of
net sales in 1994.

Gross profit increased 101.0% to $268.5 million in 1995 from $133.6 million
in 1994. The gross profit percentage decreased to 7.8% in 1995 compared to 8.4%
in 1994. The gross profit percentage decrease is primarily attributable to the
higher cost of the product mix purchased by customers added through the NAD
acquisition. Gross profit excluding the effect of the NAD and Malone
acquisitions increased to 8.7% of sales in 1995 compared to 8.4% in 1994. The
increase is primarily a result of the renegotiation of a contract with one of
the Company's largest customers and the growth of a new account added in
mid-1994, for which the Company records a distribution fee without any related
product cost.

Operating expenses increased 94.8% to $255.2 million in 1995 from $131.0
million in 1994. As a percentage of net sales, operating expenses declined to
7.4% in 1995 from 8.2% in 1994. This decrease is a

24
<PAGE> 28

result of the acquisition of NAD which has a product mix with a higher unit
sales value. Operating expenses as a percentage of net sales, excluding the NAD
acquisition, increased to 8.4% in 1995 from 8.2% in 1994, primarily attributable
to increased personnel due to growth of the business, the payment of management
incentives which vested due to achievement of business plan objectives, and
higher workers' compensation and vehicular insurance costs.

Earnings from operations increased to $12.6 million in 1995 from $2.6
million in 1994. The 1995 earnings were reduced by $0.7 million in restructuring
charges related to the consolidation and integration of the corporate support
functions following the NAD acquisition.

Net interest expense increased 102.2% to $13.3 million in 1995 from $6.6
million in 1994, primarily attributable to the additional borrowings associated
with the acquisition of NAD. However, net interest expense as a percentage of
net sales decreased 5.5% from 0.41% to 0.39% as a result of lower interest rates
and higher net operating asset turnover. See "-- Liquidity and Capital
Resources."

The income tax provision in 1995 was $0.1 million compared to an income tax
benefit of $1.6 million in 1994. The 1995 provision resulted from a lower
pre-tax loss in 1995 which, because of permanent differences resulting from the
NAD acquisition, translated into a relatively small amount of taxable income.

YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 25, 1993

Net sales increased 20.2% to $1,598.1 million in 1994 from $1,329.3 million
in 1993. Net sales excluding the effect of the Valley and Malone acquisitions
increased by $229.3 million, or 18.1% of 1993 net sales, primarily from the
growth in sales to Burger King restaurants. 1994 also included an additional
week of sales.

Gross profit increased 12.8% to $133.6 million in 1994 from $118.4 million
in 1993. Gross profit as a percentage of sales decreased to 8.4% in 1994
compared to 8.9% in 1993. The decrease is primarily a result of competitive
pricing pressures on distribution fees. See "-- General."

Operating expenses increased 14.7% to $131.0 million in 1994 from $114.2
million in 1993. As a percentage of net sales, operating expenses declined to
8.2% in 1994 from 8.6% in 1993. This decrease is attributable to the planned
staff reductions during 1994 and the impact of increased sales in 1994 without a
corresponding increase in fixed operating expenses.

Earnings from operations decreased to $2.6 million in 1994 from $4.2
million in 1993, primarily as a result of the decrease in gross profit
percentage.

Net interest expense increased 19.4% to $6.6 million in 1994 from $5.5
million in 1993, primarily as a result of higher interest rates.

Income tax benefit for 1994 increased $1.1 million over the benefit for
1993. The increase in the tax benefit was attributable to the Company's greater
pre-tax loss in 1994. The Company's income tax benefit reflects an effective tax
rate of 40.9% for 1994, compared to an effective rate of 37.5% for 1993.

LIQUIDITY AND CAPITAL RESOURCES

The Company historically has financed its operations and growth primarily
with cash flow from operations, borrowings under its credit facilities,
operating leases and normal vendor trade credit terms. The Company's cash flow
from operations was $9.0 million, $0.9 million and $50.0 million, in 1993, 1994
and 1995, respectively. The significant cash flow in 1995 was attributable to
the one-time benefit of acquiring assets without assuming certain corresponding
operating liabilities in connection with the acquisition of NAD. During the 1996
fiscal period, cash used in operations was $3.0 million, primarily as a result
of lower earnings from operations in the first quarter and other seasonal
fluctuations.

Cash used in investing activities was $8.0 million in the 1996 fiscal
period, all of which related to capital expenditures, primarily for cart
delivery equipment ($2.6 million) and computer systems upgrades ($3.8 million).
The Company anticipates capital expenditures of approximately $15 to $20 million
in each of the next three to five years in connection with the implementation of
its new distribution network, including the

25
<PAGE> 29

expansion of warehousing facilities to accommodate expected growth, continued
investment in computer systems and the further deployment of cart deliveries.
The Company intends to finance such capital expenditures with cash provided from
operations, borrowings under its credit facility and through operating leases.
Cash used in investing activities was $175.6 million in 1995, primarily to fund
the NAD acquisition for $170.3 million and capital expenditures of $5.7 million
(primarily for cart delivery equipment and computer systems upgrades). In 1994
net cash provided by investing activities was $1.9 million. Proceeds from the
settlement of certain purchase price provisions relating to the BKDS acquisition
were $6.6 million, offset by $3.8 million used in the Malone acquisition and
$1.4 million for capital expenditures, primarily related to computer systems
upgrades. Cash used in investing activities was $16.1 million in 1993, of which
$13.2 million was for the Valley and McCabe's acquisitions and $2.4 million was
for capital expenditures related to computer systems upgrades.

The Company's financing activities include borrowings under, and
refinancings of, various credit facilities and the issuance of equity securities
and subordinated notes principally to finance acquisitions. The Company's
financing activities resulted in net cash provided by financing activities of
$11.5 million in the 1996 fiscal period, $126.7 million in 1995 and $8.7 million
in 1993 and net cash used by financing activities of $3.2 million in 1994. In
March 1995, the Company entered into a $240 million loan agreement with
NationsBank of Georgia N.A. and certain other financial institutions. Such
agreement provides for a revolving credit facility of up to $210 million and
term loans aggregating $30 million. Such facility and term loans were used to
finance the acquisition of NAD and refinance certain of the Company's
outstanding indebtedness. Availability under the revolving credit facility may
also be used to fund the Company's working capital requirements. As of June 29,
1996, there was an aggregate of $144.6 million outstanding under such loan
agreement. The loan agreement terminates on March 31, 2000 and the revolving
credit facility and term loans bear interest at prime plus 0.5% or the
Eurodollar borrowing rate plus 2.75%. The revolving credit facility and term
loans are secured by a lien on substantially all of the Company's assets. In
addition, the loan agreement contains restrictions on, among other things, the
Company's ability to pay dividends, prepay subordinated indebtedness, dispose of
assets, make future capital expenditures and investments and make loans and
other financial accommodations to affiliates, as well as the flow of funds from
the Company's subsidiaries to the parent company.

The net proceeds of the offering will be used as follows: (i) $15.4 million
to prepay principal and accrued interest under the $15 million Subordinated Note
held by Onex, (ii) $9.2 million to prepay at a discount the $10 million
Subordinated Note held by Martin-Brower and (iii) $21.8 million to repay a
portion of amounts outstanding under the Company's revolving credit facility.
The reduction of outstanding indebtedness with the proceeds of the offering will
result in a reduction of interest expense. At June 29, 1996, the Company had
$173.4 million of total indebtedness, which had an overall weighted average
annual interest rate of 9.14%, excluding the amortization of deferred financing
costs. See Note 6 of the Notes to Consolidated Financial Statements. After
giving effect to the offering and the use of the estimated net proceeds thereof
as described in "Use of Proceeds," assuming an initial public offering price
equal to the midpoint of the range set forth on the cover page of this
Prospectus, as of June 29, 1996, pro forma total indebtedness would have been
$123.3 million, with an overall weighted average annual interest rate of 8.9%.
After giving effect to the offering, as of June 29, 1996, the Company's pro
forma borrowing availability under its revolving credit facility would have been
$94.5 million.

The Company is in preliminary discussions with several bank groups to
refinance its revolving credit facility and term loans with new bank financing
or an asset-backed securitization facility. Based on proposals received by the
Company, the Company believes that interest on the remaining outstanding amounts
could be reduced by 100-200 basis points by such refinancing. To the extent the
Company replaces its revolving credit facility, it expects to incur a pre-tax
extraordinary charge in the quarter in which the offering is consummated of up
to $10.0 million associated with prepayment penalties of approximately $4.0
million and write-off of the deferred financing costs. The Company believes a
new credit facility will also provide more flexibility in managing the Company's
working capital requirements. There can be no assurance that the Company will be
successful in refinancing its outstanding credit facility and term loans or
consummating an asset-backed securitization.

26
<PAGE> 30

The Company expects to incur certain other non-recurring (pre-tax) charges
to operations in the quarter in which the offering is consummated. These charges
are summarized as follows:

- A non-cash charge of $1.5 million, assuming an initial public offering
price equal to the midpoint of the range set forth on the cover page of
this Prospectus, to record the effect of an amendment to the 1995
Option Plan prior to the offering under which unvested options will
vest according to a specified time schedule. Such charge will equal the
aggregate difference between the initial public offering price of the
Class A Common Stock and the exercise price for such options. This $1.5
million will be reflected as a charge to operations with a
corresponding increase in additional paid-in capital.

- A payment of $1.3 million for the termination of a consulting agreement
between the Company and certain former owners of Valley, which
agreement was due to expire on March 28, 1998.

- The issuance to Onex of $4.0 million in Class B Common Stock valued at
the initial public offering price in exchange for the agreement of Onex
to relinquish its right to receive an annual fee, payable in cash, for
management services rendered to the Company. This $4.0 million will be
reflected as a charge to operations with a corresponding increase in
Common Stock and additional paid-in capital.

The Company believes that the combination of proceeds received from the
offering, cash flow generated from operations and borrowings available under its
current credit facility (or any refinancing thereof) are sufficient to satisfy
its anticipated working capital needs for at least 12 months. Management may
determine that it is necessary or desirable to obtain financing for growth
through additional bank borrowings or the issuance of new debt or equity
securities. The Company is a holding company with no independent operations or
assets other than an investment in its operating subsidiaries, and, as such, it
is dependent on its operating subsidiaries to obtain cash flow. The Company's
loan agreement includes certain restrictive covenants which limit the flow of
funds from the Company's subsidiaries to the parent company. Such covenants are
not expected to have a material effect on the ability of the parent to meet its
cash obligations.

ASSET MANAGEMENT

Net operating asset turnover on average was 13.6 times, 16.5 times, 18.3
times and 18.3 times for 1993, 1994, 1995 and the 1996 fiscal period,
respectively. As a percentage of net sales, working capital on average was
3.30%, 2.99%, 2.95% and 3.13% for 1993, 1994, 1995, and the 1996 fiscal period,
respectively. Working capital turnover (net sales divided by working capital),
which measures the Company's effectiveness in managing its net current assets,
was on average 30.3 times, 33.4 times, 33.8 times and 31.9 times for 1993, 1994,
1995 and the 1996 fiscal period, respectively.

The Company's inventory turnover averaged 40.4 times, 44.4 times, 24.8
times, and 27.2 times for 1993, 1994, 1995, and the 1996 fiscal period,
respectively. The decrease in 1995 and 1996 is attributable to the acquisition
of NAD, which has a lower inventory turnover due to the increased complexity and
greater number of stock keeping units maintained for casual dining restaurant
chains. The high rate of inventory turnover benefits the Company by allowing it
to finance a portion of its working capital requirements through payables to its
vendors. Average accounts payable days, which measures the number of days
accounts payable are outstanding, were 19.1 days, 23.3 days, 22.4 days, and 21.9
days, for 1993, 1994, 1995, and the 1996 fiscal period, respectively.

Most of the Company's sales are made on open account terms. Credit terms
vary by customers and most allow discounts for early payment. The number of days
sales on average accounts receivable, which represents the Company's experience
in converting sales into cash, was 22.3 days, 26.1 days, 20.9 days, and 20.0
days for 1993, 1994, 1995, and the 1996 fiscal period, respectively. The
increase in days sales outstanding during 1994 resulted from inefficiencies
encountered in converting the Company's accounts receivable system.

27
<PAGE> 31

QUARTERLY RESULTS AND SEASONALITY

Set forth is summary information with respect to the Company's operations
for the most recent ten fiscal quarters. Historically, the restaurant and
foodservice business is seasonal with lower sales in the first calendar quarter.
In addition, the weather in the first quarter of 1996 was particularly severe,
adversely impacting sales. Furthermore, the Company may experience quarterly
fluctuations in net sales depending on the timing of any acquisitions.
Management believes the Company's quarterly results will continue to be impacted
by the seasonality of the restaurant business and the timing of any future
acquisitions.

<TABLE>
<CAPTION>
FISCAL YEAR 1994
---------------------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER(a)(b)
------- -------- -------- -------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Net sales....................................... $ 356.6 $ 389.5 $ 399.8 $ 452.2
Gross profit.................................... 29.9 32.3 33.0 38.4
Earnings (loss) from operations................. (0.5) 2.6 0.9 (0.4)
Net earnings (loss)............................. (1.2) 0.5 (0.5) (1.2)
</TABLE>

<TABLE>
<CAPTION>
FISCAL YEAR 1995
---------------------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER(c) QUARTER QUARTER
------- -------- -------- -------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Net sales....................................... $ 411.4 $1,036.4 $1,008.1 $ 1,005.9
Gross profit.................................... 35.4 79.5 78.3 75.3
Earnings (loss) from operations................. (0.5) 4.6 3.1 5.4
Earnings (loss) before extraordinary charge..... (1.3) 0.1 (0.7) 1.1
Net earnings (loss)............................. (2.1) 0.1 (0.7) 1.1
</TABLE>

<TABLE>
<CAPTION>
FISCAL 1996
--------------------
1ST 2ND
QUARTER QUARTER
------- --------
(IN MILLIONS)
<S> <C> <C>
Net sales....................................... $ 968.7 $1,045.4
Gross profit.................................... 73.2 81.9
Earnings (loss) from operations................. (26.9) 5.6
Net earnings (loss)............................. (19.2) 1.2
</TABLE>

- ---------------
(a) Includes the acquisition of certain assets and the assumption of certain
liabilities of Malone on October 31, 1994.

(b) Includes fourteen weeks of operations due to the 53 week year.

(c) Includes the acquisition of substantially all of the assets and the
assumption of certain liabilities of NAD on March 31, 1995.

BUSINESS COMBINATIONS

All of the Company's acquisitions have been accounted for using the
purchase method and accordingly the acquired assets and liabilities have been
recorded at fair value at the date of acquisition. The excess of the purchase
price over the fair value of tangible net assets acquired related to these
business combinations was approximately $41.3 million, including the effect of a
revision on March 31, 1996 of the estimates of certain costs related to the NAD
acquisition which increased goodwill by $7.6 million. The Company's intangible
assets, including goodwill, are being amortized on a straight-line basis ranging
from 3 to 40 years. The Company has determined that goodwill should be amortized
over 40 years, which reflects management's best estimate of the appropriate
period over which to amortize goodwill associated with those acquisitions and is
consistent with industry practice.

28
<PAGE> 32

BUSINESS

ProSource is the nation's leading independent foodservice distributor
specializing in distribution to chain restaurants and is one of the largest
foodservice distributors in the United States. The Company distributes a wide
variety of items, including fresh and frozen meat and poultry, seafood, frozen
foods, canned and dry goods, fresh and pre-processed produce, beverages, dairy
products, paper goods and cleaning and other supplies. The Company specializes
in providing food and food-related products to two segments of the restaurant
industry -- limited-menu quick service restaurants, including Burger King,
Arby's, Long John Silver's, Sonic, Chick-fil-A, TCBY and Wendy's, and casual
dining restaurants, including Red Lobster, Olive Garden, TGIFriday's and
Chili's. ProSource is an indirect subsidiary of Onex Corporation. See
"-- Controlling Stockholder" and "Risk Factors -- Control of the Company;
Benefit of the Offering to Controlling Stockholder."

The Company was formed in 1992 to acquire BKDS, the "in-house" distributor
for BKC, which serviced approximately 4,150 Burger King restaurants. In the four
years since the acquisition, ProSource has, through a combination of
acquisitions and internal growth, become a leading distributor to chain
restaurants, servicing approximately 14,450 restaurants within 18 different
restaurant chains. In February 1993, the Company acquired certain operating
assets of McCabe's, and in connection therewith added 127 of the Burger King
restaurants included in the Company's current customer base. In March 1993, the
Company acquired certain assets and assumed certain liabilities of Valley,
adding 318 of the restaurants included in the Company's current customer base,
including certain Wendy's restaurants. In October 1994, the Company acquired
certain assets and assumed certain liabilities of Malone, adding 656 of the
restaurants included in the Company's current customer base, including certain
Sonic and KFC restaurants. In March 1995, the Company entered the casual dining
segment of the restaurant industry and further expanded its quick service
business with the acquisition of substantially all of the assets and the
assumption of certain liabilities of NAD from Martin-Brower, which added a total
of approximately 8,000 restaurants within 12 chains included in the Company's
current customer base. The Company has also been successful in expanding through
internally generated sales. For example, since its formation, the Company has
added approximately 400 of the Burger King restaurants included in its current
customer base through the growth of existing franchisee customers and the
addition of new customers. The Company has also added approximately 570 Jenny
Craig Weight Loss Centres and 150 Sonic restaurants through internal growth.
Since the Company's formation in 1992, net sales have grown from $1.3 billion in
1993 (the first full year of operations) to $4.0 billion in 1995 on a pro forma
basis.

The Company was incorporated in 1992 as a Delaware corporation. Its
principal executive offices are located at 550 Biltmore Way, 10th Floor, Coral
Gables, Florida 33134, and the Company's telephone number is (305) 529-2500. The
Company operates under the name "ProSource Distribution Services."

FOODSERVICE DISTRIBUTION INDUSTRY

The foodservice distribution business involves the purchasing, warehousing,
marketing and transportation of fresh and frozen meat and poultry, seafood,
frozen foods, canned and dry goods, fresh and pre-processed produce, beverages,
dairy products, paper goods and cleaning and other supplies from manufacturers
to a broad range of enterprises, including restaurants, cafeterias, nursing
homes, hospitals, other health care facilities and schools. The foodservice
distribution business generally does not include distribution to supermarkets
and other retail grocery stores. In 1995, the United States foodservice
distribution industry had an estimated $129 billion in net sales. Industry
sources indicate that the industry has grown at a rate of approximately 2.4%
over the past three years.

Within the foodservice distribution industry, there are two primary types
of distributors: broadline distributors and specialist distributors. Broadline
foodservice distributors service a wide variety of customers including both
independent and chain restaurants, schools, cafeterias and hospitals. Broadline
distributors may purchase and inventory as many as 25,000 different food and
food-related items. Customers utilizing broadline foodservice distributors
typically purchase inventory from several distributors. Specialist foodservice
distributors may be segregated into three categories: (i) product specialists
which distribute only one or a limited number of products such as produce or
meat, (ii) market specialists which distribute to one type of restaurant such as
Mexican and (iii) "systems" specialists which focus on one type of customer such
as chain restaurants or health care facilities. Systems specialists typically
serve as a single source of supply for their customers.

29
<PAGE> 33

The Company is a systems distributor specializing in distribution to the
chain restaurant segment. With aggregate net sales in 1995 estimated by the
Company at approximately $42 billion, the chain restaurant segment represents a
significant portion of the foodservice distribution industry. The Company
believes the chain restaurant foodservice distribution segment is particularly
attractive due to (i) the high growth rate of chain restaurants, with compound
annual growth of 7% over the past three years according to industry sources,
primarily due to the growth of existing chain restaurants and the introduction
of new chain restaurant concepts, (ii) the uniformity of product offerings and
consistency of demand by chain restaurant customers, (iii) the increasingly
important focus by chain restaurants on foodservice distributors that can
provide consistent quality and reliable service on a nationwide basis to
maintain the chain's uniform standards and (iv) the fragmented nature of the
foodservice distribution segment serving chain restaurants, with over 3,000
companies operating in the industry. The Company believes that the consolidation
in this industry will continue as larger foodservice distributors with
nationwide service are better able to meet the need for consistent quality and
reliable service by chain restaurants.

The Company believes systems distributors are better able to service chain
restaurants than broadline distributors because they can offer their customers a
higher quality of service at a lower cost. Given the uniformity of product
offerings and the consistency of demand of chain restaurants, a systems
distributor has the opportunity to reduce its overall costs and consequently
those of its customers through purchasing and holding in inventory fewer stock
keeping units ("SKUs") than a broadline distributor. This reduces both the
in-bound and outbound freight costs through higher volumes and larger drop sizes
and provides more efficient and reliable distribution schedules thereby reducing
labor costs of both the systems distributor and its customer. In addition,
systems distributors generally require a smaller sales force than broadline
distributors require. The Company believes that the uniformity of product
offerings and frequency of deliveries also result in higher volumes, allowing a
systems distributor to chain restaurants to significantly improve net asset
turnover as compared to a broadline distributor. In addition, management
believes that the larger systems distributors have the volume and scale to offer
chain restaurants an opportunity to further reduce their costs through
value-added services such as procurement of non-proprietary items and in-bound
transportation management as well as the capital to invest in systems and
business processes to continually improve supply chain management from the
vendor to the restaurant.

STRATEGIES

The Company is the nation's leading independent foodservice distributor
specializing in distribution to chain restaurants, and believes that it has one
of the most comprehensive distribution networks of any independent distributor
serving chain restaurants, based on geographic coverage. With net sales of $4.0
billion in 1995 on a pro forma basis, the Company believes, based on its
estimates, that it has captured approximately 10% of the $42 billion chain
restaurant distribution market in the United States. The Company estimates that
the next largest independent systems distributor has a market share of
approximately 6%. The Company believes that its size and scale give it an
advantage over its competitors with respect to purchasing power and lower
distribution costs. The Company plans to strengthen its position as a market
leader by continuing to pursue the following strategies for maximizing
profitability and enhancing its long-term growth opportunities.

- Growth With Existing Chains. The chain restaurant segment of the
restaurant industry has historically grown faster than the overall
industry. As the primary distributor to most of its customers, the
Company expects to continue to grow with the chain restaurants it serves.
Such growth can result from a variety of factors, including increased
traffic in existing restaurants, the addition of new customers within the
chain and the acquisition or development of new chains by the Company's
existing customers. In addition, the Company believes that there is the
opportunity for increased "product penetration" by increasing the range
of products, including produce, dairy and bakery products, distributed to
existing customers.

30
<PAGE> 34

- Growth Through Addition of New Chains. The Company is continually
monitoring the marketplace for opportunities to expand the portfolio of
chains that it serves. Primary targets include chains offering menu
categories not covered by the Company's existing customers, chains
operating in geographic areas in which the Company could benefit from
increased customer density, and regional chains which could be added to
the national chains which have traditionally been the Company's focus. In
seeking potential new customers, the Company attempts to concentrate on
growing chains served by broadline distributors who might benefit from
the industry focus that a systems distributor brings, as well as chains
which the Company believes would benefit from the quality of service and
attention to supply chain management that the Company provides to its
customers.

- Selective Acquisitions. The Company believes the fragmented nature of
the industry and consolidation activity offer the Company opportunities
to supplement internal growth through selective acquisitions. In
addition, the Company believes that the strength of its balance sheet
following the offering will put it in a position to take advantage of
such opportunities. The Company intends to continue to focus its
acquisition strategy on systems specialists that distribute principally
to limited-menu quick service and casual dining chain restaurants which
will expand its customer base or improve geographic customer density.

Margin Improvement/Cost Reduction Programs. The Company is undertaking
several initiatives to increase margins and reduce its overall cost structure.

- Network Optimization. The Company is initiating a major project to
restructure its distribution network and create a new national
distribution system. Through this process, which is expected to take 3-5
years to complete, the Company intends to consolidate and integrate its
existing distribution network of 34 centers into 23 centers consisting of
six large regional distribution centers and 17 local distribution
centers. The new network should provide the Company with additional
distribution center capacity for continued growth. The Company estimates
the capital investment for this network optimization program will be
approximately $35 million and, as a result primarily of reduced miles
driven to make deliveries, is projecting cost savings following full
implementation of the new system of approximately $20-25 million annually
compared to projected network costs under its existing system. However,
there can be no assurance that the proposed network will be completed
within the time period projected, that costs to implement the network
will not be higher than currently estimated or that projected costs
savings will be realized. See "-- Operations and Distribution -- Product
Replenishment," "Risk Factors -- No Assurance of Achieving Anticipated
Cost Savings" and "Risk Factors -- Capacity Constraints; Ability to
Implement Network Optimization Program."

- Enhanced Delivery Systems. The Company has recently introduced an
innovative value-added cart delivery system which the Company estimates
should result in restaurant deliveries which are 2-3 times faster than
methods currently used in the industry. The Company is currently using
cart delivery for approximately 17% of its customers and expects to
service approximately 75% through this method within three years. The
Company estimates the capital investment required for implementation of
the cart delivery system will be approximately $8 million and, as a
result primarily of reduced labor costs associated with deliveries, is
projecting cost savings to the Company, when fully implemented, of
approximately $10 million annually compared to projected costs of
conventional delivery methods. The Company believes that cart delivery
will also benefit its customers by reducing the disruption caused by
deliveries and labor costs associated with unloading. However, there can
be no assurance that costs to complete implementation will not be higher
or that projected cost savings will be realized. See "-- Operations and
Distribution -- Cart Delivery System" and "Risk Factors -- No Assurance
of Achieving Anticipated Cost Savings."

31
<PAGE> 35

reduce overall personnel levels by 75 positions and, as a result, is
expected to yield aggregate cost savings of approximately $5-6 million
annually. However, there can be no assurance that costs to complete
implementation will not be higher or that the projected reductions in
personnel and cost savings will be realized. See "Risk Factors -- No
Assurance of Achieving Anticipated Cost Savings."

Anticipated capital investment requirements for, and projected cost saving
from, the margin improvement/cost reduction programs have been derived from
internal analyses prepared, in certain instances, with the assistance of
independent consultants. Cost savings estimates have been determined by assuming
current sales levels and cost structure and adjusting for (i) savings
attributable to projected reductions in miles driven, (ii) lower lease costs and
labor costs associated with reduced delivery time and (iii) reduced personnel
levels. Realization of such estimated net cost savings could be impacted by a
number of factors such as inflation and changes in volume or service levels. The
Company intends to finance these initiatives with cash provided from operations,
borrowings under its credit facility and through operating leases. Proceeds of
the offering will be used, in part, to repay $21.8 million of the $144.6 million
outstanding as of June 29, 1996 under the Company's credit facility. See "Risk
Factors -- Net Losses," "Risk Factors -- No Assurance of Achieving Anticipated
Cost Savings" and "Selected Financial Data -- Future Non-recurring Charges to
Earnings."

Establish Position as Preeminent Supply Chain Manager. The Company
believes that its size, scale and expertise in foodservice distribution and
transportation systems allow it to assist its customers in managing the entire
chain of supply, from the vendor location to the customer's storeroom. Emphasis
on supply chain management has allowed the Company to identify value-added
services to customers which result in reduced costs for its customers and
improved margins for the Company. Two examples of value-added services which the
Company is currently offering to customers are the purchasing of non-proprietary
products and the management and provision of in-bound transportation services
(i.e., transportation of products from the vendor to the distribution center).

Technological Leadership. The Company believes that it is a leader within
the industry in the application of information technology to its operations. The
Company has invested approximately $10 million in information systems since its
inception in 1992 through June 29, 1996, and has budgeted approximately $5
million per year for the next three to five years for new systems and upgrades.
The Company intends to finance these investments with cash provided from
operations, borrowings under its credit facility and through operating leases.
The Company currently has in place a variety of information technology systems,
including electronic ordering, inventory management, financial and routing
systems. The Company continues to invest in technology. Among a new generation
of information technology being installed are new systems in the area of
electronic customer ordering, "order optimization" to manage the Company's
purchasing and inventory functions, and freight management. In addition, in
connection with its "network optimization" program, the Company intends to put
in place new customer ordering and warehouse management systems. Management
believes that these systems will allow the Company to manage the complexity and
diversity of its business at a lower cost and with higher service levels. See
"-- Operations and Distribution -- Order Fulfillment."

Service Quality Program. The Company places a significant emphasis on
providing a high level of service to its customers. The Company continuously
measures its service performance levels by monitoring (i) its delivery of the
cases ordered by a customer, the "order fill rate", (ii) its successful delivery
of an order within one hour of the pre-arranged time, "on-time delivery", (iii)
its delivery of all the cases ordered by a customer, the "perfect order" and
(iv) its customers' perception of the quality of service ProSource provides, the
"customer satisfaction index". The Company believes it is a leader in the
industry in quality and reliability of service to its customers. By providing a
high level of service and reliability, the Company believes it can reduce the
number of reorders and redeliveries, reducing costs for both the Company and its
customers and improving customer loyalty. See "-- Operations and
Distribution -- Order Fulfillment."

CUSTOMERS

The Company's customers as of June 29, 1996 consisted of 2,780 franchisees
and 17 corporate owners of approximately 14,450 limited-menu quick service and
casual dining chain restaurants representing 18 restaurant chains. The Company
is generally one of a limited number of suppliers to the chains it serves. The
largest chains served by the Company are Burger King, Red Lobster and Arby's,
representing 38%, 15% and

32
<PAGE> 36

10% of 1995 net sales, respectively, on a pro forma basis. The Company's largest
customer is Darden Restaurants, Inc. (owner of all Olive Garden and Red Lobster
restaurants), representing 21% of the Company's 1995 net sales on a pro forma
basis. No other chain or single customer accounted for more than 10% of the
Company's pro forma net sales in 1995.

The following table sets forth a list of the chains the Company served as
of December 30, 1995:

<TABLE>
<CAPTION>
1995 PRO FORMA % OF TOTAL 1995
NUMBER OF RESTAURANTS NET SALES PRO FORMA
CHAIN CUSTOMERS SERVED (IN THOUSANDS) NET SALES
- ---------------------------------------- --------- ----------- -------------- ---------------
<S> <C> <C> <C> <C>
Quick Service
Burger King............................. 946 4,428 $1,531,774 38.4%
Arby's.................................. 442 2,513 404,781 10.1
Long John Silver's...................... 85 1,479 319,028 8.0
Chick-fil-A............................. 11 658 157,409 3.9
Sonic................................... 154 734 83,640 2.1
Wendy's................................. 29 258 74,788 1.9
KFC..................................... 94 346 51,856 1.3
Manchu Wok.............................. 52 145 11,345 0.3
----- ------ ---------- -----
1,853 10,561 2,634,621 66.0
Casual Dining
Red Lobster............................. 1 715 599,818 15.0
Olive Garden............................ 1 488 255,753 6.4
TGIFriday's............................. 50 328 197,948 5.0
Chili's................................. 14 326 143,492 3.6
Spaghetti Warehouse..................... 3 38 11,641 0.3
----- ------ ---------- -----
69 1,895 1,208,651 30.3
Other
TCBY.................................... 606 1,234 78,086 2.0
Other Chains............................ 79 285 67,547 1.6
Jenny Craig(1).......................... 1 587 4,537 0.1
----- ------ ---------- -----
686 2,106 150,170 3.7
TOTALS........................ 2,608 14,562(2) $3,993,443 100.0%
===== ====== ========== =====
</TABLE>

- ---------------
(1) The Company does not take title to the products it delivers to Jenny Craig
Weight Loss Centres.

(2) During the six months ended June 29, 1996, the number of restaurants served
by the Company decreased by 903, which was partially offset by the addition
of 792 new restaurants. The number of restaurants served during this period
decreased primarily as a result of the Company's discontinuation of less
profitable accounts and customer restaurant closings.

The Company has contracts with customers representing approximately 75% of
net sales, with terms ranging from 2-7 years and an average term of three years.
In connection with the acquisition of BKDS in 1992, the Company entered into an
exclusive distributor agreement and related distribution agreements with BKC,
pursuant to which, through 2002, (i) the Company is designated as the exclusive
distributor to BKC's company-owned and operated Burger King restaurants in the
United States (which accounted for 3.9% of 1995 net sales on a pro forma basis),
(ii) the Company is one of ten companies approved as regional distributors to
franchised Burger King restaurants in the United States, and (iii) the Company
is the only company approved by BKC to service Burger King restaurants on a
national basis. BKC has the right to terminate these contracts (i) upon a
material failure to perform by the Company and (ii) in the case of the exclusive
distributor agreement, upon the bankruptcy of the Company. In addition to the
521 BKC-owned restaurants, the Company also services 4,037 Burger King
restaurants owned by franchisees. In the aggregate, this represents 68% of all
Burger King restaurants in the United States. The Company has also entered into
distribution agreements with Olive Garden and Red Lobster pursuant to which the
Company is the primary distributor to the restaurants owned by Olive Garden and
Red Lobster operating in the United States. All Olive Garden and Red Lobster
restaurants are currently company-owned. Olive Garden and Red Lobster

33
<PAGE> 37

have the right to terminate their respective agreements upon (i) a material
change in ownership of the Company other than as a result of a public offering
by the Company, (ii) a material breach by the Company, (iii) the bankruptcy of
the Company and (iv) a failure of the Company to meet certain performance
reliability standards. Both agreements terminate in 1998. The Company believes
that from time to time it may not have been in strict compliance with all of the
performance reliability standards in such contracts. However, it is not aware of
any issues of non-compliance which could reasonably be expected to result in
early termination of such contracts.

The Company considers its relationships with its customers to be good. The
Company holds regular meetings with its customers to discuss performance
reliability and other issues which have arisen from time to time. The Company
views the strength of its relationships with its customers, rather than its
contracts, as defining the commitment between them.

PURCHASING AND SUPPLY

The Company purchases and distributes a wide variety of items, including
fresh and frozen meat and poultry, seafood, frozen foods, canned and dry goods,
fresh and pre-processed produce, beverages, dairy products, paper goods and
cleaning and other supplies. Due to the high volume of proprietary products
required by chain restaurants, the chain typically negotiates product sourcing
directly with vendors and then requires the distributor to use such vendors and
purchase at the negotiated price. Furthermore, customers within the same chain
often cooperate to utilize internal or third party purchasing organizations.
Because suppliers for proprietary products are generally designated by the
chain, the loss of any such supplier would likely result in the development of a
new source of supply by such chain. Substantially all types of non-proprietary
products distributed by the Company are available from a variety of suppliers,
some of which also supply the Company with proprietary products. Accordingly,
the Company does not believe that the loss of any supplier would have a material
adverse effect on the Company's operating results or its ability to serve its
customers.

The Company's emphasis on supply chain management has allowed the Company
to identify the purchasing of non-proprietary products as a value-added service
which it can provide to customers. The Company has formed a purchasing
subsidiary which pools the needs of its customers for non-proprietary products,
such as unlabeled paper products, cleaning supplies and produce, and uses the
resulting purchasing power to negotiate lower prices with vendors. The Company
and its customers share in the cost savings, improving margins for the Company
and reducing costs for its customers. Of the $800 million in non-proprietary
products sold to its customers in 1995, $27.5 million were purchased by the
Company and resold to its customers on this basis, and the Company believes that
a total of approximately $400 million of such purchases were potentially
available for purchase and resale in this manner. The Company believes that
expansion of its purchasing services represents an important opportunity for
growth.

MARKETING AND CUSTOMER SERVICE

The Company's senior management, together with a team of marketing, sales
and customer service personnel, are involved in maintaining relationships with
key customers and securing new accounts. The Company targets as potential new
customers restaurant chains offering menu categories not covered by the
Company's existing customers, chains operating in geographic areas in which the
Company could benefit from increased customer density, and regional chains which
could be added to the national chains which have traditionally been the
Company's focus. In seeking new customers, the Company attempts to concentrate
on growing chains served by broadline distributors which might benefit from the
industry focus that a systems distributor brings, as well as chains which the
Company believes would benefit from the quality of service and attention to
supply chain management that the Company provides to its customers.

The Company's customer service activities are highly customized to the
unique needs of the customer. Each customer has a dedicated account manager who
is responsible for overseeing all of its service needs and coordinating the
services provided through an account team of customer service professionals,
including a dedicated "logistics services manager." The logistics services
manager is responsible for coordinating day-to-day product flow for the
customer, as well as working closely with the customer's purchasing and
marketing organization.

34
<PAGE> 38

The Company rigorously monitors customer service levels. In order to manage
problem resolution, the Company is implementing professional help desk software
which tracks customer calls in order to ensure that appropriate action and
follow-up occurs. The Company utilizes frequent trips to the customer's site for
regularly scheduled reviews and key project meetings and telephone conferencing
in order to ensure close coordination between the Company and the customer. In
addition, the Company monitors customer perceptions through periodic surveys.
See "-- Operations and Distribution -- Order Fulfillment."

OPERATIONS AND DISTRIBUTION

The Company's operations can generally be categorized into two business
processes: (i) product replenishment and (ii) order fulfillment. Product
replenishment involves the management of logistics from the vendor location
through the delivery of products to the Company's distribution centers. Order
fulfillment involves all activities from customer order placement through
delivery to the restaurant location. Supporting the Company's business processes
are its innovative cart delivery system, its fleet of approximately 1,450
tractors and trailers and its management information systems.

Product Replenishment. While the Company is responsible for purchasing
products to be delivered to its customers, each chain typically selects the
vendor and negotiates the price at which most products will be purchased. See
"-- Purchasing and Supply." The Company determines the distribution centers
which will warehouse products for each customer and the quantities in which such
products will be purchased. Order quantities for each product are systematically
determined for each distribution center, taking into account both recent sales
history and projected customer demand. The number of distribution centers used
to serve a customer is based on the number and location of the restaurants to be
serviced. Given the Company's experience in managing its product flow, losses
due to shrinkage, damage and product obsolescence represent less than 0.1% of
1995 net sales. The Company is in the process of implementing a new order
optimization system which will utilize a demand forecasting program to (i)
establish order quantities and product availability levels and (ii) order
products as needed. The new system incorporates proprietary decision support
technology that optimizes the trade-off between in-bound transportation costs
and inventory carrying costs.

The Company works with its chain customers in order to optimize
transportation from vendor locations to distribution warehouses. By utilizing
the collective demand of its customers for in-bound transportation, its existing
fleet of trucks and its expertise in managing transportation, the Company can
offer its customers in-bound transportation, in many instances on a more
economical basis than that offered by the vendors that have traditionally
provided such services. The Company believes it can offer its customers lower
in-bound transportation costs through (i) use of the Company's delivery fleet to
backhaul products, (ii) consolidation of products from more than one vendor or
for use by more than one customer to increase truckloads and (iii) brokering the
freight to third party carriers with whom the Company has negotiated lower
transportation rates. In 1995, the Company managed approximately 30% of the
total freight tonnage to its distribution centers. The Company utilizes a number
of third party carriers to provide in-bound transportation services. None of
these carriers are material to the Company's operations.

The Company currently warehouses 5,500 types of products for its customers
at 34 facilities in 27 cities. This distribution network includes the Company's
preexisting distribution centers, as well as the distribution centers acquired
in the NAD transaction. Currently, no one distribution center maintains
inventories for all customers and, as a result, some customers are not serviced
by the distribution center closest to them. The Company has begun plans to
implement a new national network of distribution centers. Through this process,
which is expected to take 3-5 years to complete, the Company intends to
consolidate and integrate its existing distribution network of 34 centers into
23 centers consisting of six large regional distribution centers ("RDCs") and 17
local distribution centers ("LDCs"). Under the new network, high volume products
will be shipped directly to both RDCs and LDCs, with low volume products being
shipped only to RDCs which will supply these products to the LDCs. The Company
expects its new distribution network to reduce costs primarily in two ways.
First, by enabling the Company to fully service more customers from a
distribution center closer to the customer, transportation costs should be
reduced. Second, more efficient utilization of its facilities should reduce by
approximately 10% the amount of warehouse space required for the same level of
business. In addition, the new network should provide the Company with
additional distribution center

35
<PAGE> 39

capacity for continued growth. See "Risk Factors -- Capacity Constraints;
Ability to Implement Network Optimization Program." The Company estimates the
capital investment for the proposed network will be approximately $35 million
and is projecting cost savings following full implementation of the new system
of approximately $20-25 million annually compared to projected network costs
under its existing system. However, there can be no assurance that the proposed
network will be completed within the time period projected, that costs to
implement the network will not be higher than currently estimated or that
projected costs savings will be realized. See "Risk Factors -- No Assurance of
Achieving Anticipated Cost Savings" and "Risk Factors -- Capacity Constraints;
Ability to Implement Network Optimization Program." The consolidation of all
customers into common distribution facilities in conjunction with the
development of the network should optimize in-bound transportation costs,
outbound miles, inventory investment and warehouse capacity.

Upon receipt of the product at the distribution centers, it is inspected
and stored in racks. Each distribution center contains ambient, refrigerated and
frozen space as well as offices for operating, sales and customer service
personnel and a computer networked with the Company's centralized computer
system. In conjunction with the network optimization and integration strategy,
the Company intends to modify the racking configurations of its distribution
centers and install a new distribution center management system that controls
routing, shipping control, trip management, invoicing, inventory control and
communications.

Order Fulfillment. The Company places a significant emphasis on providing
a high service level in order fulfillment. For the six months ended June 29,
1996, the Company achieved order fill rates of 99.7% and on-time deliveries of
92%. By providing a high level of service and reliability, the Company believes
that it can reduce the number of reorders and redeliveries, reducing costs for
both the Company and its customers. Each restaurant places product orders based
on recent usage, estimated sales and existing restaurant inventories. The
Company has developed pre-established routes and pre-arranged delivery times
with each customer. Product orders are placed with the Company one to three
times a week either through the Company's customer service representative or
through electronic transmission using the Company's proprietary software.
Approximately 42% of the restaurants served by the Company transmit product
orders electronically. Orders are generally placed on a designated day in order
to coordinate with the Company's pre-established delivery schedules. Processing
and dispatch of each order is generally completed within 24 hours of receipt and
the Company's standards require each order to be delivered to the customer
within one hour of a pre-arranged delivery time.

Products are picked and labeled at each distribution center. The products
are placed on either a pallet or one of the Company's delivery carts for loading
of outbound trailers. The Company utilizes radio frequency and bar code scanning
in two distribution centers, and intends to implement this technology in its new
distribution center management systems. The Company estimates that the capital
investment required for the implementation of this radio frequency and bar code
scanning technology will be approximately $5 million. The Company intends to
fund this investment with cash provided from operations, borrowings under its
credit facility and through operating leases. Delivery routes are scheduled to
both fully utilize the trailer's load capacity and minimize the number of miles
driven. The Company transports approximately 1.65 million tons of product and
its trucks travel in excess of 60 million miles annually. The Company currently
utilizes several unloading methods at the restaurant including (i) gravity aided
rollers, (ii) hand carts and ramps and (iii) its new cart delivery system.

Cart Delivery System. The Company has recently introduced an innovative
value-added cart delivery system which the Company estimates should result in
restaurant deliveries which are 2-3 times faster than methods currently used in
the industry. Under this system, at the distribution center, products are loaded
into carts which are then loaded directly onto delivery trucks. At the delivery
site, instead of unloading products by conveyor or handcart, the entire cart is
simply unloaded and rolled into the customer's storeroom. The cart delivery
system improves productivity of the Company's drivers, enhances utilization of
its tractors and trailers and improves employee safety. The Company is currently
using cart delivery for approximately 17% of its customers and expects to
service approximately 75% through this method within three years. The Company
estimates the capital investment required for implementation of the cart
delivery system will be approximately $8 million and is projecting cost savings
to the Company, when fully implemented, of approximately $10

36
<PAGE> 40

million per year compared to projected costs of conventional delivery methods.
The Company believes that cart delivery will also benefit its customers by
reducing the disruption caused by deliveries and labor costs associated with
unloading. However, there can be no assurance that costs to complete
implementation will not be higher or that projected cost savings will be
realized. See "Risk Factors -- No Assurance of Achieving Anticipated Cost
Savings."

The Company believes that the cart delivery system represents a major
innovation in foodservice distribution methods. The Company hopes to expand the
cart delivery system by leaving the carts at the customer's location until the
next delivery, allowing them to be used as shelving by the customer, and
developing new software which would manage the loading of the carts and
trailers, thereby maximizing cart utilization and ease of customer use. See
"-- Strategies -- Margin Improvement/Cost Reduction Programs -- Enhanced
Delivery Systems."

