Prosource Inc – ‘DEFM14A’ on 4/30/98

As of:  Thursday, 4/30/98   ·   Accession #:  950123-98-4342   ·   File #:  0-21677

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Definitive Proxy Solicitation Material — Merger or Acquisition   —   Schedule 14A
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Document/Exhibit                   Description                      Pages   Size 

 1: DEFM14A     Prosource, Inc.                                      175    870K 

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SCHEDULE 14A
(Rule 14a-101)

 INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

Filed by the Registrant   [X]                                                   

Filed by a Party other than the Registrant   [ ]                                

Check the appropriate box:                                                      

[ ]   Preliminary Proxy Statement                                               
[ ]   Confidential, for Use of the Commission only (as permitted by             
Rule 14a-6(e)(2))                                                   
[X]   Definitive Proxy Statement                                                
[ ]   Definitive Additional Materials                                           
[ ]   Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12       

 PROSOURCE, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)

Not Applicable
 -----------------------------------------------------------------------
 (Name of Person(s) Filing Proxy Statement if other than the Registrant)

[ ]   No Filing Fee Required                                                    
[ ]   Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.  
 (1)   Title of each class of securities to which transaction applies:
Class A Common Stock and Class B Common Stock           
(2)   Aggregate number of securities to which transaction applies:  
  (3)   Per unit price or other underlying value of transaction computed
         pursuant to Exchange Act Rule 0-11 (set forth the amount on which
      the filing fee is calculated and state how it was determined):
(4)   Proposed maximum aggregate value of transaction:              
(5)   Total fee paid:                                               
[X]   Fee paid previously with preliminary materials.                           
[ ]   Check box if any part of the fee is offset as provided by Exchange Act    
    Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
   paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.         

(1)   Amount Previously Paid:                                       
(2)   Form, Schedule or Registration Statement No.:                 
(3)   Filing Party:                                                 
(4)   Date Filed:                                                   

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 PROSOURCE, INC.
1500 San Remo Avenue
 Coral Gables, Florida 33146

April 30, 1998

Dear Stockholder:                                                               

You are cordially invited to attend a Special Meeting of
Stockholders (the "Special Meeting") of ProSource, Inc. (the "Company") to be   
held at 11:30 a.m., local time, on May 20, 1998 at the offices of Kaye, Scholer,
Fierman, Hays & Handler, LLP, 425 Park Avenue, 19th Floor, New York, New York   
10022.                                                                          

        As described in the accompanying Proxy Statement, at the Special
Meeting you will be asked to consider and vote on a proposal to approve and     
adopt an Agreement and Plan of Merger, dated as of January 29, 1998 (the "Merger
Agreement"), among AmeriServe Food Distribution, Inc., a Delaware corporation   
("AmeriServe"), Steamboat Acquisition Corp., a Delaware corporation and a       
wholly-owned subsidiary of AmeriServe ("Merger Sub"), and the Company and to    
approve the transactions contemplated thereby, including the Merger (as defined 
below). On the terms and subject to the conditions of the Merger Agreement, if  
the stockholders of the Company approve and adopt the Merger Agreement, (i)     
Merger Sub will be merged with and into the Company (the "Merger"), with the    
Company continuing as the surviving corporation and becoming a wholly-owned     
subsidiary of AmeriServe, and (ii) all of the presently issued and outstanding  
shares of the Company's Class A common stock, par value $0.01 per share ("Class 
A Common Stock"), and Class B common stock, par value $0.01 per share ("Class B 
Common Stock" and collectively with the Class A Common Stock, the "Common       
Stock"), including fractional shares, will be converted into the right to       
receive $15.00 per share in cash (or a pro-rata portion thereof, in the case of 
fractional shares), without interest (the "Merger Consideration") (other than   
shares held by the Company as treasury stock or shares owned by AmeriServe,     
Merger Sub or any subsidiary of the Company, AmeriServe or Merger Sub, which    
will be canceled, and shares held by the stockholders of the Company, if any,   
who properly exercise their appraisal rights under Delaware law). The Merger    
Consideration was determined by negotiations between the Company and AmeriServe,
and is not subject to adjustment. No third party valuations or appraisals were  
obtained in connection with the determination of the Merger Consideration. The  
same per share valuation was used in determining the consideration payable in   
respect of whole and fractional shares. The aggregate Merger Consideration to be
paid in the Merger, including amounts paid by the Company in respect of the     
cancellation of options to purchase Common Stock and amounts paid in respect of 
fractional shares, is approximately $144 million. Detailed information          
concerning the Merger is set forth in the accompanying Proxy Statement which you
are urged to read carefully. A copy of the Merger Agreement is attached as Annex
I to the accompanying Proxy Statement.                                          

  Approval and adoption of the Merger Agreement requires the
affirmative vote of the holders of shares of Common Stock entitled to cast a    
majority of the votes of all outstanding shares of Common Stock held by         
stockholders of record on April 1, 1998 (the "Record Date"). On the Record Date,
the Company had outstanding 9,383,591 shares of Common Stock (3,526,835 shares  
of Class A Common Stock and 5,856,756 shares of Class B Common Stock). Holders  
of the Class A Common Stock will be entitled to one vote for each share of Class
A Common Stock so held and holders of the Class B Common Stock will be entitled 
to ten votes for each share of Class B Common Stock so held. Pursuant to a      
Voting Agreement, dated as of January 29, 1998 (the "Voting Agreement"), among  
AmeriServe, Merger Sub and Onex DHC LLC,                                        

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Onex OMI LLC, ProSource Executive Investco LLC and Onex Ohio LLC (collectively, 
the "Onex Stockholders"), the Onex Stockholders have agreed, among other things,
to vote their shares in favor of the Merger, the adoption by the Company of the 
Merger Agreement and the approval of the terms thereof and each of the other    
transactions contemplated by the Merger Agreement. The Onex Stockholders are    
controlled by Onex Corporation. The Onex Stockholders beneficially own          
approximately 14.1% of the outstanding shares of Class A Common Stock and 89.1% 
of the outstanding shares of Class B Common Stock entitled to vote at the       
Special Meeting, representing in the aggregate approximately 84.8% of the total 
votes entitled to be cast at the Special Meeting and thus have sufficient voting
power to approve and adopt the Merger Agreement without regard to the votes of  
other stockholders. A copy of the Voting Agreement is attached as Annex II to   
the accompanying Proxy Statement.                                               

           Holders of Common Stock who comply with the applicable requirements
of Delaware law will be entitled to appraisal rights under Delaware law in      
connection with the Merger as described in the accompanying Proxy Statement.    

   The Company's Board of Directors has carefully reviewed and
considered the terms and conditions of the Merger Agreement and has determined  
that the Merger Agreement and the Merger are fair to and in the best interests  
of the Company and its stockholders AND HAS UNANIMOUSLY APPROVED AND ADOPTED THE
MERGER AGREEMENT AND RECOMMENDS THAT YOU VOTE FOR APPROVAL AND ADOPTION OF THE  
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY. In reaching its     
determination, the Board of Directors considered, among other things, the       
opinion of Morgan Stanley & Co. Incorporated ("Morgan Stanley"), that as of the 
date of such opinion and based upon and subject to certain matters stated       
therein, the consideration to be received by the holders of Class A Common Stock
in the Merger, was fair from a financial point of view. The opinion of Morgan   
Stanley is included as Annex III to the accompanying Proxy Statement. You are   
urged to read the opinion in its entirety for further information with respect  
to the assumptions made, matters considered and limits of the review undertaken 
by Morgan Stanley.                                                              

            We urge you to read the enclosed material carefully and request that
you promptly complete and return the enclosed proxy in the enclosed return      
envelope, which requires no postage if mailed in the United States. If you      
attend the Special Meeting, you may vote in person even if you have previously  
returned your proxy.                                                            

Sincerely,

/s/ David R. Parker                  /s/ Thomas C. Highland         
      -----------------------              -------------------------------------
David R. Parker                      Thomas C. Highland             
      Chairman of the Board                President and Chief Executive Officer

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 PROSOURCE, INC.
1500 San Remo Avenue
 Coral Gables, Florida 33146

 NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 1998

To Our Stockholders:                                                            

     NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders
(including any adjournments or postponements thereof, the "Special Meeting") of 
ProSource, Inc., a Delaware corporation (the "Company"), will be held on May 20,
1998, at 11:30 a.m., local time, at the offices of Kaye, Scholer, Fierman, Hays 
& Handler, LLP, 425 Park Avenue, 19th Floor, New York, New York 10022 for the   
following purposes, which are more fully described in the accompanying Proxy    
Statement:                                                                      

                  (a) To consider and vote on a proposal (the "Merger Proposal")
         to approve and adopt an Agreement and Plan of Merger, dated as of
        January 29, 1998 (the "Merger Agreement"), among AmeriServe Food
            Distribution, Inc., a Delaware corporation ("AmeriServe"), Steamboat
    Acquisition Corp., a Delaware corporation and a wholly-owned
            subsidiary of AmeriServe ("Merger Sub"), and the Company pursuant to
           which, (i) Merger Sub will be merged with and into the Company (the
           "Merger"), with the Company continuing as the surviving corporation
           and becoming a wholly-owned subsidiary of AmeriServe, and (ii) each
          outstanding share of the Company's Class A common stock, par value
           $0.01 per share ("Class A Common Stock"), and Class B Common Stock,
          par value $0.01 per share ("Class B Common Stock" and collectively
    with the Class A Common Stock the "Common Stock"), including
      fractional shares, will be converted into the right to receive
     $15.00 in cash (or a pro-rata portion thereof, in the case of
         fractional shares), without interest (the "Merger Consideration")
          (other than shares held by the Company as treasury stock or shares
         owned by AmeriServe, Merger Sub or any subsidiary of the Company,
            AmeriServe or Merger Sub, which will be canceled, and shares held by
            the stockholders of the Company, if any, who properly exercise their
appraisal rights under Delaware law), and to approve the
        transactions contemplated by the Merger Agreement, including the
            Merger. A copy of the Merger Agreement is attached as Annex I to the
accompanying Proxy Statement.                           

            (b) To transact such other business as may properly come
 before the Special Meeting, including any adjournments or
postponements thereof.                                  

  Approval and adoption of the Merger Agreement requires the
affirmative vote of the holders of shares of Common Stock entitled to cast a    
majority of the votes of all outstanding shares of Common Stock held by         
stockholders of record on April 1, 1998 (the "Record Date"). On the Record Date,
the Company had outstanding 9,383,591 shares of Common Stock (3,526,835 shares  
of Class A Common Stock and 5,856,756 shares of Class B Common Stock). Holders  
of the Class A Common Stock will be entitled to one                             

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vote for each share of Class A Common Stock so held and holders of the Class B  
Common Stock will be entitled to ten votes for each share of Class B Common     
Stock so held.                                                                  

         Pursuant to a Voting Agreement, dated as of January 29, 1998 (the
"Voting Agreement"), among AmeriServe, Merger Sub and Onex DHC LLC, Onex OMI    
LLC, ProSource Executive Investco LLC and Onex Ohio LLC (collectively, the "Onex
Stockholders"), the Onex Stockholders have agreed to vote their shares in favor 
of the Merger, the adoption by the Company of the Merger Agreement and the      
approval of the terms thereof and each of the other transactions contemplated by
the Merger Agreement, and against certain other corporate actions, including any
such actions that relate to any competing transaction, and the Onex Stockholders
have granted AmeriServe and Merger Sub an irrevocable proxy to vote all shares  
of Common Stock beneficially owned by them and all other shares of Common Stock 
of which the Onex Stockholders acquire beneficial ownership after January 29,   
1998 and during the term of the Voting Agreement, if any (such shares           
collectively, the "Subject Shares"), in such manner. The Onex Stockholders      
have also agreed, pursuant to the Voting Agreement, to comply with certain      
restrictions on the transfer of the Subject Shares, to waive any rights of      
appraisal available in connection with the Merger and to take or refrain from   
taking certain other actions. Pursuant to the Voting Agreement, the Onex        
Stockholders have granted to Merger Sub an irrevocable option (the "Merger Sub  
Option") to purchase the Subject Shares at $15.00 per share (the "Exercise      
Price") if the Merger Agreement is terminated under certain circumstances       
subject to the terms and conditions of the Voting Agreement. In the event that  
Merger Sub purchases the Subject Shares pursuant to the Merger Sub Option, it   
will be required to make a cash tender offer for the remaining shares of Common 
Stock not held by it at a price of $15.00 per share, subject to certain         
conditions set forth in the Voting Agreement. If Merger Sub exercises the       
option, purchases the Subject Shares and has not acquired the remaining shares  
of Common Stock, then Merger Sub will be obligated to pay the Onex Stockholders 
one-half of any consideration in excess of the Exercise Price (net of taxes,    
expenses and other specified amounts) received by Merger Sub in respect of the  
Subject Shares in connection with certain business combinations during the one  
year period following the closing of the Merger Sub Option exercise. The Onex   
Stockholders are controlled by Onex Corporation. The Onex Stockholders          
beneficially own approximately 14.1% of the outstanding shares of Class A Common
Stock and 89.1% of the outstanding shares of Class B Common Stock entitled to   
vote at the Special Meeting, representing in the aggregate approximately 84.8%  
of the total votes entitled to be cast at the Special Meeting and thus have     
sufficient voting power to approve and adopt the Merger Agreement without regard
to the votes of other stockholders. None of the Onex Stockholders received any  
consideration in exchange for agreeing to enter into the Voting Agreement. A    
copy of the Voting Agreement is attached as Annex II to the accompanying Proxy  
Statement. For a more detailed summary of the foregoing provisions and certain  
other provisions of the Voting Agreement, see "The Voting Agreement."           

         Upon consummation of the Merger, all outstanding shares of Common
Stock (other than shares held by the Company as treasury stock or shares owned  
by AmeriServe, Merger Sub or any subsidiary of the Company, AmeriServe or Merger
Sub, which will be canceled, and shares held by the stockholders of the Company,
if any, who properly exercise their appraisal rights under Delaware law),       
including fractional shares, will be converted into the right to receive the    
$15.00 per share Merger Consideration (or a pro-rata portion thereof, in the    
case of fractional shares). The Merger Consideration was determined by          
negotiations between the Company and AmeriServe, and is not subject to          
adjustment. No third party valuations or appraisals were obtained in connection 
with the determination of the Merger Consideration. The same per share valuation
was used in determining the consideration payable in respect of whole and       
fractional shares. The aggregate Merger Consideration to be paid in the Merger, 
including amounts paid by the Company in respect of the cancellation of options 
to purchase Common Stock and amounts paid in respect of fractional shares, is   
approximately $144 million.                                                     

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        At the Effective Time, outstanding options to purchase shares of
Common Stock granted under any of the Company's option plans, whether or not    
then vested or exercisable ("Options"), surrendered by the holder thereof for   
cash, will be canceled, and in consideration of such cancellation (except to the
extent that AmeriServe or Merger Sub and the holder of any such Option otherwise
agree), the Company will pay to each such holder of Options an amount in cash in
respect thereof equal to the product of (i) the excess, if any, of the Merger   
Consideration over the per share exercise price of such Options and (ii) the    
number of shares of Common Stock subject to such Options, less applicable       
withholding taxes. As of the Record Date, there were approximately 639,650      
Options outstanding, all of which were held by current or former directors,     
officers or employees of the Company. Each Option represents the right to       
purchase one share of Common Stock. Approximately $1.9 million will be paid by  
the Company to Option holders in respect of the cancellation of such Options in 
connection with the Merger, including approximately $1.3 million to executive   
officers and directors of the Company, less applicable withholding taxes. See   
"The Merger Agreement -- The Merger -- Options."                                

            The Company's 1997 Employee Stock Purchase Plan (the "ESPP") permits
full-time employees of the Company and its subsidiaries who have been employed  
for at least three months prior to July 1 each year (the first day of the ESPP  
plan year) to purchase shares of Class A Common Stock, through payroll          
deductions, at 85% of the fair market value of a share of Class A Common Stock  
on the first business day of the plan year. Amounts withheld are held in        
participant accounts until the last business day of each quarter, at which time 
the shares of Class A Common Stock are purchased. Pursuant to the Merger        
Agreement, the Company has agreed to amend the ESPP such that, if the Effective 
Time occurs prior to the end of the current plan year, the date on which the    
Effective Time occurs will be deemed the last day of the current plan year for  
purposes of the ESPP. Such amendment will have the effect that on such date,    
immediately prior to the Effective Time, in accordance with the ESPP, all       
amounts previously withheld from the participants' pay pursuant to the ESPP will
be used to purchase shares of Class A Common Stock from the Company at a        
purchase price of $6.035 (85% of the fair market value of the Class A Common    
Stock on July 1, 1997 (as determined in accordance with the ESPP), the first    
business day of the current plan year). The shares purchased will thereafter be 
converted in the Merger into the right to receive the Merger Consideration. See 
"The Merger Agreement -- The Merger -- Employee Stock Purchase Plan."           

   The Company's Board of Directors has carefully reviewed and
considered the terms and conditions of the Merger Agreement and has determined  
that the Merger Agreement and the Merger are fair to and in the best interests  
of the Company and its stockholders AND HAS UNANIMOUSLY APPROVED AND ADOPTED THE
MERGER AGREEMENT AND RECOMMENDS THAT YOU VOTE FOR APPROVAL AND ADOPTION OF THE  
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY. See "The Merger -   
Background of the Merger" for a detailed description of negotiations between    
AmeriServe and the Company, and "The Merger - Reasons for the Merger;           
Recommendation of the Board of Directors" for a detailed discussion of the      
principal factors considered by the Board of Directors in reaching its          
determination that the Merger Agreement and the Merger are fair to and in the   
best interest of the Company and its stockholders.                              

          Only holders of record of Common Stock at the close of business on
the Record Date are entitled to notice of and to vote at the Special Meeting or 
any adjournments or postponements thereof. A complete list of stockholders      
entitled to vote at the Special Meeting will be available for examination, for  
proper purposes, during ordinary business hours at the offices of Kaye, Scholer,
Fierman, Hays & Handler, LLP, 425 Park Avenue, 19th Floor, New York, New York   
10022 during the ten days prior to the Special Meeting.                         

3 

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            The accompanying Proxy Statement describes the Merger Agreement, the
proposed Merger and certain actions to be taken in connection with the Merger.  
To ensure that your vote will be counted, please complete, date and sign the    
enclosed proxy card and return it promptly in the enclosed postage-paid         
envelope, whether or not you plan to attend the Special Meeting. You may revoke 
your proxy at any time before it is voted at the Special Meeting by giving due  
notice of such revocation to the Secretary of the Company, by signing and       
delivering a proxy bearing a later date or by attending the Special Meeting and 
voting in person. See "The Special Meeting - Voting and Revocation of Proxies;  
Adjournments" for a detailed discussion of the procedure for revoking proxies.  

       All shares of Common Stock which are represented at the Special
Meeting by a properly executed proxy received and not duly and timely revoked   
will be voted at the Special Meeting in accordance with the instructions        
contained therein. Proxies that do not contain any instruction to vote for or   
against or to abstain from voting on the Merger Proposal will be voted For the  
Merger Proposal.                                                                

        In connection with the proposed Merger, appraisal rights will be
available to those stockholders of the Company who meet and comply with the     
requirements of Section 262 of the General Corporation Law of the State of      
Delaware (the "DGCL"), a copy of which is included as Annex IV to the Proxy     
Statement. See "The Merger - Appraisal Rights" in the Proxy Statement for a     
detailed discussion of the appraisal rights available to stockholders under     
Section 262 of the DGCL in connection with the proposed Merger. Stockholders    
electing to exercise appraisal rights may receive more or less than the $15.00  
per share Merger Consideration to be paid to stockholders who do not exercise   
appraisal rights.                                                               

             By Order of the Board Of Directors,

       /s/ Paul A. Garcia de Quevedo
         -------------------------------
   Paul A. Garcia de Quevedo
Secretary             

Coral Gables, Florida                                                           
April 30, 1998                                                                  

        TO VOTE YOUR SHARES OF COMMON STOCK, PLEASE MARK, DATE, SIGN AND
RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE IN THE ENCLOSED              
POSTAGE-PREPAID ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING.

          PLEASE DO NOT SEND YOUR COMMON STOCK CERTIFICATES AT THIS TIME. IF
THE MERGER IS CONSUMMATED, AFTER THE EFFECTIVE TIME OF THE MERGER, YOU WILL BE  
SENT A LETTER OF TRANSMITTAL REGARDING THE SURRENDER OF YOUR CERTIFICATES. SEE  
"THE MERGER AGREEMENT -- THE MERGER -- EXCHANGE OF CERTIFICATES" IN THE         
ACCOMPANYING PROXY STATEMENT.                                                   

        IF YOU HAVE ANY QUESTIONS OR REQUIRE ADDITIONAL MATERIAL, PLEASE
CONTACT THE COMPANY'S CORPORATE SECRETARY, PAUL A. GARCIA DE QUEVEDO, AT (305)  
740-1000.                                                                       

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 PROSOURCE, INC.
1500 San Remo Avenue
 Coral Gables, Florida 33146

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

 PROXY STATEMENT

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

 SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 1998

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

INTRODUCTION

           This Proxy Statement (this "Proxy Statement") is being furnished to
holders of Class A common stock, par value $0.01 per share (the "Class A Common 
Stock") and holders of Class B common stock, par value $0.01 per share (the     
"Class B Common Stock" and collectively with the Class A Common Stock, the      
"Common Stock"), of ProSource, Inc., a Delaware corporation (together with its  
subsidiaries, except where the context otherwise requires, "ProSource" or the   
"Company"), in connection with the solicitation of proxies by and on behalf of  
the Company's Board of Directors (the "Board" or the "Board of Directors") for  
use at a Special Meeting of stockholders to be held at 11:30 a.m., local time,  
on May 20, 1998, at the offices of Kaye, Scholer, Fierman, Hays & Handler, LLP, 
425 Park Avenue, 19th Floor, New York, New York 10022, and at any adjournments  
or postponements thereof (the "Special Meeting").                               

        At the Special Meeting, holders of Common Stock will be asked to
consider and vote on a proposal to approve and adopt an Agreement and Plan of   
Merger, dated as of January 29, 1998 (the "Merger Agreement"), among AmeriServe 
Food Distribution, Inc., a Delaware corporation ("AmeriServe"), Steamboat       
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of      
AmeriServe ("Merger Sub"), and the Company and to approve the transactions      
contemplated by the Merger Agreement, including the Merger (as defined below).  
On the terms and subject to the conditions of the Merger Agreement, if the      
stockholders of the Company approve and adopt the Merger Agreement, (i) Merger  
Sub will be merged with and into the Company (the "Merger"), with the Company   
continuing as the surviving corporation (the "Surviving Corporation") and       
becoming a wholly-owned subsidiary of AmeriServe, and (ii) each outstanding     
share of Common Stock, including fractional shares, will be converted into the  
right to receive $15.00 in cash (or a pro-rata portion thereof, in the case of  
fractional shares), without interest (the "Merger Consideration") (other than   
shares held by the Company as treasury stock or shares owned by AmeriServe,     
Merger Sub or any subsidiary of the Company, AmeriServe or Merger Sub, which    
will be canceled, and shares held by the stockholders of the Company, if any,   
who properly exercise their appraisal rights under Delaware law). A copy of the 
Merger Agreement is attached as Annex I to this Proxy Statement. This Proxy     
Statement describes the material portions of the Merger Agreement. The          
description of the Merger Agreement set forth herein is subject to, and is      
qualified in its entirety by reference to, the text of the Merger Agreement.    

           The Merger Consideration was determined by negotiations
between the Company and AmeriServe, and is not subject to adjustment. No third  
party valuations or appraisals were obtained in connection with the             
determination of the Merger Consideration. The same per share valuation was used
in determining the consideration payable in respect of whole and fractional     
shares. The aggregate Merger Consideration to be paid in the Merger, including  
amounts paid by the Company in respect of the cancellation                      

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of options to purchase Common Stock and amounts paid in respect of fractional   
shares, is approximately $144 million.                                          

  Approval and adoption of the Merger Agreement requires the
affirmative vote of the holders of shares of Common Stock entitled to cast a    
majority of the votes of all outstanding shares of Common Stock held by         
stockholders of record on April 1, 1998 (the "Record Date"). Pursuant to a      
Voting Agreement, dated as of January 29, 1998 (the "Voting Agreement"), among  
AmeriServe, Merger Sub and Onex DHC LLC, Onex OMI LLC, ProSource Executive      
Investco LLC and Onex Ohio LLC (collectively, the "Onex Stockholders"), the Onex
Stockholders have agreed, among other things, to vote their shares in favor of  
the Merger, the adoption by the Company of the Merger Agreement and the approval
of the terms thereof and each of the other transactions contemplated by the     
Merger Agreement. The Onex Stockholders are controlled by Onex Corporation      
("Onex"). The Onex Stockholders beneficially own approximately 14.1% of the     
outstanding shares of Class A Common Stock and 89.1% of the outstanding shares  
of Class B Common Stock entitled to vote at the Special Meeting, representing in
the aggregate approximately 84.8% of the total votes entitled to be cast at the 
Special Meeting and thus have sufficient voting power to approve and adopt the  
Merger Agreement without regard to the votes of other stockholders. None of the 
Onex Stockholders received any consideration in exchange for agreeing to enter  
into the Voting Agreement. A copy of the Voting Agreement is attached as Annex  
II to this Proxy Statement. This Proxy Statement describes the material portions
of the Voting Agreement. The description of the Voting Agreement set forth      
herein is subject to, and is qualified in its entirety by reference to, the text
of the Voting Agreement.                                                        

   The Company's Board of Directors has carefully reviewed and
considered the terms and conditions of the Merger Agreement and has determined  
that the Merger Agreement and the Merger are fair to and in the best interests  
of the Company and its stockholders AND HAS UNANIMOUSLY APPROVED AND ADOPTED THE
MERGER AGREEMENT AND RECOMMENDS THAT YOU VOTE FOR APPROVAL AND ADOPTION OF THE  
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY. In reaching its     
determination, the Board of Directors considered, among other things, the       
opinion of Morgan Stanley & Co. Incorporated ("Morgan Stanley"), that as of the 
date of such opinion and based upon and subject to certain matters stated       
therein, the consideration to be received by the holders of Class A Common Stock
in the Merger, was fair from a financial point of view. The opinion of Morgan   
Stanley is included as Annex III to this Proxy Statement. You are urged to read 
the opinion in its entirety for further information with respect to the         
assumptions made, matters considered and limits of the review undertaken by     
Morgan Stanley.                                                                 

    All information contained in this Proxy Statement concerning
AmeriServe and its subsidiaries, including Merger Sub, has been supplied by     
AmeriServe and has not been independently verified by the Company. Except as    
otherwise indicated, all other information contained in this Proxy Statement has
been supplied or prepared by the Company.                                       

    This Proxy Statement and the accompanying form of proxy (the
"Proxy") and the other enclosed documents are being mailed on or about April 30,
1998 to holders of Common Stock entitled to notice of, and to vote at, the      
Special Meeting.                                                                

The date of this Proxy Statement is April 30, 1998. 

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 TABLE OF CONTENTS

SUMMARY  ......................................................................1
         THE COMPANIES.........................................................1
         THE SPECIAL MEETING...................................................1
         THE MERGER............................................................5

THE SPECIAL MEETING...........................................................11
         GENERAL  ............................................................11
         MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING......................11
         REQUIRED VOTES.......................................................11
         VOTING AND REVOCATION OF PROXIES; ADJOURNMENTS.......................12
         RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM..........................12
         APPRAISAL RIGHTS.....................................................13
         SOLICITATION OF PROXIES..............................................13

THE MERGER....................................................................14
         BACKGROUND OF THE MERGER ............................................14
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF        
                  DIRECTORS...................................................17
         OPINION OF MORGAN STANLEY............................................18
         INTERESTS OF CERTAIN PERSONS IN THE MERGER...........................21
         SOURCE AND AMOUNT OF FUNDS...........................................23
         ACCOUNTING TREATMENT.................................................23
         CERTAIN FEDERAL INCOME TAX CONSEQUENCES..............................24
         REGULATORY APPROVALS.................................................25
         CERTAIN CONSEQUENCES OF THE MERGER...................................25
         APPRAISAL RIGHTS.....................................................25

THE MERGER AGREEMENT..........................................................28
         THE MERGER...........................................................28
         REPRESENTATIONS AND WARRANTIES.......................................31
         CERTAIN COVENANTS....................................................32
         CONDITIONS TO THE MERGER.............................................35
         TERMINATION OF THE MERGER AGREEMENT..................................37
         AMENDMENT............................................................37
         FEES AND EXPENSES....................................................38

THE VOTING AGREEMENT..........................................................38
         TERM AND TERMINATION.................................................38
         VOTING   ............................................................38
         RESTRICTIONS ON TRANSFER AND WAIVER OF APPRAISAL RIGHTS..............39
         NO SOLICITATION......................................................39
         MERGER SUB OPTION....................................................40
         FURTHER AGREEMENTS OF AMERISERVE AND MERGER SUB......................41

THE COMPANIES.................................................................42
         PROSOURCE............................................................42
         AMERISERVE...........................................................42

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SELECTED FINANCIAL DATA.......................................................44

MARKET PRICES OF COMMON STOCK.................................................46

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL                                        
         OWNERS AND MANAGEMENT................................................48

STOCKHOLDER PROPOSALS.........................................................50

INDEPENDENT AUDITORS..........................................................50

OTHER MATTERS.................................................................50

AVAILABLE INFORMATION.........................................................51

ANNEX I--   Merger Agreement.................................................I-1
ANNEX II--  Voting Agreement................................................II-1
ANNEX III-- Morgan Stanley Opinion.........................................III-1
ANNEX IV--  Section 262 of the Delaware General Corporation Law.............IV-1
ANNEX V--   Certain Information Regarding ProSource, Inc.....................V-1

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 SUMMARY

   The following is a summary of certain information contained
elsewhere in this Proxy Statement. This summary is not intended to be complete  
and is qualified in its entirety by reference to the more detailed information  
contained elsewhere in this Proxy Statement and the Annexes hereto. Stockholders
are urged to read this Proxy Statement and the Annexes hereto carefully and in  
their entirety.                                                                 

 THE COMPANIES

ProSource.......................   The Company provides foodservice distribution
                            services to chain restaurants in North
                                   America and provides purchasing and logistics
                             services to the foodservice market. 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 serves a variety
                                of restaurants, including Burger King, Red
                                Lobster, Long John Silver's, Olive Garden,
                               TGIFriday's, Chick-fil-A, Chili's, Sonic,
                                TCBY and Wendy's. ProSource is an indirect
                              subsidiary of Onex Corporation. See "The
              Companies -- ProSource."

AmeriServe......................   AmeriServe is one of the nation's largest    
                                   foodservice distributors, distributing a wide
                                variety of items, including meat, poultry,
                                  frozen foods, canned and dry goods, produce,
                             beverages, dairy products, paper goods,
                           cleaning and other supplies and small
                                   equipment. See "The Companies -- AmeriServe."

Merger Sub......................   Merger Sub is a newly incorporated Delaware  
                                  corporation organized in connection with the
                                Merger and is a wholly-owned subsidiary of
                              AmeriServe. Upon the consummation of the
                                Merger, Merger Sub will be merged with and
                                   into the Company, with the Company continuing
                                 as the Surviving Corporation and becoming a
                            wholly-owned subsidiary of AmeriServe.

 THE SPECIAL MEETING

Time, Date and Place;                                                           
Record Date.....................   The Special Meeting of the stockholders of   
                                   the Company will be held at 11:30 a.m., local
                                   time, on May 20, 1998 at the offices of Kaye,
                                Scholer, Fierman, Hays & Handler, LLP, 425
                                 Park Avenue, 19th Floor, New York, New York
                                   10022. Stockholders of record at the close of
                                 business on April 1, 1998, the Record Date,
                                will be entitled to notice of, and to vote
                              at, the Special Meeting. The date of the
                        mailing of this Proxy Statement to
                                stockholders of the Company is on or about
     April 30, 1998.

Effective Time..................   The Merger Agreement provides that, on the   
                               second business day after satisfaction or
                                 waiver of the conditions to the Merger, the
                            closing of the Merger shall take place
                              (unless another time is agreed to by the
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                                  at such time the Company and Merger Sub will
                           file a certificate of merger with the
                                 Secretary of State of the State of Delaware
                              and make all other filings or recordings
                                  required by the Delaware General Corporation
                             Law (the "DGCL") in connection with the
                                  Merger, and the Merger will become effective
                                  upon such filing or at such later time as is
                                  specified in such certificate of merger (the
        "Effective Time").

                             The obligations of each of the Company,
                                 AmeriServe and Merger Sub to consummate the
                               Merger are subject to various conditions,
                              including, without limitation, obtaining
                                 requisite Company stockholder approval, the
                               termination or expiration of the relevant
                                waiting period under the Hart-Scott-Rodino
                            Antitrust Improvements Act of 1976, as
                                 amended (the "HSR Act") (see "The Merger --
                                Regulatory Approvals"), and the absence of
                                   any applicable law, injunction or other legal
                                   restraint prohibiting the consummation of the
                          Merger. See "The Merger Agreement --
                                Conditions to the Merger." The Company has
                                   been informed by the Federal Trade Commission
                                   (the "FTC") that the waiting period under the
                            HSR Act was terminated effective as of
        February 13, 1998.

                                If the stockholders of the Company approve
                                  the Merger Proposal (as defined herein), the
                                 Effective Time is expected to occur as soon
                                   as practicable following the Special Meeting.

Matters to be Considered at                                                     
the Special Meeting.............   At the Special Meeting, the stockholders of  
                               the Company will consider and vote upon a
                              proposal to approve and adopt the Merger
                                 Agreement and the transactions contemplated
                                thereby, including the Merger (the "Merger
                                   Proposal"), pursuant to which Merger Sub will
                             merge with and into the Company and the
                              stockholders of the Company will receive
                                 $15.00 in cash, without interest, per share
                                of Common Stock, other than shares held by
                                   the Company as treasury stock or shares owned
                                 by AmeriServe, Merger Sub or any subsidiary
                               of the Company, AmeriServe or Merger Sub,
                                which will be canceled, and shares held by
                                  the stockholders of the Company, if any, who
                              properly exercise their appraisal rights
                          under Delaware law. See "The Special
                                Meeting -- Matters to be Considered at the
       Special Meeting."

Required Votes..................   The approval of the Merger Proposal will     
                                 require the affirmative vote of the holders
                                  of shares of Common Stock entitled to cast a
                              majority of the votes of all outstanding
                                shares of Common Stock entitled to vote at
                                  the Special Meeting. On the Record Date, the
                                 Company had outstanding 9,383,591 shares of
                               Common Stock (3,526,835 shares of Class A
                                  Common Stock and 5,856,756 shares of Class B
                                  Common Stock). Holders of the Class A Common
                                 Stock will be entitled to one vote for each
                               share of Class A Common Stock so held and
                                 holders of the Class B Common Stock will be
                                   entitled to ten votes for each share of Class
                                   B Common Stock so held. The Onex Stockholders
                               have agreed, pursuant to the terms of the
                             Voting Agreement, to vote all shares of
                                 Common Stock beneficially owned by them and
                                   all other shares of Common Stock of which the
Onex      

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                               Stockholders acquire beneficial ownership
                                   after January 29, 1998 and during the term of
                               the Voting Agreement, if any (such shares
                                   collectively, the "Subject Shares"), in favor
                                   of the Merger Proposal. The Onex Stockholders
                                   are controlled by Onex. The Onex Stockholders
                                 beneficially own approximately 14.1% of the
                                outstanding shares of Class A Common Stock
                                  and 89.1% of the outstanding shares of Class
                            B Common Stock entitled to vote at the
                          Special Meeting, representing in the
                                aggregate approximately 84.8% of the total
                              votes entitled to be cast at the Special
                                   Meeting and thus have sufficient voting power
                               to approve and adopt the Merger Agreement
                          without regard to the votes of other
                                 stockholders. None of the Onex Stockholders
                                received any consideration in exchange for
                                  agreeing to enter into the Voting Agreement.
                                  See "The Special Meeting -- Required Votes,"
                          "The Voting Agreement" and "Security
                                Ownership of Certain Beneficial Owners and
  Management."

Voting and Revocation of                                                        
Proxies; Adjournments...........   This Proxy Statement is being furnished to   
                            stockholders of record at the close of
                               business on the Record Date in connection
                                with the solicitation of Proxies by and on
                                behalf of the Board for use at the Special
                                   Meeting. All shares of Common Stock which are
                             represented at the Special Meeting by a
                                   properly executed Proxy received and not duly
                             and timely revoked will be voted at the
                            Special Meeting in accordance with the
                                  instructions contained therein. Proxies that
                                   do not contain any instruction to vote for or
                              against or to abstain from voting on the
                                  Merger Proposal will be voted For the Merger
Proposal. 

                                   The Board of Directors is not currently aware
                             of any business to be acted upon at the
                           Special Meeting other than the Merger
                              Proposal. If, however, other matters are
                                 properly brought before the Special Meeting
                                   or any adjournments or postponements thereof,
                                the persons appointed as proxies will have
                              the discretion to vote or act thereon in
                                 accordance with their best judgment, unless
                                  authority to do so is withheld in the Proxy.
                               The persons appointed as proxies will not
                                   exercise their discretionary voting authority
                            to vote any such Proxy in favor of any
                                  adjournments or postponements of the Special
                                   Meeting. If the Special Meeting is adjourned,
                              for whatever reason, the approval of the
                                   Merger Proposal shall be considered and voted
                                upon by the stockholders of the Company at
                                 the subsequent, reconvened meeting, if any.

                        Any Proxy signed and returned by a
                        stockholder may be revoked by such
                                   stockholder at any time before it is voted by
                                 giving due notice of such revocation to the
                                   Company's Corporate Secretary, Paul A. Garcia
                                de Quevedo, at 1500 San Remo Avenue, Coral
                           Gables, Florida 33146, by signing and
                                   delivering a Proxy bearing a later date or by
                                 attending the Special Meeting and voting in
                               person. Attendance at the Special Meeting
                                without taking other affirmative action as
                          aforementioned will not constitute a
                             revocation of a Proxy. See "The Special
                                  Meeting -- Voting and Revocation of Proxies;
    Adjournments."

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Solicitation of Proxies.........   The cost of soliciting proxies, which will be
                             undertaken by mail, telephone, personal
                                   contact or other means of communication, will
                                be borne by the Company. Arrangements will
                                 also be made with brokerage firms and other
                                  custodians, nominees and fiduciaries for the
                                  forwarding of proxy solicitation material to
                                certain beneficial owners of the Company's
                                  Common Stock, and the Company will reimburse
                            such forwarding parties for reasonable
                              expenses incurred by them. The Company's
                           regularly retained investor relations
                                 consultant, Corporate Communications, Inc.,
                                will assist in the solicitation of proxies
                                  from stockholders, and further solicitations
                                  may be undertaken by directors, officers and
                                 employees of the Company. Such persons will
                               not be compensated for such services, but
                          will be reimbursed for out of pocket
                           expenses. See "The Special Meeting --
               Solicitation of Proxies."

                          If you have any questions or require
                          additional material, please call the
                                   Company's Corporate Secretary, Paul A. Garcia
                               de Quevedo, at (350) 740-1000. HOLDERS OF
                        COMMON STOCK SHOULD NOT SEND STOCK
                                   CERTIFICATES WITH THEIR PROXY CARDS. See "The
                                   Merger Agreement -- The Merger -- Exchange of
    Certificates."

Security Ownership of                                                           
Certain Beneficial                                                              
Owners and Management...........   As of the Record Date, the Onex Stockholders 
                                beneficially owned an aggregate of 496,583
                                  shares of Class A Common Stock (representing
                                   approximately 14.1% of the outstanding shares
                                   of Class A Common Stock) and 5,218,072 shares
                           of Class B Common Stock (representing
                                   approximately 89.1% of the outstanding shares
                           of Class B Common Stock). Such shares
                              represent in the aggregate approximately
                                  84.8% of the total votes entitled to be cast
                                   at the Special Meeting. The Onex Stockholders
                               have agreed, pursuant to the terms of the
                                  Voting Agreement, to vote the Subject Shares
                      in favor of the Merger Proposal.

                                  As of the Record Date, excluding shares held
                                 by Onex and its affiliates which are deemed
                                 beneficially owned by Gerald W. Schwartz, a
                                 director of the Company and Chairman of the
                                  Board, President and Chief Executive Officer
                                   of Onex, the directors and executive officers
                          of the Company beneficially owned an
                                  aggregate of 17,645 shares of Class A Common
                                   Stock (representing approximately 0.5% of the
                                 outstanding shares of Class A Common Stock)
                                and 439,200 shares of Class B Common Stock
                             (representing approximately 7.5% of the
                                  outstanding shares of Class B Common Stock).
                            Such shares represent in the aggregate
                           approximately 7.1% of the total votes
                                 entitled to be cast at the Special Meeting.
                                 The directors and executive officers of the
                                Company have indicated that they intend to
                                   vote their shares of Common Stock in favor of
                                  the Merger Proposal. See "Security Ownership
                                   of Certain Beneficial Owners and Management."

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THE MERGER

Effect of the Merger;                                                           
Merger Consideration............   Upon consummation of the Merger, (i) Merger  
                                   Sub will be merged with and into the Company,
                                  with the Company continuing as the Surviving
                             Corporation and becoming a wholly-owned
                             subsidiary of AmeriServe, and (ii) each
                                  outstanding share of Common Stock, including
                                   fractional shares, will be converted into the
                           right to receive $15.00 in cash (or a
                              pro-rata portion thereof, in the case of
                                 fractional shares), without interest (other
                                 than shares held by the Company as treasury
                                  stock, or shares owned by AmeriServe, Merger
                           Sub or any subsidiary of the Company,
                             AmeriServe or Merger Sub, which will be
                                   canceled, and shares held by the stockholders
                                   of the Company, if any, who properly exercise
                                 their appraisal rights under Section 262 of
                             the DGCL). The Merger Consideration was
                            determined by negotiations between the
                                   Company and AmeriServe, and is not subject to
                              adjustment. No third party valuations or
                                 appraisals were obtained in connection with
                     the determination of the Merger
                                 Consideration. The same per share valuation
                               was used in determining the consideration
                                payable in respect of whole and fractional
                                   shares. The aggregate Merger Consideration to
                                   be paid in the Merger, including amounts paid
                                   by the Company in respect of the cancellation
                             of options to purchase Common Stock and
                                   amounts paid in respect of fractional shares,
                    is approximately $144 million.

Treatment of Stock                                                              
Options.........................   At the Effective Time, outstanding options to
                                   purchase shares of Common Stock granted under
                                  any of the Option Plans (as defined herein),
                               whether or not then vested or exercisable
                            ("Options"), surrendered by the holder
                                thereof for cash, will be canceled, and in
                                   consideration of such cancellation (except to
                                  the extent that AmeriServe or Merger Sub and
                             the holder of any such Option otherwise
                               agree), the Company will pay to each such
                            holder of Options an amount in cash in
                                 respect thereof equal to the product of (i)
                       the excess, if any, of the Merger
                               Consideration over the per share exercise
                                  price of such Options and (ii) the number of
                            shares of Common Stock subject to such
                                 Options, less applicable withholding taxes.
                       As of the Record Date, there were
                                approximately 639,650 Options outstanding,
                                  all of which were held by current and former
                             directors, officers or employees of the
                                  Company. Each Option represents the right to
                         purchase one share of Common Stock.
                                Approximately $1.9 million will be paid by
                                 the Company to Option holders in respect of
                         the cancellation of such Options in
                           connection with the Merger, including
                             approximately $1.3 million to executive
                                 officers and directors of the Company, less
                                   applicable withholding taxes. See "The Merger
                          Agreement -- The Merger -- Options."

Treatment of the                                                                
Company's Employee                                                              
Stock Purchase Plan.............   The Company's 1997 Employee Stock Purchase   
                                   Plan (the "ESPP") permits full-time employees
                                  of the Company and its subsidiaries who have
been      

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                                 employed for at least three months prior to
                                 July 1 each year (the first day of the ESPP
                              plan year) to purchase shares of Class A
                                  Common Stock, through payroll deductions, at
                                85% of the fair market value of a share of
                                Class A Common Stock on the first business
                                day of the plan year. Amounts withheld are
                                 held in participant accounts until the last
                                 business day of each quarter, at which time
                            the shares of Class A Common Stock are
                                  purchased. Pursuant to the Merger Agreement,
                                   the Company has agreed to amend the ESPP such
                                 that, if the Effective Time occurs prior to
                                   the end of the current plan year, the date on
                             which the Effective Time occurs will be
                                  deemed the last day of the current plan year
                                   for purposes of the ESPP. Such amendment will
                        have the effect that on such date,
                                 immediately prior to the Effective Time, in
                           accordance with the ESPP, all amounts
                                previously withheld from the participants'
                              pay pursuant to the ESPP will be used to
                                  purchase shares of Class A Common Stock from
                               the Company at a purchase price of $6.035
                                  (85% of the fair market value of the Class A
                                 Common Stock on July 1, 1997 (as determined
                             in accordance with the ESPP), the first
                                 business day of the current plan year). The
                                   shares purchased will thereafter be converted
                                 in the Merger into the right to receive the
                                  Merger Consideration. At the Effective Time,
                                   the Company will terminate the ESPP, any cash
                            held in participant accounts after the
                                  purchase described above will be distributed
                                to the respective participants in the ESPP
                           and no plan year that would otherwise
                                   commence on or after such date will commence.
                                If the current plan year ends prior to the
                                   Effective Time, the ESPP will terminate as of
                             the last day of the plan year. See "The
                                Merger Agreement -- The Merger -- Employee
           Stock Purchase Plan."

Recommendation of the                                                           
Board of Directors..............   The Board, at a meeting duly called and held,
                             has unanimously (i) determined that the
                                 Merger Agreement and the Merger are fair to
                                  and in the best interests of the Company and
                                its stockholders and (ii) recommended that
                                  the Company's stockholders approve and adopt
                               the Merger Agreement and the transactions
                           contemplated thereby. In reaching its
                                 determination that the Merger Agreement and
                            the Merger are fair to and in the best
                      interests of the Company and its
                                 stockholders, the Board considered a number
                               of factors, as more fully described under
                            "The Merger -- Reasons for the Merger;
                                Recommendation of the Board of Directors."

Opinion of Morgan                                                               
Stanley.........................   Morgan Stanley has delivered to the Board of 
                                Directors a written opinion, dated January
                                 29, 1998 (the "Morgan Stanley Opinion"), to
                             the effect that, as of the date of such
                                   opinion and based upon and subject to certain
                        matters stated therein, the Merger
                              Consideration was fair, from a financial
                              point of view, to the holders of Class A
                               Common Stock. The full text of the Morgan
                          Stanley Opinion which sets forth the
                              assumptions made, matters considered and
                              limitations on the review undertaken, is
                                   attached as Annex III to this Proxy Statement
                                   and should be read carefully in its entirety.
                                   The Morgan Stanley Opinion is directed to the
                                Board of Directors and relates only to the
                                 fairness of the Merger Consideration to the
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                                 Stock, from a financial point of view, does
                                   not address any other aspect of the Merger or
                           any related transactions and does not
                        constitute a recommendation to any
                               stockholder of the Company as to how such
                            stockholder should vote at the Special
                                   Meeting. See "The Merger -- Opinion of Morgan
Stanley." 

Interests of Certain Persons                                                    
in the Merger...................   Certain directors and executive officers of  
                               the Company may have interests, described
                              herein, that present them with potential
                                  conflicts of interest in connection with the
                                Merger. The Board of Directors is aware of
                           such conflicts and considered them in
                                   addition to the other matters described under
                            "The Merger -- Reasons for the Merger;
                                Recommendation of the Board of Directors."

                                   For example, as of the Record Date, excluding
                                  shares held by Onex and its affiliates which
                                are deemed beneficially owned by Gerald W.
                             Schwartz, a director of the Company and
                                Chairman of the Board, President and Chief
                              Executive Officer of Onex, the executive
                           officers and directors of the Company
                           (including one former director of the
                                   Company) owned an aggregate of 486,845 shares
                                   of Common Stock (or approximately 5.2% of the
                                total outstanding shares of Common Stock).
                              The aggregate consideration that will be
                                  received upon the consummation of the Merger
                                by the executive officers and directors of
                                   the Company in respect of such shares will be
                               $7,302,675. In addition, as of the Record
                            Date, the current and former executive
                                   officers and directors of the Company had the
                                 right to acquire, in the aggregate, 355,100
                                 shares of Common Stock upon the exercise of
                                  Options granted pursuant to the Option Plans
                             at exercise prices less than the Merger
                                   Consideration. The cash that will be received
                                by the executive officers and directors of
                              the Company upon the consummation of the
                                 Merger pursuant to the surrender of Options
                            will be approximately $1,255,175, less
                            applicable withholding taxes. David R.
                                  Parker, the Company's Chairman of the Board,
                           and Thomas C. Highland, the Company's
                                President and Chief Executive Officer, are
                              currently in discussions with AmeriServe
                               regarding the possible extension of their
                                employment agreements with the Company and
                                 the terms thereof. Further, pursuant to the
                                  Voting Agreement, the Onex Stockholders have
                                   agreed to vote the Subject Shares in favor of
                                 the Merger Proposal and have granted Merger
                                   Sub the Merger Sub Option (as defined herein)
                           to purchase the Subject Shares at the
                                 Exercise Price (as defined herein), in each
                                  case, subject to the terms and conditions of
                                   the Voting Agreement. If Merger Sub exercises
                                  the option, purchases the Subject Shares and
                              has not acquired the remaining shares of
                           Common Stock, then Merger Sub will be
                            obligated to pay the Onex Stockholders
                                one-half of any consideration in excess of
                                the Exercise Price (net of taxes, expenses
                              and other specified amounts) received by
                                 Merger Sub in respect of the Subject Shares
                               in connection with a Third Party Business
                                Combination (as defined herein) during the
                                  one year period following the closing of the
                               Option exercise. For detailed information
                                   concerning such conflicts, see "The Merger --
                                  Interests of Certain Persons in the Merger."