Fleet. The Company operates a fleet of approximately 1,450 vehicles,
including approximately 600 tractors and 850 trailers. The Company leases
approximately 450 of the tractors from Ryder System, Inc. pursuant to
full-service leases which include maintenance, licensing and fuel tax reporting.
The remaining tractors are leased under similar full-service leases from a
variety of truck leasing companies. The Company leases approximately 350
trailers from GE Capital Services. The remainder are either Company-owned or
leased from various companies, including Ryder Truck Rental, Inc., Pitney Bowes,
Inc. and Ruan. Lease terms average six years for tractors and 7-10 years for
trailers.

Substantially all of the Company's vehicles contain on-board computers. The
computers assist in managing fleet operations and provide expense controls,
automated service level data collection and real-time driver feedback, thereby
enhancing the Company's service level to customers. Substantially all of the
Company's trailers contain three temperature-controlled compartments, which
allow the Company to simultaneously deliver frozen food, refrigerated food and
dry goods. In order to implement its cart delivery system, as trailer leases
expire, the Company has begun the process of substituting new trailers which are
configured so as to accommodate the carts. This generally involves dividing the
trailers into thirds longitudinally in order to allow for separate carts to go
in each of the separate temperature controlled sections. Approximately 17% of
the Company's existing trailers are configured for cart delivery, and the
Company expects that 75% of its fleet of trailers will ultimately be so
configured. See "-- Strategies -- Margin Improvement/Cost Reduction
Programs -- Enhanced Delivery Systems."

Management Information Systems. The Company has invested approximately $10
million in information systems since its inception in 1992 through June 29,
1996, and has budgeted approximately $5 million per year for the next three to
five years for new systems and upgrades. The Company intends to finance these
investments with cash provided from operations, borrowings under its credit
facility and through operating leases. The Company currently has in place a
variety of information technology systems, including electronic ordering,
inventory management, financial and routing systems. These systems represent a
combination of systems that were installed in 1993 following formation of the
Company and systems that were acquired in connection with the acquisition of
NAD. The Company is in the process of integrating these systems and installing
new system technologies in the areas of electronic customer ordering, "order
optimization" to manage the Company's purchasing and inventory functions, and
freight management. In addition, in connection with its "network optimization"
program, the Company intends to put in place new customer ordering and warehouse
management systems. Management believes that these systems will allow the
Company to manage the complexity and diversity of its business at a lower cost
and with higher service levels. See "-- Strategies -- Technological Leadership."

COMPETITION

The foodservice distribution industry is highly competitive. The Company
competes with other systems foodservice distribution companies focused on chain
restaurants and with broadline foodservice distributors. The Company's principal
national competitors are Sysco Corp., Alliant Foodservice Inc. (formerly Kraft
Distribution), MBM Corp., NEBCO-Ameriserv, Marriott Distribution Services Inc.,
King Provision Corp. and Pepsi Foodservices, an in-house distributor for
PepsiCo, Inc. The Company also competes with regional distributors, principally
for business from franchisee-owned Burger King restaurants. The Company believes

37
<PAGE> 41

that distributors in the foodservice industry compete on the basis of price and
the quality and reliability of service. Because a number of the Company's
customers prefer a distributor that is able to service their restaurants on a
nationwide basis, the Company believes that it is in a strong position to
compete for national chain accounts. The Company attributes its ability to
compete effectively against smaller regional and local distributors in part to
the cost advantages resulting from its size, centralized purchasing operations
and ability to offer broad market coverage through a wide network of
distribution centers. However, in light of the consolidation in the foodservice
distribution industry, the Company could face increased competition to the
extent that there is an increase in the number of foodservice distributors
specializing in distribution to chain restaurants on a nationwide basis.

In addition, distribution fees received from a number of the Company's
customers decreased significantly in 1993 and 1994 as a result of competitive
pricing pressures. While distribution fees have stabilized in 1995 and the first
six months of 1996, and management expects such stabilization to continue
through 1996, there can be no assurance that competitive pricing pressure will
not recur in the future. See "Risk Factors -- Competition."

PROPERTIES

The Company's principal executive office is located in Coral Gables,
Florida, with additional administrative facilities located in Chicago, Cleveland
and Coral Gables. The Company is currently in the process of consolidating these
operations into a new principal executive office and corporate support center
located in Coral Gables. This facility, consisting of approximately 83,000
square feet of leased space, is expected to begin operation during October 1996.
See "-- Strategies -- Margin Improvement/Cost Reduction Programs -- Corporate
Unification Program."

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<PAGE> 42

The following table sets forth certain information with respect to the
Company's 34 operating distribution centers:

<TABLE>
<CAPTION>
APPROXIMATE
LOCATION SQUARE FEET
------------------------------------------------------------------------- -----------
<S> <C>
Atlanta, Georgia(1)...................................................... 217,670
Burlington, New Jersey................................................... 60,880
Chester, New York........................................................ 131,400
Chicago, Illinois........................................................ 67,457
Cleveland, Ohio.......................................................... 40,540
Columbus, Ohio........................................................... 174,000
Dallas, Texas (1)(3)..................................................... 176,400
Denver, Colorado(4)...................................................... 57,608
Detroit, Michigan........................................................ 34,897
Greensboro, North Carolina............................................... 41,000
Gridley, Illinois........................................................ 151,000
Houston, Texas(1)........................................................ 77,900
Kansas City, Kansas(2)(5)................................................ 216,450
Lakeland, Florida........................................................ 31,806
Los Angeles, California(2)............................................... 245,540
Miami, Florida........................................................... 31,225
New Orleans, Louisiana................................................... 36,180
New York, New York....................................................... 35,000
Norman, Oklahoma (6)..................................................... 52,000
Orlando, Florida......................................................... 150,000
Oxford, Massachusetts.................................................... 40,000
Phoenix, Arizona......................................................... 38,200
Portland, Oregon......................................................... 74,500
San Jose, California..................................................... 31,500
Trenton, Ontario......................................................... 20,000
Virginia Beach, Virginia................................................. 23,045
Washington, DC(7)........................................................ 83,000
---------
Total:......................................................... 2,339,198
=========
</TABLE>

- ---------------
(1) Two facilities.

(2) Three facilities.

(3) Includes approximately 39,200 square feet of supplemental space in three
remote facilities.

(4) Includes approximately 38,610 square feet of supplemental space in two
remote facilities.

(5) Includes approximately 23,500 square feet of supplemental space in a remote
facility.

(6) Includes approximately 11,000 square feet of supplemental space in a remote
facility.

(7) Includes approximately 30,000 square feet of supplemental space in a remote
facility.

Of the 34 facilities, 20 facilities (representing an aggregate of approximately
832,830 square feet) are leased and 14 facilities (representing an aggregate of
approximately 1,506,370 square feet) are owned by the Company.

EMPLOYEES

As of June 29, 1996, the Company had approximately 3,800 full-time
employees, of whom approximately 420 were employed in corporate support
functions and approximately 3,380 were warehouse, driver and administrative
staff in the distribution centers. Approximately 690 of the Company's employees
were covered by 11 collective bargaining contracts with seven local unions, six
of which are associated with the International Brotherhood of Teamsters, and one
of which is independent. Three contracts, covering approximately 90 employees,
will expire by the end of 1996, and three contracts, covering approximately 180
employees, will

39
<PAGE> 43

expire during 1997. The Company has not experienced any significant labor
disputes or work stoppages. The Company believes that its relationships with its
employees are good.

REGULATORY MATTERS

The Company is subject to a number of federal, state and local laws,
regulations and codes, including those relating to the protection of human
health and the environment, compliance with which has required, and will
continue to require, capital and operating expenditures. The Company is not
aware of any violations of, or pending changes in, such laws, regulations and
codes that are likely to result in material penalties or material increases in
compliance costs. The Company, however, is not able to predict the impact of any
changes in the requirements or mode of enforcement of these laws, regulations
and codes on its operating results.

The Company owns and leases distribution centers, at some of which on-site
vehicle fueling activities may have resulted in releases of diesel or other
petroleum products to the soil or groundwater. The Company may be subject to
liability for clean-up of contaminated soil or groundwater at these distribution
centers and is in the process of investigating or remediating the contamination.
Although there can be no assurances, the Company does not believe that the
estimated costs associated with any required investigation or remediation will
have a material adverse effect on the Company's financial condition, results of
operations or liquidity. The Company has engaged in a program to remove
underground fuel storage tanks located on its properties. As a result, with the
exception of two such tanks, which are scheduled to be removed during 1996, all
underground fuel storage tanks have been removed from the Company's properties.
In addition, several of the Company's facilities are located over areas of
regional groundwater contamination or are near sites which have contaminated
soil or groundwater. The Company has not been named a responsible party at, and
does not anticipate any liability associated with, any of these sites.

LITIGATION

From time to time the Company is involved in litigation relating to claims
arising out of its normal business operations. The Company is not currently
engaged in any legal proceedings that are expected, individually or in the
aggregate, to have a material adverse effect on the Company.

CONTROLLING STOCKHOLDER

The Company is controlled by Onex. Onex Corporation, based in Toronto,
Canada, is a publicly listed (on The Toronto Stock Exchange and The Montreal
Exchange) diversified company that operates through autonomous subsidiaries and
strategic partnerships. Onex had consolidated revenues of Cdn.$6.5 billion for
1995 and consolidated assets of Cdn.$2.8 billion at June 30, 1996. In addition
to its interests in ProSource, as of September 30, 1996, Onex had investments in
a broad range of companies, including Onex Food Services, Inc. (which, through
its subsidiaries, Sky Chefs, Inc. and Caterair International Inc., is engaged in
the airline catering business), Dura Automotive Systems, Inc., Tower Automotive,
Inc., Phoenix Pictures Inc., Vencap, Inc. and Imperial Parking Limited. None of
Onex's current businesses competes with or is a customer of the Company. Onex
currently owns 86% of the outstanding Common Stock of the Company. Upon
completion of the offering, Onex will own 87% of the outstanding Class B Common
Stock, representing 82% of the combined voting power of the outstanding Common
Stock. See "Principal Stockholders" and "Certain Transactions."

40
<PAGE> 44

MANAGEMENT

The following table sets forth certain information concerning the directors
and executive officers of the Company as of the date of this Prospectus.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- ------------------------------------------
<S> <C> <C>
David R. Parker........................... 53 Chairman of the Board of Directors
Thomas C. Highland........................ 55 President, Chief Executive Officer and
Director
Daniel J. Adzia........................... 54 Vice-Chairman, Chief Marketing Officer and
Director
William F. Evans.......................... 49 Executive Vice President, Chief Financial
Officer
Paul A. Garcia de Quevedo................. 42 Vice President, Treasurer and Secretary
Dennis T. Andruskiewicz................... 43 Senior Vice President, Operations Support
William G. Berryman....................... 53 Senior Vice President, Chief Information
Officer
Robert S. Donaldson....................... 41 Senior Vice President, Field Operations
John E. Foley............................. 47 Senior Vice President, Operations
Development
John P. Gainor............................ 39 Senior Vice President, Logistics and
Purchasing
Gerald W. Schwartz........................ 54 Director
Anthony R. Melman......................... 49 Director
Michael E. Treacy......................... 40 Director
Michael Carpenter......................... 49 Director
Anthony Munk.............................. 36 Director
C. Lee Johnson............................ 64 Director
R. Geoffrey P. Styles..................... 65 Director
</TABLE>

David R. Parker Mr. Parker has served as Chairman of the Board of
Directors since the formation of the Company in 1992. From July 1, 1991 to July
1, 1992, Mr. Parker was an independent investor, working primarily on the
formation of the Company and the acquisition of BKDS. Prior to such time, he was
Senior Executive Vice President of Ryder System, Inc. and President of the
Vehicle Leasing and Services Division. Previously, he was Chief Operating
Officer of Ryder's Business Services Group which included the company's
worldwide aviation support businesses and its insurance management services
businesses. Before joining Ryder System in 1984, Mr. Parker was Executive Vice
President and Sector Executive of American Can Company (Primerica). Mr. Parker
serves on the Boards of Directors of Premark International, Inc. and SunTrust
Bank, Miami, N.A.

Thomas C. Highland Mr. Highland has served as President, Chief Executive
Officer and a Director of the Company since its formation in 1992. Before
serving in this capacity, Mr. Highland was President of BKDS from 1988 to 1992.
Prior thereto, he held various executive positions at Warner Lambert Company,
including Vice President, U.S. Distribution, Director, Distribution Operations,
Pharmaceutical Group and Director, Distribution Center Operations from 1963 to
1988.

Daniel J. Adzia Mr. Adzia has served as Vice-Chairman, Chief Marketing
Officer of the Company since the acquisition of NAD in March 1995 and a Director
of the Company since April 1995. From 1975 to 1995, Mr. Adzia served in various
executive capacities at Martin-Brower including President of NAD. Prior to
joining Martin-Brower, Mr. Adzia held various sales and sales management
positions with Oscar Mayer & Co.

William F. Evans Mr. Evans has served as Executive Vice President, Chief
Financial Officer of the Company since July 1995. Prior to joining the Company,
he was the Senior Vice President, Corporate Operations of H&R Block, Inc. from
August 1992 to June 1995. Prior to 1992, Mr. Evans served in executive
capacities at D&B Software Services, Inc. from 1990 to 1992, Management Science
America, Inc. from 1989 to 1990 and Electromagnetic Sciences, Inc. from 1985 to
1989. From June 1980 to November 1985, Mr. Evans served as a partner of KPMG
Peat Marwick LLP, the Company's independent auditors. Mr. Evans serves as a
Director of LXE, Inc. and Interim Services, Inc. Mr. Evans is a certified public
accountant.

41
<PAGE> 45

Paul A. Garcia de Quevedo Mr. Garcia has served as Vice President,
Treasurer and Secretary of the Company since its formation in 1992. Prior to
such time, Mr. Garcia served as Vice President, Finance, for BKDS. Mr. Garcia
joined BKDS in January 1986. Mr. Garcia is a certified public accountant.

Dennis T. Andruskiewicz Mr. Andruskiewicz has served as Senior Vice
President, Operations Support of the Company since the acquisition of NAD in
March 1995. Before serving in such capacity, Mr. Andruskiewicz was the Vice
President of Distribution for Martin-Brower from 1990 to 1995 and the Director
of Distribution for the Planters Life Savers Division of RJR Nabisco from 1974
to 1990.

William G. Berryman Mr. Berryman has served as Senior Vice President,
Chief Information Officer of the Company since May 1996. Before serving in such
capacity, Mr. Berryman was Chief Information Officer, Vice President, MIS for
The Penn Traffic Company, a food, general merchandise and drug retailer and
involved in the manufacture of various food products from May 1995 to April
1996, Vice President for Technology Solutions Co. from September 1994 to April
1995 and Vice President, MIS, for Dominick's Finer Foods from April 1989 to
December 1993.

Robert S. Donaldson Mr. Donaldson has served as Senior Vice President,
Field Operations of the Company since January 1995. From January 1993 to
December 1994, he served as Vice President of Business Development of the
Company. Prior to joining the Company, Mr. Donaldson was the President of
Institution Food House, Inc., a broadline foodservice distributor from 1986 to
1993 and Vice President of Sky Brothers, Inc., a foodservice distributor from
1973 to 1986.

John E. Foley Mr. Foley has served as Senior Vice President, Operations
Development of the Company since August 1995 and Senior Vice President, Finance
and Systems, Chief Financial Officer from April 1994 to July 1995. Prior to
joining the Company, Mr. Foley was the Senior Vice President, Grand Metropolitan
Computer Systems for Grand Metropolitan, PLC from 1992 to 1995 and Vice
President, MIS for Burger King Corporation from 1990 to 1992.

John P. Gainor Mr. Gainor has served as Senior Vice President, Logistics
and Purchasing of the Company since November 1995, Vice President, Operations
Support from July 1992 to May 1993 and from November 1994 to November 1995 and
Eastern Region, Vice President from June 1993 to October 1994. Prior to joining
the Company in April 1992, he held various executive positions, including
Director, Transportation and Planning, Manager, Transportation, Manager, Private
Carriage Operations and Regional Transportation Manager, at Warner Lambert
Company since 1982.

Gerald W. Schwartz Mr. Schwartz has served as a Director of the Company
since its formation in 1992. Mr. Schwartz is Chairman of the Board, President
and Chief Executive Officer of Onex Corporation and has served in such capacity
since its formation in 1983. Mr. Schwartz serves on the Board of Directors of
Alliance Communications Corporation.

Anthony R. Melman Mr. Melman has served as a Director of the Company since
its formation in 1992. Mr. Melman has been Vice President of Onex Corporation
since 1984. Prior to joining Onex, Mr. Melman held various executive positions
at Canadian Imperial Bank of Commerce and Union Acceptances Limited, a South
African merchant banking organization.

Michael E. Treacy Dr. Treacy has served as a Director of the Company since
October 1992. Dr. Treacy is the Managing Director of Treacy & Company, LLC and
has served as the President of Treacy Forum since 1985. Dr. Treacy holds a Ph.D.
in management science from M.I.T. and was a professor of management science at
the Sloan School of Management at M.I.T. from 1983 to 1989.

Michael Carpenter Mr. Carpenter has served as a Director of the Company
since October 1992. Since January 1995, he has been Chairman and Chief Executive
Officer of Travelers Life and Annuity Company. He also serves as Executive Vice
President of Travelers Group, Inc., responsible for business development and
planning. Mr. Carpenter was Chairman of the Board, President and Chief Executive
Officer of Kidder, Peabody Group Inc., a wholly owned subsidiary of General
Electric Company from January 1989 to June 1994. Mr. Carpenter serves on the
Board of Directors of General Signal, Inc., a diversified manufacturing company.

42
<PAGE> 46

Anthony Munk Mr. Munk has served as a Director of the Company since
January 1995. He joined Onex Corporation in April 1988, and is currently a Vice
President. During the period January 1995 to September 1995, Mr. Munk served as
Senior Vice President and is currently a Director of The Horsham Corporation, a
Canadian based company which has interests in gold, real estate and refining
ventures.

C. Lee Johnson Mr. Johnson has served as a Director of the Company since
October 1992. Since July 1986, he has been President of Limited Distribution
Services (a subsidiary of The Limited, Inc.). From 1984 to 1986, he was Senior
Vice President, Beatrice U.S. Food Corporation and President, Beatrice
Distribution, Inc. Mr. Johnson serves on the Board of Directors of Columbus Port
Authority and the Executive Committee and Board of Directors of Columbus Chamber
of Commerce.

R. Geoffrey P. Styles Mr. Styles has served as a Director of the Company
since October 1992 and is a director of Onex Corporation. Since 1990, he served
as Director of Drivers Jonas (Canada) Ltd. and since 1988, he served as Chairman
and Director of Grosvenor International Holdings Limited. He serves on the
Boards of Directors of Royal Trust Company, The Geon Company, Echo Bay Mines
Ltd., Fairwater Capital Corporation, Working Ventures Canadian Fund Inc. and
Scott's Hospitality Inc.

TERMS OF OFFICE AND COMMITTEES

All directors of the Company currently hold office until the next annual
meeting of stockholders of the Company or until their successors are elected and
qualified. Messrs. Parker and Highland were elected to the Board of Directors
pursuant to the Management Shareholders Agreement under which the management
shareholders have the right to have two designees nominated to the Board of
Directors by Onex. While the management shareholders' right to nominate
designees to the Company's Board of Directors will terminate upon completion of
the offering, Onex has indicated that it has no present intention to withdraw
its support for the continued service of Messrs. Parker and Highland on the
Board of Directors. See "Certain Transactions -- Shareholders
Agreements -- Management Shareholders Agreement." Executive officers hold office
until their successors are chosen and qualified, subject to earlier removal by
the Board of Directors. There are no family relationships among any of the
directors or executive officers of the Company.

The Board of Directors has established an Audit Committee comprising
Messrs. Treacy, Carpenter and Styles. The Audit Committee is responsible for
recommending to the Board of Directors the engagement of independent auditors of
the Company and reviewing with the independent auditors the scope and results of
the audits, the internal accounting controls of the Company, audit practices and
the professional services furnished by the independent auditors.

The Board of Directors has also established a Compensation and Nominating
Committee comprising Messrs. Schwartz, Melman and Johnson and an Equity
Compensation Committee comprising Messrs. Carpenter and Styles. The Compensation
and Nominating Committee is responsible for reviewing and approving all
non-equity based compensation arrangements for officers of the Company. In
addition, the Compensation and Nominating Committee advises and makes
recommendations to the Board of Directors on the selection of candidates as
nominees for election as directors. The Equity Compensation Committee is
responsible for reviewing and approving all equity based compensation
arrangements for officers of the Company and for administering the Company's
option plans. Prior to the offering, the Company did not have a compensation or
a nominating committee.

DIRECTOR COMPENSATION

Following completion of the offering, directors who are not officers or
employees of the Company or Onex will receive an annual fee of $20,000. All
directors will be reimbursed for out-of-pocket expenses. Dr. Michael E. Treacy
received a Company-guaranteed loan of $0.2 million from a third party lender to
finance, in part, the purchase of 30,000 shares of Common Stock in 1993. See
"Certain Transactions -- Certain Equity Offerings to Management."

43
<PAGE> 47

EXECUTIVE COMPENSATION AND OTHER MATTERS

EXECUTIVE COMPENSATION

The following table sets forth certain information regarding compensation
earned during the fiscal year ended December 30, 1995 by the Company's chief
executive officer and each of the four other most highly compensated executive
officers whose total annual salary and bonus exceeded $100,000 (the "Named
Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION(1) -------------
----------------- SECURITIES ALL OTHER
FISCAL SALARY BONUS UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) OPTIONS(#)(2) ($)(3)
- -------------------------------------------- ------ ------- ------- ------------- ------------
<S> <C> <C> <C> <C> <C>
David R. Parker............................. 1995 300,000 150,000 5,000 153,120
Chairman of the Board of Directors
Thomas C. Highland.......................... 1995 300,000 150,000 3,750 103,120
President, Chief Executive Officer
Daniel J. Adzia(4).......................... 1995 225,385 112,500 22,500 21,410
Vice Chairman, Chief Marketing Officer
John E. Foley............................... 1995 170,000 70,000 15,000 3,400
Senior Vice President, Operations
Development
Robert S. Donaldson......................... 1995 157,500 58,575 -- 3,109
Senior Vice President, Field Operations
</TABLE>

- ---------------
(1) Excludes perquisites and other personal benefits because such compensation
did not exceed the lesser of $50,000 or 10% of the total annual salary and
bonus for any of the Named Executive Officers.

(2) Options to acquire shares of Common Stock.

(3) The amounts shown in the "All Other Compensation" column consist of the
following: (i) Mr. Parker: $150,000 consulting fee paid by Onex for services
rendered in 1995 (including amounts actually paid in 1996), and $3,120 in
Company matching contributions to the Company's Associates' Savings Plan, a
defined contribution plan (the "401-K Plan"), (ii) Mr. Highland: $100,000
consulting fee paid by Onex for services rendered in 1995 and $3,120 in
Company matching contributions to the 401-K Plan, (iii) Mr. Adzia: $21,410
in Company contributions to the Company's Money Purchase Plan for Former NAD
Salaried Employees, a defined contribution plan, (iv) Mr. Foley: $3,400 in
Company matching contributions to the 401-K Plan and (v) Mr. Donaldson:
$3,109 in Company contributions to the 401-K Plan. In addition, Messrs.
Parker, Highland, Adzia and Donaldson received Company-guaranteed loans from
a third party lender to finance, in part, purchases of Common Stock by such
executive officers. As of December 30, 1995, the outstanding amounts under
such loans were $373,188, $437,250, $300,000 and $141,563, respectively. See
"Certain Transactions -- Certain Equity Offerings to Management."

(4) Represents amounts paid from April 1, 1995 through the end of 1995. Prior to
such time Mr. Adzia was employed by NAD.

44
<PAGE> 48

The following table provides information regarding stock options granted to
the Named Executive Officers during fiscal year 1995. No stock appreciation
rights were granted.

OPTION GRANTS DURING FISCAL YEAR 1995

<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS(1) REALIZABLE VALUE
------------------------------------------------------------ AT ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE ------------------
NAME GRANTED (#) FISCAL YEAR ($/SHARE) EXPIRATION DATE 5%($) 10%($)
- ------------------------ ------------ ------------ --------- ------------------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
David R. Parker......... 5,000 4.9% 10.00 December 31, 2000 13,814 30,526
Thomas C. Highland...... 3,750 3.7 10.00 December 31, 2000 10,361 22,894
Daniel J. Adzia......... 22,500 22.1 10.00 December 31, 2000 62,163 137,365
John E. Foley........... 15,000 14.7 10.00 December 31, 2000 41,442 91,577
Robert S. Donaldson..... -- -- -- -- -- --
</TABLE>

- ---------------
(1) Options vest according to the following schedule: 10% at the end of each of
years 1995 through 1999, with the remaining 50% vesting at the end of such
five-year period.

The following table sets forth certain information regarding the number and
year-end value of unexercised options held by the Named Executive Officers at
December 30, 1995. No stock options were exercised by the Named Executive
Officers during fiscal year 1995.

AGGREGATE OPTION EXERCISES IN 1995 FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES(1)

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES "IN-THE-MONEY"
UNDERLYING UNEXERCISED OPTIONS AT FISCAL
OPTIONS AT FISCAL YEAR-END($)
YEAR-END(#) EXERCISABLE/
NAME EXERCISABLE/UNEXERCISABLE(2) UNEXERCISABLE(2)(3)
- --------------------------------------------------- ---------------------------- ---------------------
<S> <C> <C>
David R. Parker.................................... 10,498/61,152 52,490/305,760
Thomas C. Highland................................. 5,438/32,062 27,190/160,310
Daniel J. Adzia.................................... 2,250/20,250 11,250/101,250
John E. Foley...................................... 1,500/13,500 7,500/ 67,500
Robert S. Donaldson................................ 1,020/ 9,180 4,080/ 36,720
</TABLE>

- ---------------
(1) No options were exercised in 1995.

(2) Options vest according to the following schedule: 10% at the end of each of
years 1995 through 1999, with the remaining 50% vesting at the end of such
five-year period.

(3) Options are "in-the-money" if the fair market value of the underlying
securities exceeds the exercise price of the options. The amounts set forth
represent the difference between an assumed initial public offering price
equal to the midpoint of the range set forth on the cover page of this
Prospectus and the exercise price of the option multiplied by the applicable
number of options.

EMPLOYMENT AND CONSULTING AGREEMENTS

The Company has entered into employment agreements (each an "Employment
Agreement") with each of Messrs. David R. Parker, Thomas C. Highland, Daniel J.
Adzia, Paul A. Garcia de Quevedo, Dennis Andruskiewicz and John E. Foley (each
an "Employee"). Each Employment Agreement provides that the Employee will
receive an annual salary (subject to increase at the discretion of the Board of
Directors), a cash bonus calculated in accordance with the Company's management
bonus or incentive compensation plan in effect from time to time and certain
benefits. The term of each Employment Agreement is three years (one year in the
case of Mr. Andruskiewicz), with automatic one year extensions unless terminated
earlier by the Company or the Employee upon prior written notice. In the event
that the Company terminates the

45
<PAGE> 49

Employee's employment for disability or without cause, the Employee is entitled
to receive his salary, a pro rata portion of the actual incentive payment that
he would have received under the management incentive plan for the year in which
termination occurs and all other benefits in effect for senior management
employees at the time of termination ("Termination Benefits") for a period of
one year from the date of termination, except in the cases of Messrs. Highland
and Adzia. In the event that the Company terminates Mr. Highland's employment
for disability or without cause, he is entitled to receive payment in an amount
equal to 150% of the sum of the Termination Benefits for a period of eighteen
months from the date of termination. In the event that the Company terminates
Mr. Adzia's employment for disability or without cause, he is entitled to
receive 100% of the Termination Benefits for a period ending on the later of
April 1, 1998 and eighteen months from the date of termination. If the Company
terminates the Employee's employment, including Messrs. Highland or Adzia, for
any other reason, the Employee is entitled to receive the Termination Benefits
through the date of termination. Each Employee is also subject to a one-year
covenant not to compete effective upon termination of employment for any reason,
except in the cases of Messrs. Highland (eighteen months) and Adzia (terminating
on the later of April 1, 1998 and eighteen months from the date of termination).

The initial terms of the Employment Agreements with Messrs. Parker and
Highland commenced on July 1, 1992. Such agreements currently expire on July 1,
1997, subject to automatic one-year renewals unless either the Company or the
Employee gives notice of termination by January 1 prior to the date of
expiration. Pursuant to their Employment Agreements, Messrs. Parker and Highland
are each to receive base salary at the rate of $425,000 for the remainder of
1996, and $450,000 for 1997, with increases in subsequent years at the
discretion of the Board of Directors. In addition, each is entitled to receive
an annual cash bonus calculated in accordance with the Company's management
bonus or incentive compensation plan in effect from time to time and certain
benefits, including an automobile allowance of $1,500 per month. Pursuant to
agreements with Onex, Messrs. Parker and Highland received consulting fees from
Onex in the following amounts: (i) $150,000 in 1995 (including amounts actually
paid in 1996) and $100,000 in each of 1994 and 1993 in the case of Mr. Parker,
and (ii) $100,000 in each of 1995 and 1994 in the case of Mr. Highland. Such
consulting arrangements will be terminated effective upon completion of the
offering, and, in consideration therefor, the base salary payable to Messrs.
Parker and Highland will be increased to the rates specified above. See "Summary
Compensation Table."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation and Nominating Committee, which currently consists of
Messrs. Schwartz, Melman and Johnson, was formed in July 1996. The Equity
Compensation Committee, which currently consists of Messrs. Carpenter and
Styles, was formed in September 1996. Prior to the formation of the Compensation
and Nominating Committee, compensation decisions were made and approved by the
Company's Board of Directors.

In January 1996, the Company completed the sale of 61,500 shares of Common
Stock in the aggregate to certain officers and management employees of the
Company at a purchase price of $10.00 per share. In May 1995, the Company
completed the sale of 208,500 shares of Common Stock in the aggregate to certain
directors, officers and management employees of the Company at a purchase price
of $10.00 per share. During 1994, the Company sold 6,900 shares of Common Stock
in the aggregate to certain officers and directors of the Company at a purchase
price of $11.00 per share. During 1993, the Company sold 125,600 shares of
Common Stock in the aggregate to certain directors, officers and employees of
the Company at a purchase price of $11.00 per share. Of these shares, the number
of such shares purchased by each executive officer and

46
<PAGE> 50

director of the Company who purchased shares during such periods, and the
aggregate amount of the purchase price financed through Company-guaranteed
loans, is set forth below:

<TABLE>
<CAPTION>
EXECUTIVE OFFICER OR DIRECTOR NUMBER OF SHARES AMOUNT FINANCED
----------------------------------------------------- ---------------- ---------------
<S> <C> <C>
David R. Parker...................................... 143,300 $ 373,188
Thomas C. Highland................................... 75,000 450,000
Daniel J. Adzia...................................... 45,000 300,000
William F. Evans..................................... 45,000 300,000
Paul A. Garcia de Quevedo............................ 15,000 100,000
Dennis T. Andruskiewicz.............................. 13,000 75,000
Robert S. Donaldson.................................. 20,400 150,000
John E. Foley........................................ 30,000 --
John P. Gainor....................................... 15,000 100,000
Michael E. Treacy.................................... 30,000 220,000
Michael Carpenter.................................... 18,200 --
C. Lee Johnson....................................... 4,500 --
R. Geoffrey P. Styles................................ 4,500 --
</TABLE>

The aggregate amount of such loans guaranteed by the Company as of June 29,
1996 was $3.3 million. The shares of Common Stock purchased were pledged to the
Company as collateral for the Company's guaranty. All of such shares are subject
to the Shareholders Agreements (as defined herein). Pursuant to the Shareholders
Agreements, if a shareholder defaults on such indebtedness, the Company has the
option to purchase such shares at a purchase price equal to 85% of fair market
value at the time of purchase, reduced by the amount of the outstanding
indebtedness secured by the shares. See "Certain Transactions."

OPTION PLANS

Amended Management Option Plan (1995). The 1995 Option Plan provides for
the grant of "non-qualified stock options" ("NQSO's") to management employees of
the Company ("1995 Employee Participants") at the time that such employees
purchase Common Stock of the Company. Options granted under the 1995 Option Plan
have an exercise price equal to the price at which the 1995 Employee Participant
purchased such stock. Options are exercisable for shares of Class B Common
Stock. The 1995 Option Plan provides for it to be administered by the Board of
Directors of the Company or a committee thereof. Prior to the offering it was
administered by the Board of Directors, and following the offering it will be
administered by the Equity Compensation Committee. Options granted under the
1995 Option Plan are not transferrable or assignable.

Options vest according to the following schedule: ten percent at the end of
years 1995 through 1999, with the remaining 50% vesting at the end of such
five-year period. Options granted under the 1995 Option Plan remain exercisable
until December 31, 2000. In the event the Company sells substantially all of its
assets or all of the Company's or any of its principal subsidiaries' shares of
Common Stock in a transaction in which the consideration is principally other
than common stock and results in Onex earning certain specified rates of return
on its initial purchase of Common Stock, then all unexercised options under the
1995 Option Plan with respect to periods not yet ended are deemed earned and
exercised immediately prior to the date the triggering transaction closes.

The 1995 Option Plan terminates on the earlier of (i) December 31, 2000 and
(ii) the sale of all of the Common Stock owned by Onex, the sale of all of the
issued and outstanding stock of the Company or the sale of all or substantially
all of the assets of a subsidiary of the Company.

Upon completion of the offering, options to purchase 350,200 shares of
Class B Common Stock will be outstanding. No additional options will be granted
under the 1995 Option Plan.

1996 Stock Option Plan. Prior to the completion of the offering, the Board
of Directors and stockholders of the Company will approve the 1996 Stock Option
Plan (the "1996 Plan"). The Company has reserved 550,000 shares of Class B
Common Stock for issuance upon exercise of options granted under the 1996 Plan.

47
<PAGE> 51

The Company intends to grant options to purchase approximately 355,000 shares of
Class B Common Stock at an exercise price equal to the initial public offering
price immediately prior to the completion of the offering.

Pursuant to the 1996 Plan, executive officers and key employees of the
Company are eligible to receive awards of stock options. The 1996 Plan provides
for the award of NQSO's only. The 1996 Plan will be administered by the Equity
Compensation Committee (the "Committee"). Subject to the provisions of the 1996
Plan, the Committee will determine when and to whom awards will be granted, and
the number of shares covered by each award. The Committee may interpret the 1996
Plan and may at any time adopt such rules and regulations for the 1996 Plan as
it deems advisable. In addition, the Committee may cancel or suspend awards.
Options granted under the 1996 Plan are not transferable or assignable, other
than upon death.

The exercise price for options granted under the 1996 Plan will be at least
100% of the fair market value of a share of Class B Common Stock on the date of
grant. Options will vest ratably on each of the first four anniversaries of the
date of grant. However, notwithstanding such vesting, no option will become
exercisable until the earlier of (i) the date on which the Market Value of the
Class B Common Stock is at least 25% greater than the exercise price of such
option and (ii) the eighth anniversary of the date of grant. "Market Value" of
the Class B Common Stock is determined by taking the average closing price of
the Class A Common Stock on the Nasdaq National Market or the principal
securities exchange on which the Common Stock is listed for any five consecutive
trading days. Subject to the foregoing, vested options may be exercised for a
period of up to 10 years from the date of grant.

The Committee may provide for the payment of the option price in cash, by
delivery of other Common Stock having a fair market value equal to the exercise
price, by a combination thereof or by such other manner as the Committee shall
determine, including a cashless exercise procedure.

The Board of Directors may at any time and from time to time suspend,
amend, modify or terminate the 1996 Plan; provided, however, that, to the extent
required by Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or any other law, regulation or stock exchange
rule, no such change shall be effective without the requisite approval of the
Company's stockholders. In addition, no such change may adversely affect any
award previously granted, except with the written consent of the grantee.

No options may be granted under the 1996 Plan after the tenth anniversary
of the approval of the 1996 Plan.

DEFINED CONTRIBUTION PLANS

401(k) Plan. The Company maintains the Associates' Savings Plan (the
"401(k) Plan"), a defined contribution retirement plan with a cash or deferral
arrangement as described in Section 401(k) of the Code. The 401(k) Plan is
intended to be qualified under Section 401(a) of the Code. All employees who are
at least 21 years old, work at least 1,000 hours a year and are not excluded by
a bargaining agreement or certain other exclusions are eligible to participate
in the 401(k) Plan. The 401(k) Plan provides that each participant may make
elective contributions from 1% to 15% of his or her compensation, subject to
statutory limits. The Company contributes to the 401(k) Plan fifty cents for
every dollar contributed up to the first 4% of an eligible employee's
compensation. All contributions made by participants are fully vested and are
not subject to forfeiture. A participant vests in any contributions made by the
Company at a rate of 20% for each year of service. Each participant's entire
401(k) account is distributed to the participant or his or her beneficiary,
without regard to vesting, upon retirement, death, disability, or termination of
employment with the Company after the completion of five years of service. The
trustee under the 401(k) Plan, at the direction of each participant, invests the
assets of the 401(k) Plan in a number of investment options.

Money Purchase Plan. The Company maintains the Money Purchase Plan for
Former NAD Salaried Employees (the "Money Purchase Plan"), a defined
contribution retirement plan with a cash or deferral arrangement, as described
in Section 401(a) of the Code. All salaried employees of the Company who were
former salaried employees of Martin-Brower immediately preceding the acquisition
of NAD by the Company and either participated in a defined contribution plan or
have completed two years of service with the

48
<PAGE> 52

Company are eligible to participate in the Money Purchase Plan. As of December
30, 1995, 324 employees participated in the Money Purchase Plan. All
contributions are made by the Company. The Company contributes an amount equal
to 10% of each eligible employee's compensation, subject to statutory limits.
All contributions made by the Company are fully vested with the participant and
are not subject to forfeiture. Each participant's account is distributed to such
participant or the participant's named beneficiary (or surviving spouse in the
case of the death of a participant) upon the termination of service with the
Company, retirement, disability or death of the participant, generally in the
form of an annuity purchased from the proceeds of the participant's account. A
committee appointed by the Company's Board of Directors, at the direction of
each participant, invests the assets of the Money Purchase Plan in a number of
investment options.

PENSION PLANS

ProSource Distribution Services Salaried Defined Benefit Plan (the
"Salaried Pension Plan"), ProSource Distribution Services Hourly Defined Benefit
Plan (the "Hourly Pension Plan") and ProSource Distribution Services Pension
Plan for Former NAD Hourly Employees (the "NAD Pension Plan"; and together with
the Salaried Pension Plan and Hourly Pension Plan, each a "Pension Plan") are
tax-qualified benefit pension plans. The Salaried Pension Plan and Hourly
Pension Plan cover all of the Company's salaried and hourly employees,
respectively, who have been employed with the Company for at least one year,
subject to certain exceptions. The NAD Pension Plan covers (i) former NAD
employees who participated in the Martin-Brower pension plan and were employed
by the Company by September 30, 1995 and (ii) every other former NAD employee
who completes one year of service for the Company and is compensated on an
hourly or mileage basis. Each Pension Plan is funded through a tax-exempt trust
into which contributions are made as necessary based on actuarial funding
analysis. The Company's funding policy is to contribute an amount not less than
the minimum funding requirements under the Employee Retirement Income Security
Act of 1974, as amended or supplemented, nor more than the maximum deductible
amount for income tax purposes.

Each Pension Plan provides for the payment of benefits upon retirement,
early retirement, death, disability and termination of employment. All benefits
become fully vested after five years of service. Benefits under the Salaried
Pension Plan and NAD Pension Plan are determined under a formula based on a
participant's compensation and credited service. Benefits under the Hourly
Pension Plan are determined under a formula based solely on a participant's
credited service. Participants may elect from several optional forms of benefit
distribution.

SALARIED PENSION PLAN TABLE

<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
FINAL AVERAGE -------------------------------------------------------
COMPENSATION (5 YEARS) 15 20 25 30 35
- ---------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$125,000 $29,471 $39,295 $49,199 $58,943 $58,943
150,000 35,721 47,628 59,536 71,443 71,443
175,000 35,721 47,628 59,536 71,443 71,443
200,000 35,721 47,628 59,536 71,443 71,443
225,000 35,721 47,628 59,536 71,443 71,443
250,000 35,721 47,628 59,536 71,443 71,443
300,000 35,721 47,628 59,536 71,443 71,443
400,000 35,721 47,628 59,536 71,443 71,443
450,000 35,721 47,628 59,536 71,443 71,443
500,000 35,721 47,628 59,536 71,443 71,443
550,000 35,721 47,628 59,536 71,443 71,443
</TABLE>

The Named Executive Officers have been credited with the following years of
service under the Salaried Pension Plan: David R. Parker -- four; Thomas C.
Highland -- eight; John E. Foley -- two; and Robert S. Donaldson -- three.
Daniel J. Adzia does not participate in the Salaried Pension Plan. The Salaried
Pension

49
<PAGE> 53

Plan defines "compensation" as cash remuneration to an employee for services
rendered, constituting an employee's salary, bonus, commissions and
contributions to any Company cafeteria plan or cash or deferred arrangement made
by the employee through pre-tax deductions, and credits compensation only up to
the limit of covered compensation under Section 401(a)(17) of the Code. The
covered compensation, as determined under the Salaried Benefit Plan, is, in the
aggregate, not substantially different than the amount reflected in the Annual
Compensation column of the Summary Compensation Table set forth above. The
estimates of annual retirement benefits reflected in the above table are based
on payment in the form of a straight-life annuity and are not subject to any
deduction for Social Security or other offset amounts.

Monthly normal retirement benefits under the Hourly Pension Plan are
determined by taking the product of the participant's years of credited service
(up to a maximum of 30 years) and $20. Monthly normal retirement benefits under
the NAD Pension Plan are equal to 1 3/4% of the participant's covered
compensation for each one-year period of credited service divided by 12.

50
<PAGE> 54

CERTAIN TRANSACTIONS

SHAREHOLDERS AGREEMENTS

Management Shareholders Agreement. The following is a summary of certain
provisions of the Amended and Restated Management Shareholders Agreement, dated
as of May 31, 1995, among the Company, Onex and certain officers and employees
("Management Shareholders") of the Company (the "Management Shareholders
Agreement"). The following executive officers of the Company are party to the
Management Shareholders Agreement: David R. Parker, Thomas C. Highland, Daniel
J. Adzia, William F. Evans, Paul A. Garcia de Quevedo, Dennis T. Andruskiewicz,
Robert S. Donaldson, John E. Foley and John P. Gainor.

The Management Shareholders Agreement governs, among other things, the
manner and means by which Common Stock, or securities convertible into shares of
Common Stock, held by the Management Shareholders at any time may be
transferred. Pursuant to such Agreement, the transfer of shares of the Company's
Common Stock, including shares received upon the conversion of options, by
Management Shareholders is prohibited except (i) to immediate family members (or
to trusts for the exclusive benefit of the transferor or his immediate family
members), (ii) to other Management Shareholders or management employees of the
Company in cases of hardship or other unusual circumstances (with the approval
of the Company's Board of Directors), subject to a right of first refusal in
favor of the Company, or (iii) through the public markets, provided that such
sales do not occur within 180 days of any public offering of Common Stock, that
such sales during any 90-day period do not exceed the greater of (a) 500 shares
of Common Stock and (b) 5% of the sum of the Management Shareholder's shares
then held by him and the Management Shareholder's shares previously sold by him
and that such sales do not exceed 50% of his shares in the aggregate, including
shares previously sold, without the prior approval of the Board of Directors,
subject to a right of first refusal in favor of the Company. If the Management
Shareholder's employment terminates for any reason, pursuant to the Company's
Restated Certificate of Incorporation, shares of Class B Common Stock held by
such Management Shareholder shall automatically convert into Class A Common
Stock, unless transferred to Onex or another Management Shareholder. See
"Description of Capital Stock."

The Management Shareholders Agreement provides the Management Shareholders
with the option to participate on a pro rata basis with Onex in sales of Common
Stock, and Onex with the right to compel participation of the Management
Shareholders in sales of Common Stock by Onex, subject, in each case, to certain
exceptions. In addition to the above-described provisions, the Management
Shareholders Agreement contains provisions granting the Management Shareholders
certain registration rights. See "Shares Available for Future Sale."

The Management Shareholders Agreement terminates if Onex ceases to hold in
the aggregate 20% of the outstanding voting capital stock of the Company or if
another person or group holds in the aggregate a greater percentage of the
outstanding voting capital stock of the Company than Onex.

Director Shareholders Agreement. The following is a summary of certain
provisions of the Director Shareholders Agreement, dated as of May 31, 1995,
among the Company, Onex and certain directors ("Director Holders") of the
Company (the "Director Shareholders Agreement" and, together with the Management
Shareholders Agreement, the "Shareholders Agreements"). The following directors
of the Company are party to the Director Shareholders Agreement: Michael E.
Treacy, Michael Carpenter, C. Lee Johnson and R. Geoffrey P. Styles.

The Director Shareholders Agreement governs, among other things, the manner
and means by which Common Stock, or securities convertible into shares of Common
Stock, held by the Director Holders at any time may be transferred. Pursuant to
such Agreement, the transfer of shares of the Common Stock, 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.

51
<PAGE> 55

The Director Shareholders Agreement provides the Director Holders with the
option to participate on a pro rata basis with Onex in sales of Common Stock,
and Onex with the right to compel participation of the Director Holders in sales
of the Common Stock by Onex, subject, in each case, to certain exceptions. In
addition to the above-described provisions, the Director Shareholders Agreement
contains provisions granting the Director Holders certain registration rights.
See "Shares Available for Future Sale."

The Director Shareholders Agreement terminates if Onex ceases to hold in
the aggregate 20% of the outstanding voting capital stock of the Company or if
another person or group holds in the aggregate a greater percentage of the
outstanding voting capital stock of the Company than Onex.

ONEX MANAGEMENT FEES

The Company paid Onex fees of $0.8 million, $0.8 million, $0.8 million and
$0.4 million for management services rendered in 1993, 1994, 1995 and the six
months ended June 29, 1996, respectively. Such fee is payable indefinitely and
is subject to an annual inflation adjustment. Onex has agreed to relinquish its
right to receive such fee upon completion of the offering, in consideration for
which Onex will receive $4.0 million payable in Class B Common Stock valued at
the initial public offering price.

CERTAIN EQUITY OFFERINGS TO MANAGEMENT

The aggregate amount of such loans guaranteed by the Company as of June 29,
1996 was $3.3 million. The shares of Common Stock purchased were pledged to the
Company as collateral for the Company's guaranty. All of such shares are subject
to the Shareholders Agreements. Pursuant to the Shareholders Agreements, if a
shareholder defaults on such indebtedness, the Company has the option to
purchase such shares at a purchase price equal to 85% of fair market value at
the time of purchase, reduced by the amount of the outstanding indebtedness
secured by the shares.

52
<PAGE> 56

ONEX SUBORDINATED NOTES

In connection with the financing of the acquisition of BKDS, the Company
issued to Onex, a 10% convertible subordinated note due 2002, in the principal
amount of $2.5 million (the "Onex Convertible Note"). In connection with the
acquisition of NAD, the Company issued to Onex a 12% Subordinated Note due 2005
in the principal amount of $15 million (the "12% Subordinated Note") and a
convertible subordinated note due 2005 in the principal amount of $3.5 million
(the "Onex NAD Note"). Onex intends to convert $2.5 million of principal and
$1.0 million of accrued interest outstanding under the Onex Convertible Note
into 350,100 shares of Common Stock immediately prior to completion of the
offering based on the stated conversion price of $10.00 per share. The
outstanding principal balance of $15 million and accrued interest of $0.4
million under the 12% Subordinated Note will be prepaid using the proceeds of
the offering. During the year ended December 30, 1995, the Company paid $2.1
million of principal and $41,000 of accrued interest under the Onex NAD Note,
resulting in an outstanding balance of $1.4 million at December 30, 1995. On
February 1, 1996, Onex converted $0.8 million principal amount of the Onex NAD
Note into 80,000 shares of the Common Stock and the remaining balance on such
note of approximately $0.6 million plus accrued interest of $0.1 million was
paid to Onex. See "Use of Proceeds."

53
<PAGE> 57

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock before the offering and after giving
effect to the offering by (i) each person known to the Company to own
beneficially more than 5% of any class of the Company's outstanding Common
Stock, (ii) each director of the Company, (iii) each Named Executive Officer of
the Company, and (iv) all executive officers and directors of the Company, as a
group. All information with respect to beneficial ownership has been furnished
to the Company by the respective stockholders of the Company. Except as
otherwise indicated in the footnotes, each beneficial owner has the sole power
to vote and to dispose of all shares held by such holder. None of the Company's
stockholders are selling shares in the offering.

<TABLE>
<CAPTION>
SHARES OF CLASS B SHARES OF CLASS B
COMMON STOCK COMMON STOCK CLASS A AND B
BENEFICIALLY OWNED BENEFICIALLY OWNED COMBINED VOTING
PRIOR TO THE OFFERING(1) AFTER THE OFFERING(1) POWER(2)
------------------------ ------------------------ ---------------
NAME NUMBER PERCENTAGE NUMBER PERCENTAGE PERCENTAGE
- ----------------------------------- --------- ---------- --------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Onex Corporation(4)................ 4,572,000 86.2% 4,922,100 87.1% 82.1%
161 Bay Street
Toronto, Ontario
Canada
Onex DHC LLC(4).................... 4,572,000 86.2 4,572,000 80.9 76.3
421 Leader Street
Marion, Ohio 43302
David R. Parker(3)................. 153,798 2.9 153,798 2.7 2.6
Thomas C. Highland(3).............. 80,438 1.5 80,438 1.4 1.3
Daniel J. Adzia(3)................. 47,250 * 47,250 * *
Robert S. Donaldson(3)............. 21,420 * 21,420 * *
John E. Foley(3)................... 31,500 * 31,500 * *
Gerald W. Schwartz(4).............. 4,572,000 86.2 4,922,100 87.1 82.1
Anthony R. Melman(5)............... -- -- -- -- --
Michael E. Treacy(3)............... 31,500 * 31,500 * *
Michael Carpenter.................. 18,200 * 18,200 * *
Anthony Munk(5).................... -- -- -- -- --
C. Lee Johnson..................... 4,500 * 4,500 * *
R. Geoffrey P. Styles.............. 7,300 * 7,300 * *
All directors and executive
officers of the Company as a
group (17 persons)............... 5,061,056 95.0 5,411,156 95.3 89.9
</TABLE>

- ---------------
* Less than 1%.

(1) Pursuant to the Recapitalization, prior to completion of the offering, the
Company's Common Stock will be converted into Class B Common Stock and all
of the Company's existing stockholders will receive shares of Class B Common
Stock in exchange for the shares of Common Stock currently held by them.
Each share of Class B Common Stock will be convertible into Class A Common
Stock on a one-to-one basis at any time at the option of the holder thereof
and in certain other circumstances. All information in the table gives
effect to the Recapitalization and assumes that no shares of Class B Common
Stock are converted into shares of Class A Common Stock. See "Description of
Capital Stock."

(2) The column entitled "Class A and Class B Combined Voting Power Percentage"
in the table shows the combined voting power of the votes attributable to
Class A Common Stock (each share of which is entitled to one vote) and Class
B Common Stock (each share of which is entitled to ten votes) of the holders
thereof.

(3) Includes shares of Common Stock which the directors and executive officers
have the right to acquire through the exercise of options within 60 days as
follows: David R. Parker -- 10,498; Thomas C. Highland -- 5,438; Daniel J.
Adzia -- 2,250; Robert S. Donaldson -- 1,020; John E. Foley -- 1,500; and
Michael E. Treacy -- 1,500.

(4) Includes 4,458,696 shares with respect to which Onex Corporation, Onex DHC
LLC and Mr. Schwartz share beneficial ownership.

(5) Excludes shares in which Messrs. Melman and Munk have an indirect interest,
with respect to which Mr. Schwartz, Onex Corporation and Onex DHC LLC share
beneficial ownership.

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<PAGE> 58

In addition, as of October 16, 1996, Messrs. Schwartz, Melman and Styles
beneficially owned 14,639,639, 62,000 and 14,000 subordinate voting shares of
Onex Corporation ("Subordinate Voting Shares"), respectively, representing 36.3%
of the outstanding Subordinate Voting Shares in the case of Mr. Schwartz, and
less than 1% of the outstanding Subordinate Voting Shares in the case of Messrs.
Melman and Styles. All directors and executive officers of the Company as a
group owned 14,715,639 Subordinate Voting Shares, representing 36.5% of the
outstanding Subordinate Voting Shares. Subordinate Voting Shares beneficially
owned includes shares which Messrs. Schwartz (400,000), Melman (62,000) and
Styles (6,000) may have the right to acquire through the exercise of options
within 60 days (the options become exercisable in the event that the average
market price of the Subordinate Voting Shares exceeds the exercise price of the
options (Cdn. $13.25) by at least 25%). Mr. Schwartz also beneficially owns
100,000 multiple voting shares of Onex Corporation ("Multiple Voting Shares"),
representing all of the outstanding Multiple Voting Shares. All information with
respect to beneficial ownership of Onex Corporation capital stock has been
furnished by the respective stockholders of Onex Corporation. Subordinate Voting
Shares carry one vote per share and as a class are entitled to 40% of the
aggregate votes attached to all voting shares of Onex Corporation, to elect 40%
of Onex Corporation's Board of Directors and to appoint the auditors. Multiple
Voting Shares are entitled to elect 60% of Onex Corporation's Board of Directors
and carry such number of votes in the aggregate as represents 60% of the
aggregate votes attached to all voting shares of Onex Corporation.

55
<PAGE> 59

DESCRIPTION OF CAPITAL STOCK

GENERAL

The authorized capital stock of the Company consists of (i) 50,000,000
shares of Class A Common Stock, par value $0.01 per share, and 10,000,000 shares
of Class B Common Stock, par value $0.01 per share, and (ii) 10,000,000 shares
of Preferred Stock, par value $0.01 per share. Of the authorized shares of Class
A Common Stock, 3,400,000 shares are being offered in the offering and 6,851,025
shares will be reserved for issuance upon conversion of Class B Common Stock
into Class A Common Stock. Of the authorized shares of Class B Common Stock,
5,652,400 will be held by the Company's existing stockholders, and 1,208,625
will be reserved for issuance upon exercise of options and warrants and
conversion of outstanding convertible indebtedness. No shares of preferred stock
will be issued and outstanding upon completion of the offering. A description of
the material terms and provisions of the Company's Restated Certificate of
Incorporation affecting the relative rights of the Class A Common Stock, the
Class B Common Stock and the Preferred Stock is set forth below. The following
description of the capital stock of the Company is intended as a summary only
and is qualified in its entirety by reference to the form of the Company's
Restated Certificate of Incorporation filed with the Registration Statement of
which this Prospectus forms a part and to Delaware corporate law.

COMMON STOCK

Voting Rights. Except for matters where applicable law requires the
approval of one or both classes of Common Stock voting as separate classes and
as otherwise described below, holders of Class A Common Stock and Class B Common
Stock vote as a single class on all matters submitted to a vote of the
stockholders, including the election of directors. 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. Generally, all matters to be voted on by stockholders must be
approved by a majority (or, in the case of election of directors, by a
plurality) of the votes entitled to be cast by all shares of Class A Common
Stock and Class B Common Stock present in person or represented by proxy, voting
together as a single class. Under Delaware law, the affirmative vote of the
holders of a majority of the outstanding shares of Class A Common Stock would be
required to approve, among other matters, an adverse change in the powers,
preferences or special rights of the shares of Class A Common Stock.

Dividends. Holders of Class A Common Stock and Class B Common Stock will
share ratably in any dividend declared by the board of directors, subject to any
preferential rights of any outstanding Preferred Stock. Dividends consisting of
shares of Class A Common Stock and Class B Common Stock may be paid only as
follows: (i) shares of Class A Common Stock may be paid only to holders of
shares of Class A Common Stock, and shares of Class B Common Stock may be paid
only to holders of Class B Common Stock; and (ii) shares shall be paid
proportionally with respect to each outstanding share of Class A and Class B
Common Stock.

The Company may not subdivide or combine shares of either class of Common
Stock without at the same time proportionally subdividing or combining shares of
the other class.

Conversion. Each share of Class B Common Stock is convertible at the
option of the holder thereof into one share of Class A Common Stock. Any shares
of Class B Common Stock transferred to a person other than an existing holder of
Class B Common Stock or any affiliate thereof shall automatically convert into
shares of Class A Common Stock upon such disposition. In addition, in the event
that any employee of the Company holding Class B Common Stock ceases to be an
employee for any reason, the shares of Class B Common Stock held by such
employee shall automatically convert into shares of Class A Common Stock, unless
transferred to Onex or another employee stockholder.

Other Rights. In the event of any merger or consolidation of the Company
with or into another company that is not a subsidiary of the Company in
connection with which shares of Common Stock are converted into or exchangeable
for shares of stock, other securities or property (including cash), all holders
of Common

56
<PAGE> 60

Stock, regardless of class, will be entitled to receive the same kind and amount
of shares of stock and other securities and property (including cash).

On liquidation, dissolution or winding up of the Company, after payment in
full of the amounts required to be paid to holders of Preferred Stock, if any,
all holders of Common Stock, regardless of class, are entitled to share ratably
in any assets available for distribution to holders of shares of Common Stock.

No shares of either class of Common Stock are subject to redemption or have
preemptive rights to purchase additional shares of Common Stock.

Upon completion of the offering, all the outstanding shares of Class A
Common Stock and Class B Common Stock will be legally issued, fully paid and
nonassessable.

PREFERRED STOCK

The Preferred Stock is issuable from time to time in one or more series and
with such designations and preferences for each series as shall be stated in the
resolutions providing for the designation and issue of each such series adopted
by the board of directors of the Company. The board of directors is authorized
by the Company's Restated Certificate of Incorporation to determine, among other
things, the voting, dividend, redemption, conversion and liquidation powers,
rights and preferences and the limitations thereon pertaining to such series.
The board of directors, without stockholder approval, may issue Preferred Stock
with voting and other rights that could adversely affect the voting power of the
holders of the Common Stock and could have certain anti-takeover effects. The
Company has no present plans to issue any shares of Preferred Stock. The ability
of the board of directors to issue Preferred Stock without stockholder approval
could have the effect of delaying, deferring or preventing a change in control
of the Company or the removal of existing management.

LIMITATION ON THE LIABILITY OF DIRECTORS

The Company's Restated Certificate of Incorporation provides that, to the
fullest extent permitted by the Delaware General Corporation Law (the "DGCL"),
directors of the Company shall not be personally liable to the Company or its
stockholders for monetary damages for breaches of their fiduciary duty as a
director. This provision, however, does not eliminate a director's liability (i)
for any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases or (iv)
for any transactions from which the director derived an improper personal
benefit. In addition, this provision does not limit directors' liability under
federal securities laws.

DELAWARE LAW, CHARTER AND BY-LAW PROVISIONS

Section 203 of the DGCL prohibits certain business combinations with
certain stockholders for a period of three years after they acquire 15% of the
outstanding voting stock of a corporation. The Company has expressly elected not
to be governed by Section 203 of the DGCL.

The Restated Certificate of Incorporation and By-Laws of the Company to be
adopted upon completion of the offering will (i) prohibit the stockholders of
the Company from taking action by written consent in lieu of a meeting by less
than unanimous written consent and (ii) provide that special meetings of
stockholders may be called only by the Board of Directors. Such provisions could
have the effect of discouraging attempts by others to obtain control of the
Company or delaying changes in control or management of the Company.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Class A and Class B Common Stock
is The Bank of New York.

57
<PAGE> 61

SHARES AVAILABLE FOR FUTURE SALE

Upon completion of the offering, the Company will have 3,400,000 shares of
Class A Common Stock issued and outstanding and 5,652,400 shares of Class B
Common Stock issued and outstanding. All of the shares of Class A Common Stock
to be sold in the offering will be freely tradeable without restrictions or
further registration under the Securities Act, except for any shares purchased
by an "affiliate" of the Company (as that term is defined in Rule 144), which
will be subject to the resale limitations of Rule 144. The shares of Class B
Common Stock to be outstanding upon completion of the offering are convertible
into shares of Class A Common Stock on a one-to-one basis at the option of the
holder and in certain other circumstances. Shares of Class A Common Stock
issuable upon conversion of Class B Common Stock have not have been registered
under the Securities Act and may not be sold in the absence of an effective
registration statement under the Securities Act other than in accordance with
Rule 144 or another exemption from registration.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are required to be aggregated) who has beneficially owned shares of
Common Stock for at least two years, or a person who may be deemed an
"affiliate", is entitled to sell, within any three-month period, a number of
shares that does not exceed the greater of one percent of the total number of
shares of the class of stock being sold or the average weekly reported trading
volume of the class of stock being sold during the four calendar weeks preceding
such sale. A person who is not deemed an "affiliate" of the Company at any time
during the three months preceding a sale and who has beneficially owned shares
for at least three years is entitled to sell such shares under Rule 144 without
regard to the volume limitations described above. As defined in Rule 144, an
"affiliate" of an issuer is a person that directly or indirectly through the use
of one or more intermediaries controls, is controlled by, or is under common
control with, such issuer. The Securities and Exchange Commission (the
"Commission") has published a notice of proposed rulemaking which, if adopted as
proposed, would shorten the applicable holding periods to one and two years,
respectively (from the current two- and three-year periods described above). The
Company cannot predict whether such amendments will be adopted or the effect
thereof on the trading market for the Class A Common Stock. The foregoing
summary of Rule 144 is not intended to be a complete description thereof.

Certain directors, officers and management employees, holding an aggregate
of 1,080,500 shares and options to purchase shares of Class B Common Stock (the
"Management Shares"), and Martin-Brower, the holder of a warrant to purchase
283,425 shares of Class B Common Stock (the "Martin-Brower Shares"), have
certain rights to require the Company to register under the Securities Act sales
of shares of Class A Common Stock issuable upon conversion of such shares,
subject to certain restrictions. If, subsequent to the completion of the
offering, the Company proposes to register any of its securities under the
Securities Act, such holders are entitled to notice of such registration and to
include their shares in such registration with their expenses borne by the
Company, subject to the right of an underwriter participating in the offering to
limit the number of shares included in the registration by such holders. With
regard to the Management Shares, the Company is required only to register such
shares on a pro rata basis with shares registered on behalf of Onex.

The Company and each of the Company's existing stockholders have agreed,
among other things, not to sell or otherwise transfer any shares of Common Stock
for a period of 180 days after the date of this Prospectus. See "Underwriters."

Prior to the offering, there has been no market for the Class A Common
Stock and no prediction can be made as to the effect, if any, that market sales
of outstanding shares of Class A Common Stock, or the availability of such
shares for sale, will have on the market price of the Class A Common Stock
prevailing from time to time. Nevertheless, sales of substantial amounts of
Class A Common Stock in the public market, or the perception that such sales
could occur, could adversely affect prevailing market prices for the Class A
Common Stock offered in the offering.

58
<PAGE> 62

UNDERWRITERS

Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof, the Underwriters named below have severally
agreed to purchase, and the Company has agreed to sell to them, severally, the
respective number of shares of Class A Common Stock set forth opposite the names
of such Underwriters below:

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Morgan Stanley & Co. Incorporated.........................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................................
Smith Barney Inc. ........................................................

-------
Total........................................................... 3,400,000
=======
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Class A Common
Stock offered hereby are subject to the approval of certain legal matters by
their counsel and to certain other conditions. The Underwriters are obligated to
take and pay for all of the shares of Class A Common Stock offered hereby (other
than those covered by the over-allotment option described below) if any such
shares are taken.

The Underwriters initially propose to offer part of the shares of Class A
Common Stock directly to the public at the public offering price set forth on
the cover page hereof and part to certain dealers at a price that represents a
concession not in excess of $ a share under the public offering price. Any
Underwriter may allow, and such dealers may reallow, a concession not in excess
of $ a share to other Underwriters or to certain other dealers. After the
initial offering of the shares of Class A Common Stock, the offering price and
other selling terms may from time to time be varied by the Underwriters.

The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to an aggregate of 510,000
additional shares of Class A Common Stock at the public offering price set forth
on the cover page hereof, less underwriting discounts and commissions. The
Underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, made in connection with the offering of the shares of
Class A Common Stock offered hereby. To the extent such option is exercised,
each Underwriter will become obligated, subject to certain conditions, to
purchase approximately the same percentage of such additional shares of Class A
Common Stock as the number set forth next to such Underwriter's name in the
preceding table bears to the total number of shares of Class A Common Stock
offered by the Underwriters hereby.

The Underwriters have informed the Company that they do not intend to
confirm sales to any accounts over which they exercise discretionary authority.

Application has been made to have the Class A Common Stock approved for
quotation on the Nasdaq National Market under the symbol "PSDS."

The Company and each of the Company's existing stockholders, have agreed,
subject to certain exceptions described below, not to (i) 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 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), or (ii) 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

59
<PAGE> 63

any such transaction described in clause (i) or (ii) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise for a
period of 180 days after the date of this Prospectus, without the prior written
consent of Morgan Stanley & Co. Incorporated, as representative of the several
Underwriters, provided that the Company may issue shares upon the exercise of an
option or warrant or the conversion of a security outstanding on the date of
this Prospectus of which the Underwriters have been advised, during such 180-day
period. The lock-up agreements permit (i) the pledge of Common Stock as security
for existing indebtedness incurred in connection with financing the purchase of
such Common Stock and any refinancings thereof, and (ii) in the case of Onex,
the transfer of Common Stock to any Onex affiliate.

From time to time, certain of the Underwriters have provided, and continue
to provide, investment banking services to the Company and its affiliates. Mr.
Michael Carpenter, a director of the Company, serves as Executive Vice President
of Travelers Group, Inc. Smith Barney Inc., one of the Underwriters, is a
wholly-owned subsidiary of Travelers Group, Inc.

The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act.

PRICING OF THE OFFERING

Prior to the offering, there has been no public market for the Common
Stock. The initial public offering price has been determined by negotiations
between the Company and the Underwriters. Among the factors considered in
determining the initial public offering price were the future prospects of the
Company and its industry in general, sales, earnings and certain other financial
and operating information of the Company in recent periods, and the
price-earnings ratios, price-sales ratios, market prices of securities and
certain financial and operating information of companies engaged in activities
similar to those of the Company.

LEGAL MATTERS

The validity of the shares of Class A Common Stock offered hereby and
certain legal matters will be passed upon for the Company by Kaye, Scholer,
Fierman, Hays & Handler, LLP, New York, New York and for the Underwriters by
Davis Polk & Wardwell.

EXPERTS

The consolidated financial statements of ProSource, Inc., as of December
31, 1994 and December 30, 1995, and each of the years in the three-year period
ended December 30, 1995 (and related schedules), have been included herein and
in the registration statement in reliance upon the report of KPMG Peat Marwick
LLP, independent certified public accountants, appearing elsewhere herein, and
upon the authority of said firm as experts in accounting and auditing.

The combined financial statements of the National Accounts Division (a
division of The Martin-Brower Company) as of July 1, 1994 and July 2, 1993 and
for the years then ended included in this Prospectus have been so included in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1 (together with all amendments, schedules and exhibits thereto, the
"Registration Statement") under the Securities Act with respect to the Class A
Common Stock offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement, certain items of which are omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the Company and the Class A Common Stock, reference is made to the
Registration Statement, which may be inspected, without charge, at the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at its New York

60
<PAGE> 64

Regional Office, Seven World Trade Center, 13th Floor, New York, New York 10048
and its Chicago Regional Office, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of all or any portion of the Registration Statement
may be obtained from the Public Reference Section of the Commission, upon
payment of prescribed fees. In addition, the Commission maintains a web site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The address
of the Commission's web site is http://www.sec.gov.

Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.

61
<PAGE> 65

FINANCIAL STATEMENTS

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE(S)
<S> <C>
Independent Auditors' Report........................................................ F-2
ProSource, Inc. Consolidated Balance Sheets as of December 31, 1994, December 30,
1995 and June 29, 1996............................................................ F-3
ProSource, Inc. Consolidated Statements of Operations for the years ended
December 25, 1993, December 31, 1994, December 30, 1995 and the periods ended
July 1, 1995 and June 29, 1996.................................................... F-4
ProSource, Inc. Consolidated Statements of Stockholders' Equity for the years ended
December 25, 1993, December 31, 1994, December 30, 1995 and the period ended
June 29, 1996..................................................................... F-5
ProSource, Inc. Consolidated Statements of Cash Flows for the years ended
December 25, 1993, December 31, 1994, December 30, 1995 and the periods ended July
1, 1995 and June 29, 1996......................................................... F-6
ProSource, Inc. Notes to Consolidated Financial Statements.......................... F-7
National Accounts Division Unaudited Condensed Combined Balance Sheet as of
March 31, 1995.................................................................... F-22
National Accounts Division Unaudited Condensed Combined Statement of Income and
Changes in Divisional Equity for the thirty-nine weeks ended March 31, 1995....... F-23
National Accounts Division Unaudited Condensed Combined Statement of Cash Flows for
the thirty-nine weeks ended March 31, 1995........................................ F-24
National Accounts Division Notes to Unaudited Condensed Combined Financial
Statements........................................................................ F-25
Report of Independent Accountants................................................... F-27
National Accounts Division Combined Balance Sheets as of July 2, 1993 and July 1,
1994.............................................................................. F-28
National Accounts Division Combined Statements of Income and Changes in Divisional
Equity for the 52 weeks ended July 2, 1993 and July 1, 1994....................... F-29
National Accounts Division Combined Statements of Cash Flows for the 52 weeks ended
July 2, 1993 and July 1, 1994..................................................... F-30
National Accounts Division Notes to Combined Financial Statements................... F-31
ProSource, Inc. Unaudited Pro Forma Condensed Consolidated Statements of
Operations........................................................................ F-39
ProSource, Inc. Unaudited Pro Forma Condensed Consolidated Statements of Operations
for the year ended December 30, 1995.............................................. F-40
ProSource, Inc. Unaudited Pro Forma Condensed Consolidated Statements of Operations
for the six months ended June 29, 1996............................................ F-41
ProSource, Inc. Notes to Unaudited Pro Forma Condensed Consolidated Statements of
Operations........................................................................ F-42
</TABLE>

F-1
<PAGE> 66

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
ProSource, Inc.:

We have audited the accompanying consolidated balance sheets of ProSource, Inc.
and subsidiaries as of December 31, 1994 and December 30, 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 30, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ProSource, Inc. and
subsidiaries as of December 31, 1994 and December 30, 1995, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 30, 1995, in conformity with generally accepted accounting
principles.

KPMG PEAT MARWICK LLP

Miami, Florida
February 1, 1996, except for Note 14,
as to which the date is October 10, 1996

F-2
<PAGE> 67

PROSOURCE, INC.

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994, DECEMBER 30, 1995 AND JUNE 29, 1996
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AND SHARE AMOUNTS)

<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
1996 (NOTE PRO FORMA
1994 1995 1996 15) 1996
-------- -------- ----------- ------------- ---------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
ASSETS
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents........................ $ 1,151 $ 2,325 $ 2,750 -- $ 2,750
Accounts receivable, net of allowance for
doubtful accounts of $2,911, $2,585 and $2,459
in 1994, 1995 and 1996, respectively........... 122,668 230,089 218,986 -- 218,986
Inventories...................................... 41,054 140,432 149,218 -- 149,218
Deferred income taxes, net....................... 1,393 4,298 11,118 -- 11,118
Prepaid expenses and other current assets........ 5,765 10,736 12,079 -- 12,079
-------- -------- -------- -------- --------
Total current assets...................... 172,031 387,880 394,151 -- 394,151
Property and equipment, net........................ 29,166 52,507 41,372 -- 41,372
Intangible assets, net............................. 12,850 36,450 43,135 -- 43,135
Deferred income taxes, net......................... 1,944 3,901 12,551 -- 12,551
Other assets, principally deferred debt issuance
costs, less accumulated amortization of $1,065,
$1,397 and $2,329 in 1994, 1995 and 1996,
respectively..................................... 2,338 8,435 10,795 -- 10,795
-------- -------- -------- -------- --------
Total assets.............................. $218,329 $489,173 $ 502,004 $ -- $502,004
======== ======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................. $115,527 $242,645 $ 249,395 -- $249,395
Accrued liabilities.............................. 12,699 27,819 29,711 -- 29,711
Current portion of long-term senior debt......... 2,183 1,500 1,500 -- 1,500
-------- -------- -------- -------- --------
Total current liabilities................. 130,409 271,964 280,606 -- 280,606
Long-term senior debt, less current portion........ 59,838 132,011 143,094 -- 143,094
Subordinated notes payable to Onex................. 3,126 19,791 18,501 (3,501) 15,000
Other subordinated notes payable................... 500 9,918 10,332 -- 10,332
Other noncurrent liabilities....................... 1,913 6,068 16,759 -- 16,759
-------- -------- -------- -------- --------
Total liabilities......................... 195,786 439,752 469,292 (3,501) 465,791
-------- -------- -------- -------- --------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value. Authorized
10,000,000 shares; issued and outstanding no
shares in 1994, no shares in 1995 and no shares
in 1996........................................ -- -- -- -- --
Class A Common Stock, $.01 par value. Authorized
50,000,000 shares; issued and outstanding no
shares in 1994, no shares in 1995 and no shares
in 1996 and 3,400,000 shares on a pro forma
basis.......................................... -- -- -- -- --
Class B Common Stock, $.01 par value. Authorized
10,000,000 shares; issued and outstanding
2,341,800 shares in 1994, 5,177,300 shares in
1995 and 5,302,300 shares in 1996 and 5,652,400
shares on a pro forma basis.................... 23 52 53 4 57
Additional paid-in-capital....................... 23,504 51,838 53,088 3,497 56,585
Accumulated deficit.............................. (984) (2,540) (20,497) -- (20,497 )
Accumulated foreign currency translation
adjustments.................................... -- 71 68 -- 68
-------- -------- -------- -------- --------
Total stockholders' equity................ 22,543 49,421 32,712 3,501 36,213
-------- -------- -------- -------- --------
Total liabilities and stockholders'
equity.................................. $218,329 $489,173 $ 502,004 $ -- $502,004
======== ======== ======== ======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE> 68

PROSOURCE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 25, 1993,
DECEMBER 31, 1994, DECEMBER 30, 1995 AND THE
PERIODS ENDED JULY 1, 1995 AND JUNE 29, 1996
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1993 1994 1995 1995 1996
(52 WEEKS) (53 WEEKS) (52 WEEKS) (26 WEEKS) (26 WEEKS)
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales............................ $1,329,347 $1,598,136 $3,461,837 $1,447,760 $2,014,074
Cost of sales........................ 1,210,942 1,464,545 3,193,270 1,332,939 1,859,000
---------- ---------- ---------- ---------- ----------
Gross profit............... 118,405 133,591 268,567 114,821 155,074
Operating expenses, including
management fees to Onex of $751,
$781 and $808 in fiscal years 1993,
1994 and 1995, respectively, and
$412 and $414 in the periods ended
July 1, 1995 and June 29, 1996,
respectively....................... 114,204 131,023 255,216 110,692 149,758
Loss on impairment of long-lived
assets............................. -- -- -- -- 15,733
Restructuring charges................ -- -- 711 68 10,866
---------- ---------- ---------- ---------- ----------
Earnings (loss) from
operations............... 4,201 2,568 12,640 4,061 (21,283)
Interest expense, including interest
to Onex of $246, $255 and $1,738 in
the fiscal years 1993, 1994 and
1995, respectively, and $649 and
$1,033 in the periods ended July 1,
1995 and June 29, 1996,
respectively....................... (5,766) (6,868) (14,678) (6,781) (8,152)
Interest income...................... 241 271 1,339 531 866
---------- ---------- ---------- ---------- ----------
Loss before income taxes
and extraordinary
charge................... (1,324) (4,029) (699) (2,189) (28,569)
Income tax (provision) benefit....... 497 1,647 (85) 965 10,612
---------- ---------- ---------- ---------- ----------
Loss before extraordinary charge... (827) (2,382) (784) (1,224) (17,957)
Extraordinary charge, net of income
tax benefit of $502 in 1995........ -- -- (772) (772) --
---------- ---------- ---------- ---------- ----------
Net loss................... $ (827) $ (2,382) $ (1,556) $ (1,996) $ (17,957)
========== ========== ========== ========== ==========
Net loss per share:
Loss before extraordinary charge... $ (0.34) $ (0.99) $ (0.17) $ (0.33) $ (3.39)
---------- ---------- ---------- ---------- ----------
Net loss........................... $ (0.34) $ (0.99) $ (0.35) $ (0.53) $ (3.39)
========== ========== ========== ========== ==========
Average outstanding shares used in
calculation (in thousands)......... 2,406 2,410 4,491 3,746 5,302
========== ========== ========== ========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE> 69

PROSOURCE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 25, 1993,
DECEMBER 31, 1994, DECEMBER 30, 1995
AND THE PERIOD ENDED JUNE 29, 1996
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL ACCUMULATED FOREIGN CURRENCY
COMMON PAID-IN EARNINGS TRANSLATION
STOCK CAPITAL (DEFICIT) ADJUSTMENTS TOTAL
------ ---------- ----------- ---------------- --------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992............... $ 22 $ 22,478 $ 2,225 $ -- $ 24,725
Issuance of 125,600 shares............. 1 1,381 -- -- 1,382
Acquisition and retirement of 1,500
shares.............................. -- (16) -- -- (16)
Net loss............................... -- -- (827) -- (827)
--
--- ------ ------- -------
Balance, December 25, 1993............... 23 23,843 1,398 -- 25,264
Issuance of 6,900 shares............... -- 76 -- -- 76
Acquisition and retirement of 39,200
shares.............................. -- (415) -- -- (415)
Net loss............................... -- -- (2,382) -- (2,382)
--
--- ------ ------- -------
Balance, December 31, 1994............... 23 23,504 (984) -- 22,543
Issuance of 2,858,500 shares........... 29 28,556 -- -- 28,585
Acquisition and retirement of 23,000
shares.............................. -- (222) -- -- (222)
Foreign currency translation
adjustments......................... -- -- -- 71 71
Net loss............................... -- -- (1,556) -- (1,556)
--
--- ------ ------- -------
Balance, December 30, 1995............... 52 51,838 (2,540) 71 49,421
Issuance of 141,500 shares
(unaudited)......................... 1 1,414 -- -- 1,415
Acquisition and retirement of 16,500
shares (unaudited).................. -- (164) -- -- (164)
Foreign currency translation
adjustments (unaudited)............. -- -- -- (3) (3)
Net loss (unaudited)................... -- -- (17,957) -- (17,957)
--
--- ------ ------- -------
Balance at June 29, 1996 (unaudited)..... $ 53 $ 53,088 $ (20,497) $ 68 $ 32,712
=== ====== ======= == =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 70

PROSOURCE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 25, 1993,
DECEMBER 31, 1994, DECEMBER 30, 1995 AND THE
PERIODS ENDED JULY 1, 1995 AND JUNE 29, 1996
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
1993 1994 1995 1995 1996
(52 WEEKS) (53 WEEKS) (52 WEEKS) (26 WEEKS) (26 WEEKS)
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss................................................. $ (827) $ (2,382) $ (1,556 ) $ (1,996 ) $(17,957)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization of property and
equipment............................................ 5,047 4,868 9,163 4,415 3,444
Amortization of intangible assets and deferred debt
issuance costs....................................... 2,846 3,103 3,530 1,147 1,881
Bad debt expense....................................... 766 2,427 1,845 757 960
Write-off of deferred loan fees........................ -- -- 1,274 1,274 --
Loss on impairment of long-lived assets................ -- -- -- -- 15,733
Deferred income taxes (benefit)........................ 697 (1,391) (1,749 ) (1,581 ) (10,740)
Gain on sale of property and equipment................. (166) (325) (184 ) (13 ) --
Changes in operating assets and liabilities, net of
effects of companies purchased:
Decrease (increase) in accounts receivable........... (16,159) (25,150) (13,441 ) (7,965 ) 10,143
(Increase) decrease in inventories................... (6,255) 865 7,706 7,038 (8,786)
(Increase) decrease in prepaid expenses and other
current assets.................................... (3,719) 2,723 (4,321 ) (2,390 ) (4,093)
(Increase) decrease in other assets.................. (2,737) (802) 1,208 313 (12,966)
Increase in accounts payable......................... 29,116 18,450 45,423 1,662 6,750
Increase (decrease) in accrued liabilities........... 1,469 (104) 2,997 33,041 1,892
Increase (decrease) in other noncurrent
liabilities....................................... (1,102) (1,365) (1,898 ) 181 10,691
-------- -------- --------- --------- --------
Net cash provided by (used in) operating
activities........................................ 8,976 917 49,997 35,883 (3,048)
-------- -------- --------- --------- --------
Cash flows from investing activities:
Capital expenditures..................................... (3,518) (1,376) (5,683 ) (1,709 ) (7,982)
Proceeds from sale of property and equipment............. 615 445 362 67 --
Payment for purchase of net assets acquired.............. (13,202) (3,792) (170,279 ) (141,119 ) --
Proceeds from settlement of purchase price provisions.... -- 6,600 -- -- --
-------- -------- --------- --------- --------
Net cash (used in) provided by investing
activities...................................... (16,105) 1,877 (175,600 ) (142,761 ) (7,982)
-------- -------- --------- --------- --------
Cash flows from financing activities:
Repayments of long-term debt to Onex..................... -- -- (2,085 ) (2,085 ) (615)
Repayments of long-term debt to others................... (1,781) (32,247) (78,938 ) (14,136 ) (1,550)
Borrowings on long-term debt to Onex..................... 371 255 18,750 18,625 125
Borrowings on long-term debt to others................... 8,718 29,124 160,616 75,678 12,247
Proceeds from issuance of common stock to Onex........... -- -- 26,500 26,500 800
Proceeds from issuance of common stock to others......... 1,382 76 2,085 2,085 615
Payments to acquire and retire treasury stock............ (16) (415) (222 ) (212 ) (164)
-------- -------- --------- --------- --------
Net cash provided by (used in) financing
activities...................................... 8,674 (3,207) 126,706 106,455 11,458
-------- -------- --------- --------- --------
Effect of exchange rate changes on cash.................... -- -- 71 -- (3)
Net increase (decrease) in cash and cash
equivalents..................................... 1,545 (413) 1,174 (423 ) 425
Cash and cash equivalents at beginning of year............. 19 1,564 1,151 1,151 2,325
-------- -------- --------- --------- --------
Cash and cash equivalents at end of year................... $ 1,564 $ 1,151 $ 2,325 $ 728 $ 2,750
======== ======== ========= ========= ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest to Onex....................................... $ -- -- 41 41 1,904
======== ======== ========= ========= ========
Interest to others..................................... $ 5,569 $ 6,264 $ 12,291 $ 5,725 $ 6,506
======== ======== ========= ========= ========
Income taxes, net of refunds........................... $ 930 $ 279 $ 993 $ 30 $ 123
======== ======== ========= ========= ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE> 71

PROSOURCE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, DECEMBER 30, 1995 AND JUNE 29, 1996
(INSOFAR AS THESE NOTES REFER TO THE PERIOD SUBSEQUENT
TO DECEMBER 30, 1995, THEY ARE UNAUDITED)

(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ProSource, Inc. (the "Parent") is engaged in the foodservice distribution
business, specializing in limited-menu quick service and casual dining
restaurant customers, primarily operating in the United States. ProSource, Inc.
and subsidiaries (the "Company") distribute to approximately 14,450 restaurants
consisting primarily of Burger King, Arby's, Long John Silver's, Sonic,
Chick-fil-A, Wendy's, Red Lobster, Olive Garden, TGI Friday's, Chili's and TCBY
restaurant concepts.

The Parent operates through three subsidiaries, ProSource Services
Corporation ("PSC"), ProSource Distribution Services Limited ("ProSource
Canada") and BroMar Services, Inc. ("BroMar"). PSC commenced operations in July
1992. The consolidated financial statements include the results of the
operations of PSC from its inception and the results of operations of ProSource
Canada and BroMar (both of which were acquired by the Company as part of the
acquisition of the National Accounts Division ("NAD") of The Martin-Brower
Company ("Martin-Brower")) since the date of acquisition. The Company is a
subsidiary of Onex Corporation (collectively with its affiliates, "Onex"), a
company traded on the Toronto and Montreal stock exchanges.

The Company operates on a 52- to-53-week accounting year ending on the last
Saturday of each calendar year.

The following is a summary of the Company's significant accounting
policies:

(a) Interim Financial Information

The unaudited consolidated balance sheet as of June 29, 1996, and the
unaudited consolidated statements of operations and cash flows for the 26 weeks
ended July 1, 1995 and June 29, 1996 and the unaudited consolidated statement of
stockholders' equity for the 26 weeks ended June 29, 1996 include, in the
opinion of management, all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the Company's consolidated financial
position, results of operations and cash flows. Operating results for the 26
weeks ended June 29, 1996 are not necessarily indicative of the results that may
be expected for the fiscal year ending December 28, 1996.

(b) Basis of Consolidation

The consolidated financial statements include the accounts of the Company
and its subsidiaries. Operations of the companies and businesses acquired have
been included in the accompanying consolidated financial statements from their
respective dates of acquisition. All significant intercompany accounts and
transactions have been eliminated in consolidation.

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

F-7
<PAGE> 72

PROSOURCE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(d) Cash and Cash Equivalents

Cash and cash equivalents include commercial paper with original maturities
of three months or less, and cash on hand and on deposit at various financial
institutions.

(e) Inventories

Inventories, consisting primarily of food items, are stated at the lower of
cost or net realizable value. Cost is determined using the weighted average cost
method and the first-in, first-out method. Cost of inventory using the weighted
average cost method represents 100 percent, 100 percent, 32 percent and 37
percent of inventories in 1993, 1994, 1995 and 1996, respectively.

(f) Property and Equipment

Property and equipment are stated at cost. Leasehold improvements and
equipment under capital leases are amortized using the straight-line method over
the lesser of asset life or lease term. Depreciation is provided using the
straight-line method, based upon the following estimated useful lives:

<TABLE>
<S> <C>
Buildings and improvements.................................... 15 to 40 years
Warehouse and transportation equipment........................ 3 to 10 years
Computer software............................................. 1 1/2 to 5
years
Leasehold improvements........................................ 3 to 7 years
Office equipment.............................................. 3 to 7 years
</TABLE>

Costs of normal maintenance and repairs are charged to expense when
incurred. Replacements or betterments of properties are capitalized. When assets
are retired or otherwise disposed of, their cost and the applicable accumulated
depreciation and amortization are removed from the accounts, and the resulting
gain or loss is reflected in the consolidated statements of operations.

(g) Intangible Assets

Intangible assets are amortized using the straight-line method over the
following periods:

<TABLE>
<S> <C>
Goodwill........................................................ 40 years
Distribution contracts.......................................... 3 to 7 years
Noncompete agreements........................................... 5 to 7 years
Customer lists.................................................. 12 years
</TABLE>

Goodwill results from business acquisitions and principally consists of the
excess of the acquisition cost over the fair value of the net assets of
businesses acquired. At each balance sheet date, the Company evaluates the
realizability of goodwill based upon expectations of operating income for each
subsidiary having a material goodwill balance. The Company believes that no
material impairment of goodwill exists at December 30, 1995 and June 29, 1996.

(h) Deferred Debt Issuance Costs

Included in other assets are deferred debt issuance costs which are
amortized over the term of the related debt.

(i) Self-Insurance

The Company self-insures for certain levels under its workers'
compensation, auto liability and medical and dental insurance programs. Costs in
excess of retention limits are insured under various contracts with

F-8
<PAGE> 73

PROSOURCE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

insurance carriers. Estimated costs for workers' compensation claims for which
the Company is responsible are determined based on historical claims experience,
adjusted for current trends. The liability related to workers' compensation is
discounted to net present value using a risk-free treasury rate for maturities
that match the expected settlement periods. At December 31, 1994, December 30,
1995 and June 29, 1996, the estimated liabilities related to workers'
compensation were approximately $2.4 million, $4.1 million and $4.4 million,
respectively, net of a discount of approximately $0.7 million, $1.2 million and
$1.5 million, respectively. These estimated liabilities related to workers'
compensation are included in accrued liabilities in the accompanying
consolidated financial statements.

(j) Net Loss Per Common and Common Equivalent Share

Earnings per share has been computed using the weighted average number of
common and common equivalent shares outstanding during the period. Common
equivalent shares (consisting of options and warrants) are excluded during
periods of net loss since they would be anti-dilutive. Shares and options issued
within one year prior to the filing of a Registration Statement relating to an
initial public offering (see Note 14) have been treated as outstanding for all
periods presented, even where the impact of the incremental shares is
anti-dilutive.

(k) Income Taxes

The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," which
requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax liabilities and
assets are determined based on the difference between the financial statement
and tax bases of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse.