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Conditions to the Merger........   The obligations of each of the Company,      
                                 AmeriServe and Merger Sub to consummate the
                               Merger are subject to various conditions,
                              including, without limitation, obtaining
                                 requisite Company stockholder approval, the
                               termination or expiration of the relevant
                                waiting period under the HSR Act (see "The
                               Merger -- Regulatory Approvals"), and the
                                  absence of any applicable law, injunction or
                           other legal restraint prohibiting the
                                 consummation of the Merger. The Company has
                               been informed by the FTC that the waiting
                             period under the HSR Act was terminated
                        effective as of February 13, 1998.

                           The conditions to closing relating to
                                 approval of the Merger Agreement by Company
                                   stockholders, compliance with the HSR Act and
                                   the absence of any laws, injunctions or other
                                   legal restraints prohibiting the consummation
                            of the Merger may not be waived by the
                              parties. The Company does not believe it
                                   could waive any other condition if the effect
                          of such waiver would be to alter the
                                   consideration to be received by stockholders,
                       unless the waiver was approved by
                                stockholders. See "The Merger Agreement --
                Conditions to the Merger."

Termination.....................   The Merger Agreement is subject to           
                          termination at any time prior to the
                             Effective Time by the mutual consent of
                            AmeriServe and the Company. The Merger
                                  Agreement is also subject to termination (i)
                                 by AmeriServe if the Company's stockholders
                               fail to approve the Merger at the Special
                          Meeting or if the Company's Board of
                                 Directors withdraws or modifies in a manner
                             adverse to AmeriServe or Merger Sub its
                              approval or recommendation of the Merger
                                Agreement or the Merger (or resolves to do
                                 so) or (ii) by AmeriServe or the Company if
                               there is any law or regulation that makes
                           consummation of the Merger illegal or
                           otherwise prohibited or any judgment,
                           injunction, order or decree enjoining
                                 AmeriServe or the Company from consummating
                                  the Merger is entered (which, in the case of
                        any action brought other than by a
                               governmental entity, has become final and
                              non-appealable), or if the Merger is not
                             consummated by July 1, 1998. The Merger
                                   Agreement does not provide for the payment of
                                  monetary penalties to any party in the event
                            that it is terminated. See "The Merger
                            Agreement -- Termination of the Merger
 Agreement."

The Voting Agreement............   Pursuant to the Voting Agreement, the Onex   
                                   Stockholders have agreed, among other things,
                                 to vote the Subject Shares, representing an
                                   aggregate of approximately 84.8% of the total
                              votes entitled to be cast at the Special
                                   Meeting, in favor of the Merger, the adoption
                                by the Company of the Merger Agreement and
                                   the approval of the terms thereof and each of
                                the other transactions contemplated by the
                                 Merger Agreement, and against certain other
                                   corporate actions, including any such actions
                                   that relate to any competing transaction, and
                                   the Onex Stockholders have granted AmeriServe
                                 and Merger Sub an irrevocably proxy to vote
                                 the Subject Shares in such manner. The Onex
                                Stockholders have also agreed, pursuant to
                                  the Voting Agreement, to comply with certain
                                 restrictions on the transfer of the Subject
                              Shares, to waive any rights of appraisal
                                 available in connection with the Merger and
                                  to take or refrain from taking certain other

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                                actions. Pursuant to the Voting Agreement,
                                  the Onex Stockholders have granted to Merger
                                Sub an irrevocable option (the "Merger Sub
                                Option") to purchase the Subject Shares at
                                $15.00 per share (the "Exercise Price") if
                              the Merger Agreement is terminated under
                                certain circumstances subject to the terms
                                and conditions of the Voting Agreement. In
                             the event that Merger Sub purchases the
                               Subject Shares pursuant to the Merger Sub
                                Option, it will be required to make a cash
                              tender offer for the remaining shares of
                               Common Stock not held by it at a price of
                          $15.00 per share, subject to certain
                                   conditions set forth in the Voting Agreement.
                                   If Merger Sub exercises the option, purchases
                                 the Subject Shares and has not acquired the
                                   remaining shares of Common Stock, then Merger
                           Sub will be obligated to pay the Onex
                                   Stockholders one-half of any consideration in
                                 excess of the Exercise Price (net of taxes,
                           expenses and other specified amounts)
                              received by Merger Sub in respect of the
                               Subject Shares in connection with a Third
                            Party Business Combination (as defined
                                  herein) during the one year period following
                          the closing of the Merger Sub Option
                         exercise. The Onex Stockholders are
                          controlled by Onex. None of the Onex
                                Stockholders received any consideration in
                             exchange for agreeing to enter into the
                                   Voting Agreement. For a more detailed summary
                                   of the foregoing provisions and certain other
                                  provisions of the Voting Agreement, see "The
        Voting Agreement."

Appraisal Rights................   Holders of Common Stock on the Record Date   
                                that do not vote in favor of approving and
                              adopting the Merger Agreement (including
                                  those who abstain with respect to the Merger
                           Proposal and those who do not provide
                                 specific voting instructions to brokers who
                                  hold their shares of Common Stock in "street
                               name") and that otherwise comply with the
                                applicable statutory procedures of Section
                                   262 of the DGCL will be entitled to appraisal
                           rights under Section 262 of the DGCL.
                                 Stockholders electing to exercise appraisal
                              rights may receive more or less than the
                                 $15.00 per share Merger Consideration to be
                              paid to stockholders who do not exercise
                                   appraisal rights. A summary of the provisions
                             of Section 262 of the DGCL, including a
                            summary of the requirements with which
                                holders of Common Stock desiring to assert
                                appraisal rights must comply, is contained
                             herein under the heading "The Merger --
                                   Appraisal Rights." The entire text of Section
                                 262 of the DGCL is attached hereto as Annex
IV.       

Certain Federal Income                                                          
Tax Consequences................   The receipt of cash by a stockholder of the  
                              Company pursuant to the Merger will be a
                                taxable transaction for federal income tax
                            purposes and may also be taxable under
                                applicable state, local and foreign income
                                   and other tax laws. In general, a stockholder
                             will recognize gain or loss for federal
                                   income tax purposes in an amount equal to the
                                  difference between the adjusted tax basis of
                                 his, her or its Common Stock and the amount
                                  of cash received in exchange therefor in the
                                 Merger. Such gain or loss generally will be
                                   capital gain or loss if the Common Stock is a
                        capital asset in the hands of such
                                stockholder. In the case of an individual,
                              any such capital gain will be subject to
                                 federal income tax at a maximum rate of 28%
                                  if the holder's holding period in the Common
                 Stock is more than one year

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                                  but not more than 18 months and at a maximum
                                   rate of 20% if the holder's holding period is
                                 more than 18 months. The foregoing does not
                              apply to individuals who are receiving a
                                payment pursuant to the Merger in exchange
                                  for Options. Such individuals will recognize
                               ordinary income equal to the full payment
                                  that they are entitled to receive in respect
                      of such Options (i.e. the Merger
                                  Consideration less the exercise price of the
                            Option). The foregoing is based on the
                              opinion of Kaye, Scholer Fierman, Hays &
                               Handler, LLP, counsel to the Company. See
                               "The Merger -- Certain Federal Income Tax
    Consequences."

                             BECAUSE CERTAIN TAX CONSEQUENCES OF THE
                                 MERGER MAY VARY DEPENDING ON THE PARTICULAR
                              CIRCUMSTANCES OF EACH STOCKHOLDER, IT IS
                              RECOMMENDED THAT HOLDERS OF COMMON STOCK
                               CONSULT THEIR TAX ADVISORS CONCERNING THE
                                FEDERAL (AND ANY STATE, LOCAL AND FOREIGN)
                             TAX CONSEQUENCES OF THE MERGER IN THEIR
               PARTICULAR CIRCUMSTANCES.

Selected Financial                                                              
Data............................   Certain selected financial data of the       
                           Company are set forth under "SELECTED
                                 FINANCIAL DATA." The data should be read in
                                   conjunction with the financial statements and
                        related notes included in "Certain
                            Information Regarding ProSource, Inc."
                                  attached as Annex V to this Proxy Statement.

Certain Information in                                                          
Connection with the                                                             
Class A Common Stock............   The Class A Common Stock is quoted on the    
                                  Nasdaq National Market. On January 29, 1998,
                               the last trading date prior to the public
                                 announcement of the execution of the Merger
                                 Agreement, the closing price of the Class A
                           Common Stock, as quoted on the Nasdaq
                                 National Market, was $6 15/16 per share. On
                                   April 1, 1998, the closing price of the Class
                             A Common Stock, as quoted on the Nasdaq
                             National Market, was $14 3/4 per share.
                              Stockholders are urged to obtain current
                                  market quotations for the Common Stock prior
                                to making any decision with respect to the
                                  Merger. See "Market Prices of Common Stock."

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 THE SPECIAL MEETING

GENERAL                                                                         

          This Proxy Statement is being furnished to holders of Common Stock
in connection with the solicitation of Proxies by and on behalf of the Board for
use at the Special Meeting to be held at 11:30 a.m., local time, on May 20,     
1998, at the offices of Kaye, Scholer, Fierman, Hays & Handler, LLP, 425 Park   
Avenue, 19th Floor, New York, New York 10022, and at any adjournments or        
postponements thereof.                                                          

MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING                                 

    At the Special Meeting, the stockholders of the Company will
consider and vote on the Merger Proposal. The Merger Agreement is attached to   
this Proxy Statement as Annex I. See "The Merger" and "The Merger Agreement."   
The Board of Directors has determined that the Merger Agreement and the Merger  
are fair and in the best interests of the Company and its stockholders, has     
unanimously approved the Merger Agreement and recommends a vote FOR approval and
adoption of the Merger Proposal. See "The Merger -- Background of the Merger"   
and "-- Reasons for the Merger; Recommendation of the Board of Directors."      

REQUIRED VOTES                                                                  

        The approval of the Merger Proposal will require the affirmative
vote of the holders of shares of Common Stock entitled to cast a majority of the
votes of all outstanding shares of Common Stock entitled to vote at the Special 
Meeting. On the Record Date, the Company had outstanding 9,383,591 shares of    
Common Stock (3,526,835 shares of Class A Common Stock and 5,856,756 shares of  
Class B Common Stock). Holders of the Class A Common Stock will be entitled to  
one vote for each share of Class A Common Stock so held and holders of the Class
B Common Stock will be entitled to ten votes for each share of Class B Common   
Stock so held. The Onex Stockholders have agreed, pursuant to the terms of the  
Voting Agreement, to vote all of the Subject Shares in favor of the Merger      
Proposal. The Onex Stockholders beneficially own approximately 14.1% of the     
outstanding shares of Class A Common Stock and 89.1% of the outstanding shares  
of Class B Common Stock entitled to vote at the Special Meeting, representing in
the aggregate approximately 84.8% of the total votes entitled to be cast at the 
Special Meeting and thus have sufficient voting power to approve and adopt the  
Merger Agreement without regard to the votes of other stockholders. A copy of   
the Voting Agreement is attached to this Proxy Statement as Annex II. See "The  
Voting Agreement" and "Security Ownership of Certain Beneficial Owners and      
Management."                                                                    

    As of the Record Date, excluding shares held by Onex and its
affiliates which are deemed beneficially owned by Gerald W. Schwartz, a director
of the Company and Chairman of the Board, President and Chief Executive Officer 
of Onex, the directors and executive officers of the Company beneficially owned 
an aggregate of 17,645 shares of Class A Common Stock (representing             
approximately 0.5% of the outstanding shares of Class A Common Stock) and       
439,200 shares of Class B Common Stock (representing approximately 7.5% of the  
outstanding shares of Class B Common Stock). Such shares represent in the       
aggregate approximately 7.1% of the total votes entitled to be cast at the      
Special Meeting. The directors and executive officers of the Company have       
indicated that they intend to vote their shares of Common Stock in favor of the 
Merger Proposal. See "Security Ownership of Certain Beneficial Owners and       
Management."                                                                    

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VOTING AND REVOCATION OF PROXIES; ADJOURNMENTS                                  

            This Proxy Statement is being furnished to stockholders of record at
the close of business on the Record Date in connection with the solicitation of 
Proxies by and on behalf of the Board for use at the Special Meeting. All shares
of Common Stock which are represented at the Special Meeting by a properly      
executed Proxy received and not duly and timely revoked will be voted at the    
Special Meeting in accordance with the instructions contained therein. If a     
Proxy is signed and returned without indicating any voting instructions, shares 
of Common Stock represented by such Proxy will be voted FOR the Merger Proposal.
The Board of Directors is not currently aware of any business to be acted upon  
at the Special Meeting other than as described herein. If, however, other       
matters are properly brought before the Special Meeting or any adjournments or  
postponements thereof, the persons appointed as proxies will have the discretion
to vote or act thereon in accordance with their best judgment, unless authority 
to do so is withheld in the Proxy. The persons appointed as proxies will not    
exercise their discretionary voting authority to vote any such Proxy in favor of
any adjournments or postponements of the Special Meeting.                       

            A Proxy signed and returned by a stockholder may be revoked prior to
its being voted by (i) delivering to the Secretary of the Company, at or before 
the Special Meeting, a written instrument bearing a later date than the Proxy   
that by its terms revokes the Proxy, (ii) duly executing a subsequent Proxy     
relating to the same shares and delivering it to the Secretary of the Company at
or before the Special Meeting or (iii) attending the Special Meeting and giving 
notice of revocation to the Secretary of the Company or in open meeting prior to
the Proxy being voted (although attendance at the Special Meeting without taking
other affirmative action as aforementioned will not constitute a revocation of a
Proxy). Any written instrument revoking a Proxy must be received before the     
taking of the votes at the Special Meeting and should be sent to: ProSource,    
Inc., 1500 San Remo Avenue, Coral Gables, Florida 33146, Attention: Paul A.     
Garcia de Quevedo, Corporate Secretary.                                         

RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM                                     

April 1, 1998 has been fixed as the Record Date for the 
determination of the holders of Common Stock entitled to notice of, and to vote 
at, the Special Meeting. Only holders of Common Stock at the close of business  
on the Record Date will be entitled to notice of, and to vote at, the Special   
Meeting. At the close of business on the Record Date, there were 3,526,835      
shares of Class A Common Stock outstanding and entitled to vote at the Special  
Meeting, held by approximately 36 stockholders of record and 5,856,756 shares of
Class B Common Stock outstanding and entitled to vote of the Special Meeting,   
held by approximately 62 stockholders of record. The presence, in person or by  
properly executed Proxy, of a majority of the votes entitled to be cast by the  
holders of all outstanding shares of Common Stock is necessary to constitute a  
quorum at the Special Meeting. Shares of Common Stock represented by Proxies    
that are marked "abstain" or that are not marked as to any particular matter or 
matters and Proxies relating to "street name" shares that are voted by brokers  
will be counted as shares present for purposes of determining the presence of a 
quorum on all matters.                                                          

          Holders of Class A Common Stock on the Record Date are entitled to
one vote per share of Class A Common Stock and holders of Class B Common Stock  
on the Record Date are entitled to ten votes per share of Class B Common Stock, 
in each case, exercisable in person or by properly executed Proxy, upon each    
matter properly submitted for the vote of stockholders at the Special Meeting.  
Abstentions and broker non-votes ("street name" shares for which brokers do not 
receive specific voting instructions from beneficial owners) will not be counted
as votes cast in favor of the Merger Proposal. Because the vote on the Merger   
Proposal requires the approval of holders of shares of Common Stock entitled to 
cast a majority of the votes                                                    

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of all outstanding shares of Common Stock entitled to vote at the Special       
Meeting, abstentions and broker non-votes will have the same effect as a        
negative vote on the Merger Proposal.                                           

APPRAISAL RIGHTS                                                                

           Holders of Common Stock on the Record Date who do not vote in favor
of approving and adopting the Merger Agreement (including those who abstain with
respect to the Merger Proposal and those who do not provide specific voting     
instructions to brokers who hold their shares of Common Stock in "street name") 
and who otherwise comply with the applicable statutory procedures of Section 262
of the DGCL will be entitled to appraisal rights under the DGCL in connection   
with the Merger. Stockholders of the Company who vote in favor of approving and 
adopting the Merger Agreement, including stockholders who return a signed Proxy 
without indicating any voting instructions as to the Merger Proposal, however,  
will thereby waive their appraisal rights. Stockholders electing to exercise    
appraisal rights may receive more or less than the $15.00 per share Merger      
Consideration to be paid to stockholders who do not exercise appraisal rights.  
The full text of Section 262 of the DGCL is attached as Annex IV to this Proxy  
Statement. See "The Merger -- Appraisal Rights" for a further discussion of such
rights and legal consequences of voting shares of Common Stock in favor of the  
Merger Proposal.                                                                

SOLICITATION OF PROXIES                                                         

         The cost of soliciting proxies, which will be undertaken by mail,
telephone, personal contact or other means of communication, will be borne by   
the Company. Arrangements will also be made with brokerage firms and other      
custodians, nominees and fiduciaries for the forwarding of proxy solicitation   
material to certain beneficial owners of the Company's Common Stock, and the    
Company will reimburse such forwarding parties for reasonable expenses incurred 
by them. The Company's regularly retained investor relations consultant,        
Corporate Communications, Inc., will assist in the solicitation of proxies from 
stockholders, and further solicitation may be undertaken by directors, officers 
and employees of the Company. Such persons will not be compensated for such     
services, but will be reimbursed for out of pocket expenses.                    

        If you have any questions or require additional material, please
call the Company's Corporate Secretary, Paul A. Garcia de Quevedo, at (305)     
740-1000.                                                                       

       STOCKHOLDERS ARE REQUESTED PROMPTLY TO COMPLETE, DATE, SIGN AND
RETURN THE ACCOMPANYING PROXY CARD TO THE COMPANY IN THE ENCLOSED POSTAGE-PAID  
ENVELOPE. STOCKHOLDERS SHOULD NOT FORWARD ANY CERTIFICATES REPRESENTING COMMON  
STOCK WITH THEIR PROXY CARDS. IN THE EVENT THE MERGER IS CONSUMMATED,           
CERTIFICATES SHOULD BE DELIVERED IN ACCORDANCE WITH INSTRUCTIONS SET FORTH IN A 
LETTER OF TRANSMITTAL WHICH WILL BE SENT TO STOCKHOLDERS PROMPTLY AFTER THE     
EFFECTIVE TIME. SEE "THE MERGER -- THE MERGER AGREEMENT -- EXCHANGE OF          
CERTIFICATES."                                                                  

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THE MERGER

BACKGROUND OF THE MERGER                                                        

           In recent years, the foodservice distribution industry in which the
Company operates has been marked by continuing consolidation. From time to time,
as opportunities to acquire other distributors have arisen, the Company has     
acquired or attempted to acquire other distributors in an effort to expand its  
customer base and improve its geographic customer density. These efforts have   
resulted in several acquisitions in recent years, including the acquisition in  
March 1995 of the National Accounts Division of The Martin-Brower Company. Not  
all of the Company's efforts to make acquisitions have been successful, however,
including two attempts in 1997 to make what would have been significant         
acquisitions.                                                                   

            Over a number of years and through October 1997 informal discussions
were held from time to time involving Anthony R. Melman, Vice President of Onex 
and a director of the Company, Anthony Munk, Vice President of Onex and a       
director of the Company, John V. Holten, Chairman and Chief Executive Officer of
AmeriServe, and, on several occasions, Benoit Jamar, a director of AmeriServe   
and a Managing Director of Donaldson, Lufkin & Jenrette Securities Corporation  
("DLJ"), an affiliate of which is an investor in AmeriServe, regarding          
AmeriServe's interest in a possible merger or other transaction with ProSource. 
Such discussions included a conversation on July 15, 1997 between Messrs. Jamar 
and Munk, a meeting on August 1, 1997 involving, among others, Messrs. Holten,  
Jamar, Melman and Munk and a conversation in mid-August between Messrs. Jamar   
and Munk. During this time, no formal proposals were made.                      

            In November 1997, Mr. Munk, in the course of a conversation with Mr.
Jamar, indicated that, as a result of interest in the food service distribution 
industry and in the Company engendered by the sale earlier that year of a       
significant competitor, Onex had received unsolicited indications of interest   
regarding its investment in the Company. In mid-December 1997, Mr. Jamar called 
Mr. Munk to arrange a meeting in early January 1998 to discuss the possibility  
of a potential transaction between AmeriServe and ProSource. In that            
conversation, Mr. Munk indicated that any proposal by AmeriServe would need to  
be made promptly in anticipation of a meeting of the Company's Board scheduled  
for late January, at which meeting Mr. Munk indicated the Company intended to   
review various strategic alternatives and determine in which direction to       
proceed. On January 8, 1998, Messrs. Holten and Jamar spoke with Messrs. Melman 
and Munk to discuss a potential transaction between AmeriServe and ProSource. On
January 13, 1998, Holberg Industries, Inc., AmeriServe's indirect parent company
("Holberg") proposed to Onex a merger involving AmeriServe and ProSource under  
which each holder of Common Stock would receive $13.00 per share in cash,       
subject to, among other things, certain closing conditions and Onex's commitment
to support the transaction. The Company believes that Holberg's determination to
make this offer was based on its independent evaluation of ProSource's business.
The following day Messrs. Jamar, Melman, Munk and Nigel S. Wright, a Principal  
of Onex, spoke by telephone and Onex indicated that the proposal was            
unacceptable. This determination was made because Onex and its affiliates, the  
Company's principal stockholders, were not prepared to vote in favor of a       
transaction at such price and believed that a higher per share price was        
obtainable through further negotiation.                                         

      During the period from January 14 though January 18, 1998, the
parties and their respective legal advisors had several telephone conversations 
regarding a possible transaction. On January 21, 1998, AmeriServe's counsel     
delivered draft merger and voting agreements to Onex. Messrs. Melman and Munk   
advised Mr. Jamar that they were not prepared to comment on or authorize counsel
for Onex and the Company to comment on the draft agreements unless a            
satisfactory price were proposed.                                               

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           On January 24, 1998, Holberg proposed to Onex a price of $14.50 per
share in cash, with terms of the merger to be as set forth in the draft         
agreements previously delivered. The Company believes that Holberg's            
determination to make this offer was based on its independent evaluation of     
ProSource's business. In a telephone conversation later that day, Onex indicated
that the proposed purchase price was still not satisfactory but that it was a   
basis upon which negotiations could proceed. Onex also committed to have its    
counsel provide comments on the draft merger agreement and voting agreement and 
requested that Holberg advise it of the specific information regarding ProSource
that it would need in order to be able to raise its price. Mr. Jamar agreed to  
do so but also advised that ProSource should prepare a presentation outlining   
its justification for additional consideration.                                 

          The following day, counsel for Onex and ProSource provided written
comments on the draft merger and voting agreements. In addition, further        
discussions were held between the parties regarding the timing and progress of  
negotiations, as well as procedures for entering into any agreement.            

            On Monday, January 26, 1998, David Parker, the Company's Chairman of
the Board, briefed each of the members of the Company's Board of Directors      
regarding the proposal by AmeriServe and the status of negotiations. In         
addition, the Company contacted Morgan Stanley to engage it for purposes of     
evaluating the proposed merger consideration and issuing an opinion as to its   
fairness, from a financial point of view, to holders of the Class A Common      
Stock. That afternoon, the parties' respective legal advisors met at the offices
of AmeriServe's counsel to discuss the terms of the merger agreement and voting 
agreement.                                                                      

      Further conversations were held during January 27 and 28, 1998
between the parties and their respective counsel regarding the terms of the     
merger agreement and voting agreement, as well as procedures for reaching       
definitive agreements. On January 27, 1998, AmeriServe and the Company executed 
a confidentiality agreement.                                                    

       On January 28, 1998, the Company and Morgan Stanley executed an
agreement whereby Morgan Stanley was formally retained to evaluate the proposed 
merger consideration and issue the fairness opinion.                            

       Late in the afternoon of January 28th, representatives of Onex,
Holberg and DLJ, as well as their respective counsel, held a telephone          
conference call during which certain contractual matters were discussed.        

        The Board of Directors of the Company met on January 29, 1998 to
consider the proposed terms and conditions of the transaction, as well as to    
consider certain other strategic alternatives. These alternatives included      
soliciting bids from third parties to acquire the Company, merging with another 
company, acquiring one or more other companies, selling a minority interest in  
the Company, entering into a strategic alliance with another company and        
continuing with the Company's existing business strategies. At this meeting,    
after having discussed and considered such strategic alternatives, the Board    
turned to the proposed Merger. The Company's legal counsel reviewed the terms of
the proposed merger agreement, and Morgan Stanley made a presentation to the    
Board setting forth its analysis of the proposed Merger and the bases therefor, 
and delivered its oral opinion indicating that the $14.50 per share             
consideration to be received by the holders Class A Common Stock in the proposed
Merger was fair from a financial point of view. After the presentation and      
discussion, the Board of Directors approved the Merger, including the cash      
purchase price of at least $14.50 per share, and the form of merger agreement   
and authorized Mr. Melman to proceed with further negotiations regarding a      
possible increase in the merger consideration. The Board's determination to     
approve the Merger and the form of merger agreement was based on its            
determination that the Merger, including merger consideration of at least $14.50
per share in cash, as compared to the other                                     

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strategic initiatives considered, represented, in the judgment of the Board, the
best option for maximizing value to holders of Common Stock, taking into account
the uncertainties inherent in such other strategic initiatives.                 

         At approximately 4:15 p.m. on January 29, AmeriServe delivered to
the Company executed copies of the Merger Agreement and Voting Agreement,       
together with a letter offering to acquire ProSource for an all cash price of   
$14.50 per share on the terms and conditions set forth in the executed Merger   
Agreement and Voting Agreement. The offer letter indicated that the offer was   
irrevocable until it expired at 9:00 p.m. that evening. Following receipt of the
executed offer letter, management representatives of the Company made a         
presentation to representatives of AmeriServe including detailed information    
regarding the financial performance of the Company and other aspects of the     
Company's operations such as financial information by type of distribution      
center, a breakdown of costs and staffing levels by functional area and         
disclosure of major capital commitments. After further discussion, at           
approximately 9:00 p.m., agreement was reached on a per share purchase price of 
$15.00, and the Merger Agreement and Voting Agreement were executed by the      
parties. The Company believes that Holberg's determination to raise its offer to
$15.00 per share was based on its independent evaluation of ProSource's         
business, which evaluation was based, in part, on the information disclosed in  
the presentation by ProSource management to representatives of AmeriServe.      

           Prior to the presentation by ProSource to AmeriServe on January 29,
no financial or other business information was exchanged by the parties, other  
than schedules to the Merger Agreement containing ordinary course disclosures   
regarding the Company's outstanding securities, material contracts (including   
collective bargaining agreements), recent changes in employee compensation, a   
recent change in an accounting principle (which is reflected in the Company's   
financial statements for the fiscal year ended December 27, 1997), outstanding  
debt, outstanding litigation, descriptions of outstanding employee benefit      
plans, certain labor and tax matters and transactions with affiliates. The      
schedules include information which is generally known to the public, as well as
non-public information.                                                         

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REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS                

         The Board has determined that the Merger Agreement and the Merger
are fair to and in the best interests of the Company and its stockholders and   
has unanimously approved and adopted the Merger Agreement. Accordingly, the     
Board recommends that stockholders vote FOR approval and adoption of the Merger 
Agreement.                                                                      

       In reaching its determination that the Merger Agreement and the
Merger are fair to and in the best interests of the Company and its             
stockholders, the Board consulted with the Company's legal and financial        
advisors and considered the following principal factors which were material to  
the Board's decision:                                                           

     (i) The premium provided by the Merger Consideration over the
historical market prices for the Common Stock, including the fact that the      
Merger Consideration represents a premium of 116% over the $6 15/16 per share   
last sale price of the Class A Common Stock on January 29, 1998, the trading day
preceding the date on which the execution of the Merger Agreement was publicly  
announced. See "Market Prices of Common Stock."                                 

          (ii) The Morgan Stanley Opinion to the effect that, based upon and
subject to certain matters stated therein, the Merger Consideration is fair,    
from a financial point of view, to the holders of Class A Common Stock and the  
presentation of Morgan Stanley at the January 29, 1998 Board meeting in         
connection with its opinion. See "-- Opinion of Morgan Stanley."                

      (iii) The fact that the Merger Consideration to be received by
stockholders of the Company is in the form of cash.                             

        (iv) The Board's view that the terms of the Merger Agreement, as
reviewed by the Board with its legal advisors and Morgan Stanley (see "The      
Merger Agreement"), are fair to and in the best interests of the Company and its
stockholders in light of the nature of the transaction.                         

           (v) The fact that AmeriServe's obligations to consummate the Merger
are not contingent upon receipt of financing to provide the necessary funds to  
complete the Merger and that the other conditions to closing are fairly limited 
in scope.                                                                       

           (vi) The Board's belief, after consultation with its legal counsel,
that the required regulatory approvals could be obtained for the Merger. See    
"The Merger -- Regulatory Approvals."                                           

            (vii) The Board's knowledge of the business, operations, properties,
assets, financial condition and operating results of the Company and the current
and prospective economic and competitive environment in which the Company       
operates.                                                                       

            The foregoing discussion of the information and factors discussed by
the Board is not meant to be exhaustive but is believed to include all material 
factors considered by the Board. In view of the variety of factors considered in
connection with its evaluation of the Merger, the Board did not find it         
practicable to, and did not quantify or otherwise attempt to assign any         
particular weight to the various factors that it considered in reaching its     
determination that the Merger Agreement and the Merger are fair to and in the   
best interests of the Company and its stockholders. In addition, individual     
members of the Board may have given different weight to different factors. As a 
result of its consideration of the foregoing and other relevant considerations, 
the Board determined that the Merger Agreement and the Merger are fair to and in
the best interests of the Company and its stockholders and unanimously approved 
and adopted the Merger Agreement.                                               

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OPINION OF MORGAN STANLEY                                                       

          ProSource retained Morgan Stanley to provide a fairness opinion in
connection with the Merger based on Morgan Stanley's qualifications, expertise  
and reputation, as well as Morgan Stanley's investment banking relationship and 
familiarity with ProSource. On January 29, 1998, Morgan Stanley delivered its   
oral opinion to the ProSource Board that, as of such date and based upon and    
subject to the various considerations set forth in the opinion, the $14.50 per  
share consideration to be received by the holders of Class A Common Stock       
pursuant to the proposed Merger Agreement was fair from a financial point of    
view to such holders. That opinion was subsequently confirmed in writing with   
respect to the $15.00 per share consideration provided for in the Merger        
Agreement.                                                                      

           The full text of Morgan Stanley's written opinion which sets forth,
among other things, assumptions made, matters considered and limitations on the 
review undertaken, is attached as Annex III to this Proxy Statement. ProSource  
stockholders are urged to, and should, read the opinion carefully and in its    
entirety. Morgan Stanley's opinion is directed to the ProSource Board, addresses
only the fairness from a financial point of view of the consideration to be     
received by the holders of the Class A Common Stock, and does not address any   
other aspect of the Merger or constitute a recommendation to any stockholder of 
ProSource as to how such stockholder should vote on the Merger Proposal. The    
summary of the Morgan Stanley Opinion as set forth in this Proxy Statement is   
qualified in its entirety by reference to the full text of such opinion.        

       In connection with rendering its opinion, Morgan Stanley, among
other things: (i) reviewed certain publicly available financial statements and  
other information regarding the Company and certain of its competitors,         
including research reports prepared by the equity research analysts of Morgan   
Stanley and other investment banks; (ii) reviewed certain internal financial    
statements and other financial and operating data concerning the Company        
prepared by the management of the Company; (iii) reviewed certain financial     
projections prepared by the management of the Company; (iv) discussed the past  
and current operations and financial condition and the financial, strategic and 
operating outlook of the Company with senior executives of the Company; (v)     
reviewed the reported prices and trading activity for the Class A Common Stock; 
(vi) compared the financial performance of the Company and the prices and       
trading activity of the Class A Common Stock with that of certain other         
comparable publicly-traded companies and their securities; (vii) reviewed the   
financial terms, to the extent publicly available, of certain comparable        
acquisition transactions; and (viii) reviewed the Merger Agreement and the      
Voting Agreement.                                                               

  Morgan Stanley assumed and relied upon without independent
verification the accuracy and completeness of the information reviewed by it for
the purposes of rendering its opinion. With regard to the financial projections,
Morgan Stanley assumed that they were reasonably prepared on bases reflecting   
the best currently available estimates and judgments of the future financial    
performance of ProSource. Morgan Stanley did not make any independent valuation 
or appraisal of the assets or liabilities of ProSource nor was it furnished with
any such appraisals. In addition, Morgan Stanley assumed that the Merger would  
be consummated in accordance with the terms set forth in the Merger Agreement.  
Morgan Stanley's opinions were necessarily based on economic, market and other  
conditions in effect on, and the information made available to Morgan Stanley as
of, the respective dates thereof.                                               

        In arriving at its opinion, Morgan Stanley was not authorized to
solicit, and did not solicit, interest from any party with respect to the       
acquisition, business combination or other extraordinary transaction involving  
the Company, nor did Morgan Stanley negotiate with AmeriServe or any parties    
which may have expressed interest in any possible acquisition of ProSource or   
certain of its constituent businesses.                                          

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         The following is a brief summary of certain analyses performed by
Morgan Stanley and reviewed with the ProSource Board on January 29, 1998, in    
connection with Morgan Stanley's presentation and opinion to the ProSource Board
on such date:                                                                   

    ProSource Class A Common Stock Performance. Morgan Stanley's
analysis of ProSource Class A Common Stock performance consisted of: a review of
closing prices and trading volumes from November 11, 1996, the date of the      
initial public offering, through January 27, 1998; ProSource's indexed price    
performance from November 11, 1996 through January 27, 1998 relative to the     
indexed price performance of a comparable company index (the "Comparable Company
Index") which was comprised of U.S. Foodservice, Inc. (formerly JP Foodservice),
Performance Food Group and SYSCO (the "Comparable Public Companies"); and the   
high and low prices for ProSource Class A Common Stock in the 12 months ended   
January 27, 1998. From November 12, 1996 through January 27, 1998 ProSource     
Class A Common Stock underperformed the Comparable Company Index. In the twelve 
month period ended January 27, 1998, the ProSource Class A Common Stock closed  
at a high of $14.00 and a low of $6.00 per share.                               

      Comparable Company Analysis. As a part of its analysis, Morgan
Stanley compared certain financial and operating data of ProSource with         
corresponding publicly available information of the Comparable Public Companies.
The financial information analyzed included a review of financial ratios such as
multiples of price to estimated 1997, 1998 and 1999 earnings per share ("EPS"), 
multiples of aggregate value (defined as market value of equity plus book value 
of debt and preferred stock less cash and marketable securities) to latest      
twelve months ("LTM") ended September 30, 1997, forecasted 1997 and 1998        
revenue, EBITDA (defined as earnings before interest, taxes, depreciation and   
amortization) and EBIT (defined as earnings before interest and taxes).         

     Morgan Stanley noted that, based on a compilation of earnings
projections dated January 23, 1998 obtained from Institutional Brokers Estimate 
System ("IBES"), the Comparable Public Companies traded at multiples of share   
price to (i) forecasted 1997 earnings per share in a range of 20.0 times to 32.0
times, compared to 24.1 times for ProSource, (ii) forecasted 1998 earnings per  
share in a range of 16.4 times to 22.3 times, compared to 10.1 times for        
ProSource, and (iii) forecasted 1999 earnings per share in a range of 13.4 times
to 17.1 times, compared to 8.2 times for ProSource. Morgan Stanley also noted   
that the Comparable Public Companies traded at multiples of aggregate value to  
(i) LTM revenue, EBITDA and EBIT of 0.3 times to 0.6 times, 10.1 times to 11.9  
times, and 13.4 times to 15.4 times, respectively, compared to 0.1 times, 8.0   
times and 14.0 times, respectively, for ProSource, (ii) forecasted 1997 EBITDA  
and EBIT of 9.6 times to 11.7 times, and 12.6 times to 15.1 times, respectively,
compared to 7.8 times and 13.2 times, respectively, for ProSource, and (iii)    
forecasted 1998 EBITDA and EBIT of 8.0 times to 10.8 times, and 10.0 times to   
14.0 times, respectively, compared to 5.9 times and 9.8 times, respectively, for
ProSource. Based on the financial ratios of the Comparable Public Companies,    
Morgan Stanley calculated theoretical per share trading ranges for ProSource    
based on earnings per share and EBITDA multiples of $5.25 to $6.25 and $11.50 to
$14.25, respectively.                                                           

          In order to compare ProSource's current operating performance with
that of the Comparable Public Companies, Morgan Stanley considered various      
financial measures of performance. Morgan Stanley noted that the Comparable     
Public Companies had LTM EBITDA, EBIT and net income margins in a range of 2.6% 
to 4.9%, 2.0% to 3.8%, and 0.9% to 2.1%, respectively, compared to 0.7%, 0.4%,  
and 0.2%, respectively, for ProSource.                                          

   No company utilized in the comparable companies analysis is
identical to the Company. In evaluating the Comparable Public Companies, Morgan 
Stanley made judgments and assumptions with regard to industry performance,     
general business, economic, market and financial conditions and other matters,  

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many of which are beyond the Company's control, such as the impact of           
competition on the Company and the industry generally, industry growth and the  
absence of any adverse material change in the financial condition and prospects 
of the Company or the industry or in the financial markets in general.          
Mathematical analysis (such as determining the average or median) is not in     
itself a meaningful method of using comparable company data.                    

       Precedent Transaction Analysis. Morgan Stanley reviewed certain
publicly available information regarding eleven transactions from 1994 to 1998  
involving the acquisition of companies determined by Morgan Stanley to be       
comparable to ProSource. For each transaction Morgan Stanley compared certain   
financial and market statistics, including the aggregate value of the           
transaction as a multiple of LTM EBITDA and the market value of equity of the   
transaction as a multiple of estimated LTM net income. In these transactions,   
Morgan Stanley noted that multiples of aggregate value to LTM EBITDA and        
multiples of the market value of equity as a multiple of LTM net income were    
within a range of 8.3 times and 13.9 times, and 16.8 times and 60.1 times,      
respectively. Pursuant to this analysis, Morgan Stanley calculated per share    
values for ProSource ranging from $9.50 to $14.00 per share.                    

         No transaction utilized in the comparable transaction analysis is
identical to the Merger. In evaluating the precedent transactions, Morgan       
Stanley made judgments and assumptions with regard to industry performance,     
general business, economic, market and financial conditions and other matters,  
many of which are beyond the Company's control, such as the impact of           
competition on the Company and the industry generally, industry growth and the  
absence of any adverse material change in the financial condition and prospects 
of the Company or the industry or in financial markets in general. Mathematical 
analysis (such as determining the average or median) is not in itself a         
meaningful method of using comparable transaction data.                         

       Discounted Cash Flow Analysis. Morgan Stanley performed several
discounted cash flow analyses in order to estimate the present values per share 
of ProSource Class A Common Stock based on certain financial projections        
prepared by management of the Company for fiscal year 1998, as well as certain  
sensitivities thereto intended to reflect the inherent uncertainty of financial 
forecasts and which incorporate differing assumptions of sales growth, EBITDA   
margins and capital expenditures. Morgan Stanley discounted the unlevered free  
cash flows of the Company (net income available to the holders of ProSource     
Class A Common Stock plus depreciation and amortization, deferred taxes,        
after-tax net interest expense less the sum of capital expenditures and         
investment in non-cash working capital) over the forecast period at a range of  
discount rates of 9.0% to 10.0%, the estimated weighted average cost of capital 
range for the Company. The present value of such free cash flows was then added 
to the present value of the Company's terminal value, computed using a range of 
terminal EBITDA multiples from 7.5 times to 8.5 times and discounted at the     
aforementioned range of discount rates. Based on the assumptions set forth      
above, the discounted cash flow analysis yielded a per share value up to $13.50 
per share.                                                                      

         The preparation of a fairness opinion is a complex process and is
not necessarily susceptible to a partial analysis or summary description. In    
arriving at its opinion, Morgan Stanley considered the results of all of its    
analyses as a whole and did not attribute any particular weight to any          
particular analysis or factor considered by it. Furthermore, selecting any      
portion of Morgan Stanley's analyses or factors considered by it, without       
considering all analyses and factors, would create an incomplete view of the    
process underlying the Morgan Stanley Opinion. In addition, Morgan Stanley may  
have deemed various assumptions more or less probable than other assumptions so 
that the ranges of valuations resulting from any particular analysis described  
above should not be taken to be Morgan Stanley's view of the actual value of    
ProSource.                                                                      

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            In performing its analyses, Morgan Stanley made numerous assumptions
with respect to industry performance, general business and economic conditions  
and other matters, many of which are beyond the control of ProSource. The       
analyses performed by Morgan Stanley are not necessarily indicative of actual   
values or actual future results, which may be significantly more or less        
favorable than suggested by such analyses. Such analyses were prepared solely as
a part of Morgan Stanley's analyses of the fairness from a financial point of   
view of the consideration to be received by the holders of Class A Common Stock 
pursuant to the Merger Agreement and were provided to the Company's Board of    
Directors in connection with the delivery of the Morgan Stanley Opinion. The    
analyses do not purport to be appraisals or to reflect the prices at which the  
Company might actually be valued in the marketplace.                            

        As described above, the Morgan Stanley Opinion, including Morgan
Stanley's presentation to ProSource's Board of Directors, was one of many       
factors taken into consideration by the Company's Board of Directors in making  
its determination to approve the Merger. Consequently, the Morgan Stanley       
analysis described above should not be viewed as determinative of the opinion of
ProSource's entire Board of Directors or the view of management with respect to 
the value of the Company.                                                       

        Morgan Stanley is a nationally recognized investment banking and
advisory firm. As part of its investment banking business, Morgan Stanley is    
continuously engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,  
secondary distributions of listed and unlisted securities, private placements   
and valuation, for corporate and other purposes. Morgan Stanley is a full       
service securities firm engaged in securities trading and brokerage activities, 
as well as providing investment banking, financing and financial advisory       
services. In the ordinary course of its trading and brokerage activities, Morgan
Stanley or its affiliates may, from time to time, hold long or short positions  
in, and may trade or otherwise effect transactions for its own accounts or for  
the accounts of customers, debt or equity securities or senior loans of         
ProSource and Onex Corporation. In the past, Morgan Stanley and its affiliates  
have provided financial advisory and financing services to ProSource and Onex   
Corporation and have received fees for the rendering of such services.          

        Pursuant to a letter agreement entered into on January 28, 1998,
between ProSource and Morgan Stanley, ProSource has agreed to pay to Morgan     
Stanley a fee of $500,000. ProSource has also agreed to reimburse Morgan Stanley
for its expenses and fees of its outside legal counsel and to indemnify Morgan  
Stanley and its affiliates, their respective directors, officers, agents and    
employees and each person, if any, controlling Morgan Stanley or any of its     
affiliates against certain liabilities, including liabilities under federal     
securities laws, and expenses, related to Morgan Stanley's engagement.          

INTERESTS OF CERTAIN PERSONS IN THE MERGER                                      

    Certain directors and executive officers of the Company have
interests, described herein, that present them with potential conflicts of      
interest in connection with the Merger. The Board of Directors is aware of the  
conflicts summarized below and considered them (to the extent in existence at   
the time) along with the other matters described under "-- Reasons for the      
Merger; Recommendation of the Board of Directors."                              

     Interests in Common Stock and Options. As of the Record Date,
excluding shares held by Onex and its affiliates which are deemed beneficially  
owned by Gerald W. Schwartz, a director of the Company and Chairman of the      
Board, President and Chief Executive Officer of Onex, the executive officers and
directors of the Company (including one former director of the Company) owned an
aggregate of 486,845 shares of Common Stock (or approximately 5.2% of the total 
outstanding shares of Common Stock). Shares of Common Stock held by the         
executive officers and directors of the Company will be converted into          

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the right to receive the same consideration as shares of Common Stock held by   
other stockholders. Accordingly, the aggregate consideration that will be       
received upon the consummation of the Merger by the executive officers and      
directors of the Company in respect of such shares will be $7,302,675.          

      In addition, as of the Record Date, the executive officers and
directors of the Company (including one former director of the Company) had the 
right to acquire, in the aggregate, 355,100 shares of Common Stock upon the     
exercise of Options granted pursuant to the Option Plans at exercise prices less
than the Merger Consideration. Pursuant to the Merger Agreement, at the         
Effective Time, outstanding Options, whether or not then vested or exercisable, 
surrendered by the holder thereof for cash, will be canceled, and in            
consideration of such cancellation (except to the extent that AmeriServe or     
Merger Sub and the holder of any such Option otherwise agree), the Company shall
pay to each such holder of Options an amount in cash in respect thereof equal to
the product of (i) the excess, if any, of the Merger Consideration over the per 
share exercise price of such Options and (ii) the number of shares of Common    
Stock subject to such Options, less applicable withholding taxes. The cash that 
will be received by the executive officers and directors of the Company upon the
consummation of the Merger pursuant to the surrender of Options will be         
approximately $1,255,175, less applicable withholding taxes. See "The Merger    
Agreement -- The Merger -- Options."                                            

         Severance Arrangements. At the request of AmeriServe, the Company
has adopted a new severance payment plan (the "Severance Plan") effective and   
conditioned upon consummation of the Merger, pursuant to which all regular      
full-time employees of the Company and its subsidiaries, including executive    
officers of the Company, may receive separation benefits. Under the Severance   
Plan, any employee whose employment is terminated without cause is eligible to  
receive severance payments. In order to receive such payments, the employee     
must, among other things, continue his or her employment through a severance    
date to be determined by the Company, sign a release of any claims that he or   
she may have against the Company and continue to comply with existing           
confidentiality and non-solicitation agreements. Severance payments, which are  
payable in normal payroll intervals, will consist of a number of weeks of the   
employee's base salary at the time of severance, based on the employee's length 
of service and level of responsibility, subject to minimum and maximum payments 
depending on level of responsibility (e.g. a minimum of 26 weeks and maximum of 
52 weeks for employees at the level of "Director").                             

    Voting Agreement. Pursuant to the Voting Agreement, the Onex
Stockholders have agreed to vote the Subject Shares in favor of the Merger      
Proposal and have granted Merger Sub the Merger Sub Option to purchase the      
Subject Shares at the Exercise Price, in each case, subject to the terms and    
conditions of the Voting Agreement. If Merger Sub exercises the option,         
purchases the Subject Shares and has not acquired the remaining shares of Common
Stock, then Merger Sub will be obligated to pay the Onex Stockholders one-half  
of any consideration in excess of the Exercise Price (net of taxes, expenses and
other specified amounts) received by Merger Sub in respect of the Subject Shares
in connection with a Third Party Business Combination (as defined herein) during
the one year period following the closing of the Option exercise. See "The      
Voting Agreement."                                                              

         Stay Bonus Arrangements. At the request of AmeriServe, to provide
incentive for a successful transition of the Company's ownership, the Company   
expects to adopt a stay bonus program, subject to consummation of the Merger,   
under which certain employees will be eligible to receive a cash bonus for      
remaining employed with the Company for a specified period after the Effective  
Time. As of the date of this Proxy Statement the individual amounts to be       
awarded to eligible employees and the aggregate amount available under such plan
are in the process of being finalized. Under the terms of the Merger Agreement, 
any stay bonus plan will be subject to the review and approval of AmeriServe.   

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         Employment Agreements. David R. Parker, the Company's Chairman of
the Board, and Thomas C. Highland, the Company's President and Chief Executive  
Officer, are currently in discussions with AmeriServe regarding the possible    
extension of their employment agreements with the Company and the terms thereof.
Such discussions were initiated by AmeriServe following execution of the Merger 
Agreement and Voting Agreement and public announcement of the proposed Merger.  
The existing employment agreements of Messrs. Parker and Highland are currently 
scheduled to expire on July 1, 1999, subject to automatic one-year renewals     
unless either the Company or the applicable employee gives notice of termination
by January 1 prior to the date of expiration.                                   

         In addition, AmeriServe has made an oral commitment to retain all
employees of the Company, including executive officers, through January 1999    
unless terminated for cause.                                                    

            Indemnification and Insurance. Pursuant to the Merger Agreement, for
six years after the Effective Time, AmeriServe will cause the Surviving         
Corporation, subject to any mandatory limitation imposed under applicable law,  
to indemnify and hold harmless the present and former officers, directors,      
employees and agents of the Company and its subsidiaries in respect of acts or  
omissions occurring on or prior to the Effective Time or arising out of or      
pertaining to such persons' having served the Company or its subsidiaries in    
such capacities or the transactions contemplated by the Merger Agreement to the 
same extent as is provided under the Company's certificate of incorporation and 
bylaws in effect on the date of the Merger Agreement. During such six-year      
period, AmeriServe and the Surviving Corporation have agreed not to amend the   
indemnification or exculpation provisions of the certificate of incorporation or
bylaws of the Surviving Corporation in a manner inconsistent with the foregoing 
or otherwise adverse to such persons.                                           

           AmeriServe has agreed that, for six years after the Effective Time,
it will cause the Surviving Corporation, subject to certain limitations, to use 
its best efforts to provide officers' and directors' liability insurance in     
respect of acts or omissions occurring prior to the Effective Time covering each
such person currently covered by the Company's officers' and directors'         
liability insurance policy on terms substantially similar to those of such      
policy in effect on the date of the Merger Agreement. See "The Merger Agreement 
-- Certain Covenants -- Director and Officer Liability."                        

SOURCE AND AMOUNT OF FUNDS                                                      

           The total amount of funds required to consummate the Merger and pay
related fees and expenses is approximately $350 million. AmeriServe has         
indicated that it currently anticipates that funds for consummation of the      
Merger will be provided from general funds available to AmeriServe and its      
affiliates and by borrowings from enhancement of existing financing sources.    

ACCOUNTING TREATMENT                                                            

         The Merger will be accounted for by AmeriServe as a "purchase" in
accordance with generally accepted accounting principles. Therefore, the        
aggregate consideration paid by AmeriServe in connection with the Merger will be
allocated to the Company's assets and liabilities based upon their fair values, 
with any excess being treated as goodwill. The assets and liabilities and       
results of operations of the Company will be consolidated into the assets and   
liabilities and results of operations of AmeriServe subsequent to the           
consummation of the Merger.                                                     

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CERTAIN FEDERAL INCOME TAX CONSEQUENCES                                         

      In the opinion of Kaye, Scholer, Fierman, Hays & Handler, LLP,
counsel to the Company, the following are, under currently applicable law,      
certain United States federal income tax considerations generally applicable to 
holders of Common Stock who receive the Merger Consideration pursuant to the    
Merger. The tax treatment described herein may vary depending upon each         
stockholder's particular circumstances and tax position. Certain stockholders   
(including insurance companies, tax-exempt organizations, financial institutions
or broker-dealers, foreign corporations, persons who are not citizens or        
residents of the United States (the "U.S."), stockholders who do not hold their 
shares of Common Stock as capital assets and stockholders who have acquired     
their existing Common Stock upon the exercise of options or otherwise as        
compensation) may be subject to special rules not discussed below. No ruling    
from the Internal Revenue Service (the "IRS") will be applied for with respect  
to the federal income tax consequences discussed herein and, accordingly, there 
can be no assurance that the IRS will agree with the conclusions stated herein. 
The discussion below is based upon the provisions of the Internal Revenue Code  
of 1986, as amended (the "Code"), and regulations, rulings and judicial         
decisions thereunder as of the date hereof, and such authorities may be         
repealed, revoked or modified so as to result in U.S. federal income tax        
consequences different from those discussed below. In addition, this discussion 
does not consider the effect of any applicable foreign, state, local or other   
tax laws. Each stockholder should consult his, her or its own tax advisor as to 
the particular tax consequences to such stockholder of the Merger, including the
applicability and effect of any foreign, state, local or other tax laws.        

        The receipt of cash in exchange for Common Stock pursuant to the
Merger will be a taxable transaction for federal income tax purposes and may    
also be a taxable transaction under applicable state, local and foreign income  
and other tax laws. The tax consequences of such receipt may vary depending     
upon, among other things, the particular circumstances of the stockholder. In   
general, a stockholder will recognize gain or loss for federal income tax       
purposes equal to the difference between the adjusted tax basis of his, her or  
its Common Stock and the amount of cash received in exchange therefor in the    
Merger. Such gain or loss generally will be capital gain or loss if the Common  
Stock is a capital asset in the hands of such stockholder. In the case of an    
individual, any such capital gain will be subject to federal income tax at a    
maximum rate of 28% if the holder's holding period in the Common Stock is more  
than one year but not more than 18 months and at a maximum rate of 20% if the   
holder's holding period is more than 18 months. The foregoing does not apply to 
individuals who are receiving a payment pursuant to the Merger in exchange for  
Options. Such individuals will recognize ordinary income equal to the full      
payment that they are entitled to receive in respect of such Options (i.e., the 
Merger Consideration less the exercise price of the Option).                    

           The receipt of cash by a stockholder of the Company pursuant to the
Merger may be subject to backup withholding unless the stockholder (i) is a     
corporation or comes within certain other exempt categories, or (ii) provides a 
certified taxpayer identification number on Form W-9 and otherwise complies with
the backup withholding rules. Backup withholding is not an additional tax; any  
amounts so withheld may be credited against the federal income tax liability of 
the stockholder subject to the withholding.                                     

  THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY. DUE TO THE INDIVIDUAL NATURE OF TAX CONSEQUENCES, STOCKHOLDERS
ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO  
THEM OF THE MERGER, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL OR FOREIGN 
INCOME OR OTHER TAX LAWS.                                                       

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REGULATORY APPROVALS                                                            

        The Merger is subject to the requirements of the HSR Act and the
rules and regulations thereunder, which provide that certain transactions may   
not be consummated until required information and materials are furnished to the
Antitrust Division of the Department of Justice (the "Antitrust Division") and  
the FTC and the requisite waiting period expires or is terminated. The Company  
and AmeriServe (or their respective parents) made all filings required by the   
Antitrust Division and the FTC on February 9, 1998, commencing a thirty-day     
waiting period. The Company has been informed by the FTC that the waiting period
under the HSR Act was terminated effective as of February 13, 1998. However, at 
any time before or after the Effective Time, the Antitrust Division or the FTC  
could take such action under the antitrust laws as it deems necessary or        
desirable in the public interest, including seeking divestiture of substantial  
assets of AmeriServe or the Company or to enjoin the Merger. In addition, other 
governmental agencies, including state antitrust authorities, and other persons 
(such as customers or competitors of the Company or AmeriServe) could take      
similar action under the antitrust laws.                                        

CERTAIN CONSEQUENCES OF THE MERGER                                              

          As a result of the Merger, Merger Sub will be merged with and into
the Company and the Company will become a wholly-owned subsidiary of AmeriServe.
AmeriServe has advised the Company that following the consummation of the       
Merger, it anticipates that it will cause the Surviving Corporation to seek to  
have the Class A Common Stock, which is currently traded on the Nasdaq National 
Market, delisted, and to have it deregistered under the Securities Exchange Act 
of 1934, as amended (the "Exchange Act").                                       

APPRAISAL RIGHTS                                                                

           Under the DGCL, any stockholder that does not wish to accept $15.00
per share for his, her or its shares of Common Stock as provided in the Merger  
Agreement has the right to dissent from the Merger and to seek an appraisal of, 
and to be paid the fair value (exclusive of any element of value arising from   
the accomplishment or expectation of the Merger) for the shares of Common Stock,
provided that such stockholder complies with the provisions of Section 262 of   
the DGCL. Stockholders electing to exercise appraisal rights may receive more or
less than the $15.00 per share Merger Consideration to be paid to stockholders  
who do not exercise appraisal rights.                                           

         Holders of record of Common Stock who do not vote in favor of the
Merger Agreement (including those who abstain with respect to the Merger        
Proposal and those who do not provide specific voting instructions to brokers   
who hold their shares of Common Stock in "street name") and who otherwise comply
with the applicable statutory procedures will be entitled to appraisal rights   
under Section 262 of the DGCL. A person having a beneficial interest in shares  
of Common Stock held of record in the name of another person, such as a broker  
or nominee, must act promptly to cause the record holder to follow the steps    
summarized below properly and in a timely manner to perfect appraisal rights.   

       THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW
PERTAINING TO APPRAISAL RIGHTS UNDER THE DGCL AND IS QUALIFIED IN ITS ENTIRETY  
BY THE FULL TEXT OF SECTION 262 OF THE DGCL THAT IS REPRINTED IN ITS ENTIRETY AS
ANNEX IV. ALL REFERENCES IN SECTION 262 OF THE DGCL AND IN THIS SUMMARY TO A    
"STOCKHOLDER" OR "HOLDER" ARE TO THE RECORD HOLDER OF THE SHARES OF COMMON STOCK
AS TO WHICH APPRAISAL RIGHTS ARE ASSERTED.                                      

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        Under Section 262 of the DGCL, holders of shares of Common Stock
("Appraisal Shares") who follow the procedures set forth in Section 262 of the  
DGCL will be entitled to have their Appraisal Shares appraised by the Delaware  
Chancery Court and to receive payment in cash of the "fair value" of such       
Appraisal Shares, exclusive of any element of value arising from the            
accomplishment or expectation of the Merger, together with a fair rate of       
interest, if any, as determined by such court.                                  

       Under Section 262 of the DGCL, where a proposed merger is to be
submitted for approval at a meeting of stockholders, the corporation, not less  
than 20 days prior to the meeting, must notify each of its stockholders who was 
a stockholder on the record date for such meeting with respect to shares for    
which appraisal rights are available, that appraisal rights are so available,   
and must include in such notice a copy of Section 262 of the DGCL.              

      This Proxy Statement constitutes such notice to the holders of
Appraisal Shares and the applicable statutory provisions of the DGCL are        
attached to this Proxy Statement as Annex IV. Any stockholder who wishes to     
exercise such appraisal rights or that wishes to preserve his, her or its right 
to do so should review the following discussion and Annex IV carefully because  
failure to timely and properly comply with the procedures therein specified will
result in the loss of appraisal rights under the DGCL.                          

      A holder of Appraisal Shares wishing to exercise such holder's
appraisal rights (i) must not vote in favor of the Merger Agreement or consent  
thereto in writing (including a consent given by returning a signed Proxy       
without indicating any voting instructions as to the Merger Proposal) and (ii)  
must deliver to the Company prior to the vote on the Merger Agreement at the    
Special Meeting, a written demand for appraisal of such holder's Appraisal      
Shares. This written demand for appraisal must be in addition to and separate   
from any proxy or vote abstaining from or against the Merger. This demand must  
reasonably inform the Company of the identity of the stockholder and of the     
stockholder's intent thereby to demand appraisal of his, her or its shares. A   
holder of Appraisal Shares wishing to exercise such holder's appraisal rights   
must be the record holder of such Appraisal Shares on the date the written      
demand for appraisal is made and must continue to hold such Appraisal Shares    
until the consummation of the Merger. Accordingly, a holder of Appraisal Shares 
who is the record holder of Appraisal Shares on the date the written demand for 
appraisal is made, but who thereafter transfers such Appraisal Shares prior to  
consummation of the Merger, will lose any right to appraisal in respect of such 
Appraisal Shares.                                                               

              Only a holder of record of Appraisal Shares is entitled to
assert appraisal rights for the Appraisal Shares registered in that holder's    
name. A demand for appraisal should be executed by or on behalf of the holder of
record, fully and correctly, as such holder's name appears on such holder's     
stock certificates. If the Appraisal Shares are owned of record in a fiduciary  
capacity, such as by a trustee, guardian or custodian, execution of the demand  
should be made in that capacity, and if the Appraisal Shares are owned of record
by more than one owner as in a joint tenancy or tenancy in common, the demand   
should be executed by or on behalf of all joint owners. An authorized agent,    
including one or more joint owners, may execute a demand for appraisal on behalf
of a holder of record; however, the agent must identify the record owner or     
owners and expressly disclose the fact that, in executing the demand, the agent 
is agent for such owner or owners. A record holder such as a broker who holds   
Appraisal Shares as nominee for several beneficial owners may exercise appraisal
rights with respect to the Appraisal Shares held for one or more beneficial     
owners while not exercising such rights with respect to the Appraisal Shares    
held for other beneficial owners; in such case, the written demand should set   
forth the number of Appraisal Shares as to which appraisal is sought. When no   
number of Appraisal Shares is expressly mentioned, the demand will be presumed  
to cover all Appraisal Shares in brokerage accounts or other nominee forms and  
those who wish to exercise appraisal rights under Section 262 of the DGCL are   
urged to consult with their brokers to determine the appropriate procedures for 
the making of a demand for appraisal by such a nominee.                         

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        ALL WRITTEN DEMANDS FOR APPRAISAL SHOULD BE SENT OR DELIVERED TO
PROSOURCE, INC., 1500 SAN REMO AVENUE, CORAL GABLES, FLORIDA 33146, ATTENTION:  
PAUL A. GARCIA DE QUEVEDO, CORPORATE SECRETARY.                                 

         Within ten days after the consummation of the Merger, the Company
will notify each stockholder that has properly asserted appraisal rights under  
Section 262 of the DGCL and has not voted in favor of or consented to the Merger
of the date the Merger became effective.                                        

     Within 120 days after the consummation of the Merger, but not
thereafter, the Company or any stockholder who has complied with the statutory  
requirements summarized above may file a petition in the Delaware Chancery Court
demanding a determination of the fair value of the Appraisal Shares that are    
entitled to appraisal rights. The Company is under no obligation to and has no  
present intention to file a petition with respect to the appraisal of the fair  
value of the Appraisal Shares that are entitled to appraisal rights.            
Accordingly, it will be the obligation of stockholders wishing to assert        
appraisal rights to initiate all necessary action to perfect their appraisal    
rights within the time prescribed in Section 262 of the DGCL.                   

 Within 120 days after the consummation of the Merger, any
stockholder that has complied with the requirements for exercise of appraisal   
rights will be entitled, upon written request, to receive from the Company a    
statement setting forth the aggregate number of Appraisal Shares not voted in   
favor of adoption of the Merger Agreement and with respect to which demands for 
appraisal have been received and the aggregate number of holders of such        
Appraisal Shares. Such statements must be mailed within ten days after a written
request therefor has been received by the Company, or within ten days after     
expiration of the period for delivery of demands for appraisal under Section 262
of the DGCL, whichever is later.                                                

          If a petition for an appraisal is filed on a timely basis, after a
hearing on such petition, of which the Register in Chancery (if so ordered by   
the Delaware Chancery Court) shall give notice to stockholders, the Delaware    
Chancery Court will determine the stockholders entitled to appraisal rights and 
will appraise the "fair value" of their Appraisal Shares, exclusive of any      
element of value arising from the accomplishment or expectation of the Merger,  
together with a fair rate of interest, if any, to be paid upon the amount       
determined to be the fair value. Stockholders considering seeking appraisal     
should be aware that the fair value of their Appraisal Shares as determined     
under Section 262 of the DGCL could be more than, the same as or less than the  
value of the consideration they would receive pursuant to the Merger Agreement  
if they did not seek appraisal of their Appraisal Shares and that investment    
banking opinions as to fairness from a financial point of view, such as the     
Morgan Stanley Opinion, are not necessarily opinions as to fair value under     
Section 262 of the DGCL.                                                        

         In determining fair value, the Delaware Chancery Court is to take
into account all relevant factors. In Weinberger v. UOP, Inc., the Delaware     
Supreme Court discussed the factors that could be considered in determining fair
value in an appraisal proceeding, stating that "proof of value by any techniques
or methods which are generally considered acceptable in the financial community 
and otherwise admissible in court" should be considered, and that "fair price   
obviously requires consideration of all relevant factors involving the value of 
a company." The Delaware Supreme Court stated that, in making this determination
of fair value, the court must consider market value, asset value, dividends,    
earnings prospects, the nature of the enterprise and any other facts which could
be ascertained as of the date of the merger that throw any light on future      
prospects of the merged corporation. In Weinberger, the Delaware Supreme Court  
stated that "elements of future value, including the nature of the enterprise,  
which are known or susceptible of proof as of the date of the merger and not the
product of speculation, may be considered." Section 262 of the DGCL provides    
that fair value is to be "exclusive of any element of value arising from the    
accomplishment or                                                               

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expectation of the merger." In Cede & Co. v. Technicolor, Inc., the Delaware    
Supreme Court stated that such exclusion is a "narrow exclusion [that] does not 
encompass known elements of value."                                             

          The Delaware Chancery Court will determine the amount of interest,
if any, to be paid upon the amounts to be received by stockholders whose        
Appraisal Shares have been appraised. The costs of the action may be determined 
by the Delaware Chancery Court and taxed upon the parties as the Delaware       
Chancery Court deems equitable. The Delaware Chancery Court may also order that 
all or a portion of the expenses incurred by any stockholder in connection with 
an appraisal, including, without limitation, reasonable attorneys' fees and the 
fees and expenses of experts utilized in the appraisal proceeding, be charged   
pro rata against the value of all of the Appraisal Shares entitled to appraisal.

          Any holder of Appraisal Shares that has duly demanded an appraisal
in compliance with Section 262 of the DGCL will not, after the consummation of  
the Merger, be entitled to vote the Appraisal Shares subject to such demand for 
any purpose or be entitled to the payment of dividends or other distributions   
on those Appraisal Shares (except dividends or other distributions payable to   
holders of record of Appraisal Shares as of a record date prior to the          
consummation of the Merger).                                                    

         If any stockholder that properly demands appraisal of his, her or
its Appraisal Shares under Section 262 of the DGCL fails to perfect, or         
effectively withdraws or loses, his, her or its right to appraisal, as provided 
in Section 262 of the DGCL, the Appraisal Shares of such stockholder will be    
converted into the right to receive the consideration receivable with respect to
such Appraisal Shares in accordance with the Merger Agreement. A stockholder    
will fail to perfect, or effectively lose or withdraw, his, her or its right to 
appraisal if, among other things, no petition for appraisal is filed within 120 
days after the consummation of the Merger, or if such stockholder delivers to   
the Company a written withdrawal of his, her or its demand for appraisal. Any   
such attempt to withdraw an appraisal demand more than 60 days after the        
consummation of the Merger will require the written approval of the Company.    

           FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR
PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS (IN WHICH     
EVENT A STOCKHOLDER WILL BE ENTITLED TO RECEIVE THE CONSIDERATION RECEIVABLE    
WITH RESPECT TO HIS, HER OR ITS APPRAISAL SHARES IN ACCORDANCE WITH THE MERGER  
AGREEMENT).                                                                     

THE MERGER AGREEMENT

          The following is a brief summary of certain material provisions of
the Merger Agreement that is attached as Annex I to this Proxy Statement. Such  
summary does not purport to be complete and is qualified in its entirety by     
reference to the Merger Agreement. All capitalized terms used herein and not    
defined are used as defined in the Merger Agreement. Stockholders are urged to  
review the Merger Agreement carefully and in its entirety.                      

THE MERGER                                                                      

     In General. The Merger Agreement provides that, following the
approval and adoption of the Merger Agreement by the stockholders of the Company
and the satisfaction or waiver of the other conditions to the Merger, Merger Sub
will be merged with and into the Company, the separate existence of Merger Sub  
will cease and the Company will continue as the Surviving Corporation. Following
the Merger, the Surviving Corporation will be a wholly-owned subsidiary of      
AmeriServe. As a result of the Merger, the                                      

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Surviving Company will possess all the property, rights, privileges, immunities,
powers and franchises of the Company and Merger Sub, and be subject to all      
debts, restrictions, disabilities and duties of the Company and Merger Sub.     

        Effective Time. The Merger Agreement provides that on the second
business day after satisfaction or waiver of the conditions to the Merger, the  
closing of the Merger shall take place (unless another time is agreed to by the 
parties), and at such time the Company and Merger Sub will file a certificate of
merger with the Secretary of State of the State of Delaware and make all other  
filings or recordings required by the DGCL in connection with the Merger, and   
the Merger will become effective upon such filing or at such later time as is   
specified in such certificate of merger. If the stockholders of the Company     
approve the Merger Proposal, the Effective Time is expected to occur as soon as 
practicable following the Special Meeting.                                      

 Conversion of Securities. At the Effective Time, (i) each
outstanding share of Common Stock owned by the Company, AmeriServe, Merger Sub  
or any subsidiary of the Company, AmeriServe or Merger Sub immediately prior to 
the Effective Time will be canceled and no payment shall be made with respect   
thereto; (ii) each share of common stock of Merger Sub outstanding immediately  
prior to the Effective Time will be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation and shall      
constitute the only outstanding shares of capital stock of the Surviving        
Corporation; and (iii) each share of Common Stock outstanding immediately prior 
to the Effective Time and held by any holder (other than the Company,           
AmeriServe, Merger Sub or any subsidiary of the Company, AmeriServe or Merger   
Sub), including shares held by officers, directors and employees of the Company,
will, except as provided in the following paragraph, be converted into the right
to receive the Merger Consideration.                                            

   Shares of Common Stock outstanding immediately prior to the
Effective Time and held by a holder who has not voted in favor of the Merger or 
consented thereto and who has delivered a written demand for appraisal of such  
shares in accordance with Section 262 of the DGCL will not be converted into a  
right to receive the Merger Consideration, unless such holder fails to perfect, 
withdraws or otherwise loses his, her or its right to appraisal. If after the   
Effective Time such holder fails to perfect, withdraws or loses his, her or its 
right to appraisal, such shares will be treated as if they had been converted as
of the Effective Time into a right to receive the Merger Consideration.         

    Exchange of Certificates. Promptly after the Effective Time,
AmeriServe or a paying agent designated by AmeriServe (and reasonably           
satisfactory to the Company) (the "Exchange Agent") will mail to each holder of 
shares of Common Stock at the Effective Time a letter of transmittal for use in 
effecting the surrender of the certificates representing shares of Common Stock 
(the "Certificates") in exchange for the Merger Consideration. The letter of    
transmittal will specify that the delivery shall be effected and risk of loss   
and title shall pass only upon proper delivery of the Certificates representing 
the Common Stock to the Exchange Agent. Upon surrender of a Certificate or      
Certificates representing shares of Common Stock to the Exchange Agent, together
with a properly completed letter of transmittal covering such shares and other  
customary documentation, the holder thereof will be entitled to receive the     
Merger Consideration payable in respect of such shares. AmeriServe has agreed to
establish procedures reasonably satisfactory to the Company under which holders 
of shares of Common Stock will be able to receive payment of the Merger         
Consideration in immediately available funds immediately after the Effective    
Time. As of the Effective Time, all shares of Common Stock will no longer be    
outstanding and will automatically be canceled and retired and will cease to    
exist, and each holder of a Certificate previously representing any such shares 
will cease to have any rights with respect thereto, other than the right to     
receive the Merger Consideration, without interest, upon surrender of the       
Certificates representing such shares, as contemplated by the Merger            

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Agreement (except to the extent such shares are held by the Company or any      
subsidiary of the Company, AmeriServe or Merger Sub or such shares are held by  
stockholders of the Company, if any, who have properly exercised their appraisal
rights under Delaware law).                                                     

            If any portion of the Merger Consideration is to be paid to a Person
other than the registered holder of the shares of Common Stock represented by   
the Certificate or Certificates surrendered in exchange therefor, it will be a  
condition to such payment that the Certificate or Certificates so surrendered   
shall be properly endorsed or otherwise be in proper form for transfer and that 
the Person requesting such payment shall: (i) pay to the Exchange Agent any     
transfer or other taxes required as a result of such payment to a Person other  
than the registered holder of such Common Stock; or (ii) establish to the       
satisfaction of the Exchange Agent that such tax has been paid or is not        
payable.                                                                        

     Any portion of the Merger Consideration made available to the
Exchange Agent that remains unclaimed by the holders of shares of Common Stock  
six months after the Effective Time will be returned to AmeriServe, upon demand,
and any such holder who has not exchanged his, her or its shares of Common Stock
for the Merger Consideration prior to that time will thereafter look only to    
AmeriServe and the Surviving Corporation for payment of the Merger Consideration
in respect of such shares. Notwithstanding the foregoing, AmeriServe will not be
liable to any holder of shares of Common Stock for any amount paid to a public  
official pursuant to applicable abandoned property laws.                        

     Any portion of the Merger Consideration made available to the
Exchange Agent to pay for Common Stock for which appraisal rights have been     
perfected shall be returned to AmeriServe upon demand. The Exchange Agent will  
be entitled to deduct and withhold from the Merger Consideration such amounts as
may be required under the Code. Such withheld amounts will be treated as having 
been paid to the holder of the Certificates in respect of which such deduction  
and withholding was made by the Exchange Agent.                                 

  STOCKHOLDERS OF THE COMPANY SHOULD NOT FORWARD THEIR STOCK
CERTIFICATES TO THE EXCHANGE AGENT WITHOUT A LETTER OF TRANSMITTAL AND SHOULD   
NOT RETURN THEIR STOCK CERTIFICATES WITH THE ENCLOSED PROXY.                    

           Options. At the Effective Time, outstanding Options, whether or not
then vested or exercisable, granted under the Company's Amended Management      
Option Plan (1995), 1996 Stock Option Plan and 1997 Directors Stock Option Plan 
(collectively, the "Option Plans"), surrendered by the holder thereof for cash, 
will be canceled, and in consideration of such cancellation (except to the      
extent that AmeriServe or Merger Sub and the holder of any such Option otherwise
agree), the Company will pay to each such holder of Options an amount in cash in
respect thereof equal to the product of (i) the excess, if any, of the Merger   
Consideration over the per share exercise price of such Option and (ii) the     
number of shares of Common Stock subject to such Options, less applicable       
withholding taxes. The provision in the Merger Agreement which allows for       
AmeriServe or Merger Sub and any holder of Options to agree on different        
consideration for such holder's Options was included in order to permit the     
possibility that alternative treatment of Options might be offered to Option    
holders. However, no such alternatives have been made available to holders of   
Options.                                                                        

       As of the Record Date, there were approximately 639,650 Options
outstanding, all of which were held by current and former directors, officers or
employees of the Company, including 355,100 Options held by executive officers  
and directors of the Company, as follows: David R. Parker (96,650), Thomas C.   
Highland (62,500), William F. Evans (37,500), Robert S. Donaldson (20,200), Paul
A. Garcia de Quevedo (17,500), Maurice L. Ambler (13,750), Dennis T.            
Andruskiewicz (16,500), John E. Foley (25,000), John P. Gainor (17,500), Michael
Carpenter (3,500), C. Lee Johnson (3,500) and R. Geoffrey P. Styles (3,500). See

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"Item 10. Directors and Executive Officers of the Registrant" set forth in      
"Certain Information Regarding ProSource, Inc." attached as Annex V to this     
Proxy Statement. Each Option represents the right to purchase one share of      
Common Stock. Approximately $1.9 million will be paid by the Company to Option  
holders in respect of the cancellation of such Options in connection with the   
Merger, including approximately $1.3 million to executive officers and directors
of the Company, less applicable withholding taxes.                              

         Employee Stock Purchase Plan. The Company has agreed to amend the
ESPP such that, if the Effective Time occurs prior to the end of the current    
plan year, the date on which the Effective Time occurs will be deemed the last  
day of the current plan year for purposes of the ESPP. Such amendment will have 
the effect that on such date, immediately prior to the Effective Time, in       
accordance with the ESPP, all amounts previously withheld from the participants'
pay pursuant to the ESPP will be used to purchase shares of Class A Common Stock
from the Company at a purchase price of $6.035 (85% of the fair market value of 
the Class A Common Stock on July 1, 1997 (as determined in accordance with the  
ESPP), the first business day of the current plan year). The shares purchased   
will thereafter be converted in the Merger into the right to receive the Merger 
Consolidation. At the Effective Time, the Company will terminate the ESPP, any  
cash held in participant accounts after the purchase described above will be    
distributed to the respective participants in the ESPP and no plan year that    
would otherwise commence on or after such date will commence. If the current    
plan year ends prior to the Effective Time, the ESPP will terminate as of the   
last day of the plan year.                                                      

REPRESENTATIONS AND WARRANTIES                                                  

            The Merger Agreement contains various representations and warranties
of the Company regarding the Company and its subsidiaries as to, among other    
things: (i) due organization, existence and good standing, corporate power and  
authority, and qualifications or licensing to do business; (ii) capitalization  
and ownership of the Company's subsidiaries; (iii) capitalization of the        
Company, including the number of shares of Common Stock and Preferred Stock     
outstanding, the number of shares issuable upon the exercise of options and     
warrants, and obligations to repurchase or redeem any equity securities; (iv)   
the authorization, execution and delivery of the Merger Agreement and the       
validity and enforceability thereof; (v) the absence of violations, breaches or 
defaults under charter documents, laws, orders or agreements resulting from the 
execution and delivery of the Merger Agreement and compliance therewith; (vi)   
consents and approvals necessary for consummation of the Merger; (vii)          
compliance with the Securities Act and the Exchange Act in connection with the  
documents filed by the Company with the Securities and Exchange Commission (the 
"Commission") and the fair presentation, in conformity with generally accepted  
accounting principles, of the consolidated financial position of the Company by 
the financial statements included in the documents filed by the Company with the
Commission; (viii) the absence of undisclosed material liabilities; (ix)        
compliance of this Proxy Statement with the applicable provisions of the        
Exchange Act; (x) certain matters related to the ownership of properties,       
including good and valid title to material properties; (xi) the absence of      
certain changes since September 27, 1997; (xii) the absence of pending          
litigation and court orders or judgments; (xiii) compliance with laws and the   
absence of claims for infringement of certain intellectual property rights;     
(xiv) certain employee benefit plan and ERISA matters; (xv) certain tax matters;
(xvi) the ability to prepay material debt instruments; (xvii) the sufficiency   
of the Company's insurance policies; (xviii) certain labor matters including as 
to existing collective bargaining agreements or other labor union contracts, the
absence of any proceeding alleging unfair labor practices and the absence of    
strikes, work stoppages or other labor disputes; (xix) the absence of agreements
restricting the Company's freedom to compete in any line of business or with any
person or in any geographic area; (xx) the absence of interests in the property 
of the Company or suppliers, distributors or customers thereof being held by    
Onex DHC LLC or its affiliates, or officers and directors of the Company or its 
subsidiaries; and (xxi) the absence of any arrangement entitling any investment 
bankers or brokers, other than Morgan Stanley, to any fee or commission. Such   

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representations and warranties are subject to exceptions set forth in the       
schedules to the Merger Agreement containing ordinary course disclosures        
regarding the Company's outstanding securities, material contracts (including   
collective bargaining agreements), a recent change in employee compensation, a  
recent change in an accounting principle (which is reflected in the Company's   
financial statements for the fiscal year ended December 27, 1997), outstanding  
debt, outstanding litigation, descriptions of outstanding employee benefit      
plans, certain labor and tax matters and transactions with affiliates.          

      The Merger Agreement also contains various representations and
warranties of AmeriServe and Merger Sub as to, among other things: (i) due      
organization, existence and good standing, corporate power and authority to do  
business; (ii) the authorization, execution and delivery of the Merger Agreement
and the validity and enforceability thereof; (iii) the absence of violations,   
breaches or defaults under charter documents, laws, orders or agreements        
resulting from the execution and delivery of the Merger Agreement and compliance
therewith; (iv) consents and approvals necessary for consummation of the Merger;
(v) the veracity of information provided by AmeriServe for inclusion in this    
Proxy Statement; (vi) the absence of any arrangement made by AmeriServe or      
Merger Sub entitling any investment bankers or brokers to any fee or commission 
from the Company; and (vii) acknowledgment that certain of the Company's        
customers may be entitled to terminate their arrangements with the Company upon 
the change of control of the Company effected by the Merger.                    

CERTAIN COVENANTS                                                               

           Interim Operations. In the Merger Agreement, the Company has agreed
that prior to the Effective Time the Company and its subsidiaries will conduct  
their business only in the ordinary course in substantially the same manner as  
theretofore conducted and will use all reasonable efforts to preserve intact    
their business organizations and relationships with third parties and to keep   
available the services of their current officers and employees.                 

            The Company has also agreed that until the Effective Time, except as
contemplated by the Merger Agreement or with the prior written approval of      
AmeriServe, it will not and will cause its subsidiaries not to do any of the    
following:                                                                      

         (i) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock or property) in respect of, any of its    
capital stock, other than dividends and distributions by any direct or indirect 
wholly-owned subsidiary of the Company to its parent;                           

          (ii) adjust, split, combine or reclassify any of its capital stock
or issue or authorize the issuance of any other securities in respect of, in    
lieu of or in substitution for shares of its capital stock;                     

         (iii) purchase, redeem or otherwise acquire any shares of capital
stock of the Company or any of its subsidiaries or any other securities thereof 
or any rights, warrants or options to acquire any such shares or other          
securities;                                                                     

          (iv) issue, deliver, sell, pledge or otherwise encumber any shares
of its capital stock, any other voting securities or any securities convertible 
into, or any rights, warrants or options, including Options, to acquire, any    
such shares, voting securities or convertible securities (other than the        
issuance of shares of Common Stock upon the exercise of Options outstanding as  
of the date of the Merger Agreement or pursuant to the ESPP);                   

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   (v) amend its certificate of incorporation, bylaws or other
comparable charter or organizational documents;                                 

            (vi) mortgage or otherwise encumber or subject to any encumbrance or
lien or, except in the ordinary course of business consistent with past practice
or pursuant to existing contracts or commitments, sell, lease, license, transfer
or otherwise dispose of any material properties or assets;                      

         (vii) amend, modify or waive any material term of any outstanding
security of the Company and its subsidiaries;                                   

           (viii) incur, assume, guarantee or become obligated with respect to
any indebtedness, other than in the ordinary course of business, consistent with
past practice, or incur, assume, guarantee or become obligated with respect to  
any other material obligations other than in the ordinary course of business and
consistent with past practice;                                                  

  (ix) make or agree to make any new capital expenditures or
acquisitions of assets or property or other acquisitions or commitments other   
than in the ordinary course of business, consistent with past practice and in   
any event not in excess of $10,000,000 in the aggregate;                        

            (x) make any material tax election or take any material tax position
(unless required by law) or change its fiscal year or accounting methods,       
policies or practices (except as required by changes in generally accepted      
accounting principles) or settle or compromise any material income tax          
liability;                                                                      

  (xi) make any loan, advance or capital contributions to or
investment in any person other than in the ordinary course of business          
consistent with past practice, but in no event in the amount of more than       
$250,000 for any one transaction or $1,000,000 in the aggregate, and other than 
investments in cash equivalents made in the ordinary course of business         
consistent with past practice;                                                  

  (xii) pay, discharge or satisfy any claims, liabilities or
obligations, other than the payment, discharge or satisfaction thereof, in the  
ordinary course of business consistent with past practice and in accordance with
their terms, or modify or amend in any material respect or terminate any        
material contract or agreement to which it is a party, or release or waive any  
material rights or claims, other than in the ordinary course of business        
consistent with past practice;                                                  

        (xiii) (A) provide to any current or former director, officer or
employee of the Company or any of its subsidiaries any material increase in     
compensation or benefits or any severance payment or other benefit not required 
under the terms of an existing employee benefit plan, except for employees who  
are not officers or directors in the ordinary course of business consistent with
past practice, (B) grant to any such director, officer or employee any increase 
in severance or termination pay (including the acceleration in the              
exercisability of Options or in the vesting of shares of Common Stock (or other 
property) except for automatic acceleration in accordance with the terms of the 
Option Plans or the provision of any tax gross-up), or (C) enter into any       
employment, deferred compensation, severance or termination agreement or        
arrangement with or for the benefit of any such current or former director,     
officer, or employee; or                                                        

      (xiv) authorize any of, or commit or agree to take any of, the
foregoing actions.                                                              

           Certain Benefit Plans. AmeriServe has agreed that it will cause the
Surviving Corporation to continue the employee benefit plans and programs of the
Company (other than equity-based plans and programs) through December 31, 1998, 
or to provide during such period employee benefits no less favorable            

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in the aggregate than are provided pursuant to such employee benefit plans and  
programs; provided that with respect to employees of the Company who are subject
to collective bargaining, all benefits will be provided in accordance with the  
applicable collective bargaining agreement. AmeriServe has also agreed to       
provide employees of the Company who continue as employees of the Surviving     
Corporation or AmeriServe with credit for years of service with the Company and 
its subsidiaries for purposes of vesting, eligibility and benefit accrual (other
than benefit accrual under any defined benefit plans, including supplemental    
retirement plans) under the employee benefit plans of the Surviving Corporation 
and AmeriServe which are made available to such employees, to the extent such   
service was credited under similar employee benefit plans and programs of the   
Company.                                                                        

        Cooperation in Arrangements with Lenders. The Company has agreed
that it will cooperate with and assist AmeriServe and its professionals and     
advisors in arranging for the prepayment at the Effective Time of all           
indebtedness of the Company and its subsidiaries.                               

          Other Covenants of the Company. The Merger Agreement also contains
covenants of the Company customary for transactions of this type. These include 
covenants relating to the preparation of this Proxy Statement and the holding of
the Special Meeting, providing AmeriServe and its representatives with          
reasonable access to information regarding the Company, and notification of     
certain events.                                                                 

         Director and Officer Liability. For six years after the Effective
Time, AmeriServe has agreed to cause the Surviving Corporation to indemnify and 
hold harmless the present and former officers, directors, employees and agents  
of the Company and its subsidiaries, and the heirs, executors and administrators
of such persons (the "Indemnified Parties") in respect of acts or omissions     
occurring on or prior to the Effective Time or arising out of or pertaining to  
any Indemnified Person having been an officer, director, employee or agent of   
the Company or any of its subsidiaries or to the transactions contemplated by   
the Merger Agreement to the extent provided under the Company's certificate of  
incorporation and bylaws in effect on the date of the Merger Agreement (and to  
pay expenses in advance of the disposition of any action with respect to any    
such matters to the fullest extent permitted by the DGCL, upon receipt from the 
person to whom expenses are advanced of the undertaking to repay such advances  
contemplated by Section 145(e) of the DGCL); provided that such indemnification 
will be subject to any mandatory limitation imposed from time to time under     
applicable law. Insofar as indemnification for liabilities arising under the    
federal securities laws may be permitted to the Indemnified Parties pursuant to 
the foregoing provisions, the Company has been informed that in the opinion of  
the Securities and Exchange Commission such indemnification is against public   
policy and is therefore unenforceable.                                          

         AmeriServe and the Surviving Corporation have agreed not to amend
the certificate of incorporation or bylaws of the Surviving Corporation to amend
the indemnification or exculpation provisions therein in a manner inconsistent  
with the foregoing or otherwise adverse to the Indemnified Parties for the      
six-year period referred to above. For six years after the Effective Time,      
AmeriServe will cause the Surviving Corporation to use its best efforts to      
provide officers' and directors' liability insurance in respect of acts or      
omissions occurring on or prior to the Effective Time covering each such person 
currently covered by the Company's officers' and directors' liability insurance 
policy on terms substantially similar to those of such policy in effect on the  
date of the Merger Agreement and from an insurer or insurers having claims      
paying ratings of at least Best A+, provided that AmeriServe will not be        
obligated to cause the Surviving Corporation to pay annual premiums in excess of
$250,000 per annum, and if the Surviving Corporation is unable to obtain such   
insurance, it will obtain as much comparable insurance as possible for an annual
premium equal to such maximum amount.                                           

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         Other Covenants of AmeriServe. The Merger Agreement also contains
covenants of AmeriServe customary for transactions of this type. These include  
covenants relating to confidentiality, the voting of any Common Stock held by   
AmeriServe or Merger Sub in favor of the Merger Proposal and causing Merger Sub 
to consummate the Merger in accordance with the Merger Agreement.               

            No Solicitation. Under the Merger Agreement, for twelve months after
any termination of the Merger Agreement, AmeriServe and Merger Sub on the one   
hand and the Company and its subsidiaries on the other will not, and will not   
permit any of their respective subsidiaries or affiliates to, employ or retain  
in any capacity any person who was employed by the Company, in the case of      
AmeriServe or Merger Sub, or AmeriServe or Merger Sub, in the case of the       
Company, or any of their respective subsidiaries, in a position of division     
president or principal executive in charge of a distribution center or any      
position senior thereto at any time after January 1, 1998.                      

        Other Mutual Covenants. The Merger Agreement also contains other
mutual covenants of the Company, AmeriServe and Merger Sub in connection with   
the consummation of the Merger. These covenants include, among other things,    
covenants relating to making governmental filings (including under the HSR Act),
obtaining consents and approvals, using reasonable best efforts to consummate   
the Merger and procedures with respect to public announcements.                 

CONDITIONS TO THE MERGER                                                        

           Conditions to the Obligations of Each Party. The obligations of the
Company, AmeriServe and Merger Sub to consummate the Merger are subject to the  
satisfaction of the following conditions: (i) the Merger Agreement shall have   
been approved and adopted by the requisite vote of the outstanding shares of    
Common Stock within the meaning and in accordance with the DGCL; (ii) any       
applicable waiting period under the HSR Act relating to the Merger shall have   
expired or been terminated; and (iii) no provision of any applicable law or     
regulation and no judgment, injunction, order, decree or other legal restraint  
shall prohibit the consummation of the Merger. As of the date of this Proxy     
Statement, the condition set forth in clause (ii) above has been satisfied.     

       Conditions to the Obligations of AmeriServe and Merger Sub. The
obligations of AmeriServe and Merger Sub to consummate the Merger are further   
subject to the satisfaction of the following conditions:                        

          (a) there shall not be instituted and remain pending any action by
  any Governmental Entity (i) challenging or seeking to make illegal, to
delay materially or otherwise directly or indirectly to restrain or 
prohibit the consummation by AmeriServe or Merger Sub of the Merger,
seeking to obtain material damages or imposing any material adverse 
    conditions in connection therewith; (ii) seeking to restrain or prohibit
 AmeriServe's or Merger Sub's ownership or operation (or that of their
    respective subsidiaries or affiliates) of all or any material portion of
the business or assets of the Company and its subsidiaries, or of   
     AmeriServe and its subsidiaries or affiliates, or to compel AmeriServe or
    any of its subsidiaries or affiliates to dispose of or hold separate all
    or any material portion of the business or assets of the Company and its
     subsidiaries, or of AmeriServe and its subsidiaries and affiliates; (iii)
    seeking to impose limitations on the ability of AmeriServe or any of its
subsidiaries or affiliates effectively to exercise full rights of   
   ownership of the shares of Common Stock, including, without limitation,
the right to vote any shares of Common Stock acquired or owned by   
AmeriServe or any of its subsidiaries or affiliates on all matters  
     properly presented to the Company's stockholders; (iv) seeking to require
      divestiture by AmeriServe or any of its subsidiaries, or affiliates of any
shares of Common Stock; or (v) that otherwise would                 

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reasonably be expected to materially adversely affect the condition 
(financial or otherwise), business, or results of operations of the 
     Company and its subsidiaries, or AmeriServe and its subsidiaries, in each
      case taken as a whole, nor shall any judgment, injunction, order or decree
have been entered that would have any of the foregoing effects;     

         (b) the Company shall have performed in all material respects its
covenants and agreements under the Merger Agreement, and the        
 representations and warranties of the Company set forth in the Merger
      Agreement that are qualified as to materiality shall be true when made and
 (except to the extent such representations and warranties relate to a
   specific date) as of the Closing as if made at and as of such time, and
     the representations and warranties set forth in the Merger Agreement that
     are not so qualified shall be true in all material respects when made and
 (except to the extent such representations and warranties relate to a
      specific date) at and as of the Closing as if made at and as of such time,
   and other than any failure of such representations and warranties to be
   true (x) arising from or in connection with changes in general economic
conditions or matters generally affecting the industry in which the 
Company and its subsidiaries are engaged, (y) arising from the      
    announcement or the consummation of the transactions contemplated by the
Merger Agreement, or (z) which would not, individually or in the    
    aggregate, reasonably be expected to have a Material Adverse Effect; and
    AmeriServe and Merger Sub shall have received a certificate of the Chief
Executive Officer or Chief Financial Officer of the Company to that 
effect; and                                                         

            (c) other than the filing of the Certificate of Merger in accordance
with DGCL, after making reasonable efforts, AmeriServe and its      
  subsidiaries (including Merger Sub) shall have obtained all regulatory
   approvals, licenses and other Consents required to be obtained prior to
   the consummation of the Merger and the transactions contemplated by the
Merger Agreement, except such approvals, licenses and other Consents
which, if not obtained, would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.           

            Conditions to the Obligations of the Company. The obligations of the
Company to consummate the Merger are subject to the further satisfaction of the 
following conditions:                                                           

      AmeriServe and Merger Sub shall have performed in all material
   respects their covenants and agreements under the Merger Agreement, and
     the representations and warranties of AmeriServe and Merger Sub set forth
      in the Merger Agreement that are qualified as to materiality shall be true
  when made at and as of the Effective Time as if made at and as of such
time, and the representations and warranties set forth in the Merger
      Agreement that are not so qualified shall be true in all material respects
  when made at and as of the Effective Time as if made at and as of such
time; and the Company shall have received certificates of the Chief 
     Executive Officer or Chief Financial Officer of AmeriServe and Merger Sub
to that effect.                                                     

            Waiver of Conditions. The conditions to closing relating to approval
of the Merger Agreement by Company stockholders, compliance with the HSR Act and
the absence of laws, injunctions or other legal restraints prohibiting the      
consummation of the Merger may not be waived by the parties. The Company does   
not believe it could waive any other condition if the effect of such waiver     
would be to alter the consideration to be received by stockholders, unless the  
waiver was approved by stockholders.                                            

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TERMINATION OF THE MERGER AGREEMENT                                             

    The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time (notwithstanding any approval 
of the Merger Agreement by the stockholders of the Company):                    

    (i) by mutual written consent of the Company and AmeriServe;

        (ii) by AmeriServe if at the Special Meeting at which the Merger
  Proposal is voted upon, the requisite approval of Company stockholders
shall not have been obtained;                                       

        (iii) by either the Company or AmeriServe, if the Merger has not
been consummated by July 1, 1998 (provided that the party seeking to
  terminate the Merger Agreement shall not have breached its obligations
under the Merger Agreement in any material respect);                

           (iv) by either the Company or AmeriServe, if there shall be any law
    or regulation that makes consummation of the Merger illegal or otherwise
prohibited, or any judgment, injunction, order or decree enjoining  
    AmeriServe or the Company from consummating the Merger (or the existence
     of which would otherwise result in the failure of the condition set forth
     in Section 9.2(a) of the Merger Agreement) is entered and, in the case of
  any action brought other than by a Governmental Entity, such judgment,
 injunction, order or decree shall become final and non-appealable; or

      (v) by AmeriServe, at any time prior to the Effective Time, by
     action of the Board of Directors of AmeriServe, if the Board of Directors
  of the Company shall have withdrawn or modified in a manner adverse to
 AmeriServe or Merger Sub its approval or recommendation of the Merger
Agreement or the Merger, or shall have resolved to do any of the    
foregoing.                                                          

         The Merger Agreement does not provide for the payment of monetary
penalties to any party in the event that it is terminated.                      

           Certain Breaches. AmeriServe and Merger Sub would have the right to
terminate the Merger Agreement if any of the representations and warranties of  
the Company described under "The Merger Agreement -- Representations and        
Warranties" were not true and correct when made and as of the closing of the    
Merger or if the Company failed to perform any of the covenants and agreements  
of the Company described under "The Merger Agreement -- Certain Covenants," if, 
in either case, such breach or failure to perform would have a material adverse 
effect on the Company or prevent or materially delay consummation of the Merger.
The Company would have the right to terminate the Merger Agreement if any of the
representations and warranties of AmeriServe described under "The Merger        
Agreement -- Representations and Warranties" were not true and correct in any   
material respect when made and as of the closing of the Merger or if AmeriServe 
and Merger Sub failed to perform in any material respect any of the covenants   
and agreements required to be performed by them and described under "The Merger 
Agreement -- Certain Covenants."                                                

AMENDMENT                                                                       

            Any provision of the Merger Agreement may be amended or waived prior
to the Effective Time if, and only if, such amendment or waiver is in writing   
and signed by the party to be charged therewith; provided that after the        
adoption of the Merger Agreement by the stockholders of the Company, no         

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amendment or waiver may, without the further approval of such stockholders,     
alter or change (i) the amount or kind of consideration to be received in       
exchange for any shares of capital stock of the Company, or (ii) any of the     
principal terms of the Merger.                                                  

FEES AND EXPENSES                                                               

             The Merger Agreement provides that all costs and expenses
incurred in connection with the Merger Agreement will be paid by the party      
incurring such costs or expenses.                                               

THE VOTING AGREEMENT

          The following is a brief summary of certain material provisions of
the Voting Agreement that is attached as Annex II to this Proxy Statement. Such 
summary does not purport to be complete and is qualified in its entirety by     
reference to the Voting Agreement. All capitalized terms used herein and not    
defined are used as defined in the Voting Agreement. Stockholders are urged to  
review the Voting Agreement carefully and in its entirety.                      

TERM AND TERMINATION                                                            

      The Voting Agreement was entered into on January 29, 1998. The
Voting Agreement will terminate immediately following the earliest to occur of  
(x) the Effective Time, (y) the 30th day following the termination of the Merger
Agreement (other than a termination upon the mutual consent of the Company and  
AmeriServe), or (z) the termination of the Merger Agreement upon the mutual     
consent of the Company and AmeriServe. Notwithstanding the foregoing, in the    
event the Merger Sub Option shall have been exercised in accordance with the    
Voting Agreement, but the Option Closing shall not have occurred, the Voting    
Agreement will not terminate, except that the Voting Agreement may be terminated
by the Onex Stockholders if Merger Sub defaults on its obligation to purchase   
the Subject Shares at the Option Closing.                                       

VOTING                                                                          

           Until the termination of the Voting Agreement each Onex Stockholder
has agreed as follows:                                                          

         At any meeting of stockholders of the Company called to vote upon
the Merger and the Merger Agreement or at any adjournment thereof or in any     
other circumstances upon which a vote or other approval with respect to the     
Merger and the Merger Agreement is sought, each Onex Stockholder will vote its  
Subject Shares in favor of the Merger, the adoption by the Company of the Merger
Agreement and the approval of the terms thereof and each of the other           
transactions contemplated by the Merger Agreement.                              

           At any meeting of stockholders of the Company or at any adjournment
thereof or in any other circumstances upon which the Onex Stockholders' vote,   
consent or other approval as stockholders is sought, the Onex Stockholders will 
vote the Subject Shares against (i) any action or agreement that would result in
a breach in any material respect of any covenant, representation or warranty or 
any other obligation or agreement of the Company under the Merger Agreement or  
of the Onex Stockholders under the Voting Agreement, and (ii) any action or     
agreement that would reasonably be expected to impede, interfere with, delay,   
postpone or attempt to discourage the Merger, including, but not limited to: (A)
the adoption by the Company of a proposal regarding (1) the acquisition of the  
Company by merger, tender offer or otherwise by any person or group, other than 
AmeriServe or Merger Sub or any designee thereof (a "Third Party"), or any other
merger, combination or similar transaction with any Third Party; (2) the        
acquisition by a Third                                                          

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Party of 10% or more of the assets of the Company and its subsidiaries, taken as
a whole; (3) the acquisition by a Third Party of 10% or more of the outstanding 
shares of Common Stock; or (4) the repurchase by the Company or any of its      
subsidiaries of 10% or more of the outstanding shares of Common Stock; (B) any  
amendment of the Company's certificate of incorporation or by-laws or other     
proposal or transaction involving the Company or any of its subsidiaries, which 
amendment or other proposal or transaction would in any manner impede,          
frustrate, prevent or nullify the Merger, the Merger Agreement or any of the    
other transactions contemplated by the Merger Agreement or change in any manner 
the voting rights of any class of the Company's capital stock; (C) any change in
the control of the board of directors of the Company; (D) any material change in
the present capitalization or dividend policy of the Company; or (E) any other  
material change in the Company's corporate structure or business. The Onex      
Stockholders have further agreed not to commit or agree to take any action      
inconsistent with the foregoing.                                                

    In addition, under the Voting Agreement, as security for the
agreements of the Onex Stockholders provided for in the Voting Agreement, each  
Onex Stockholder has granted to AmeriServe and Merger Sub a proxy to vote the   
Subject Shares as indicated above, which proxy is irrevocable during the term of
the Voting Agreement. None of the Onex Stockholders received any consideration  
in exchange for agreeing to enter into the Voting Agreement.                    