Income taxes of interim periods are determined based on the Company's
estimate of its annual effective tax rate. The rate is revised, if necessary, as
of the end of each interim period during the fiscal year to reflect the
Company's best estimate of its annual effective tax rate.

(l) Interest Rate Protection Agreements

The differential to be paid or received under interest rate swap agreements
are accrued with the resulting net interest income or expense recorded as an
adjustment to interest expense on the underlying debt. Premiums paid for
interest rate collars are amortized to interest expense over the terms of the
agreement.

(m) Translation of Foreign Currency

The translation of the accounts of ProSource Canada into U.S. dollars is
performed for balance sheet accounts using current exchange rates in effect at
the balance sheet date and for revenue and expense accounts using an average
exchange rate during the period. Translation adjustments arising from
differences in exchange rates from period to period are included in accumulated
foreign currency translation adjustments as a component of stockholders' equity.

(n) Recent Accounting Pronouncements

The Company adopted Statement of Financial Accounting Standards No. 121
("SFAS 121"), which became effective on January 1, 1996, and requires long-lived
assets be reviewed for impairment (measured based on the fair value of assets).

F-9
<PAGE> 74

PROSOURCE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

During 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation," which establishes a fair value based method of accounting for
compensation costs related to stock option plans and other forms of stock based
compensation plans as an alternative to the intrinsic value based method of
accounting defined under Accounting Principles Board Opinion No. 25. Companies
who do not elect the new method of accounting for 1996 will be required to
provide pro forma disclosures as if the fair value based method had been
applied. The Company will include the disclosures required by SFAS 123 in the
notes to future consolidated financial statements.

(o) Fair Value of Financial Instruments

The carrying amounts reported in the consolidated balance sheets for cash
and equivalents, accounts receivable, accounts payable and accrued liabilities
approximate fair value because of their short-term maturities. The carrying
amounts reported for long-term senior debt approximate fair value because it is
a variable rate instrument that re-prices monthly.

(p) Reclassifications

Certain amounts in the 1993, 1994 and 1995 consolidated financial
statements have been reclassified to conform to the 1996 consolidated financial
statements presentation.

(2) BUSINESS COMBINATIONS

(a) National Accounts Division of The Martin-Brower Company

On March 31, 1995, the Company completed the acquisition of substantially
all of the assets and the assumption of certain liabilities of NAD from
Martin-Brower. The total cost of the acquisition of $170 million was funded
through a borrowing of $116 million under the Company's revolving credit
facility, a $9 million note payable to Martin-Brower (net of a discount to
reflect a constant interest rate), $18.5 million in notes payable to Onex, and
the issuance of 26,500 shares of the Company's common stock valued at
approximately $26.5 million. The acquisition has been accounted for under the
purchase method of accounting. The accompanying consolidated financial
statements include the assets acquired of approximately $232 million, consisting
primarily of accounts receivable and inventories and liabilities assumed of
approximately $87 million, consisting primarily of trade accounts payable, based
on their estimated fair values at the acquisition date. As a result of this
transaction, the Company recorded total costs in excess of fair value of net
assets acquired of approximately $25 million. In addition, the Company incurred
an extraordinary charge relating to the write-off of approximately $0.8 million
of unamortized deferred debt issuance costs on debt repaid at the acquisition
date.

On March 30, 1996, the Company revised its estimates of certain costs
related to the acquisition by $12 million. The effect of the revision increased
acquisition-related liabilities by $12 million, deferred tax assets by
approximately $4.4 million and goodwill by approximately $7.6 million.

(b) Malone Products, Inc.

On October 31, 1994, the Company acquired certain assets and assumed
certain liabilities of Malone Products, Inc. ("Malone"). The total cost of the
acquisition of $3.8 million was funded through a borrowing of $3.3 million under
the Company's revolving credit facility and $0.5 million of convertible
subordinated debt issued to Malone. The acquisition of Malone resulted in the
recognition of $3.4 million of costs in excess of fair value of net assets
acquired. The acquisition has been accounted for under the purchase method of
accounting. The accompanying consolidated financial statements include the
assets acquired of approximately $7 million, consisting primarily of accounts
receivable and inventories, and liabilities assumed of approxi-

F-10
<PAGE> 75

PROSOURCE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

mately $6.6 million, consisting primarily of trade accounts payable, based on
their estimated fair values at the acquisition date.

On March 27, 1993, the Company completed the acquisition of certain assets
and the assumption of certain liabilities of Valley Food Services, Inc.
("Valley"). The total cost of the acquisition of $9.3 million was funded through
long-term senior debt. The acquisition of Valley resulted in the recognition of
$0.6 million as costs in excess of fair value of net assets acquired. The
acquisition has been accounted for under the purchase method of accounting. The
accompanying consolidated financial statements include the assets acquired of
approximately $12.4 million, consisting primarily of accounts receivable,
inventories and identifiable intangibles, and liabilities assumed of
approximately $3.7 million, consisting primarily of trade accounts payable,
based on their estimated fair values at the acquisition date.

(d) McCabe's Quality Foods, California, Inc.

On February 27, 1993, the Company acquired certain operating assets,
consisting primarily of accounts receivable and inventories, of McCabe's Quality
Foods, California, Inc. at their estimated fair values for approximately $3.9
million. This transaction was accounted for under the purchase method of
accounting and financed through PSC's existing credit facility.

(e) BKDS Acquisition

On June 30, 1992, the Company completed the acquisition of certain assets
and the assumption of certain liabilities of Burger King Distribution Services
("BKDS"), a division of Burger King Corporation ("BKC"). In 1994, the Company
and BKC settled certain purchase price provisions by BKC paying $6.6 million to
the Company. The payment has been accounted for as an adjustment of the original
purchase price by decreasing net deferred tax assets by $1.3 million,
acquisition-related distribution contracts by $3.2 million and goodwill by $2.1
million.

(3) RESTRUCTURING CHARGES AND IMPAIRMENT OF LONG-LIVED ASSETS

In conjunction with the NAD acquisition, the Company incurred restructuring
costs of approximately $0.7 million in 1995 primarily relating to costs incurred
to consolidate and integrate certain functions and operations. In 1996, as a
result of a study to analyze, among other things, ways to integrate the NAD
operations, improve customer service, reduce operating costs and increase
existing warehouse capacity, the Company adopted a plan to consolidate and
integrate its corporate and network operations. Through this plan, which was
approved by the Board of Directors, the Company specifically identified all
significant actions, consisting of the closing of 19 distribution facilities
currently leased and 11 distribution facilities currently owned. The Company has
begun activities to integrate these facilities, including communications to its
employees and its customers, and expects to complete the plan in stages through
the year 2000. As a result, in the first quarter of 1996, the Company accrued
restructuring charges of $10.9 million. The restructuring charges consist
approximately of $7.9 million in costs related to the termination of the
existing facility leases, $1.2 million of costs to be incurred after operations
cease in the closed facilities and $1.8 million of other costs. As of June 29,
1996, the Company had approximately $10.5 million of accrued unpaid
restructuring charges.

The significant change brought about by the plan to integrate and
consolidate the existing distribution network impaired the value of long-lived
assets to be held and used until the plan is completed. As a result, in
conjunction with the recording of the restructuring reserves in the first
quarter of 1996, the Company recognized a loss on impairment in value of
long-lived assets. The loss consists of $7.3 million of land and owned buildings
and $4.3 million of furniture and equipment and leasehold improvements
management plans to hold and use through the completion of the plan, and $4.1
million of capitalized software costs which do not

F-11
<PAGE> 76

PROSOURCE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

meet the long-term information technology strategy of the Company. The Company
measured the amount of the loss by comparing fair value of the land and owned
building (determined by independent appraisals and updated with current
comparisons to similar assets) to capitalized cost. The carrying value of
furniture and equipment and capitalized software costs was written down to net
realizable value since it is being replaced.

(4) PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1994, December 30, 1995 and June 29,
1996 consisted of the following (amounts in thousands):

1994 1995 1996
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Land................................................ $ 3,873 $ 4,746 $ 3,624
Buildings and improvements.......................... 13,146 20,428 15,846
Warehouse and transportation equipment.............. 5,032 20,309 22,430
Computer software................................... 12,551 14,815 13,879
Leasehold improvements.............................. 3,959 6,672 3,414
Office equipment.................................... 2,048 6,046 6,132
------ ------ ------
40,609 73,016 65,325
Less accumulated depreciation and amortization...... 11,443 20,509 23,953
------ ------ ------
$29,166 $52,507 $41,372
====== ====== ======
</TABLE>

(5) INTANGIBLE ASSETS

Intangible assets at December 31, 1994, December 30, 1995 and June 29, 1996
consisted of the following (amounts in thousands):

1994 1995 1996
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Identifiable intangibles............................ $10,504 $10,785 $10,785
Goodwill............................................ 8,376 33,664 41,298
------ ------ ------
18,880 44,449 52,083
Less accumulated amortization....................... 6,030 7,999 8,948
------ ------ ------
$12,850 $36,450 $43,135
====== ====== ======
</TABLE>

F-12
<PAGE> 77

PROSOURCE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(6) LONG-TERM DEBT

(a) Long-Term Senior Debt

Long-term senior debt at December 31, 1994, December 30, 1995 and June 29,
1996 consisted of the following loan agreements with banks (amounts in
thousands):

1994 1995 1996
------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
$210 million revolving credit facility, at prime
rate (8.25% at June 29, 1996) plus 0.50% or
Eurodollar rate plus 3% (2.75% at June 29, 1996),
due March 31, 2000............................... $ -- $104,636 $ 116,469
$15 million term loan facility, at prime rate plus
0.50% or Eurodollar rate plus 3% (2.75% at June
29, 1996), payable in quarterly installments each
of $0.38 million commencing on July 1, 1995 and
through March 31, 2000........................... -- 13,875 13,125
$15 million term loan facility, at prime rate plus
0.50% or Eurodollar rate plus 3% (2.75% at June
29, 1996), due March 31, 2000.................... -- 15,000 15,000
$86 million revolving credit facility, at prime
rate plus 0.75% or Eurodollar rate plus 2.75%,
due June 30, 1997................................ 35,774 -- --
$15 million term loan facility, at prime rate plus
0.75% or Eurodollar rate plus 2.75%, payable in
varying amounts and maturities through June 30,
1997............................................. 13,400 -- --
$12 million revolving credit facility, at prime
rate plus 1.50%, due September 30, 1997.......... 12,497 -- --
$0.35 million term loan facility, at prime rate
plus 1.50%, payable quarterly through September
30, 1997......................................... 350 -- --
------- -------- --------
Total long-term senior debt........................ 62,021 133,511 144,594
Less current portion............................... 2,183 1,500 1,500
------- -------- --------
Long-term senior debt, less current portion........ $59,838 $132,011 $ 143,094
======= ======== ========
</TABLE>

On March 31, 1995, in conjunction with the acquisition of NAD, the Company
entered into a new $240 million Loan and Security Agreement (the "Loan
Agreement") with a group of banks that extends through March 31, 2000. Such
agreement provides for a revolving credit facility of up to $210 million and
term loans aggregating $30 million. This agreement replaced all existing senior
debt which was due to expire in September 1997.

The Loan Agreement requires PSC, ProSource Canada and BroMar (the
"Borrowers"), to meet specific affirmative and negative covenants which include,
among other requirements, limitations on the acquisition and disposition of
assets, prohibition of borrowings other than under the Loan Agreement,
restrictions on dividend payments and compliance with certain financial
covenants. The Loan Agreement is collateralized by substantially all of the
Borrowers' assets, and the pledge by the Parent of all of the issued and
outstanding stock of the Borrowers and other collateral rights. In addition, the
Parent has guaranteed payment of all amounts due under the Loan Agreement.

Borrowings under the Loan Agreement are limited to a borrowing base as
defined in the agreement. At December 30, 1995 and June 29, 1996, the Company
had approximately $82 million and $73 million,

F-13
<PAGE> 78

PROSOURCE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

respectively, available under the revolving credit facility. The Loan Agreement
also provides for a commitment fee of 0.50 percent per annum of the daily unused
revolving credit facility, as defined in the agreement.

In 1994, PSC entered into two interest rate swap agreements, having
notional principal amounts of approximately $10.7 million and $20 million, that
mature in 1997 and 1999, respectively. Under these agreements, PSC makes fixed
rate payments and receives floating rate payments in return. In 1995, PSC
entered into two interest rate collar transactions having notional principal
amounts of approximately $25 million and $20 million, maturing in 1998. The
counterparties to these agreements are large financial institutions. These
interest rate protection agreements were entered into to reduce the Company's
exposure to interest rate volatility and are not used for trading purposes. At
December 30, 1995 and June 29, 1996, the total fair value of these agreements
was an unrealized loss of approximately $2.2 million and $0.9 million,
respectively, based on quoted market prices as provided by the financial
institutions which are the counterparties to the interest rate protection
agreements.

Long-term senior debt at December 30, 1995 and June 29, 1996, is due as
follows (amounts in thousands):

1995 1996
-------- -----------
(UNAUDITED)
<S> <C> <C>
1996 (through December 28, 1996)............................. $ 1,500 $ 750
1997......................................................... 1,500 1,500
1998......................................................... 1,500 1,500
1999......................................................... 1,500 1,500
2000......................................................... 127,511 139,344
-------- --------
$133,511 $ 144,594
======== ========
</TABLE>

The interest rate on the Company's long-term senior debt is reset every
month to reflect current market rates.

(b) Subordinated Notes Payable to Onex

Subordinated Notes Payable to Onex consist of three agreements at December
30, 1995 and two agreements at June 29, 1996. A $15 million, 12 percent,
subordinated note is payable to Onex, with interest payable annually beginning
March 31, 1996, and the principal payable in full on April 1, 2005. This note is
an unsecured obligation of the Company and is subordinated to all long-term
senior debt.

A $2.5 million convertible subordinated note, plus accrued interest of $0.9
million at December 30, 1995 and $1 million at June 29, 1996, is payable to
Onex, with interest at 10 percent compounded annually and due, together with the
principal, on July 1, 2002. Onex may convert both principal and accrued interest
on the note into shares of the Company's common stock at any time at a
conversion price of $10 per share.

A $3.5 million convertible subordinated note was payable to Onex, with
interest at prime rate (8.5 percent at December 30, 1995), compounded annually
and due, together with the principal, on April 1, 2005. During the year ended
December 30, 1995, the Company paid $2.1 million of such note to Onex resulting
in an outstanding balance of $1.4 million at December 30, 1995. On February 1,
1996, Onex converted $0.8 million of the note into 80,000 shares of the
Company's common stock and the remaining balance on the note of approximately
$0.6 million plus accrued interest was paid to Onex.

F-14
<PAGE> 79

PROSOURCE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Other Subordinated Notes Payable consist of two agreements at December 30,
1995 and June 29, 1996. A $10 million subordinated note is payable to
Martin-Brower. Interest on this note is payable semiannually, beginning
September 30, 1998, with rates ranging from zero percent to 13 percent.
Principal is payable in full on March 31, 2002. This note has been discounted in
the accompanying consolidated financial statements to reflect a constant
interest rate through its maturity.

A $0.5 million convertible subordinated note (the "MPI Note") is payable to
Malone Products, Inc. Interest at 8 percent on the MPI Note is payable annually
and the principal of the MPI Note is payable in full on November 1, 1999. The
holders of the MPI Note may convert the principal of the MPI Note into shares of
the Company's common stock at any time at a conversion price of $20.00 per
share.

The carrying value of long-term debt approximates fair value at December 30,
1995 and June 29, 1996.

(7) LEASES

The Company leases facilities, vehicles and other equipment under long-term
operating leases with varying terms, the majority of which contain renewal
and/or purchase options. Certain transportation equipment leases call for
contingent rental payments based upon total miles. As of December 30, 1995 and
June 29, 1996, aggregate future minimum lease payments under noncancelable
operating leases were as follows (amounts in thousands):

1995 1996
------- -----------
(UNAUDITED)
<S> <C> <C>
1996 (through December 28, 1996).............................. $24,861 $ 15,725
1997.......................................................... 20,937 25,906
1998.......................................................... 17,887 22,558
1999.......................................................... 13,163 17,549
2000.......................................................... 9,039 12,218
All years thereafter.......................................... 11,295 19,396
------ ------
Total future minimum lease payments................. $97,182 $ 113,352
====== ======
</TABLE>

Rent expense, including contingent rental expense, was approximately $7.8
million, $13.4 million and $30.6 million during the years ended December 25,
1993, December 31, 1994 and December 30, 1995, respectively, and $19.4 million
for the period ended June 29, 1996.

F-15
<PAGE> 80

PROSOURCE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(8) INCOME TAXES

The income tax benefit (provision) before extraordinary charge, net of a
tax benefit of $0.5 million, for the years ended December 25, 1993, December 31,
1994 and December 30, 1995 consisted of the following (amounts in thousands):

<TABLE>
<CAPTION>
1993 1994 1995
------- ------ -------
<S> <C> <C> <C>
Current taxes:
Federal.............................................. $ 986 $ 256 $(1,236)
State................................................ 99 -- (408)
----- ----- -----
Total current................................ 1,085 256 (1,644)
----- ----- -----
Deferred taxes, excluding other components:
Federal.............................................. (553) 582 1,126
State................................................ (144) 236 264
----- ----- -----
Total deferred taxes, excluding other
components................................. (697) 818 1,390
----- ----- -----
Other:
Alternative minimum tax credit carryforwards......... 19 64 666
Utilization of operating loss carryforwards.......... 90 509 (497)
----- ----- -----
Total other.................................. 109 573 169
----- ----- -----
$ 497 $1,647 $ (85)
===== ===== =====
</TABLE>

The following table accounts for the difference between the actual tax
benefit and the amounts obtained by applying the statutory U.S. federal income
tax rate of 34 percent to the loss before income taxes for the years ended
December 25, 1993, December 31, 1994 and December 30, 1995 (amounts in
thousands):

<TABLE>
<CAPTION>
1993 1994 1995
---- ------ -----
<S> <C> <C> <C>
Tax benefit computed at statutory rate..................... $450 $1,370 $ 237
Increases in taxes due to:
State income taxes (net of federal tax benefit).......... (16) 198 (118)
Goodwill amortization.................................... (56) (61) (76)
Miscellaneous............................................ 119 140 (128)
---- ----- ----
Actual tax benefit (provision) before extraordinary charge,
net of tax benefit of $502............................... $497 $1,647 $ (85)
==== ===== ====
</TABLE>

Except for the effects of the reversal of net deductible temporary
differences, the Company is not aware of any factors which would cause any
significant differences between taxable income and pre-tax book income in future
years.

F-16
<PAGE> 81

PROSOURCE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities at December 31,
1994 and December 30, 1995 are presented below (amounts in thousands):

<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Deferred tax assets:
Acquisition related expenses................................... $ 1,094 $ 2,873
Accounts receivable, principally due to allowance for
doubtful accounts........................................... 1,664 1,046
Property, plant and equipment, principally due to differences
in depreciation............................................. 486 831
Inventories.................................................... 189 462
Self-insurance reserves........................................ 492 2,609
Rent expenses, principally due to differences in operating
lease expenditures.......................................... 248 323
Alternative minimum tax credit carryforwards................... 84 901
Benefit of net operating loss carryforwards.................... 497 --
Other accrued expenses......................................... 385 1,096
----- ------
Total deferred tax assets.............................. 5,139 10,141
Less valuation allowance....................................... -- --
----- ------
Total deferred tax assets, net.............................. $ 5,139 $10,141
===== ======
Deferred tax liabilities:
Computer software.............................................. $(1,068) $ (842)
Prepaid expenses............................................... (264) (167)
Acquisition related liabilities................................ (349) (771)
Other.......................................................... (121) (162)
----- ------
Total deferred tax liabilities......................... (1,802) (1,942)
----- ------
Net deferred tax assets................................ $ 3,337 $ 8,199
===== ======
</TABLE>

The net change in deferred tax assets for the year ended December 30, 1995,
included $3.1 million recorded as a result of the acquisition reserves
established in connection with the acquisition of NAD.

During the period ended June 29, 1996, the net change in deferred tax
assets included $4.4 million recorded as a result of the increase in the
acquisition reserves in connection with the acquisition of NAD. Additionally, a
deferred tax benefit of $11 million was recorded which consisted primarily of
future deductible temporary differences attributable to the SFAS 121 adjustments
and the accrual of restructuring reserves during the period ended June 29, 1996.

In order to fully realize the net deferred tax assets at December 30, 1995
and June 29, 1996, the Company will need to generate future taxable income of
approximately $18.5 million and $56.1 million, respectively. Management believes
that it is more likely than not that the existing net deductible temporary
differences will reverse during periods in which the Company will generate such
taxable income. The Company anticipates that increases in taxable income will
result primarily from (i) future projected revenue growth through the addition
of new restaurant chains and the expansion of existing restaurant chains, (ii) a
reduction in interest expense due to a reduction in its indebtedness, (iii) cost
savings through its corporate and network consolidation plan and (iv) other cost
reduction initiatives.

At December 31, 1994, December 30, 1995 and June 29, 1996, other current
assets included income taxes receivable of approximately $1.3 million, $1.4
million and $1.6 million, respectively, which consisted primarily of
overpayments of tax liabilities and pending carryback refund claims.

F-17
<PAGE> 82

PROSOURCE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

At June 29, 1996, the Company had a net operating loss carryforward ("NOL")
of approximately $7.2 million. Management believes that it is more likely than
not that the Company will realize the benefit of the NOL's existing at June 29,
1996 before they expire in 2011.

United States income tax returns for fiscal years 1992 and 1993 are
currently under examination by the Internal Revenue Service. Assessments, if
any, are not expected to have a material adverse effect on the consolidated
financial position or results of operations of the Company as of December 30,
1995 and June 29, 1996.

(9) EMPLOYEE BENEFIT PLANS

(a) Defined Benefit Pension Plans

The Company has three noncontributory defined benefit pension plans
covering substantially all of its salaried and hourly employees excluding those
employees covered by multi-employer pension plans under collective bargaining
agreements. The pension benefits are based on years of service and participants'
compensation. The Company's funding policy is to contribute an amount not less
than the ERISA minimum funding requirement nor more than the maximum amount that
can be deducted for income tax purposes. The following table sets forth the
plans' funded status and the amounts recognized in the Company's consolidated
balance sheets at December 25, 1993, December 31, 1994 and December 30, 1995
(amounts in thousands).

<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation............................. $ (490) $(1,530) $(4,795)
======= ======= =======
Accumulated benefit obligation........................ $(1,044) $(1,928) $(5,582)
======= ======= =======
Projected benefit obligation for service recorded to
date................................................ $(1,626) $(2,300) $(7,143)
Plan assets at fair value............................. 351 1,347 6,103
------- ------- -------
Projected benefit obligation in excess of plan
assets.............................................. (1,275) (953) (1,040)
Unrecognized amortization............................. 247 5 --
Unrecognized net gain................................. -- -- (390)
------- ------- -------
Unfunded accrued liability included in other
noncurrent liabilities.............................. $(1,028) $ (948) $(1,430)
======= ======= =======
</TABLE>

Approximately 88 percent of plan assets are invested in equity mutual
funds.

Net pension cost for 1993, 1994 and 1995 included the following components
(amounts in thousands):

<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Service cost -- benefits earned during the period............. $632 $781 $883
Interest cost on projected benefit obligation................. 58 136 404
Actual return on plan assets.................................. (7) (57) (663)
Net amortization and deferral................................. -- 10 301
---- ---- -----
Net pension cost.............................................. $683 $870 $925
==== ==== =====
</TABLE>

F-18
<PAGE> 83

PROSOURCE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Pension costs under the Company's defined benefit pension plans are
actuarially computed on an annual basis. Actuarial assumptions used in
accounting for the defined benefit pension plans as of December 25, 1993,
December 31, 1994 and December 30, 1995 were:

<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Discount rates................................................. 7.25% 8.25% 7.25%
Rates of increase in compensation levels....................... 4.00% 4.00% 4.00%
Expected long-term rate of return on assets.................... 8.50% 8.50% 8.50%
</TABLE>

The Company's pension expense for contributions to the various
multi-employer pension plans under collective bargaining agreements was
approximately $0.1 million, $0.1 million, $0.9 million and $0.6 million
for the years ended December 25, 1993, December 31, 1994, December 30, 1995 and
the period ended June 29, 1996.

(b) Defined Contribution Plans

The Company sponsors various defined contribution plans which cover
substantially all full-time and part-time, salaried and hourly employees.
Depending on the plan, eligible employees may contribute up to 10, 12.5 or 15
percent of base compensation, and the Company matches 50 percent of the first 4
percent or 100 percent of the first 2.5 percent of eligible compensation.
Effective January 1, 1996, all of these plans were combined into one plan (the
"Associates' Savings Plan"). The Company also has a Money Purchase Plan which
covers those former NAD salaried employees not covered by a defined benefit
plan. Under this plan, the Company contributes 10 percent of eligible salary.
The amount of contribution expenses incurred by the Company for these plans were
approximately $0.7 million, $0.7 million, $2.2 million and $1.4 million for the
years ended December 25, 1993, December 31, 1994, December 30, 1995 and the
period ended June 29, 1996, respectively.

The Company plans to adopt a supplemental executive retirement plan in 1996
to cover certain key executives of the Company. Accrued pension costs of
approximately $0.1 million related to this plan were recorded at December 30,
1995.

(10) STOCKHOLDERS' EQUITY

Under the ProSource, Inc. Employee Stock Purchase Plan (the "Stock Plan"),
at June 30, 1992 officers and key employees of the Company ("Management
Employees") purchased 408,100 shares of common stock at $10 per share. During
1993 and 1994, 125,600 and 6,900 shares of common stock were purchased by
Management Employees at $11 per share, respectively. During 1995, in connection
with the NAD acquisition, certain Management Employees purchased 208,500 shares
of common stock at $10 per share. In connection with the purchases of common
stock, each Management Employee entered into a Management Shareholders Agreement
with the Company and Onex.

The ProSource, Inc. Management Option Plan (1995) (the "1995 Option Plan")
was amended in conjunction with the acquisition of NAD. The 1995 Option Plan
provides certain Management Employees with options to purchase one-half the
number of shares of common stock purchased under the Employee Stock Purchase
Plan at the same price per share paid by such stockholder.

F-19
<PAGE> 84

PROSOURCE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A summary of outstanding stock options as of December 25, 1993, December
31, 1994, December 30, 1995 and June 29, 1996 is as follows:

<TABLE>
<CAPTION>
1996
OPTION PRICE 1993 1994 1995 -----------
-------------- ------- ------- ------- (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Outstanding, beginning of
year................... $10.00 - 11.00 204,050 253,650 237,450 327,700
Granted.................. 10.00 - 11.00 50,350 3,450 101,750 30,750
Exercised................ 10.00 - 11.00 -- -- -- --
Canceled................. 10.00 - 11.00 (750) (19,650) (11,500) (8,250)
-------------- -------- -------- -------- --------
Outstanding, end of
year................... $10.00 - 11.00 253,650 237,450 327,700 350,200
============== ======== ======== ======== ========
Exercisable.............. 10,200 9,300 41,500 43,700
======== ======== ======== ========
</TABLE>

In conjunction with the acquisition of NAD, the Company issued warrants to
Martin-Brower. At December 30, 1995 and June 29, 1996, the warrants were
exercisable for 283,425 shares of common stock at $12.35 per share during the
period commencing on April 1, 1997 and through March 31, 2000, and upon
consummation of certain transactions.

(11) COMMITMENTS AND GUARANTEES

The Company has guaranteed the principal due on certain loans obtained by
its officers and employees in connection with the purchase of common stock under
the Stock Plan. At December 30, 1995 and June 29, 1996, such guarantees amounted
to approximately $2.9 million and $3.3 million, respectively.

At December 30, 1995 and June 29, 1996, the Company was also obligated for
$19 million and $18 million, respectively, in letters of credit issued on behalf
of the Company primarily as a guarantee of payment for obligations arising from
workers' compensation claims. At December 30, 1995 and June 29, 1996, the
Company had $6 million and $7 million, respectively, available in unused letters
of credit.

(12) LITIGATION

The Company and its subsidiaries are parties to various legal actions
arising in the ordinary course of business. Management believes that the outcome
of such cases will not have a material adverse effect on the consolidated
results of operations or financial position of the Company.

(13) CONCENTRATIONS OF CREDIT RISK

The Company performs periodic credit evaluations of its customers'
financial condition and generally does not require collateral. BKC-owned and
franchisee-owned Burger King restaurants collectively accounted for 94 percent,
90 percent, 45 percent and 40 percent of the Company's sales in fiscal years
1993, 1994, 1995 and during the period ended June 29, 1996, respectively. Sales
to BKC-owned restaurants represented approximately 17 percent, 13 percent, 5
percent and 4 percent of sales for the years ended December 25, 1993, December
31, 1994, December 30, 1995 and the period ended June 29, 1996, respectively.
Amounts due from BKC at December 31, 1994, December 30, 1995 and June 29, 1996
were $6 million, $4.7 million and $7.1 million, respectively.

In addition, sales to Darden Restaurants, Inc. (owner of Olive Garden and
Red Lobster restaurants) accounted for 18 percent and 22 percent of Company
sales in fiscal year 1995 and during the period ended June 29, 1996,
respectively. Amounts due from Darden Restaurants, Inc. at December 30, 1995 and
June 29, 1996, were approximately $51.8 million and $39.1 million, respectively.
Sales to franchisor-owned and franchisee-owned Arby's restaurants accounted for
10 percent of Company sales in fiscal year 1995 and during the period ended June
29, 1996, respectively.

F-20
<PAGE> 85

PROSOURCE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(14) SUBSEQUENT EVENT

In September 1996, the Company filed a Registration Statement with the
Securities and Exchange Commission with respect to an initial public offering.
The net proceeds of the offering will be used to repay certain indebtedness of
the Company.

In October 1996, the Company changed its capital structure to 10,000,000
authorized shares of $.01 par value preferred stock, 50,000,000 authorized
shares of $.01 par value Class A Common Stock and 10,000,000 authorized shares
of $.01 par value Class B Common Stock.

In October 1996, the Company's Board of Directors declared a 100-to-1 stock
split effective as of the date of the commencement of the initial public
offering. The par value of each share is $.01. The Company's additional paid-in
capital account and the Class B Common Stock account have been restated to
retroactively reflect the stock split.

(15) UNAUDITED PRO FORMA ADJUSTMENTS AND PRO FORMA CONSOLIDATED BALANCE SHEET

The pro forma adjustments and pro forma consolidated balance sheet at June
29, 1996, reflect the issuance of 350,100 shares of Class B Common Stock upon
conversion of the convertible subordinated note payable to Onex.

F-21
<PAGE> 86

NATIONAL ACCOUNTS DIVISION
(A DIVISION OF THE MARTIN-BROWER COMPANY)

UNAUDITED CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1995
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
(UNAUDITED)
<S> <C>
ASSETS
Current assets:
Cash........................................................................... $ 698
Accounts receivable, less allowance for doubtful accounts of $1,893............ 96,034
Inventories.................................................................... 106,444
Prepaid expenses............................................................... 3,791
--------
Total current assets................................................... 206,967
Property, plant and equipment, net............................................... 29,133
Other assets..................................................................... 43
--------
$ 236,143
========
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities:
Accounts payable and accrued liabilities....................................... $ 95,898
Overdrafts..................................................................... 21,317
Current portion of long-term debt.............................................. 2,711
--------
Total current liabilities.............................................. 119,926
Long-term debt, less current portion............................................. 514
--------
120,440
--------
Divisional equity................................................................ 115,637
Cumulative translation adjustment................................................ 66
--------
115,703
--------
Commitments and contingent liabilities........................................... --
$ 236,143
========
</TABLE>

See accompanying notes to unaudited condensed combined financial statements.

F-22
<PAGE> 87

NATIONAL ACCOUNTS DIVISION
(A DIVISION OF THE MARTIN-BROWER COMPANY)
UNAUDITED CONDENSED COMBINED STATEMENT OF INCOME
AND CHANGES IN DIVISIONAL EQUITY
FOR THE THIRTY-NINE WEEKS ENDED MARCH 31, 1995
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
(UNAUDITED)
<S> <C>
Net sales...................................................................... $1,608,923
Other income................................................................... 1,081
----------
1,610,004
----------
Costs and expenses:
Cost of goods sold........................................................... 1,501,894
Selling, general and administrative.......................................... 99,218
Allocated charges from Martin-Brower......................................... 7,778
Interest..................................................................... 1,350
----------
1,610,240
----------
Loss before income tax benefit................................................. (236 )
Income tax benefit............................................................. 359
----------
Net income..................................................................... 123
Divisional equity at:
Beginning of period.......................................................... 37,327
Dividends paid............................................................... (2,750 )
Advances from Parent......................................................... 80,937
----------
End of period................................................................ $ 115,637
==========
</TABLE>

See accompanying notes to unaudited condensed combined financial statements.

F-23
<PAGE> 88

NATIONAL ACCOUNTS DIVISION
(A DIVISION OF THE MARTIN-BROWER COMPANY)

UNAUDITED CONDENSED COMBINED STATEMENT OF CASH FLOWS
FOR THE THIRTY-NINE WEEKS ENDED MARCH 31, 1995
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
(UNAUDITED)
<S> <C>
Cash flows from operating activities:
Net income..................................................................... $ 123
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization............................................... 4,630
Change in assets and liabilities:
Accounts receivable....................................................... (32,159)
Inventories............................................................... (15,991)
Prepaid expenses.......................................................... (1,891)
Overdrafts................................................................ (20,763)
Accounts payable and accrued liabilities.................................. (4,321)
Other..................................................................... (10)
--------
Net cash used in operating activities.................................. (70,382)
--------
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment............................ 1,132
Additions to property, plant and equipment..................................... (4,167)
--------
Net cash used in investing activities.................................. (3,035)
--------
Cash flows from financing activities:
Proceeds from (repayments of) borrowing, net................................... (4,353)
Borrowings from parent......................................................... 80,937
Dividends paid................................................................. (2,750)
--------
Net cash provided by financing activities.............................. 73,834
Effect of exchange rate changes on cash.......................................... 2
Net increase in cash................................................... 419
Cash at:
Beginning of period............................................................ 279
--------
End of period.................................................................. $ 698
========
</TABLE>

See accompanying notes to unaudited condensed combined financial statements.

F-24
<PAGE> 89

NATIONAL ACCOUNTS DIVISION
(A DIVISION OF THE MARTIN-BROWER COMPANY)

NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

NOTE 1 -- BASIS OF PRESENTATION:

The unaudited condensed combined balance sheet as of March 31, 1995, and
the unaudited condensed combined statements of income and changes in divisional
equity and cash flows for the 39 weeks ended March 31, 1995 include, in the
opinion of management, all adjustments (consisting of normal recurring
adjustments) necessary to present fairly the Company's combined financial
position, results of operations, and cash flows. Operating results for the 39
weeks ended March 31, 1995 are not necessarily indicative of the results that
may be expected for the fiscal year ending July 1, 1995. These statements should
be read in conjunction with the combined financial statements and notes thereto
for the fiscal year ended July 1, 1994.

The unaudited condensed combined financial statements include the accounts
of (a) the National Accounts Division, a division of The Martin-Brower Company
(the "Company"), (b) NAD Distribution Systems, a division of Martin-Brower of
Canada, Ltd., a wholly owned subsidiary of the Company, and (c) BroMar Services,
Inc., a wholly owned subsidiary of the Company, collectively the "Division". The
Company is wholly owned by Dalgety, Inc. (the "Parent") and ultimately wholly
owned by Dalgety PLC, a company traded on the London and Australian stock
exchanges. All significant intradivisional transactions have been eliminated.

NOTE 2 -- RELATED PARTY TRANSACTIONS:

The Company has provided the Division with certain legal, treasury, audit,
insurance, facility, human resource management, regulatory and administrative
services. Charges for these services to the Division are based on allocations of
the Company's actual direct and indirect costs using varying allocation bases
(payroll, headcount, floor space, etc.) designed to estimate the actual cost
incurred by the Company to render these services to the Division. However, while
management believes that these charges are reasonable, there can be no assurance
that these allocations would approximate the costs incurred if the Division had
operated as an independent stand-alone entity. The allocation process is
consistent with the methodology used by the Company to allocate the cost of
similar service to its other division. The allocated cost of these services was
$7,778 for the period ended March 31, 1995 and is reflected in the combined
statement of income.

The Parent at the end of the fiscal year usually charges the Company for
interest and certain services, paid for by the Parent on behalf of the Company,
which is then allocated to the Division. No amounts have been allocated to the
Division for the period ended March 31, 1995.

The divisional equity account varies according to the working capital
requirements of the Division. The Division is charged interest on that portion
of the equity account deemed to represent advances from the Parent. Total
interest expense of $1,005 relating to such advances is included in the combined
statement of income for the period ended March 31, 1995. This interest is based
on interest rates incurred by the Parent.

NOTE 3 -- ACCOUNTS RECEIVABLE:

The Company has an agreement with two financial institutions to sell, on an
ongoing basis and with limited recourse, up to $50,000 of selected trade
accounts receivable. Recourse is limited principally to the substitution of
"eligible" receivables for "ineligible" receivables as defined in the agreement.
As of March 31, 1995, none of the sold receivables were allocated to the
Division by management.

NOTE 4 -- COMMITMENTS AND CONTINGENCIES:

As of March 31, 1995, the Company had open letters of credit, some of which
secured guarantees to third parties, net of amounts reported as liabilities or
lease commitments, aggregating $13,369 available for the

F-25
<PAGE> 90

NATIONAL ACCOUNTS DIVISION
(A DIVISION OF THE MARTIN-BROWER COMPANY)

NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)

Division and the Company's other operations. Commitment fees to banks associated
with open letters of credit vary from 3/8% to 5/8%.

The Division has various claims and legal proceedings outstanding. In the
opinion of management, the ultimate outcome of outstanding litigation and claims
will not have a material adverse effect on the financial position of the
Division.

NOTE 5 -- SUBSEQUENT EVENT:

On March 31, 1995, the Company sold substantially all of the assets and
certain liabilities of the Division to ProSource, Inc. in accordance with the
provisions within the Agreement for the Purchase and Sale of the National
Accounts Division of The Martin-Brower Company and Martin-Brower of Canada, Ltd.
(the "Purchase Agreement") dated November 10, 1994. The net book value of the
net assets sold was approximately $151,000 as of March 31, 1995.

F-26
<PAGE> 91

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Stockholder of The Martin-Brower Company

We have audited the accompanying combined balance sheets of the National
Accounts Division of The Martin-Brower Company as of July 2, 1993 and July 1,
1994 and the related combined statements of income and changes in divisional
equity and of cash flows for the 52 week periods then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the combined financial statements audited by us present fairly,
in all material respects, the financial position of the National Accounts
Division at July 2, 1993 and July 1, 1994, and the results of its operations and
its cash flows for the 52 week periods then ended, in conformity with generally
accepted accounting principles in the United States of America.

As explained in Notes 1 and 3, the National Accounts Division is a division of
The Martin-Brower Company and has extensive transactions with related parties.

PRICE WATERHOUSE LLP

Chicago, Illinois
December 9, 1994

F-27
<PAGE> 92

NATIONAL ACCOUNTS DIVISION
(A DIVISION OF THE MARTIN-BROWER COMPANY)

COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
JULY 2, 1993 JULY 1, 1994
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash............................................................... $ 251 $ 279
Accounts receivables, less allowance for doubtful accounts of
$1,655 and $1,276, respectively................................. 47,584 63,875
Inventories........................................................ 80,962 90,453
Prepaid expenses................................................... 1,504 1,900
-------- --------
Total current assets....................................... 130,301 156,507
Property, plant and equipment, net (Note 5).......................... 31,191 30,730
Other assets......................................................... 236 29
-------- --------
$161,728 $187,266
======== ========
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities:
Accounts payable................................................... $ 73,015 $ 86,286
Accrued liabilities................................................ 12,121 13,933
Overdrafts......................................................... 34,294 42,080
Current portion of long-term debt (Note 6)......................... 710 6,932
-------- --------
Total current liabilities.................................. 120,140 149,231
Long-term debt, less current portion (Note 6)........................ 4,953 646
-------- --------
125,093 149,877
-------- --------
Divisional equity.................................................... 36,604 37,327
Cumulative translation adjustment.................................... 31 62
-------- --------
36,635 37,389
-------- --------
Commitments and contingent liabilities (Note 10)..................... -- --
$161,728 $187,266
======== ========
</TABLE>

See accompanying notes to combined financial statements.

F-28
<PAGE> 93

NATIONAL ACCOUNTS DIVISION
(A DIVISION OF THE MARTIN-BROWER COMPANY)

COMBINED STATEMENTS OF INCOME AND CHANGES IN DIVISIONAL EQUITY
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
52 WEEKS ENDED
-----------------------------
JULY 2, 1993 JULY 1, 1994
------------ ------------
<S> <C> <C>
Net sales........................................................... $ 1,881,326 $ 2,029,055
Other income........................................................ 314 307
---------- ----------
1,881,640 2,029,362
---------- ----------
Costs and expenses:
Cost of goods sold................................................ 1,749,679 1,889,355
Selling, general and administrative............................... 113,093 121,924
Allocated charges from Martin-Brower.............................. 9,415 10,433
Interest.......................................................... 1,424 2,982
---------- ----------
1,873,611 2,024,694
---------- ----------
Income before provision for income taxes............................ 8,029 4,668
Provision for income taxes.......................................... 3,169 1,818
---------- ----------
Net income.......................................................... 4,860 2,850
Divisional equity at:
Beginning of year................................................. 44,271 36,604
Dividends paid.................................................... -- (2,844)
Advances from (payments to) Dalgety, Inc.......................... (12,527) 717
---------- ----------
End of year....................................................... $ 36,604 $ 37,327
========== ==========
</TABLE>

See accompanying notes to combined financial statements.

F-29
<PAGE> 94

NATIONAL ACCOUNTS DIVISION
(A DIVISION OF THE MARTIN-BROWER COMPANY)

COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
52 WEEKS ENDED
-----------------------------
JULY 2, 1993 JULY 1, 1994
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income......................................................... $ 4,860 $ 2,850
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization...................................... 5,843 6,026
Loss (gain) on sale of property, plant and equipment............... (120) 169
Change in assets and liabilities:
Accounts receivable............................................. 10,136 (16,291)
Inventories..................................................... (5,215) (9,491)
Prepaid expenses................................................ (649) (396)
Accounts payable................................................ (7,663) 13,271
Accrued liabilities............................................. 1,449 1,812
Overdrafts...................................................... 14,823 7,786
Other........................................................... 1,239 632
-------- --------
Net cash provided by operating activities............................ 24,703 6,368
-------- --------
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment................ 1,033 231
Additions to property, plant equipment............................. (8,504) (5,965)
-------- --------
Net cash used in investing activities................................ (7,471) (5,734)
-------- --------
Cash flow from financing activities:
Payment of capital lease obligations............................... (1,173) (551)
Proceeds from (repayments of) borrowings, net...................... (3,476) 2,072
Change in divisional equity........................................ (12,527) (2,127)
-------- --------
Net cash used by financing activities.............................. (17,176) (606)
-------- --------
Net increase in cash................................................. 56 28
Cash at:
Beginning of year.................................................. 195 251
-------- --------
End of year........................................................ $ 251 $ 279
======== ========
</TABLE>

See accompanying notes to combined financial statements.

F-30
<PAGE> 95

NATIONAL ACCOUNTS DIVISION
(A DIVISION OF THE MARTIN-BROWER COMPANY)

NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

NOTE 1 -- BASIS OF PRESENTATION, OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:

Basis of Presentation

The combined financial statements include the accounts of (a) the National
Accounts Division, a division of The Martin-Brower Company (the "Company"), (b)
NAD Distribution Systems, a division of Martin-Brower of Canada, Ltd., a wholly
owned subsidiary of the Company, and (c) BroMar Services, Inc., a wholly owned
subsidiary of the Company, collectively the "Division". The Company is wholly
owned by Dalgety, Inc. (the "Parent") and ultimately wholly owned by Dalgety
PLC, a company traded on the London and Australian stock exchanges. All
significant intradivisional transactions have been eliminated.

On November 10, 1994, the Company entered into a definitive agreement (the
"Purchase Agreement") to sell the Division to ProSource, Inc. ("ProSource"), a
subsidiary of Onex Corporation, a company traded on the Toronto and Montreal
stock exchanges. (See Note 12.)

The accompanying financial statements reflect the "carve-out" financial
position, results of operations and cash flows of the Division for the periods
presented. Certain general and administrative expenses incurred by the Company
have been allocated to the Division on bases described in Note 3 which, in the
opinion of management, are reasonable. However, such expenses are not
necessarily indicative of and it is not practicable for management to estimate,
the nature and level of expenses which might have been incurred had the Division
been operating as a separate company.

The financial information included herein does not necessarily reflect what
the financial position and results of operations of the Division would have been
had it operated as a stand-alone entity during the periods covered, and may not
be indicative of future operations or financial position.

The Company and the Division will have rights and obligations as negotiated
in connection with, or as reflected in, the Purchase Agreement which has been
executed between the Company and ProSource. Certain other rights and obligations
may arise as a result of a proposed service agreement between the Company and
ProSource. (See Note 12.)

Operations

The Division is a distributor of food and paper products to quick service
and specialty restaurant chains. One customer accounted for a 40 percent and 37
percent of the Division's combined sales in fiscal 1994 and 1993, respectively.

The Division's operations in Canada had sales and loss before taxes for
fiscal 1994 of $43,475 and $(35), respectively ($51,652 and $(113) for fiscal
1993). Net Canadian assets (liabilities) at July 2, 1993 and July 1, 1994 were
$(168) and $1,915, respectively, including net property, plant and equipment of
$267 and $176 in 1993 and 1994, respectively.

Significant Accounting Policies

A summary of significant accounting policies follows:

A. Fiscal Year: The Division's fiscal year consists of 52 or 53 weeks
ending on the Friday closest to June 30. Results for 1993 are for the 52 weeks
ended July 2, 1993 and for 1994 are for the 52 weeks ended July 1, 1994.

F-31
<PAGE> 96

NATIONAL ACCOUNTS DIVISION
(A DIVISION OF THE MARTIN-BROWER COMPANY)

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)

B. Translation of Foreign Currency: The accounts of the Division's
Canadian operations are translated into U.S. dollars in accordance with
Statement of Financial Accounting Standards (FAS) No. 52 as follows:

<TABLE>
<S> <C>
Assets and liabilities Year end exchange rates
Revenues and expenses Average monthly exchange rates
</TABLE>

Translation gains and losses are included in the cumulative translation
adjustment component of divisional equity.

C. Inventories: Inventories, consisting of product for resale, are stated
at the lower of cost or market, cost being determined generally using the
last-in, first out (LIFO) method. Inventories would have been higher by
approximately $2,739 at July 2, 1993 and $1,757 at July 1, 1994 if the first-in,
first out (FIFO) method had been used. The Division's inventories are included
with the other inventories of the Company in a single LIFO pool. The calculation
of the effects of LIFO on the Division is based on the relative proportions of
inventory on a FIFO basis for the Company's operations at June 30, 1992, July 2,
1993 and July 1, 1994, respectively.

D. Property, Plant and Equipment: Property additions, major renewals and
betterments are included in asset accounts at cost. Interest charges incurred
during the period required to construct major properties are capitalized as part
of the project cost and amortized over the life of the asset. Certain corporate
assets of the Company have been allocated to the Division on various bases
which, in the opinion of management, are reasonable.

Depreciation is computed generally using the straight line method over the
estimated useful lives of the assets, ranging from 3 to 40 years. Amortization
of leasehold improvements and equipment under capital leases is computed using
the straight line method generally over the shorter of the useful lives or the
remaining lease terms.

E. Income Taxes: Provision has been made for income taxes in accordance
with FAS No. 109, "Accounting for Income Taxes." FAS 109 requires recognition of
deferred tax assets and liabilities for the expected future tax consequences of
events that have been included in the financial statements or tax returns. Under
this method, deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.

The Division's operations have been included with the Parent in a U.S.
consolidated federal income tax return. The Division's Canadian operations have
been included in Martin-Brower of Canada, Ltd.'s Canadian income tax return. For
financial reporting purposes, amounts provided for income taxes are determined
as if the Division were to file separate U.S. and Canadian income tax returns
and the U.S. federal and state and Canadian federal and provincial current and
deferred income tax balances are settled through the divisional equity account.
Differences resulting from the separate return method of allocating taxes are
reflected in the consolidated financial statements of the Parent. (See Note 7).

F. Medical Benefits for Retired Employees: The provisions of FAS 106,
"Employer's Accounting for Post-retirement Benefits Other than Pensions" have
not yet been adopted and the Division accounts for such costs on a cash basis.
(See Note 11).

G. Revenue Recognition: Distribution revenue is recognized upon receipt of
product by the customer.

F-32
<PAGE> 97

NATIONAL ACCOUNTS DIVISION
(A DIVISION OF THE MARTIN-BROWER COMPANY)

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)

NOTE 2 -- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during fiscal 1993 and 1994 for external interest expense was
$820 and $651, respectively. Capital lease obligations of $308 and $394 were
incurred in fiscal 1993 and 1994, respectively, primarily for transportation and
computer equipment.

NOTE 3 -- RELATED PARTY TRANSACTIONS:

The Company has provided the Division with certain legal, treasury, audit,
insurance, facility, human resource management, regulatory and administrative
services. Charges for these services to the Division are based on allocations of
the Company's actual direct and indirect costs using varying allocation bases
(payroll, headcount, floor space, etc.) designed to estimate the actual cost
incurred by the Company to render these services to the Division. However, while
management believes that these charges are reasonable, there can be no assurance
that these allocations would approximate the costs incurred if the Division had
operated as an independent stand-alone entity. The allocation process is
consistent with the methodology used by the Company to allocate the cost of
similar services to its other division. The allocated cost of these services
were $9,415 and $10,433 for fiscal 1993 and 1994, respectively, and are
reflected in the combined statements of income.

In fiscal 1994, the Parent charged the Company for interest and certain
services, paid for by the Parent on behalf of the Company in fiscal 1993 and
1994, $2,629 of which was allocated to the Division.

The divisional equity account varies according to the working capital
requirements of the Division. The Division is charged interest on that portion
of the equity account deemed to represent advances from the Parent. Total
interests expense of $786 and $869 relating to such advances are included in the
combined statements of income for fiscal 1993 and 1994, respectively. This
interest is based on interest rates incurred by the Parent.

NOTE 4 -- ACCOUNTS RECEIVABLE:

The Company has an agreement with two financial institutions to sell, on an
ongoing basis and with limited recourse, up to $75,000 of selected trade
accounts receivable. Recourse is limited principally to the substitution of
"eligible" receivables for "ineligible" receivables as defined in the agreement.
As of July 2, 1993 and July 1, 1994, $30,000 of the sold receivables were
allocated to the Division by management. Under accounting principles generally
accepted in the United States of America, these receivables are not included in
the Division's balance sheet.

NOTE 5 -- PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment consists of the following:

<TABLE>
<CAPTION>
JULY 2, 1993 JULY 1, 1994
------------ ------------
<S> <C> <C>
Land and land improvements................................... $ 1,907 $ 1,909
Buildings.................................................... 11,782 10,372
Leasehold improvements....................................... 6,847 7,280
Transportation equipment..................................... 4,323 4,247
Machinery and other equipment................................ 35,392 41,332
-------- --------
60,251 65,140
Less -- Accumulated depreciation and amortization............ (29,060) (34,410)
-------- --------
$ 31,191 $ 30,730
======== ========
</TABLE>

F-33
<PAGE> 98

NATIONAL ACCOUNTS DIVISION
(A DIVISION OF THE MARTIN-BROWER COMPANY)

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)

Depreciation expense, including amortization of assets held under
capitalized leases, was $5,843 and $6,026 in fiscal 1993 and 1994, respectively.

Certain property, plant and equipment is pledged, at July 2, 1993 and July
1, 1994, as security for long-term debt (see Notes 6 and 8).

NOTE 6 -- DEBT:

Long-term debt consists of the following:

<TABLE>
<CAPTION>
JULY 2, 1993 JULY 1, 1994
------------ ------------
<S> <C> <C>
Capital lease obligations with interest rates ranging from 6% to 8%,
due through 1998................................................... $1,215 $ 1,058
Industrial development revenue bonds, with a fixed interest rate of
9.55%, due December 1, 1994, secured by certain land, buildings and
equipment with a net book value of approximately $3,584 at July 2,
1993 and $2,980 at July 1, 1994 (the Company settled this liability
before the due date)............................................... 4,200 4,200
Bank borrowings, with interest at a variable rate of approximately
8.25%, due through 1994, guaranteed by Dalgety PLC................. 248 2,320
------ -------
5,663 7,578
Less -- current portion.............................................. (710) (6,932)
------ -------
$4,953 $ 646
====== =======
</TABLE>

The carrying value of the Division's debt at July 2, 1993 and July 1, 1994
approximates fair value.

The aggregate annual principal installments of outstanding long-term debt
(exclusive of capital lease obligations reported in Note 8) scheduled for
payment during fiscal year ending June 30, 1995 are $6,520.

At July 1, 1994 the Company shares with its Parent a bank line of credit of
$20,000, of which $10,000 is available in U.S. funds and is available for the
Division and the Company's other operations. This line of credit is guaranteed
by Dalgety PLC. At July 1, 1994, $2,320 was outstanding and related to the
Division.

NOTE 7 -- INCOME TAXES:

Amounts provided are summarized as follows:

<TABLE>
<CAPTION>
52 WEEKS ENDED
-----------------------------
JULY 2, 1993 JULY 1, 1994
------------ ------------
<S> <C> <C>
Current:
Federal.................................................... $2,392 $1,383
State...................................................... 529 234
Foreign.................................................... (54) (15)
------ ------
Current income tax expense................................... 2,867 1,602
Deferred:
Federal.................................................... 265 197
State...................................................... 37 19
------ ------
Total income tax expense..................................... $3,169 $1,818
====== ======
</TABLE>

F-34
<PAGE> 99

NATIONAL ACCOUNTS DIVISION
(A DIVISION OF THE MARTIN-BROWER COMPANY)

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)

Principal temporary differences between book and taxable income for the
above fiscal years consist of bad debt expense, fixed asset depreciation and
gain or loss on disposition, employee benefits, state income tax and other
expense accruals.

The effective income tax rate for fiscal 1993 (39.4%) and 1994 (38.9%) is
different from the federal statutory rate (34.5% and 35% respectively) as a
result of the following: state income taxes (4.6% and 3.5%, respectively) and
other significant items, including foreign operations, certain tax credits and
nondeductible meals and entertainment.

NOTE 8 -- LEASES:

The Division leases a portion of its transportation and other equipment and
several of its warehouses and office facilities. Leases of transportation
equipment generally expire over the next five years and are accounted for as
either capital or operating depending upon the lease terms. Certain
transportation equipment leases call for contingent rental payments based upon
mileage traveled. Most leases of facilities and other equipment are classified
as operating leases and are for various periods extending through fiscal 2007.

Future minimum lease payments under capital leases and operating leases
(with initial terms of one year or more) as of July 1, 1994 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING ON THE FRIDAY CAPITAL OPERATING
CLOSEST TO JUNE 30: LEASES LEASES
----------------------------------------------------------------- ------- ---------
<S> <C> <C>
1995............................................................. $ 484 $11,782
1996............................................................. 358 10,090
1997............................................................. 273 6,443
1998............................................................. 42 5,016
1999............................................................. -- 4,458
Thereafter....................................................... -- 3,057
------ -------
Total minimum lease payments..................................... 1,157 $40,846
Less -- Amount representing interest............................. (99)
------
Present value of net minimum lease payments...................... $ 1,058
======
</TABLE>

Minimum lease payments and contingent payments (based on usage) for capital
leases were as follows:

<TABLE>
<CAPTION>
52 WEEKS ENDED
-----------------------------
JULY 2, 1993 JULY 1, 1994
------------ ------------
<S> <C> <C>
Minimum rentals.............................................. $551 $695
Contingent rental (based on usage)........................... 118 141
---- ----
$669 $836
==== ====
</TABLE>

Total rental expense for all operating leases were as follows:

<TABLE>
<CAPTION>
52 WEEKS ENDED
-----------------------------
JULY 2, 1993 JULY 1, 1994
------------ ------------
<S> <C> <C>
Minimum rentals.............................................. $ 14,040 $ 15,000
Contingent rental (based on usage)........................... 2,995 3,045
------- -------
Rental expense............................................... $ 17,035 $ 18,045
======= =======
</TABLE>

F-35
<PAGE> 100

NATIONAL ACCOUNTS DIVISION
(A DIVISION OF THE MARTIN-BROWER COMPANY)

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)

The Division's property held under capital leases, included with owned
property in the combined balance sheet, consists of:

<TABLE>
<CAPTION>
JULY 2, 1993 JULY 1, 1994
------------ ------------
<S> <C> <C>
Transportation equipment..................................... $ 506 $ 577
Machinery and other equipment................................ 1,369 1,130
------ ------
1,875 1,707
Less -- Accumulated depreciation............................. (710) (686)
------ ------
$1,165 $1,021
====== ======
</TABLE>

NOTE 9 -- EMPLOYEE BENEFIT PLANS:

The Division provides retirement benefits for substantially all of its
employees through various Company-administered defined benefit and defined
contribution plans and plans administered under collective bargaining
agreements. Pension expense for the Division in fiscal 1993 and 1994 totalled
$2,670 and $3,039, respectively.

Defined Benefit Plan

The Company sponsors a non-contributory defined benefit pension plan for
hourly paid employees not covered by a collective bargaining agreement. Benefits
under the plan are based on participants' compensation over their entire years
of service. The Company's funding policy is to contribute annually the maximum
amount that can be deducted for federal income tax purposes.

Net periodic pension cost for the Division included the following
components:

<TABLE>
<CAPTION>
52 WEEKS ENDED
-------------------
JULY 2, JULY 1,
1993 1994
------- -------
<S> <C> <C>
Service cost -- benefits earned during the period................... $ 298 $ 392
Interest cost on projected benefit obligation....................... 200 236
Actual return on assets............................................. (141) (60)
Amortization of excess of plan assets over projected benefit
obligations, over 15 years from July 1985......................... (39) (39)
Amortization of prior service cost.................................. -- 22
Amortization of loss................................................ 31 40
Asset loss deferral................................................. (67) (129)
---- ----
Net periodic pension cost........................................... $ 282 $ 462
==== ====
</TABLE>

Actuarial assumptions used for the Company's defined benefit pension plan
for both fiscal years were:

<TABLE>
<CAPTION>
1993 1994
---- ----
<S> <C> <C>
Discount rate......................................................... 8.5% 7.5%
Rate of increase in compensation levels............................... 6.0% 3.5%
Expected long-term rate of return on plan assets...................... 9.0% 8.0%
</TABLE>

F-36
<PAGE> 101

NATIONAL ACCOUNTS DIVISION
(A DIVISION OF THE MARTIN-BROWER COMPANY)

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)

The following table sets forth the funded status and the amounts recognized
in the Division's combined balance sheet for its portion of the Company's
defined benefit pension plan:

<TABLE>
<CAPTION>
JULY 2, JULY 1,
1993 1994
------- -------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation including vested benefits of
$1,664 and $2,394 in 1993 and 1994, respectively............... $(1,919) $(2,776)
Projected benefit obligation..................................... $(2,841) $(3,674)
Plan assets at fair value (primarily listed stocks and government
obligations)................................................... 2,444 2,552
----- -----
Projected benefit obligation greater than plan assets............ (397) (1,122)
Unrecognized net loss............................................ 769 937
Unrecognized prior service cost.................................. -- 306
Unrecognized excess of plan assets at fair value over projected
benefit obligation at July 1, 1985, being recognized over 15
years.......................................................... (271) (231)
----- -----
(Accrued) prepaid pension cost included in other assets.......... $ 101 $ (110)
===== =====
</TABLE>

Defined contribution plans

The Company sponsors a 401(k) plan for salaried employees and hourly
employees who participate in the Company's defined benefit pension plan. The
plan includes optional employee participation levels of up to 10% of eligible
earnings, subject to IRS limitations, with matching employer contributions of up
to 2% of eligible earnings. The employer contribution costs recognized by the
Division during fiscal 1993 and 1994 amounted to $387 and $429, respectively.

The Company also sponsors a money purchase plan for salaried employees
under which the Company makes contributions of 10% of eligible salary, with full
vesting, after two years of service. The Division's costs of these plans for
fiscal 1993 and 1994 amounted to $1,201 and $1,272, respectively.

Multi-employer pension plan

The Company contributes to various multi-employer pension plans under
collective bargaining agreements. The Company's share of liabilities for
unfunded benefits associated with these plans is not determinable. The
Division's pension expense for contributions to these plans was approximately
$800 and $876 in fiscal 1993 and 1994, respectively.

NOTE 10 -- COMMITMENTS AND CONTINGENCIES:

At July 1, 1994, the Company had open letters of credit, some of which
secured guarantees to third parties, net of amounts reported as liabilities or
lease commitments (reported in Note 8), aggregating $25,823 available for the
Division and the Company's other operations. Commitment fees to banks associated
with open letters of credit vary from 3/8% to 5/8%.

F-37
<PAGE> 102

NATIONAL ACCOUNTS DIVISION
(A DIVISION OF THE MARTIN-BROWER COMPANY)

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)

NOTE 11 -- MEDICAL BENEFITS FOR RETIRED EMPLOYEES:

The Company has a post-retirement medical benefit plan that covers certain
employees who had met age and length of service requirements as of December 1,
1987. In fiscal 1993 and 1994, the Division paid medical claims expense of $59
and $24, respectively, for retired employees.

FAS 106, "Employers' Accounting for Post-retirement Benefits Other than
Pensions," would require the Division to begin accruing medical benefits for
retired employees by fiscal 1996. Furthermore, implementation of the standard
would require the recognition of a "transition obligation" (as defined in that
standard) based on the aggregate amount that would have been accrued in prior
years had the new standard been in effect for those years. That standard,
however, permits the Division to recognize the entire "transition obligation" in
the year of adoption or to amortize it over a period of years.

The Division estimates that the transition obligation approximates $482 as
of July 1, 1994. The Division has decided neither the timing nor method of
adoption of FAS 106.

NOTE 12 -- SUBSEQUENT EVENT:

On November 10, 1994, the Company signed the Purchase Agreement to sell
substantially all of the assets of the Division to ProSource for approximately
$140,000 and the assumption of the trade payables, subject to certain closing
conditions. The final net value to ProSource will vary depending on various
closing and post-closing adjustments, and retained liabilities.

The Company will retain all assets defined as "Excluded Assets", consisting
principally of cash and cash equivalents, certain insurance deposits, prepaid
items and refundable excise taxes as of the closing date. Liabilities to be
retained by the Company include primarily pre-closing federal and state income
taxes, post-retirement medical and life insurance benefits and other pre-closing
employee benefit obligations, pre-closing product liabilities,
incurred-but-not-reported medical and dental liabilities, workers' compensation
liabilities, vehicle accident liabilities, environmental liabilities and certain
other liabilities as specified in the Purchase Agreement.

The Company intends to enter into a service agreement with ProSource to
cover transition services to be provided by both parties after the closing. The
extent of the services provided and the rates to be charged have not been agreed
upon. Upon the planned service agreement, the Company would provide to ProSource
certain personnel and salary administration, accounting and treasury assistance,
print shop services and record storage space. ProSource would provide the
Company certain office space, computer processing, accounting and recordkeeping
services. Charges for the services to be rendered by the parties would be
determined on various bases including monthly fees, hourly rates and charges per
square foot. The services would be provided for periods up to one year, except
for recordkeeping which would continue for a period of seven years.

F-38
<PAGE> 103

PROSOURCE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

The following unaudited pro forma condensed consolidated statements of
operations of ProSource, Inc., for the year ended December 30, 1995 and the six
months ended June 29, 1996 give effect to the pro forma events (as described
below), as if such events had occurred at the beginning of the periods presented
for results of operations data.

The pro forma events are (i) inclusion of the results of operations of the
National Accounts Division ("NAD") of The Martin-Brower Company for the three
months ended March 31, 1995 as if the acquisition were consummated on January 1,
1995 and (ii) reduction of interest expense for the periods presented assuming
the net proceeds of the offering were utilized to prepay, on January 1, 1995 and
January 1, 1996, balances outstanding under various debt instruments.

These unaudited pro forma condensed consolidated statements of operations
should be read in conjunction with the audited consolidated financial statements
of ProSource, Inc. The unaudited pro forma data are not necessarily indicative
of the results of operations of ProSource, Inc. that would have occurred if the
pro forma events had been in effect at the beginning of the periods presented,
nor are they necessarily indicative of future results of operations. The pro
forma adjustments are based upon available information and certain assumptions
set forth herein, included in the notes to the unaudited pro forma condensed
consolidated statements of operations.

F-39
<PAGE> 104

PROSOURCE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 30, 1995
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA,
ADJUSTMENTS AS ADJUSTED
FOR THE FOR THE PRO FORMA
ACQUISITION ACQUISITION ADJUSTMENTS
OF OF FOR THE PRO FORMA,
HISTORICAL NAD NAD OFFERING AS ADJUSTED
---------- -------------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales.......................... $3,461,837 $531,606(A) $3,993,443 $ -- $ 3,993,443
Cost of sales...................... 3,193,270 496,156(A) 3,689,426 -- 3,689,426
---------- -------- ---------- ------- ----------
Gross profit..................... 268,567 35,450 304,017 -- 304,017
Operating expenses................. 255,216 35,726(A) 290,942 -- 290,942
Restructuring charges.............. 711 -- 711 -- 711
---------- -------- ---------- ------- ----------
Earnings from operations......... 12,640 (276) 12,364 -- 12,364
Interest expense................... (14,678) (2,738)(B) (17,416) 5,014(C) (12,402)
Interest income.................... 1,339 69 1,408 -- 1,408
---------- -------- ---------- ------- ----------
Earnings (loss) before income
taxes and extraordinary
charge........................ (699) (2,945) (3,644) 5,014 1,370
Income tax (provision) benefit..... (85) 1,131(D) 1,046 (1,976)(D) (930)
---------- -------- ---------- ------- ----------
Earnings (loss) before
extraordinary charge.......... $ (784) $ (1,814) $ (2,598) $ 3,038 $ 440
========== ======== ========== ======= ==========
Per Share Data:
Earnings (loss) before
extraordinary charge per
share......................... $ (0.17) $ (0.58) $ 0.05
========== ========== ==========
Average outstanding shares (in
thousands).................... 4,491 4,491 8,217
========== ========== ==========
</TABLE>

See accompanying notes to unaudited pro forma condensed consolidated financial
information.

F-40
<PAGE> 105

PROSOURCE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 29, 1996
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR THE PRO FORMA,
HISTORICAL OFFERING AS ADJUSTED
---------- ----------- -----------
<S> <C> <C> <C>
Net sales.............................................. $2,014,074 $ -- $ 2,014,074
Cost of sales.......................................... 1,859,000 -- 1,859,000
---------- ------- ----------
Gross profit......................................... 155,074 -- 155,074
Operating expenses..................................... 149,758 -- 149,758
Loss on impairment of long-lived assets................ 15,733 -- 15,733
Restructuring charges.................................. 10,866 -- 10,866
---------- ------- ----------
Loss from operations................................. (21,283) -- (21,283)
Interest expense....................................... (8,152) 2,376(E) (5,776)
Interest income........................................ 866 -- 866
---------- ------- ----------
Loss before income tax benefit....................... (28,569) 2,376 (26,193)
Income tax benefit..................................... 10,612 (1,189)(D) 9,423
---------- ------- ----------
Net earnings (loss).................................. $ (17,957) $ 1,187 $ (16,770)
========== ======= ==========
Per Share Data:
Net earnings (loss) per share........................ $ (3.39) $ (1.86)
========== ==========
Average outstanding shares used in calculation (in
thousands)........................................ 5,302 9,040
========== ==========
</TABLE>

See accompanying notes to unaudited pro forma condensed consolidated financial
information.

F-41
<PAGE> 106

PROSOURCE, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

A. Adjustment reflects the results of operations of the National Accounts
Division ("NAD") of The Martin-Brower Company for the three months ended
March 31, 1995 as if the acquisition were consummated on January 1, 1995 as
follows:

<TABLE>
<S> <C>
Net sales......................................................... $531,606
Cost of sales..................................................... 496,156
Operating expenses................................................ 35,139
</TABLE>

Operating expenses also include an additional three months of amortization
of goodwill and deferred loan fees in the amount of $587.

B. Adjustment reflects additional interest expense of $2,738 to finance the
acquisition and operations of NAD for three months as if the acquisition
were consummated on January 1, 1995. For purposes of this pro forma
calculation, the Company applied the average interest rate on debt used to
finance the acquisition to the assumed incremental outstanding debt balance
associated with the acquisition.

C. Adjustment represents the decrease in interest expense of $5,014 for the
year ended December 30, 1995, assuming the net proceeds of the offering were
utilized to prepay, on January 1, 1995, the balances outstanding under the
following debt instruments as follows:

<TABLE>
<CAPTION>
1995 INTEREST
REPAYMENTS SAVINGS
---------- -------------
<S> <C> <C>
$15 million subordinated note payable to Onex, at 12%........ $ 15,000 $ 1,800
$10 million subordinated note payable to Martin-Brower,
discounted at 9%........................................... 8,826 794
Revolving credit facility, at 9.60%.......................... 22,604 2,170
------- ------
$ 46,430 $ 4,764
======= ======
</TABLE>

The adjustment also assumes that the $2.5 million convertible subordinated
note payable to Onex (which Onex intends to convert in connection with the
offering), plus accrued interest, was converted into shares of the Company's
common stock on January 1, 1995, resulting in interest savings of $250.

D. Adjustments reflect the estimated income tax effect of various pro forma
adjustments at 39%, which represents the Company's approximate marginal tax
rate.

E. Adjustment represents the decrease in interest expense of $2,376 for the six
months ended June 29, 1996, assuming the net proceeds of the offering were
utilized to prepay, on January 1, 1996, the balances outstanding under the
various debt instruments as follows:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 1996
PRINCIPAL INTEREST
REPAYMENTS SAVINGS
---------- ----------
<S> <C> <C>
$15 million subordinated note payable to Onex, plus accrued
interest at 12%............................................ $ 16,350 $ 900
$10 million subordinated note payable to Martin-Brower,
discounted at 9%........................................... 9,418 415
Revolving credit facility, at 9.06%.......................... 20,662 936
------- ------
$ 46,430 $2,251
======= ======
</TABLE>

F-42
<PAGE> 107

INSIDE BACK COVER ARTWORK

Picture of a man sitting in a restaurant and drinking from a cup and a
Company truck in the background on the top left-hand side of the page. Picture
of a Company employee unloading a truck outside on the top right-hand side of
the page. Picture of a Company employee driving a chain of carts in a warehouse
on the bottom of the page.
<PAGE> 108

[PROSOURCE LOGO]
<PAGE> 109

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the estimated (except for the Securities and
Exchange Commission registration fee, the National Association of Securities
Dealers, Inc. filing fee and The Nasdaq National Market filing fee) fees and
expenses (other than underwriting discounts and commissions) in connection with
the offering described in this registration statement:

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.................... $ 19,827
National Association of Securities Dealers, Inc. filing fee............ 6,250
The Nasdaq National Market filing fee.................................. 42,500
Transfer Agent and Registrar fees...................................... 10,000
Blue Sky filing and counsel fees and expenses.......................... 20,000
Printing and engraving costs........................................... 275,000
Legal fees and expenses................................................ 425,000
Accounting fees and expenses........................................... 200,000
Miscellaneous.......................................................... 1,423
=========
Total........................................................ $1,000,000
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

As authorized by Section 102(b)(7) of the Delaware General Corporation Law,
Article Eighth of the Company's Restated Certificate of Incorporation provides
that directors of the Company shall not be personally liable to the Company or
its stockholders for monetary damages for breaches of their fiduciary duty of
care as a director, except that such provision does not limit or eliminate the
liability of any director (i) for any breach of the director's duty of loyalty
to the Company or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or knowing violation of law, (iii) in
respect of certain unlawful dividend payments or stock redemptions or
repurchases or (iv) for any transactions from which the director derived an
improper personal benefit. In addition, this provision does not limit directors'
liability under federal securities laws.

Section 145 of the Delaware Law provides, in summary, that directors and
officers of Delaware corporations are entitled, under certain circumstances, to
be indemnified against all expenses and liabilities (including attorney's fees)
incurred by them as a result of suits brought against them in their capacity as
a director or officer, if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, if they had no
reasonable cause to believe their conduct was unlawful; provided, that no
indemnification may be made against expenses in respect of any claim, issue or
matter as to which they shall have been adjudged to be liable to the Company,
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, they are fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper. Any such indemnification may be made by the Company only as authorized
in each specific case upon a determination by the stockholders or disinterested
directors that indemnification is proper because the indemnitee has met the
applicable standard of conduct. Article 8 of the Company's Restated Certificate
of Incorporation entitles officers and directors of the Company to
indemnification to the fullest extent permitted by Section 145 of the Delaware
Law, as the same may be supplemented from time to time.

Reference is also made to the Company's Restated Certificate of
Incorporation, filed as Exhibit 3.1 hereto.

II-1
<PAGE> 110

Reference is also made to Section 7 of the Underwriting Agreement contained
in Exhibit 1.1 hereto, which provides certain indemnification rights to the
directors and officers of the Company in connection with the offering.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Since June 30, 1993, the Company has not issued or sold any securities not
registered under the Securities Act of 1933, as amended (the "Securities Act"),
except as follows:

(a) During 1993, the Company sold 125,600 shares of Common Stock in
the aggregate to certain directors, officers and management employees of
the Company at a purchase price equal to $11.00 per share.

(b) During 1994, the Company sold 6,900 shares of Common Stock in the
aggregate to certain officers and management employees of the Company at a
purchase price equal to $11.00 per share.

(c) On November 1, 1994, in connection with the acquisition of certain
assets and the assumption of certain liabilities of Malone Products, Inc.
("Malone") and as partial consideration therefor, the Company issued a
Subordinated Convertible Note in the principal amount of $0.5 million to
Malone (the "Malone Subordinated Note"). The Malone Subordinated Note is
convertible, in whole or in part, at any time into shares of Common Stock
at a conversion price equal to $20.00 per share, subject to adjustment.

(d) On March 31, 1995, in connection with the acquisition of
substantially all of the assets and the assumption of certain liabilities
of the National Accounts Division of The Martin-Brower Company
("Martin-Brower") and as partial consideration therefor, the Company
issued:

(i) a Stock Subscription Warrant to Martin-Brower for the purchase
of shares of Common Stock at an exercise price of $12.35 per share,
which was assigned a nominal value for purposes of such transaction;

(ii) a Subordinated Note Due March 31, 2002 in the principal amount
of $10 million to Martin-Brower;

(iii) a 12% Subordinated Note Due April 1, 2005 in the principal
amount of $15 million to Onex; and

(iv) a Convertible Subordinated Note Due April 1, 2005 in the
principal amount of $3.5 million to Onex (the "Onex NAD Note"). During
the year ended December 30, 1995, the Company paid $2.1 million of
principal and $41,000 of accrued interest under the Onex NAD Note,
resulting in an outstanding balance of $1.4 million at December 30,
1995. On February 1, 1996, Onex converted $0.8 million principal amount
of the Onex NAD Note into 80,000 shares of the Common Stock and the
remaining balance on such note of approximately $0.6 million plus
accrued interest of $0.1 million was paid to Onex.

(e) In May 1995, the Company completed the sale of 208,500 shares of
Common Stock in the aggregate to certain directors, officers and management
employees of the Company at a purchase price equal to $10.00 per share.

(f) In January 1996, the Company completed the sale of 61,500 shares
of Common Stock in the aggregate to certain officers and management
employees of the Company at a purchase price equal to $10.00 per share.

The issuances and sales of the securities listed above were exempt from
registration under the Securities Act by virtue of Section 4(2) thereof and
Regulation D promulgated thereunder as transactions not involving a public
offering.

II-2
<PAGE> 111

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- -------- ----------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement(1)
3.1 Form of Restated Certificate of Incorporation of the Company
3.2 Form of Amended and Restated By-Laws of the Company
4.1 Form of Certificate for Class A Common Stock(1)
5.1 Opinion of Kaye, Scholer, Fierman, Hays & Handler, LLP
10.1 Form of Amended and Restated Management Shareholders Agreement among ProSource,
Inc., Onex DHC LLC and the individuals party thereto from time to time
10.2 Form of Amended and Restated Director Shareholders Agreement among ProSource,
Inc., Onex DHC LLC and the individuals party thereto from time to time
10.3 Stock Subscription Warrant, dated March 31, 1995, issued by ProSource, Inc. in
favor of The Martin-Brower Company to subscribe for 283,425 shares of Common
Stock(1)
10.4 Agreement, dated November 10, 1994, for the Purchase and Sale of the National
Accounts Division of The Martin-Brower Company and Martin-Brower of Canada, Ltd.,
among ProSource, Inc., The Martin-Brower Company and Martin-Brower of Canada,
Ltd.(1)
10.5 Purchase Agreement Amendment, dated February 24, 1995, among The Martin-Brower
Company, Martin-Brower of Canada, Ltd. and ProSource, Inc.(1)
10.6 Second Purchase Agreement Amendment, dated February 28, 1995, among The
Martin-Brower Company, Martin-Brower of Canada, Ltd. and ProSource, Inc.(1)
10.7 Third Purchase Agreement Amendment, dated March 31, 1995, among The Martin-Brower
Company, Martin-Brower of Canada, Ltd. and ProSource, Inc.(1)
10.8 Loan and Security Agreement, dated as of March 31, 1995, among ProSource Services
Corporation, BroMar Services, Inc., ProSource Distribution Services Limited, the
Financial Institutions party thereto and NationsBank of Georgia, N.A., The First
National Bank of Boston and Shawmut Capital Corporation, as Co-Agents, and
NationsBank of Georgia, N.A., as Administrative Agent(1)
10.9 Amendment No. 1, dated as of December 29, 1995, to Loan and Security Agreement,
among ProSource Services Corporation, BroMar Services, Inc., ProSource
Distribution Services Limited, the Financial Institutions party thereto and
NationsBank of Georgia, N.A., The First National Bank of Boston and Shawmut
Capital Corporation, as Co-Agents, and NationsBank of Georgia, N.A., as
Administrative Agent(1)
10.10 Amendment No. 2 and Waiver, dated as of March 28, 1996, to Loan and Security
Agreement, among ProSource Services Corporation, BroMar Services, Inc., ProSource
Distribution Services Limited, the Financial Institutions party thereto and
NationsBank, N.A. (South), The First National Bank of Boston and Fleet Capital
Corporation, as Co-Agents, and NationsBank, N.A. (South), as Administrative
Agent(1)
10.11 Amendment No. 3 and Consent, dated as of September 6, 1996, to Loan and Security
Agreement, among ProSource Services Corporation, BroMar Services, Inc., ProSource
Distribution Services Limited, the Financial Institutions party thereto and
NationsBank, N.A. (South), The First National Bank of Boston and Fleet Capital
Corporation, as Co-Agents, and NationsBank, N.A. (South), as Administrative
Agent(1)
</TABLE>

II-3
<PAGE> 112

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- -------- ----------------------------------------------------------------------------------
<C> <S>
10.12 Amendment No. 4 and Consent, dated as of September 26, 1996, to Loan and Security
Agreement, among ProSource Services Corporation, BroMar Services, Inc., ProSource
Distribution Services Limited, the Financial Institutions party thereto and
NationsBank, N.A. (South), The First National Bank of Boston and Fleet Capital
Corporation, as Co-Agents, and NationsBank, N.A. (South), as Administrative
Agent(1)
10.13 Pledge Agreement, made as of March 31, 1995, by ProSource, Inc. in favor of
NationsBank of Georgia, N.A., as Administrative Agent(1)
10.14 Pledge Agreement, made as of March 31, 1995, by ProSource Services Corporation in
favor of NationsBank of Georgia, N.A., as Administrative Agent(1)
10.15 Subordination Agreement, dated as of March 31, 1995, made by ProSource Services
Corporation and Onex Corporation in favor of NationsBank of Georgia, N.A., as
Administrative Agent(1)
10.16 Unconditional Guaranty, made as of March 31, 1995, by ProSource, Inc. in favor of
NationsBank of Georgia, N.A., as Administrative Agent(1)
10.17 Subordinated Note, dated March 31, 1995, executed by ProSource, Inc. and payable
to the order of The Martin-Brower Company in the original principal amount of
$10,000,000(1)
10.18 Subordinated Note, dated March 31, 1995, executed by ProSource Services
Corporation and payable to the order of Onex Ohio Holdings, Inc. in the original
principal amount of $15,000,000(1)
10.19 Form of Distribution Agreement, dated as of June 30, 1992, between Burger King
Corporation and ProSource Services Corporation(1)
10.20 Form of Amendment Agreement, dated as of June 30, 1992, between Burger King
Corporation and ProSource Services Corporation(1)
10.21 Addendum to Forms of Distribution Agreement and Amendment Agreement(1)
10.22 Form of Amended and Restated Employment Agreement between ProSource Services
Corporation and David R. Parker
10.23 Form of Amended and Restated Employment Agreement between ProSource Services
Corporation and Thomas C. Highland
10.24 Employment Agreement, dated as of April 1, 1995, between ProSource Services
Corporation and Daniel Adzia(1)
10.25 Employment Agreement, dated July 1, 1992, between ProSource Services Corporation
and Paul A. Garcia de Quevedo(1)
10.26 Employment Agreement, dated as of July 1, 1995, between ProSource Services
Corporation and Dennis Andruskiewicz(1)
10.27 Employment Agreement, dated April 1, 1994, between ProSource Services Corporation
and John E. Foley(1)
10.28 Amended and Restated Management Option Plan (1995)
10.29 1996 Stock Option Plan
10.30 Truck Lease and Service Agreement, dated as of May 19, 1995, between Ryder Truck
Rental, Inc. and ProSource Services Corporation(1)(2)
10.31 Lease Agreement, dated as of August 22, 1991, between Burger King Corporation
(subsequently assigned to ProSource Services Corporation) and Gelco Corporation,
doing business as GE Capital Fleet Services(1)
10.32 Management Advisory Agreement, dated as of July 1, 1992, between OMI Partnership
Holdings Ltd., an affiliate of Onex Corporation, and ProSource Services
Corporation(1)
</TABLE>

II-4
<PAGE> 113

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- -------- ----------------------------------------------------------------------------------
<C> <S>
10.33 Form of Termination Agreement between OMI Partnership Holdings Ltd., an affiliate
of Onex Corporation, and ProSource Services Corporation(1)
21.1 Subsidiaries of the Company(1)
23.1 Consent of KPMG Peat Marwick LLP(1)
23.2 Consent of Price Waterhouse LLP(1)
23.3 Consent of Kaye, Scholer, Fierman, Hays & Handler, LLP (included in Exhibit 5.1)
24.1 Powers of Attorney (included on signature page)
27.1 Financial Data Schedule(1)
</TABLE>

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

(1) Previously filed.

(2) Confidential treatment has been requested for portions of this Exhibit.

(b) Consolidated Financial Statements Schedules

Schedule I -- Condensed Financial Information of Registrant

Schedule II -- Valuation and Qualifying Accounts

ITEM 17. UNDERTAKINGS

(1) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

(2) The undersigned registrant hereby undertakes that:

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

(b) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

(3) The undersigned registrant hereby undertakes to provide to the
Underwriters at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
Underwriters to permit prompt delivery to each purchaser.

II-5
<PAGE> 114

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement on Form S-1 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Coral Gables, State of Florida on November 6, 1996.

PROSOURCE, INC.

By: /s/ DAVID R. PARKER
........................................

David R. Parker
Chairman of the Board

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 4 to the Registration Statement on Form S-1 has been signed
by the following persons in the capacities and on the dates indicated. Each
person whose signature appears below hereby authorizes each of David R. Parker,
Thomas C. Highland, William F. Evans and Paul A. Garcia de Quevedo, as
attorney-in-fact, to sign and file on his or her behalf, individually and in
each capacity stated below, any pre-effective or post-effective amendment hereto
or any registration statement relating to the offering covered hereby filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- --------------------------------- ------------------
<C> <S> <C>
* Chairman of the Board of November 6, 1996
...................................... Directors (principal executive
David R. Parker officer)

* President, Chief Executive November 6, 1996
...................................... Officer and Director
Thomas C. Highland

* Vice-Chairman, Chief Marketing November 6, 1996
...................................... Officer and Director
Daniel J. Adzia

* Executive Vice President, Chief November 6, 1996
...................................... Financial Officer
William F. Evans (principal financial officer)

* Vice President, Controller November 6, 1996
...................................... (principal accounting officer)
Marcelino Iturrey

* Director November 6, 1996
......................................
Gerald W. Schwartz

* Director November 6, 1996
......................................
Anthony R. Melman
</TABLE>

II-6
<PAGE> 115

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- --------------------------------- ------------------
<C> <S> <C>
* Director November 6, 1996
......................................
Michael E. Treacy
* Director November 6, 1996
......................................
Michael Carpenter
* Director November 6, 1996
......................................
Anthony Munk
* Director November 6, 1996
......................................
C. Lee Johnson
* Director November 6, 1996
......................................
R. Geoffrey P. Styles

*By: /s/ DAVID R. PARKER
.................................
David R. Parker
individually and as attorney-in-fact
</TABLE>

II-7
<PAGE> 116

PROSOURCE, INC. (PARENT ONLY)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEET INFORMATION
DECEMBER 31, 1994 AND DECEMBER 30, 1995
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................................. $ 1,118 $ 939
Due from subsidiaries.................................................. -- 96
Other current assets................................................... 58 --
------- -------
Total current assets........................................... 1,176 1,035
Investment in subsidiaries............................................... 28,160 58,935
Deferred income taxes.................................................... 291 394
------- -------
Total assets................................................... $29,627 $60,364
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued liabilities.................................................... $ 10 $ 110
------- -------
Total current liabilities........................................... 10 110
Subordinated notes payable............................................... -- 9,418
Convertible subordinated notes payable................................... -- 1,415
Due to subsidiaries...................................................... 7,074 --
------- -------
Total liabilities.............................................. 7,084 10,943
------- -------
Commitments and contingencies
Stockholders' equity:
Preferred Stock........................................................ -- --
Class A Common Stock................................................... -- --
Class B Common Stock................................................... 23 52
Additional paid-in-capital............................................. 23,504 51,838
Accumulated deficit.................................................... (984) (2,540)
Accumulated foreign currency translation adjustments................... -- 71
------- -------
Total stockholders' equity..................................... 22,543 49,421
------- -------
Total liabilities and stockholders' equity..................... $29,627 $60,364
======= =======
</TABLE>

See accompanying notes to condensed financial information.

S-1
<PAGE> 117

PROSOURCE, INC. (PARENT ONLY)

SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT) INFORMATION
FOR THE YEARS ENDED DECEMBER 25, 1993, DECEMBER 31, 1994 AND DECEMBER 30, 1995
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
1994 1995
1993 ---------- ----------
---------- (53 WEEKS) (52 WEEKS)
(52 WEEKS)
<S> <C> <C> <C>
Revenues.................................................. $ -- $ -- $ --
Expenses.................................................. -- -- 3
Interest expense.......................................... (413) (571) (729)
Interest income........................................... 27 55 53
Equity in losses of subsidiaries.......................... (938) (3,513) (1,294)
------- ------- -------
Loss before income taxes................................ (1,324) (4,029) (1,973)
Income tax benefit........................................ 497 1,647 417
------- ------- -------
Net loss................................................ (827) (2,382) (1,556)
Retained earnings (deficit), beginning of year............ 2,225 1,398 (984)
------- ------- -------
Retained earnings (deficit), end of year.................. $ 1,398 $ (984) $ (2,540)
======= ======= =======
</TABLE>

See accompanying notes to condensed financial information.