RESTRICTIONS ON TRANSFER AND WAIVER OF APPRAISAL RIGHTS                         

           Under the Voting Agreement, each Onex Stockholder has agreed not to
(i) sell, transfer or otherwise dispose of, or enter into any contract, option  
or other arrangement or understanding (including any profit sharing arrangement)
with respect to the transfer of, any of the Subject Shares other than to any    
direct or indirect wholly-owned subsidiary of Onex (if such subsidiary assumes  
the Onex Stockholder's obligations under the Voting Agreement) or pursuant to   
the terms of the Voting Agreement and the Merger Agreement, (ii) enter into any 
voting arrangement or understanding with respect to the Subject Shares, whether 
by proxy, voting agreement or otherwise, or (iii) take any action that would    
reasonably be expected to make any of its representations and warranties        
contained in the Voting Agreement untrue or incorrect or could have the effect  
of preventing or disabling such Onex Stockholder from performing any of its     
obligations under the Voting Agreement.                                         

  Pursuant to the Voting Agreement each Onex Stockholder has
irrevocably waived any and all rights which it may have as to appraisal, dissent
or any similar or related matter with respect to the Merger.                    

NO SOLICITATION                                                                 

            The Voting Agreement provides that none of the Onex Stockholders nor
any of their affiliates shall (whether directly or indirectly through any       
officer, director, member, advisor, agent, representatives or other             
intermediary), nor shall the Onex Stockholders or any of their affiliates       
authorize or permit any of their officers, directors, members, advisors, agents,
representatives or other intermediaries to, (i) solicit, initiate, encourage or 
take any action intended to or reasonably likely to facilitate any submission of
inquiries, proposals or offers from any person relating to any acquisition or   
purchase of all or a material amount of assets of, or any equity interest in,   
the Company (or any subsidiary or division thereof) or any merger,              
consolidation, tender offer (including a self tender offer), exchange offer,    
business combination, recapitalization, liquidation, dissolution or similar     
transaction involving the Company (or any subsidiary or division thereof), other
than the transactions contemplated by the Voting Agreement or the Merger        
Agreement, or any other transaction the consummation of which would reasonably  
be expected to impede, interfere with, prevent or materially delay the Merger or
which would reasonably be expected to materially dilute the benefits to         
AmeriServe or Merger Sub of the transactions contemplated by the Merger         
Agreement                                                                       

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(collectively, "Transaction Proposals") or agree to or endorse any              
Transaction Proposal, other than the transactions contemplated by the Merger    
Agreement, or (ii) enter into or participate in any discussions or negotiations 
regarding any of the foregoing, or furnish to any other person any information  
with respect to the Company's business, properties or assets or any of the      
foregoing, or otherwise cooperate in any way with, or assist or participate in, 
facilitate or encourage, any effort or attempt by any other person to do or seek
any of the foregoing. Notwithstanding anything in the Voting Agreement to the   
contrary, the Onex Stockholders have agreed to promptly advise AmeriServe and   
Merger Sub orally and in writing of the receipt by any of them (or any of the   
other entities or persons referred to above) of any Transaction Proposal or any 
inquiry which is likely to lead to any Transaction Proposal, the material terms 
and conditions of such Transaction Proposal or inquiry, and the identity of the 
person making any such Transaction Proposal or inquiry. The Onex Stockholders   
have agreed to keep AmeriServe and Merger Sub fully informed of the status and  
details of any such Transaction Proposal or inquiry. The Voting Agreement       
provides that the foregoing restrictions will not restrict the activities of any
individual (whether or not an affiliate of any Onex Stockholder) in his or her  
capacity as a director, officer, employee or agent of the Company or any of its 
subsidiaries.                                                                   

MERGER SUB OPTION                                                               

        Under the Voting Agreement, each Onex Stockholder has granted to
Merger Sub (or its designee), the Merger Sub Option to purchase the Subject     
Shares, on the terms and subject to the conditions set forth in the Voting      
Agreement. The Merger Sub Option may be exercised by Merger Sub, as a whole and 
not in part, at any time during the period commencing upon the termination of   
the Merger Agreement (other than a termination based on the mutual consent of   
the Company and AmeriServe or a termination by the Company as a result of an    
actual material breach by AmeriServe or Merger Sub of their respective          
obligations under the Merger Agreement) and ending on the date which is the 30th
calendar day following such termination.                                        

          If Merger Sub wishes to exercise the Merger Sub Option, Merger Sub
must send a written notice to the Onex Stockholders of its intention to exercise
the Merger Sub Option, specifying the place, and, if then known, the time and   
the date (the "Option Closing Date") of the closing (the "Option Closing") of   
the purchase. The Option Closing Date will occur on the fifth business day (or  
such later date as shall be no later than five business days following the first
time that the Option Closing is permitted by applicable law or regulation) after
the later of (i) the date on which such notice is delivered, and (ii) the       
satisfaction of the conditions described below.                                 

           At the Option Closing, the Onex Stockholders have agreed to deliver
to Merger Sub (or its designee) all of the Subject Shares by delivery of a      
certificate or certificates evidencing the Subject Shares duly endorsed to      
Merger Sub or accompanied by powers duly executed in favor of Merger Sub, with  
all necessary stock transfer stamps affixed; and Merger Sub will, and AmeriServe
will cause Merger Sub to, pay to the Onex Stockholders pursuant to the exercise 
of the Merger Sub Option, by wire transfer, cash in immediately available funds 
to the accounts of the Onex Stockholders (such accounts to be specified in      
writing at least two days prior to the Option Closing), an amount equal to the  
aggregate Exercise Price.                                                       

         The Option Closing will be further subject to the satisfaction of
each of the following conditions: (i) no court, arbitrator or governmental body,
agency or official shall have issued any order, decree or ruling and there shall
not be any statute, rule or regulation, restraining, enjoining or prohibiting   
the consummation of the purchase and sale of the Subject Shares pursuant to the 
exercise of the Merger Sub Option; (ii) any waiting period applicable to the    
consummation of the purchase and sale of the Subject Shares pursuant to the     
exercise of the Merger Sub Option under the HSR Act shall have expired or been  
terminated; and (iii) all actions by or in respect of, and any filing with, any 
governmental body, agency, official, or                                         

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authority required to permit the consummation of the purchase and sale of the   
Subject Shares pursuant to the exercise of the Merger Sub Option shall have been
obtained or made and shall be in full force and effect, except such actions and 
filings which, if not made or obtained, would not, individually or in the       
aggregate, reasonably be expected to have a Material Adverse Effect. As of the  
date of this Proxy Statement, the condition set forth in clause (ii) above has  
been satisfied.                                                                 

FURTHER AGREEMENTS OF AMERISERVE AND MERGER SUB                                 

        The Voting Agreement provides that, in the event that Merger Sub
purchases the Subject Shares pursuant to the Option, as promptly as practicable 
thereafter, Merger Sub will make a tender offer for the remaining shares of     
Common Stock to the stockholders of the Company (the consummation of which shall
be subject only to the condition that no court, arbitrator or governmental body,
agency or official shall have issued any order, decree or ruling and there shall
not be any statute, rule or regulation, restraining, enjoining or prohibiting   
the consummation of such tender offer) pursuant to which the stockholders of the
Company (other than the Company, any direct or indirect subsidiary of the       
Company or AmeriServe or Merger Sub) will receive an amount of cash             
consideration per share equal to $15.00, and will take such actions as may be   
necessary or appropriate in order to effectuate such tender offer at the        
earliest practicable time.                                                      

          If, after purchasing the Subject Shares pursuant to the Merger Sub
Option, Merger Sub or any of its affiliates has not acquired the remaining      
shares of Common Stock, Merger Sub or any of its affiliates receives any cash or
non-cash consideration in respect of the subject shares in connection with a    
Third Party Business Combination (as defined below) during the period commencing
on the date of the Option Closing and ending on the first anniversary thereof,  
Merger Sub shall promptly pay over to the Onex Stockholders, as an addition to  
the purchase price for the Subject Shares, (x) one-half of the excess, if any,  
of such consideration over the aggregate purchase price paid for the Subject    
Shares which are sold by Merger Sub hereunder less (y) the sum of (I) the amount
of taxes payable or to be payable by Merger Sub (as estimated by Merger Sub in  
good faith) in connection with such Third Party Business Combination (it being  
intended and understood that Merger Sub retain one-half of the after-tax profit 
from such sale taking into account any adjustment to basis resulting from the   
payment to the Onex Stockholders), (II) the amount of expenses of Merger Sub    
in connection herewith and the Merger Agreement and in connection with such     
Third Party Business Combination, and (III) the pro rata portion (based on share
holdings) of all capital contributions to and retained earnings of the Company  
from the date of the Option Closing through the date of the Third Party Business
Combination. If the consideration received by Merger Sub or such affiliates     
consists of securities listed on a national securities exchange or traded on the
Nasdaq National Market, the per share value of such consideration will be equal 
to the closing price per share of such securities listed on such national       
securities exchange or the Nasdaq National Market on the date such transaction  
is consummated, and if the consideration received by Merger Sub or such         
affiliates is in a form other than securities, the per share value will be      
determined in good faith as of the date such transaction is consummated by      
Merger Sub and the Onex Stockholders (or, if Merger Sub and the Onex            
Stockholders cannot reach agreement, by a nationally recognized investment      
banking firm reasonably acceptable to the parties). The term "Third Party       
Business Combination" means the occurrence of any of the following events: (A)  
the Company, or more than 50% of the outstanding shares of the Company's capital
stock, is acquired by merger or otherwise by any third party; or (B) a third    
party acquires all or substantially all of the total assets of the Company and  
its subsidiaries, taken as a whole; provided, that in no event will any         
transaction in which shares of the Company's capital stock or any of its assets 
are sold or transferred directly or indirectly in connection with or as a part  
of a sale or other transaction involving the sale, merger or other similar      
transaction of AmeriServe or any of its material assets or business constitute a
Third Party Business Combination, and                                           

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in no event will a sale of any division, line of business or similar unit of the
Company and its subsidiaries constitute a Third Party Business Combination.     

 THE COMPANIES

PROSOURCE                                                                       

       The Company provides foodservice distribution services to chain
restaurants in North America and provides purchasing and logistics services to  
the foodservice market. 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 serves a variety of          
restaurants, including Burger King, Red Lobster, Long John Silver's, Olive      
Garden, TGIFriday's, Chick-fil-A, Chili's, Sonic, TCBY and Wendy's. ProSource is
an indirect subsidiary of Onex Corporation.                                     

          The Company was formed in 1992 to acquire Burger King Distribution
Services, the "in-house" distributor for Burger King Corporation, which serviced
approximately 4,150 Burger King restaurants. Since the acquisition, ProSource   
has, through a combination of acquisitions and internal growth, become a leading
distributor to chain restaurants, servicing approximately 12,700 restaurants    
within 19 different restaurant chains as of December 27, 1997. In March 1995,   
the Company acquired substantially all of the assets and assumed certain        
liabilities of the National Accounts Division of The Martin-Brower Company,     
which added a total of approximately 8,000 restaurants within 11 chains included
in the Company's current customer base. The Company has also been successful in 
expanding through internally generated sales. Since the Company's formation in  
1992, net sales have grown from $1.3 billion in 1993 (the first full year of    
operations) to $3.9 billion in 1997.                                            

         A more detailed description of the business and properties of the
Company is set forth in "Certain Information Regarding ProSource, Inc."         
attached as Annex V to this Proxy Statement.                                    

         The Company's principal executive offices are located at 1500 San
Remo Avenue, Coral Gables, Florida 33146, telephone number (305) 740-1000.      

AMERISERVE                                                                      

           AmeriServe is one of the nation's largest foodservice distributors,
distributing a wide variety of items, including meat, poultry, frozen foods,    
canned and dry goods, produce, beverages, dairy products, paper goods, cleaning 
and other supplies and small equipment. It serves a total of 25,500 restaurants 
in the United States, Canada and Mexico and has more than 5,000 employees       
operating out of 35 distribution centers. In addition to its corporate          
headquarters in Dallas, AmeriServe has customer support offices in Wichita,     
Kansas, Louisville, Kentucky and Irvine, California.                            

            AmeriServe's principal executive offices are located at 14841 Dallas
Parkway, Dallas, Texas 75240-2100 and its telephone number is (972) 338-7000.   

            Merger Sub is a newly incorporated Delaware corporation organized in
connection with the Merger, and has not carried on any activities other than in 
connection with the Merger. Merger Sub is a wholly-owned subsidiary of          
AmeriServe. Upon the consummation of the Merger, Merger Sub will be merged with 
and into the Company, with the Company continuing as the Surviving Corporation  
and                                                                             

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becoming a wholly-owned subsidiary of AmeriServe. Merger Sub's principal        
executive offices are located at 545 Steamboat Road, Greenwich, Connecticut     
06830 and its telephone number is (203) 661-2500.                               

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 SELECTED FINANCIAL DATA

      The following table sets forth selected financial data for the
Company for the periods indicated. The data set forth below should be read in   
conjunction with the Company's Consolidated Financial Statements and the Notes  
thereto included in "Certain Information Regarding ProSource, Inc." attached as 
Annex V to this Proxy Statement.                                                

(In millions, except per share and certain other data)

                                                        [Enlarge/Download Table]

                                                                                     Fiscal Years Ended                             
                                                        --------------------------------------------------------------------------  
                                                        December 27,    December 28,    December 30,    December 31,  December 25,  
                                                            1997           1996            1995(a)        1994(b)        1993(c)    
                                                        --------------------------------------------------------------------------  
                                                         (52 weeks)      (52 weeks)      (52 weeks)     (53 weeks)     (52 weeks)   
                                                                                                                                    
Statement of Operations Data:                                                                                                       
     Net sales                                          $    3,901.2    $    4,125.0    $    3,461.8    $   1,598.1    $   1,329.3  
     Cost of sales                                           3,591.4         3,806.8         3,193.3        1,464.5        1,210.9  
                                                        --------------------------------------------------------------------------  
       Gross profit                                            309.8           318.2           268.5          133.6          118.4  
     Operating expenses                                        302.1           301.3           255.2          131.0          114.2  
     Loss on impairment of long-live assets                     --              15.7            --             --             --    
     Restructuring and contract-termination charges             --              28.5             0.7           --             --    
                                                        --------------------------------------------------------------------------  
       Income (loss) from operations                             7.7           (27.3)           12.6            2.6            4.2  
     Interest expense, net                                       9.2            13.1            13.3            6.6            5.5  
                                                        --------------------------------------------------------------------------  
     Loss before income taxes, extraordinary items and                                                                              
       cumulative effect of a change in accounting                                                                                  
       principle                                                (1.5)          (40.4)           (0.7)          (4.0)          (1.3) 
     Income tax benefit (provision)                              0.5            15.4            (0.1)           1.6            0.5  
                                                        --------------------------------------------------------------------------  
     Loss before extraordinary items and cumulative                                                                                 
       effect of a change in accounting principle               (1.0)          (25.0)           (0.8)          (2.4)          (0.8) 
     Extraordinary (loss) gain, net                             (6.3)            0.6            (0.8)          --             --    
     Cumulative effect of a change in accounting                                                                                    
       principle, net                                           (6.4)           --              --             --             --    
                                                        --------------------------------------------------------------------------  
       Net loss                                         $      (13.7)   $      (24.4)   $       (1.6)   $      (2.4)   $      (0.8) 
                                                        ==========================================================================  

Net loss per common share (basic and diluted):                                                                                      
     Loss before extraordinary items and cumulative                                                                                 
       effect of a change in accounting principle       $      (0.11)   $      (4.31)   $      (0.18)   $     (1.01)   $     (0.35) 
     Extraordinary items, net                                  (0.67)           0.11           (0.17)          --             --    
     Cumulative effect of a change in accounting                                                                                    
       principle, net                                          (0.69)           --              --             --             --    
                                                        --------------------------------------------------------------------------  
       Net loss per common share                        $      (1.47)   $     (4.20)    $      (0.35)   $     (1.01)   $     (0.35) 
                                                        ==========================================================================  

     Average outstanding shares used in calculation                                                                                 
       (in thousands)                                          9,334           5,796           4,441          2,353          2,348  
                                                        ==========================================================================  

Balance Sheet Data (at end of period):                                                                                              
     Working capital                                    $      106.0    $       85.5    $      115.9    $      41.6    $      42.7  
     Total assets                                              548.1           503.7           487.3          216.9          199.6  
     Total debt                                                174.2           112.6           162.7           65.1           68.5  
     Stockholders' equity                                       64.4            78.5            49.4           22.5           25.3  
Other Data:                                                                                                                         
     Net asset turnover                                         16.4x           20.1x           18.3x           16.5x          13.6x
     Depreciation and amortization                      $       11.2    $       10.9    $       12.7    $       8.0    $       7.9  
     Capital expenditures                               $       30.0    $       20.0    $        5.7    $       1.4    $       3.5  
     Number of restaurants served (at end of period)          12,715          14,641          14,562          6,752          5,113  

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(a)   Includes the effects of the acquisition of substantially all of the assets
and the assumption of certain liabilities of the National Accounts  
Division of The Martin-Brower Company on March 31, 1995.            

(b)   Includes the effects of the acquisition of certain assets and the         
     assumption of certain liabilities of Malone Products, Inc. on October 31,
1994.                                                               

(c)   Includes the effects of the acquisition of certain operating assets of    
 McCabe's Quality Foods, California, Inc. on February 27, 1993 and the
      effects of the acquisition of certain assets and the assumption of certain
liabilities of Valley Food Services, Inc. on March 27, 1993.        

(d)   The per share amounts prior to 1997 have been restated as required to     
      comply with Statement of Financial Accounting Standards No. 128, "Earnings
      Per Share". For further discussion of this and the impact of Statement No.
 128, see the Notes to the Company's Consolidated Financial Statements
   included in "Certain Information Regarding ProSource, Inc." attached as
Annex V to this Proxy Statement.                                    

(e)   Certain amounts presented above for prior years have been reclassified to 
conform to the current year's presentation.                         

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 MARKET PRICES OF COMMON STOCK

      The Company's Class A Common Stock began trading on the Nasdaq
National Market under the symbol "PSDS" on November 12, 1996. The table sets    
forth the high and low sales prices per share for the Company's Class A Common  
Stock as reported on the Nasdaq National Market for each fiscal quarter         
subsequent to the commencement of trading.                                      

                                                             Sale Prices
                                                             -----------
1996                                                          High         Low  
                                                            ----         ---

Fourth Quarter (from November 12, 1996)..................   $14 1/8      $ 9 3/4

1997                                                                            

First Quarter............................................   $14 1/8      $10 1/2
Second Quarter...........................................    13 3/8        6 1/4
Third Quarter............................................     9 1/8        6 3/4
Fourth Quarter...........................................     9 3/4        6    

1998                                                                            

First Quarter............................................   $14 3/4      $ 6 1/2

  On January 29, 1998, the last trading date prior to public
announcement of the execution of the Merger Agreement, the closing price of the 
Common Stock, as quoted on the Nasdaq National Market was $ 6 15/16 per share.  
On April 1, 1998, the closing price of the Class A Common Stock, as reported on 
the Nasdaq National Market was $14 3/4 per share. Stockholders are urged to     
obtain current market quotations for the Class A Common Stock prior to making   
any decision with respect to the Merger.                                        

         At the close of business on the Record Date, there were 3,526,835
shares of Class A Common Stock outstanding and entitled to vote at the Special  
Meeting, held by approximately 36 stockholders of record and 5,856,756 shares of
Class B Common Stock outstanding and entitled to vote of the Special Meeting,   
held by approximately 62 stockholders of record. At such date, the Company had  
approximately 1,200 beneficial owners of its Class A Common Stock and Class B   
Common Stock, in the aggregate.                                                 

       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. The terms of the       
Company's credit agreements prohibit it from paying dividends to its            
stockholders without the approval of the lending group. 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.                                                                

           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 vote together
on all matters submitted to a vote of stockholders, including the Merger        
Proposal. 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                                 

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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 its affiliates, or another  
employee stockholder.                                                           

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
 OWNERS AND MANAGEMENT

        The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock at February 9, 1998 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. On that date 3,526,835 shares
of Class A Common Stock and 5,856,756 shares of Class B Common Stock were       
outstanding. 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.                 

                                                        [Enlarge/Download Table]

                                                                                                      Class A and B
                                                  Shares of Class A           Shares of Class B         Combined   
                                                     Common Stock               Common Stock             Voting    
                                                Beneficially Owned (1)      Beneficially Owned (1)      Power (2)  
                                               ------------------------  ---------------------------    ---------- 
                   Name                        Number        Percentage     Number        Percentage    Percentage 
-----------------------------------------      ------        ----------     ------        ----------    ---------- 
                                                                                                                   
Onex DHC LLC(3) (7)                                                                                                
    421 Leader Street                                                                                              
    Marion, Ohio  43302..................    500,000            14.2%    4,951,242            84.5%        80.5%   
Onex Corporation (4) (7)                                                                                           
    161 Bay Street                                                                                                 
    Toronto, Ontario                                                                                               
    Canada...............................    500,000            14.2     5,236,956            89.4         85.1    
Onex OMI LLC (7).........................         --            --         285,714             4.9          4.6    
Onex Ohio LLC (7)........................         --            --         379,242             6.5          6.1    
Steamboat Acquisition Corp. (7)                                                                                    
Nebco Evans Holding Company                                                                                        
Nebco Evans Distributors, Inc                                                                                      
Holberg Industries, Inc.                                                                                           
Holberg Incorporated                                                                                               
John V. Holten                                                                                                     
    545 Steamboat Road                                                                                             
    Greenwich, CN  06830.................    496,583            14.1     5,218,072            89.1         84.8    
AmeriServe Food Distribution, Inc. (7)                                                                             
    14841 Dallas Parkway                                                                                           
    Dallas, TX  75240....................    496,583            14.1     5,218,072            89.1         84.8    
The Kaufman Fund, Inc.                                                                                             
    140 E. 45th Street, 43rd Floor                                                                                 
    New York, NY  10017..................  1,000,000            28.4            --            --            1.6    
Skyline Asset Management                                                                                           
    311 South Wacker Drive, Ste. 4500                                                                              
    Chicago, IL 60606....................    480,300            13.6            --            --             *     
Heartland Advisors, Inc.                                                                                           
    790 North Milwaukee Street                                                                                     
    Milwaukee, WI 53202..................    300,000             8.5            --            --             *     
David R. Parker (5)......................      7,337              *        174,378             3.0          2.3    
Thomas C. Highland (5)...................      1,118              *         94,188             1.6          1.2    
Daniel J. Adzia (5)......................         --             --         55,500             *             *     
William F. Evans (5).....................      4,187              *         55,500             *             *     
Gerald W. Schwartz (4)...................    500,000            14.2     5,236,956            89.4         85.1    
Anthony R. Melman (6)....................         --             --             --            --           --      

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                                                        [Enlarge/Download Table]

                                                                                                     Class A and B
                                                 Shares of Class A            Shares of Class B         Combined  
                                                    Common Stock                Common Stock             Voting   
                                               Beneficially Owned (1)      Beneficially Owned (1)       Power (2) 
                                              ------------------------    ------------------------     ---------- 
                   Name                       Number        Percentage     Number        Percentage    Percentage 
-------------------------------------------   ------        ----------     ------        ----------    ---------- 
                                                                                                                  
Michael Carpenter .........................       --             --        18,200               *             *   
Anthony Munk (6) ..........................       --             --            --              --            --   
C. Lee Johnson ............................       --             --         4,500               *             *   
R. Geoffrey P. Styles .....................    1,000              *         7,300               *             *   
Robert S. Donaldson (5) ...................    1,732              *        25,960               *             *   
All directors and executive officers of the                                                                       
    Company as a group (17 persons) .......  517,645           14.7     5,778,495            97.0          92.2   

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

(1)   Each share of Class B Common Stock is presently 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. All information in the table assumes that no
      shares of Class B Common Stock are converted into shares of Class A Common
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)   Onex DHC LLC's beneficial ownership of the Company's Common Stock includes
      (i) 500,000 shares of Class A Common Stock and 4,572,000 shares of Class B
     Common Stock beneficially owned directly by Onex DHC LLC and (ii) 379,242
   shares of Class B Common Stock beneficially owned directly by Onex Ohio
    LLC, which Onex DHC LLC may be deemed to own beneficially as a result of
   its direct beneficial ownership of 74.9% of the equity of Onex Ohio LLC
(clauses (i) and (ii) together referred to as the "DHC Shares").    

(4)   As the direct and indirect beneficial owner of 100% of the equity of Onex 
   DHC LLC, and the direct beneficial owner of 25.1% of the equity of Onex
Ohio LLC, Onex Corporation may be deemed to own beneficially the DHC
Shares. In addition, as the indirect beneficial owner of 100% of the
      equity of Onex OMI LLC, Onex Corporation may be deemed to own beneficially
      285,714 shares of Class B Common Stock beneficially owned directly by Onex
   OMI LLC. Gerald W. Schwartz is the Chairman of the Board, President and
      Chief Executive Officer of Onex Corporation and the indirect holder of all
     the issued and outstanding Multiple Voting Shares (defined below) of Onex
  Corporation, and therefore may also be deemed to own beneficially such
shares of Common Stock.                                             

(5)   Includes shares of Class B 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 - 31,078; Thomas C. Highland - 19,188;
Daniel J. Adzia - 10,500; William F. Evans - 10,500; and Robert S.  
Donaldson - 5,560.                                                  

(6)   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.                                 

(7)   Based on information contained in a Statement on Schedule 13D (the        
"Schedule 13D") filed with the Commission on February 9, 1998 by    
AmeriServe, Merger Sub and certain of their affiliates (the "Filing 
  Persons"), as of January 29, 1998, under the definition of "beneficial
    ownership" as set forth in Rule 13d-3 under the Exchange Act, Merger Sub
      may be deemed to beneficially own the Subject Shares subject to the Voting
   Agreement. If Merger Sub were to exercise the Merger Sub Option, Merger
    Sub would have the power to dispose of all of the Subject Shares. Unless
   and until Merger Sub or its designee, if any, acquires shares of Common
     Stock upon exercise of the Merger Sub Option, neither Merger Sub nor such
     designee, if any, has any power to dispose of any shares of Common Stock.
    The Filing Persons may be deemed to share the power to direct the voting
of the Subject Shares with respect to the Merger and certain related
    actions, in accordance with the terms of the Voting Agreement, and, upon
    exercise of the Merger Sub Option, would have the shared power to direct
the voting of and the disposition of such shares.                   

In addition, as of December 27, 1997, Messrs. Schwartz and Styles   
beneficially owned 13,051,878 and 17,000 subordinate voting shares of Onex      
Corporation ("Subordinate Voting Shares"), respectively, representing 27.6% 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 Mr. Styles. 
All directors and executive officers of the Company as a group owned 13,068,878 
Subordinate Voting Shares, representing 27.6% of the outstanding Subordinate    
Voting Shares. Subordinate Voting Shares beneficially owned includes shares     
which Mr. Styles (9,000) may have the right to acquire through the exercise of  
options within 60 days (the                                                     

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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.                        

 STOCKHOLDER PROPOSALS

         The Company will hold a 1998 Annual Meeting only if the Merger is
not consummated. In the event of such a meeting, in order to have been          
considered for inclusion in the Company's proxy materials for the 1998 Annual   
Meeting of Stockholders, stockholder proposals must have been received at the   
Company's principal executive offices in Coral Gables, Florida not later than   
December 1, 1997.                                                               

INDEPENDENT AUDITORS

           The consolidated financial statements of the Company as of December
27, 1997 and December 28, 1996 and for each of the three years in the period    
ended December 27, 1997, included in "Certain Information Regarding ProSource,  
Inc." attached as Annex V to this Proxy Statement, have been audited by KPMG    
Peat Marwick LLP, independent auditors, as stated in their report included      
therein.                                                                        

           Representatives of KPMG Peat Marwick LLP are expected to attend the
Special Meeting and will have an opportunity to make a statement if they so     
desire and to respond to appropriate questions from stockholders.               

 OTHER MATTERS

           The Board of Directors is not currently aware of any business to be
acted upon at the Special Meeting other than the Merger Proposal. If, however,  
other matters are properly brought before the Special Meeting, the persons      
appointed as proxies will have the discretion to vote or act thereon in         
accordance with their best judgment, unless authority to do so is withheld in   
the Proxy.                                                                      

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 AVAILABLE INFORMATION

       The Company is subject to the informational requirements of the
Exchange Act, and in accordance therewith files periodic reports, proxy         
statements and other information with the Commission. Such periodic reports,    
proxy statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,    
Washington, D.C. 20549, and at the regional offices of the Commission at Seven  
World Trade Center, Suite 1300, New York, New York 10048 and 500 West Madison   
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be     
obtained from the Public Reference Section of the Commission at 450 Fifth       
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission        
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants, like the Company, that file            
electronically with the Commission at the following address: http://www.sec.gov.
The Class A Common Stock is quoted on the Nasdaq National Market, and such      
reports, proxy statements and other information may be inspected at the offices 
of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.              

         NO PERSON IS AUTHORIZED TO PROVIDE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS WITH RESPECT TO THE MATTERS DESCRIBED IN THIS PROXY STATEMENT   
OTHER THAN THOSE CONTAINED HEREIN. ANY INFORMATION OR REPRESENTATIONS WITH      
RESPECT TO SUCH MATTERS NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING  
BEEN AUTHORIZED BY THE COMPANY. THE DELIVERY OF THIS PROXY STATEMENT SHALL NOT, 
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION        
CONTAINED IN THIS PROXY STATEMENT IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE   
DATE HEREOF.                                                                    

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                                                                         ANNEX I

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

AGREEMENT AND PLAN OF MERGER

by and among

AMERISERVE FOOD DISTRIBUTION, INC.

 STEAMBOAT ACQUISITION CORP.

 and

 PROSOURCE, INC.

Dated as of January 29, 1998

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

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w                                                                               

 TABLE OF CONTENTS

                                                                          Page

 ARTICLE I

THE MERGER

SECTION 1.1.    The Merger.................................................    2
SECTION 1.2.    Closing....................................................    2
SECTION 1.3.    Effective Time of the Merger...............................    2
SECTION 1.4.    Effects of the Merger......................................    2

ARTICLE II

 EFFECT OF THE MERGER ON THE CAPITAL
 STOCK OF THE CONSTITUENT CORPORATIONS

SECTION 2.1.    Conversion of Shares.......................................    2
SECTION 2.2.    Surrender and Payment......................................    3
SECTION 2.3.    Dissenting Shares..........................................    4
SECTION 2.4.    Stock Options and Stock Plans..............................    5

 ARTICLE III

 THE SURVIVING CORPORATION

SECTION 3.1.    Certificate of Incorporation...............................    6
SECTION 3.2.    Bylaws.....................................................    6
SECTION 3.3.    Directors and Officers.....................................    6

ARTICLE IV

 REPRESENTATIONS AND WARRANTIES OF THE COMPANY

SECTION 4.1.    Organization, Standing and Corporate Power.................    6
SECTION 4.2.    Subsidiaries...............................................    7
SECTION 4.3.    Capital Structure..........................................    8
SECTION 4.4.    Authority; Noncontravention................................    8
SECTION 4.5.    SEC Documents; Financial Statements; No Undisclosed             
                    Liabilities............................................    9
SECTION 4.6.    Disclosure Documents.......................................   10
SECTION 4.7.    Property; Sufficiency of Assets............................   10
SECTION 4.8.    Absence of Certain Changes or Events.......................   10
SECTION 4.9.    Litigation.................................................   12
SECTION 4.10.   Compliance with Laws, Etc..................................   12

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                                                                            Page

SECTION 4.11.   Absence of Changes in Stock or Benefit Plans...............   12
SECTION 4.12.   ERISA Compliance...........................................   13
SECTION 4.13.   Tax Matters................................................   15
SECTION 4.14.   Debt Instruments...........................................   16
SECTION 4.15.   Insurance..................................................   17
SECTION 4.16.   Labor Matters..............................................   17
SECTION 4.17.   No Restrictive Agreements..................................   17
SECTION 4.18.   Interests of Officers and Directors........................   17
SECTION 4.19.   Brokers....................................................   18

 ARTICLE V

REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY

SECTION 5.1.    Organization, Standing and Corporate Power.................   18
SECTION 5.2.    Authority; Noncontravention................................   18
SECTION 5.3.    Disclosure Documents.......................................   19
SECTION 5.4.    Brokers....................................................   20
SECTION 5.5.    Company Contracts .........................................   20

ARTICLE VI

COVENANTS OF THE COMPANY

SECTION 6.1.    Conduct of Business........................................   20
SECTION 6.2.    Shareholder Meeting; Proxy Material........................   22
SECTION 6.3.    Access to Information......................................   22
SECTION 6.4.    Covenants Regarding Certain Benefit Plans..................   23
SECTION 6.5.    Cooperation in Arrangements with Lenders...................   23

 ARTICLE VII

 COVENANTS OF PARENT

SECTION 7.1.    Confidentiality............................................   23
SECTION 7.2.    Obligations of Merger Subsidiary...........................   24
SECTION 7.3.    Voting of Shares...........................................   24
SECTION 7.4.    Director and Officer Liability.............................   24

ARTICLE VIII

 COVENANTS OF PARENT AND THE COMPANY

SECTION 8.1.    HSR Act Filings; Reasonable Efforts; Notification..........   25
SECTION 8.2.    Public Announcements.......................................   27

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                                                                            Page

SECTION 8.3.    No Solicitation............................................   27

ARTICLE IX

CONDITIONS TO THE MERGER

SECTION 9.1.    Conditions to the Obligations of Each Party................   27
SECTION 9.2.    Conditions to the Obligations of Parent and Merger              
                   Subsidiary..............................................   27
SECTION 9.3.    Conditions to the Obligations of the Company...............   29

 ARTICLE X

 TERMINATION

SECTION 10.1.   Termination................................................   29
SECTION 10.2.   Effect of Termination......................................   30

ARTICLE XI

 MISCELLANEOUS

SECTION 11.1.   Notices....................................................   30
SECTION 11.2.   Survival of Representations and Warranties.................   31
SECTION 11.3.   Amendments; No Waivers.....................................   31
SECTION 11.4.   Fees and Expenses..........................................   31
SECTION 11.5.   Successors and Assigns; Parties in Interest................   32
SECTION 11.6.   Governing Law..............................................   32
SECTION 11.7.   Counterparts; Effectiveness; Interpretation................   32

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INDEX OF DEFINED TERMS

                               Page                                         Page
Agreement.........................1          Governmental Entity...............9
Benefit Plans....................13          HSR Act...........................9
CA Act............................9          indebtedness.....................16
Certificate of Merger.............2          Indemnified Parties..............25
Class A Shares....................1          Material Adverse Effect...........7
Class B Shares....................1          Merger............................1
Closing...........................2          Merger Consideration..............3
Code.............................13          Merger Subsidiary.................1
Company...........................1          Multiemployer Plan...............14
Company Option....................5          Multiple Employer Plan...........14
Company Proxy Statement..........10          Option Plans......................5
Company Shareholder Approval......8          Parent............................1
Company Shareholder Meeting......22          Parent Material Adverse Effect...19
Consents..........................9          person............................4
Constituent Corporations..........2          Plans............................13
Controlled Group Liability.......13          Preferred Shares..................7
DGCL..............................1          Qualified Plans..................14
Dissenting Shares.................4          SEC...............................9
Effective Time....................2          SEC Documents.....................9
ERISA............................13          Securities Act...................10
ERISA Affiliate..................13          Shares............................1
ESPP..............................5          Stockholders......................1
Exchange Act......................9          Voting Agreement..................1
GAAP..............................9                                             

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AGREEMENT AND PLAN OF MERGER

          AGREEMENT  AND PLAN OF MERGER (the  "Agreement"),  dated as of January
29, 1998, by and among ProSource, Inc. , a Delaware corporation (the "Company"),
AmeriServe  Food  Distribution,  Inc., a Delaware  corporation  ("Parent"),  and
Steamboat   Acquisition  Corp.,  a  Delaware  corporation  and  a  wholly  owned
subsidiary of Parent ("Merger Sub").                                            

          WHEREAS,  the Board of  Directors of the Company has  unanimously  (i)
determined  that  this  Agreement  and  the  transactions  contemplated  hereby,
including the Merger (as defined herein),  are fair to and in the best interests
of the shareholders of the Company, (ii) determined that the consideration to be
paid in the Merger is fair to and in the best interests of the  shareholders  of
the Company,  (iii)  approved this Agreement and the  transactions  contemplated
hereby,  including  the Merger,  and (iv)  resolved to  recommend  approval  and
adoption of this Agreement,  the Merger and the other transactions  contemplated
hereby by such shareholders;                                                    

          WHEREAS, the respective Boards of Directors of Parent,  Merger Sub and
the Company have approved the merger of Merger Sub into the Company as set forth
below (the "Merger"),  upon the terms and subject to the conditions set forth in
this  Agreement  and the General  Corporation  Law of the State of Delaware (the
"DGCL"),  whereby (i) each issued and outstanding share of Class A Common Stock,
par value  $0.01 per share,  of the  Company  (the  "Class A  Shares")  shall be
converted into the right to receive the Merger Consideration (as defined herein)
and (ii) each issued and  outstanding  share of Class B Common Stock,  par value
$0.01 per share,  of the Company  (the "Class B Shares" and,  together  with the
Class A Shares,  the "Shares")  shall be converted into the right to receive the
Merger  Consideration,  in each case excluding Class A Shares and Class B Shares
owned,  directly or indirectly,  by the Company or any subsidiary of the Company
or by Parent, Merger Sub or any other subsidiary of Parent and Dissenting Shares
(as defined herein);                                                            

          WHEREAS, as a condition to the willingness of Parent and Merger Sub to
enter into this Agreement and consummate the transactions  contemplated  hereby,
Parent has required that Onex DHC LLC, a Wyoming limited liability company,  and
certain of its affiliates  (together,  the  "Stockholders"),  agree, among other
things, to vote all Shares  beneficially owned by the Stockholders in accordance
with the Voting Agreement,  dated as of the date hereof, among the Stockholders,
Parent  and  Merger  Sub (the  "Voting  Agreement")  and  comply  with the other
provisions of the Voting Agreement; and in order to induce Parent and Merger Sub
to enter into this  Agreement,  the  Stockholders  will  execute and deliver the
Voting Agreement; and                                                           

          WHEREAS,  Parent,  Merger Sub and the Company  desire to make  certain
representations,  warranties,  covenants and  agreements in connection  with the
Merger and also to prescribe various conditions to the consummation thereof.    

          NOW,  THEREFORE,  in  consideration  of the  foregoing  and the mutual
promises,   representations,   warranties,   covenants  and  agreements   herein
contained,  the parties hereto,  intending to be legally bound,  hereby agree as
follows:                                                                        

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 ARTICLE I

THE MERGER

          SECTION 1.1. The Merger.  Upon the terms and subject to the conditions
set forth in this Agreement,  and in accordance with the DGCL,  Merger Sub shall
be merged with and into the Company at the Effective  Time (as defined  herein).
At the  Effective  Time,  the separate  corporate  existence of Merger Sub shall
cease,  and the Company (i) shall  continue as the  surviving  corporation  as a
direct or indirect wholly owned subsidiary of Parent (Merger Sub and the Company
are sometimes hereinafter referred to as "Constituent  Corporations" and, as the
context requires,  the Company,  after giving effect to the Merger, is sometimes
hereinafter  referred to as the "Surviving  Corporation") and (ii) shall succeed
to and assume all the rights and  obligations  of Merger Sub in accordance  with
the DGCL.                                                                       

          SECTION 1.2. Closing. Unless this Agreement shall have been terminated
and the transactions  herein  contemplated shall have been abandoned pursuant to
Section 10.1,  and subject to the  satisfaction  or waiver of the conditions set
forth in Article IX, the closing of the Merger (the "Closing")  shall take place
at 10:00 a.m. on the second  business  day after  satisfaction  or waiver of the
conditions set forth in Article IX, at the offices of Wachtell,  Lipton, Rosen &
Katz, 51 West 52nd Street,  New York,  New York,  unless  another date,  time or
place is agreed to in writing by the parties hereto. At the time of the Closing,
the  Company  and Merger Sub will cause the Merger to be  consummated  by filing
this Agreement or a certificate of merger (the "Certificate of Merger") with the
Secretary  of State of the State of  Delaware  in such form as  required  by and
executed in accordance  with the relevant  provisions of the DGCL and shall make
all other  filings or  recordings  required by the DGCL in  connection  with the
Merger.                                                                         

          SECTION 1.3. Effective Time of the Merger.  The Merger shall,  subject
to the DGCL,  become  effective as of such date and time as the  Certificate  of
Merger is duly filed with the  Secretary of State of the State of Delaware or at
such later  date and time as is  specified  in the  Certificate  of Merger  (the
"Effective Time").                                                              

          SECTION 1.4. Effects of the Merger. From and after the Effective Time,
the Surviving  Corporation shall possess all the property,  rights,  privileges,
immunities,  powers  and  franchises  and  be  subject  to  all  of  the  debts,
restrictions,  disabilities  and duties of the Company  and Merger  Sub,  all as
provided under the DGCL.                                                        

ARTICLE II

 EFFECT OF THE MERGER ON THE CAPITAL
 STOCK OF THE CONSTITUENT CORPORATIONS

          SECTION 2.1. Conversion of Shares. At the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any Shares or any
shares of capital stock of Merger Sub:                                          

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          (a) each Share owned by the Company or owned by Parent,  Merger Sub or
     any  subsidiary  of any of the  Company,  Parent or Merger Sub  immediately
     prior to the Effective Time shall be canceled, and no payment shall be made
with respect thereto;                                                 

          (b) each share of common stock of Merger Sub  outstanding  immediately
     prior to the  Effective  Time shall be converted  into and become one fully
     paid and nonassessable  share of common stock of the Surviving  Corporation
     and shall  constitute the only  outstanding  shares of capital stock of the
Surviving Corporation; and                                            

          (c) each Share  outstanding  immediately  prior to the Effective  Time
     shall,  except as  otherwise  provided in Section  2.1(a) or as provided in
     Section 2.3 with respect to Dissenting  Shares, be converted into the right
  to receive $15.00 in cash without interest (the "Merger Consideration").

          SECTION 2.2. Surrender and Payment.  (a) At the Effective Time, Parent
shall,  or shall cause Merger Sub to, deposit in trust, or enter into such other
agreement or arrangement as may be reasonably  satisfactory to the Company, with
a bank or trust company  designated by Parent and  reasonably  acceptable to the
Company (the "Exchange Agent"), cash in an aggregate amount equal to the product
of (i) the number of Shares issued and  outstanding at the Effective Time (other
than Shares owned by the Company,  Parent or Merger Sub or any subsidiary of the
Company,  Parent or Merger Sub) and (ii) the Merger Consideration (the "Exchange
Fund").  Promptly after the Effective Time,  Parent will send, or will cause the
Exchange  Agent to send, to each holder of Shares at the Effective Time a letter
of transmittal  for use in such exchange  (which shall specify that the delivery
shall be  effected,  and risk of loss and title  shall  pass,  only upon  proper
delivery of the certificates  representing  Shares to the Exchange  Agent).  The
Exchange Agent shall,  pursuant to irrevocable  instructions  given by Parent or
Merger Sub, make the payments provided in this Section.  The Exchange Fund shall
not be used for any other purpose, except as provided in this Agreement.        

          (b) Each  holder of Shares  that have been  converted  into a right to
receive the Merger  Consideration,  upon  surrender to the  Exchange  Agent of a
certificate or certificates  representing such Shares,  together with a properly
completed  letter of  transmittal  covering  such  Shares  and  other  customary
documentation,  will be entitled to receive the Merger Consideration  payable in
respect  of  such  Shares.   Parent  shall   establish   procedures   reasonably
satisfactory  to the  Company  under  which  holders  of Shares  will be able to
receive  payment of the Merger  Consideration  in  immediately  available  funds
immediately  after the Effective Time. As of the Effective Time, all such Shares
shall no longer be outstanding and shall  automatically  be canceled and retired
and  shall  cease  to  exist,  and  each  holder  of  a  certificate  previously
representing  any  such  Shares  shall  cease to have any  rights  with  respect
thereto, except the right to receive the Merger Consideration, without interest,
upon surrender of the  certificates  representing  such Shares,  as contemplated
hereby.                                                                         

          (c) If any  portion  of the  Merger  Consideration  is to be paid to a
person  other  than the  registered  holder  of the  Shares  represented  by the
certificate  or  certificates  surrendered in exchange  therefor,  it shall be a
condition to such payment that the  certificate or  certificates  so            

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surrendered  shall be  properly  endorsed  or  otherwise  be in proper  form for
transfer and that the person  requesting  such payment shall pay to the Exchange
Agent any  transfer  or other taxes  required  as a result of such  payment to a
person  other than the  registered  holder of such  Shares or  establish  to the
satisfaction  of the  Exchange  Agent  that  such  tax has  been  paid or is not
payable.  For  purposes  of this  Agreement,  "person"  means an  individual,  a
corporation,  a  partnership,  an  association,  a trust or any other  entity or
organization,  including a government or political  subdivision or any agency or
instrumentality thereof.                                                        

          (d) After the Effective Time,  there shall be no further  registration
of transfers of Shares. If, after the Effective Time, certificates  representing
Shares are  presented to the Surviving  Corporation,  they shall be canceled and
exchanged  for the  consideration  provided  for,  and in  accordance  with  the
procedures set forth, in this Article II.                                       

          (e) Any portion of the  Exchange  Fund that  remains  unclaimed by the
holders of Shares six  months  after the  Effective  Time shall be  returned  to
Parent,  upon  Parent's  demand,  and any such holder who has not  exchanged his
Shares for the Merger  Consideration  in  accordance  with this Section prior to
that time shall thereafter look only to Parent and the Surviving Corporation for
payment of the Merger  Consideration  in respect of his Shares.  Notwithstanding
the foregoing, Parent shall not be liable to any holder of Shares for any amount
paid to a public official pursuant to and in accordance with the requirements of
applicable abandoned property, escheat or similar laws.                         

          (f) Any  portion of the Merger  Consideration  made  available  to the
Exchange  Agent pursuant to Section 2.2(a) to pay for Shares for which the right
to a  determination  of fair market value,  as  contemplated by Section 2.3, has
been perfected shall be returned to Parent upon Parent's demand.                

          SECTION 2.3. Dissenting Shares. (a)  Notwithstanding  anything in this
Agreement to the contrary,  Shares that are issued and  outstanding  immediately
prior to the Effective  Time and which are held by holders who have not voted in
favor of or  consented  to the  Merger and who shall  have  delivered  a written
demand for  appraisal of such Shares in the time and manner  provided in Section
262 of the  DGCL and  shall  not  have  failed  to  perfect  or  shall  not have
effectively  withdrawn or lost their rights to appraisal  and payment  under the
DGCL (the "Dissenting  Shares") shall not be converted into the right to receive
the Merger Consideration,  but shall be entitled to receive the consideration as
shall be  determined  pursuant  to Section 262 of the DGCL;  provided,  however,
that, if any such holder shall have failed to perfect or shall have  effectively
withdrawn or lost his, her or its right to appraisal and payment under the DGCL,
such holder's Shares shall  thereupon be deemed to have been  converted,  at the
Effective Time, into the right to receive the Merger  Consideration set forth in
Section 2.1(c) of this Agreement, without any interest thereon.                 

          (b) The Company  shall give Parent and Merger Sub (i) prompt notice of
any demands for  appraisal  pursuant to Section 262 of the DGCL  received by the
Company,  withdrawals of such demands and any other instruments  served pursuant
to the DGCL and received by the Company,  and (ii) the opportunity to direct all
negotiations  and  proceedings  with respect                                    

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to demands for appraisal  under the DGCL. The Company shall not, except with the
prior  written  consent of Parent,  make any  payment  with  respect to any such
demands for appraisal or offer to settle any such demands.                      

          SECTION 2.4. Stock Options and Stock Plans. (a) Parent and the Company
shall take all actions necessary to provide that at the Effective Time, (i) each
Company Option (defined below) surrendered for cash, shall be canceled, and (ii)
in consideration of such  cancellation,  and except to the extent that Parent or
Merger  Sub and the  holder of any such  Company  Option  otherwise  agree,  the
Company  shall pay to each such  holder of Company  Options an amount in cash in
respect  thereof  equal to the product of (1) the excess,  if any, of the Merger
Consideration  over the per share  exercise  price thereof and (2) the number of
Shares subject thereto  immediately  prior to the Effective Time less applicable
withholding  taxes.  "Company  Option" means any option granted,  whether or not
exercisable (it being understood that all Company Options shall be deemed to be,
and shall be treated under this Article II as though,  such Company Options were
fully vested and fully exercisable immediately prior to the Effective Time), and
not  exercised  or  expired,  to a  current  or  former  employee,  director  or
independent  contractor  of  the  Company  or any  of  its  subsidiaries  or any
predecessor thereof to purchase Shares pursuant to the Amended Management Option
Plan (1995),  the 1996 Stock Option Plan,  and the 1997  Directors  Stock Option
Plan (collectively, the "Option Plans").                                        

          (b) Prior to the Effective  Time, the Company shall use its reasonable
efforts to (i) obtain any consents from holders of Company Options and (ii) make
any  amendments  to the  terms of such  stock  option or  compensation  plans or
arrangements  that, in the case of either  clause (i) or (ii),  are necessary to
give effect to the transactions contemplated by this Section.                   

          (c)  Immediately  prior  to the  Effective  Time,  the  Company  shall
terminate the Option Plans.                                                     

          (d) In the event the current Plan Year (as such term is defined in the
Company's  1997  Employee  Stock  Purchase  Plan (the "ESPP")) ends prior to the
Effective  Time,  the Company  shall take all such action as may be necessary in
accordance  with the ESPP to terminate  the ESPP as of the last day of such Plan
Year, with the effect,  among other things, that no new Plan Year shall commence
thereafter.  In the  event  the  current  Plan  Year  under  the ESPP  would not
otherwise end prior to the Effective  Time,  then prior to the date that is five
days prior to the Effective Time, the Company shall amend the ESPP such that the
date on which the  Effective  Time  occurs  shall be the last day of the current
Plan Year for purposes of the ESPP with  respect to the current Plan Year,  with
the effect that on such date  immediately  prior to the Effective  Time,  Shares
will be purchased  from the Company as provided in Section 5.3 of the ESPP,  and
the Shares  purchased shall  thereafter be converted in the Merger,  as provided
for in Section  2.1(c).  At the Effective  Time, the Company shall terminate the
ESPP,  any cash  held in  participants'  accounts  after  giving  effect to this
Section shall be distributed to the respective  participants  in the ESPP and no
Plan Year that would otherwise commence on or after such date shall commence.   