S-2
<PAGE> 118

PROSOURCE, INC. (PARENT ONLY)

SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF CASH FLOW INFORMATION
FOR THE YEARS ENDED DECEMBER 25, 1993, DECEMBER 31, 1994 AND DECEMBER 30, 1995
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
1994 1995
1993 ---------- ----------
---------- (53 WEEKS) (52 WEEKS)
(52 WEEKS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss................................................ $ (827) $ (2,382) $ (1,556)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Undistributed losses of subsidiaries................. 441 2,062 914
Dividends received from subsidiaries................. -- 561 7,208
Deferred income taxes................................ (98) (193) (103)
Amortization of note discount........................ -- -- 592
Changes in operating assets and liabilities:
(Increase) decrease in other current assets........ (54) (4) 58
Increase in accrued liabilities.................... -- 10 100
------- ------- --------
Net cash provided by (used in) operating
activities.................................... (538) 54 7,213
------- ------- --------
Cash flows from investing activities:
Capital contributions to subsidiaries................... (6,497) (2) (38,826)
Advances to/from subsidiaries........................... 7,059 15 (7,170)
------- ------- --------
Net cash provided by (used in) investing
activities.................................... 562 13 (45,996)
------- ------- --------
Cash flows from financing activities:
Issuance of long-term debt.............................. -- -- 12,326
Repayments of long-term debt............................ -- -- (2,085)
Proceeds from issuance of common stock.................. 1,382 76 28,585
Payments to acquire and retire treasury stock........... (16) (415) (222)
------- ------- --------
Net cash provided by (used in) financing
activities.................................... 1,366 (339) 38,604
------- ------- --------
Net increase (decrease) in cash and cash
equivalents................................... 1,390 (272) (179)
Cash and cash equivalents, beginning of year.............. -- 1,390 1,118
------- ------- --------
Cash and cash equivalents, end of year.................... $ 1,390 $ 1,118 $ 939
======= ======= ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest........................................... $ -- $ -- $ 41
======= ======= ========
Income taxes, net of refunds....................... $ 14 $ 4 $ 1
======= ======= ========
</TABLE>

See accompanying notes to condensed financial information.

S-3
<PAGE> 119

PROSOURCE, INC. (PARENT ONLY)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO CONDENSED FINANCIAL INFORMATION
DECEMBER 30, 1995
(DOLLARS IN THOUSANDS)

(1) BASIS OF PRESENTATION

The accompanying condensed financial information should be read in
conjunction with the ProSource, Inc. Consolidated Financial Statements.
Capitalized terms are as defined in the ProSource, Inc. Consolidated Financial
Statements.

(2) LONG-TERM DEBT

Total debt of the Registrant (Parent only) consists of two agreements at
December 30, 1995. A $10 million subordinated note is payable to The
Martin-Brower Company. Interest on this note is payable semiannually, with rates
ranging from zero to 13 percent, beginning March 31, 1998. The principal is
payable in full on March 31, 2002. This note has been discounted to reflect a
constant interest rate of 9 percent through its maturity.

A $3.5 million convertible subordinated note was payable to Onex, with
interest at prime rate (8.5 percent at December 30, 1995), compounded annually
and due, together with the principal, on April 1, 2005. During the year ended
December 30, 1995, the Parent paid $2.1 million of such note to Onex resulting
in an outstanding balance of $1.4 million at December 30, 1995. On February 1,
1996, Onex converted $0.8 million of the note into 80,000 shares of the Parent's
common stock and the remaining balance on the note of approximately $0.6 million
plus accrued interest was paid to Onex.

The subsidiaries' Loan and Security Agreements include certain restrictive
covenants which, among other things, limit the flow of funds to the Parent.
Substantially all of the subsidiaries' assets are pledged to secure the
revolving credit facility and term loans, as well as a pledge by the Parent of
all of the issued and outstanding common stock of the subsidiaries. In addition,
the Parent has guaranteed payment of all amounts due under the revolving credit
facility and term loan. See Note 6 of the Notes to Consolidated Financial
Statements for further discussion of the restrictions contained in this loan
agreement.

(3) SUBSEQUENT EVENT

In September 1996, the Parent filed a Registration Statement with the
Securities and Exchange Commission with respect to an initial public offering.
The net proceeds of the offering will be used to repay certain indebtedness of
the Parent and its subsidiaries.

In October 1996, the Parent changed its capital structure to 10,000,000
authorized shares of $.01 par value preferred stock, 50,000,000 authorized
shares of $0.01 par value Class A Common Stock and 10,000,000 authorized shares
of $.01 par value Class B Common Stock.

On October 1996, the Parent's board of directors declared a 100-to-1 stock
split effective as of the date of the commencement of the initial public
offering. The par value of each share is $.01. The Parent's additional paid-in
capital account and the Class B Common Stock accounts have been restated
retroactively to reflect the stock split.

S-4
<PAGE> 120

PROSOURCE, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 25, 1993, DECEMBER 31, 1994 AND DECEMBER 30, 1995
(DOLLARS IN THOUSANDS)

<TABLE>
<S> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
BALANCE, December 31, 1992....................................................... $ 1,818
Additions charged to costs and expenses....................................... 766
Recoveries.................................................................... --
Write-offs.................................................................... (56)
-----
BALANCE, December 25, 1993....................................................... 2,528
Additions charged to costs and expenses....................................... 2,427
Recoveries.................................................................... 190
Write-offs.................................................................... (2,234)
-----
BALANCE, December 31, 1994....................................................... 2,911
Acquired allowance of NAD..................................................... 1,893
Additions charged to costs and expenses....................................... 1,845
Recoveries.................................................................... 153
Write-offs.................................................................... (4,217)
-----
BALANCE, December 30, 1995....................................................... $ 2,585
=====
</TABLE>

S-5
<PAGE> 121

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER NUMBER
- -------- ----------
<C> <S> <C>
1.1 Form of Underwriting Agreement(1)........................................
3.1 Form of Restated Certificate of Incorporation of the Company.............
3.2 Form of Amended and Restated By-Laws of the Company......................
4.1 Form of Certificate for Class A Common Stock(1)..........................
5.1 Opinion of Kaye, Scholer, Fierman, Hays & Handler, LLP...................
10.1 Form of Amended and Restated Management Shareholders Agreement among
ProSource, Inc., Onex DHC LLC and the individuals party thereto from time
to time..................................................................
10.2 Form of Amended and Restated Director Shareholders Agreement among
ProSource, Inc., Onex DHC LLC and the individuals party thereto from time
to time..................................................................
10.3 Stock Subscription Warrant, dated March 31, 1995, issued by ProSource,
Inc. in favor of The Martin-Brower Company to subscribe for 283,425
shares of Common Stock(1)................................................
10.4 Agreement, dated November 10, 1994, for the Purchase and Sale of the
National Accounts Division of The Martin-Brower Company and Martin-Brower
of Canada, Ltd., among ProSource, Inc., The Martin-Brower Company and
Martin-Brower of Canada, Ltd.(1).........................................
10.5 Purchase Agreement Amendment, dated February 24, 1995, among The Martin-
Brower Company, Martin-Brower of Canada, Ltd. and ProSource, Inc.(1).....
10.6 Second Purchase Agreement Amendment, dated February 28, 1995, among The
Martin-Brower Company, Martin-Brower of Canada, Ltd. and ProSource,
Inc.(1)..................................................................
10.7 Third Purchase Agreement Amendment, dated March 31, 1995, among The
Martin-Brower Company, Martin-Brower of Canada, Ltd. and ProSource,
Inc.(1)..................................................................
10.8 Loan and Security Agreement, dated as of March 31, 1995, among ProSource
Services Corporation, BroMar Services, Inc., ProSource Distribution
Services Limited, the Financial Institutions party thereto and
NationsBank of Georgia, N.A., The First National Bank of Boston and
Shawmut Capital Corporation, as Co-Agents, and NationsBank of Georgia,
N.A., as Administrative Agent(1).........................................
10.9 Amendment No. 1, dated as of December 29, 1995, to Loan and Security
Agreement, among ProSource Services Corporation, BroMar Services, Inc.,
ProSource Distribution Services Limited, the Financial Institutions party
thereto and NationsBank of Georgia, N.A., The First National Bank of
Boston and Shawmut Capital Corporation, as Co-Agents, and NationsBank of
Georgia, N.A., as Administrative Agent(1)................................
10.10 Amendment No. 2 and Waiver, dated as of March 28, 1996, to Loan and
Security Agreement, among ProSource Services Corporation, BroMar
Services, Inc., ProSource Distribution Services Limited, the Financial
Institutions party thereto and NationsBank, N.A. (South), The First
National Bank of Boston and Fleet Capital Corporation, as Co-Agents, and
NationsBank, N.A. (South), as Administrative Agent(1)....................
10.11 Amendment No. 3 and Consent, dated as of September 6, 1996, to Loan and
Security Agreement, among ProSource Services Corporation, BroMar
Services, Inc., ProSource Distribution Services Limited, the Financial
Institutions party thereto and NationsBank, N.A. (South), The First
National Bank of Boston and Fleet Capital Corporation, as Co-Agents, and
NationsBank, N.A. (South), as Administrative Agent
</TABLE>

<PAGE> 122

<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER NUMBER
- -------- ----------
<C> <S> <C>
10.12 Amendment No. 4 and Consent, dated as of September 26, 1996, to Loan and
Security Agreement, among ProSource Services Corporation, BroMar
Services, Inc., ProSource Distribution Services Limited, the Financial
Institutions party thereto and NationsBank, N.A. (South), The First
National Bank of Boston and Fleet Capital Corporation, as Co-Agents, and
NationsBank, N.A. (South), as Administrative Agent(1)
10.13 Pledge Agreement, made as of March 31, 1995, by ProSource, Inc. in favor
of NationsBank of Georgia, N.A., as Administrative Agent(1)..............
10.14 Pledge Agreement, made as of March 31, 1995, by ProSource Services
Corporation in favor of NationsBank of Georgia, N.A., as Administrative
Agent(1).................................................................
10.15 Subordination Agreement, dated as of March 31, 1995, made by ProSource
Services Corporation and Onex Corporation in favor of NationsBank of
Georgia, N.A., as Administrative Agent(1)................................
10.16 Unconditional Guaranty, made as of March 31, 1995, by ProSource, Inc. in
favor of NationsBank of Georgia, N.A., as Administrative Agent(1)........
10.17 Subordinated Note, dated March 31, 1995, executed by ProSource, Inc. and
payable to the order of The Martin-Brower Company in the original
principal amount of $10,000,000(1).......................................
10.18 Subordinated Note, dated March 31, 1995, executed by ProSource Services
Corporation and payable to the order of Onex Ohio Holdings, Inc. in the
original principal amount of $15,000,000(1)..............................
10.19 Form of Distribution Agreement, dated as of June 30, 1992, between Burger
King Corporation and ProSource Services Corporation(1)...................
10.20 Form of Amendment Agreement, dated as of June 30, 1992, between Burger
King Corporation and ProSource Services Corporation(1)...................
10.21 Addendum to Forms of Distribution Agreement and Amendment Agreement(1)...
10.22 Form of Amended and Restated Employment Agreement between ProSource
Services Corporation and David R. Parker.................................
10.23 Form of Amended and Restated Employment Agreement between ProSource
Services Corporation and Thomas C. Highland..............................
10.24 Employment Agreement, dated as of April 1, 1995, between ProSource
Services Corporation and Daniel Adzia(1).................................
10.25 Employment Agreement, dated July 1, 1992, between ProSource Services
Corporation and Paul A. Garcia de Quevedo(1).............................
10.26 Employment Agreement, dated as of July 1, 1995, between ProSource
Services Corporation and Dennis Andruskiewicz(1).........................
10.27 Employment Agreement, dated April 1, 1994, between ProSource Services
Corporation and John E. Foley(1).........................................
10.28 Amended and Restated Management Option Plan (1995).......................
10.29 1996 Stock Option Plan...................................................
10.30 Truck Lease and Service Agreement, dated as of May 19, 1995, between
Ryder Truck Rental, Inc. and ProSource Services Corporation (1)(2).......
10.31 Lease Agreement, dated as of August 22, 1991, between Burger King
Corporation (subsequently assigned to ProSource Services Corporation) and
Gelco Corporation, doing business as GE Capital Fleet Services(1)
</TABLE>

<PAGE> 123

<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER NUMBER
- -------- ----------
<C> <S> <C>
10.32 Management Advisory Agreement, dated as of July 1, 1992, between OMI
Partnership Holdings Ltd., an affiliate of Onex Corporation, and
ProSource Services Corporation(1)
10.33 Form of Termination Agreement between OMI Partnership Holdings Ltd., an
affiliate of Onex Corporation, and ProSource Services Corporation(1)
21.1 Subsidiaries of the Company(1)...........................................
23.1 Consent of KPMG Peat Marwick LLP(1)......................................
23.2 Consent of Price Waterhouse LLP(1).......................................
23.3 Consent of Kaye, Scholer, Fierman, Hays & Handler, LLP (included in
Exhibit 5.1).............................................................
24.1 Powers of Attorney (included on signature page)..........................
27.1 Financial Data Schedule(1)...............................................
</TABLE>

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

(1) Previously filed.

(2) Confidential treatment has been requested for portions of this Exhibit.

<PAGE> 1
Exhibit 3.1

FORM OF
RESTATED CERTIFICATE OF INCORPORATION

PROSOURCE, INC.

ProSource, Inc., a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:

1. The name of the Corporation is ProSource, Inc. The
Corporation was originally incorporated under the name Onex Distribution, Inc.
The date of filing of its original Certificate of Incorporation with the
Secretary of State was May 13, 1992.

2. This Restated Certificate of Incorporation has been duly
adopted by unanimous written consent of the directors of the Corporation and
written consent of the stockholders of the Corporation in accordance with the
applicable provisions of Sections 141, 228, 242 and 245 of the General
Corporation Law of the State of Delaware, and, pursuant to Section 228(d),
notice has been provided to stockholders who have not consented in writing to
such action. This Restated Certificate of Incorporation restates and integrates
and further amends the provisions of the Certificate of Incorporation of the
Corporation, as previously amended.

FIRST: The name of the Corporation is ProSource, Inc.

SECOND: The address of the Corporation's registered office in
the State of Delaware is 1209 Orange Street, Wilmington, Delaware (New Castle
County). The name of its registered agent at such address is The Corporation
Trust Company.

THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware, as amended from time to time (the
"GCL").

FOURTH:

SECTION 1. The aggregate number of shares of stock which the
Corporation shall have authority to issue is 70,000,000 shares, of which (i)
10,000,000 shares shall be preferred stock, par value $0.01 per share (the
"Preferred Stock"), (ii) 50,000,000 shares shall be Class A Common Stock, par
value $0.01 per share (the "Class A Common Stock"), and (iii) 10,000,000 shares
shall be Class B Common Stock, par value $0.01 per share (the "Class B Common
Stock"). The Class A Common Stock and the Class B Common Stock are collectively
referred to herein as the "Common Stock." All of such shares shall be issued as
fully paid and non-assessable shares, and the holder thereof shall not be liable
for any further payments in respect thereof.

<PAGE> 2

SECTION 2. The preferences, designations and relative rights
of the shares of each class and the qualifications, limitations or restrictions
thereof shall be as follows:

A. Preferred Stock.

1. The shares of Preferred Stock may be issued from time to
time in one or more series of any number of shares, provided that the aggregate
number of shares issued and not canceled of any and all such series shall not
exceed the total number of shares of Preferred Stock hereinabove authorized, and
with such powers, preferences, rights and qualifications, limitations or
restrictions thereof, and such distinctive serial designations, all as shall
hereafter be stated and expressed in the resolution or resolutions adopted by
the Board of Directors of the Corporation (the "Board of Directors") providing
for the issue of such shares of Preferred Stock from time to time pursuant to
authority to do so which is hereby vested in the Board of Directors.

2. Each series of shares of Preferred Stock (a) may have such
voting rights or powers, full or limited, or may be without voting rights or
powers; (b) may be subject to redemption at such time or times and at such
prices; (c) may be entitled to receive dividends (which may be cumulative or
non-cumulative) at such rate or rates, on such conditions and at such times, and
payable in preference to, or in such relation to, the dividends payable on any
other class or classes or series of stock; (d) may have such rights upon the
voluntary or involuntary liquidation, winding up or dissolution of, or upon any
distribution of the assets of, the Corporation; (e) may be made convertible into
or exchangeable for, shares of any other class or classes or of any other series
of the same or any other class or classes of stock of the Corporation at such
price or prices or at such rates of exchange and with such adjustments; (f) may
be entitled to the benefit of a sinking fund to be applied to the purchase or
redemption of shares of such series in such amount or amounts; (g) may be
entitled to the benefit of conditions and restrictions upon the creation of
indebtedness of the Corporation or any subsidiary, upon the issue of any
additional shares (including additional shares of such series or of any other
series) and upon the payment of dividends or the making of other distributions
on, and the purchase, redemption or other acquisition by the Corporation or any
subsidiary of, any outstanding shares of the Corporation and (h) may have such
other relative, participating, optional or other special rights, qualifications,
limitations or restrictions thereof; all as shall be stated in said resolution
or resolutions providing for the issue of such shares of Preferred Stock.

3. Any of the voting powers, designations, preferences, rights
and qualifications, limitations or restrictions of any such series of Preferred
Stock may be made dependent upon facts ascertainable outside of the resolution
or resolutions adopted by the Board of Directors providing for the issue of such
Preferred Stock pursuant to the authority vested in the Board of Directors by
this Section 2A of Article Fourth, provided that the manner in which such facts
shall operate upon the voting powers, designations, preferences, rights and
qualifications, limitations or restrictions of such series of Preferred Stock is
clearly and expressly set forth in the resolution or resolutions providing for
the issue of such Preferred Stock. The term "facts" as used in the preceding
sentence shall have the meaning given to it in Section 151(a) of the GCL.

<PAGE> 3

4. Shares of Preferred Stock of any series that have been
redeemed (whether through the operation of a sinking fund or otherwise) or that
if convertible or exchangeable have been converted into or exchanged for shares
of any other class or classes, shall have the status of authorized and unissued
shares of Preferred Stock undesignated as to series and may be reissued as a
part of the series of which they were originally a part or as part of a new
series of shares of Preferred Stock to be created by resolution or resolutions
of the Board of Directors or as part of any other series of shares of Preferred
Stock, all subject to any conditions or restrictions on issuance set forth in
the resolution or resolutions adopted by the Board of Directors providing for
the issue of any series of shares of Preferred Stock.

B. Common Stock.

Except as otherwise provided in this Section 2B of Article
Fourth or as otherwise required by applicable law, all shares of Class A Common
Stock and Class B Common Stock shall be identical in all respects and shall
entitle the holders thereof to the same rights and privileges, subject to the
same qualifications, limitations and restrictions.

1. Voting Rights. Except as otherwise provided in this Section
2B of Article Fourth or as otherwise required by applicable law, holders of
Class A Common Stock shall be entitled to one (1) vote per share on all matters
to be voted on by the stockholders of the Corporation, and the holders of Class
B Common Stock shall be entitled to ten (10) votes per share on all such
matters. Except as otherwise required by applicable law, the holders of Class A
Common Stock and Class B Common Stock shall vote together as a single class on
all matters to be voted on by the stockholders of the Corporation; provided,
that for any matter to be voted on by the stockholders which independently
affects only one class of Common Stock, without such an effect on the other
class, the affected class of Common Stock shall vote as a separate class on such
matters.

2. Dividends. Subject to the rights of any series of Preferred
Stock, dividends may be declared and paid or set apart for payment upon the
Common Stock out of any assets or funds of the Corporation legally available for
the payment of dividends, and the holders of Class A Common Stock and Class B
Common Stock shall be entitled to participate in such dividends ratably on a per
share basis; provided, that if dividends are declared which are payable in
shares of Class A Common Stock or Class B Common Stock, dividends shall be
declared which are payable at the same rate on both classes of Common Stock and
the dividends payable in shares of Class A Common Stock shall be payable to
holders of that class of stock and the dividends payable in shares of Class B
Common Stock shall be payable to holders of that class of stock.

3. Liquidation. Upon any liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, and after either (i)
the holders of Preferred Stock shall have been paid in full the amounts to which
they shall be entitled in accordance with Section 2A of Article Fourth, the
terms of any outstanding series of Preferred Stock and applicable law, or (ii)
an amount sufficient to pay the aggregate amount to which the holders of the
Preferred Stock shall be entitled shall have been deposited with a bank or trust
company having capital, surplus and

<PAGE> 4

undivided profits of at least Twenty-Five Million Dollars ($25,000,000) as a
trust fund for the benefit of the holders of such Preferred Stock, then, the
remaining net assets of the Corporation shall be distributed to the holders of
Common Stock pro rata based on the number of shares held by the holders of the
Common Stock, to the exclusion of the holders of such Preferred Stock.

4. Conversion.

For purposes of this paragraph 4 of Article Fourth,
Section 2B, the following terms shall be defined as follows:

"Affiliate" shall mean (i) with respect to
any natural person, the parents, spouse, siblings, lineal descendants and
successors in interest upon death of such person, as well as any trust, all of
the beneficiaries of which consist of any of the foregoing, and (ii) with
respect to any Person other than a natural person, any other Person controlling,
controlled by or under common control with such Person.

"Conversion Event" shall mean (i) with
respect to Class B Common Stock held by any Person, any Transfer of such Class B
Common Stock to a Person who, immediately prior to such Transfer, is not a
holder of Class B Common Stock or an Affiliate of the Transferor or such holder,
other than the pledge by such holder of Class B Common Stock of such Class B
Common Stock as security for indebtedness incurred in connection with financing
the purchase of such Class B Common Stock and any pledge of such Class B Common
Stock in connection with any refinancing of such indebtedness; or (ii) with
respect to Class B Common Stock held by any employee of the Corporation or any
of its subsidiaries, such employee ceasing to be employed on a full-time basis
by the Corporation or such subsidiary (the date of cessation of employment
constituting the date of occurrence of the Conversion Event for purposes of this
paragraph 4 of Article Fourth, Section 2B), unless the Class B Common Stock held
by such employee is Transferred to Onex Corporation, an Affiliate thereof or any
other employee of the Corporation or any of its subsidiaries within 45 days
after such employee ceases to be so employed.

"Person" shall mean any natural person and
any corporation, partnership, limited liability company, joint venture, trust,
unincorporated organization and any other entity or organization;

"Transfer" shall mean (i) any sale,
exchange, assignment, conveyance, gift, disposition or other transfer, (ii) the
granting of any lien, security interest, pledge or other encumbrance, or (iii)
the entering into of any agreement to do any of the foregoing; but shall not
include the issue or sale of Common Stock by the Corporation.

<PAGE> 5

4A. Conversion of Class B Common Stock.

(a) Upon the occurrence of a Conversion Event, each share of
Class B Common Stock subject to such Conversion Event shall automatically
convert into one share of Class A Common Stock. Upon the occurrence of any
Conversion Event, the holder or holders of Class B Common Stock affected thereby
shall promptly comply with the procedures for conversion of Class B Common Stock
to Class A Common Stock as set forth in subsection 4B of this Article Fourth,
Section 2B.

(b) Each holder of Class B Common Stock shall be entitled at
any time to convert any or all of the shares of such holder's Class B Common
Stock into the same number of shares of Class A Common Stock by electing to do
so in accordance with the procedures set forth in subsection 4B of this Article
Fourth, Section 2B.

4B. Conversion Procedure.

(a) In connection with each conversion of shares of Class B
Common Stock into shares of Class A Common Stock, the certificate or
certificates representing the shares to be converted shall be surrendered at the
principal office of the Corporation at any time during normal business hours. In
the case of an elective conversion pursuant to subsection 4A(b) of this Article
Fourth, Section 2B, the surrender of the certificate or certificates
representing such Class B Common Stock shall be accompanied by a written notice
by the holder of such shares stating that the holder desires to convert the
shares, or a stated number of the shares, of such Class B Common Stock
represented by such certificate or certificates into shares of Class A Common
Stock.

Each conversion pursuant to a Conversion Event shall be deemed
to have been effected as of the date on which such Conversion Event occurred.
Each elective conversion pursuant to subsection 4A(b) shall be deemed to have
been effected as of the close of business on the date on which such certificate
or certificates have been surrendered and the corresponding notice has been
received. Immediately upon the conversion of Class B Common Stock into Class A
Common Stock, the rights of the holder of the converted Class B Common Stock
with respect to the shares so converted shall cease and the Person or Persons in
whose name or names the certificate or certificates for shares of Class A Common
Stock are to be issued upon such conversion shall be deemed to have become the
holder or holders of record of the shares of Class A Common Stock represented
thereby.

(b) For each conversion effected pursuant to a Conversion
Event, promptly after the surrender of certificates, the Corporation shall issue
and deliver the certificate or certificates for the Class A Common Stock
issuable upon such conversion. For each conversion effected pursuant to an
elective conversion under subsection 4A(b), promptly after the surrender of
certificates and the receipt of written notice, the Corporation shall issue and
deliver in accordance with the surrendering holder's instructions (i) the
certificate or certificates for the Class A Common Stock issuable upon such
conversion and (ii) a certificate representing any Class B Common Stock which
was

<PAGE> 6

represented by the certificate or certificates delivered to the Corporation in
connection with such conversion but which was not converted.

(c) The issuance of certificates for Class A Common Stock upon
conversion of Class B Common Stock will be made without charge to the holders of
such shares for any issuance tax in respect thereof or other cost incurred by
the Corporation in connection with such conversion and the related issuance of
Class A Common Stock.

(d) The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Class A Common Stock,
solely for the purpose of issuance upon the conversion of the Class B Common
Stock, such number of shares of Class A Common Stock issuable upon the
conversion of all outstanding Class B Common Stock. All shares of Class A Common
Stock which are so issuable shall, when issued, be duly and validly issued,
fully paid and nonassessable and free from all taxes, liens and charges. The
Corporation shall take all such actions as may be necessary to assure that all
such shares of Class A Common Stock may be so issued without violation of any
applicable law or governmental regulation or any requirements of any domestic
securities exchange or automatic quotation system upon which shares of Class A
Common Stock may be listed or quoted (except for official notice of issuance
which will be immediately transmitted by the Corporation upon issuance).

(e) The Corporation shall not close its books against the
transfer of shares of Common Stock in any manner which would interfere with the
timely conversion of any shares of Class B Common Stock.

5. Stock Splits. If the Corporation in any manner subdivides
or combines the outstanding shares of one class of Common Stock, the outstanding
shares of the other class of Common Stock shall be proportionately subdivided or
combined in a similar manner.

6. Reorganization, Consolidation or Merger. In case of any
reorganization or consolidation of the Corporation with one or more other
corporations or a merger of the Corporation with another corporation, each
holder of a share of Class A Common Stock shall be entitled to receive with
respect to such share the same kind and amount of shares of stock and other
securities and property (including cash) receivable upon such reorganization,
consolidation or merger by a holder of a share of Class B Common Stock and each
holder of a share of Class B Common Stock shall be entitled to receive with
respect to such share the same kind and amount of shares of stock and other
securities and property (including cash) receivable upon such reorganization,
consolidation or merger by a holder of a share of Class A Common Stock.

C. General Provisions

1. Nonliquidating Events. A consolidation or merger of the
Corporation with or into another corporation or corporations or a sale, whether
for cash, shares of stock, securities or properties, or any combination thereof,
of all or substantially all of the assets of the Corporation shall

<PAGE> 7

not be deemed or construed to be a liquidation, dissolution or winding up of the
Corporation within the meaning of this Article Fourth.

2. No Preemptive Rights. No holder of Preferred Stock or
Common Stock of the Corporation shall be entitled, as such, as a matter of
right, to subscribe for or purchase any part of any new or additional issue of
stock of any class or series whatsoever or of securities convertible into stock
of any class whatsoever, whether now or hereafter authorized and whether issued
for cash or other consideration, or by way of dividend.

FIFTH: The Board of Directors shall have the power to make,
alter or repeal the by-laws of the Corporation.

SIXTH: The election of the Board of Directors need not be by
written ballot.

SEVENTH: The Corporation shall indemnify to the fullest extent
permitted by Section 145 of the GCL each person who is or was a director or
officer of the Corporation and the heirs, executors and administrators of such a
person.

EIGHTH: No director shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director for any act or omission occurring subsequent to the date when
this provision becomes effective, except that he may be liable (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the GCL or
(iv) for any transaction from which the director derived an improper personal
benefit.

NINTH: The Corporation elects not to be governed by Section
203 of the GCL.

TENTH: No action required or permitted to be taken at any
meeting of stockholders may be taken by written consent without a meeting.

ELEVENTH: Special meetings of the stockholders may be called
by resolution of the Board of Directors and shall be called by the chairman of
the board, chief executive officer or secretary upon the written request
(stating the purpose or purposes of the meeting) of a majority of directors then
in office. Only business related to the purposes set forth in the notice of the
meeting may be transacted at a special meeting.

<PAGE> 8

IN WITNESS WHEREOF, this Restated Certificate of Incorporation
has been signed this ____ day of November, 1996.

PROSOURCE, INC.

By:________________________________________
Paul A. Garcia de Quevedo
Vice President, Treasurer and Secretary

<PAGE> 1
Exhibit 3.2

FORM OF

AMENDED AND RESTATED

BY-LAWS

PROSOURCE, INC.

1. MEETINGS OF STOCKHOLDERS.

1.1 Annual Meeting. The annual meeting of stockholders shall
be held on or prior to the first Thursday in May of each year, or as soon
thereafter as practicable, and shall be held at a place and time determined by
the board of directors (the "Board").

1.2 Special Meetings. Special meetings of the stockholders may
be called by resolution of the Board and shall be called by the chairman of the
board, chief executive officer or secretary upon the written request (stating
the purpose or purposes of the meeting) of a majority of the directors then in
office. Only business related to the purposes set forth in the notice of the
meeting may be transacted at a special meeting.

1.3 Place and Time of Meetings. Meetings of the stockholders
may be held in or outside Delaware at the place and time specified by the Board
or the directors or stockholders requesting the meeting.

1.4 Notice of Meetings; Waiver of Notice. Written notice of
each meeting of stockholders shall be given to each stockholder entitled to vote
at the meeting, except that (a) it shall not be necessary to give notice to any
stockholder who submits a signed waiver of notice before or after the meeting,
and (b) no notice of an adjourned meeting need be given except when required
under Section 1.5 of these by-laws or by law. Each notice of a meeting shall be
given, personally or by mail, not less than 10 nor more than 60 days before the
meeting and shall state the time and place of the meeting, and unless it is the
annual meeting, shall state at whose direction or request the meeting is called
and the purposes for which it is called. If mailed, notice shall be considered
given when mailed to a stockholder at his address on the corporation's records.
The attendance of any stockholder at a meeting, without protesting at the
beginning of the meeting that the meeting is not lawfully called or convened,
shall constitute a waiver of notice by him.

1.5 Quorum. At any meeting of stockholders, the presence in
person or by proxy of the holders of a majority of the outstanding shares
entitled to vote shall constitute a quorum for the transaction of any business
except as otherwise provided by law or by the certificate of incorporation, as
amended from time to time (the "Certificate of Incorporation") of the
corporation. When a specified item of business requires a vote by a class or
series (if the
<PAGE> 2
corporation shall then have outstanding shares of more than one class or series)
voting as a class, the holders of a majority of the outstanding shares of such
class or series shall constitute a quorum (as to such class or series) for the
transaction of such item of business. In the absence of a quorum a majority in
voting interest of those present or, if no stockholders are present, any officer
entitled to preside at or to act as secretary of the meeting, may adjourn the
meeting until a quorum is present. At any adjourned meeting at which a quorum is
present any action may be taken which might have been taken at the meeting as
originally called. No notice of an adjourned meeting need be given if the time
and place are announced at the meeting at which the adjournment is taken except
that, if adjournment is for more than thirty days or if, after the adjournment,
a new record date is fixed for the meeting, notice of the adjourned meeting
shall be given pursuant to Section 1.4.

1.6 Voting; Proxies. Except as otherwise provided by law or by
the Certificate of Incorporation and subject to Section 5.3 hereof, every
stockholder shall at every meeting of the stockholders be entitled to one (1)
vote in person or by proxy for each share of the corporation's Class A Common
Stock, par value $0.01 per share, held by such stockholder. Except as otherwise
provided by the law or by the Certificate of Incorporation and subject to
Section 5.3, every stockholder shall at every meeting of the stockholders be
entitled to ten (10) votes in person or by proxy for each share of the
corporation's Class B Common Stock, par value $0.01 per share, held by such
stockholder. Corporate action to be taken by stockholder vote, other than the
election of directors, shall be authorized by a majority of the votes cast at a
meeting of stockholders, except as otherwise provided by law or by Section 1.8
of these by-laws. Directors shall be elected in the manner provided in Section
2.1 of these by-laws. Voting need not be by ballot unless requested by a
stockholder at the meeting or ordered by the chairman of the meeting; however,
all elections of directors shall be by written ballot, unless otherwise provided
in the Certificate of Incorporation. Each stockholder entitled to vote at any
meeting of stockholders or to express consent to or dissent from corporate
action in writing without a meeting may authorize another person to act for him
by proxy. Every proxy must be signed by the stockholder or his attorney-in-fact.
No proxy shall be valid after three years from its date unless it provides
otherwise.

1.7 List of Stockholders. Not less than 10 days prior to the
date of any meeting of stockholders, the secretary of the corporation shall
prepare a complete list of stockholders entitled to vote at the meeting,
arranged in alphabetical order and showing the address of each stockholder and
the number of shares registered in his name. For a period of not less than 10
days prior to the meeting, the list shall be available during ordinary business
hours for inspection by any stockholder for any purpose germane to the meeting.
During this period, the list shall be kept either (a) at a place within the city
where the meeting is to be held, if that place shall have been specified in the
notice of the meeting, or (b) if not so specified, at the place where the
meeting is to be held. The list shall also be available for inspection by
stockholders at the time and place of the meeting.

2
<PAGE> 3
1.8 Action by Consent Without a Meeting. No action required or
permitted to be taken at any meeting of stockholders may be taken by written
consent without a meeting.

2. BOARD OF DIRECTORS.

2.1 Number, Qualification, Election and Term of Directors. The
business of the corporation shall be managed by the Board, which shall consist
of four directors, or such other number of directors as may be fixed from time
to time by resolution of the Board or by the stockholders; provided that no
decrease may shorten the term of any incumbent director. Directors shall be
elected at each annual meeting of stockholders by a plurality of the votes cast
and shall hold office until the next annual meeting of stockholders and until
the election and qualification of their respective successors, subject to the
provisions of Section 2.9.

2.2 Quorum and Manner of Acting. A majority of the Board shall
constitute a quorum for the transaction of business at any meeting, except as
provided in Section 2.10 of these by-laws. Action of the Board shall be
authorized by the vote of a majority of the directors present at the time of the
vote if there is a quorum, unless otherwise provided by law or these by-laws. In
the absence of a quorum a majority of the directors present may adjourn any
meeting from time to time until a quorum is present.

2.3 Place of Meetings. Meetings of the Board may be held in or
outside Delaware.

2.4 Annual and Regular Meetings. Annual meetings of the Board,
for the election of officers and consideration of other matters, shall be held
either (a) without notice immediately after the annual meeting of stockholders
and at the same place or (b) as soon as practicable after the annual meeting of
stockholders, on notice as provided in Section 2.6 of these by-laws. Regular
meetings of the Board may be held without notice at such times and places as the
Board determines. If the day fixed for a regular meeting is a legal holiday, the
meeting shall be held on the next business day.

2.5 Special Meetings. Special meetings of the Board may be
called by the chairman of the board, the president or by a majority of the
directors. Only business related to the purposes set forth in the notice of
meeting may be transacted at a special meeting.

2.6 Notice of Meetings; Waiver of Notice. Notice of the time
and place of each special meeting of the Board, and of each annual meeting not
held immediately after the annual meeting of stockholders and at the same place,
shall be given to each director by mailing it to him at his residence or usual
place of business at least three days before the meeting, or by delivering or
telephoning or telecopying it to him at least two days before the meeting.
Notice of a special meeting shall also state the purpose or purposes for which
the meeting is called. Notice need not be given to any director who submits a
signed waiver of notice before or after the meeting or who attends the meeting
without protesting at the beginning of the meeting the trans-

3
<PAGE> 4
action of any business because the meeting was not lawfully called or convened.
Notice of any adjourned meeting need not be given, other than by announcement at
the meeting at which the adjournment is taken.

2.7 Board or Committee Action Without a Meeting. Any action
required or permitted to be taken by the Board or by any committee of the Board
may be taken without a meeting if all of the members of the Board or of the
committee consent in writing to the adoption of a resolution authorizing the
action. The resolution and the written consents by the members of the Board or
the committee shall be filed with the minutes of the proceeding of the Board or
of the committee.

2.8 Participation in Board or Committee Meetings by Conference
Telephone. Any or all members of the Board or of any committee of the Board may
participate in a meeting of the Board or of the committee by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at the meeting.

2.9 Resignation and Removal of Directors. Any director may
resign at any time by delivering his resignation in writing to the president or
secretary of the corporation, to take effect at the time specified in the
resignation; the acceptance of a resignation, unless required by its terms,
shall not be necessary to make it effective. Any or all of the directors may be
removed at any time, either with or without cause, by vote of the stockholders.

2.10 Vacancies. Any vacancy in the Board, including one
created by an increase in the number of directors, may be filled for the
unexpired term by a majority vote of the remaining directors, though less than a
quorum.

2.11 Compensation. Directors shall receive such compensation
as the Board determines, together with reimbursement of their reasonable
expenses in connection with the performance of their duties. A director may also
be paid for serving the corporation, its affiliates or subsidiaries in other
capacities.

3. COMMITTEES.

3.1 Executive Committee. The Board, by resolution adopted by a
majority of the Board, may designate an Executive Committee of one or more
directors which shall have all the powers and authority of the Board, except as
otherwise provided in the resolution, Section 141(c) of the Delaware General
Corporation Law, or any other applicable law. The members of the Executive
Committee shall serve at the pleasure of the Board. All action of the Executive
Committee shall be reported to the Board at its next meeting.

4
<PAGE> 5
3.2 Other Committees. The Board, by resolution adopted by a
majority of the Board, may designate other committees of directors of one or
more directors, which shall serve at the Board's pleasure and have such powers
and duties as the Board determines.

3.3 Rules Applicable to Committees. The Board may designate
one or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. In the absence or
disqualification of any member of a committee, the member or members present at
a meeting of the committee and not disqualified, whether or not a quorum, may
unanimously appoint another director to act at the meeting in place of the
absent or disqualified member. All action of a committee shall be reported to
the Board at its next meeting. Each committee shall adopt rules of procedure and
shall meet as provided by those rules or by resolutions of the Board.

4. OFFICERS.

4.1 Number; Security. The executive officers of the
corporation shall be the chairman of the board, the president and a secretary.
The Board may also elect one or more vice chairmen, vice presidents, a treasurer
and such other officers or assistant officers as the Board may from time to time
deem advisable. Any two or more offices may be held by the same person. Unless
otherwise required by law, the Board shall not be required to fill a vacancy in
an executive office. The Board may require any officer, agent or employee to
give security for the faithful performance of his duties.

4.2 Election; Term of Office. The executive officers of the
corporation shall be elected annually by the Board, and each such officer shall
hold office until the next annual meeting of the Board and until the election of
his successor, subject to the provisions of Section 4.4.

4.3 Subordinate Officers. The Board may appoint subordinate
officers (including assistant secretaries and assistant treasurers), agents or
employees, each of whom shall hold office for such period and have such powers
and duties as the Board determines. The Board may delegate to any executive
officer or to any committee the power to appoint and define the powers and
duties of any subordinate officers, agents or employees.

4.4 Resignation and Removal of Officers. Any officer may
resign at any time by delivering his resignation in writing to the president or
secretary of the corporation, to take effect at the time specified in the
resignation; the acceptance of a resignation, unless required by its terms,
shall not be necessary to make it effective. Any officer appointed by the Board
or appointed by an executive officer or by a committee may be removed by the
Board either with or without cause, and in the case of an officer appointed by
an executive officer or by a committee, by the officer or committee who
appointed him or by the president.

5
<PAGE> 6
4.5 Vacancies. A vacancy in any office may be filled for the
unexpired term in the manner prescribed in Sections 4.2 and 4.3 of these by-laws
for election or appointment to the office.

4.6 Chairman of the Board. The chairman of the board shall
preside at all meetings of the Board and of the stockholders and shall have such
powers and duties as the Board assigns to him.

4.7 The President. The president shall be the chief executive
officer and the chief operating officer of the corporation. Subject to the
control of the Board, he shall have general supervision over the business of the
corporation and shall have such other powers and duties as presidents of
corporations usually have or as the Board assigns to him.

4.8 Vice Presidents. The vice presidents, if any, shall have
such powers and duties as the Board or the president assigns to him.

4.9 The Treasurer. The treasurer, if any, shall be in charge
of the corporation's books and accounts. Subject to the control of the Board, he
shall have such other powers and duties as the Board or the president assigns to
him.

4.10 The Secretary. The secretary shall be the secretary of,
and keep the minutes of, all meetings of the Board and of the stockholders,
shall be responsible for giving notice of all meetings of stockholders and of
the Board, and shall keep the seal and, when authorized by the Board, apply it
to any instrument requiring it. Subject to the control of the Board, he shall
have such powers and duties as the Board or the president assigns to him. In the
absence of the secretary from any meeting, the minutes shall be kept by the
person appointed for that purpose by the presiding officer.

4.11 Salaries. The Board may fix the officers' salaries, if
any, or it may authorize the president to fix the salary of any other officer.

5. SHARES.

5.1 Certificates. The corporation's shares shall be
represented by certificates in the form approved by the Board. Each certificate
shall be signed by the chairman of the board, the president or a vice president
and by the secretary or an assistant secretary, or the treasurer or an assistant
treasurer, and shall be sealed with the corporation's seal or a facsimile of the
seal. Any or all of the signatures on the certificate may be a facsimile.

5.2 Transfers. Shares shall be transferable only on the
corporation's books, upon surrender of the certificate for the shares, properly
endorsed. The Board may require satisfactory surety before issuing a new
certificate to replace a certificate claimed to have been lost or destroyed.

6
<PAGE> 7
5.3 Determination of Stockholders of Record. The Board may
fix, in advance, a date as the record date for the determination of stockholders
entitled to notice of or to vote at any meeting of the stockholders, or to
express consent to or dissent from any proposal without a meeting, or to receive
payment of any dividend or the allotment of any rights, or for the purpose of
any other action. The record date may not be more than 60 or less than 10 days
before the date of the meeting or more than 60 days before any other action.

6. MISCELLANEOUS.

6.1 Seal. The Board shall adopt a corporate seal, which shall
be in the form of a circle and shall bear the corporation's name and the year
and state in which it was incorporated.

6.2 Fiscal Year. The Board may determine the corporation's
fiscal year from time to time. Until changed by the Board, the corporation's
fiscal year shall be the 52- or 53- week period ending on the last Saturday of
each calendar year.

6.3 Voting of Shares in Other Corporations. Shares in other
corporations which are held by the corporation may be represented and voted by
the chairman of the board, the president or a vice president of this corporation
or by proxy or proxies appointed by one of them. The Board may, however, appoint
some other person to vote the shares.

6.4 Amendments. By-laws may be amended, repealed or adopted by
the stockholders or by a majority of the Board, but any by-law adopted by the
Board may be amended or repealed by the stockholders.

<PAGE> 1
Exhibit 5.1

[LETTERHEAD OF KAYE, SCHOLER, FIERMAN, HAYS & HANDLER, LLP]

(212) 836-8000

November 6, 1996

ProSource, Inc.
550 Biltmore Way
Coral Gables, Florida 33134

Gentlemen:

We have acted as counsel to ProSource, Inc. (the "Company"),
in connection with its registration statement on Form S-1 (the "Registration
Statement") filed pursuant to the Securities Act of 1933, as amended (File no.
333-11499), relating to the proposed offering of up to 3,400,000 shares of its
Class A Common Stock, par value $.01 per share (the "Shares") to be offered to
the public (including 510,000 shares which may be so offered pursuant to an
over-allotment option granted to the underwriters).

In that connection, we have reviewed the certificate of
incorporation, its by-laws, resolutions adopted by its Board of Directors, the
Registration Statement, and such other documents and proceedings as we have
deemed appropriate.

On the basis of such review, and having regard to legal
considerations that we deem relevant, we are of the opinion that, when issued in
accordance with the terms set forth in the Registration Statement, the Shares to
be offered by the Company have been duly authorized and will be duly
and validly issued, fully paid and nonassessable.

We hereby consent to the use of our name under the caption
"Legal Matters" in the Prospectus included in the Registration Statement and to
the filing of this opinion as an exhibit to the Registration Statement. In
giving this opinion, we do not hereby admit that we are within the category of
persons whose consent is required under Section 7 of the Act or the Rules and
Regulations of the Commission.