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 ARTICLE III

 THE SURVIVING CORPORATION

          SECTION  3.1.   Certificate  of  Incorporation.   The  certificate  of
incorporation  of the  Merger Sub in effect at the  Effective  Time shall be the
certificate  of  incorporation  of the  Surviving  Corporation  until amended as
provided  therein and in  accordance  with  applicable  law;  provided  that the
provisions thereof as to  indemnification  and exculpation of directors shall be
no less favorable than those  contained in the certificate of  incorporation  of
the Company, as previously filed as an exhibit to the SEC Documents.            

          SECTION  3.2.  Bylaws.  The  bylaws of the Merger Sub in effect at the
Effective Time shall be the bylaws of the Surviving Corporation until amended or
repealed  as  provided  therein  and  in  accordance  with  the  certificate  of
incorporation  and applicable  law;  provided that the provisions  thereof as to
indemnification  and  exculpation  of directors  shall be no less favorable than
those contained in the bylaws of the Company,  as previously filed as an exhibit
to the SEC Documents.                                                           

          SECTION 3.3.  Directors  and  Officers.  From and after the  Effective
Time, until successors are duly elected or appointed and qualified in accordance
with  applicable  law, the officers and directors of Merger Sub at the Effective
Time shall be the officers and directors of the Surviving Corporation.          

ARTICLE IV

 REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 The Company represents and warrants to Parent and Merger Sub:

          SECTION 4.1.  Organization,  Standing and Corporate Power. Each of the
Company  and  each  of  its  significant  subsidiaries  is  a  corporation  duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of the
jurisdiction in which it is incorporated  and has the requisite  corporate power
and  authority  to carry on its  business  as now being  conducted.  Each of the
Company and each of its  significant  subsidiaries is duly qualified or licensed
to do business and is in good standing in each  jurisdiction in which the nature
of its  business  or the  ownership  or  leasing  of its  properties  makes such
qualification or licensing necessary, other than in such jurisdictions where the
failure to be so qualified or licensed  (individually or in the aggregate) would
not  reasonably  be  expected  to (i)  have a  material  adverse  effect  on the
condition  (financial or otherwise),  business,  or results of operations of the
Company and its  subsidiaries  taken as a whole,  or (ii) prevent or  materially
delay consummation of any of the transactions  contemplated by this Agreement (a
"Material  Adverse  Effect").  The Company has delivered to Parent  complete and
correct  copies  of  its  certificate  of  incorporation  and  bylaws,  and  the
certificate of incorporation and bylaws (or equivalent organizational documents)
of its  significant  subsidiaries,  in each case as  amended to the date of this
Agreement.  For purposes of this  Agreement,  a "subsidiary" of any person means
another person in which such first person,  directly or indi-                   

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rectly,  owns 50% or more of the  equity  interests  or has the  right,  through
ownership of equity, contractually or otherwise, to elect at least a majority of
its Board of Directors or other governing body, and "significant subsidiary" has
the meaning given that term in Regulation  S-X  promulgated by the United States
Securities and Exchange Commission.                                             

          SECTION 4.2. Subsidiaries. All the outstanding shares of capital stock
or other ownership interests of each significant  subsidiary of the Company have
been validly issued and are fully paid and nonassessable and, all such shares or
ownership  interests  are owned by the  Company,  by another  subsidiary  of the
Company or by the  Company and another  such  subsidiary,  free and clear of all
encumbrances  and  liens  and  free  of  any  other  limitation  or  restriction
(including any  restriction on the right to vote,  sell or otherwise  dispose of
such capital stock or equity interests).  All of the subsidiaries of the Company
that are not  "significant  subsidiaries"  would not, if taken in the aggregate,
constitute a  "significant  subsidiary"  and are not  otherwise  material to the
Company.                                                                        

          SECTION 4.3. Capital  Structure.  The authorized  capital stock of the
Company  consists of 50,000,000  Class A Shares,  10,000,000  Class B Shares and
10,000,000  shares of preferred stock, par value $0.01 per share (the "Preferred
Shares").  As of December 31, 1997, (i) 3,490,835 Class A Shares were issued and
outstanding, (ii) 5,892,756 Class B Shares were issued and outstanding, (iii) no
Shares were held by the Company or by any of the  Company's  subsidiaries,  (iv)
10,500 Class A Shares were  reserved for  issuance  pursuant to the  outstanding
Company Options,  (v) 629,150 Class B Shares were reserved for issuance pursuant
to the outstanding  Company Options,  (vi) 300,000 Class A Shares and no Class B
Shares were reserved for issuance  pursuant to the ESPP,  and (vii) no shares of
Preferred Stock were issued, reserved for issuance or outstanding. Except as set
forth above or on Schedule  4.3, no shares of capital  stock or other  equity or
voting  securities  of  the  Company  are  issued,   reserved  for  issuance  or
outstanding,  except for Shares  referred to in clauses (iv) and (v) above which
may be issued upon exercise of the outstanding Company Options.  All outstanding
shares of capital  stock of the Company  are, and all Shares which may be issued
pursuant to the Option Plans will,  when  issued,  be duly  authorized,  validly
issued,  fully paid and  nonassessable  and not  subject to  preemptive  rights.
Except as set forth on Schedule 4.3, there are not any bonds, debentures,  notes
or other  indebtedness or securities of the Company having the right to vote (or
convertible into, or exchangeable  for,  securities having the right to vote) on
any  matters  on which  shareholders  of the  Company  may vote.  Other than the
Shares, Company Options,  Option Plans and the ESPP, or as set forth on Schedule
4.3,  there  are  not  any  securities,   options,   warrants,   calls,  rights,
commitments,  agreements,  arrangements or undertakings of any kind to which the
Company or any of its  subsidiaries  is a party or by which any of them is bound
obligating the Company or any of its subsidiaries to issue,  deliver or sell, or
cause to be issued,  delivered or sold,  additional  shares of capital  stock or
other equity or voting  securities of the Company or of any of its  subsidiaries
or obligating the Company or any of its subsidiaries to issue,  grant, extend or
enter  into  any  such  security,  option,  warrant,  call,  right,  commitment,
agreement,   arrangement  or  undertaking.  There  are  no  outstanding  rights,
commitments, agreements, arrangements or undertakings of any kind obligating the
Company or any of its subsidiaries to repurchase, redeem or otherwise acquire or
dispose of any shares of capital  stock or other equity or voting  securities of
the Company or any                                                              

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of its  subsidiaries  or  any  securities  of  the  type  described  in the  two
immediately preceding sentences.                                                

          SECTION  4.4.  Authority;  Noncontravention.  (a) The  Company has the
requisite  corporate  power and  authority  to enter  into this  Agreement  and,
subject to the  Company  Shareholder  Approval  (as defined  below)  required in
connection with the  consummation of the Merger,  to consummate the transactions
contemplated  by  this  Agreement.  The  Merger  requires  the  approval  by the
affirmative  vote of the  holders of Shares  entitled  to cast a majority of the
votes of all  outstanding  Shares (the "Company  Shareholder  Approval"),  which
approval  is the only vote of the  holders of any class or series of the capital
stock of the Company  necessary to approve the Merger and this Agreement and the
transactions contemplated hereby.                                               

          (b) The  execution  and delivery of this  Agreement by the Company and
the  consummation  by the  Company  of the  transactions  contemplated  by  this
Agreement  have been duly  authorized by all necessary  corporate  action on the
part of the Company,  except for the Company Shareholder  Approval in connection
with the  consummation of the Merger.  This Agreement has been duly executed and
delivered by the Company and,  assuming this  Agreement  constitutes a valid and
binding  agreement  of Parent and Merger  Sub,  constitutes  a valid and binding
obligation of the Company,  enforceable  against the Company in accordance  with
its terms.                                                                      

          (c) The  execution  and delivery of this  Agreement  does not, and the
consummation of the  transactions  contemplated by this Agreement and compliance
with the provisions of this Agreement will not,  conflict with, or result in any
violation  of, or  default  (with or without  notice or lapse of time,  or both)
under,  or give rise to a right of  termination,  cancellation,  modification or
acceleration of any obligation or to a loss of a benefit under, or result in the
creation of any  encumbrance or lien upon any of the properties or assets of the
Company or any of its  subsidiaries  under, (i) the certificate of incorporation
or bylaws of the Company or the comparable  charter or organizational  documents
of any of its  subsidiaries,  (ii) any loan or  credit  agreement,  note,  bond,
mortgage, indenture, lien, lease or any other contract,  agreement,  instrument,
permit, commitment,  concession,  franchise or license applicable to the Company
or any of its  subsidiaries or their respective  properties or assets,  or (iii)
subject  to the  governmental  filings  and  other  matters  referred  to in the
following sentence, any judgment,  order, decree, statute, law, ordinance,  rule
or  regulation  applicable  to the Company or any of its  subsidiaries  or their
respective  properties  or assets  other than,  in the case of clauses  (ii) and
(iii) above, any such conflicts,  violations,  defaults, rights, losses or liens
that (x)  individually  or in the aggregate  would not reasonably be expected to
have a Material Adverse Effect or (y) are set forth on Schedule 4.4.            

          (d) No consent, approval, franchise, order, license, permit, waiver or
authorization  of, or  registration,  declaration  or filing with or  exemption,
notice,  application,  or certification by or to (collectively,  "Consents") any
federal, state or local government or any arbitral panel or any court, tribunal,
administrative  or  regulatory  agency  or  commission  or  other   governmental
authority,  department,  bureau,  commission  or agency,  domestic or foreign (a
"Governmental  Entity"), is required by or with respect to the Company or any of
its subsidiaries in connection with the execution and delivery of this Agreement
by  the  Company  or  the  consummation  by  the  Company  of  the  transactions
contemplated  by this  Agreement,  except  for (i)                              

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the filing of the documents  referred to in Section 1.2 in  accordance  with the
DGCL and similar  documents  with the  relevant  authorities  of other states in
which the Company is qualified  to do  business,  (ii) the filing of a premerger
notification  and  report  form  by  the  Company  under  the  Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (iii) compliance
with any  applicable  requirements  of the  Securities  Exchange Act of 1934, as
amended,  and the rules and regulations  thereunder (the "Exchange  Act"),  (iv)
such  notifications as may be required  pursuant to the Competition Act (Canada)
(the  "CA  Act") or the  Investment  Canada  Act  (Canada),  and (v) such  other
Consents  as to which the  failure  to obtain or make  would not  reasonably  be
expected to have a Material Adverse Effect.                                     

          SECTION 4.5.  SEC  Documents;  Financial  Statements;  No  Undisclosed
Liabilities.  (a) The Company has filed,  and made  available to Parent true and
complete copies of, all required reports, schedules, forms, statements, exhibits
and other  documents filed with the Securities and Exchange  Commission  ("SEC")
since January 1, 1996 (the "SEC  Documents").  As of their respective dates, and
except to the  extent  later  modified  in  subsequent  SEC  Documents,  the SEC
Documents  complied  in all  material  respects  with  the  requirements  of the
Securities  Act of 1933, as amended,  and the rules and  regulations  thereunder
(the "Securities  Act"), or the Exchange Act, as the case may be,  applicable to
such SEC Documents, and none of the SEC Documents contained any untrue statement
of a material  fact or omitted to state a material  fact  required  to be stated
therein or necessary in order to make the  statements  therein,  in light of the
circumstances under which they were made, not misleading.                       

     (b)  The financial  statements of the Company included in the SEC
Documents   comply  in  all  material   respects  with   applicable   accounting
requirements  and the published  rules and  regulations  of the SEC with respect
thereto,  have been prepared in accordance with United States generally accepted
accounting principles (except, in the case of unaudited statements, as permitted
by Form 10-Q of the SEC) applied on a consistent  basis  throughout  the periods
involved  ("GAAP")  (except as may be indicated in the notes thereto) and fairly
present the consolidated  financial position of the Company and its consolidated
subsidiaries  as of the dates  thereof  and the  consolidated  results  of their
operations  and cash flows for the periods then ended  (subject,  in the case of
unaudited statements, to normal year-end audit adjustments).                    

          (c)  Except  as set  forth  in  the  SEC  Documents,  and  except  for
liabilities  and  obligations   arising  in  the  ordinary  course  of  business
consistent with past practice,  neither the Company nor any of its  subsidiaries
has any  liabilities or obligations of any nature  (whether  accrued,  absolute,
contingent  or  otherwise),   except  for  liabilities  and  obligations  which,
individually  or in the  aggregate,  have not had or  would  not  reasonably  be
expected to have a Material Adverse Effect.                                     

          SECTION 4.6. Disclosure Documents.  (a) The definitive proxy statement
of the  Company  (the  "Company  Proxy  Statement")  to be filed with the SEC in
connection with the Merger, and any amendments or supplements thereto will, when
filed,  comply in all material respects with the applicable  requirements of the
Exchange Act.                                                                   

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          (b) At the time of filing the Company Proxy Statement with the SEC, at
the time the Company Proxy  Statement or any amendment or supplement  thereto is
first mailed to shareholders of the Company,  at the time such shareholders vote
on adoption of this  Agreement,  and at the  Effective  Time,  the Company Proxy
Statement,  as  supplemented  or amended,  if  applicable,  will not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein,  in the light of the circumstances
under which they were made, not misleading.  The  representations and warranties
contained in this Section 4.6 will not apply to statements or omissions included
in the Company Proxy Statement based upon  information  furnished to the Company
in writing by Parent or Merger Sub specifically for use therein.                

          SECTION 4.7. Property;  Sufficiency of Assets.  Except in each case as
would not reasonably be expected to have a Material Adverse Effect,  the Company
and its subsidiaries  (i) have good and valid title to all property  material to
the  business of the  Company  and  reflected  in the latest  audited  financial
statements  included in the SEC  Documents as being owned by the Company and its
subsidiaries  or acquired  after the date  thereof  (except  properties  sold or
otherwise  disposed  of in the  ordinary  course  of  business  since  the  date
thereof),  and (ii) are collectively the lessee of all property  material to the
business of the Company and reflected as leased in the latest audited  financial
statements  included  in the SEC  Documents  (or on the books and records of the
Company as of the date thereof) or acquired  after the date thereof  (except for
leases that have  expired by their  terms) and are in peaceful  and  undisturbed
possession of the properties  purported to be leased  thereunder,  and each such
lease is valid and in full force and effect  without  default  thereunder by the
lessee or the lessor.  Such owned and leased property that is tangible  personal
property is in good working order,  reasonable  wear and tear  excepted,  and is
suitable for the use for which it is intended,  except that, which  individually
or in the aggregate, would not reasonably be expected to have a Material Adverse
Effect.                                                                         

          SECTION 4.8. Absence of Certain Changes or Events. Except as disclosed
in the SEC Documents or as set forth on Schedule 4.8, since  September 27, 1997,
the Company and its  subsidiaries  have  conducted  their  business  only in the
ordinary  course  consistent  with past  practice,  and,  except in the ordinary
course of business consistent with past practice, there has not been:           

          (i) any event,  occurrence or development of a state of  circumstances
     which has had or would  reasonably  be expected to have a Material  Adverse
Effect,                                                               

          (ii) any  declaration,  setting  aside or payment of any  dividend  or
     other distribution (whether in cash, stock or property) with respect to any
     of the  Company's  capital  stock or any  repurchase,  redemption  or other
     acquisition by the Company or any of its  subsidiaries  of any  outstanding
     shares of capital  stock or other  securities  of the Company or any of its
subsidiaries,                                                         

          (iii) any adjustment, split, combination or reclassification of any of
     its capital stock or any issuance or the  authorization  of any issuance of
     any other  securities  in  respect  of, in lieu of or in  substitution  for
shares of its capital stock,                                          

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          (iv) (A) any granting by the Company or any of its subsidiaries to any
     current or former  director,  officer or  employee of the Company or any of
     its  subsidiaries  of any material  increase in  compensation  or benefits,
     except for grants to  employees  who are not  officers or  directors in the
     ordinary course of business consistent with past practice, (B) any granting
     by the Company or any of its subsidiaries to any such director,  officer or
     employee of any increase in severance or  termination  pay  (including  the
     acceleration  in the vesting of Shares (or other property) or the provision
     of any tax  gross-up),  except for grants to employees who are not officers
     or  directors  in the  ordinary  course of  business  consistent  with past
     practice,  or (C) any entry by the Company or any of its subsidiaries  into
     any employment,  deferred compensation,  severance or termination agreement
     or  arrangement  with or for the  benefit  of any such  current  or  former
     director,  officer or employee,  except with employees who are not officers
     or  directors  in the  ordinary  course of  business  consistent  with past
practice,                                                             

          (v) any change in accounting  methods,  principles or practices by the
Company or any of its subsidiaries,                                   

          (vi) any amendment, waiver or modification of any material term of any
outstanding security of the Company or any of its subsidiaries,       

          (vii) any incurrence, assumption or guarantee by the Company or any of
     its  subsidiaries of any material  indebtedness for borrowed money or other
     material  obligations,  or any creation or assumption by the Company or any
     of its  subsidiaries  of any encumbrance or lien on any asset other than in
     the ordinary course of business  consistent  with past practice  (including
     borrowings under  pre-existing  credit  facilities,  not resulting in total
     consolidated funded indebtedness as of the date of this Agreement in excess
of $200 million),                                                     

          (viii) any making of any loan, advance or capital  contributions to or
     investment  in any person  other than in the  ordinary  course of  business
consistent with past practice,                                        

          (ix) any single or related series of transactions or commitments made,
     or any single or related series of contracts or agreements entered into, by
     the Company or any of its subsidiaries  involving aggregate  obligations of
     more than $2,000,000 for any transaction or series of transactions,  or any
capital expenditures in excess of $20,000,000 in the aggregate,       

          (x) any  acquisition  or  disposition  of any  assets or any merger or
     consolidation  with any  person  on  behalf  of the  Company  or any of its
     subsidiaries  (other  than sales of  inventory  in the  ordinary  course of
     business in accordance  with past practice and other than  dispositions  of
     used, obsolete or outmoded equipment or machinery in the ordinary course of
business in accordance with past practice),                           

          (xi) any  relinquishment  by the Company or any of its subsidiaries of
     any  contract or other right,  in either case,  material to the Company and
its subsidiaries  taken as a                                          

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     whole,  other than  transactions  and commitments in the ordinary course of
     business  consistent  with  past  practice  and those  contemplated  by the
Agreement, or                                                         

          (xii) any  agreement,  commitment,  arrangement  or undertaking by the
     Company or any of its  subsidiaries  to perform  any  action  described  in
clauses (i) through (xi).                                             

          SECTION 4.9. Litigation. Except as set forth on Schedule 4.9, there is
no Action or proceeding pending or, to the knowledge of the Company,  threatened
against or affecting the Company or any of its subsidiaries  that,  individually
or in the aggregate,  has resulted in or would  reasonably be expected to have a
Material Adverse Effect, nor is there any judgment, decree, injunction,  rule or
order of any Governmental  Entity outstanding  against the Company or any of its
subsidiaries  which could  reasonably  be  expected  to have a Material  Adverse
Effect.                                                                         

          SECTION 4.10.  Compliance  with Laws,  Etc. The conduct by the Company
and its  subsidiaries  of their business is and has been in compliance  with all
statutes, laws, regulations,  ordinances,  rules, judgments,  orders or decrees,
applicable  thereto and does not  infringe  upon or conflict in any respect with
any patent,  copyright,  trademark,  trade name,  service mark,  brand name, any
related  regulations or other intellectual  property rights of any other person,
except for violations,  failures so to comply,  infringements  or conflicts,  if
any, that, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect.                                                 

          SECTION 4.11. Absence of Changes in Stock or Benefit Plans.  Except as
set forth on Schedule  4.11,  except as  required  under this  Agreement,  since
September 27, 1997, there has not been (i) any acceleration, amendment or change
of the period of  exercisability  or vesting of any  Company  Options  under the
Option Plans (including any  discretionary  acceleration of the exercise periods
or vesting by the Company's  Board of Directors or any committee  thereof or any
other persons administering an Option Plan) or authorization of cash payments in
exchange  for any  Company  Options  under any of such  Option  Plans,  (ii) any
adoption or material  amendment by the Company or any of its subsidiaries of any
collective bargaining agreement or any bonus, pension, profit sharing,  deferred
compensation,  incentive compensation,  stock ownership,  stock purchase,  stock
option,   phantom  stock,  stock  appreciation  right,   retirement,   vacation,
severance,  disability,  death  benefit,   hospitalization,   medical,  worker's
compensation, supplementary unemployment benefits, or other plan, arrangement or
understanding or any employment agreement providing  compensation or benefits to
any current or former employee,  officer,  director or independent contractor of
the Company or any of its  subsidiaries  or any  beneficiary  thereof or entered
into, maintained or contributed to, as the case may be, by the Company or any of
its subsidiaries  (collectively,  "Benefit Plans"), or (iii) any adoption of, or
amendment to, or change in employee participation or coverage under, any Benefit
Plans which would increase  materially  the expense of maintaining  such Benefit
Plans above the level of the expense  incurred in respect thereof for the fiscal
year ended on December 28, 1996. Except as expressly  contemplated  hereby or as
provided  in the Option  Plans,  neither  the  execution  and  delivery  of this
Agreement nor the  consummation  of the  transactions  contemplated  hereby will
(either  alone or in  conjunction  with any other  event)  result in,  cause the
accelerated  vesting or  delivery  of, or  increase  the amount or value of, any
payment or benefit to any employee of the Company.                              

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          SECTION 4.12.  ERISA  Compliance.  (a) For purposes of this Agreement,
the following definitions apply: "Code" means the Internal Revenue Code of 1986,
as  amended,  and  the  Treasury  regulations   thereunder;   "Controlled  Group
Liability"  means any and all  liabilities  under  (i)  Title IV of ERISA,  (ii)
section  302 of  ERISA,  (iii)  sections  412 and  4971 of the  Code,  (iv)  the
continuation  coverage  requirements of section 601 et seq. of ERISA and section
4980B of the Code, and (v)  corresponding or similar  provisions of foreign laws
or regulations,  other than such liabilities that arise solely out of, or relate
solely to, the Plans;  "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended,  and the regulations  thereunder;  "ERISA Affiliate" means,
with  respect to any  entity,  trade or  business,  any other  entity,  trade or
business that is a member of a group  described in Section  414(b),  (c), (m) or
(o) of the Code or Section  4001(b)(1)  of ERISA that includes the first entity,
trade or  business,  or that is a member of the same  "controlled  group" as the
first entity, trade or business pursuant to Section 4001(a)(14) of ERISA.       

          (b) Schedule  4.12  includes a complete  list of all employee  benefit
plans,  programs,  policies and practices  providing  benefits to any current or
former  employee,  officer or director of the Company or any of its subsidiaries
or  beneficiary  or  dependent  thereof,  whether or not  written,  and  whether
covering  one person or more than one person,  sponsored  or  maintained  by the
Company  or to which the  Company  contributes  or is  obligated  to  contribute
("Plans").  Without  limiting the generality of the foregoing,  the term "Plans"
includes all employee  welfare  benefit plans within the meaning of Section 3(1)
of ERISA,  all employee pension benefit plans within the meaning of Section 3(2)
of  ERISA,  and  all  other  employee  benefit,   bonus,   incentive,   deferred
compensation,  stock purchase,  stock option,  severance  ,change of control and
fringe benefit plans, programs or agreements .                                  

          (c) With  respect to each Plan,  the  Company  has  delivered  or made
available  to Parent and Merger Sub a true,  correct and  complete  copy of: (i)
each writing  constituting a part of such Plan, including without limitation all
plan documents  (including benefit schedules),  trust agreements,  and insurance
contracts and other funding  vehicles;  (ii) the most recent Annual Report (Form
5500 Series) and accompanying  schedule,  if any; (iii) the current summary plan
description and any material modifications thereto, if any; (iv) the most recent
annual financial  report,  if any; (v) the most recent actuarial report, if any;
and  (vi)  the  most  recent  determination  letter  from  the  IRS.  Except  as
specifically  provided in the foregoing documents delivered to Parent and Merger
Sub,  there are no amendments to any Plan or any new Plan that have been adopted
or approved nor has the Company  undertaken to make any such amendments or adopt
or approve any new Plan.                                                        

          (d)  Schedule  4.12  identifies  each  Plan that is  intended  to be a
"qualified  plan" within the meaning of Section  401(a) of the Code  ("Qualified
Plans"). Except as set forth in Schedule 4.12(d), the IRS has issued a favorable
determination  letter  with  respect  to each  Qualified  Plan that has not been
revoked,  and, to the knowledge of the Company,  no circumstances exist nor have
any events  occurred that could  adversely  affect the  qualified  status of any
Qualified  Plan  or  the  related  trust.  No  Plan  is  intended  to  meet  the
requirements of Code Section 501(c)(9).                                         

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          (e) All  contributions  required to be made to any Plan by  applicable
law or regulation or by any plan document or other contractual undertaking,  and
all premiums due or payable with respect to insurance policies funding any Plan,
for any period through the date hereof have been timely made or paid in full or,
to the extent not required to be made or paid on or before the date hereof, have
been fully reflected on the financial statements contained in the SEC Documents.

          (f)  The  Company  has  complied,  and is now  in  compliance,  in all
material  respects  with  all  provisions  of  ERISA,  the Code and all laws and
regulations  applicable to the Plans. There is not now, nor, to the knowledge of
the Company, do any circumstances exist that could give rise to, any requirement
for the  posting of security  with  respect to a Plan or the  imposition  of any
encumbrance  or lien on the assets of the Company  under  ERISA or the Code.  No
non-exempt prohibited transaction has occurred with respect to any Plan.        

          (g) The Company  does not maintain or  contribute  to any Plan that is
subject to Title IV or Section  302 of ERISA or Section 412 or 4971 of the Code.
All  liabilities  in connection  with the  termination  of any employee  pension
benefit plan that was sponsored,  maintained or contributed to by the Company at
any time within the past three years (and any other material  liabilities  under
Title IV of ERISA with respect to any such plan) have been fully satisfied. Each
such employee pension benefit plan has received a favorable determination letter
from the IRS with respect to its termination.                                   

(h) Except as set forth on Schedule  4.12, no Plan is a     
"multiemployer  plan"  within  the  meaning of  Section  4001(a)(3)  of ERISA   
(a "Multiemployer  Plan") or a plan that has two or more  contributing          
sponsors at least two of whom are not under  common  control,  within the       
meaning of Section 4063 of ERISA (a "Multiple Employer Plan"). No Plan that is  
a Multiemployer Plan is in  reorganization or is insolvent and, to the best     
knowledge of the Company, no  circumstances  exist  that  would be  reasonably  
expected  to  result  in a reorganization or insolvency of any such             
Multiemployer Plan. Neither the Company nor any of its  subsidiaries  has       
withdrawn  or  partially  withdrawn  from any Multiemployer Plan or has any     
liabilities under any Multiemployer Plan that have not been fully  satisfied.   
There are no more than 450  employees of the Company and its subsidiaries who   
are currently participating in or have accrued benefits under a Multiemployer   
Plan.                                                                           

          (i) There  does not now  exist,  nor do any  circumstances  exist that
could result in, any Controlled Group Liability that would be a liability of the
Company following the Closing.                                                  

          (j) The Company has no material liability for life, health, medical or
other  welfare  benefits to former  employees  or  beneficiaries  or  dependents
thereof, except for health continuation coverage as required by Section 4980B of
the Code or Part 6 of Title I of ERISA and at no expense to the Company.        

          (k) All Plans covering foreign  employees of the Company or any of its
subsidiaries  comply with applicable  local law and are fully funded and/or book
reserved to the extent applicable.                                              

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          (l) Except as set forth on Schedule  4.12,  no labor  organization  or
group of employees of the Company has made a pending  demand for  recognition or
certification,  and there are no representation or certification  proceedings or
petitions seeking a representation proceeding presently pending or threatened to
be brought or filed,  with the National Labor Relations Board or any other labor
relations  tribunal or authority.  Each of the Company and its subsidiaries have
complied with the Worker Adjustment and Retraining Notification Act.            

          (m) There are no pending or  threatened  claims (other than claims for
benefits  in the  ordinary  course),  lawsuits or  arbitrations  which have been
asserted or instituted  against the Plans, any fiduciaries  thereof with respect
to their duties to the Plans or the assets of any of the trusts under any of the
Plans which could reasonably be expected to result in any material  liability of
the Company to the Pension  Benefit  Guaranty  Corporation,  the  Department  of
Treasury, the Department of Labor or any Multiemployer Plan.                    

        SECTION 4.13. Tax Matters. Except as set forth in the SEC Documents:

          (a) Each of the  Company  and each of its  subsidiaries  has filed all
federal  income tax and other  material  tax returns and reports  required to be
filed by it. All such returns are complete and correct in all material respects.
Each of the  Company and each of its  subsidiaries  has paid (or the Company has
paid on its subsidiaries' behalf) all taxes shown as due on such returns and all
material  taxes required to be paid by it for which no return was required to be
filed.                                                                          

   (b) Except as set forth on Schedule  4.13, no tax return of the
Company or  any of  its  subsidiaries  is  under  audit  or  examination  by    
any  taxing authority,  and no written or unwritten  notice of such an audit or 
examination has been  received by the Company or any of its  subsidiaries.      
Each  deficiency resulting  from  any  audit or  examination  relating  to      
taxes  by any  taxing authority has been paid,  except for deficiencies  being  
contested in good faith by appropriate  proceedings  and which have been        
reserved  against in accordance with GAAP.  None of the  federal  income  tax   
returns  of the  Company  and its subsidiaries consolidated in such returns has 
been examined and settled with the IRS for any year, and no years are otherwise 
closed.                                                                         
(c) No liens for taxes exist  with  respect to any assets or
properties  of the  Company or any of its subsidiaries, except for statutory    
liens for taxes not yet due or taxes that are being  contested  in good faith   
by  appropriate  proceedings  and that have been reserved against in accordance 
with GAAP.                                                                      

          (d) None of the Company or any of its subsidiaries is a party to or is
bound by any tax sharing  agreement,  tax  allocation  agreement,  tax indemnity
obligation or similar written or unwritten agreement or arrangement with respect
to taxes (including any advance pricing  agreement,  closing  agreement or other
agreement relating to taxes with any taxing authority), other than agreements or
arrangements among the Company and its subsidiaries.                            

          (e) The  disallowance  of a deduction under Section 162(m) of the Code
for  employee  remuneration  will not apply to any amount paid or payable by the
Company or any of its  subsidiaries  under any  contract,  Option Plan,  Benefit
Plan, program, arrangement or understanding currently in effect.                

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          (f) No amount or other  entitlement that could be received (whether in
cash or property or the vesting of property) in connection with the transactions
contemplated  hereby (either alone or in conjunction  with any other event) will
be an "excess parachute  payment" (as such term is defined in Section 280G(b)(1)
of the Code).                                                                   

          (g) As used in this  Agreement,  "taxes"  shall  include all  federal,
state, local and foreign income, property, sales, excise,  withholding and other
taxes,  tariffs  or  governmental  charges  of any  nature  whatsoever,  and all
interest, penalties and additions to tax with respect to any of the foregoing.  

          SECTION 4.14. Debt Instruments.  Except as set forth on Schedule 4.14,
all loan or credit agreements,  notes,  bonds,  mortgages,  indentures and other
agreements and  instruments  pursuant to which any material  indebtedness of the
Company  or  any of its  subsidiaries  is  outstanding  or may be  incurred  are
prepayable at any time without  penalty,  subject to a notice period of not more
than thirty days. For purposes of this Section,  "indebtedness" shall mean, with
respect to any person,  without duplication,  (i) all obligations of such person
for borrowed  money, or with respect to deposits or advances of any kind to such
person,  (ii) all  obligations  of such person  evidenced by bonds,  debentures,
notes or similar  instruments,  (iii) all  obligations of such person upon which
interest charges are customarily paid, (iv) all obligations of such person under
conditional  sale or other  title  retention  agreements  relating  to  property
purchased by such person,  (v) all  obligations of such person issued or assumed
as the deferred purchase price of property or services (excluding obligations of
such person to creditors  for raw  materials,  inventory,  services and supplies
incurred in the ordinary course of such person's business), (vi) all capitalized
lease obligations of such person, (vii) all obligations of others secured by any
encumbrance  or lien on  property or assets  owned or  acquired by such  person,
whether or not the  obligations  secured  thereby have been assumed,  (viii) all
obligations  of such person under  interest rate or currency  swap  transactions
(valued at the termination value thereof), (ix) all letters of credit issued for
the account of such person  (excluding  letters of credit issued for the benefit
of suppliers to support accounts  payable to suppliers  incurred in the ordinary
course of business),  (x) all obligations of such person to purchase  securities
(or other  property)  which arises out of or in connection  with the sale of the
same or substantially  similar  securities or property,  and (xi) all guarantees
and arrangements having the economic effect of a guarantee of such person of any
indebtedness of any other person.                                               

          SECTION 4.15. Insurance.  The Company and its subsidiaries are covered
by valid  and  currently  effective  insurance  policies  issued in favor of the
Company  that  are  customary  for  companies  of  similar  size  and  financial
condition.                                                                      

          SECTION 4.16. Labor Matters.  Except as disclosed in the SEC Documents
or as set  forth on  Schedule  4.16,  (i)  neither  the  Company  nor any of its
subsidiaries  is a party to, or bound by, any collective  bargaining  agreement,
contract or other  agreement with a labor union or labor  organization;  (ii) to
the knowledge of the Company, neither the Company nor any of its subsidiaries is
the subject of any proceeding  asserting that it or any of its  subsidiaries has
committed an unfair  labor  practice or seeking to compel it to bargain with any
labor  organization  as to wages or conditions of employment;  (iii) there is no
strike, work stoppage or other labor dis-                                       

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pute  involving  the  Company  or any of its  subsidiaries  pending  or,  to the
Company's  knowledge,  threatened;  (iv) to the  knowledge  of the  Company,  no
material action, suit, complaint,  charge,  arbitration,  inquiry, proceeding or
investigation  by or before any  Governmental  Entity brought by or on behalf of
any employee, prospective employee, former employee, retiree, labor organization
or other  representative  of its employees is pending or threatened  against the
Company or any of its  subsidiaries;  (v) to the  knowledge of the  Company,  no
material  grievance is pending or  threatened  against the Company or any of its
subsidiaries;  and (vi)  neither the Company  nor any of its  subsidiaries  is a
party to, or otherwise  bound by, any consent  decree with,  or citation by, any
Governmental Entity relating to employees or employment practices.              

          SECTION 4.17. No  Restrictive  Agreements.  Except as disclosed in the
SEC Documents,  the Company and its  subsidiaries are not parties to or bound by
any agreement, contract, policy, license, document,  instrument,  arrangement or
commitment that limits the freedom of the Company or any of its  subsidiaries to
compete in any line of business or with any person or in any geographic  area or
which would so limit the freedom of the  Company or any of its  subsidiaries  or
affiliates after the Effective Time.                                            

          SECTION 4.18.  Interests of Officers and  Directors.  None of Onex DHC
LLC, a Wyoming limited liability  company,  or any of its respective  affiliates
(other  than the  Company or any of its  subsidiaries)  has any  interest in any
property, real or personal, tangible or intangible, used in or pertaining to the
business of the Company or its  subsidiaries,  or any supplier,  distributor  or
customer  of  the  Company  or its  subsidiaries,  or  any  other  relationship,
contract, agreement, arrangement or understanding with the Company or any of its
subsidiaries,  except as set forth in Schedule  4.18 or as  disclosed in the SEC
Documents and except for rights under the Benefit Plans and the Option Plans and
the normal rights of a holder of a non-controlling,  direct or indirect interest
in equity securities.  To the Company's knowledge,  none of the Company's or any
of its  subsidiaries'  other  officers or directors  or any of their  respective
affiliates  (other than the Company or any of its subsidiaries) has any material
interest in any material  property,  real or personal,  tangible or  intangible,
used in the  business  of the  Company  or its  subsidiaries,  or any  supplier,
distributor  or  customer  of the  Company  or its  subsidiaries,  or any  other
relationship, contract, agreement, arrangement or understanding with the Company
or any of its subsidiaries,  except as disclosed in the SEC Documents and except
for rights under the Benefit Plans and the Option Plans and the normal rights of
a  holder  of  a   non-controlling,   direct  or  indirect  interest  in  equity
securities.                                                                     

          SECTION 4.19. Brokers. Morgan Stanley & Co. Incorporated, the fees and
expenses  of which will be paid by the Company  (and copies of whose  engagement
letters  and a  calculation  of the fees that would be due  thereunder  has been
provided to Parent),  has orally  delivered to the Company's  Board of Directors
its  opinion  that the  consideration  to be paid in the  Merger  is fair to the
holders of Shares from a financial point of view, and shall deliver such opinion
in writing to the  Company's  Board of  Directors  prior to the date the Company
files the Company Proxy  Statement  with the SEC. In addition,  no other broker,
investment  banker,  financial  advisor  or other  person,  is  entitled  to any
broker's,  finder's,  financial  advisor's or other similar fee or commission in
connection  with the  transactions  contemplated  by this  Agreement  based upon
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such engagement  letters  obligate the Company to continue to use their services
or pay fees or expenses in connection with any future transaction.              

 ARTICLE V

REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY

          Parent and Merger Sub represent and warrant to the Company as follows:

          SECTION 5.1.  Organization,  Standing  and  Corporate  Power.  Each of
Parent and Merger Sub is a corporation  duly organized,  validly existing and in
good standing under the laws of its respective  state of  incorporation  and has
the  requisite  corporate  power and  authority  to carry on its business as now
being conducted.                                                                

          SECTION 5.2.  Authority;  Noncontravention.  (a) Parent and Merger Sub
have all requisite  corporate  power and authority to enter into this  Agreement
and to consummate the transactions contemplated by this Agreement.              

          (b) The execution and delivery of this Agreement and the  consummation
of the transactions  contemplated by this Agreement have been duly authorized by
all  necessary  corporate  action on the part of Parent  and  Merger  Sub.  This
Agreement  has been duly  executed  and  delivered by Parent and Merger Sub and,
assuming  this  Agreement  constitutes  a valid  and  binding  agreement  of the
Company,  constitutes a valid and binding obligation of such party,  enforceable
against such party in accordance with its terms.                                

          (c) The  execution  and  delivery of this  Agreement  do not,  and the
consummation of the  transactions  contemplated by this Agreement and compliance
with the provisions of this Agreement will not,  conflict with, or result in any
violation  of, or  default  (with or without  notice or lapse of time,  or both)
under,  or give rise to a right of  termination,  cancellation,  modification or
acceleration  of any  obligation or to a loss of a material  benefit  under,  or
result in the creation of any  encumbrance or lien upon any of the properties or
assets  of Parent  or any of its  subsidiaries  under,  (i) the  certificate  of
incorporation  or  bylaws  of  Parent  or  Merger  Sub,  (ii) any loan or credit
agreement,  note,  bond,  mortgage,  indenture,  lease  or any  other  contract,
agreement,  instrument,  permit, concession,  franchise or license applicable to
Parent or Merger Sub or their respective  properties or assets, or (iii) subject
to the  governmental  filings and other  matters  referred  to in the  following
sentence,  any  judgment,  order,  decree,  statute,  law,  ordinance,  rule  or
regulation applicable to Parent, Merger Sub or any other subsidiary of Parent or
their respective properties or assets, other than, in the case of clause (ii) or
(iii), any such conflicts,  violations,  defaults,  rights, losses or liens that
individually  or in the  aggregate  would not impair  the  ability of Parent and
Merger Sub to perform  their  respective  obligations  under this  Agreement  or
prevent  the  consummation  of any  of the  transactions  contemplated  by  this
Agreement (a "Parent Material Adverse Effect").                                 

          (d) No  Consent  of any  Governmental  Entity is  required  by or with
respect to Parent,  Merger Sub or any other  subsidiary  of Parent in connection
with the execution and deliv-                                                   

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ery of this Agreement or the  consummation  by Parent or Merger Sub, as the case
may be, of any of the  transactions  contemplated by this Agreement,  except for
(i) the filing of the documents  referred to in Section 1.2 in  accordance  with
the DGCL and similar documents with the relevant  authorities of other states in
which the Company is qualified  to do  business,  (ii) the filing of a premerger
notification  and  report  form  under the HSR Act,  (iii)  compliance  with any
applicable  requirements of the Exchange Act, and (iv) such other Consents as to
which the failure to obtain or make could not  reasonably  be expected to have a
Parent Material Adverse Effect.                                                 

          SECTION 5.3.  Disclosure  Documents.  The information  with respect to
Parent and its  subsidiaries  that Parent  furnishes  to the Company in writing,
specifically for use in the Company Proxy Statement will not contain, any untrue
statement  of a material  fact or omit to state any material  fact  necessary in
order to make the  statements  made therein,  in the light of the  circumstances
under  which they were made,  not  misleading  at the time of filing the Company
Proxy  Statement  with the SEC, at the time the Company  Proxy  Statement or any
amendment or supplement  thereto is first mailed to shareholders of the Company,
at the time the  shareholders  vote on  adoption  of this  Agreement  and at the
Effective Time.                                                                 

          SECTION 5.4. Brokers. No broker,  investment banker, financial advisor
or other person is entitled to any broker's,  finder's,  financial  advisor's or
other  similar  fee or  commission  from  the  Company  in  connection  with the
transactions  contemplated by this Agreement based upon  arrangements made by or
on behalf of Parent or Merger Sub.                                              

          SECTION 5.5. Company Contracts. Parent and Merger Sub acknowledge that
some of the Company's customers may be entitled,  pursuant to the terms of their
contracts with the Company,  to terminate  their  arrangements  with the Company
upon the change of control of the Company effected by the Merger.               

ARTICLE VI

COVENANTS OF THE COMPANY

The Company agrees that:                                    

          SECTION 6.1.  Conduct of Business.  During the period from the date of
this Agreement to the Effective  Time,  the Company  shall,  and shall cause its
subsidiaries  to, carry on their business in the ordinary  course of business in
substantially  the same  manner  as  heretofore  conducted  and,  to the  extent
consistent  therewith,  use all  reasonable  efforts to  preserve  intact  their
current  business  organizations,  keep  available the services of their current
officers  and  employees  (as a group) and  preserve  their  relationships  with
customers,  suppliers,  licensors,  licensees,  distributors  and others  having
business  dealings with them.  Without limiting the generality of the foregoing,
during the period from the date of this  Agreement to the  Effective  Time,  the
Company  shall not, and shall not permit any of its  subsidiaries  to, except as
contemplated by this Agreement or with the prior written approval of Parent:    

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          (a) (i) declare,  set aside or pay any dividends on, or make any other
distributions  (whether in cash,  stock or  property)  in respect of, any of its
capital stock,  other than dividends and distributions by any direct or indirect
wholly  owned  subsidiary  of the Company to its  parent,  (ii)  adjust,  split,
combine  or  reclassify  any of its  capital  stock or issue  or  authorize  the
issuance of any other  securities  in respect of, in lieu of or in  substitution
for shares of its capital stock, or (iii) purchase,  redeem or otherwise acquire
any shares of capital  stock of the  Company or any of its  subsidiaries  or any
other securities thereof or any rights,  warrants or options to acquire any such
shares or other securities;                                                     

          (b) issue,  deliver,  sell, pledge or otherwise encumber any shares of
its capital stock,  any other voting  securities or any  securities  convertible
into, or any rights, warrants or options, including Company Options, to acquire,
any such shares,  voting  securities or convertible  securities  (other than the
issuance of Shares upon the exercise of Company  Options  outstanding  as of the
date hereof or pursuant to the ESPP);                                           

          (c) amend its certificate of incorporation, bylaws or other comparable
charter or organizational documents;                                            

          (d) mortgage or otherwise  encumber or subject to any  encumbrance  or
lien or, except in the ordinary course of business consistent with past practice
or pursuant to existing contracts or commitments, sell, lease, license, transfer
or otherwise dispose of any material properties or assets;                      

          (e)  amend,  modify  or waive  any  material  term of any  outstanding
security of the Company and its subsidiaries;                                   

          (f) incur,  assume,  guarantee or become obligated with respect to any
indebtedness (as defined in Section 4.14),  other than in the ordinary course of
business,  consistent with past practice , or incur, assume, guarantee or become
obligated  with  respect  to any other  material  obligations  other than in the
ordinary course of business and consistent with past practice;                  

          (g) make or agree to make any new capital expenditures or acquisitions
of assets or property or other  acquisitions  or  commitments  other than in the
ordinary course of business,  consistent with past practice and in any event not
in excess of $10,000,000 in the aggregate;                                      

          (h) make any  material  tax election or take any material tax position
(unless  required  by law) or change  its  fiscal  year or  accounting  methods,
policies  or  practices  (except  as  required  by changes in GAAP) or settle or
compromise any material income tax liability;                                   

          (i) make any loan,  advance or capital  contributions to or investment
in any person other than in the ordinary course of business consistent with past
practice,  but in no event  in the  amount  of more  than  $250,000  for any one
transaction or $1,000,000 in the aggregate,  and other than  investments in cash
equivalents  made in the  ordinary  course  of  business  consistent  with  past
practice;                                                                       

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          (j) pay, discharge or satisfy any claims,  liabilities or obligations,
other than the  payment,  discharge  or  satisfaction  thereof,  in the ordinary
course of business  consistent  with past practice and in accordance  with their
terms,  or modify or amend in any  material  respect or  terminate  any material
contract or agreement  to which it is a party,  or release or waive any material
rights or claims,  other in the ordinary course of business consistent with past
practice;                                                                       

          (k) (i) provide to any current or former director, officer or employee
of the Company or any of its subsidiaries any material  increase in compensation
or benefits or any  severance  payment or other  benefit not required  under the
terms  of an  existing  Plan,  except  for  employees  who are not  officers  or
directors in the ordinary course of business consistent with past practice, (ii)
grant to any such  director,  officer,  or employee any increase in severance or
termination  pay (including the  acceleration in the  exercisability  of Company
Options or in the  vesting of Shares (or other  property)  except for  automatic
acceleration  in accordance  with the terms of the Option Plans or the provision
of any tax gross-up), or (iii) enter into any employment, deferred compensation,
severance or termination agreement or arrangement with or for the benefit of any
such current or former director, officer, or employee; or                       

          (l) authorize any of, or commit or agree to take any of, the foregoing
actions.                                                                        

          SECTION 6.2.  Shareholder Meeting;  Proxy Material.  The Company shall
cause a meeting of its shareholders  (the "Company  Shareholder  Meeting") to be
duly called and held as soon as reasonably practicable for the purpose of voting
on the approval and adoption of this Agreement and the Merger.  The Directors of
the Company  shall  recommend  approval and adoption of this  Agreement  and the
Merger by the  Company's  shareholders.  In connection  with such  meeting,  the
Company (i) will promptly prepare and file with the SEC, will use its reasonable
efforts to have cleared by the SEC and will thereafter mail to its  shareholders
as  promptly as  practicable  the Company  Proxy  Statement  and all other proxy
materials  for such  meeting,  (ii)  will use its best  efforts  to  obtain  the
necessary  approvals by its  shareholders of this Agreement and the transactions
contemplated hereby, and (iii) will otherwise comply with all legal requirements
applicable  to such  meeting.  The  Company  has  been  advised  that all of its
directors  currently  intend  to vote all  shares  owned by them in favor of the
Merger.  The Company will provide  Parent with a copy of the  preliminary  proxy
statement and all  modifications  thereto prior to filing or delivery to the SEC
and will consult with Parent in  connection  therewith.  The Company will notify
Parent  promptly of the receipt of any comments from the SEC or its staff and of
any request by the SEC or its staff for amendments or supplements to the Company
Proxy Statement or for additional information and will supply Parent with copies
of all correspondence between the Company or any of its representatives,  on the
one hand,  and the SEC or its  staff,  on the other  hand,  with  respect to the
Company  Proxy  Statement  or the  Merger.  If at any time prior to the  Company
Shareholder  Meeting  there shall occur any event that should be set forth in an
amendment  or  supplement  to the Company  Proxy  Statement,  the  Company  will
promptly prepare and mail to its  shareholders  such an amendment or supplement.
The Company  will not mail any Company  Proxy  Statement,  or any  amendment  or
supplement thereto, to which Parent reasonably objects.                         

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          SECTION  6.3.  Access to  Information.  From the date hereof until the
Effective Time, the Company will give Parent, its counsel,  financial  advisors,
auditors and other  authorized  representatives  access (during normal  business
hours  and  upon  reasonable  notice)  to  the  offices,  properties,  officers,
employees, accountants,  auditors, counsel and other representatives,  books and
records of the  Company  and its  subsidiaries,  will  furnish  to  Parent,  its
counsel, financial advisors,  auditors and other authorized representatives such
financial,  operating and property  related data and other  information  as such
persons  may  reasonably  request,  and  will  instruct  the  Company's  and its
subsidiaries' employees, counsel and financial advisors to cooperate with Parent
in its  investigation of the business of the Company and the  subsidiaries,  and
will  exercise all  reasonable  efforts to obtain from  landlords  such estoppel
certificates as Parent may request.  The Company and its subsidiaries  shall not
be required to take any action under this Section 6.3 that (i) would violate any
confidentiality  or similar  obligation of the Company or its  subsidiaries,  or
(ii) would reasonably be expected to result in the waiver of  attorney-client or
work product privilege.                                                         

          SECTION 6.4. Covenants  Regarding Certain Benefit Plans. Parent agrees
that it shall cause the Surviving  Corporation to continue the employee  benefit
plans and programs of the Company (other than  equity-based  plans and programs)
through December 31, 1998, or to provide during such period employee benefits no
less  favorable in the  aggregate  than are provided  pursuant to such  employee
benefit  plans and  programs;  provided  that with  respect to  employees of the
Company who are subject to collective bargaining, all benefits shall be provided
in accordance with the applicable collective bargaining agreement.  Parent shall
provide  employees of the Company who  continue as  employees  of the  Surviving
Corporation  or Parent with credit for years of service with the Company and its
subsidiaries  for purposes of vesting,  eligibility  and benefit  accrual (other
than benefit  accrual under any defined  benefit plans,  including  supplemental
retirement plans) under the employee benefit plans of the Surviving  Corporation
and Parent  which are made  available  to such  employees,  to the  extent  such
service was credited  under similar  employee  benefit plans and programs of the
Company.                                                                        

          SECTION 6.5.  Cooperation in  Arrangements  with Lenders.  The Company
shall, and shall cause its subsidiaries to, cooperate with and assist Parent and
its  professionals and advisors in arranging for the prepayment at the Effective
Time of all  indebtedness  (as  defined in Article  IV) of the  Company  and its
subsidiaries and shall provide whatever other assistance and cooperation  Parent
and its  professionals  and  advisors  might  reasonably  request in  connection
therewith.                                                                      

 ARTICLE VII

 COVENANTS OF PARENT

Parent agrees that:                                         

          SECTION 7.1.  Confidentiality.  Prior to the Effective  Time and after
any termination of this Agreement, Parent will hold, and will use its reasonable
best efforts to cause its officers, directors, employees,  accountants, counsel,
consultants,  advisors and agents to hold, in                                   

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confidence,  unless compelled to disclose by judicial or administrative  process
or by other  requirements  of law,  and not use for any  purpose  other than the
consummation of the transactions  contemplated by this Agreement , all documents
and information  concerning the Company and its subsidiaries furnished to Parent
in connection with the  transactions  contemplated by or otherwise in accordance
with this Agreement  except to the extent that such  information can be shown to
have been (i) previously known on a nonconfidential basis by Parent, (ii) in the
public domain through no fault of Parent,  or (iii) later  lawfully  acquired by
Parent from sources other than the Company,  not under a duty of confidentiality
to the Company or a subsidiary of the Company; provided that Parent may disclose
such information to its officers, directors,  employees,  accountants,  counsel,
consultants,  advisors and agents who Parent determines need to know the same in
connection with the transactions  contemplated by this Agreement and to its (and
its parent entities')  lenders and equity investors in connection with obtaining
the financing for the  transactions  contemplated  by this  Agreement so long as
such  persons  are  informed  by  Parent  of the  confidential  nature  of  such
information and are directed by Parent to treat such information  confidentially
and in accordance  with this Section 7.1.  Parent shall be  responsible  for any
unauthorized  disclosure or use of any such documents and  information by any of
its officers, directors, employees,  accountants, counsel, consultants, advisors
and agents. Parent's obligation to hold any such information in confidence shall
be satisfied if it exercises the same care with respect to such  information  as
it would take to preserve the confidentiality of its own similar information. If
this  Agreement is  terminated,  Parent  will,  and will use its best efforts to
cause its officers,  directors,  employees,  accountants,  counsel, consultants,
advisors and agents to, deliver to the Company,  upon request, all documents and
other materials and all copies thereof, obtained by Parent or on its behalf from
the Company in connection  with this  Agreement and to destroy all documents (in
any form,  including,  without  limitation,  electronic media) prepared by or on
behalf of Parent or any  person or entity to whom  Parent  provided  information
under this  Section that  include or reflect any  information  provided by or on
behalf of the Company.                                                          

          SECTION 7.2.  Obligations of Merger Sub.  Parent will take all action,
and  provide  all  financing,  necessary  to cause  Merger  Sub to  perform  its
obligations  under this  Agreement and to consummate the Merger on the terms and
conditions set forth in this Agreement.                                         

          SECTION 7.3. Voting of Shares. Each of Parent and Merger Sub agrees to
vote all Shares  beneficially  owned by it, if any, in favor of adoption of this
Agreement at the Company Shareholder Meeting.                                   

          SECTION 7.4. Director and Officer  Liability.  (a) For six years after
the Effective Time, Parent will cause the Surviving Corporation to indemnify and
hold harmless the present and former officers,  directors,  employees and agents
of the Company and its subsidiaries,  and the heirs executors and administrators
of such  persons  (the  "Indemnified  Parties")  in respect of acts or omissions
occurring on or prior to the  Effective  Time or arising out of or pertaining to
any Indemnified  Person having been an officer,  director,  employee or agent of
the Company or any of its  subsidiaries or to the  transactions  contemplated by
this  Agreement  to the  extent  provided  under the  Company's  certificate  of
incorporation and bylaws in effect on the date hereof (and shall pay expenses in
advance of the disposition of any action with respect to any such matters to the
fullest  extent  permitted  by the DGCL,  upon  receipt  from the person to whom
expenses are                                                                    

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advanced  of the  undertaking  to repay such  advances  contemplated  by Section
145(e) of the DGCL);  provided that such indemnification shall be subject to any
mandatory  limitation imposed from time to time under applicable law. Parent and
Surviving Corporation shall not amend the certificate of incorporation or bylaws
of the  Surviving  Corporation  to  amend  the  indemnification  or  exculpation
provisions  therein in a manner  inconsistent  with this  Section  or  otherwise
adverse to the  Indemnified  Parties for the six-year  period referred to above.
For six  years  after the  Effective  Time,  Parent  will  cause  the  Surviving
Corporation  to use  its  best  efforts  to  provide  officers'  and  directors'
liability insurance in respect of acts or omissions occurring on or prior to the
Effective  Time  covering  each such person  currently  covered by the Company's
officers'  and  directors'  liability  insurance  policy on terms  substantially
similar to those of such policy in effect on the date hereof and from an insurer
or insurers  having claims paying ratings of at least Best A+,  provided that in
satisfying its obligation  under this Section,  Parent shall not be obligated to
cause the Surviving Corporation to pay annual premiums in excess of $250,000 per
annum,  and if the  Surviving  Corporation  is unable to  obtain  the  insurance
required  by this  Section,  it shall  obtain as much  comparable  insurance  as
possible for an annual premium equal to such maximum amount.                    

          (b) The Indemnified  Parties are intended third party beneficiaries of
this Section to the extent such provisions benefit any such Indemnified Party.  

ARTICLE VIII

 COVENANTS OF PARENT AND THE COMPANY

The parties hereto agree that:                              

          SECTION 8.1. HSR Act Filings;  Reasonable Efforts;  Notification.  (a)
Each of Parent and the Company  shall (i) promptly (but in no in event more than
eight business days after the date of this  Agreement)  make or cause to be made
the filings required of such party or any of its subsidiaries  under the HSR Act
and the CA Act with respect to the transactions  contemplated by this Agreement,
(ii) comply at the earliest  practicable date with any request under the HSR Act
and the CA Act for additional information, documents, or other material received
by such party or any of its  subsidiaries  from the Federal Trade  Commission or
the  Department of Justice or any other  Governmental  Entity in respect of such
filings  or such  transactions,  and (iii)  cooperate  with the  other  party in
connection  with  any  such  filing,   and  in  connection  with  resolving  any
investigation or other inquiry of any such agency or other  Governmental  Entity
under the HSR Act, the CA Act, the Sherman Act, as amended,  the Clayton Act, as
amended,  the Federal Trade Commission Act, as amended, and any other federal or
state  statutes,  rules,  regulations,  orders or decrees  that are  designed to
prohibit,  restrict  or  regulate  actions  having  the  purpose  or  effect  of
monopolization or restraint of trade with respect to any such filing or any such
transaction.   Each  party  shall  promptly   inform  the  other  party  of  any
communication with, and any proposed  understanding,  undertaking,  or agreement
with,  any   Governmental   Entity  regarding  any  such  filings  or  any  such
transaction.   Neither  party  shall  participate  in  any  meeting,   with  any
Governmental  Entity in respect  of any such  filings,  investigation,  or other
inquiry  without giving the other party                                         

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notice of the meeting and, to the extent permitted by such Governmental  Entity,
the opportunity to attend and participate.                                      

          (b) Each of  Parent  and the  Company  shall use its  reasonable  best
efforts  to  take  such  reasonable  action  as may be  required  to  cause  the
expiration  of the  notice  periods  under the HSR Act,  the CA Act or any state
statutes, rules,  regulations,  orders or decrees that are designed to prohibit,
restrict or regulate actions having the purpose or effect of  monopolization  or
restraint  of trade with  respect  to the  transactions  contemplated  hereby as
promptly as possible after the execution of this Agreement.                     

          (c) Each of the parties agrees to use its  reasonable  best efforts to
take, or cause to be taken,  all reasonable  actions,  and to do, or cause to be
done,  and to  assist  and  cooperate  with the  other  parties  in  doing,  all
reasonable  things  necessary,  proper  or  advisable  to  consummate  and  make
effective,  in the most expeditious  manner practicable the Merger and the other
transactions contemplated by this Agreement,  including (i) the obtaining of all
other  necessary  actions or  nonactions,  waivers,  consents and approvals from
Governmental  Entities and the making of all other necessary  registrations  and
filings (including other filings with Governmental  Entities,  if any), (ii) the
obtaining of all necessary  consents,  approvals or waivers from third  parties,
(iii) the preparation of the Company Proxy Statement,  (iv) the repayment of all
of the Company's  indebtedness  as  contemplated by Section 6.5 at the Effective
Time, and (v) the execution and delivery of any additional instruments necessary
to  consummate  the  transactions  contemplated  by, and to fully  carry out the
purposes of, this Agreement.                                                    

          (d) Notwithstanding anything to the contrary in Section 8.1(a), (b) or
(c),  neither  Parent  nor  Merger  Sub  shall be  required  to waive any of the
conditions to the Merger set forth in Article IX.                               

          (e) The Company shall give prompt notice to Parent upon becoming aware
of (i) any  representation  or warranty  made by it contained in this  Agreement
becoming untrue or inaccurate in any respect that would result in the failure to
satisfy the  condition  in Section  9.2(b),  or (ii) the failure by it to comply
with or satisfy in any  respect  any  covenant,  condition  or  agreement  to be
complied with or satisfied by it under this  Agreement  that would result in the
failure to satisfy the condition in Section 9.2(b);  provided,  however, that no
such notification  shall affect the  representations,  warranties,  covenants or
agreements of the parties or the  conditions to the  obligations  of the parties
under this Agreement.                                                           

          (f) The  Company  shall give  prompt  notice to Parent,  and Parent or
Merger Sub shall give prompt notice to the Company, of:                         

          (i) any written notice or other written  communication from any person
     alleging  that  the  consent  of  such  person  is or  may be  required  in
connection with the transactions contemplated by this Agreement;      

          (ii) any  written  notice  or  other  written  communication  from any
     Governmental  Entity in connection  with the  transactions  contemplated by
this Agreement; and                                                   

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          (iii)  any  actions,  suits,  claims,  investigations  or  proceedings
     commenced or, to the best of its knowledge threatened against,  relating to
     or  involving or otherwise  affecting it or any of its  subsidiaries  which
     relate  to  the  consummation  of the  transactions  contemplated  by  this
Agreement.                                                            

          SECTION 8.2. Public  Announcements.  Parent and Merger Sub, on the one
hand,  and the Company,  on the other hand,  will consult with each other before
issuing,  and provide each other the opportunity to review and comment upon, any
press  release or other  public  statements  with  respect  to the  transactions
contemplated  by this Agreement,  including the Merger,  and shall not issue any
such press release or make any such public statement prior to such consultation,
except as may be required by applicable  law,  court  process or by  obligations
pursuant to any listing agreement with any national  securities exchange or with
the Nasdaq National Market.  The parties agree that the initial press release to
be issued with respect to the  transactions  contemplated by this Agreement will
be in the form attached hereto.                                                 

          SECTION  8.3. No  Solicitation.  Prior to the  Effective  Time and for
twelve months after any termination of this Agreement, Parent and Merger Sub, on
the one hand,  and the  Company,  on the other  hand,  shall not,  and shall not
permit any of their  respective  subsidiaries or affiliates to, employ or retain
in any  capacity  any person who was  employed  by the  Company,  in the case of
Parent and Merger Sub, or Parent or Merger Sub, in the case of the  Company,  or
any of their  respective  subsidiaries  in a position of division  president  or
principal  executive in charge of a distribution  center or any position  senior
thereto at any time after January 1, 1998.                                      

ARTICLE IX

CONDITIONS TO THE MERGER

          SECTION  9.1.  Conditions  to  the  Obligations  of  Each  Party.  The
obligations  of the Company,  Parent and Merger Sub to consummate the Merger are
subject to the satisfaction of the following conditions:                        

          (a) this  Agreement  shall  have  been  approved  and  adopted  by the
     requisite vote of the outstanding  Shares of the Company within the meaning
and in accordance with the DGCL;                                      

          (b) any  applicable  waiting  period under the HSR Act relating to the
Merger shall have expired or been terminated; and                     

          (c) no provision of any  applicable law or regulation and no judgment,
     injunction,  order,  decree or other legal  restraint  shall  prohibit  the
consummation of the Merger.                                           

          SECTION 9.2.  Conditions to the  Obligations of Parent and Merger Sub.
The  obligations  of Parent and Merger Sub to consummate  the Merger are further
subject to the satisfaction of the following conditions:                        

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          (a) there shall not be instituted and remain pending any action by any
Governmental  Entity  (i)  challenging  or  seeking  to make  illegal,  to delay
materially  or  otherwise  directly or  indirectly  to restrain or prohibit  the
consummation  by Parent or Merger Sub of the Merger,  seeking to obtain material
damages or imposing any material  adverse  conditions in  connection  therewith,
(ii)  seeking to restrain or prohibit  Parent's  or Merger  Sub's  ownership  or
operation (or that of their respective subsidiaries or affiliates) of all or any
material portion of the business or assets of the Company and its  subsidiaries,
or of Parent and its  subsidiaries or affiliates,  or to compel Parent or any of
its  subsidiaries  or  affiliates  to  dispose  of or hold  separate  all or any
material portion of the business or assets of the Company and its  subsidiaries,
or of Parent  and its  subsidiaries  and  affiliates,  (iii)  seeking  to impose
limitations  on the ability of Parent or any of its  subsidiaries  or affiliates
effectively  to exercise  full  rights of  ownership  of the Shares,  including,
without limitation,  the right to vote any Shares acquired or owned by Parent or
any of its subsidiaries or affiliates on all matters  properly  presented to the
Company's shareholders,  (iv) seeking to require divestiture by Parent or any of
its  subsidiaries  or  affiliates  of any Shares,  or (v) that  otherwise  would
reasonably be expected to materially  adversely affect the condition  (financial
or  otherwise),  business,  or  results of  operations  of the  Company  and its
subsidiaries, or Parent and its subsidiaries, in each case taken as a whole, nor
shall any  judgment,  injunction,  order or decree have been  entered that would
have any of the foregoing effects;                                              

          (b) the Company  shall have  performed  in all  material  respects its
covenants and  agreements  under this  Agreement,  and the  representations  and
warranties of the Company set forth in this  Agreement  that are qualified as to
materiality  shall be true  when  made and at and  (except  to the  extent  such
representations  and warranties  relate to a specific date) as of the Closing as
if made at and as of such time, and the representations and warranties set forth
in this  Agreement  that  are not so  qualified  shall  be true in all  material
respects when made and (except to the extent such representations and warranties
relate to a specific date) at and as of the Closing as if made at and as of such
time,  and other than any failure of such  representations  and warranties to be
true  (x)  arising  from or in  connection  with  changes  in  general  economic
conditions or matters generally  affecting the industry in which the Company and
its  subsidiaries  are  engaged,  (y)  arising  from  the  announcement  or  the
consummation of the  transactions  contemplated by this Agreement,  or (z) which
would not,  individually  or in the aggregate,  reasonably be expected to have a
Material  Adverse  Effect;  and Parent  and  Merger  Sub shall  have  received a
certificate of the Chief  Executive  Officer or Chief  Financial  Officer of the
Company to that effect; and                                                     

          (c) other than the filing of the  Certificate  of Merger in accordance
with  DGCL,  after  making  reasonable  efforts,  Parent  and  its  subsidiaries
(including  Merger Sub) shall have obtained all regulatory  approvals,  licenses
and other  Consents  required to be obtained  prior to the  consummation  of the
Merger  and  the  transactions  contemplated  by  this  Agreement,  except  such
approvals,  licenses  and other  Consents  which,  if not  obtained,  would not,
individually  or in the  aggregate,  reasonably  be  expected to have a Material
Adverse Effect.                                                                 

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          SECTION  9.3.  Conditions  to  the  Obligations  of the  Company.  The
obligations  of the Company to consummate  the Merger are subject to the further
satisfaction of the following conditions:                                       

               Parent  and  Merger  Sub shall  have  performed  in all  material
     respects  their  covenants and  agreements  under this  Agreement,  and the
     representations  and  warranties of Parent and Merger Sub set forth in this
     Agreement that are qualified as to  materiality  shall be true when made at
     and as of the Effective Time as if made and at and as of such time, and the
     representations  and warranties set forth in this Agreement that are not so
     qualified shall be true in all material respects when made and at and as of
     the Effective Time as if made at and as of such time; and the Company shall
     have  received  certificates  of  the  Chief  Executive  Officer  or  Chief
Financial Officer of Parent and Merger Sub to that effect.            

 ARTICLE X

 TERMINATION

          SECTION 10.1.  Termination.  This  Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time (notwithstanding
any approval of this Agreement by the shareholders of the Company):             

(a) by mutual written consent of the Company and Parent;    

          (b) by Parent if at the Company Shareholder Meeting or any adjournment
thereof at which the Company  Shareholder  Approval  is voted upon,  the Company
Shareholder Approval shall not have been obtained;                              

          (c) by either  the  Company  or  Parent,  if the  Merger  has not been
consummated  by July 1, 1998  (provided  that the party seeking to terminate the
Agreement  shall not have breached its  obligations  under this Agreement in any
material respect);                                                              

          (d) by either  the  Company or  Parent,  if there  shall be any law or
regulation   that  makes   consummation  of  the  Merger  illegal  or  otherwise
prohibited, or any judgment, injunction, order or decree enjoining Parent or the
Company from  consummating the Merger (or the existence of which would otherwise
result in the failure of the condition  set forth in Section  9.2(a)) is entered
and, in the case of any action brought other than by a Governmental Entity, such
judgment, injunction, order or decree shall become final and non-appealable; or 

          (e) by Parent,  at any time prior to the Effective  Time, by action of
the Board of Directors of Parent, if the Board of Directors of the Company shall
have  withdrawn  or  modified  in a manner  adverse  to Parent or Merger Sub its
approval  or  recommendation  of this  Agreement  or the  Merger,  or shall have
resolved to do any of the foregoing.                                            

          SECTION 10.2.  Effect of Termination.  If this Agreement is terminated
pursuant to Section 10.1, this Agreement shall become void and of no effect with

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no liability on the part of any party  hereto or their  respective  officers and
directors,  except that the agreements  contained in Sections 7.1, 11.4 and 11.6
shall survive the termination  hereof.  Specifically,  and without  limiting the
generality of the  foregoing,  Parent and Merger Sub agree that  termination  of
this  Agreement  shall be their sole and  exclusive  remedy  for any  nonwillful
breach by the Company of its  representations,  warranties  and covenants  under
this Agreement and the Company agrees that  termination of this Agreement  shall
be its sole and exclusive  remedy for any nonwillful  breach by Parent or Merger
Sub of their representations, warranties and covenants under this Agreement.    

ARTICLE XI

 MISCELLANEOUS

          SECTION 11.1. Notices. All notices,  requests and other communications
to any party  hereunder  shall be in  writing  (including  telecopy  or  similar
writing) and shall be given,                                                    

if to Parent or Merger Sub, to:                             

      AmeriServe Food Distribution, Inc.
545 Steamboat Road          
 Greenwich, Connecticutt 06830
Telecopy: (203) 661-5756    
Attention: A. Petter 0stberg

with a copy to:                                             

  Wachtell, Lipton, Rosen & Katz
51 West 52nd Street         
New York, New York 10019    
Telecopy: (212) 403-2000    
     Attention: Adam O. Emmerich, Esq.

if to the Company, to:                                      

ProSource, Inc.             
530 Biltmore Way, 10th Floor
Coral Gables, Florida 33134 
Telecopy: (305) 529-2573    
     Attention:  Chairman of the Board

with a copy to:                                             

               Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue             
New York, New York 10022    
Telecopy: (212) 836-8689    
      Attention: Joel I. Greenberg, Esq.

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or such other address or telecopy number as such party may hereafter specify for
the purpose by notice to the other parties hereto. Each such notice,  request or
other  communication  shall be effective when delivered at the address specified
in this Section.                                                                

          SECTION  11.2.  Survival  of  Representations   and  Warranties.   The
representations  and  warranties  and  agreements  contained  herein  and in any
certificate  or other writing  delivered  pursuant  hereto shall not survive the
Effective  Time  or  the   termination   of  this   Agreement   except  for  the
representations,  warranties and agreements set forth in Sections 7.1, 7.4, 11.4
and 11.6.                                                                       

          SECTION  11.3.  Amendments;  No  Waivers.  (a) Any  provision  of this
Agreement may be amended or waived prior to the Effective  Time if, and only if,
such  amendment  or waiver is in writing and signed,  by the party to be charged
therewith;   provided  that  after  the  adoption  of  this   Agreement  by  the
shareholders  of the Company,  no such  amendment or waiver  shall,  without the
further approval of such shareholders, alter or change (i) the amount or kind of
consideration  to be received in exchange for any shares of capital stock of the
Company, or (ii) any of the principal terms of the Merger.                      

          (b) No failure or delay by any party in exercising any right, power or
privilege  hereunder  shall operate as a waiver  thereof nor shall any single or
partial  exercise  thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.  The rights and remedies herein
provided  shall be  cumulative  and not  exclusive  of any  rights  or  remedies
provided by law.                                                                

          SECTION 11.4.  Fees and Expenses.  All costs and expenses  incurred in
connection with this Agreement shall be paid by the party incurring such cost or
expense.                                                                        

          SECTION  11.5.  Successors  and  Assigns;  Parties  in  Interest.  The
provisions of this Agreement  shall be binding upon, and inure to the benefit of
the parties hereto and their respective successors and assigns, provided that no
party  may  assign,  delegate  or  otherwise  transfer  any  of  its  rights  or
obligations under this Agreement without the consent of the other parties hereto
except that Merger Sub may transfer or assign,  in whole or from time to time in
part, to one or more of Parent or any of its wholly owned  subsidiaries,  any or
all of its rights or  obligations,  but any such transfer or assignment will not
relieve Merger Sub of its obligations under this Agreement.  Except as expressly
set forth herein nothing in this Agreement,  express or implied,  is intended to
or shall confer upon any person not a party hereto any right,  benefit or remedy
of any nature  whatsoever  under or by reason of this  Agreement,  including  to
confer third party beneficiary rights.                                          

          SECTION  11.6.  Governing  Law. This  Agreement  shall be construed in
accordance with and governed by the law of the State of Delaware, without giving
effect to principles of conflicts of laws.                                      

          SECTION  11.7.  Counterparts;   Effectiveness;   Interpretation.  This
Agreement may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same  instrument.  This  Agreement  shall become  effective  when each party
hereto  shall  have  received  counterparts  hereof  signed  by                 

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all of the other parties hereto. When a reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless otherwise
indicated.  The table of contents and headings  contained in this  Agreement are
for  reference  purposes  only and shall not  affect in any way the  meaning  or
interpretation  of this Agreement.  Whenever the words "include,"  "includes" or
"including" are used in this  Agreement,  they shall be deemed to be followed by
the words "without limitation."                                                 

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          The parties  hereto have caused this  Agreement to be duly executed by
their respective authorized officers as of the day and year first above written.

             PROSOURCE, INC.

                    By:/s/ David R. Parker
                          Name:  David R. Parker
                                Title: Chairman of the Board

                                AMERISERVE FOOD DISTRIBUTION, INC.

                   By:/s/ John V. Holten
                         Name:  John V. Holten
                                       Title: Chairman and Chief Executive
                         Officer

                         STEAMBOAT ACQUISITION CORP.

                   By:/s/ John V. Holten
                         Name:  John V. Holten
                                    Title: Chairman of the Board and
                           President

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                                                                        ANNEX II

VOTING AGREEMENT

          VOTING AGREEMENT (this  "Agreement")  dated as of January 29, 1998, by
and among AmeriServe Food Distribution, Inc., a Delaware corporation ("Parent"),
Steamboat  Acquisition Corp., a Delaware corporation ("Merger Sub") and Onex DHC
LLC, a Wyoming  limited  liability  company,  and certain of its  affiliates the
names  of  which  appear  on  the   signature   pages  hereto   (together,   the
"Stockholders").                                                                

          WHEREAS,  Parent,  Merger  Sub  and  ProSource,   Inc.  ,  a  Delaware
corporation (the "Company"),  have entered into an Agreement and Plan of Merger,
dated as of the date hereof (the "Merger Agreement";  capitalized terms used but
not defined  herein shall have the  meanings set forth in the Merger  Agreement;
provided that the terms  "Merger" and "Merger  Agreement"  shall not include any
amendments or  modifications  thereto unless such  amendments and  modifications
have been  approved in writing by the  Stockholders),  providing  for the merger
(the  "Merger")  of  Merger  Sub with and into the  Company,  upon the terms and
subject to the conditions set forth in the Merger Agreement; and                

          WHEREAS, the Stockholders  beneficially own 496,583 Class A Shares and
5,218,072 Class B Shares (such Class A Shares and Class B Shares,  together with
any  other  Class A Shares  and  Class B Shares  that the  Stockholders  acquire
beneficial  ownership  of after  the date  hereof  and  during  the term of this
Agreement,  whether  upon the  exercise  of  options,  warrants  or rights,  the
conversion or exchange of convertible or exchangeable securities, or by means of
purchase,  dividend,  distribution or otherwise,  being collectively referred to
herein  as the  "Subject  Shares"),  owned  by each of the  Stockholders  in the
amounts  indicated beneath their respective names on the signature pages hereto;
and                                                                             

          WHEREAS,  as a condition to its  willingness  to enter into the Merger
Agreement,   Parent  and  Merger  Sub  have  requested  and  required  that  the
Stockholders enter into this Agreement.                                         

          NOW, THEREFORE,  to induce Parent and Merger Sub to enter into, and in
consideration of its entering into, the Merger  Agreement,  and in consideration
of the promises and the  representations,  warranties and  agreements  contained
herein, the parties hereto agree as follows:                                    

          1.  Representations  and Warranties of the  Stockholders.  Each of the
Stockholders  hereby  represents and warrants to Parent and Merger Sub as of the
date hereof as follows:                                                         

          (a) Authority; No Conflicts.  Each Stockholder has the necessary legal
capacity,  power and authority to execute and deliver this Agreement, to perform
its  obligations  hereunder  and to  consummate  the  transactions  contemplated
hereby.  This Agreement has been duly authorized,  executed and delivered by and
on behalf of each Stockholder,  and, assuming due  authorization,  execution and
delivery  by Parent and  Merger  Sub,  constitutes  a legal,  valid and  binding
obligation of the Stockholders, enforceable in accordance with its terms. Except
for the filings  required  under the HSR Act or the Exchange  Act, (i) no filing
with, and no permit, authorization,                                             

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consent or approval of, any Governmental Entity or any other person is necessary
for the  execution  and  delivery  of this  Agreement  by and on  behalf  of any
Stockholder  and  the  consummation  by  any  Stockholder  of  the  transactions
contemplated  hereby,  and  (ii)  none of the  execution  and  delivery  of this
Agreement  by  and  on  behalf  of  any  Stockholder,  the  consummation  of the
transactions  contemplated  hereby and  compliance  with the terms hereof by any
Stockholder  will conflict with, or result in any violation of, or default (with
or without  notice or lapse of time or both) under any  provision  of, any trust
agreement, loan or credit agreement,  note, bond, mortgage,  indenture, lease or
other agreement,  instrument, permit, concession,  franchise, license, judgment,
order, notice, decree, statute, law, ordinance, rule or regulation applicable to
any Stockholder or to any Stockholder's property or assets.                     

          (b) The Subject Shares.  Each  Stockholder is the beneficial  owner of
the Subject Shares indicated  beneath its respective name on the signature pages
hereto and has,  and  throughout  the term of this  Agreement  and at the Option
Closing Date will have,  and will have the power and authority to convey to, and
will at the Option Closing  convey to, Merger Sub, good and marketable  title to
such Subject Shares free and clear of all encumbrances and liens (other than any
arising as a result of actions  taken or omitted by Parent or Merger  Sub).  The
Stockholders do not  beneficially own any shares of capital stock of the Company
or securities  convertible  into or exchangeable  for shares of capital stock of
the Company, other than the Subject Shares. The Stockholders have the sole right
and power to vote and  dispose of the  Subject  Shares,  and none of the Subject
Shares  is  subject  to any  voting  trust or other  agreement,  arrangement  or
restriction with respect to the voting or transfer (other than the provisions of
the Securities Act) of any of the Subject Shares, except as contemplated by this
Agreement.                                                                      

          2.  Representations  and  Warranties of Parent and Merger Sub. Each of
Parent and Merger Sub hereby represents and warrants to the Stockholders that it
is a corporation duly organized, validly existing and in good standing under the
laws of the  State  of  Delaware  and  has the  necessary  corporate  power  and
authority  to execute and deliver  this  Agreement,  to perform its  obligations
hereunder and to consummate the transactions contemplated hereby. This Agreement
has been duly  authorized,  executed  and  delivered by and on behalf of each of
Parent and Merger Sub and, assuming due authorization, execution and delivery by
the Stockholders,  constitutes a legal,  valid and binding  obligation of Parent
and Merger Sub enforceable in accordance with its terms.  Except for the filings
required  under the HSR Act and the Exchange  Act,  (i) no filing  with,  and no
permit,  authorization,  consent or approval of, any Governmental  Entity or any
other person is necessary for the  execution of this  Agreement by and on behalf
of Parent or Merger  Sub and the  consummation  by Parent  and Merger Sub of the
transactions contemplated hereby, and (ii) none of the execution and delivery of
this Agreement by Parent and Merger Sub, the  consummation  of the  transactions
contemplated  hereby  nor the  compliance  with the terms  hereof by Parent  and
Merger Sub will  conflict  with, or result in any violation of, or default (with
or  without  notice  or lapse of time or  both)  under  any  provision  of,  the
certificate  of  incorporation  or  by-laws of Parent or Merger  Sub,  any trust
agreement, loan or credit agreement,  note, bond, mortgage,  indenture, lease or
other agreement,  instrument, permit, concession,  franchise, license, judgment,
order, notice, decree, statute, law, ordinance, rule or regulation applicable to
Parent or Merger Sub or to Parent's or Merger Sub's  property or assets.  If the
Option (as defined herein) is exercised, the Subject Shares will be acquired for
investment for Parent's and Merger Sub's own ac-                                

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count,  not as a nominee or agent and not with a view to the distribution of any
part  thereof.  Neither  Parent  nor  Merger Sub has any  present  intention  of
selling,  granting any  participation in or otherwise  distributing the same nor
does  Parent  or  Merger  Sub  have  any  contract,  undertaking,  agreement  or
arrangement  with any person with respect to any of the Subject Shares.  Each of
Parent and Merger Sub further  understands  that the  Subject  Shares may not be
sold,  transferred  or  otherwise  disposed  of without  registration  under the
Securities Act or pursuant to an exemption therefrom.                           

          3.  Covenants  of the  Stockholders.  Until  the  termination  of this
Agreement  in  accordance  with  Section 8  hereof,  the  Stockholders  agree as
follows:                                                                        

          (a) Voting of Subject  Shares.  At any meeting of  stockholders of the
Company  called to vote  upon the  Merger  and the  Merger  Agreement  or at any
adjournment  thereof  or in any other  circumstances  upon which a vote or other
approval  with respect to the Merger and the Merger  Agreement  is sought,  each
Stockholder  shall vote its Subject Shares in favor of the Merger,  the adoption
by the Company of the Merger Agreement and the approval of the terms thereof and
each of the other transactions contemplated by the Merger Agreement.            

          At any meeting of  stockholders  of the Company or at any  adjournment
thereof or in any other circumstances upon which the Stockholders' vote, consent
or other approval as stockholders are sought,  the  Stockholders  shall vote the
Subject Shares against (i) any action or agreement that would result in a breach
in any material respect of any covenant, representation or warranty or any other
obligation  or  agreement  of the Company  under the Merger  Agreement or of the
Stockholders  hereunder,  and (ii) any action or agreement that would reasonably
be expected to impede,  interfere with, delay, postpone or attempt to discourage
the Merger,  including, but not limited to: (A) the adoption by the Company of a
proposal regarding (1) the acquisition of the Company by merger, tender offer or
otherwise  by any  person  or group,  other  than  Parent  or Merger  Sub or any
designee thereof (a "Third Party"), or any other merger,  combination or similar
transaction with any Third Party; (2) the acquisition by a Third Party of 10% or
more of the assets of the Company and its  subsidiaries,  taken as a whole;  (3)
the  acquisition by a Third Party of 10% or more of the outstanding  Shares;  or
(4) the repurchase by the Company or any of its  subsidiaries  of 10% or more of
the  outstanding  Shares;  (B) any  amendment of the  Company's  certificate  of
incorporation or by-laws or other proposal or transaction  involving the Company
or any of its  subsidiaries,  which  amendment or other  proposal or transaction
would in any manner impede, frustrate, prevent or nullify the Merger, the Merger
Agreement or any of the other transactions  contemplated by the Merger Agreement
or change in any manner the voting rights of any class of the Company's  capital
stock;  (C) any change in the control of the board of  directors of the Company;
(D) any material change in the present  capitalization or dividend policy of the
Company;  or (E) any other material change in the Company's  corporate structure
or business.  The Stockholders  further agree not to commit or agree to take any
action inconsistent with the foregoing.                                         

          (b)  Proxies.  As  security  for the  agreements  of the  Stockholders
provided for herein,  each Stockholder  hereby grants to Parent and Merger Sub a
proxy to vote the  Subject  Shares as  indicated  in Section  3(a)  above.  Each
Stockholder agrees that this proxy shall be ir-                                 

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revocable  during the term of this  Agreement  and coupled  with an interest and
each of the Stockholders, Parent and Merger Sub will take such further action or
execute such other  instruments  as may be necessary to effectuate the intent of
this proxy and hereby revokes any proxy  previously  granted by any  Stockholder
with respect to any of the Subject Shares.                                      

          (c) Transfer  Restrictions.  Each Stockholder  agrees not to (i) sell,
transfer,  pledge,  encumber,  assign or  otherwise  dispose  of or  hypothecate
(including by gift or by  contribution  or  distribution to any trust or similar
instrument  or  to  any   beneficiaries  of  such   Stockholder   (collectively,
"Transfer")),  or enter  into any  contract,  option  or  other  arrangement  or
understanding  (including  any profit sharing  arrangement)  with respect to the
Transfer of, any of the Subject  Shares other than  pursuant to the terms hereof
and  the  Merger   Agreement,   (ii)  enter  into  any  voting   arrangement  or
understanding  with  respect to the  Subject  Shares,  whether by proxy,  voting
agreement  or  otherwise,  or (iii) take any action  that  would  reasonably  be
expected  to make any of its  representations  or  warranties  contained  herein
untrue or incorrect  or could have the effect of  preventing  or disabling  such
Stockholder  from performing any of its obligations  hereunder.  Notwithstanding
the  foregoing,  each  Stockholder  may transfer  its Subject  Shares to another
direct or indirect wholly owned subsidiary of Onex Corporation on condition that
the  transferee  executes and delivers to Parent and Merger Sub an instrument in
writing, in form and substance reasonably satisfactory to Parent and Merger Sub,
assuming all of such Stockholder's obligations under this Agreement.            

          (d) Appraisal Rights.  Each Stockholder  hereby irrevocably waives any
and all rights  which it may have as to  appraisal,  dissent  or any  similar or
related matter with respect to the Merger.                                      

          (e)  No  Solicitation.  None  of the  Stockholders  nor  any of  their
affiliates shall (whether directly or indirectly through any officer,  director,
member,  advisor, agent,  representatives or other intermediary),  nor shall the
Stockholders  or any of  their  affiliates  authorize  or  permit  any of  their
officers,  directors,  members,  advisors,  agents,   representatives  or  other
intermediaries to, (i) solicit, initiate,  encourage or take any action intended
to or reasonably likely to facilitate any submission of inquiries,  proposals or
offers  from any person  relating  to any  acquisition  or  purchase of all or a
material  amount of assets of, or any equity  interest  in, the  Company (or any
subsidiary  or  division  thereof) or any merger,  consolidation,  tender  offer
(including  a  self  tender  offer),   exchange  offer,   business  combination,
recapitalization,  liquidation, dissolution or similar transaction involving the
Company (or any  subsidiary or division  thereof),  other than the  transactions
contemplated by this Agreement or the Merger Agreement, or any other transaction
the  consummation  of which would  reasonably  be expected to impede,  interfere
with,  prevent or  materially  delay the  Merger or which  would  reasonably  be
expected  to  materially  dilute  the  benefits  to Parent or Merger  Sub of the
transactions  contemplated by the Merger Agreement  (collectively,  "Transaction
Proposals")  or agree to or endorse  any  Transaction  Proposal,  other than the
transactions  contemplated  by the  Merger  Agreement,  or  (ii)  enter  into or
participate in any discussions or  negotiations  regarding any of the foregoing,
or furnish to any other person any  information  with  respect to the  Company's
business,  properties or assets or any of the foregoing,  or otherwise cooperate
in any way with, or assist or  participate  in,  facilitate  or  encourage,  any
effort  to  attempt  by any  other  person  to do or seek any of the  foregoing.
Notwithstanding any-                                                            

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thing in this  Agreement to the  contrary,  from and after the date hereof,  the
Stockholders  shall promptly  advise Parent and Merger Sub orally and in writing
of the receipt by any of them (or any of the other entities or persons  referred
to above) of any Transaction  Proposal or any inquiry which is likely to lead to
any Transaction Proposal,  the material terms and conditions of such Transaction
Proposal or inquiry,  and the identity of the person making any such Transaction
Proposal  or  inquiry.  The  Stockholders  will keep Parent and Merger Sub fully
informed of the status and details of any such Transaction  Proposal or inquiry.
Nothing in this Section shall restrict the activities of any individual (whether
or not an  affiliate of any  Stockholder)  in his or her capacity as a director,
officer, employee or agent of the Company or any of its subsidiaries.           

          (f)  Merger  Agreement.   Each  Stockholder   accepts  the  terms  and
conditions of the Merger Agreement as they apply to the holders of Shares.      

4. Option.                                                  

          (a) The Stockholders hereby grant to Merger Sub (or its designee),  an
irrevocable  option to purchase the Subject Shares,  on the terms and subject to
the conditions set forth herein (the "Option").                                 

          (b) The Option may be  exercised  by Merger Sub, as a whole and not in
part, at any time during the period commencing upon the occurrence of any of the
following events and ending on the date which is the 30th calendar day following
the first to occur of such events:                                              

          (i) the  Merger  Agreement  shall  have been  terminated  pursuant  to
Section 10.1(b) thereof;                                              

          (ii) the Merger  Agreement  shall  have been  terminated  pursuant  to
     Section 10.1(c) thereof (other than a termination by the Company  following
     a failure to consummate the Merger as a result of an actual material breach
     by Parent or Merger Sub of their  respective  obligations  under the Merger
Agreement);                                                           

          (iii) the Merger  Agreement  shall have been  terminated  pursuant  to
Section 10.1(d) thereof;                                              

          (iv) the Merger  Agreement  shall  have been  terminated  pursuant  to
Section 10.1(e) thereof; or                                           

          (v) the  Merger  Agreement  shall have been  terminated  for any other
     reason (other than a termination as a result of an actual  material  breach
     by Parent or Merger Sub of their  respective  obligations  under the Merger
Agreement).                                                           

          (c) If Merger Sub wishes to exercise the Option, Merger Sub shall send
a written  notice to the  Stockholders  of its intention to exercise the Option,
specifying  the place,  and, if then known,  the time and the date (the  "Option
Closing Date") of the closing (the "Option Closing") of the purchase. The Option
Closing Date shall occur on the fifth  business day (or such later date as shall
be no later than five  business  days  following  the first time that the Option

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Closing shall be permitted by applicable law or  regulation)  after the later of
(i) the date on which such notice is delivered, and (ii) the satisfaction of the
conditions set forth in Section 4(f).                                           

          (d) At the Option Closing,  the  Stockholders  shall deliver to Merger
Sub (or its designee) all of the Subject  Shares by delivery of a certificate or
certificates  evidencing  the  Subject  Shares  duly  endorsed  to Merger Sub or
accompanied  by powers duly  executed in favor of Merger Sub, with all necessary
stock transfer stamps affixed.                                                  

          (e) At the Option  Closing,  Merger Sub shall,  and Parent shall cause
Merger Sub to, pay to the  Stockholders  pursuant to the exercise of the Option,
by wire  transfer,  cash in immediately  available  funds to the accounts of the
Stockholders  (such  accounts to be specified in writing at least two days prior
to the Option Closing),  an amount equal to the product of $15.00 and the number
of Subject Shares (the "Subject Shares Purchase Price").                        

          (f) The Option Closing shall be subject to the satisfaction of each of
the following conditions:                                                       

          (i) no court,  arbitrator  or  governmental  body,  agency or official
     shall have  issued any order,  decree or ruling and there  shall not be any
     statute,  rule or regulation,  restraining,  enjoining or  prohibiting  the
     consummation of the purchase and sale of the Subject Shares pursuant to the
exercise of the Option;                                               

          (ii) any waiting period applicable to the consummation of the purchase
     and sale of the Subject Shares pursuant to the exercise of the Option under
the HSR Act shall have expired or been terminated; and                

          (iii) all  actions by or in  respect  of,  and any  filing  with,  any
     governmental  body, agency,  official,  or authority required to permit the
     consummation of the purchase and sale of the Subject Shares pursuant to the
     exercise  of the Option  shall have been  obtained  or made and shall be in
     full force and effect,  except such actions and filings which,  if not made
     or obtained,  would not,  individually  or in the aggregate,  reasonably be
expected to have a Material Adverse Effect.                           

5. Further Agreements of Parent and Merger Sub.             

          (a) Parent and Merger Sub hereby agree that,  in the event that Merger
Sub  purchases  the  Subject  Shares  pursuant  to the  Option,  as  promptly as
practicable  thereafter,  Merger Sub will,  and Parent will cause Merger Sub to,
make a tender offer for the remaining  Shares to the stockholders of the Company
(the consummation of which shall be subject only to the condition that no court,
arbitrator or governmental body, agency or official shall have issued any order,
decree  or ruling  and  there  shall  not be any  statute,  rule or  regulation,
restraining,  enjoining or prohibiting  the  consummation  of such tender offer)
pursuant to which the  stockholders of the Company (other than the Company,  any
direct or  indirect  subsidiary  of the  Company  or Parent or Merger  Sub) will
receive an amount of cash consideration per Share equal to $15.00, and will take
such actions as may be  necessary or  appropriate  in order to  effectuate  such
tender offer at the earliest practicable time.                                  

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          (b)  Subject to the last  sentence of this  Section  5(b),  if,  after
purchasing the Subject Shares  pursuant to the Option,  Merger Sub or any of its
affiliates  has not  acquired  the  remaining  Shares,  Merger Sub or any of its
affiliates receives any cash or non-cash consideration in respect of the Subject
Shares in connection with a Third Party Business  Combination (as defined below)
during the period commencing on the date of the Option Closing and ending on the
first  anniversary   thereof,   Merger  Sub  shall  promptly  pay  over  to  the
Stockholders,  as an addition to the Subject Shares Purchase Price, (x) one-half
of the excess, if any, of such  consideration  over the aggregate Subject Shares
Purchase  Price  paid  for the  Subject  Shares  which  are sold by  Merger  Sub
hereunder  less (y) the sum of (I) the amount of taxes  payable or to be payable
by Merger Sub (as estimated by Merger Sub in good faith) in connection with such
Third Party Business  Combination  (it being intended and understood that Merger
Sub retain  one-half of the after-tax  profit from such sale taking into account
any adjustment to basis  resulting  from the payment  required by this section),
and (II) the amount of expenses  of Merger Sub in  connection  herewith  and the
Merger  Agreement and in connection with such Third Party Business  Combination,
and  (II)  the pro  rata  portion  (based  on  share  holdings)  of all  capital
contributions  to and retained  earnings of the Company from the date of date of
the Option  Closing  through the date of the Third Party  Business  Combination;
provided  that,  (i)  if the  consideration  received  by  Merger  Sub  or  such
affiliates  shall be  securities  listed on a national  securities  exchange  or
traded on the Nasdaq National Market,  the per share value of such consideration
shall be equal to the closing price per share of such securities  listed on such
national  securities  exchange  or the Nasdaq  National  Market on the date such
transaction is consummated, and (ii) if the consideration received by Merger Sub
or such affiliates shall be in a form other than securities, the per share value
shall be determined in good faith as of the date such transaction is consummated
by Merger  Sub and the  Stockholders,  or, if  Merger  Sub and the  Stockholders
cannot reach  agreement,  by a  nationally  recognized  investment  banking firm
reasonably   acceptable  to  the  parties.   The  term  "Third  Party   Business
Combination"  means  the  occurrence  of any of the  following  events:  (A) the
Company,  or more than 50% of the  outstanding  shares of the Company's  capital
stock,  is acquired by merger or otherwise  by any Third  Party;  or (B) a Third
Party acquires all or  substantially  all of the total assets of the Company and
its subsidiaries, taken as a whole; provided, however, that in no event will any
transaction in which shares of the Company's  capital stock or any of its assets
are sold or transferred  directly or indirectly in connection  with or as a part
of a  sale  or  other  transaction  involving  sale,  merger  or  other  similar
transaction  of Parent or any of its  material  assets or business  constitute a
Third Party Business  Combination,  and in no event will a sale of any division,
line of business or similar unit of the Company and its subsidiaries  constitute
a Third Party Business Combination.                                             

          6. Stop Transfer Order. The Stockholders  hereby authorize and request
the  Company's  counsel to notify the Company's  transfer  agent that there is a
stop  transfer  order with  respect to all of the Subject  Shares (and that this
Agreement places limits on the voting of the Subject Shares).                   

          7. Assignment. Neither this Agreement nor any of the rights, interests
or obligations  hereunder,  except as expressly  provided herein with respect to
Parent's and Merger  Sub's rights under the Option,  shall be assigned by any of
the parties without the prior written consent of the other parties,  except that
each of Parent or Merger Sub may assign,  in its sole discretion,               

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any or all of its rights,  interests and obligations  hereunder to any direct or
indirect wholly owned subsidiary of Parent.  Subject to the preceding  sentence,
this Agreement will be binding upon,  inure to the benefit of and be enforceable
by the  parties and their  permitted  assigns  and their  respective  successors
(including  the Company as  successor  to Merger Sub  pursuant  to the  Merger),
heirs, agents, representatives,  trust beneficiaries,  attorneys, affiliates and
associates  and all of  their  respective  predecessors,  successors,  permitted
assigns, heirs, executors and administrators.                                   

          8.  Termination.  This Agreement shall  terminate,  and no party shall
have any rights or obligations  hereunder and this  Agreement  shall become null
and void and have no further effect immediately  following the earliest to occur
of (x) the Effective  Time,  (y) the 30th day following the  termination  of the
Merger  Agreement  pursuant  to  Section  10.1(b),  10.1(c),  10.1(d) or 10.1(e)
thereof,  or (z) the  termination  of the Merger  Agreement  pursuant to Section
10.1(a) thereof.  Notwithstanding  the foregoing,  in the event the Option shall
have been  exercised in accordance  with Section 4, but the Option Closing shall
not have  occurred,  this  Agreement  shall  not  terminate,  except  that  this
Agreement may be terminated  by the  Stockholders  if Merger Sub defaults on its
obligation to purchase the Subject Shares at the Option Closing. Nothing in this
Section shall relieve any party of liability for breach of this Agreement.      

9. General Provisions.                                      

          (a)  Amendments.  This  Agreement  may  not be  amended  except  by an
instrument in writing signed by the party to be charged therewith.              

          (b) Notice. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered  personally  or sent by overnight
courier  (providing  proof of delivery)  to Parent and Merger Sub in  accordance
with  Section 11.1 of the Merger  Agreement  and to the  Stockholders  c/o Kaye,
Scholer, Fierman, Hays & Handler, LLP, 425 Park Avenue New York, New York 10022,
Telecopy: (212) 836-8689,  Attention:  Joel I. Greenberg, Esq. (or at such other
address for a party as shall be specified by like notice).                      

          (c)  Interpretation.  When a reference  is made in this  Agreement  to
Sections,  such  reference  shall  be to a  Section  of  this  Agreement  unless
otherwise indicated.  The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or  interpretation  of
this Agreement. Wherever the words "include," "includes" or "including" are used
in this  Agreement,  they shall be deemed to be followed  by the words  "without
limitation."                                                                    

          (d)  Counterparts.  This  Agreement  may be  executed  in one or  more
counterparts,  all of which shall be considered one and the same agreement,  and
shall become effective when one or more of the counterparts  have been signed by
each of the parties and delivered to the other parties, it being understood that
each party need not sign the same counterpart.                                  

          (e) Governing Law. This Agreement  shall be governed by, and construed
in  accordance  with,  the laws of the State of Delaware  regardless of the laws
that might  otherwise  govern under  applicable  principles  of conflicts of law
thereof.                                                                        

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          10. Enforcement. The parties agree that irreparable damage would occur
in the event that any of the  provisions of this Agreement were not performed in
accordance  with  their  specific  terms  or  were  otherwise  breached.  It  is
accordingly  agreed that the  parties  shall be  entitled  to an  injunction  or
injunctions to prevent  breaches of this  Agreement and to enforce  specifically
the terms and  provisions  of this  Agreement in any Federal court of the United
States  located in the  Southern  District  of the State of New York or in a New
York state  court  located in  Manhattan,  this being in  addition  to any other
remedy to which they are entitled at law or in equity. In addition,  each of the
parties hereto (i) consents to submit such party to the personal jurisdiction of
any Federal court  located in the Southern  District of the State of New York or
any New York state court  located in Manhattan  in the event any dispute  arises
out of this  Agreement  or any of the  transactions  contemplated  hereby,  (ii)
agrees  that  such  party  will not  attempt  to deny or  defeat  such  personal
jurisdiction  by motion or other  request for leave from any such  court,  (iii)
agrees that such party will not bring any action  relating to this  Agreement or
the  transactions  contemplated  hereby in any court other than a Federal  court
sitting in the  Southern  District  of the State of New York or a New York state
court  located  in  Manhattan,  and (iv)  waives any right to trial by jury with
respect to any claim or proceeding  related to or arising out of this  Agreement
or any of the transactions contemplated hereby.                                 

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          IN WITNESS WHEREOF,  Parent, Merger Sub and the Stockholders have each
caused this Agreement to be signed by its signatory  thereunto duly  authorized,
each as of the date first written above.                                        

                            AMERISERVE FOOD DISTRIBUTION, INC.