Very truly yours,

/s/ Kaye, Scholer, Fierman,
Hays & Handler, LLP

<PAGE> 1
Exhibit 10.1

FORM OF AMENDED AND RESTATED
MANAGEMENT SHAREHOLDERS AGREEMENT

THIS AMENDED AND RESTATED MANAGEMENT SHAREHOLDERS
AGREEMENT dated as of November __, 1996 amends and restates in its entirety the
Amended and Restated Management Shareholders Agreement dated May 31, 1995, as
amended by Amendment No. 1 thereto dated as of December 8, 1995 (as so amended,
the "Original Agreement"), among ProSource, Inc., formerly known as Onex
Distribution, Inc., a Delaware corporation (the "Corporation"), Onex DHC LLC, a
Wyoming limited liability company ("Onex"), as successor-in-interest (with
respect to the shares of the Common Stock of the Corporation) to Onex U.S.
Investments, Inc., and the individuals named from time to time on Schedule I to
this Agreement (each a "Management Holder" and collectively the "Management
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 Management Holders is an employee of the
Corporation or any direct or indirect subsidiary of the Corporation (each a
"Subsidiary", collectively, the "Subsidiaries") 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> 2

1. RESTRICTIONS ON TRANSFER OF SHARES

1.1 REPRESENTATION. Each of the Management Holders represents and
agrees that the Management 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 Management Holder may transfer Management 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 Management 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 Management Holders may
finance up to 66 2/3% of the purchase price of such 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 Management Shares
pursuant to this Agreement, the Management Holder shall discharge any
indebtedness permitted by Section 1.3 and deliver to the purchaser the share
certificates representing such Management Shares free and clear of any pledge,
lien, security interest or other encumbrance of any kind. If the Management
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 Management Holder fails to deliver certificates
representing Management 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 cancelled and of no
effect (no limitation of any other remedy available to the purchaser being
intended).

<PAGE> 3

2. SALE OR TRANSFER OF MANAGEMENT SHARES

2.1 TRANSFER TO MANAGEMENT HOLDER'S FAMILY. A Management Holder may
transfer Management 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 Management
Holder.

2.2 SALE TO MANAGEMENT HOLDERS OR OTHER MANAGEMENT EMPLOYEES. A
Management Holder may transfer Management Shares to either another Management
Holder or to a management employee of the Corporation or a Subsidiary who is
acceptable to the Board of Directors of the Corporation if (a) due to hardship
or unusual circumstances, such Management Holder determines that it is in his
best interest to effect a transfer of his Management Shares and (b) the
Corporation's Board of Directors approves the same. A Management Holder who
desires to transfer Management Shares in accordance with this Section 2.2 shall
give the Corporation notice thereof ("Notice"), attaching thereto a copy of a
bona fide written offer to purchase such Shares for cash ("Offer"). The
Corporation or a subsidiary designated by it shall have the option, exercisable
by notice to the Management Holder given within 30 days after the date of
receipt of the Notice by the Corporation, to purchase all or any portion of the
Management Shares proposed to be sold pursuant to the Offer for the same price
per share and on the same terms as the Offer. If the Corporation or its designee
does not exercise such option within such 30-day period and the Board of
Directors of the Corporation consents to the proposed sale, the Management
Holder shall have the right at any time within 60 days after the expiration of
the 30-day option period provided for in this Section, to sell the Management
Shares as to which the option was not exercised to the proposed offeree in
accordance with the terms of the Offer; any transferee shall, by its purchase of
such Shares and acceptance of the certificates therefor be deemed to agree to,
and shall agree in writing to be bound by, the provisions of this Agreement. If
the Management Shares as to which the option was not exercised remain unsold at
the end of such 60-day period, such Management Shares may not thereafter be
transferred unless the Management Holder complies with this Section 2.2 again.

2.3 SALE: CORPORATION IS A PUBLIC COMPANY. Notwithstanding Section 2.2,
if the Corporation is a Public Company, a Management Holder may sell during any
90-day period up to the greater of (a) five Shares (subject to adjustment to
reflect the effect of stock splits, combinations and the like effected after the
date of the Original Agreement) and (b) 5% of the sum of (i) the Management
Holder's Shares then held by him and (ii) the Management Holder's Shares
previously sold by him pursuant to this Section 2.3, 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 Management Shares. Any
such sale or sales shall be through the facilities of any securities exchange on
which the Management Shares may then be listed and shall be made in a manner
that complies with applicable securities law and regulations. Such sales may not
be made, however, unless the Management Holder gives the Corporation written
notice of its intention to sell not less than five and not more than ten
business days before effecting any sale ("Market Sale Notice") and offers to
sell to it all or any part of that number of Management Shares (no partial
purchase that

<PAGE> 4

would result in the remaining Shares offered to be sold constituting an odd lot
shall be permitted) that it proposes to sell, at a price equal to the Market
Price Per Share (as defined in Section 11.4). The Corporation (or, at the
Corporation's option, a subsidiary of the Corporation) may accept such offer by
giving notice to the Management Holder within seven days after receipt of such
Market Sale Notice by the Corporation, which notice shall designate the number
of Management Shares to be purchased. The Management Holder shall thereupon be
bound to sell such Management Shares to the Corporation or a subsidiary of the
Corporation, as the case may be, and the Corporation or a subsidiary of the
Corporation, as the case may be, shall be obligated to buy such Management
Shares. Notwithstanding the foregoing, no Management Holder shall sell more than
50% of the sum of (x) the Management Holder's Shares then held by him and (y)
the Management Holder's Shares previously sold by him pursuant to this Section
2.3 without the prior approval of the Board of Directors of the Corporation.

2.4 SALE UPON TERMINATION OF EMPLOYMENT; CORPORATION IS NOT A PUBLIC
COMPANY. If a Management Holder ceases to be employed in a full-time capacity by
the Corporation or a Subsidiary at any time when the Corporation is not a Public
Company, the Management Shares owned by such Management Holder shall be
transferred as follows:

(a) Upon termination without cause or as a result of death,
retirement, or Disability, the Corporation shall purchase, and the Management
Holder shall sell, all of the Management Shares owned by such Management Holder
for a purchase price equal to Book Value Per Share multiplied by the number of
Management Shares owned by such Management Holder (the "Initial Section 2.4(a)
Payment"). However, if the Management Holder's employment is terminated by the
Corporation or a Subsidiary (i) other than for cause and (ii) as a result of the
planned restructuring or consolidation of the Corporation and its subsidiaries
and the Corporation has achieved its plan objectives through the date of
termination, the Initial Section 2.4(a) Payment shall equal the greater of
$1,000 per share or the then current Book Value Per Share. If the Corporation
effects any offering of securities registered under the 1933 Act that involves
an offering of shares of the same class as Management Shares within four months
after the termination of the Management Holder's employment, 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 2.4(a)
Payment"). Subject to the limitations set forth in Section 2.4(c), the Initial
Section 2.4(a) Payments shall be paid in cash at the closing of the purchase and
sale and Additional Section 2.4(a) Payments shall be paid in cash within 60 days
of the closing of the registered offering.

(b) Upon termination for any reason not described in Section
2.4(a) (including without limitation, termination for cause or voluntary
termination by the Management Holder), the Corporation shall purchase, and the
Management Holder shall sell, all of the Management Shares owned by such
Management Holder for a purchase price equal to 90% of Book Value Per Share
multiplied by the number of Management Shares owned by such Management Holder.
Subject to

<PAGE> 5

the limitations set forth in Section 2.4(c), 50% of the purchase price for
Management Shares purchased pursuant to this subsection (b) shall be paid in
cash (or, if greater, the amount required to pay both the outstanding balance of
any financing pursuant to Section 1.3 and the amount of any federal income tax
owed by the Management Holder for the year in which the sale occurs in respect
of the portion of the gain recognized by such Management Holder with respect to
the sale during such year) at the closing of the purchase and sale (the "Initial
Section 2.4(b) Payment") and the balance of the purchase price shall be paid in
approximately equal quarterly installments over the two-year period following
the sale, the last payment to be paid on the second anniversary of the sale (the
"Additional Section 2.4(b) Payment"). Interest on any unpaid portion of the
Additional Section 2.4(b) Payment shall be paid quarterly from the closing at
Prime Rate. The payment of Initial Section 2.4(b) Payments and the Additional
Section 2.4(b) Payments is subject to the limitations set forth in Section
2.4(c).

(c) The amount of the purchase price payable by the
Corporation to any Management Holder pursuant to Section 2.4(a) and (b) 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 Management Shareholder to
purchase the Management Shares. If, as a result of restrictions in its loan
agreement with NationsBank of Georgia, N.A., ProSource Services Corporation
("PSC"), formerly known as BDKA Corporation, 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 2.4(a) and 2.4(b) and to cash-out Options pursuant to Section 6.4 of
the Option Plans, the Corporation shall be entitled to pay any unpaid portion of
the payments required to be made under Sections 2.4(a) and 2.4(b) and under
Section 6.4 of the Option Plans, 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. The Corporation shall use available funds received from PSC first to
pay all amounts due on account of any Initial Section 2.4(a) Payments and
Initial Section 2.4(b) Payments, then to pay all amounts due on account of
Additional Section 2.4(a) Payments and Additional Section 2.4(b) Payments, and
then to pay all amounts due on account of the cash-out of Options pursuant to
Section 6.4 of the Option Plans.

2.5 SALE UPON TERMINATION OF EMPLOYMENT: CORPORATION IS A PUBLIC
COMPANY.

(a) If a Management Holder ceases to be employed in a
full-time capacity by the Corporation or a Subsidiary when the Corporation is a
Public Company, Onex or its designee shall have the option to purchase all or
any portion of the Management Shares owned by such Management Holder. The
purchase price for such Management Shares shall be equal to the number of such
Shares to be purchased multiplied by Market Price Per Share and shall be paid in
cash at the closing of the sale.

(b) If Onex or its designee does not exercise such option
within 30 days from the date of the termination of the Management Holder's
employment, the Management Holder shall be entitled to sell his Management
Shares through the facilities of any securities exchange on which the

<PAGE> 6

Shares may then be listed in a manner that complies with applicable securities
laws and regulations; provided that the Management Holder shall not sell during
the year following the termination of the Management Holder's employment in the
aggregate more than 50% of the Management Shares owned by such Management Holder
and his Family Group Members unless such termination arises from (i) his death
or Disability, in which case the foregoing restriction shall not apply or (ii)
his retirement, in which case the Management Holder may sell during the year
following the termination of the Management Holder's employment in the aggregate
up to 66-2/3% of the Management Shares owned by such Management Holder and his
Family Group Members.

(c) The parties acknowledge that, pursuant to paragraph 4 of
Article Fourth, Section 2B of the Company's Restated Certificate of
Incorporation, Class B Common Stock automatically converts in accordance with
such paragraph of the Restated Certificate of Incorporation into Class A Common
Stock upon termination of the Management Holder's employment, unless transferred
to Onex (or an affiliate thereof) or another Management Holder.

2.6 SALE UPON DEFAULT ON INDEBTEDNESS. If a Management Holder defaults
on any indebtedness referred to in Section 1.3, the Corporation shall have the
option, exercisable upon notice to the Management Holder at any time following a
default, to purchase all or any portion of the Management 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.

2.7 CLOSING OF SALE. The closing of any purchase and sale of Management
Shares pursuant to the exercise of a right under this Section 2 (other than
transfers or sales made pursuant to Sections 2.1 or 2.2 or through the
facilities of any securities exchange pursuant to Sections 2.3 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 Management 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 Management Holder the consideration payable upon
closing.

3. OPTIONS TO PURCHASE SHARES

3.1 Shares received by a Management Holder upon the exercise or
conversion of any options, warrants, rights to purchase shares or securities
convertible into Shares, including the Options, shall be subject to the terms
and conditions of this Agreement and may not be transferred except as permitted
by this Agreement.

<PAGE> 7

4. 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 Management Holder or other management employee or directors of the
Corporation or a Subsidiary, (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) pursuant to an offering of securities registered
under the 1933 Act (a "Tag Along Disposition"), each of the Management Holders
shall have the right to sell to the proposed purchaser a number of his Manage-
ment Shares equal to the total number of his Management 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 Ratio." A sale of Management 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 Management 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 Management Holder has the option to
sell to the proposed purchaser a number of Management Shares equal to the total
number of Management 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 Management Holders will
be conditioned upon a sale of Shares by the Onex Group Member pursuant to this
Section.

(c) A Management Holder may exercise its sale option pursuant to
Section 4.1 by delivering to the Onex Group Member, within ten days after such
Management Holder receives the Tag Along Notice, written notice of his offer to
sell Management Shares pursuant to this Section and indicating the number of
Management Shares offered for sale. If a Management 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 Management 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. If any Person does not elect to sell the
full number of Shares that he or it is entitled to sell, the balance shall be
available, in accordance with such procedures as the Onex Group Member may
designate, to the shareholder that has elected to sell the maximum number of
Shares initially available to it or him for

<PAGE> 8

such purpose. 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 Management Shares being sold by a Management Holder free of this
Agreement. If, however, any Onex Group Member is required to transfer any Onex
Shares subject to this Agreement, then the Management Holder shall also transfer
his Management 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 Management Holder at least 20 days prior to the Drag Along Disposition
(the "Drag Along Notice") require the Management Holders to sell a number of
Management Shares equal to the total number of Management 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 Management 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 pursuant to this Section. Any transferee
of Shares owned by any Onex Group Member or of the Management 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 Management Shares are to be
sold by a Management Holder, Onex and the selling Onex Group Member may require
the Management Holder to enter into agreements with the purchaser representing
and warranting that, except as specifically disclosed to the purchaser in
writing, such Management 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 Management Holder under such
representation and warranty shall be limited to the amount which he receives
from the sale of his Management Shares in connection with such transfer and
shall be pro rata in accordance with the number of Shares sold by the Management
Holder in relation to the Shares being sold by all holders.

<PAGE> 9

Management 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 Management Shares of all classes held by the Management 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 Management Shares outstanding on such date (including the Management
Shares). Any securities acquired by a Management 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.

5. PIGGY-BACK REGISTRATION RIGHTS

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 Management
Shares, it shall give written notice of its intention to do so (the "Public
Offering Notice") to each Management Holder.

5.2 Upon the written request of a Management Holder (the "Management
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
Management Shares stated in the Management Holder's Request for disposition in
accordance with the intended method of disposition as stated in the Management
Holder's Request; provided, that:

(a) if, the number of Management Shares stated in the
Management Holder's request represents a greater proportion of the total number
of Management Shares owned by such Management 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 Management Shares;

(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 Management 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 Management Shares in connection with

<PAGE> 10

such registration or (ii) in the case of a determination to delay registration,
shall be entitled to delay the registration of the Management 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 Management 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 and the Management Holders 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 Management Holder above such maximum number (the Shares
so included to be apportioned pro rata among the members of the Onex Group and
each Management Holder so that each member of the Onex Group and each Management
Holder shall be entitled to have included in the offering a number of Shares
that is proportionate to his or its respective ownership of Shares; if any
member of the Onex Group or any Management Holder is entitled to have included
in the offering more Shares than he wishes to sell, each remaining Management
Holder and members of the Onex Group shall be entitled to make up the difference
pro rata from its or his respective ownership of Shares); and

(d) the Corporation shall not be obligated to effect any
registration of Management 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 Management 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 Management Shares
and the fees of any counsel or other advisers retained by Management Holders.

6. LEGEND

All certificates representing Management Shares held by any Management
Holder (and held by a transferee of Management 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 2.3 or 2.5 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

<PAGE> 11

voting of such shares is subject to conditions specified in
the Amended and Restated Management Shareholders Agreement,
dated November __, 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."

7. INTENTIONALLY OMITTED

8. 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 Management
Holders have the right to receive the same securities in proportion to their
respective holdings of Shares.

9. MANAGEMENT REPRESENTATIVES

Each of the Management Holders hereby irrevocably constitutes and
appoints the Management Representatives (as defined in this Section 9) as his
representatives to take all actions on his behalf in connection with this
Agreement, in their sole and absolute discretion, including but not limited to,
executing any consents or waivers in connection with, or any amendments to, this
Agreement but not any decision to sell his Management Shares or any decision to
buy any securities of the Corporation pursuant to Section 4.4. The term
"Management Representative" shall mean, any two of the Chairman of the Board of
Directors of ProSource Services Corporation, a subsidiary of the Corporation
("PSC"), the President of PSC, and the Vice Chairman of the Board of Directors
of PSC.

10. INTENTIONALLY OMITTED

11. CERTAIN DEFINITIONS

11.1 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 required the purchase and sale pursuant to
Section 2.4 determined in accordance with generally accepted accounting
principles in effect in the United States on the date of this Agreement 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

<PAGE> 12

excluded and (ii) it shall be assumed that all Options 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.

11.2 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.

11.3 The term "DISABILITY" shall mean the inability of a Management
Holder to perform his duties of employment for the Corporation or any of its
Subsidiaries or affiliates, including PSC, for an aggregate of 180 days or more
in any 365-day period, because of physical or mental disability.

11.4 The term "MANAGEMENT SHARES" shall mean the Shares owned at any
time by any Management Holder.

11.5 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 Market Sale Notice (in the
case of a sale pursuant to Section 2.3) or the closing of the sale (in the case
of a sale pursuant to Section 2.5).

11.6 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 only upon the happening of a contingency that has
not occurred) or to otherwise direct the management of such Person.

11.7 The term "ONEX SHARES" shall mean the Shares owned at any time by
the Onex Group.

11.8 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

<PAGE> 13

amended, restated or modified from time to time, except that the term "Option
Plan" as used in Section 2.4(c) shall exclude the Corporation's 1996 Stock
Option Plan.

11.9 The term "OPTION" shall mean Option as defined in the Option
Plans.

11.10 The term "PERSON" shall mean an individual, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, and a
government or any department or agency thereof.

11.11 The term "PRIME RATE" shall mean the prime rate announced from
time to time by NationsBank of Georgia, N.A.

11.12 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.

11.13 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.

12. 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 Person when that Person no
longer owns any Management Shares or Onex Shares, as the case may be.

13. EFFECTIVE DATE

This Agreement shall become effective upon the consummation of the
Offering.

14. MISCELLANEOUS

14.1 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

<PAGE> 14

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):

(a) 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

(b) 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) 362-7711
Telecopy: (416) 362-5765

(c) if to any Management Holder, to him at his address as it appears on
Schedule I attached hereto or as shown on the records of the Corporation.

14.2 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
Management Holders.

<PAGE> 15

14.3 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.

14.4 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
Management Representatives or by Onex, the Corporation and the holders of at
least 75% of the Management Shares.

14.5 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.

14.6 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.

14.7 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.

14.8 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.

<PAGE> 16

14.9 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:__________________________________
Name:
Title:

PROSOURCE, INC.

By:__________________________________
Name:
Title:

<PAGE> 17

MANAGEMENT REPRESENTATIVES
On behalf of the Management Holders listed
on Schedule I hereto pursuant to Section 9
of the Original Agreement

By:__________________________________
Name:
Title:

<PAGE> 18

Schedule I

List of Management Holders

[To Be Attached]

<PAGE> 1
Exhibit 10.2

FORM OF AMENDED AND RESTATED
DIRECTOR SHAREHOLDERS AGREEMENT

THIS DIRECTOR SHAREHOLDERS AGREEMENT dated as of November __,
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

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:

1
<PAGE> 2
1. 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).

2
<PAGE> 3
2. 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 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.

3
<PAGE> 4
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.

3. 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.

4. 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 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.

4
<PAGE> 5
(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 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.

5
<PAGE> 6
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.

5. PIGGY-BACK REGISTRATION RIGHTS

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

6
<PAGE> 7
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

(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

7
<PAGE> 8
expenses payable to underwriters in respect of Director Shares and the fees of
any counsel or other advisers retained by Director Holders.

6. 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 __, 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."

7. INTENTIONALLY OMITTED

8. 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.

9. INTENTIONALLY OMITTED

10. 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

8
<PAGE> 9
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 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.

9
<PAGE> 10
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.

11. 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.

12. EFFECTIVE DATE

This Agreement shall become effective upon the consummation of the
Offering.

13. MISCELLANEOUS

13.1 NOTICES

10
<PAGE> 11
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.

13.2 ASSIGNMENT

11
<PAGE> 12
13.3 NO WAIVER

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

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.

12
<PAGE> 13
13.9 SEVERABILITY

ONEX DHC LLC

By:____________________________
Name:
Title:

PROSOURCE, INC.

By:____________________________
Name:
Title:

DIRECTOR HOLDERS

-------------------------------
Michael Carpenter

-------------------------------
C. Lee Johnson

-------------------------------
R. Geoffrey P. Styles

-------------------------------
Michael Treacy

13
<PAGE> 14
Schedule I

<TABLE>
<CAPTION>
List of Director Holders
------------------------

Name Addresses Shares
---- --------- ------

<S> <C> <C>
Michael Carpenter 134 Otter Rock Drive 18,200
Greenwich, CT 06830

C. Lee Johnson 7384 Brandshire Lane 4,500
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> 1
Exhibit 10.22

FORM OF AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement"),
dated as of __________ __, 1996, by and between ProSource Services Corporation
(the "Company"), and David R. Parker (the "Employee").

RECITALS

WHEREAS, the Company (f/k/a BKDA Corporation) and the Employee
are parties to an Employment Agreement, dated July 1, 1992 (the "Original
Agreement").

WHEREAS, the Employee and Onex Management U.S. Inc. ("Onex")
are parties to a letter agreement, dated July 21, 1992 (the "Onex Consulting
Agreement").

WHEREAS, the Company and the Employee desire to amend and
restate in its entirety the Original Agreement as hereinafter provided.

WHEREAS, Onex and the Employee desire to terminate the Onex
Consulting Agreement.

NOW, THEREFORE, the parties agree as follows:

1. EFFECTIVENESS AND EMPLOYMENT. The Company shall employ the
Employee and the Employee shall be employed by the Company as of the date of
this Agreement

(the "Commencement Date").

2. TERM. The term of this Agreement and the employment of the
Employee hereunder shall commence as of the Commencement Date, continue until
July 1, 1997, and automatically shall be extended for an unlimited number of
successive one-year periods unless terminated (a) by the Company or the Employee
effective as of July 1, 1997 or any subsequent anniversary thereof upon the
giving of written notice of such party's intention to terminate on or

<PAGE> 2

before January 1 of the year in which such employment is to terminate, or (b) as
provided in Section 5.

3. POSITIONS AND DUTIES; PLACE OF PERFORMANCE.

(a) POSITIONS AND DUTIES. The Employee shall be employed as
Chairman of the Board of the Company and shall have the duties, responsibilities
and authority as may from time to time be assigned to him by the Company's Board
of Directors (the "Board") that are consistent with and normally associated with
such position and, without additional compensation, shall serve as a member of
the Board and as chairman of the Board of Directors of ProSource Inc. (f/k/a
Onex Distribution, Inc.) ("ProSource") and shall hold such offices at ProSource
and its subsidiaries, as ProSource's board of directors determines. The Employee
shall devote substantially all of his business time, effort, and energies
exclusively to the business of the Company, ProSource and its other
subsidiaries, and shall not serve as an active principal or a director or
officer of any other company or entity without the prior written consent of the
Board, except that the Employee may serve, without such consent, as a director
or officer of any company on the board of which he is currently serving and of
any trade association, civic, educational or charitable organization unless the
Board determines that such service interferes with the performance of Employee's
duties hereunder.

(b) PLACE OF PERFORMANCE. The Employee shall be based in the
Miami, Florida metropolitan area, except for required travel on the Company's
business.

4. COMPENSATION AND BENEFITS.

(a) BASE SALARY. Effective as of the Commencement Date, the
Company shall pay the Employee a base salary at the rate of $425,000 per year
through

<PAGE> 3

December 31, 1996 and thereafter at the rate of $450,000 per year (the "Base
Salary"), payable in accordance with the Company's normal payroll practices for
senior executives. The Board shall review the Base Salary annually; the Employee
shall be entitled to such increases in his Base Salary as may be determined from
time to time by the Board or pursuant to its delegation. If the Base Salary is
increased, the new salary shall thereafter constitute the "Base Salary" for
purposes of this Agreement.

(b) BONUSES. In addition to Base Salary, the Employee may
receive a cash bonus. The bonus shall be determined in accordance with any
applicable executive management bonus or incentive compensation plan in effect
at the date of determination or, if no such plan is in effect, by the Board or
the appropriate committee thereof, in its sole discretion.

(c) OTHER BENEFIT PLANS AND FRINGE BENEFITS. The Employee
shall be eligible to (i) participate in ProSource's Amended and Restated
Management Option Plan (1995) and 1996 Stock Option Plan, (ii) participate in
all employee benefit plans maintained by the Company for its senior management
executives during the employment term, (iii) receive all fringe benefits for
which his status and level of employment qualify him in accordance with the
Company's usual plans, policies, and arrangements, and (iv) be reimbursed for up
to $6,000 for actual expenses incurred for, among other things, financial
consulting and tax planning and preparation and legal advice.

(d) VACATION. Employee shall be entitled to four weeks of paid
vacation annually. Employee shall determine, in his reasonable discretion, the
timing of such vacation.

<PAGE> 4

(e) AUTOMOBILE. During the term of his employment, the Company
shall pay to Employee on a monthly basis an amount equal to $1,500 to cover the
monthly cost of an automobile of his choice and related expenses, including
insurance on, maintenance of, and fuel for, the automobile.

(f) INITIATION FEES/CLUB DUES. The Employee shall receive
$7,000 each year for club memberships, including country clubs, luncheon clubs,
health clubs, and airline travel clubs.

5. TERMINATION.

(a) COMPENSATION AND BENEFITS. Except as otherwise provided in
this Section or Section 7, upon termination of the Employee's employment
hereunder, his right to compensation hereunder shall cease except that the
Employee shall be entitled to receive his Base Salary and benefits up to the
Date of Termination (as defined in Section 5(e)) or for the period required by
law, except that any bonus payable pursuant to Section 4(b) shall be prorated to
the Date of Termination.

(b) DEATH AND DISABILITY. The Employee's employment hereunder
shall terminate upon his death and may be terminated by the Company due to
Employee's Disability. For purposes of this Agreement, "Disability" shall mean
the determination by the Board that the Employee is physically or mentally
incapacitated and has been unable for a period of six consecutive months, or for
shorter periods aggregating six months in any period of 12 consecutive months,
to perform the duties for which he was responsible immediately before the onset
of his incapacity. To assist the Board in making such a determination, the
Employee shall, as reasonably requested by the Board, (i) make himself available
for medical examinations,

<PAGE> 5

without cost to Employee, by a physician chosen by the Board and approved by the
Employee, whose approval shall not unreasonably be withheld, and (ii) grant the
Board and any such physician access to all relevant medical information
concerning him, arrange to furnish copies of medical records to such physician,
and use his best efforts to cause his own physicians to be available to discuss
his health with such physician. The determination of the physician chosen in
accordance with the preceding sentence shall be final and binding on the Company
and the Employee.

(c) TERMINATION BY THE COMPANY FOR CAUSE. The Employee's
employment hereunder may be terminated by the Company for Cause. For purposes of
this Agreement, the term "Cause" shall mean (i) the Employee's conviction of a
crime involving actual dishonesty against the Company or any of its affiliates,
(ii) gross negligence or gross misconduct by the Employee against the Company or
another employee, or in carrying out his duties and responsibilities, or (iii) a
breach of the provisions of Section 6(a) or (b) hereof, that is harmful to the
Company or any of its affiliates. In any case described in this Section 5(c),
the Board shall give the Employee written notice, in accordance with Section
5(e), that the Company intends to terminate his employment for Cause (the
"Preliminary Cause Notice"). The Preliminary Cause Notice shall specify the
particular act or acts or failure to act that is or are the basis for the
decision to so terminate the Employee's employment for Cause. The Board shall
give the Employee an opportunity to meet with the Board to defend such act or
acts or failure to act within 30 calendar days of Employee's receipt of such
notice and to correct such act or failure to act within 30 business days
following such meeting. If the Employee fails to correct such act or failure to
act within the 30 business days following the meeting, the Employee's employment

<PAGE> 6
by the Company shall be terminated under this Section 5(c) for Cause as of the
Date of Termination.

(d) COMPENSATION UPON TERMINATION WITHOUT CAUSE OR FOR
DISABILITY.

(i) If the Company terminates the Employee's employment
hereunder without Cause or for disability in accordance with Section 5(b):

(A) In addition to the amounts paid to the Employee pursuant
to Section 5(a), in lieu of any further salary payments to the Employee for any
period subsequent to the Date of Termination, the Company shall pay to the
Employee, during the one-year period commencing on the Date of Termination, an
amount equal to (1) the Employee's annual Base Salary in effect as of the Date
of Termination plus (2) a cash bonus in an amount equal to the pro rata portion
of the actual incentive payment that Employee would have received under the
management incentive plan for the year in which the Date of Termination occurs
but for Employee's termination. Except as provided in Section 7, the amount
described in clause (1) of this Paragraph (A) shall be paid in substantially
equal monthly payments during the 12-month period following the Date of
Termination, except that the Company may determine, in its sole discretion, to
pay such amount (or any portion remaining during such period if periodic
payments have commenced) in a single lump sum in cash or, if so requested by the
Employee, in two lump sums. The amount described in clause (2) of this Paragraph
(A) shall be paid at the same time as payments are or would have been made under
the incentive plan in effect on the Date of Termination.

<PAGE> 7
(B) For the one-year period following the Date of Termination,
the Company shall continue to provide the Employee (and his eligible dependents,
if any) with (1) group health and life insurance benefits and long-term
disability insurance coverage (or the economic equivalent thereof) at the level
in effect on the Date of Termination, (2) the perquisite allowance referred to
in Section 4(c)(iv), and (3) the benefits referred to in Sections 4(e) and 4(f);
provided that if the Employee is employed by another employer within such
one-year period such benefits and insurance coverage shall cease except for
insurance coverage for conditions existing on the date of employment by an
employer other than the Company, and further provided that, at the expiration of
the extended period of insurance coverage provided under this clause (i)(B), the
Employee (and his eligible dependents, if any) shall be entitled to the full
period of coverage provided him under Section 4980B of the Internal Revenue Code
of 1986, as amended, unless other employment has been obtained.

(C) The Company shall reimburse Employee for actual costs
incurred in seeking reemployment, including costs of outplacement services up to
a maximum of $25,000.

(e) NOTICE OF TERMINATION; DATE OF TERMINATION. Any
termination of the Employee's employment, other than by reason of his death,
shall be communicated by the terminating party by a written notice of
termination (the "Notice of Termination"). The Notice of Termination shall (i)
indicate the specific termination provision in this Agreement upon which the
termination is based, (ii) set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated, and (iii) specify the Date of
Termination. For purposes of this Agreement, "Date of Termination" shall mean
(i) if the Employee's employment is terminated by his death, the date of

<PAGE> 8

his death, and (ii) in all other cases, the later of the date of actual receipt
of the Notice of Termination and the date specified in such notice. The Date of
Termination shall not occur prior to the completion of the cure period described
in Section 5(c) if termination is for Cause.

(f) NO MITIGATION; NO OFFSET. In the event of any termination
of the Employee's employment under this Section 5, the Employee shall be under
no obligation to seek other employment and there shall be no offset against any
amounts due the Employee under this Agreement on account of any remuneration
that the Employee may obtain from any subsequent employment. Any amounts due
under this Section 5 are in the nature of liquidated damages and not in the
nature of a penalty.

6. COVENANTS.

(a) CONFIDENTIALITY. The Employee acknowledges that he has
acquired and will acquire confidential information respecting the business of
the Company. Accordingly, the Employee agrees that he will not willfully
disclose, at any time (during the employment term or thereafter), any such
confidential information to any unauthorized third party without the consent of
the Company as authorized by the Board. For this purpose, information shall be
considered confidential only if such information is proprietary to the Company
and has not been made publicly available prior to its disclosure by the
Employee. There shall be no breach of this Section 6(a) if the disclosure does
not have an adverse effect on the Company's business or operations, or otherwise
harm or damage the Company.

(b) COMPETITIVE ACTIVITY. (i) If Employee's employment
hereunder is terminated, Employee shall not, without the written consent of the
Board, during the twelve-month period following the Date of Termination,
directly, individually or as an employee, agent,

<PAGE> 9

partner, shareholder, consultant or in any other capacity, participate in,
engage in or have a financial interest or management position or other interest
in any business operation or any enterprise that is in direct competition with
the Company. The ownership of an interest constituting not more than 1% of the
outstanding debt or equity in a corporation the shares of which are traded on a
recognized stock exchange or trade in the over-the-counter market, even though
that corporation may be a competitor of the Company or any of its subsidiaries,
shall not be deemed financial participation in a competitor.

(ii) The Employee shall not, without the written consent of
the Board, during the employment term and through the first anniversary of his
Date of Termination, directly or indirectly, either for his own benefit or for
the benefit of any other person, solicit to take away, or take away any
customers doing business with the Company on the Date of Termination or who were
being solicited to become customers as of the Date of Termination or recruit,
induce, or encourage any employee of the Company or any affiliate of the Company
to terminate such employee's employment with the Company or such affiliate,
except that nothing herein shall prohibit the Employee from giving a reference
or a recommendation to any third party with respect to any such employee.

(c) REMEDY FOR BREACH AND MODIFICATION. The Employee
acknowledges that the provisions of this Section 6 are reasonable and necessary
for the protection of the Company and that the Company will be irrevocably
damaged if such provisions are not specifically enforced. Accordingly, the
Employee agrees that, in addition to any other relief or remedies available to
the Company, the Company shall be entitled to seek and obtain an appropriate
injunction or other equitable remedy from a court with proper jurisdiction for
the

<PAGE> 10

purposes of restraining the Employee from any actual or threatened breach of
such provisions, and no bond or security will be required in connection
therewith. If any provision of this Section 6 is deemed invalid or
unenforceable, such provision shall be deemed modified and limited to the extent
necessary to make it valid and enforceable.

7. SECTION 280G PAYMENTS. If the aggregate present value of
the Employee's payments under this Agreement, and any plan, program, or
arrangement maintained by the Company constitutes an "excess parachute payment"
(within the meaning of Section 280G(b)(1) of the Internal Revenue Code of 1986,
as amended (the "Code")) and the excise tax on such payment would cause the net
parachute payments (after taking into account federal, state and local income
and excise taxes) to which the Employee otherwise would be entitled to be less
than what the Employee would have netted (after taking into account federal,
state and local taxes) had the present value of his total parachute payments
equaled $1.00 less than three times his "base amount" (within the meaning of
Code Section 280(G)(b)(3)(A)), the Employee's total "parachute payments" (within
the meaning of Code Section 280G(b)(2)(A)) shall be reduced (by the minimum
possible amount) so that their aggregate present value equals $1.00 less than
three times such base amount. For purposes of this calculation, it shall be
assumed that the Employee's tax rate will be the maximum marginal federal, state
and local income tax rate on earned income, with such maximum federal rate to be
computed with regard to Code Section 1(g), if applicable. If the Employee and
the Company are unable to agree as to the amount of the reduction described
above, if any, the Employee shall select a law firm or accounting firm from
among those regularly consulted (during the twelve-month period immediately
prior to the change in control that resulted in the characterization of the
payments as

<PAGE> 11

parachute payments) by the Company regarding federal income tax or employee
benefit matters and such law firm or accounting firm shall determine the amount
of such reduction and such determination shall be final and binding upon the
Employee and the Company.

8. INDEMNIFICATION. The Company shall indemnify, defend, and
hold the Employee harmless, to the maximum extent permitted by law, from any and
all claims, litigation, or suits arising out of the activities of the Employee
reasonably taken in the performance of his duties hereunder, including all
reasonable expenses and professional fees that may relate thereto. The Company
shall obtain a directors and officers liability insurance policy covering the
Employee in a sufficient amount to provide such indemnification if such coverage
is available on commercially reasonable terms, and shall maintain such policy
during the employment term (and for so long thereafter as is practicable in the
circumstances taking into account the availability of such insurance).

9. TERMINATION OF ONEX CONSULTING AGREEMENT. Onex and the
Employee agree that the Onex Consulting Agreement is hereby terminated.

10. MISCELLANEOUS.

(a) GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the laws of the State of Florida applicable
to agreements made and to be performed in that State.

<PAGE> 12

requested, to those listed below at their following respective addresses or at
such other address as each may specify by notice to the others:

To the Employee, to his attention at:

930 Castile Avenue
Coral Gables, Florida 33134
Telephone: (305) 443-2702
Telecopy: (305) 444-6753

To the Company:

ProSource Services Corporation
550 Biltmore Way, 10th Floor
Coral Gables, Florida 33134
Attention: President
Telephone: (305) 529-2500
Telecopy: (305) 529-2573

To Onex:

Onex Management U.S. Inc.
161 Bay Street
49th Floor
P.O. Box 700
Toronto, Ontario
M5J 2S1
Canada
Attention: Anthony R. Melman
Vice President
Telephone: (416) 362-7711
Telecopy: (416) 362-5765

<PAGE> 13

With copies (in the case of notices to
the Employee or the Company) to:

Anthony R. Melman
Vice President
Onex Corporation
161 Bay Street
49th Floor
P.O. Box 700
Toronto, Ontario
M5J 2S1
Canada
Telephone: (416) 362-7711
Telecopy: (416) 362-5765

Joel I. Greenberg, Esq.
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Telephone: (212) 836-8201
Telecopy: (212) 836-8689

(c) ENTIRE AGREEMENT; AMENDMENT. This Agreement shall
supersede any and all existing agreements between the Employee and the Company
or any of its affiliates and the Employee and Onex or any of its affiliates
relating to the terms of the Employee's employment during the employment term.
It may not be amended except by a written agreement signed by both parties.

(d) 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 thereof or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.

(e) ASSIGNMENT. Except as otherwise provided in this Section
9(e), this Agreement shall inure to the benefit of and be binding upon the
parties hereto and their

<PAGE> 14

respective heirs, representatives, successors and assigns. This Agreement shall
not be assignable by the Employee and shall be assignable by the Company only to
any corporation or other entity resulting from the reorganization, merger, or
consolidation of the Company with any other corporation or entity or any
corporation or entity to or with which the Company's business or substantially
all of its business or assets may be sold, exchanged, or transferred, and it
must be so assigned by the Company to, and accepted as binding upon it by, such
other corporation or entity in connection with any such reorganization, merger,
consolidation, sale, exchange, or transfer (the provisions of this sentence also
being applicable to any such successive transaction).

(f) HEADINGS. Section headings are used herein for convenience
of reference only and shall not affect the meaning of any provision of this
Agreement.

(g) RULES OF CONSTRUCTION. Whenever the context so requires,
the use of the masculine gender shall be deemed to include the feminine and vice
versa, and the use of the singular shall be deemed to include the plural and
vice versa.

<PAGE> 15

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

By and on behalf of

PROSOURCE SERVICES CORPORATION

By:____________________________________

Thomas C. Highland
President

DAVID R. PARKER

_______________________________________

For purposes of Section 9 only:

ONEX MANAGEMENT U.S. INC.

By:____________________________________
Name:
Title:

<PAGE> 1
Exhibit 10.23

FORM OF AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this
"Agreement"), dated as of _________ __, 1996, by and between ProSource Services
Corporation (the "Company"), and Thomas C. Highland (the "Employee").

RECITALS

WHEREAS, the Company (f/k/a BKDA Corporation) and the Employee
are parties to an Employment Agreement, dated July 1, 1992 (the "Original
Agreement").

WHEREAS, the Employee has received consulting fees from Onex
Management U.S. Inc. ("Onex") pursuant to an informal agreement between the
Employee and Onex (the "Onex Consulting Arrangement").

WHEREAS, the Company and the Employee desire to amend and
restate in its entirety the Original Agreement as hereinafter provided.

WHEREAS, Onex and the Employee desire to terminate the Onex
Consulting Arrangement.

NOW, THEREFORE, the parties agree as follows:

1. EFFECTIVENESS AND EMPLOYMENT. The Company shall employ the
Employee and the Employee shall be employed by the Company as of the date of
this Agreement (the "Commencement Date").

2. TERM. The term of this Agreement and the employment of the
Employee hereunder shall commence as of the Commencement Date, continue until
July 1, 1997, and automatically shall be extended for an unlimited number of
successive one-year periods unless terminated (a) by the Company or the Employee
effective as of July 1, 1997 or any subsequent
<PAGE> 2
anniversary thereof upon the giving of written notice of such party's intention
to terminate on or before January 1 of the year in which such employment is to
terminate, or (b) as provided in Section 5.

3. POSITIONS AND DUTIES; PLACE OF PERFORMANCE.

(a) POSITIONS AND DUTIES. The Employee shall be
employed as President of the Company and shall have the duties, responsibilities
and authority as may from time to time be assigned to him by the Company's Board
Of Directors (the "Board") that are consistent with and normally associated with
such position and, without additional compensation, shall serve as a member of
the Board and a member of the board of directors of ProSource, Inc. (f/k/a Onex
Distribution, Inc.) ("ProSource") and shall hold such offices at ProSource and
its subsidiaries as ProSource's board of directors determines. The Employee
shall devote substantially all of his business time, effort, and energies
exclusively to the business of the Company, ProSource and its other
subsidiaries, and shall not serve as an active principal or a director or
officer of any other company or entity without the prior written consent of the
Board, except that the Employee may serve, without such consent, as a director
or officer of any company on the board of which he is currently serving and of
any trade association, civic, educational or charitable organization unless the
Board determines that such service interferes with the performance of Employee's
duties hereunder.

(b) PLACE OF PERFORMANCE. The Employee shall be based
in the Miami, Florida metropolitan area, except for required travel on the
Company's business.

2
<PAGE> 3
4. COMPENSATION AND BENEFITS.

(a) BASE SALARY. Effective as of the Commencement
Date, the Company shall pay the Employee a base salary at the rate of $425,000
per year through December 31, 1996 and thereafter at the rate of $450,000 per
year (the "Base Salary"), payable in accordance with the Company's normal
payroll practices for senior executives. The Board shall review the Base Salary
annually; Employee shall be entitled to such increases in his Base Salary as may
be determined from time to time by the Board or pursuant to its delegation. If
the Base Salary is increased, the new salary shall thereafter constitute the
"Base Salary" for purposes of this Agreement.

(b) BONUSES. In addition to Base Salary, the Employee
may receive a cash bonus. The bonus shall be determined in accordance with any
applicable executive management bonus or incentive compensation plan in effect
at the date of determination or, if no such plan is in effect, by the Board or
the appropriate committee thereof, in its sole discretion.

(c) OTHER BENEFIT PLANS AND FRINGE BENEFITS. The
Employee shall be eligible to (i) participate in ProSource's Amended and
Restated Management Option Plan (1995) and 1996 Stock Option Plan, (ii)
participate in all employee benefit plans maintained by the Company for its
senior management executives during the employment term, (iii) receive all
fringe benefits for which his status and level of employment qualify him in
accordance with the Company's usual plans, policies, and arrangements, and (iv)
be reimbursed for up to $6,000 for actual expenses incurred for, among other
things, financial consulting and tax planning and preparation services and legal
advice.

3
<PAGE> 4
(d) VACATION. Employee shall be entitled to four
weeks of paid vacation annually. Employee shall determine, in his reasonable
discretion, the timing of such vacation.

(e) AUTOMOBILE. During the term of his employment,
the Company shall pay to Employee on a monthly basis an amount equal to $1,500
to cover the monthly cost of an automobile of his choice and related expenses,
including insurance on, maintenance of, and fuel for, the automobile.

(f) INITIATION FEES/CLUB DUES. The Employee shall
receive $7,000 each year for club memberships, including country clubs, luncheon
clubs, health clubs, and airline travel clubs.

5. TERMINATION.

(a) COMPENSATION AND BENEFITS. Except as otherwise
provided in this Section or Section 7, upon termination of the Employee's
employment hereunder, his right to compensation hereunder shall cease except
that the Employee shall be entitled to receive his Base Salary and benefits up
to the Date of Termination (as defined in Section 5(e)) or for the period
required by law, except that any bonus payable pursuant to Section 4(b) shall be
prorated to the Date of Termination.

4
<PAGE> 5
consecutive months, to perform the duties for which he was responsible
immediately before the onset of his incapacity. To assist the Board in making
such a determination, the Employee shall, as reasonably requested by the Board,
(i) make himself available for medical examinations, without cost to the
Employee, by a physician chosen by the Board and approved by the Employee, whose
approval shall not unreasonably be withheld, and (ii) grant the Board and any
such physician access to all relevant medical information concerning him,
arrange to furnish copies of medical records to such physician, and use his best
efforts to cause his own physicians to be available to discuss his health with
such physician. The determination of the physician chosen in accordance with the
preceding sentence shall be final and binding on the Company and the Employee.

5
<PAGE> 6
act that is or are the basis for the decision to so terminate the Employee's
employment for Cause. The Board shall give the Employee an opportunity to meet
with the Board to defend such act or acts or failure to act within 30 calendar
days of Employee's receipt of such notice and to correct such act or failure to
act within 30 business days following such meeting. If the Employee fails to
correct such act or failure to act within the 30 business days following the
meeting, the Employee's employment by the Company shall be terminated under this
Section 5(c) for Cause as of the Date of Termination.