               By:/s/ John V. Holten
                     Name:  John V. Holten
                                   Title: Chairman and Chief Executive
                     Officer

                     STEAMBOAT ACQUISITION CORP.

               By:/s/ John V. Holten
                     Name:  John V. Holten
                                Title: Chairman of the Board and
                       President

      ONEX DHC LLC
                     (479,498 Class A Shares and
                     4,458,696 Class B Shares)

                  By:/s/ Anthony R. Melman
                        Name:  Anthony R. Melman
                       Title: Attorney-in-fact

      ONEX OMI LLC
                  (285,714 Class B Shares)

                  By:/s/ Anthony R. Melman
                        Name:  Anthony R. Melman
                       Title: Attorney-in-fact

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                          PROSOURCE EXECUTIVE INVESTCO LLC
                     (17,085  Class A Shares and
                94,420 Class B Shares)

                  By:/s/ Anthony R. Melman
                        Name:  Anthony R. Melman
                       Title: Attorney-in-fact

       ONEX OHIO LLC
                  (379,242 Class B Shares)

                  By:/s/ Anthony R. Melman
                        Name:  Anthony R. Melman
                       Title: Attorney-in-fact

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                                                                       ANNEX III

MORGAN STANLEY                                                                  
                                                  Morgan Stanley & Co.
                                          Incorporated
                                                 One Financial Place
                                                      440 South LaSalle Street
                                               Chicago, IL 60605
                                            (312) 706-4000

                                              January 29, 1998

Board of Directors                                                              
ProSource, Inc.                                                                 
1500 San Remo Avenue                                                            
Coral Gables, FL 33146                                                          

Members of the Board:                                                           

We understand that ProSource, Inc. ("ProSource" or the "Company"), AmeriServe   
Food Distribution, Inc. ("Buyer") and Steamboat Acquisition Corp., a            
wholly-owned subsidiary of the Buyer ("Acquisition Sub") have entered into an   
Agreement and Plan of Merger, dated as of January 29, 1998, (the "Merger        
Agreement"), which provides, among other things, for the merger (the "Merger")  
of Acquisition Sub with and into ProSource. Pursuant to the Merger, ProSource   
will become a wholly-owned subsidiary of Buyer and each outstanding share of    
Class A common stock, par value $0.01 per share (the "Class A Common Stock"), of
the Company and Class B common stock, par value $0.01 per share (the "Class B   
Common Stock" and, together with the Class A Common Stock, the "Common Stock"), 
of the Company, other than shares held in treasury or held by Buyer or any      
affiliate of Buyer or as to which dissenters' rights have been perfected, will  
be converted into the right to receive $15.00 per share in cash. The terms and  
conditions of the Merger are more fully set forth in the Merger Agreement.      

We further understand that Onex Corporation and affiliates of Onex Corporation  
("Onex") control approximately 85.1% of the voting power of the Common Stock and
that Buyer, Acquisition Sub and Onex have entered into a Voting Agreement dated 
as of January 29, 1998 (the "Voting Agreement") pursuant to which Onex agreed to
take certain actions to support the transactions contemplated by the Merger     
Agreement.                                                                      

You have asked for our opinion as to whether the consideration to be received by
the holders of Class A Common Stock pursuant to the Merger Agreement is fair    
from a financial point of view to such holders.                                 

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For purposes of the opinion set forth herein, we have:                          

       (i)      reviewed certain publicly available financial statements and
other information of the Company;           

   (ii)     reviewed certain internal financial statements and other
                financial and operating data concerning the Company prepared
by the management of the Company;           

 (iii)    reviewed certain financial projections prepared by the
management of the Company;                  

  (iv)     discussed the past and current operations and financial
          condition and the prospects of the Company with senior
executives of the Company;                  

    (v)      reviewed the reported prices and trading activity for the
Class A Common Stock;                       

    (vi)     compared the financial performance of the Company and the
              reported prices and trading activity of the Class A Common
               Stock with that of certain other comparable publicly-traded
companies and their securities;             

(vii)    reviewed the financial terms, to the extent publicly 
              available, of certain comparable acquisition transactions;

      (viii)   reviewed the Merger Agreement and the Voting Agreement; and

       (ix)     performed such other analyses as we have deemed appropriate.

We have assumed and relied upon without independent verification the accuracy   
and completeness of the information reviewed by us for the purposes of this     
opinion. With respect to the financial projections, we have assumed that they   
have been reasonably prepared on bases reflecting the best currently available  
estimates and judgments of the future financial performance of the Company. We  
have not made any independent valuation or appraisal of the assets or           
liabilities of the Company, nor have we been furnished with any such appraisals.
Our opinion is necessarily based on economic, market and other conditions as in 
effect on, and the information made available to us as of, the date hereof.     

In arriving at our opinion, we were not authorized to solicit, and did not      
solicit, interest from any party with respect to the acquisition, business      
combination or other extraordinary transaction involving the Company, nor did we
negotiate with Buyer or any parties which may have expressed interest in any    
possible acquisition of the Company or certain of its constituent businesses.   

We have been engaged to provide this opinion to the Board of Directors of the   
Company in connection with this transaction and will receive a fee for our      
services. In the past, Morgan Stanley & Co. Incorporated and its affiliates have
provided financial advisory and financing services for the Company and Onex and 
have received fees for the rendering of these services.                         

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It is understood that this letter is for the information of the Board of        
Directors of the Company and may not be used for any other purpose without our  
prior written consent, except that this opinion may be included in its entirety 
in any filing by the Company in respect of this transaction with the Securities 
and Exchange Commission.                                                        

Based on the foregoing, we are of the opinion on the date hereof that the       
consideration to be received by the holders of Class A Common Stock pursuant to 
the Merger Agreement is fair from a financial point of view to such holders.    

         Very truly yours,

            MORGAN STANLEY & CO.
    INCORPORATED

                 By: /s/ William H. Strong
                                      --------------------------------------
                 William H. Strong
                 Managing Director

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                                                                        ANNEX IV

DELAWARE GENERAL CORPORATION LAW

SECTION 262 APPRAISAL RIGHTS                                                    

        (a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this  
section with respect to such shares, who continuously holds such shares through 
the effective date of the merger or consolidation, who has otherwise complied   
with subsection (d) of this section and who has neither voted in favor of the   
merger or consolidation nor consented thereto in writing pursuant to Section 228
of this title shall be entitled to an appraisal by the Court of Chancery of the 
fair value of the stockholder's shares of stock under the circumstances         
described in subsections (b) and (c) of this section. As used in this section,  
the word "stockholder" means a holder of record of stock in a stock corporation 
and also a member of record of a nonstock corporation; the words "stock" and    
"share" mean and include what is ordinarily meant by those words and also       
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a       
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository. 

        (b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be 
effected pursuant to Section 251 (other than a merger effected pursuant to      
Section 251 (g) of this title), Section 252, Section 254, Section 257, Section  
258, Section 263 or Section 264 of this title:                                  

              (1) Provided, however, that no appraisal rights under this section
  shall be available for the shares of any class or series of stock, which
    stock, or depository receipts in respect thereof, at the record date fixed
    to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or    
    consolidation, were either (i) listed on a national securities exchange or
     designated as a national market system security on an interdealer quotation
     system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no    
appraisal rights shall be available for any shares of stock of the    
  constituent corporation surviving a merger if the merger did not require
    for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of Section 251 of this title.           

           (2) Notwithstanding paragraph (1) of this subsection, appraisal
     rights under this section shall be available for the shares of any class or
 series of stock of a constituent corporation if the holders thereof are
   required by the terms of an agreement of merger or consolidation pursuant
  to Sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept
for such stock anything except:                                       

                a. Shares of stock of the corporation surviving or resulting
      from such merger or consolidation, or depository receipts in respect
thereof;                                                      

              b. Shares of stock of any other corporation, or depository
   receipts in respect thereof, which shares of stock (or depository
      receipts in respect thereof) or depository receipts at the effective
         date of the merger or consolidation will be either listed on a national
securities exchange                                           

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      or designated as a national market system security on an interdealer
     quotation system by the National Association of Securities Dealers,
Inc. or held of record by more than 2,000 holders;            

                 c. Cash in lieu of fractional shares or fractional depository
     receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or                                                 

                  d. Any combination of the shares of stock, depository receipts
         and cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b.               
and c. of this paragraph.                                     

      (3) In the event all of the stock of a subsidiary Delaware
   corporation party to a merger effected under Section 253 of this title is
not owned by the parent corporation immediately prior to the merger,  
appraisal rights shall be available for the shares of the subsidiary  
Delaware corporation.                                                 

     (c) Any corporation may provide in its certificate of incorporation
that appraisal rights under this section shall be available for the shares of   
any class or series of its stock as a result of an amendment to its certificate 
of incorporation, any merger or consolidation in which the corporation is a     
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision, 
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.                   

(d) Appraisal rights shall be perfected as follows:           

         (1) If a proposed merger or consolidation for which appraisal
     rights are provided under this section is to be submitted for approval at a
  meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
 record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that   
appraisal rights are available for any or all of the shares of the    
   constituent corporations, and shall include in such notice a copy of this
  section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
     merger or consolidation, a written demand for appraisal of his shares. Such
   demand will be sufficient if it reasonably informs the corporation of the
 identity of the stockholder and that the stockholder intends thereby to
   demand the appraisal of his shares. A proxy or vote against the merger or
     consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein    
provided. Within 10 days after the effective date of such merger or   
 consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become 
effective; or                                                         

       (2) If the merger or consolidation was approved pursuant to
 Section 228 or Section 253 of this title, each constituent corporation,
   either before the effective date of the merger or consolidation or within
ten days thereafter, shall notify each of the holders of any class or 
series of stock of such constituent corporation who are entitled to   
  appraisal rights of the approval of the merger or consolidation and that
appraisal rights are available for any or all shares of such class or 
    series of stock of such constituent corporation, and shall include in such
    notice a copy of this section; provided that, if the notice is given on or
    after the effective date of the merger or consolidation, such notice shall
   be given by the surviving or resulting corporation to all such holders of
any class or series of                                                

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   stock of a constituent corporation that are entitled to appraisal rights.
     Such notice may, and, if given on or after the effective date of the merger
 or consolidation, shall, also notify such stockholders of the effective
    date of the merger or consolidation. Any stockholder entitled to appraisal
     rights may, within 20 days after the date of mailing of such notice, demand
 in writing from the surviving or resulting corporation the appraisal of
such holder's shares. Such demand will be sufficient if it reasonably 
 informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such holder's  
     shares. If such notice did not notify stockholders of the effective date of
   the merger or consolidation, either (i) each such constituent corporation
shall send a second notice before the effective date of the merger or 
     consolidation notifying each of the holders of any class or series of stock
  of such constituent corporation that are entitled to appraisal rights of
    the effective date of the merger or consolidation or (ii) the surviving or
   resulting corporation shall send such a second notice to all such holders
    on or within 10 days after such effective date; provided, however, that if
   such second notice is sent more than 20 days following the sending of the
    first notice, such second notice need only be sent to each stockholder who
is entitled to appraisal rights and who has demanded appraisal of such
 holder's shares in accordance with this subsection. An affidavit of the
secretary or assistant secretary or of the transfer agent of the      
 corporation that is required to give either notice that such notice has
   been given shall, in the absence of fraud, be prima facie evidence of the
     facts stated therein. For purposes of determining the stockholders entitled
     to receive either notice, each constituent corporation may fix, in advance,
 a record date that shall be not more than 10 days prior to the date the
notice is given; provided, that if the notice is given on or after the
 effective date of the merger or consolidation, the record date shall be
 such effective date. If no record date is fixed and the notice is given
     prior to the effective date, the record date shall be the close of business
on the day next preceding the day on which the notice is given.       

(e) Within 120 days after the effective date of the merger or 
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to   
appraisal rights, may file a petition in the Court of Chancery demanding a      
determination of the value of the stock of all such stockholders.               
Notwithstanding the foregoing, at any time within 60 days after the effective   
date of the merger or consolidation, any stockholder shall have the right to    
withdraw his demand for appraisal and to accept the terms offered upon the      
merger or consolidation. Within 120 days after the effective date of the merger 
or consolidation, any stockholder who has complied with the requirements of     
subsections (a) and (d) hereof, upon written request, shall be entitled to      
receive from the corporation surviving the merger or resulting from the         
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for   
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after  
his written request for such a statement is received by the surviving or        
resulting corporation or within 10 days after expiration of the period for      
delivery of demands for appraisal under subsection (d) hereof, whichever is     
later.                                                                          

         (f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which   
shall within 20 days after such service file in the office of the Register in   
Chancery in which the petition was filed a duly verified list containing the    
names and addresses of all stockholders who have demanded payment for their     
shares and with whom agreements as to the value of their shares have not been   
reached by the surviving or resulting corporation. If the petition shall be     
filed by the surviving or resulting corporation, the petition shall be          
accompanied by such a duly verified list. The Register in Chancery, if so       
ordered by the Court, shall give notice of the time and place fixed for the     
hearing of such petition by registered or certified mail to the surviving or    
resulting corporation                                                           

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and to the stockholders shown on the list at the addresses therein stated. Such 
notice shall also be given by one or more publications at least one week before 
the day of the hearing, in a newspaper of general circulation published in the  
City of Wilmington, Delaware or such publication as the Court deems advisable.  
The forms of the notices by mail and by publication shall be approved by the    
Court, and the costs thereof shall be borne by the surviving or resulting       
corporation.                                                                    

    (g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an   
appraisal for their shares and who hold stock represented by certificates to    
submit their certificates of stock to the Register in Chancery for notation     
thereon of the pendency of the appraisal proceedings; and if any stockholder    
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.                                                               

      (h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any  
element of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon   
the amount determined to be the fair value. In determining such fair value, the 
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of 
interest which the surviving or resulting corporation would have had to pay to  
borrow money during the pendency of the proceeding. Upon application by the     
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery 
or other pretrial proceedings and may proceed to trial upon the appraisal prior 
to the final determination of the stockholder entitled to an appraisal. Any     
stockholder whose name appears on the list filed by the surviving or resulting  
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may     
participate fully in all proceedings until it is finally determined that he is  
not entitled to appraisal rights under this section.                            

         (i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court 
may direct. Payment shall be so made to each such stockholder, in the case of   
holders of uncertificated stock forthwith, and the case of holders of shares    
represented by certificates upon the surrender to the corporation of the        
certificates representing such stock. The Court's decree may be enforced as     
other decrees in the Court of Chancery may be enforced, whether such surviving  
or resulting corporation be a corporation of this State or of any state.        

    (j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances. Upon  
application of a stockholder, the Court may order all or a portion of the       
expenses incurred by any stockholder in connection with the appraisal           
proceeding, including, without limitation, reasonable attorney's fees and the   
fees and expenses of experts, to be charged pro rata against the value of all   
the shares entitled to an appraisal.                                            

       (k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded his appraisal rights as provided in subsection  
(d) of this section shall be entitled to vote such stock for any purpose or to  
receive payment of dividends or other distributions on the stock (except        
dividends or other distributions payable to stockholders of record at a date    
which is prior to the effective date of the merger or consolidation); provided, 
however, that if no petition for an appraisal shall be filed within the time    
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or                                 

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consolidation, either within 60 days after the effective date of the merger or  
consolidation as provided in subsection (e) of this section or thereafter with  
the written approval of the corporation, then the right of such stockholder to  
an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding
in the Court of Chancery shall be dismissed as to any stockholder without the   
approval of the Court, and such approval may be conditioned upon such terms as  
the Court deems just.                                                           

       (l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they        
assented to the merger or consolidation shall have the status of authorized and 
unissued shares of the surviving or resulting corporation.                      

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                                                                         ANNEX V

 CERTAIN INFORMATION REGARDING

 PROSOURCE, INC.

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 CERTAIN INFORMATION REGARDING
 PROSOURCE, INC.

         The following information is excerpted from the Company's Annual Report
on Form 10-K for the Fiscal Year ended December 27, 1997, as filed with the     
Securities and Exchange Commission on March 3, 1998 and amended on April 30,    
1998.                                                                           

ITEM 1.  BUSINESS.                                                              

     ProSource, Inc. ("ProSource" or the "Company") provides foodservice
distribution services to chain restaurants in North America and provides        
purchasing and logistics services to the foodservice market. 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 serves a variety of restaurants, including Burger King, Red Lobster,
Long John Silver's, Olive Garden, TGIFriday's, Chick-fil-A, Chili's, Sonic, TCBY
and Wendy's. ProSource is an indirect subsidiary of Onex Corporation (together  
with its affiliates, "Onex"). See "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. Since the  
acquisition, ProSource has, through a combination of acquisitions and internal  
growth, become a leading distributor to chain restaurants, servicing            
approximately 12,700 restaurants within 16 different restaurant chains as of    
December 27, 1997. In March 1995, the Company acquired substantially all of the 
assets and assumed certain liabilities of the National Accounts Division ("NAD")
of The Martin-Brower Company ("Martin-Brower"), which added a total of          
approximately 8,000 restaurants within 11 chains included in the Company's      
current customer base. The Company has also been successful in expanding through
internally generated sales. Since the Company's formation in 1992, net sales    
have grown from $1.3 billion in 1993 (the first full year of operations) to $3.9
billion in 1997.                                                                

     The Company was incorporated in 1992 as a Delaware corporation. Its
principal executive offices are located at 1500 San Remo Avenue, Coral Gables,  
Florida 33146, and the Company's telephone number is (305) 740-1000. The Company
operates under the name "ProSource Distribution Services."                      

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 network of 34 distribution centers, its fleet of approximately 1,500    
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                                                                        

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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   
1997 net sales.                                                                 

 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 (i.e. transportation of products    
from the vendor to the distribution center), 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 1997, the Company managed approximately 38% 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 approximately 7,000 types of products
for its customers at its distribution centers. 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 implementing a new national network of distribution centers. Through this 
"network optimization" program, which is expected to take up to 5 years to      
complete, the Company intends to consolidate and integrate its existing         
distribution network into a hub and spoke network utilizing approximately six   
large regional distribution centers ("RDCs"), and nineteen local distribution   
centers ("LDCs"). See "Management's Discussion and Analysis of Financial        
Condition and Results of Operations -- Liquidity and Capital Resources." 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 by enabling the Company to fully service more customers from a     
distribution center closer to the customer, and thereby reduce transportation   
costs. In addition, the new network should provide the Company with additional  
distribution center capacity for continued growth. 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.                                                    

 Order Fulfillment. The Company places a significant emphasis on
providing a high service level in order fulfillment. For the year ended December
27, 1997, the Company achieved order fill rates of 99.7% and on-time deliveries 
of 92.3%. 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 53% 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                                                                       

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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. Delivery routes are scheduled both to fully   
utilize the trailer's load capacity and minimize the number of miles driven. The
Company transports approximately 2.1 million tons of product and its trucks     
travel approximately 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 cart delivery system.                   

   Fleet. The Company's fleet, as of December 27, 1997, consisted of
approximately 1,500 vehicles, including approximately 600 tractors and 900      
trailers. The Company leases approximately 500 of the tractors from Penske Truck
Leasing, Co. L.P. 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 400 trailers from GE Capital Services. The         
remainder are either Company-owned or leased from various other companies. Lease
terms average 4-6 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.                                                                      

      Management Information Systems. The Company currently has in place a
variety of information technology systems, including electronic ordering,       
inventory management, financial and routing systems. In addition, in connection 
with its "network optimization" program, the Company intends to put in place new
customer ordering and warehouse management systems. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and  
Capital Resources."                                                             

CUSTOMERS                                                                       

    The Company's customers as of December 27, 1997 consisted of 3,110
franchisees and 14 franchisor/owners of approximately 12,700 quick service and  
casual dining chain restaurants representing 16 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 in 1997 were Burger King and Red Lobster,  
representing 46% and 15% of 1997 net sales, respectively. The Company's largest 
customer is Darden Restaurants, Inc. (owner of all Olive Garden and Red Lobster 
restaurants), representing 21% of the Company's 1997 net sales. No other chain  
or single customer accounted for more than 10% of the Company's net sales in    
1997. In January 1997, the Company announced the termination, effective April 1,
1997, of its distribution agreement with ARCOP, the purchasing cooperative for  
Arby's, which represented approximately 10% of the Company's net sales in 1996. 

         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 approximately 5% of 1997  
net sales), (ii) the Company is one of ten companies approved as regional       

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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 520 BKC-owned restaurants, as of December 27, 1997, the Company 
also serviced 4,554 Burger King restaurants owned by franchisees. In the        
aggregate, this represents approximately 68% of all Burger King restaurants in  
the United States. The Company has also entered into two distribution agreements
with Darden Restaurants, Inc. pursuant to which the Company is the primary      
distributor to its restaurants, Olive Garden and Red Lobster, operating in the  
United States and Canada. All Olive Garden and Red Lobster restaurants are      
currently company-owned. Olive Garden and Red Lobster 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 2002. The Company believes that from time to time it may
not have been in strict compliance with all of the performance reliability      
standards in these and other contracts. However, it is not aware of any issues  
of non-compliance which could reasonably be expected to result in early         
termination of material contracts.                                              

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. 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 growing 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 which might benefit from the industry focus that  
it, as a specialist in                                                          

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distribution to chain restaurants, 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.                                                         

      The Company rigorously monitors customer service levels. 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.                         

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., U.S. Foodservice, Inc. (formerly
JP Foodservice, Inc.), Alliant Foodservice Inc. (formerly Kraft Distribution),  
MBM Corp., AmeriServe Food Distribution, Inc. ("AmeriServe"), Marriott          
Distribution Services Inc., Performance Food Group, and McLane Company, Inc. The
Company also competes with regional distributors, principally for business from 
franchisee-owned Burger King restaurants. The Company believes 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. See "Merger Agreement."                      

     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 since that time, there can be
no assurance that severe competitive pricing pressure will not recur in the     
future.                                                                         

EMPLOYEES                                                                       

        As of December 27, 1997, the Company had approximately 3,400 full-time
employees, of whom approximately 340 were employed in corporate support         
functions and approximately 3,060 were warehouse, driver and administrative     
staff in the distribution centers. Approximately 560 of the Company's employees 
were covered by 11 collective bargaining contracts with 7 local unions, all of  
which are associated with the International Brotherhood of Teamsters. The       
Company has not experienced any significant labor disputes or work stoppages.   
The Company believes that its relationships with its employees are good.        

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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.                                  

CONTROLLING STOCKHOLDER                                                         

        The Company is controlled by Onex Corporation. Onex, 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. $8.9 billion for 
1996 (Cdn. $8.1 billion for the 9 months ended September 30, 1997) and          
consolidated assets of Cdn. $3.8 billion at December 31, 1996 (Cdn. $5.3 billion
at September 30, 1997). In addition to its interests in ProSource, as of        
December 31, 1997, Onex had investments in a broad range of companies, including
Onex Food Services, Inc. (which does business through its subsidiaries, Sky     
Chefs, Inc. and Caterair International Inc.), Celestica International Holdings  
Inc., Dura Automotive Systems, Inc., Tower Automotive, Inc., Phoenix Pictures   
Inc., Vencap, Inc. and Lantic Sugar Limited, its most recently acquired         
subsidiary. None of Onex's current businesses competes with or is a customer of 
the Company. Onex currently owns approximately 89% of the Company's outstanding 
Class B common stock, $.01 par value per share (the "Class B Common Stock"), and
approximately 14% of the Company's outstanding Class A common stock, $.01 par   
value per share (the "Class A Common Stock" and, collectively with the Class B  
Common Stock, "Common Stock"), representing approximately 85% of the combined   
voting power of the outstanding Common Stock. See "Security Ownership of Certain
Beneficial Owners and Management."                                              

MERGER AGREEMENT                                                                

       On January 29, 1998, the Company signed a definitive merger agreement
with AmeriServe. Under the terms of the agreement, AmeriServe has agreed to pay 
$15.00 in cash for each outstanding share of the Company's common stock. In     
addition, under the agreement, all outstanding options will be accelerated and  
option holders will receive $15.00 less the applicable exercise for each share  
issuable upon exercise of the options. The merger is subject to regulatory      
approvals and other customary conditions to closing. Onex Corporation and       
certain of its affiliates have committed to vote in favor of the merger, which  
will assure the necessary stockholder approval. The merger is expected to close 
in the second quarter of fiscal 1998.                                           

         Upon consummation of the merger, the Company will become a wholly-owned
subsidiary of AmeriServe. AmeriServe has advised the Company that following the 
consummation of the Merger, it anticipates that it will cause the Surviving     
Corporation to seek to have the Class A Common Stock, which                     

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is currently traded on the Nasdaq National Market, delisted. In addition,       
following the consummation of the Merger, the Class A Common Stock will be      
eligible for deregistration under the Securities Exchange Act of 1934, as       
amended (the "Exchange Act").                                                   

FORWARD-LOOKING STATEMENTS                                                      

     This Annex V contains certain forward-looking statements within the
meaning of Section 21E of the Exchange Act that involve risks and uncertainties.
Such forward looking statements include, among other things, statements         
regarding sources of growth and plans and objectives of management for future   
operations (including those concerning the Company's new distribution center    
network and new information systems and upgrades), the potential impact of      
pending litigation and anticipated capital expenditures and working capital     
needs. Actual outcomes may be affected by economic trends impacting its         
customers and the restaurant industry, in general. Also, the Company is in a    
highly competitive business, is in the process of integrating its operations,   
and is implementing a strategic plan intended to expand its business through    
acquisitions and internal growth and improve its cost structure. There can be no
assurance that in its highly competitive business environment, the Company will 
achieve the planned efficiencies and cost savings, successfully acquire other   
distributors, or increase its business with new or existing customers.          

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ITEM 2.  PROPERTIES.                                                            

         The Company leases its principal executive office and corporate support
center which is located in Coral Gables, Florida. The facility consists of      
approximately 83,000 square feet. The Company operates 34 distribution centers  
and 5 remote locations, of which 25 facilities (representing an aggregate of    
approximately 1,574,176 square feet) are leased and 14 facilities (representing 
an aggregate of approximately 794,238 square feet) are owned by the Company.    

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

                                                                 APPROXIMATE
LOCATION                                                           SQUARE FEET  
--------                                                           -----------  
Atlanta, Georgia (1)                                                 217,670    
Burlington, New Jersey                                                60,880    
Chester, New York                                                    127,100    
Chicago, Illinois                                                     91,021    
Cleveland, Ohio                                                       40,540    
Columbus, Ohio                                                       174,000    
Dallas, Texas (1)(3)                                                 165,423    
Denver, Colorado                                                      92,145    
Detroit, Michigan                                                     34,897    
Greensboro, North Carolina                                            41,000    
Gridley, Illinois                                                    146,100    
Humbolt, Tennessee                                                    35,000    
Houston, Texas (1)                                                    74,900    
Kansas City, Kansas (1)(4)                                           175,642    
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 (5)                                                  63,000    
Orlando, Florida                                                     143,200    
Oxford, Massachusetts                                                 40,000    
Phoenix, Arizona                                                      38,200    
Portland, Oregon                                                      70,400    
San Jose, California                                                  31,500    
Trenton, Ontario                                                      20,000    
Virginia Beach, Virginia                                              23,045    
Washington, DC (6)                                                    83,000    
                                                               ---------
Total:                                                             2,368,414    
                                                               =========

(1)  Two facilities.                                                            
(2)  Three facilities.                                                          
(3)  Includes approximately 28,223 square feet of supplemental space in two     
remote facilities.                                                    
(4)  Includes approximately 26,172 square feet of supplemental space in a remote
facility.                                                             
(5)  Includes approximately 11,000 square feet of supplemental space in a remote
facility.                                                             
(6)  Includes approximately 30,000 square feet of supplemental space in a remote
facility.                                                             

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ITEM 3.  LEGAL PROCEEDINGS.                                                     

       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 the financial position of the Company.                 

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.                   

    No matters were submitted to a vote of the stockholders during the
fourth quarter ended December 27, 1997.                                         

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER       
MATTERS.                                                      

         See "MARKET PRICES OF COMMON STOCK" in the body of the Proxy Statement.

ITEM 6.  SELECTED FINANCIAL DATA.                                               

   See "SELECTED FINANCIAL DATA" in the body of the Proxy Statement.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.                                                

       In the following comparisons of the results of operations, the fiscal
years ended December 27, 1997, December 28, 1996 and December 30, 1995 are      
referred to as 1997, 1996 and 1995, respectively. The Company's fiscal year ends
on the last Saturday in December. Consequently, the Company will periodically   
have a 53 week fiscal year. 1997, 1996 and 1995 each consisted of 52 weeks.     

RESULTS OF OPERATIONS                                                           

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

                                                        [Enlarge/Download Table]

                                                                             Fiscal Year Ended                 
                                                            ---------------------------------------------------
                                                             December 27,      December 28,      December 30,  
                                                                 1997              1996              1995      
                                                            ---------------  ----------------  ----------------
                                                                                                               
Net sales                                                       100.00%           100.00%           100.00%    
Cost of sales                                                    92.06             92.29             92.24     
                                                            ---------------------------------------------------
   Gross profit                                                   7.94              7.71              7.76     

Operating expenses                                                7.74              7.30              7.37     
Loss on impairment of long-lived assets                             --              0.38                --     
Restructuring and contract-termination charges                      --              0.69              0.02     
                                                            ---------------------------------------------------
Income (loss) from operations                                     0.20             (0.66)             0.37     

Interest expense, net                                            (0.24)            (0.32)            (0.39)    
                                                            ---------------------------------------------------
Loss before income taxes, extraordinary items and                                                              
   cumulative effect of a change in accounting principle         (0.04)            (0.98)            (0.02)    
Income tax benefit                                                0.01              0.37                --     
                                                            ---------------------------------------------------
Loss before extraordinary items and cumulative effect                                                          
   of a change in accounting principle                           (0.03)            (0.61)            (0.02)    
Extraordinary (loss) gain, net                                   (0.16)             0.01             (0.02)    
Cumulative effect of a change in accounting principle, net       (0.16)               --                --     
                                                            ---------------------------------------------------
Net loss                                                         (0.35)%           (0.60)%           (0.04)%   
                                                            ===================================================

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YEAR ENDED DECEMBER 27, 1997 COMPARED TO YEAR ENDED DECEMBER 28, 1996           

   Net sales declined 5.4% to $3,901.2 million in 1997 from $4,125.0
million in 1996. The decrease is primarily attributed to the Company's decision 
to terminate its distribution contract with ARCOP, the purchasing cooperative   
for Arby's, effective April 1, 1997. In 1996, sales to company-owned and        
franchisee-owned Arby's restaurants accounted for approximately 10% of the      
Company's sales. The Company was able to partially mitigate the effect this had 
on 1997's operations by increasing its sales to its current customer base. This 
was accomplished by two methods: (1) increasing its sales to existing           
restaurants and (2) increasing the number of restaurants served (primarily      
franchisee-owned Burger King restaurants).                                      

      Gross profit decreased by 2.7% to $309.8 million in 1997 from $318.2
million in 1996. The gross profit percentage increased slightly to 7.9% in 1997 
from 7.7% in 1996 as a result of the Company's efforts to increase its          
value-added services and a change in sales mix.                                 

         Operating expenses increased slightly by 0.3% to $302.1 million in 1997
from $301.3 million in 1996. As a percentage of net sales, operating expenses   
increased to 7.7% in 1997 from 7.3% in 1996 due primarily to the impact that    
certain fixed costs have on a lower sales volume. The Company has also incurred 
higher expenses in the fourth quarter of 1997 due to the start-up of new        
distribution centers as part of its new network program.                        

       The Company generated income from operations totaling $7.7 million in
1997 compared to a loss from operations of $27.3 million in 1996. The 1996 loss 
from operations was caused by restructuring charges of $10.9 million,           
contract-termination charges of $17.6 million, and a loss on impairment of      
long-lived assets of $15.7 million. Excluding these non-recurring items, the    
Company generated income from operations of $16.9 million in 1996. The 1997     
operating income was negatively affected by the reduction in gross profit caused
by the lower sales volume and the start-up costs incurred in the fourth quarter,
discussed previously.                                                           

         Net interest expense decreased 30.0% to $9.2 million in 1997 from $13.1
million in 1996. This is due to the prepayment of indebtedness in November 1996 
with the proceeds of the Company's initial public offering as well as a lower   
effective interest rate on the Company's new credit facilities, which closed in 
March 1997.                                                                     

      The Company recognized an income tax benefit in 1997 of $0.5 million
compared to $15.4 million in 1996 as a result of a lower pre-tax loss in 1997.  
The effective income tax rates for 1997 and 1996 were 32.9% and 38.2%,          
respectively. The decreased 1997 effective tax rate is due to an increase in    
permanent tax differences, relative to taxable loss, which resulted in a lower  
recorded tax benefit.                                                           

     The Company recognized an extraordinary loss of $10.3 million ($6.3
million net of taxes) in 1997 associated with the early retirement of its       
previous credit facility in March 1997. This charge includes the write-off of   
deferred financing costs ($6.3 million), prepayment penalties ($2.7 million) and
costs associated with the termination of interest-rate protection agreements    
($1.3 million). In 1996, the Company recognized an extraordinary gain of $0.6   
million, net of taxes, due to the pay-off of subordinated debt with the proceeds
from the Company's initial public offering.                                     

       During the fourth quarter of 1997, the Financial Accounting Standards
Board's Emerging Issues Task Force reached a consensus on Issue No. 97-13,      
"Accounting for Costs Incurred in Connection with a Consulting Contract or an   
Internal Project that Combines Business Process Reengineering and Information   
Technology Transformation." The consensus requires that the cost of business    
process reengineering                                                           

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activities, whether done internally or by third parties, is to be expensed as   
incurred. As a result, any remaining unamortized portion of previously          
capitalized business process reengineering costs is required to be written off. 
The cumulative impact of initially conforming to this new standard in the fourth
quarter of 1997 was reported as a change in accounting principle, resulting in a
charge of $9.7 million ($6.4 million net of taxes).                             

YEAR ENDED DECEMBER 28, 1996 COMPARED TO YEAR ENDED DECEMBER 30, 1995           

     Net sales increased 19.2% to $4,125.0 million in 1996 from $3,461.8
million in 1995. The increase in net sales is primarily attributable to the     
acquisition of NAD on March 31, 1995. Net sales, excluding the effect of the NAD
acquisition, increased to $1,916.1 million in 1996 from $1,791.2 million in     
1995, a $124.9 million or 7.0% increase when compared to 1995. This 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.                                                                    

    Gross profit increased 18.5% to $318.2 million in 1996 compared to
$268.5 million in 1995 primarily due to the increase in net sales. The gross    
profit percentage decreased to 7.7% in 1996 from 7.8% in 1995 due primarily to  
the inclusion for the entire year in 1996 of NAD sales which have a higher      
product cost than other Company sales.                                          

   Operating expenses increased 18.1% to $301.3 million in 1996 from
$255.2 million in 1995 primarily due to the increase in net sales. As a         
percentage of net sales, operating expenses declined to 7.3% in 1996 from 7.4%  
in 1995 due primarily to the impact of the higher product cost per unit sold by 
NAD.                                                                            

   Losses from operations in 1996 were $27.3 million (as compared to
earnings from operations of $12.6 million in 1995), as a result of restructuring
charges of $10.9 million, contract-termination charges of $17.6 million, and a  
loss on impairment in value of long-lived assets of $15.7 million. The          
restructuring charges and impairment losses are related to a plan to consolidate
and integrate the Company's corporate and network operations. Of the            
restructuring charges, approximately $7.9 million related 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 contract-termination charges consist of $10.6 million of costs 
associated with terminating the distribution agreement with ARCOP, the          
purchasing cooperative for Arby's, and $7.0 million in costs associated with the
termination of various agreements in connection with the Company's initial      
public offering in November 1996. 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 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 and contract          
termination charges and impairment losses were $16.9 million in 1996 compared to
$13.3 million in 1995.                                                          

    Net interest expense decreased to $13.1 million in 1996 from $13.3
million in 1995. Net interest expense as a percentage of net sales decreased    
17.9% from 0.39% to 0.32% as a result of lower interest rates and improved net  
asset turnover.                                                                 

        The income tax benefit in 1996 was $15.4 million compared to an income
tax provision of $0.1 million in 1995. The change in the tax benefit was        
attributable to the Company's greater pre-tax loss in 1996.                     

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The 1995 provision resulted from a pre-tax loss which, due to permanent         
differences arising from the NAD acquisition, translated into a relatively small
amount of taxable income.                                                       

   The extraordinary items in both 1996 and 1995 relate to the early
retirement of debt. In 1996, the pay-off of subordinated debt with the proceeds 
from the initial public offering resulted in a gain of $0.6 million, net of the 
related tax provision of $0.4 million. In 1995, the debt refinancing associated 
with the NAD acquisition resulted in the write-off of unamortized deferred debt 
issuance costs of $0.8 million, net of the related tax benefit of $0.5 million. 

LIQUIDITY AND CAPITAL RESOURCES                                                 

The Company meets its liquidity needs through cash provided by
operations, normal vendor trade-credit terms, operating leases and borrowings   
under its credit facilities. Excluding $18.8 million of non-recurring payments  
for acquisition, contract termination and restructure related items, the Company
generated net cash of $0.4 million from operating activities in 1997. The       
Company generated net cash from operating activities of $21.3 million and $50.0 
million in 1996 and 1995, respectively. The significant cash flow in 1995 was   
attributable to the one-time benefit of acquiring assets without assuming       
certain corresponding liabilities in connection with the acquisition of NAD.    
Cash flow in 1997 was negatively impacted primarily by an increase in inventory.

         Cash used for capital expenditures was $30.0 million in 1997, primarily
for computer system upgrades ($13.3 million) and distribution facilities and    
equipment ($8.7 million). In 1996, the Company used $20.0 million for capital   
expenditures, primarily for the Company's cart delivery program ($6.6 million)  
and computer system upgrades ($9.5 million). 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). The Company anticipates capital       
expenditures of approximately $19.0 million in 1998 (consisting primarily of    
$9.6 million for computer system upgrades and $7.4 million for distribution     
facilities and equipment); however, there can be no assurance that capital      
expenditures will not exceed such amount.                                       

       On November 15, 1996 the Company completed an initial public offering
of 3,400,000 shares of its Class A Common Stock. The net proceeds of the        
offering of $43.2 million were used primarily to prepay $25.3 million in        
outstanding indebtedness under subordinated notes payable and repay $16.6       
million of outstanding indebtedness under the Company's previous credit         
facility. The reduction of outstanding indebtedness with the proceeds resulted  
in a reduction of interest expense in 1997.                                     

   In March 1997, the Company entered into five-year loan agreements
aggregating $225 million with a group of financial institutions to replace its  
previous credit facility. The agreements, which consist of a $150 million       
accounts receivable securitization facility and a $75 million revolving-credit  
facility, bear interest based on either the prime rate or LIBOR plus an         
additional spread based on certain financial ratios and mature on March 14,     
2002. The effective rate at December 27, 1997 was 7.34%. The Company is required
to comply with various covenants and borrowings are subject to calculations     
based on accounts receivable and inventory. These agreements are secured by     
liens on substantially all of the Company's assets and contain various          
restrictions on, among other things, the Company's ability to pay dividends and 
dispose of assets. ProSource Receivables Corporation ("PRC"), a subsidiary of   
ProSource Services Corporation, the Company's principal operating subsidiary    
("PSC"), is the legal borrower for the accounts receivable securitization       
facility. Pursuant to the terms of the accounts receivable securitization       
facility PSC sells, on an ongoing basis and without recourse, an undivided      
interest in a designated pool of trade accounts receivable to PRC. In order to  
maintain the designated balance in the pool of accounts receivable sold, PSC    

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is obligated to sell undivided interests in new receivables as existing         
receivables are collected. PSC has retained substantially the same credit risk  
as if the receivables had not been sold. PSC, as agent for PRC, retains         
collection and administrative responsibilities on the receivables sold to PRC.  
The creditors for this facility have security interests in PRC's assets         
(consisting primarily of accounts receivable purchased from PSC) and are        
entitled to be satisfied by such assets prior to equity holders.                

    The Company borrowed an additional $61.6 million in 1997 under its
credit facilities to fund its operating, investing and other financing          
activities and increase its cash and cash equivalents by $9.7 million. The      
Company paid approximately $4.6 million in 1997 for fees associated with the    
early extinguishment of its previous credit facility and for deferred loan fees 
on its new credit facilities, which closed in March 1997. Approximately $0.6    
million was paid in 1997 to acquire and retire treasury stock.                  

       The Company believes that the combination of cash flow generated from
operations and borrowings under the existing credit facilities are sufficient to
satisfy its anticipated capital expenditures and working capital needs for at   
least twelve 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, is  
dependent on its operating subsidiaries to obtain cash flow. The Company's      
credit agreements include 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.                                                               

IMPACT OF FLUCTUATION IN PRODUCT COST AND INFLATION                             

       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 (which constituted the substantial portion of restaurants     
served by NAD), particularly those which serve seafood, have a higher average   
product cost per unit of measure than quick service chain restaurants, 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.                            

INFORMATION SYSTEMS AND THE IMPACT OF THE YEAR 2000                             

   Since 1995, the Company has been actively engaged in a program to
replace and/or upgrade its significant transaction processing systems. This     
effort was initiated to effect the integration of acquired businesses. As a     
result of this program, the Company believes that it will be Year 2000 compliant
on all of its significant applications by the end of 1998. In addition, the     
Company at this time does not believe that the cost of Year 2000 remediation for
its transaction processing systems will have a material financial impact on the 
Company's financial operations over the next two years. The Company has engaged 
a firm to conduct an outside review to ensure the Company's entire enterprise   
compliance readiness. Until this review is                                      

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complete, however, there can be no assurance that significant efforts will not  
be required to ensure Year 2000 compliance, including with respect to its       
customer and vendor relationships. See "Liquidity and Capital Resources."       

QUARTERLY RESULTS AND SEASONALITY                                               

Set forth is summary information with respect to the Company's
operations for the most recent eight fiscal quarters. Historically, the         
restaurant and foodservice business is seasonal with lower sales in the first   
calendar quarter. Furthermore, the Company may experience quarterly fluctuations
in net sales depending on the timing of any acquisitions or lost accounts.      
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 or lost business.                                                  

   The 1996 and first three quarters of 1997 income (loss) per share
amounts have been restated to comply with Statement of Financial Accounting     
Standards No. 128, "Earnings Per Share". For further discussion of this and the 
impact of Statement No. 128, see the notes to the consolidated financial        
statements.                                                                     

                                                        [Enlarge/Download Table]

                                                                 Fiscal Year Ended 1997                     
                                             ---------------------------------------------------------------
                                                   1st             2nd             3rd             4th      
                                                 Quarter       Quarter (a)       Quarter         Quarter    
                                             --------------- --------------- --------------- ---------------
                                                          (In millions, except per share data)              
                                                                                                            
Net sales                                      $1,017.0        $  970.8      $  945.8     $  967.6          
Gross profit                                       80.6            76.2          77.3         75.7          
Income (loss) from operations                       2.5             2.6           4.3         (1.7)         
Income (loss) before extraordinary item and                                                                 
     cumulative effect of a change in                                                                       
     accounting principle                           0.2             0.1           0.7         (2.0)         
Net income (loss)                                  (6.1)            0.1           0.7         (8.4)         
Net income (loss) per common share - basic                                                                  
     and diluted                                  (0.64)            0.01          0.08       (0.90)         

                                                        [Enlarge/Download Table]

                                                                  Fiscal Year Ended 1996                     
                                              ---------------------------------------------------------------
                                                    1st             2nd             3rd             4th      
                                                  Quarter         Quarter         Quarter         Quarter    
                                              --------------- --------------- --------------- ---------------
                                                           (In millions, except per share data)              
                                                                                                             
Net sales                                        $   968.7      $ 1,045.4       $ 1,053.5       $ 1,057.4    
Gross profit                                          73.2           81.9            80.8            82.3    
Income (loss) from operations                        (26.9)           5.6             5.8           (11.8)   
Income (loss) before extraordinary item              (19.2)           1.2             1.4            (8.4)   
Net income (loss)                                    (19.2)           1.2             1.4            (7.8)   
Net income (loss) per common share - basic            (3.61)          0.23            0.26           (1.07)  
Net income (loss) per common share - diluted          (3.61)          0.23            0.25           (1.07)  


(a)      Includes the effects resulting from the Company's decision to terminate
      its distribution contract with ARCOP, the purchasing cooperative for
Arby's, effective April 1, 1997.                              

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ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.                           

 PROSOURCE, INC.

Index to Consolidated Financial Statements

Independent Auditors' Report...........................................V-17     

Audited Consolidated Financial Statements:                                      

    Consolidated Balance Sheets...................................V-18

    Consolidated Statements of Operations.........................V-19

    Consolidated Statements of Stockholders' Equity...............V-20

    Consolidated Statements of Cash Flows.........................V-21

    Notes to Consolidated Financial Statements....................V-22

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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 27, 1997 and December 28, 1996, and the related 
consolidated statements of operations, stockholders' equity, and cash flows for 
each of the years in the three-year period ended December 27, 1997. 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 27, 1997 and December 28, 1996, and the results of  
their operations and their cash flows for each of the years in the three-year   
period ended December 27, 1997, in conformity with generally accepted accounting
principles.                                                                     

As discussed in Note 13 to the consolidated financial statements, the Company   
changed its method of capitalization of business process reengineering          
activities in the fourth quarter of 1997.                                       

KPMG PEAT MARWICK LLP                                                           

/s/KPMG PEAT MARWICK LLP                                                        

Miami, Florida                                                                  
February 20, 1998                                                               

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 PROSOURCE, INC.
 CONSOLIDATED BALANCE SHEETS
 December 27, 1997 and December 28, 1996
 (In thousands, except share and per-share data)

                                                        [Enlarge/Download Table]

                                    Assets                                 1997          1996    
                                    ------                                 ----          ----    
                                                                                                 
Current assets:                                                                                  
    Cash and cash equivalents                                          $    12,501   $     2,763 
    Accounts receivable, net of allowance for doubtful accounts of                               
       $4,085 and $2,334 respectively                                      222,247       219,340 
    Inventories                                                            160,621       144,040 
    Deferred income taxes, net                                               7,190        10,914 
    Prepaid expenses and other current assets                                8,434         7,373 
                                                                       -----------   ----------- 
                  Total current assets                                     410,993       384,430 

Property and equipment, net                                                 59,961        49,637 
Intangible assets, net                                                      39,883        41,436 
Deferred income taxes, net                                                  28,802        16,100 
Other assets                                                                 8,462        12,121 
                                                                       -----------   ----------- 

                  Total assets                                         $   548,101   $   503,724 
                                                                       ===========   =========== 
                     Liabilities and Stockholders' Equity                                        

Current liabilities:                                                                             
    Accounts payable                                                   $   277,953   $   254,907 
    Accrued liabilities                                                     27,012        42,475 
    Current portion of long-term debt                                          --          1,500 
                                                                       -----------   ----------- 
                  Total current liabilities                                304,965       298,882 

Long-term debt, less current portion                                       174,200       111,084 
Other noncurrent liabilities                                                 4,521        15,243 
                                                                       -----------   ----------- 
                  Total liabilities                                        483,686       425,209 
                                                                       -----------   ----------- 

Commitments and contingencies                                                                    

Stockholders' equity:                                                                            
    Preferred stock, $.01 par value                                                              
        Authorized 10,000,000 shares: none issued                              --            --  
    Class A common stock, $.01 par value                                                         
       Authorized 50,000,000 shares; issued and outstanding 3,496,499                            
       shares and 3,400,000 shares, respectively                                35            34 
    Class B common stock, $.01 par value                                                         
       Authorized 10,000,000 shares; issued and outstanding 5,856,756                            
       shares and 5,963,856 shares, respectively                                58            60 
    Additional paid-in capital                                             104,934       105,256 
    Accumulated deficit                                                    (40,580)      (26,901)
    Accumulated foreign-currency translation adjustments                       (32)           66 
                                                                       -----------   ----------- 

                  Total stockholders' equity                                64,415        78,515 
                                                                       -----------   ----------- 

                  Total liabilities and stockholders' equity           $   548,101   $   503,724 
                                                                       ===========   =========== 

See accompanying notes to consolidated financial statements.                    

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PROSOURCE, INC. 
 CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 27, 1997,
 December 28, 1996 and December 30, 1995
 (In thousands, except share and per-share data)

                                                        [Enlarge/Download Table]

                                                                                         1997          1996          1995 
                                                                                         ----          ----          ---- 
                                                                                                                          
Net sales                                                                         $ 3,901,165   $ 4,125,054   $ 3,461,837 

Cost of sales                                                                       3,591,368     3,806,811     3,193,270 
                                                                                  -----------   -----------   ----------- 
       Gross profit                                                                   309,797       318,243       268,567 

Operating expenses, including management fees to Onex of                                                                  
    $0, $729 and $808, respectively                                                   302,080       301,295       255,216 

Loss on impairment of long-lived assets                                                  --          15,733          --   

Restructuring and contract-termination charges                                           --          28,466           711 
                                                                                  -----------   -----------   ----------- 

       Income (loss) from operations                                                    7,717       (27,251)       12,640 

Interest expense, including interest to Onex of $0, $1,888                                                                
    and $1,738, respectively                                                          (11,745)      (14,824)      (14,678)

Interest income                                                                         2,552         1,694         1,339 
                                                                                  -----------   -----------   ----------- 

       Loss before income taxes, extraordinary items and                                                                  
          cumulative effect of a change in accounting                                                                     
             principle                                                                 (1,476)      (40,381)         (699)

Income tax benefit (provision)                                                            485        15,410           (85)
                                                                                  -----------   -----------   ----------- 

       Loss before extraordinary items and cumulative                                                                     
          effect of a change in accounting principle                                     (991)      (24,971)         (784)

Extraordinary (loss) gain on early retirement of debt, net of income tax benefit                                          
    (provision) of $4,073, $(397) and $502,                                                                               
    respectively                                                                       (6,262)          610          (772)

Cumulative effect of a change in accounting principle, net                                                                
    of income tax benefit of $3,293                                                    (6,426)         --            --   
                                                                                  -----------   -----------   ----------- 

       Net loss                                                                   $   (13,679)  $   (24,361)  $    (1,556)
                                                                                  ===========   ===========   =========== 

Net loss per common share (basic and diluted):                                                                            

Loss before extraordinary items and cumulative                                                                            
    effect of a change in accounting principle                                    $     (0.11)  $     (4.31)  $     (0.18)

Extraordinary items, net                                                                (0.67)         0.11         (0.17)

Cumulative effect of a change in accounting principle, net                              (0.69)         --            --   
                                                                                  -----------   -----------   ----------- 

       Net loss per common share                                                  $     (1.47)  $     (4.20)  $     (0.35)
                                                                                  ===========   ===========   =========== 

Weighted average number of shares                                                   9,333,527     5,795,676     4,440,692 

See accompanying notes to consolidated financial statements.                    