(d) COMPENSATION UPON TERMINATION WITHOUT CAUSE OR
FOR DISABILITY.

(i) If the Company terminates the Employee's
employment hereunder without Cause or for disability in accordance with
Section 5(b):

(A) In addition to the amounts paid to the Employee
pursuant to Section 5(a), in lieu of any further salary payments to
the Employee for any period subsequent to the Date of Termination, the
Company shall pay to the Employee, during the eighteen-month period
commencing on the Date of Termination, an amount equal to 150% of the
sum of (1) of Employee's annual Base Salary in effect as of the Date of
Termination plus (2) a cash bonus in an amount equal to the pro rata
portion of the actual incentive payment that Employee would have
received under the management incentive plan for the year in which the
Date of Termination occurs but for Employee's termination. Except as
provided in Section 7, the amount described in clause (1) of this
Paragraph (A) shall be paid in substantially equal monthly payments
during the 18-month period following the Date of Termination, except
that the Company may determine, in its sole discretion, to pay such
amount (or any portion remaining during such period if periodic
payments have commenced) in a single lump sum in cash or, if so
requested by the

6
<PAGE> 7
Employee, in two lump sums. The amount described in clause (2) of this
Paragraph (A) shall be paid at the same time as payments are or would
have been made under the incentive plan in effect on the Date of
Termination.

(B) For the 18 months following the Date of Termination,
the Company shall continue to provide the Employee (and his eligible
dependents, if any) with (1) group health and life insurance benefits
and long-term disability insurance coverage (or the economic equivalent
thereof) at the level in effect on the Date of Termination, (2) the
perquisite allowance referred to in Section 4(c)(iv), and (3) the
benefits referred to in Sections 4(e) and 4(f); provided that if the
Employee is employed by another employer within such 18-month period
such benefits and insurance coverage shall cease except for insurance
coverage for conditions existing on the date of employment by an
employer other than the Company, and further provided that, at the
expiration of the extended period of insurance coverage provided under
this clause (i)(B), the Employee (and his eligible dependents, if any)
shall be entitled to the full period of coverage provided him under
Section 4980B of the Internal Revenue Code of 1986, as amended, unless
other employment has been obtained.

(C) The Company shall reimburse Employee for actual costs
incurred in seeking reemployment, including costs of outplacement,
services up to a maximum of $25,000.

(D) Unless Employee has in fact vested under any retirement
plan then in effect, Employee shall be deemed to have been employed by the
Company for the minimum number of years required to vest under such plans.

7
<PAGE> 8
(e) NOTICE OF TERMINATION; DATE OF TERMINATION. Any
termination of the Employee's employment, other than by reason of his death,
shall be communicated by the terminating party by a written notice of
termination (the "Notice of Termination"). The Notice of Termination shall (i)
indicate the specific termination provision in this Agreement upon which the
termination is based, (ii) set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated, and (iii) specify the Date of
Termination. For purposes of this Agreement, "Date of Termination" shall mean
(i) if the Employee's employment is terminated by his death, the date of his
death, and (ii) in all other cases, the later of the date of actual receipt of
the Notice of Termination and the date specified in such notice. The Date of
Termination shall not occur prior to the completion of the cure period described
in Section 5(c) if termination is for Cause.

6. COVENANTS.

(a) CONFIDENTIALITY. The Employee acknowledges that
he has acquired and will acquire confidential information respecting the
business of the Company. Accordingly, the Employee agrees that he will not
willfully disclose, at any time (during the employment term or thereafter), any
such confidential information to any unauthorized third party without the
consent of the Company as authorized by the Board. For this purpose, information
shall be considered confidential only if such information is proprietary to the
Company and has not been made publicly available prior to its disclosure by the
Employee. There shall be no breach of this Section 6(a) if the disclosure does
not have an adverse effect on the Company's business or operations, or otherwise
harm or damage the Company.

8
<PAGE> 9
(b) COMPETITIVE ACTIVITY. (i) If Employee's
employment hereunder is terminated, Employee shall not, without the written
consent of the Board, during the eighteen month period following the Date of
Termination, directly, individually or as an employee, agent, partner,
shareholder, consultant or in any other capacity, participate in, engage in or
have a financial interest or management position or other interest in any
business operation or any enterprise that is in direct competition with the
Company. The ownership of an interest constituting not more than 1% of the
outstanding debt or equity in a corporation the shares of which are traded on a
recognized stock exchange or trade in the over-the-counter market, even though
that corporation may be a competitor of the Company or any of its subsidiaries,
shall not be deemed financial participation in a competitor.

(ii) The Employee shall not, without the written consent of
the Board, during the employment term and for eighteen months following the Date
of Termination, directly or indirectly, either for his own benefit or for the
benefit of any other person, solicit to take away, or take away any customers
doing business with the Company on the Date of Termination or who were being
solicited to become customers as of the Date of Termination or recruit, induce,
or encourage any employee of the Company or any affiliate of the Company to
terminate such employee's employment with the Company or such affiliate, except
that nothing herein shall prohibit the Employee from giving a reference or a
recommendation to any third party with respect to any such employee.

9
<PAGE> 10
cally enforced. Accordingly, the Employee agrees that, in addition to any other
relief or remedies available to the Company, the Company shall be entitled to
seek and obtain an appropriate injunction or other equitable remedy from a court
with proper jurisdiction for the purposes of restraining the Employee from any
actual or threatened breach of such provisions, and no bond or security will be
required in connection therewith. If any provision of this Section 6 is deemed
invalid or unenforceable, such provision shall be deemed modified and limited to
the extent necessary to make it valid and enforceable.

7. SECTION 280G PAYMENTS. If the aggregate present value of
the Employee's payments under this Agreement, and any plan, program, or
arrangement maintained by the Company constitutes an "excess parachute payment"
(within the meaning of Section 280G(b)(1) of the Internal Revenue Code of 1986,
as amended (the "Code")) and the excise tax on such payment would cause the net
parachute payments (after taking into account federal, state and local income
and excise taxes) to which the Employee otherwise would be entitled to be less
than what the Employee would have netted (after taking into account federal,
state and local income taxes) had the present value of his total parachute
payments equaled $1.00 less than three times his "base amount" (within the
meaning of Code Section 280(G)(b)(3)(A)), the Employee's total "parachute
payments" (within the meaning of Code Section 280G(b)(2)(A)) shall be reduced
(by the minimum possible amount) so that their aggregate present value equals
$1.00 less than three times such base amount. For purposes of this calculation,
it shall be assumed that the Employee's tax rate will be the maximum marginal
federal, state and local income tax rate on earned income, with such maximum
federal rate to be computed with regard to Code Section 1(g), if applicable. If
the Employee and the Company are unable to agree as to the amount of the

10
<PAGE> 11
reduction described above, if any, the Employee shall select a law firm or
accounting firm from among those regularly consulted (during the twelve-month
period immediately prior to the change in control that resulted in the
characterization of the payments as parachute payments) by the Company regarding
federal income tax or employee benefit matters and such law firm or accounting
firm shall determine the amount of such reduction and such determination shall
be final and binding upon the Employee and the Company.

8. INDEMNIFICATION. The Company shall indemnify, defend, and
hold the Employee harmless, to the maximum extent permitted by law, from any and
all claims, litigation, or suits arising out of the activities of the Employee
reasonably taken in the performance of his duties hereunder, including all
reasonable expenses and professional fees that may relate thereto. The Company
shall obtain a directors and officers liability insurance policy covering the
Employee in a sufficient amount to provide such indemnification if such coverage
is available on commercially reasonable terms and shall maintain such policy
during the employment term (and for so long thereafter as is practicable in the
circumstances taking into account the availability of such insurance).

9. TERMINATION OF ONEX CONSULTING ARRANGEMENT. Onex and the
Employee agree that the Onex Consulting Arrangement is hereby terminated.

11
<PAGE> 12
10. MISCELLANEOUS.

(a) GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the laws of the State of Florida applicable
to agreements made and to be performed in that State.

(b) NOTICE. Any notice, consent, request or other
communication made or given in connection with this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or mailed by
registered or certified mail, return receipt requested, to those listed below at
their following respective addresses or at such other address as each may
specify by notice to the others:

To the Employee, to his attention at:

7120 Lago Drive West
Coral Gables, Florida 33134
Telephone: (305) 667-6740
Telecopy: (305) 669-0671

To the Company:

ProSource Services Corporation
550 Biltmore Way, 10th Floor
Coral Gables, Florida 33134
Attention: Chairman of the Board
Telephone: (305) 529-2500
Telecopy: (305) 529-2573

12
<PAGE> 13
To Onex:

Onex Management U.S. Inc.
161 Bay Street
49th Floor
P.O. Box 700
Toronto, Ontario
M5J 2S1
Canada
Attention: Anthony R. Melman
Vice President
Telephone: (416) 362-7711
Telecopy: (416) 362-5765

With copies (in the case of notices to the
Employee or the Company) to:

Anthony R. Melman
Vice President
Onex Corporation
161 Bay Street
49th Floor
P.O. Box 700
Toronto, Ontario
M5J 2S1
Canada
Telephone: (416) 362-7711
Telecopy: (416) 362-5765

Joel I. Greenberg, Esq.
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Telephone: (212) 836-8201
Telecopy: (212) 836-8689

13
<PAGE> 14
Employee's employment during the employment term. It may not be amended except
by a written agreement signed by both parties.

(d) 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 thereof or deprive that party of the right thereafter to
insist upon strict adherence to that term or any other term of this Agreement.

(e) ASSIGNMENT. Except as otherwise provided in this
Section 9(e), this Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, representatives, successors and
assigns. This Agreement shall not be assignable by the Employee and shall be
assignable by the Company only to any corporation or other entity resulting from
the reorganization, merger, or consolidation of the Company with any other
corporation or entity or any corporation or entity to or with which the
Company's business or substantially all of its business or assets may be sold,
exchanged, or transferred, and it must be so assigned by the Company to, and
accepted as binding upon it by, such other corporation or entity in connection
with any such reorganization, merger, consolidation, sale, exchange, or transfer
(the provisions of this sentence also being applicable to any successive such
transaction).

(f) HEADINGS. Section headings are used herein for
convenience of reference only and shall not affect the meaning of any provision
of this Agreement.

(g) RULES OF CONSTRUCTION. Whenever the context so
requires, the use of the masculine gender shall be deemed to include the
feminine and vice versa, and the use of the singular shall be deemed to include
the plural and vice versa.

14
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.

By and on behalf of

PROSOURCE SERVICES CORPORATION

By: ______________________________

David R. Parker
Chairman of the Board

THOMAS C. HIGHLAND

____________________________________

For Purposes of Section 9 only:

ONEX MANAGEMENT U.S. INC.

By: ______________________________

Name:
Title:

<PAGE> 1
EXHIBIT 10.28

PROSOURCE, INC.

AMENDED AND RESTATED

MANAGEMENT OPTION PLAN (1995)

Section 1. PURPOSE.

The purpose of this Amended and Restated ProSource, Inc.
Management Option Plan (1995) (the "Plan") is to provide a means whereby
ProSource, Inc. (the "Company") may, through the grant of options to purchase
common shares in the capital of the Company to management employees of the
Company and its direct and indirect subsidiaries (the "Subsidiaries") motivate
those management employees to exert their best efforts on behalf of the Company
and the Subsidiaries and closely align the personal interests of management
employees with those of the shareholders of the Company.

Prior to the Plan becoming effective in accordance with
Section 11, in connection with the proposed initial public offering (the
"Offering") of shares of the Company's Class A Common Stock (as hereinafter
defined), (i) the Company intends to file a 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 Company's outstanding shares of common stock, par
value $.01 per share, will converted into shares of Class B Common Stock.

Section 2. DEFINITIONS.

2.1. The following terms as used in the Plan shall have the
respective meanings set forth below unless the context otherwise requires:

(1) "BOARD OF DIRECTORS" means the board of directors of the
Company or any committee of the same charged with the responsibility of
administering the Plan.

(2) "COMMON SHARES" means shares of the Company's Class B
Common Stock.

(3) "CLOSING DATE" means the date the Options are granted to
the Management Employees under the Plan.

(4) "CAUSE" means, with respect to any Optionee, the
occurrence of one or more of the following: (i) such Optionee is convicted of,
pleads guilty to, or confesses to any felony or any act of fraud,
misappropriation or embezzlement, (ii) such Optionee engages in a fraudulent act
to the material damage or prejudice of the Company or any Subsidiary or in
conduct or activities materially damaging to the property, business or
reputation of the Company or any Subsidiary, all as determined by the Board of
Directors in good faith in its sole discretion, (iii) any material act or
omission by such Optionee involving malfeasance or negligence in the performance
of the

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Optionee's duties to the Company or any Subsidiary or (iv) failure by such
Optionee to comply in any material respect with the terms of his employment
agreement, if any, or any written policies or directives of the Board of
Directors as determined by the Board of Directors in good faith in its sole
discretion, which has not been corrected by the Optionee within 30 days after
written notice of such failure.

(5) "DISABILITY" shall mean any illness or other physical or
mental condition of an Optionee that renders the Optionee incapable of
performing his customary and usual duties for the Company, or any medically
determinable illness or other physical or mental condition resulting from a
bodily injury, disease or mental disorder which, in the judgment of the Board of
Directors, is expected to be permanent and continuous in nature. The Committee
may require such medical or other evidence as it deems necessary to judge the
nature and permanency of the Optionee's condition.

(6) "FISCAL YEAR" means the Company's fiscal year ending on
the last Saturday of the calendar year.

(7) "MANAGEMENT EMPLOYEES" means those management employees of
the Company and the Subsidiaries who were granted options under the Company's
Management Option Plan (1992) and who are employed with the Company or a
Subsidiary as of the date hereof and those management employees of the Company
and the Subsidiaries listed on Schedule A.

(8) "MANAGEMENT REPRESENTATIVES" means Management
Representatives as defined in the Management Shareholders Agreement.

(9) "MANAGEMENT SHAREHOLDERS AGREEMENT" means the Amended and
Restated Management Shareholders Agreement, dated November __, 1996, as such
agreement may be amended, restated, or modified from time to time, among the
Company, Onex, certain of the employees of the Company and the Subsidiaries, and
the Management Employees.

(10) "ONEX" means Onex DHC LLC.

(11) "OPTION" means an option to purchase one Common Share
pursuant to the terms of this Plan.

(12) "OPTIONEE" means each Management Employee to whom an
Option has been granted.

(13) "PUBLIC COMPANY" means a corporation that has shares of
capital stock registered under Section 12 or that is subject to the reporting
requirements under Section 15(d) of the Securities Exchange Act of 1934 or
similar federal statute in force.

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2.2. Words importing the singular number only shall include
the plural and vice versa and words importing gender shall include all genders,
unless the context clearly requires otherwise.

Section 3. NUMBER OF SHARES AVAILABLE UNDER PLAN.

Options will be granted by the Company in accordance with the
terms of the Plan to Management Employees to purchase Common Shares, and such
Shares shall be reserved for issue upon the exercise of Options (subject to
adjustment as provided in Section 6.8).

Section 4. ELIGIBILITY AND ADMINISTRATION.

4.1. All Management Employees shall be eligible for
participation in the Plan.

4.2. Except with respect to persons granted options under the
Management Option Plan (1992) who, prior to June 30, 1995, notified the Company
in writing that he or she has elected not to have his or her options governed by
this Plan, all options granted under the Company's Management Option Plan (1992)
shall be governed by the terms of this Plan, if the optionholder is still
employed with the Company or a Subsidiary as of the date hereof. All options
which became exercisable under the Company's Management Option Plan (1992) shall
continue to be exercisable for the same number of shares under this Plan.

4.3. Subject to the terms hereof, the Plan shall be
administered under the supervision of the Board of Directors.

4.4. The Board of Directors may interpret the Plan as may be
necessary or appropriate for the administration of the Plan and shall make such
other determinations and take such other action as it deems necessary or
advisable. The Board of Directors shall give the Management Representatives
notice of any interpretation or determination formally made by the Board of
Directors not less than 14 days prior to the effective date thereof. Any such
interpretation or determination so made shall be final, binding, and conclusive.

Section 5. GRANT OF OPTIONS.

At any time after the purchase of Common Shares by a
Management Employee, the Board of Directors may authorize the grant to such
Management Employee Options to acquire a number of Common Shares determined by
the Board of Directors. Options granted pursuant to this Section shall be
exercisable at the times and in the amounts set forth in this Section . Ten
percent of the Options held by each Optionee shall become exercisable at the end
of each of the Fiscal Years 1995 through 1999. The remaining fifty percent of
the Options held by each Optionee shall become exercisable at the end of Fiscal
Year 1999.

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Section 6. TERMS AND CONDITIONS.

6.1. GENERAL. Each Option granted under this Plan shall be
subject to the following express terms and conditions set forth in this Section
and to such other terms and conditions as the Board of Directors may deem
appropriate.

6.2. EXERCISE PERIOD. (a) Options are exercisable only in
accordance with the terms of the Plan and all Options that have not otherwise
expired or been canceled under the terms of the Plan shall expire, if not
exercised by the Optionee, on December 31, 2000.

(b) In connection with termination of an Optionee's employment
with the Company or any Subsidiary, an Option shall terminate at the earliest of
the following circumstances:

(i) the date that is three (3) months after the
Optionee's termination of employment, for any reason other
than as provided in paragraph (ii), (iii) or (iv) below;

(ii) the date that is twelve (12) months after
employment ceases due to Disability, but in no event later
than the date his Option would have expired under paragraph
(a);

(iii) the date the Optionee's employment is
terminated for Cause; and

(iv) the date twelve (12) months after the Optionee's
termination of employment as a result of death, but in no
event later than the date his Option would have expired under
paragraph (a).

(c) In the event that any Options are exercised following
termination of an Optionee's employment, all Common Shares purchased through
such exercise shall be subject to Section 2.5 of the Management Shareholders
Agreement (as if termination of employment had occurred as of the date of
exercise).

6.3. EXERCISE PRICE.

(a) PRICE. The exercise price of each Common Share subject to
an Option (the "Exercise Price") shall be the price at which the Optionee
holding such Option purchased Common Shares from the Company.

(b) PAYMENT OF EXERCISE PRICE. The Exercise Price of any
Common Shares in respect of which an Option is exercised shall be paid in cash
or by certified check payable to the Company at the time of exercise.

6.4. INTENTIONALLY OMITTED.

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6.5. EXERCISE IN THE EVENT OF A SALE. Upon an Exercise Event
(as hereinafter defined), all Options for Fiscal Years (or any portion thereof)
not yet ended shall be deemed to have been earned and each Management Employee
shall be entitled to receive in exchange for the cancellation of his Options the
consideration that such Employee would have received in such transaction had
such Options and all other Options exercisable on the date the triggering
transaction closes been exercised immediately prior to such date, less the
Exercise Price of such Options, and all such Options shall be cancelled upon
payment of such amount. "Exercise Event" shall mean either (i) if the Company is
not a Public Company and Onex and its affiliates sells all of their Common
Shares, or (ii) an agreement is made with a third party dealing at arm's length
with the Company for the sale (for consideration which is principally other than
common stock) of substantially all of the assets of the Company or any principal
Subsidiary, or all of the issued and outstanding shares of the Company, any
principal Subsidiary, or any successor corporation resulting from the merger or
consolidation of any one or more of them with any other corporation and if, as a
result of such transaction, Onex or any affiliate of Onex would receive a
compounded annual return on its initial purchase of Common Shares at least equal
to the return set forth on Schedule B.

6.6. NON-TRANSFERABILITY. No Option shall be transferable or
assignable.

6.7. INVESTMENT REPRESENTATION, LISTING, AND REGULATION.

(a) Each Optionee shall deliver to the Board of Directors,
upon demand, at the time of any exercise of any Option, a written representation
that the Common Shares to be acquired upon such exercise are to be acquired for
investment and not with a view to the distribution thereof and an
indemnification in favor of the Company in the event of any violation by such
person of any law governing the transfer of such shares. Upon such demand,
delivery of such representation prior to the delivery of any Common Shares
issued upon exercise of Options and prior to the expiration of the exercise
period shall be a condition precedent to the right of the Optionee or such other
person to purchase any Common Shares pursuant to Options.

(b) Each Option shall be subject to the requirement that, if
at any time the Board of Directors determines, in its sole discretion, that the
registration, qualification, or other approval of or in connection with this
Plan or the Common Shares covered thereby is necessary or desirable under any
applicable law, then such Option may not be exercised, as a whole or in part,
unless and until any such registration, qualification, or approval is obtained
free of any condition not acceptable to the Board of Directors. The Optionee
shall cooperate with the Company in relation thereto and shall have no claim or
cause of action against the Company, any Subsidiary, or any of their officers or
directors, as the result of any failure by the Company to obtain or to take any
steps to obtain any such registration, qualification, or approval.

(c) The granting of Options and the issuance of Commons Shares
under the Plan shall be carried out in compliance with applicable law and with
the regulations of governmental authorities and applicable stock exchanges.

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6.8. ADJUSTMENTS IN EVENT OF CHANGE IN COMMON SHARES. In the
event of any change in the issued Common Shares of the Company occasioned by
reason of a stock dividend, recapitalization, reorganization, merger,
consolidation, split-up, combination, or exchange of shares, a rights offering
to purchase Common Shares at a price substantially below fair market value, or
any similar change affecting the issued Common Shares (excluding any issuance of
warrants by the Company that triggers the pre-emptive rights granted in the
Management Shareholders Agreement, but including any issuance of any other
warrants by the Company for the purchase of its securities), the number and kind
of shares subject to outstanding Options and the exercise price per share
thereof shall be appropriately adjusted consistent with such change in such
manner as the Board of Directors may deem equitable to prevent substantial
dilution or enlargement of the rights granted to, or available to, participants
in the Plan.

6.9. NO RIGHTS AS SHAREHOLDER. No Optionee shall have any
rights as a shareholder with respect to any Common Shares subject to an Option
granted to him prior to the date of issuance to him of a certificate or
certificates for such Shares.

6.10. NO RIGHTS TO CONTINUED EMPLOYMENT. Neither the Plan nor
any Option shall confer upon any Optionee any right with respect to continuance
of employment or continuance as a director or officer with the Company or any
subsidiary, or interfere in any way with the right of the Company or the
Subsidiaries to terminate his employment at any time in accordance with
applicable law.

6.11. MANAGEMENT SHAREHOLDERS AGREEMENT. The transfer, sale,
or other disposition of Common Shares acquired pursuant to the exercise of an
Option granted hereunder shall be governed by the Management Shareholders
Agreement.

Section 7. PROCEEDS FROM SALES OF SHARES.

Any cash proceeds from the sale of Common Shares issued upon
exercise of Options shall be added to the general funds of the Company and shall
thereafter be used from time to time for such corporate purposes as the Board of
Directors may determine.

Section 8. ASSIGNMENT.

Except as specifically provided under this Plan, or unless
otherwise required by applicable law, no rights or interests of a participant
under this Plan shall be given as security or assigned by any participant and no
portion of any Common Shares reserved for issuance under the Plan shall be
subject to attachment, charge, anticipation, execution, garnishment,
sequestration, or other seizure under any legal or other process. Any
transaction purporting to effect such a prohibited result is void.

Section 9. AMENDMENT AND TERMINATION OF PLAN.

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9.1. Unless renewed for such further period and upon such
terms and conditions as the Board of Directors may determine, this Plan shall
terminate on the earlier of:

(i) the date of signing of an underwriting agreement in
relation to an initial public offering of Common Shares if, pursuant to such
initial public offering, any regulatory authority, including any stock exchange
to which an application is made to list the Common Shares, so requires;

(ii) December 31, 2000; and

(iii) subject to subsection 6.5, the effective date of a sale
to a third party dealing at arm's length of:

(a) all of the Common Shares owned by Onex or any
affiliate of Onex if the Company is a Public Company, or

(b) all or substantially all of the assets of the
Company or a principal Subsidiary, or

(c) all of the issued and outstanding shares of the
Company, a principal Subsidiary, or any successor corporation
resulting from the merger or consolidation of any one or more
of them with any other corporation.

Any termination of the Plan pursuant to (iii)(b) or (c) as the
result of the sale of all or substantially all of the assets of a principal
Subsidiary or the sale of all of the issued and outstanding shares of a
principal Subsidiary shall only be deemed to be a termination of the Plan as to
the Management Employees of that Subsidiary.

No Options shall be granted after the effective date of
termination of the Plan.

9.2. Notwithstanding Section 9.1 and without the consent of
any other party, the Company shall be permitted to amend or terminate this Plan
at any time if so required by applicable laws or by the rules of any regulatory
authority to whose jurisdiction the Company is subject.

9.3. If this Plan is terminated for any reason pursuant to
this Section 9 (other than pursuant to subsection 9.1(ii)), or revised to comply
with any applicable regulatory requirements, the Company shall, to the extent
permitted by law or regulatory authorities, adopt a plan in substitution
therefor, or make other arrangements, that will confer upon Management Employees
benefits approximately equivalent to those conferred by this Plan.

Section 10. MISCELLANEOUS.

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10.1. If any provision of the Plan is ever held illegal or
invalid for any reason, such illegality or invalidity shall not affect the
remaining parts or provisions of the Plan and the Plan shall be construed,
administered, and enforced as if such illegal or invalid provision had never
been included herein.

10.2. The Plan shall be governed by and construed in
accordance with the laws of the State of Delaware.

10.3. The division of the Plan into sections, subsections,
paragraphs, subparagraphs, and clauses and the insertion of headings are for
convenience of reference only and shall not affect the construction or
interpretation of the Plan.

10.4. Any notice required to be given pursuant to the terms of
the Plan shall be given by registered mail and shall be deemed to have been
received on the third day after mailing.

Section 11. EFFECTIVE DATE.

Subject to prior approval of the Board of Directors, this Plan
shall be effective only upon consummation of the Offering.

Approved by the Board of Directors: November __, 1996.

<PAGE> 9
SCHEDULE A

MANAGEMENT EMPLOYEES OPTIONS

[Option holder list to be Attached]
<PAGE> 10
SCHEDULE B

<TABLE>
<CAPTION>
TRANSACTION OCCURS ON COMPOUND ANNUAL
OR WITHIN 30 DAYS OF: RATE OF RETURN*
--------------------- ---------------
<S> <C>
First Anniversary of Closing Date 38%
Second Anniversary of Closing Date 36%
Third Anniversary of Closing Date 34%
Fourth Anniversary of Closing Date 32%
Fifth Anniversary of Closing Date 30%
</TABLE>

- --------
* For a transaction consummated on a date other than an anniversary of
the Closing Date or with 30 days of the same, an interpolated Compound
Annual Rate of Return shall apply.

<PAGE> 1
EXHIBIT 10.29
PROSOURCE, INC.
1996 STOCK OPTION PLAN

ARTICLE 1 - PURPOSE

1.1. General.

The purpose of the ProSource, Inc. 1996 Stock Option Plan (the "Plan")
is to promote the success, and enhance the value, of ProSource, Inc. (the
"Company") by linking the personal interests of its qualified officers and other
key employees and the officers and key employees of any Affiliated Entity to
those of Company stockholders and by providing such officers and key employees
with an incentive for outstanding performance. The Plan is further intended to
provide flexibility to the Company in its ability to motivate, attract, and
retain the services of employees upon whose judgment, interest, and special
effort the successful conduct of the Company's operation is largely dependent.

ARTICLE 2 - EFFECTIVE DATE

2.1. Effective Date.

Subject to the prior approval of the Company's stockholders, the Plan
shall be effective upon consummation of the Company's initial public offering
(the "Offering") of shares of Class A Common Stock (as hereinafter defined).

ARTICLE 3 - DEFINITIONS

3.1. Definitions

(a) "Affiliated Entity" means any corporation, partnership, limited
liability company, trust, association or other entity, of which a
majority of the outstanding voting stock or voting power is
beneficially owned directly or indirectly by the Company.

(b) "Board" means the Board of Directors of the Company.

(c) "Cause" means, with respect to any Optionee, the occurrence of one
or more of the following: (i) such Optionee is convicted of, pleads
guilty to, or confesses to any felony or any act of fraud,
misappropriation or embezzlement, (ii) such Optionee engages in a
fraudulent act to the material damage or prejudice of the Company or
any Subsidiary or in conduct or activities materially damaging to the
property, business or reputation of the Company or any Subsidiary, all
as determined by the Board of Directors in good faith in its sole
discretion, (iii) any material act or omission by such Optionee
involving malfeasance or negligence in the performance of the
Optionee's duties to the Company or any Subsidiary or (iv) failure by
such Optionee to comply in any material respect with the

<PAGE> 2
terms of his employment agreement, if any, or any written policies or
directives of the Board of Directors as determined by the Board of
Directors in good faith in its sole discretion, which has not been
corrected by the Optionee within 30 days after written notice of such
failure.

(d) "Class A Common Stock" means the Class A Common Stock, $0.01 par
value per share, of the Company.

(e) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.

(f) "Committee" means the committee of the Board described in Article
4.

(g) "Company" means ProSource, Inc., a Delaware corporation.

(h) "Disability" shall mean any illness or other physical or mental
condition of a Participant that renders the Participant incapable of
performing his customary and usual duties for the Company, or any
medically determinable illness or other physical or mental condition
resulting from a bodily injury, disease or mental disorder which, in
the judgment of the Committee, is expected to be permanent and
continuous in nature. The Committee may require such medical or other
evidence as it deems necessary to judge the nature and permanency of
the Participant's condition.

(i) "Effective Date" means the date of consummation of the Offering.

(j) "Fair Market Value" of a share of Stock means the average closing
price of shares of the Class A Common Stock for the five trading days
immediately preceding the applicable date on (i) the New York Stock
Exchange, if the Class A Common Stock is then listed on such exchange,
(ii) if the Class A Common Stock is not listed on the New York Stock
Exchange, on the principal national stock exchange on which the Class A
Common Stock is then listed or (iii) if not listed on any national
exchange, as reported by NASDAQ. If the Class A Common Stock is not
then listed on any national stock exchange or reported by NASDAQ, then
the Fair Market Value shall be determined in any reasonable manner
approved by the Committee.

(k) "Management Shareholders Agreement" means the Amended and Restated
Management Shareholders Agreement, dated November __, 1996, as such
agreement may be amended, restated, or modified from time to time,
among the Company, Onex DHC LLC, and certain of the employees of the
Company and its subsidiaries.

(l) "Non-Qualified Stock Option" means an Option that is not intended
to meet the requirements of Section 422 of the Code or any successor
provision thereto.

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<PAGE> 3
(m) "Option" means a right granted to a Participant under Article 7 of
the Plan to purchase Stock at a specified price during specified time
periods. All Options granted under the Plan are intended to be
Non-Qualified Stock Options.

(n) "Option Agreement" means any written agreement, contract, or other
instrument or document evidencing an Option.

(o) "Participant" means a person who has been granted an Option under
the Plan.

(p) "Plan" means the ProSource, Inc. 1996 Stock Option Plan, as amended
from time to time.

(q) "Stock" means the Class B Common Stock, $0.01 par value per share,
of the Company.

(r) "1933 Act" means the Securities Act of 1933, as amended from time
to time.

(s) "1934 Act" means the Securities Exchange Act of 1934, as amended
from time to time.

ARTICLE 4 - ADMINISTRATION

4.1. Committee.

The Plan shall be administered by a Committee of the Board. The
Committee shall consist solely of two or more members of the Board who are
intended to be (i) "outside directors" as that term is used in Section 162(m) of
the Code and the regulations promulgated thereunder, and (ii) "non-employee
directors" as such term is defined in Rule 16b-3 promulgated under Section 16 of
the 1934 Act or any successor provision, in each case to the extent applicable.
However, the mere fact that a Committee member shall fail to qualify under
either of the foregoing requirements shall not invalidate any Option made by the
Committee which is otherwise validly made under the Plan. The members of the
Committee shall be appointed by, and may be changed at any time in the
discretion of the Board.

4.2. Action by the Committee.

For purposes of administering the Plan, the following rules of
procedure shall govern the Committee. A majority of the Committee shall
constitute a quorum. The acts of a majority of the members present at any
meeting at which a quorum is present and acts approved in writing by the
unanimous consent of the members of the Committee in lieu of a meeting shall be
deemed the acts of the Committee. Each member of the Committee is entitled, in
good faith, to rely or act upon any report or other information furnished to
that member by any officer or other employee of the Company or any Affiliated
Entity, the Company's independent certified public accountants, or any executive
compensation consultant, attorney or other professional retained by

3+
<PAGE> 4
the Company to assist in the administration of the Plan. No member of the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any award hereunder.

4.3. Authority of Committee.

The Committee shall have the exclusive power, authority and discretion
to:

(a) Designate Participants;

(b) Determine the number of Options to be granted and the number of
shares of Stock to which an Option will relate;

(c) Determine the terms and conditions of any Option granted under the
Plan, including but not limited to, the exercise price, any
restrictions or limitations on the Option, any schedule for lapse of
forfeiture restrictions or restrictions on the exercisability of an
Option, and accelerations or waivers thereof, based in each case on
such considerations as the Committee in its sole discretion determines;

(d) Determine whether, to what extent, and under what circumstances an
Option may be granted, or the manner in which the exercise price of an
Option may be paid (in cash, Stock or other property), or an Option may
be canceled, forfeited, surrendered or suspended;

(e) Prescribe the form of each Option Agreement, which need not be
identical for each Participant;

(f) Exercise all of the powers granted to it under the Plan; construe,
interpret and implement the Plan and any Options granted; correct any
defect, supply any omission and reconcile any inconsistency in the Plan
or any Option; and decide all other matters that must be determined in
connection with the Plan or an Option;

(g) Establish, adopt or revise any rules and regulations as it may deem
necessary or advisable to administer the Plan; and

(h) Make all other decisions and determinations that may be required
under the Plan or as the Committee deems necessary or advisable to
administer the Plan.

4.4. Decisions Binding.

The Committee is hereby granted discretionary authority to construe and
interpret the provisions of the Plan. The Committee's interpretation of the
Plan, any Options granted under the Plan, any Option Agreement and all decisions
and determinations by the Committee with respect to the Plan shall be final,
binding, and conclusive on all parties.

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<PAGE> 5
4.5. Authority of Board.

Notwithstanding anything to the contrary contained herein (i) until the
Board shall appoint the members of the Committee, the Plan shall be administered
by the Board and (ii) the Board may, in its sole discretion, at any time from
time to time, resolve to administer the Plan. In either of the foregoing events,
the term Committee as used herein shall be deemed to mean the Board.

ARTICLE 5 - SHARES SUBJECT TO THE PLAN

5.1. Number of Shares.

Subject to adjustment as provided in Article 9, the aggregate number of
shares of Stock reserved and available for Options shall be 550,000.

5.2. Lapsed Awards.

To the extent that an Option is canceled, terminates, expires or lapses
for any reason without the payment of consideration, any shares of Stock subject
to the Option will again be available for the grant of an Option under the Plan.

5.3. Stock Distributed.

Any Stock distributed pursuant to an Award may consist, in whole or in
part, of authorized and unissued Stock, or treasury Stock.

5.4. Limitation on Number of Shares Subject to Awards.

Notwithstanding any provision in the Plan to the contrary, the maximum
number of shares of Stock with respect to which Options may be granted under the
Plan to any one Participant during any one calendar year shall be 225,000.

ARTICLE 6 - ELIGIBILITY

6.1. General.

Officers or other key employees of the Company or an Affiliated Entity,
selected by the Committee shall be eligible for the grant of options hereunder.

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<PAGE> 6
ARTICLE 7 - STOCK OPTIONS

7.1. Exercise Price.

The exercise price per share of Stock under an Option shall not be less
than the Fair Market Value on the date of grant.

7.2. Time and Conditions of Exercise.

Twenty-five percent (25%) of the Options awarded in any grant shall
become exercisable on each of the first four anniversaries of the date of grant.
Notwithstanding the foregoing, no Option shall become exercisable until the
earlier of (i) the date on which the Fair Market Value of the Stock at any time
following the date of grant (notwithstanding whether such Option is exercisable
pursuant to the preceding sentence) is at least 25% greater than the exercise
price of such Option and (ii) the eighth anniversary of the date of grant.

7.3. Payment.

The Committee shall determine the methods by which the exercise price
of an Option may be paid, the form of payment, including, without limitation,
cash, shares of Stock having a Fair Market Value equal to the exercise price of
the Option, or other property, and the methods by which shares of Stock shall be
delivered or deemed to be delivered to Participants. The Committee may provide
in the Option Agreement that, at the election of the Participant, an Option may
be exercised by conversion into the nearest whole number of shares of Stock
determined as follows:

Number of shares to be issued = N (FMV - EP)
------------
FMV

Where

N = the number of shares of Stock issuable
upon the exercise of the Option (or
portion thereof) to be so exercised by
conversion.

FMV = Fair Market Value per share on the date of
exercise.

EP = the exercise price.

7.4. Evidence of Grant.

All Options shall be evidenced by a written Option Agreement between
the Company and the Participant. The Option Agreement shall include such
provisions consistent with the Plan, as may be specified by the Committee.

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<PAGE> 7
7.5. Term.

A Stock Option may be awarded pursuant to the Plan at any time prior to
the expiration of ten (10) years from the date such Plan is approved by the
stockholders.

7.6. Lapse of Option.

(a) Unless an Option Agreement otherwise provides, an Option that has
not otherwise expired or been cancelled under the terms of the Plan
shall expire, if not exercised by the Participant, on the date that is
ten (10) years after the Option is granted.

(b) In connection with termination of a Participant's employment with
the Company or any of its subsidiaries, on Option shall terminate at
the earliest of the following circumstances:

(i) the date that is three (3) months after the Participant's
termination of employment, for any reason other than as
provided in paragraph (ii), (iii) or (iv) or below;

(ii) the date that is twelve (12) months after employment
ceases due to Disability, but in no event later than the date
his Option would have expired under paragraph (a);

(iii) the date the Participant's employment is terminated for
Cause; and

(iv) the date twelve (12) months after the Participant's
termination of employment as a result of death, but in no
event later than the date his Option would have expired under
paragraph (a), if he had not died.

(c) In the event that any Options are exercised following termination
of a Participant's employment, all shares of Stock purchased through
such exercise shall be subject to Section 2.5 of the Management
Shareholders Agreement (as if termination had occurred as of the date
of exercise).

7.7. Management Shareholders Agreement

The transfer, sale or other disposition of shares of Stock acquired
pursuant to the exercise of an Option granted hereunder shall be governed by the
Management Shareholders Agreement.

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ARTICLE 8 - PROVISIONS APPLICABLE TO AWARDS

8.1. Limits on Transfer.

No Option shall be assignable or transferable by a Participant other
than by will or the laws of descent and distribution.

8.2. Beneficiaries.

Notwithstanding Section 8.1, a Participant may, in the manner
determined by the Committee, designate a beneficiary to exercise the rights of
the Participant, to exercise any Option and to receive any distribution with
respect to any Option upon the Participant's death. A beneficiary, legal
guardian, legal representative, or other person claiming any rights under the
Plan is subject to all terms and conditions of the Plan and any Option Agreement
applicable to the Participant, except to the extent the Plan and Option
Agreement otherwise provide. If no beneficiary has been designated or survives
the Participant, the determination whether to exercise any exercisable Option
shall be made by, and any distributions made to, the person entitled thereto
under the Participant's will or the laws of descent and distribution. Subject to
the foregoing, a beneficiary designation may be changed or revoked by a
Participant at any time provided the change or revocation is filed in a manner
to be determined by the Committee.

8.3. Stock Certificates.

All Stock certificates delivered under the Plan are subject to any
stop-transfer orders and other restrictions as the Company deems necessary of
advisable to comply with federal or state securities laws, rules and regulations
and the rules of any national securities exchange or automated quotation system
on which the Stock is listed, quoted, or traded. The Company may place legends
on any Stock certificate to reference any restrictions applicable to the Stock
issued under the Plan.

ARTICLE 9 - CHANGES IN CAPITAL STRUCTURE

9.1. General.

In the event a stock dividend is declared upon the Stock, the shares of
Stock then subject to each Option shall be increased proportionately without any
change in the aggregate purchase price, if any, therefor. In the event the Stock
shall be changed into or exchanged for a different number or class of shares of
stock or securities of the Company or of another company, whether through
reorganization, recapitalization, stock split-up, combination of shares, merger
or consolidation, there shall be substituted for each such share of Stock then
subject to each Option the number and class of shares into which each
outstanding share of Stock shall be so exchanged, all without any change in the
aggregate purchase price for the shares then subject to each Option.

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9.2. Adjustments on Account of Corporate Events.

The maximum number of shares that may be issued or transferred under
the Plan (or to any person in any calendar year), the number of shares covered
by outstanding Options and the exercise prices of outstanding Options are
subject to adjustment in the event of a stock dividend, stock split, combination
of shares, recapitalization, merger, consolidation, spin off, reorganization,
liquidation or similar transaction or event, to the extent determined by the
Committee in its sole discretion.

ARTICLE 10 - AMENDMENT, MODIFICATION AND TERMINATION

10.1. Amendment, Modification and Termination.

With the approval of the Board, at any time and from time to time, the
Committee may terminate, amend or modify the Plan. However, to the extent
required by the Code, by the insider trading rules of Section 16 of the 1934
Act, by any national securities exchange on which the Stock is listed or
reported, or by a regulatory body having jurisdiction, without approval of the
stockholders of the Company or other conditions, no such termination, amendment,
or modification may:

(a) Increase the total number of shares of Stock that may be issued
under the Plan, except as provided in Article 9;

(b) Modify the eligibility requirements for participation in the Plan;
or

10.2. Awards Previously Granted.

No termination, amendment, or modification of the Plan shall adversely
affect any Option previously granted under the Plan, without the written consent
of the Participant.

ARTICLE 11 - GENERAL PROVISIONS

11.1. No Rights to Awards.

No person shall have any claim to be granted any Option under the Plan,
and neither the Company nor the Committee shall be obligated to treat any
persons uniformly.

11.2. No Stockholder Rights.

No Option shall give a Participant any of the rights of a stockholder
of the Company unless and until shares of Stock are in fact issued to such
person in connection with such Option.

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11.3. Withholding.

The Company or any Affiliated Entity shall have the authority and the
right to deduct or withhold, or require a Participant to remit to the Company,
an amount sufficient to satisfy federal, state, and local taxes (including the
Participant's FICA obligation) required by law to be withheld with respect to
any taxable event arising as a result of the Plan. With respect to withholding
required upon any taxable event under the Plan, the Committee may, at the time
the Option is granted or thereafter, require that any such withholding
requirement be satisfied, in whole or in part, by withholding shares of Stock
having a Fair Market Value on the date of withholding equal to the amount to be
withheld for tax purposes, all in accordance with such procedures as the
Committee may establish.

11.4. No Right to Employment.

Nothing in the Plan or any Option Agreement shall interfere with or
limit in any way the right of the Company or any Affiliated Entity to terminate
any Participant's service with the Company or any Affiliated Entity at any time,
or confer upon any Participant any right to continue in the service of the
Company or any Affiliated Entity.

11.5. Indemnification.

To the extent allowable under applicable law, each member of the
Committee shall be indemnified and held harmless by the Company from any loss,
cost, liability, or expense that may be imposed upon or reasonably incurred by
such member in connection with or resulting from any claim, action, suit, or
proceeding to which such member may be a party or in which he may be involved by
reason of any action or failure to act under the Plan and against and from any
and all amounts paid by such member in satisfaction of judgment in such action,
suit, or proceeding against him, provided he gives the Company an opportunity,
at its own expense, to handle and defend the same before he undertakes to handle
and defend it on his own behalf. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such persons
may be entitled under the Certificate of Incorporation or By-Laws of the Company
or as a matter of law, or otherwise, or any power that the Company may have to
indemnify them or hold them harmless.

11.6. Titles and Headings.

The titles and headings of the Sections in the Plan are for convenience
of reference only, and in the event of any conflict, the text of the Plan,
rather than such titles or headings, shall control.

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11.7. Gender and Number.

Except where otherwise indicated by the context, any masculine term
used herein also shall include the feminine; the plural shall include the
singular and the singular shall include the plural.

11.8. Fractional Shares.

No fractional shares of Stock shall be issued and the Committee shall
determine, in its discretion, whether cash shall be paid in lieu of fractional
shares or whether such fractional shares shall be eliminated.

11.9. Governing Law.

The Plan and all Option Agreements shall be construed in accordance
with and governed by the laws of the State of Delaware.