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PROSOURCE, INC. 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 27, 1997,
 December 28, 1996 and December 30, 1995
 (In thousands, except share data)

                                                        [Enlarge/Download Table]


                                                                                Additional             
                                                             Common Stock        paid-in    Accumulated
                                                             Class A   Class B   capital      deficit  
                                                             -------   -------   -------      -------  
                                                                                                       
Balance, December 25, 1994                                    $--       $ 23    $  23,504     $   (984)

    Issuance of 2,858,500 Class B shares                       --         29       28,556         --   
    Acquisition and retirement of 23,000 Class B shares        --        --          (222)        --   
    Net loss                                                   --        --          --         (1,556)
    Foreign-currency translation adjustments                   --        --          --           --   
                                                              ---       ----    ---------     -------- 

Balance, December 30, 1995                                     --         52       51,838       (2,540)

    Issuance of 3,400,000 Class A shares, net                  34        --        43,193         --   
    Amendment to 1995 Option Plan                              --        --         1,224         --   
    Issuance of 285,714 Class B shares to Onex                 --          3        3,997         --   
    Conversion of subordinated notes payable to Onex                                                   
       into 459,242 Class B shares                             --          5        4,594         --   
    Issuance of 61,500 Class B shares                          --        --           615         --   
    Acquisition and retirement of 20,000 Class B shares        --        --          (205)        --   
    Net loss                                                   --        --          --        (24,361)
    Foreign-currency translation adjustments                   --        --          --           --   
                                                              ---       ----    ---------     -------- 

Balance, December 28, 1996                                     34         60      105,256      (26,901)

    Issuance of 33,799 Class A shares under the Employee                                               
       Stock Purchase Plan                                     --        --           204         --   
    Acquisition and retirement of 44,400 Class B shares        --         (1)        (554)        --   
    Conversion of 62,700 Class B shares into 62,700 Class A                                            
       shares                                                   1         (1)        --           --   
    Compensation expense accrued under the 1997                                                        
       Directors Stock Option Plan                             --        --            28         --   
    Net loss                                                   --        --          --        (13,679)
    Foreign-currency translation adjustments                   --        --          --           --   
                                                              ---       ----    ---------     -------- 

Balance, December 27, 1997                                    $35       $ 58    $ 104,934     $(40,580)
                                                              ===       ====    =========     ======== 

                                                                [Download Table]

                                                             Accumulated           
                                                               foreign-            
                                                               currency            
                                                             translation           
                                                             adjustments     Total 
                                                             -----------     ----- 
                                                                                   
Balance, December 25, 1994                                     $--        $ 22,543 

    Issuance of 2,858,500 Class B shares                        --          28,585 
    Acquisition and retirement of 23,000 Class B shares         --            (222)
    Net loss                                                    --          (1,556)
    Foreign-currency translation adjustments                     71             71 
                                                               ----       -------- 

Balance, December 30, 1995                                       71         49,421 

    Issuance of 3,400,000 Class A shares, net                   --          43,227 
    Amendment to 1995 Option Plan                               --           1,224 
    Issuance of 285,714 Class B shares to Onex                  --           4,000 
    Conversion of subordinated notes payable to Onex                               
       into 459,242 Class B shares                              --           4,599 
    Issuance of 61,500 Class B shares                           --             615 
    Acquisition and retirement of 20,000 Class B shares         --            (205)
    Net loss                                                    --         (24,361)
    Foreign-currency translation adjustments                     (5)            (5)
                                                               ----       -------- 

Balance, December 28, 1996                                       66         78,515 

    Issuance of 33,799 Class A shares under the Employee                           
       Stock Purchase Plan                                      --             204 
    Acquisition and retirement of 44,400 Class B shares         --            (555)
    Conversion of 62,700 Class B shares into 62,700 Class A                        
       shares                                                   --            --   
    Compensation expense accrued under the 1997                                    
       Directors Stock Option Plan                              --              28 
    Net loss                                                    --         (13,679)
    Foreign-currency translation adjustments                    (98)           (98)
                                                               ----       -------- 

Balance, December 27, 1997                                     $(32)      $ 64,415 
                                                               ====       ======== 

See accompanying notes to consolidated financial statements.                    

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 PROSOURCE, INC.
 CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 27, 1997,
 December 28, 1996 and December 30, 1995
 (In thousands, except share and per-share data)

                                                        [Enlarge/Download Table]

                                                                                                    1997       1996        1995 
                                                                                                    ----       ----        ---- 
                                                                                                                                
CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                           
    Net loss                                                                                   $ (13,679)  $(24,361)  $  (1,556)
    Adjustments to reconcile net loss to net cash (used in) provided by operating activities:                                   
       Depreciation and amortization                                                              11,231     10,937      12,693 
       Bad debt expense                                                                            2,275      1,682       1,845 
       Loss (gain) on early retirement of debt                                                    10,335     (1,007)      1,274 
       Cumulative effect of a change in accounting principle                                       9,719       --          --   
       Deferred income tax benefit                                                                (8,978)   (14,085)     (1,749)
       Loss on impairment of long-lived assets                                                      --       15,733        --   
       Noncash contract-termination charges                                                         --        5,224        --   
       Gain on sales of property and equipment                                                      (655)      (154)       (184)
       Changes in operating assets and liabilities, net of effects of companies acquired                                        
              (Increase) decrease in accounts receivable                                          (5,182)     9,067     (13,441)
              (Increase) decrease in inventories                                                 (16,581)    (3,608)      7,706 
              Increase in prepaid expenses and other assets                                       (3,949)   (13,854)     (1,208)
              Increase in accounts payable                                                        23,046     12,262      43,518 
              (Decrease) increase in accrued and other noncurrent liabilities                    (25,952)    23,450       1,099 
                                                                                               ---------   --------   --------- 
                 NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES                             (18,370)    21,286      49,997 
                                                                                               ---------   --------   --------- 

CASH FLOWS FROM INVESTING ACTIVITIES:                                                                                           
    Capital expenditures                                                                         (29,997)   (19,987)     (5,683)
    Proceeds from sales of property and equipment                                                  1,786        154         362 
    Payment for purchase of net assets acquired                                                     --         --      (170,279)
                                                                                               ---------   --------   --------- 
                 NET CASH USED IN INVESTING ACTIVITIES                                           (28,211)   (19,833)   (175,600)
                                                                                               ---------   --------   --------- 

CASH FLOWS FROM FINANCING ACTIVITIES:                                                                                           
    Repayments of long-term debt to Onex                                                            --      (15,000)     (2,085)
    Repayments of long-term debt to others                                                      (589,701)  (558,902)   (578,813)
    Borrowings on long-term debt from Onex                                                          --         --        18,750 
    Borrowings on long-term debt from others                                                     651,317    528,633     660,491 
    Fees incurred in conjunction with long-term debt                                              (4,644)      --          --   
    Proceeds from issuance of common stock to Onex                                                  --        7,000      26,500 
    Proceeds from issuance of common stock to others                                                --       37,464       2,085 
    Payments to acquire and retire treasury stock                                                   (555)      (205)       (222)
                                                                                               ---------   --------   --------- 
                 NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                              56,417     (1,010)    126,706 
                                                                                               ---------   --------   --------- 

Effect of exchange-rate changes on cash                                                              (98)        (5)         71 
                                                                                               ---------   --------   --------- 
                 NET INCREASE IN CASH AND CASH EQUIVALENTS                                         9,738        438       1,174 
                                                                                               ---------   --------   --------- 

Cash and cash equivalents at beginning of year                                                     2,763      2,325       1,151 
                                                                                               ---------   --------   --------- 
Cash and cash equivalents at end of year                                                       $  12,501   $  2,763   $   2,325 
                                                                                               =========   ========   ========= 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year                                                    
    for:                                                                                                                        
       Interest to Onex                                                                        $    --     $  2,927   $      41 
                                                                                               =========   ========   ========= 
       Interest to others                                                                      $  10,938   $ 16,435   $  12,291 
                                                                                               =========   ========   ========= 
       Income taxes, net of refunds                                                            $    --     $   --     $     993 
                                                                                               =========   ========   ========= 

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:            

In October 1997, the Company issued 33,799 Class A common shares to employees   
under the 1997 Employee Stock Purchase Plan at $6.035 per share in exchange for 
accrued compensation totaling $204.                                             

During 1997, the Company recognized $28 of compensation expense associated with 
the 1997 Directors Stock Option Plan.                                           

See accompanying notes to consolidated financial statements.                    

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Notes to Consolidated Financial Statements
Years Ended December 27, 1997, December 28, 1996 and December 30, 1995

(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                             

(a)      THE BUSINESS                                         

        ProSource, Inc. (the "Company") provides foodservice
               distribution services to chain restaurants in North America
         and provides purchasing and logistics services to the
            foodservice market. The Company's 3,400 associates serve
             approximately 12,700 restaurants, consisting primarily of
               Burger King, Red Lobster, Long John Silver's, Olive Garden,
              TGIFriday's, Chick-fil-A, Chili's, Sonic, TCBY and Wendy's
             restaurant concepts, from 34 distribution centers and its
      Corporate Support Center in Coral Gables, Florida.

               The Company operates through ProSource Services Corporation
           ("PSC"), a wholly owned subsidiary, and PSC's four main
               wholly-owned operating subsidiaries, ProSource Distribution
                Services Limited ("ProSource Canada"), BroMar Services, Inc.
                  ("BroMar"), ProSource Receivables Corporation ("PRC"), and PSD
        Transportation Services, Inc. ("PSD"). PSC commenced
             operations in July 1992. PRC and PSD commenced operations
             during fiscal 1997. The consolidated financial statements
                  include the results of the operations of PSC, PRC and PSD from
              their inception and the results of operations of ProSource
           Canada and BroMar, which were formed or acquired by the
              Company in connection with 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.

(b)      PRINCIPLES 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.

(c)      USE OF ESTIMATES                                     

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995

(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                 

(d)      CASH AND CASH EQUIVALENTS                            

            Cash on hand and in banks and short-term securities with
         maturities of three months or less when purchased are
considered cash and cash equivalents.       

(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 34%, 32% and 32 % of
      inventories in 1997, 1996, and 1995, respectively.

(f)      PROPERTY AND EQUIPMENT                               

               Property and equipment are stated at cost, less accumulated
                 depreciation and amortization. Depreciation is computed using
               the straight-line method over the estimated useful lives of
                 the related assets. Amortization of leasehold improvements is
               computed using the straight-line method over the shorter of
           the lease term or estimated useful lives of the related
assets.                                     

                  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:                 

                          Goodwill                                    40 years
                          Noncompete agreements                        5 years
                          Customer lists                              12 years

                 Goodwill represents the excess of cost over fair value of net
           assets acquired. The Company periodically evaluates the
            recoverability of recorded costs for goodwill based upon
               estimations of future undiscounted related operating income
                from the acquired companies. Should the Company determine it
                 probable that future estimated undiscounted related operating
               income from any of its acquired companies will be less than
                 the carrying amount of the associated goodwill, an impairment
                  of goodwill would be recognized, and goodwill would be reduced
          to the amount estimated to be recoverable. The Company
                believes that no material impairment existed at December 27,
1997 and December 28, 1996.                 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995

(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                 

(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 up to certain retention limits under
         its workers' compensation (except for a period during
               1996-1997), auto liability and medical and dental insurance
             programs. Costs in excess of retention limits are insured
              under various contracts with insurance carriers. Estimated
             costs for 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 27, 1997 and December 28, 1996, the
                  estimated accrued liabilities related to workers' compensation
     were approximately $3.3 million and $4.4 million,
                 respectively, net of a discount of approximately $1.0 million
and $1.6 million, respectively.             

(j)      NET LOSS PER COMMON SHARE                            

                 In February 1997, Statement of Financial Accounting Standards
               ("SFAS") No. 128, "Earnings per Share" was issued. SFAS No.
             128 replaced the calculation of primary and fully diluted
                 earnings per share with basic and diluted earnings per share.
               Unlike primary earnings per share, basic earnings per share
          excludes any dilutive effects of options, warrants and
              convertible securities. Diluted earnings per share is very
                 similar to the previously reported fully diluted earnings per
              share. All earnings per share amounts for all periods have
              been presented, and where appropriate, restated to conform
with the requirements of SFAS No. 128.      

(k)      INCOME TAXES                                         

               The Company and its wholly-owned domestic subsidiaries file
            consolidated federal and state tax returns in the United
          States. Separate foreign tax returns are filed for the
                Company's Canadian subsidiary. The Company follows the asset
                  and liability method of accounting for income taxes prescribed
             by SFAS No. 109, "Accounting for Income Taxes". Under the
         asset and liability method, deferred income taxes are
                  recognized for the tax consequences of "temporary differences"
                by applying enacted statutory tax rates applicable to future
                 years to differences between the financial statement carrying
                 amounts and the tax basis of existing assets and liabilities.
            The effect on deferred taxes of a change in tax rates is
                recognized in income in the year that includes the enactment
date.                                       

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995

(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                 

(l)      TRANSLATION OF FOREIGN CURRENCY                      

             The accounts of ProSource Canada are translated into U.S.
             dollars in accordance with SFAS No. 52, "Foreign Currency
              Translation". Consequently, all balance sheet accounts are
               translated at the current exchange rate. Income and expense
            accounts are translated at the average exchange rates in
          effect during the year. Adjustments resulting from the
            translation are included in accumulated foreign-currency
           translation adjustments as a component of stockholders'
equity.                                     

(m)      IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS       

                 In June 1997, the Financial Accounting Standards Board (FASB)
               issued Statement No. 130, "Reporting Comprehensive Income,"
            which establishes standards for reporting and display of
              comprehensive income and its components. In June 1997, the
          FASB also issued Statement No. 131, "Disclosures about
            Segments of an Enterprise and Related Information." This
             statement establishes standards for reporting information
                about a company's operating segments and related disclosures
                about its products, services, geographic areas of operations
               and major customers. Both statements will be adopted by the
              Company in 1998. Management believes the adoption of these
                  statements will not materially impact the Company's results of
 operations, cash flows or financial position.

(n)      FAIR VALUE OF FINANCIAL INSTRUMENTS                  

             The carrying amounts reported in the consolidated balance
              sheets for cash and cash equivalents, accounts receivable,
             accounts payable and accrued liabilities approximate fair
              value because of their short-term maturities. The carrying
              amounts reported for long-term debt approximate fair value
           because they are variable-rate instruments that reprice
monthly.                                    

(o)      RECLASSIFICATIONS                                    

         Certain amounts previously presented in the financial
                  statements of prior years have been reclassified to conform to
the current year presentation.              

(2)      BUSINESS COMBINATIONS                                                  

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 previous 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 2,650,000 shares of the Company's Class B 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,

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995

(2)      BUSINESS COMBINATIONS (CONTINUED)                                      

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 goodwill 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. During 1997, the Company reviewed the adequacy of its reserve
     associated with the NAD acquisition and concluded that the costs of
integrating NAD would be higher than originally anticipated,  
     principally due to employee related costs. As a result, in 1997 the
         Company increased the acquisition reserve by reclassifying $3.4 million
       from the restructuring reserve (see note 3). Management believes that
        the recorded acquisition reserve at December 27, 1997 is sufficient to
   cover all remaining costs associated with the integration of NAD.

(3)      RESTRUCTURING, TERMINATION 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, which was approved by
        its Board of Directors, to consolidate and integrate its corporate and
         network operations, including the closing of 19 distribution facilities
   under lease agreements and 11 owned distribution facilities. As a
         result, in the first quarter of 1996, the Company accrued restructuring
       charges of $10.9 million, primarily related to the termination of the
        existing facility leases and employee related costs. The Company began
       the integration of some of these facilities, including communications
      to its employees and its customers in 1996. During 1997, the Company
       undertook a thorough evaluation of each specific facility's return on
       investment and alternative uses. As a result, the Company now intends
         to close 10 distribution facilities currently leased and 9 distribution
         facilities currently owned. The Company expects to complete the plan in
         stages through the year 2002. During 1997 and 1996, the Company paid in
     the aggregate $1.7 million and $2.8 million, respectively, in costs
         primarily related to facility leases and relocation costs. In addition,
  during 1997 the Company reclassified $3.4 million to acquisition
        related liabilities, which had no impact on 1997 operating results. As
     of December 27, 1997, the Company had approximately $3.0 million of
    accrued unpaid restructuring charges. Management believes that the
     remaining accrued restructuring charges, which consist primarily of
        costs associated with the termination of existing facility leases, are
adequate to complete its plans.                               

   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 consisted of $7.3
    million of land and owned buildings, $4.3 million of furniture and
       equipment and leasehold improvements management plans to hold and use
through the completion of the plan,                           

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995

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

      and $4.1 million of capitalized software costs which do not 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
       the owned buildings (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.                                                     

The Company discontinued its distribution services to Arby's  
     restaurants effective April 1, 1997. In connection therewith, as of
       December 28, 1996, the Company accrued approximately $10.6 million of
       costs associated with the termination of this agreement. During 1997,
     the Company paid and charged in the aggregate $9.1 million in costs
        primarily related to lease costs in connection with idle equipment and
   warehouse space and costs associated with rerouting the Company's
     transportation fleet required as a result of the loss of the Arby's
    business. In addition, the Company reclassified approximately $1.2
      million to the allowance for doubtful accounts receivable to reserve
    against outstanding Arby's accounts receivable. As of December 27,
    1997, the Company had approximately $0.3 million of accrued unpaid
         termination charges which management believes will be paid during 1998.

(4)      PROPERTY AND EQUIPMENT                                                 

      Property and equipment and related depreciable lives were as follows
(in thousands):                                                                 

                                                                [Download Table]

                              December 27,  December 28,     Depreciable  
                                 1997          1996             Lives     
                              -----------   ------------  --------------- 
                                                                          
Land                          $ 3,662       $ 3,636              --       
Buildings and improvements     17,092        16,413        15 to 40 years 
Warehouse and transportation                                              
    equipment                  25,592        24,465        3 to 10 years  
Computer software               7,391         4,262        1 1/2to 5 years
Leasehold improvements          8,966         4,384        3 to 13 years  
Office equipment                8,209         7,261        3 to 7 years   
Projects in progress           18,456        11,760              --       
                              -------       -------                       

                               89,368        72,181                       
Less accumulated                                                          
depreciation                   29,407        22,544                       
                              -------       -------                       
    and amortization                                                      
Property and equipment, net   $59,961       $49,637                       
                              =======       =======                       

(5)      INTANGIBLE ASSETS                                                      

Intangible assets consisted of the following (in thousands):  

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995

                                                                [Download Table]

                                 December 27,     December 28,
                                     1997             1996    
                                 -----------     ------------ 
                                                              
Goodwill                          $41,298           $41,298   
Identifiable intangibles            3,870             3,870   
                                  -------           -------   
                                   45,168            45,168   
Less accumulated amortization       5,285             3,732   
                                  -------           -------   
Intangible assets, net            $39,883           $41,436   
                                  =======           =======   

(6)      LONG-TERM DEBT                                                         

      Long-term debt consisted of the following loan agreements with banks
(in thousands):                                                                 

                                                        [Enlarge/Download Table]

                                                            December 27,  December 28,
                                                                1997         1996     
                                                            ------------  ------------
                                                                                      
$150 million accounts receivable securitization facility,                             
         due March 14, 2002                                  $125,000       $     --  
$75 million revolving credit facility, due March 14, 2002      49,200             --  
$210 million revolving credit facility, retired and repaid                            
         March 14, 1997                                            --         84,834  
$15 million term-loan facility, retired and repaid                                    
         March 14, 1997                                            --         12,750  
$15 million term-loan facility, retired and repaid                                    
         March 14, 1997                                            --         15,000  
                                                             --------       --------  
         Total long-term debt                                 174,200        112,584  
Less current portion                                               --          1,500  
                                                             --------       --------  
         Long-term debt, less current portion                $174,200       $111,084  
                                                             ========       ========  

(a)      EXISTING CREDIT FACILITIES                           

               In March, 1997, the Company entered into two five-year loan
             agreements aggregating $225 million (the "Existing Credit
                  Facilities") with a group of financial institutions to replace
               its previous credit facility. In connection with this early
                retirement of long-term debt, the Company recorded a pre-tax
              extraordinary charge of $10.3 million ($6.3 million net of
           taxes) in the first quarter of fiscal 1997. This charge
               reflected the write-off of deferred financing costs of $6.3
                  million, prepayment penalties of $2.7 million and $1.3 million
             in costs associated with the termination of interest-rate
protection agreements.                      

                The Existing Credit Facilities bear interest based on either
              the prime rate or LIBOR plus an additional spread based on
              certain financial ratios and mature on March 14, 2002. The
                 effective rate at December 27, 1997 was 7.34%. The Company is
                required to comply with various covenants in connection with
                the Existing Credit Facilities and borrowings are subject to
                calculations based on accounts receivable and inventory. The
                  revolving credit facility is secured by liens on substantially
                 all of the Company's assets and contains various restrictions
                  on, among other things, the Company's ability to pay dividends
                 and dispose of assets. Additionally, in the event of a change
         in control, the outstanding principal amount of these
             facilities shall become due and payable. PRC is the legal
borrower for the accounts                   

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995

(6)      LONG-TERM DEBT(CONTINUED)                                              

                receivable securitization facility. Pursuant to the terms of
                 the accounts receivable securitization facility PSC sells, on
                an ongoing basis and without recourse, an undivided interest
                in a designated pool of trade accounts receivable to PRC. In
           order to maintain the designated balance in the pool of
                accounts receivable sold, PSC is obligated to sell undivided
            interests in new receivables as existing receivables are
                  collected. PSC has retained substantially the same credit risk
              as if the receivables had not been sold. PSC, as agent for
                  PRC, retains collection and administrative responsibilities on
                the receivables sold to PRC. The creditors for this facility
                 have security interests in PRC's assets (consisting primarily
                  of accounts receivable purchased from PSC) and are entitled to
            be satisfied by such assets prior to equity holders. The
                Company pays a quarterly variable commitment fee, as defined
         in the agreements, based on the unused portion of the
              facilities which fee averaged 0.33% of such unused portion
      during 1997. At December 27, 1997, the Company had
                 approximately $35 million available under the Existing Credit
Facilities.                                 

(b)      PREVIOUS CREDIT FACILITY                             

                  On March 31, 1995, in conjunction with the acquisition of NAD,
             the Company entered into a $240 million Loan and Security
              Agreement (the "Previous Credit Facility") with a group of
                  banks that was retired and repaid before its maturity on March
         14, 1997. The Previous Credit Facility provided for a
                  revolving-credit facility of up to $210 million and term loans
              aggregating $30 million. The interest rate on the Previous
            Credit Facility was reset every month to reflect current
                market rates. The effective rate during fiscal 1996 and 1995
      was 8.7 percent. This rate reflected the effect of
                 interest-rate protection agreements, which were terminated on
            March 14, 1997 in connection with the retirement of this
facility.                                   

(7)      LEASES                                                                 

  The Company leases certain of its facilities, vehicles and other
    equipment under long-term operating leases. Certain transportation
       equipment leases call for contingent rental payments based upon total
     miles. Future minimum lease payments under non-cancelable operating
   leases as of December 27, 1997, by fiscal year are as follows (in
thousands):                                                   

                                                                [Download Table]
                                               
1998                                   $ 28,600
1999                                     25,183
2000                                     22,222
2001                                     18,342
2002                                     13,581
Thereafter                               36,315
                                       --------
Total                                  $144,243
                                       ========

      Rent expense, including contingent rental expense, was approximately
    $36.8 million, $39.3 million and $30.6 million during fiscal years
1997, 1996 and 1995, respectively.                            

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 PROSOURCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995

(8)      INCOME TAXES                                                           

   The income tax benefit (provision) before extraordinary items and
        cumulative effect of a change in accounting principle for fiscal years
   1997, 1996 and 1995, respectively, consisted of the following (in
thousands):                                                   

                                                                [Download Table]

                                               1997       1996       1995   
                                             --------   --------   -------- 
                                                                            
Current taxes:                                                              
     Federal                                 $   (582)  $    937   $ (1,236)
     State                                       (545)        (9)      (408)
                                             --------   --------   -------- 
         Total current taxes                   (1,127)       928     (1,644)
                                             --------   --------   -------- 

Deferred taxes, excluding other components:                                 
      Federal                                   1,170     11,449      1,126 
      State                                       404      3,217        264 
                                             --------   --------   -------- 
         Total deferred taxes, excluding                                    
           other components                     1,574     14,666      1,390 
                                             --------   --------   -------- 

Other:                                                                      
      Alternative minimum tax-credit                                        
          (utilization) carryforwards              38       (184)       666 
      Utilization of operating-loss                           --       (497)
                                                        --------   -------- 
      carryforwards                                --                       
                                             --------                       
         Total other                               38       (184)       169 
                                             --------   --------   -------- 

Income tax benefit (provision)               $    485   $ 15,410   $    (85)
                                             ========   ========   ======== 

      The following table summarizes the differences between the Company's
         effective income tax rate and the statutory Federal income tax rate for
fiscal years 1997, 1996 and 1995:                             

                                                                [Download Table]

                                                   1997     1996     1995  
                                                 -------  -------   -----  
                                                                           
Statutory federal income tax rate                  34.0%    34.0%    34.0% 
Increase (decrease) resulting from:                                        
      State income taxes (net of federal taxes)     5.0      5.2    (16.9) 
      Goodwill amortization                        (0.7)    (0.3)   (10.9) 
      Other                                        (5.4)    (0.7)   (18.4) 
                                                 ------   ------   ------  
                                                   32.9%    38.2%   (12.2)%
                                                 ======   ======   ======  

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995

(8)      INCOME TAXES (CONTINUED)                                               

        The tax effects of each type of temporary difference that gave rise to
   the Company's deferred tax assets and deferred tax liabilities at
        December 27, 1997 and December 28, 1996 are as follows (in thousands):

                                                                [Download Table]

                                                               1997       1996  
                                                            --------   -------- 
                                                                                
Deferred tax assets:                                                            
     Acquisition-related expenses                           $  1,262   $  3,567 
     Accounts receivable, principally due to allowance for                      
         doubtful accounts                                     2,011      1,222 
     Property, plant and equipment, principally due to                          
         differences in depreciation                           1,063      1,935 
     Self-insurance reserves                                   3,355      3,493 
     Impairment of long-lived assets                           3,231      4,036 
     Restructuring and contract-termination charges            3,224      8,121 
     Benefit of federal and state net operating-loss                            
         carryforwards                                        23,933      5,797 
     Other                                                     2,682      2,025 
                                                            --------   -------- 
         Total deferred tax assets                            40,761     30,196 
     Less valuation allowance                                     --         -- 
                                                            --------   -------- 
         Total deferred tax assets, net                     $ 40,761   $ 30,196 
                                                            ========   ======== 

Deferred tax liabilities:                                                       
     Computer software                                      $ (3,225)  $ (1,811)
     Acquisition-related liabilities                          (1,138)      (803)
     Other                                                      (406)      (568)
                                                            --------   -------- 

         Total deferred tax liabilities                       (4,769)    (3,182)
                                                            --------   -------- 

         Net deferred tax assets                            $ 35,992   $ 27,014 
                                                            ========   ======== 

       In order to fully realize the net deferred tax assets at December 27,
  1997, the Company will need to generate future taxable income of
       approximately $90 million. Management believes that it is more likely
      than not that the Company's deferred tax asset will be realized as a
        result of future taxable income, expected to be generated based on the
  Company's reasonable projections of future earnings. The Company
         anticipates that increases in taxable income will result primarily from
  (i) future projected revenue and gross margin growth through the
 addition of new restaurant chains and the expansion of services
     provided to new and 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. In addition, management believes
     reasonable tax planning strategies and other potential transactions
        will be available that could be used to realize the deferred tax asset
        before the expiry of any material net operating losses, which will not
begin to occur until after 2010.                              

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995

(8)      INCOME TAXES (CONTINUED)                                               

  At December 27, 1997 and December 28, 1996, other current assets
         included income taxes receivable of approximately $0.4 million and $1.5
         million, respectively, which consisted primarily of overpayments of tax
        liabilities and pending carryback refund claims. United States federal
       income tax returns for fiscal years 1992 and 1993 are currently under
       examination by the Internal Revenue Service. A preliminary assessment
         is pending which is not material to the consolidated financial position
or results of operations as of December 27, 1997.             

(9)      EMPLOYEE BENEFIT PLANS                                                 

(a)      DEFINED-CONTRIBUTION PLANS                           

                On January 1, 1997, the Company's defined contribution plan,
             which covers substantially all employees, was renamed the
               ProSource Retirement Advantage Plan. Eligible employees can
                 contribute up to 15% of base compensation, with the following
          benefits: (i) Company contributions of 2 percent, (ii)
            additional Company matching of 50 percent of the first 6
             percent contributed by the employee, and (iii) vesting of
             Company contributions ratably over four years of service.

                  The Company also had a Money Purchase Plan which covered those
                  former NAD salaried employees not covered by a defined-benefit
                plan. Under this plan, the Company contributed 10 percent of
           eligible salary. The Money Purchase Plan was terminated
effective December 1996.                    

                  The amount of contribution expense incurred by the Company for
                these plans was approximately $1.5 million, $2.7 million and
      $2.2 million for fiscal years 1997, 1996 and 1995,
respectively.                               

(b)      DEFINED-BENEFIT PENSION PLANS                        

               In conjunction with the changes to the ProSource Retirement
            Advantage Plan in 1997, the Company terminated all three
          noncontributory defined-benefit pension plans covering
       substantially all employees except those covered by
           multiemployer pension plans under collective-bargaining
           agreements. The Company settled all pension obligations
             related to these terminated plans in 1997 through (i) the
               purchase of annuities, (ii) lump-sum payments, or (iii) the
           transfer of plan benefits into the ProSource Retirement
                 Advantage Plan, at the participant's discretion. In 1997, the
          Company recognized no gain or loss associated with the
          termination of these defined-benefit pension plans. At
                December 27, 1997, the Company's remaining accrual of $9,000
                 combined with excess plan assets of approximately $46,000 are
         expected to cover any remaining costs relating to the
termination of these plans.                 

                Pension costs of approximately $1.1 million and $0.9 million
              reflected in the consolidated statements of operations for
             fiscal years 1996 and 1995, respectively, were determined
                 based on actuarial studies. The Company's pension expense for
contributions to the various                

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995

           multiemployer pension plans under collective-bargaining
                agreements was approximately $1.1 million, $1.2 million, and
      $0.9 million for fiscal years 1997, 1996 and 1995,
respectively.                               

(10)     STOCKHOLDERS' EQUITY                                                   

    Under the ProSource, Inc. Employee Stock Purchase Plan (the "Stock
Plan"), officers and key employees of the Company ("Management
         Employees") purchased a total of 408,100 shares of Class B common stock
        at $10.00 per share in 1992, 132,500 shares of Class B common stock at
         $11.00 per share in 1993 and 1994, and 270,000 shares of Class B common
    stock at $10.00 per share in 1995 and 1996. In connection with the
     purchases of Class B common stock, each Management Employee entered
     into a Management Shareholders Agreement with the Company and Onex.

      The ProSource, Inc. Amended Management Option Plan (1995) (the "1995
     Option Plan") provides certain Management Employees with options to
purchase one-half the number of shares of Class B common stock
         purchased under the Stock Plan at the same price per share paid by such
         stockholder (either $10.00 or $11.00). Subject to the 1995 Option Plan,
  options granted under the 1995 Option Plan are exercisable until
         December 31, 2000. No additional options will be granted under the 1995
   Option Plan. The 1995 Option Plan was amended in November 1996 to
  provide that all unvested options vest at a rate of 10% per year
  through December 31, 1999, when all remaining options vest. As a
      result, the Company recorded a pretax charge in 1996 of $1.2 million
     reflecting the difference between the market price of the Company's
         Class A common stock on the date of amendment and the exercise price of
such options.                                                 

        Under the 1996 Stock Option Plan (the "1996 Option Plan"), the Company
        may grant options to its employees for up to 550,000 shares of Class B
         common stock. In 1997 and 1996, the Company granted options to purchase
     16,000 and 358,000 shares, respectively, of Class B common stock at
        $14.00 per share. Options under the 1996 Option Plan vest ratably over
       four years from the date of grant. These options cannot be exercised,
         however, until the earlier of (i) the date on which the market value of
       the Company's common stock is 25% greater than the exercise price and
  (ii) the eighth anniversary of the date of grant. Subject to the
         provisions of the 1996 Option Plan, vested options may be exercised for
a period of up to 10 years from the date of grant.            

       Under the ProSource, Inc. 1997 Directors Stock Option Plan (the "1997
         Directors Plan"), which was approved by the shareholders in April 1997,
         the Company may grant options to its directors, who so elect to receive
    such options in lieu of fees, to purchase shares of Class A common
         stock at $4.00 per share below the stated fair market value on the date
      of grant. Options to purchase up to 100,000 shares of Class A common
  stock may be granted under this plan. In April 1997, the Company
      granted options to purchase 10,500 shares of Class A common stock at
        $5.25 per share. Options under the 1997 Directors Plan vest and become
       exercisable one year from the date of grant, provided that the holder
         thereof is still a director of the Company at such time. Subject to the
       provisions of the 1997 Directors Plan, options may be exercised for a
        period of up to 10 years after the vesting date. During the year ended
   December 27, 1997, the Company recognized $28,000 of compensation
expense associated with this plan.                            

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995

(10)     STOCKHOLDERS' EQUITY (CONTINUED)                                       

     A summary of the status of the Company's three option plans for the
         years ended December 27, 1997, December 28, 1996, and December 30, 1995
is as follows:                                                

                                                        [Enlarge/Download Table]

                                  Weighted             Weighted             Weighted 
                                  Average              Average               Average 
                         1997     Exercise     1996    Exercise   1995       Exercise
                        Shares     Price      Shares    Price    Shares       Price  
                        ------     -----      ------    -----    ------     -------- 
                                                                                     
Options outstanding -                                                                
   beginning            706,450   $  12.10   327,700   $  10.16   237,450   $  10.22 
Options granted          26,500      10.53   388,750      13.69   101,750      10.00 
Options exercised            --         --      (125)     10.00        --         -- 
Options canceled        (93,300)     11.91    (9,875)     10.00   (11,500)     10.00 
                       --------   --------  --------   --------  --------   -------- 
Options outstanding -                                                                
   ending               639,650   $  12.06   706,450   $  12.10   327,700   $  10.16 
                       ========   ========  ========   ========   =======   ======== 
Options exercisable -                                                                
   year-end             176,449   $  11.86    78,401   $  10.13    41,500   $  10.12 
                       ========   ========  ========   ========  ========   ======== 

The following table summarizes information about stock options
outstanding at December 27, 1997:                                               

                                                        [Enlarge/Download Table]

                     Options Outstanding                                   Options Exercisable     
-------------------------------------------------------------------  ------------------------------
                 Number           Weighted Avg.                        Number                      
 Exercise      Outstanding          Remaining         Weighted Avg.  Exercisable     Weighted Avg. 
  Prices       at 12/27/97      Contractual Life     Exercise Price  at 12/27/97    Exercise Price 
  ------       -----------      ----------------     --------------  -----------    -------------- 
                                                                                                   
 $  5.25          10,500          9 years              $   5.25           -          $   5.25      
   10.00         262,100          3 years                 10.00         87,034          10.00      
   11.00          33,050          3 years                 11.00          9,915          11.00      
   14.00         334,000          9 years                 14.00         79,500          14.00      
                 -------          -------              --------         ------       --------      

  Totals         639,650          6 years              $  12.06        176,449       $  11.86      
                 =======          =======              ========        =======       ========      

      During fiscal year 1996, the Company adopted SFAS No. 123. Under the
       provisions of the new standard, the Company elected to continue using
       the intrinsic-value method of accounting for stock-based compensation
      plans granted to employees under Accounting Principles Board Opinion
         No. 25 and provide pro-forma disclosure for the fair-value based method
        of accounting for compensation costs related to stock-option plans and
other forms of stock-based compensation under SFAS No.        
123.                                                          

      The Company estimated the weighted-average fair value of each option
granted during 1997, 1996 and 1995 at $5.41, $7.34 and $8.27, 
        respectively. The fair value of these options was computed at the date
        of grant using a Black-Scholes option pricing model with the following
     weighted-average assumptions for 1997, 1996 and 1995, respectively:
     risk-free interest rates of 6.3%, 6.2% and 6.3%; dividend yields of
         0.0% for all years presented, volatility factors of the expected market
      price of the Company's common stock of 33.0% for all years presented
   and a weighted-average expected life of the options of 5, 7 and 7
years, respectively.                                          

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995

(10)     STOCKHOLDERS' EQUITY (CONTINUED)                                       

   The Black-Scholes option valuation model was developed for use in
  computing the fair value of traded options which have no vesting
        restrictions and are fully transferable. In addition, option valuation
         models require the input of highly subjective assumptions including the
       expected stock price volatility. Because the Company's employee stock
    options have characteristics significantly different from those of
         traded options, and because changes in the subjective input assumptions
         can materially affect the fair value estimate, in management's opinion,
  the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.      

       For purposes of pro forma disclosures, the computed fair value of the
       options is amortized to expense over the options' vesting period. The
         Company's pro forma information follows (in thousands, except per share
data).                                                        

                                                        [Enlarge/Download Table]

                                                      1997          1996          1995    
                                                  -----------   -----------   ----------- 
                                                                                          
Pro forma net loss                                $   (13,943)  $   (23,817)  $    (1,587)

Pro forma net loss per share - basic and diluted  $     (1.49)  $     (4.10)  $     (0.35)

         In conjunction with the acquisition of NAD, the Company issued warrants
   to Martin-Brower. At December 27, 1997 and December 28, 1996, the
         warrants were exercisable for 283,425 shares of Class B common stock at
         $12.35 per share during the period from April 1, 1997 through March 31,
2000, and upon consummation of certain transactions.          

       On November 15, 1996, the Company completed the issuance of 3,400,000
         shares of Class A common stock (at a price of $14.00 per share) through
         an initial public offering, resulting in net proceeds to the Company of
         approximately $43.2 million, after deducting underwriting discounts and
      commissions, and other offering costs of approximately $4.4 million.
       The net proceeds of the offering were used: (i) to prepay $15 million
       in outstanding principal and $1.1 million in accrued interest under a
       subordinated note payable to Onex; (ii) 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 and (iii) to repay $16.6 million of outstanding
   indebtedness under the Company's revolving-credit facility, after
       deducting a $1.3 million payment concurrent with the offering for the
       termination of a consulting agreement between the Company and certain
   former owners of an acquired company. Also in connection with the
      initial public offering, the Company incurred a noncash charge of $4
        million resulting from the issuance to Onex of 285,714 shares of Class
        B common stock valued at the initial public-offering price in exchange
         for the agreement of Onex to relinquish its rights to receive an annual
       fee, previously paid in cash, for management services rendered to the
Company.                                                      

        Under the ProSource, Inc. 1997 Employee Stock Purchase Plan, which was
      approved by the shareholders in April 1997, employees of the Company
      purchased a total of 33,799 shares of Class A common stock at $6.035
    per share in 1997. In January 1998, an additional 30,336 shares of
      Class A common stock were purchased by employees at $6.035 per share
under this plan.                                              

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PROSOURCE, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995

(11)     CONTINGENCIES 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 27, 1997, such guarantees
        amounted to approximately $0.8 million and were covered by a letter of
        credit. At December 27, 1997, the Company was also obligated for $15.0
    million in other letters of credit issued on behalf of the Company
  primarily as a guarantee of payment for obligations arising from
     workers' compensation claims. At December 27, 1997, the Company had
       $9.2 million available in unused letters of credit under its Existing
Credit Facilities.                                            

       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 the financial position of the
Company.                                                      

(12)     CONCENTRATIONS OF CREDIT RISK                                          

        Burger King Corporation ("BKC") owned and franchisee-owned Burger King
restaurants collectively accounted for 46%, 41% and 45% of the
    Company's sales in fiscal years 1997, 1996 and 1995, respectively.
      Sales to BKC-owned restaurants represented approximately 5% of sales
  for each of the aforementioned years. Amounts due from BKC-owned
  restaurants at December 27, 1997 and December 28, 1996 were $5.8
million and $5.5 million, respectively.                       

      In addition, sales to Darden Restaurants, Inc. (owner of Red Lobster
      and Olive Garden restaurants) accounted for 21%, 20%, and 18% of the
    Company's sales in fiscal years 1997, 1996 and 1995, respectively.
    Amounts due from Darden Restaurants, Inc. at December 27, 1997 and
        December 28, 1996, were approximately $41.4 million and $41.1 million,
respectively.                                                 

        Sales to Arby's restaurants (primarily franchisee-owned) accounted for
       10% of Company sales in fiscal years 1996 and 1995. No other customer
    or restaurant concept accounted for more than 10% of the Company's
    sales in fiscal years 1997, 1996 or 1995. The Company periodically
       performs credit evaluations on its customers' financial condition and
generally does not require collateral.                        

(13)     CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE                  

       During the fourth quarter of 1997, the Financial Accounting Standards
     Board's Emerging Issues Task Force reached a consensus on Issue No.
       97-13, "Accounting for Costs Incurred in Connection with a Consulting
Contract or an Internal Project that Combines Business Process
         Reengineering and Information Technology Transformation." The consensus
      requires that the cost of business process reengineering activities,
   whether done internally or by third parties, is to be expensed as
        incurred. As a result, any remaining unamortized portion of previously
    capitalized business process reengineering costs is required to be
        written off. The cumulative impact of initially conforming to this new
    standard in the fourth quarter of 1997 was reported as a change in
     accounting principle in the accompanying consolidated statements of
       operations, with a cumulative charge, net of tax, of $6.4 million, or
$0.69 per share.                                              

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995

(14)     NET LOSS PER SHARE                                                     

        For all years presented in the accompanying consolidated statements of
      operations, all stock options and other potential common shares were
     excluded from the calculation of diluted loss per share, since they
would produce anti-dilutive results. As a result, there are no
     reconciling items to the numerator and denominator of the basic and
diluted loss per share computations.                          

      The following were outstanding during fiscal 1997, but were excluded
      from the computation of diluted net loss per common share for fiscal
1997.                                                         

                                                        [Enlarge/Download Table]

                                 Related Number of          Conversion                                    
                                Common Stock Shares       Price per Share    Expiration                   
                                -------------------       ---------------    ----------                   
                                                                                                          
Options - 1995 Option Plan      288,650 shares - Class B   $10.00 or $11.00  December 2000                
Options - 1996 Option Plan      340,500 shares - Class B   $14.00            November 2006 to January 2007
Options - 1997 Director's Plan   10,500 shares - Class A   $ 5.25            April 2007                   
Stock Warrants                  283,425 shares - Class B   $12.35            March 2000                   
$0.5 million convertible         25,000 shares - Class A                                                  
   subordinated note                                       $20.00            November 1999                

(15)     SUBSEQUENT EVENT                                                       

       On January 29, 1998, the Company signed a definitive merger agreement
         with AmeriServe Food Distribution, Inc. ("AmeriServe"). Under the terms
        of the agreement, AmeriServe has agreed to pay $15.00 in cash for each
         outstanding share of the Company's common stock. In addition, under the
   agreement, all outstanding options will be accelerated and option
         holders will receive $15.00 less the applicable exercise for each share
         issuable upon exercise of the options. AmeriServe has indicated that it
intends to refinance all of the Company's outstanding debt.   

   The merger is subject to regulatory approvals and other customary
        conditions to closing. Onex Corporation and certain of its affiliates,
 which own approximately 61% of the Company's outstanding stock,
       representing approximately 85% of the voting power, have committed to
vote in favor of the merger, which will assure the necessary  
     shareholder approval. The merger is expected to close in the second
quarter of fiscal 1998.                                       

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INDEPENDENT AUDITORS' REPORT
ON FINANCIAL STATEMENT SCHEDULES

The Board of Directors and Stockholders                                         
ProSource, Inc.:                                                                

Under date of February 20, 1998, we reported on the consolidated balance sheets 
of ProSource, Inc. and subsidiaries as of December 27, 1997 and December 28,    
1996, and the related consolidated statements of operations, stockholders'      
equity, and cash flows for each of the years in the three-year period ended     
December 27, 1997, which are included in the Company's Annual Report on Form    
10-K. In connection with our audits of the aforementioned consolidated financial
statements, we also audited the related financial statement schedules in the    
Company's Annual Report on Form 10-K. These financial statement schedules are   
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statement schedules based on our audits.          

In our opinion, such financial statement schedules, when considered in relation 
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.                    

KPMG PEAT MARWICK LLP                                                           

/s/KMPG PEAT MARWICK LLP                                                        

Miami, Florida                                                                  
February 20, 1998                                                               

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 PROSOURCE, INC. (PARENT ONLY)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEETS INFORMATION
 DECEMBER 27, 1997 AND DECEMBER 28, 1996
(DOLLARS IN THOUSANDS)

                                                                [Download Table]

                                   ASSETS                        1997        1996   
                                                              ---------   --------- 
                                                                                    
Current assets:                                                                     
      Cash and cash equivalents ............................. $     689   $     670 
      Due from subsidiaries .................................     2,621       2,936 
                                                              ---------   --------- 
                Total current assets ........................     3,310       3,606 
Investment in subsidiaries ..................................    58,735      72,526 
Deferred income taxes .......................................     2,387       2,383 
                                                              ---------   --------- 
                Total assets ................................ $  64,432   $  78,515 
                                                              =========   ========= 
LIABILITIES AND STOCKHOLDERS' EQUITY                                                
Current liabilities:                                                                
      Accrued liabilities ................................... $      17   $      -- 
                                                              ---------   --------- 
      Total current liabilities .............................        17          -- 
                                                              ---------   --------- 
Commitments and contingencies                                                       
Stockholders' equity:                                                               
      Preferred stock .......................................        --          -- 
      Class A Common Stock ..................................        35          34 
      Class B Common Stock ..................................        58          60 
      Additional paid-in capital ............................   104,934     105,256 
      Accumulated deficit ...................................   (40,580)    (26,901)
      Accumulated foreign currency translation adjustments ..       (32)         66 
                                                              ---------   --------- 
                Total stockholders' equity ..................    64,415      78,515 
                                                              ---------   --------- 
                Total liabilities and stockholders' equity ..  $ 64,432   $  78,515 
                                                              =========   ========= 

SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL INFORMATION.                      

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 PROSOURCE, INC. (PARENT ONLY)
SCHEDULE 1 - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(DEFICIT) INFORMATION FOR THE YEARS ENDED DECEMBER 27, 1997,
 DECEMBER 28, 1996 AND DECEMBER 30, 1995
(DOLLARS IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                                                                 1997       1996        1995   
                                                                              --------   --------    --------  
                                                                             (52 WEEKS)  (52 WEEKS)  (52 WEEKS)
                                                                                                               
Revenues ...................................................................  $     --    $     --    $     -- 
Operating expenses .........................................................        --          --          (3)
Contract termination charges ...............................................        --      (5,224)         -- 
Interest expense ...........................................................        --        (748)       (729)
Interest income ............................................................        18          33          53 
Equity in losses of subsidiaries ...........................................   (13,693)    (21,418)     (1,294)
                                                                              --------    --------    -------- 
   Loss before income taxes and extraordinary item .........................   (13,675)    (27,357)     (1,973)
Income tax (provision) benefit .............................................        (4)      2,386         417 
                                                                              --------    --------    -------- 
   Loss before extraordinary item ..........................................   (13,679)    (24,971)     (1,556)
Gain on early retirement of debt net of tax provision of $397  .............        --         610          -- 
                                                                              --------    --------    -------- 
   Net loss ................................................................   (13,679)    (24,361)     (1,556)
Retained earnings (deficit), beginning of year .............................   (26,901)     (2,540)       (984)
                                                                              --------    --------    -------- 
Retained earnings (deficit), end of year ...................................  $(40,580)   $(26,901)   $ (2,540)
                                                                              ========    ========    ======== 

See accompanying notes to condensed financial information.                      

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 PROSOURCE, INC. (PARENT ONLY)
SCHEDULE 1 - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
 CONDENSED STATEMENTS OF CASH FLOW INFORMATION
FOR THE YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND
 DECEMBER 30, 1995
(DOLLARS IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                                                                1997        1996        1995   
                                                                              --------    --------    -------- 
                                                                             (52 WEEKS)  (52 WEEKS)  (52 WEEKS)
                                                                                                               
Cash flows from operating activities:                                                                          
Net loss ................................................................... $(13,679)   $(24,361)   $ (1,556) 
Adjustments to reconcile net loss to net cash provided by (used in)                                            
     operating activities:                                                                                     
     Undistributed losses of subsidiaries ..................................   13,693      21,418         914  
     Contract termination charges ..........................................       --       5,224          --  
     Dividends received from subsidiaries ..................................       --          --       7,208  
     Deferred income taxes .................................................       (4)     (1,989)       (103) 
     Gain on early retirement of debt ......................................       --      (1,007)         --  
     Amortization of note discount .........................................       --         740         592  
     Changes in operating assets and liabilities:                                                              
       Decrease in other current assets ....................................       --          --          58  
       Increase (decrease) in accrued liabilities ..........................       17        (110)        100  
                                                                              --------    --------    -------- 
         Net cash provided by (used in) operating activities ...............       27         (85)      7,213  
                                                                              --------    --------    -------- 
Cash flows from investing activities:                                                                          
   Capital contributions to subsidiaries ...................................       --     (31,802)    (38,897) 
   Advances to/from subsidiaries ...........................................       90      (2,870)     (7,170) 
                                                                              --------    --------    -------- 
         Net cash provided by (used in) investing activities ...............       90     (34,672)    (46,067) 
                                                                              --------    --------    -------- 
Cash flows from financing activities:                                                                          
   Issuance of long-term debt ..............................................       --          --      12,326  
   Repayments of long-term debt ............................................       --      (9,766)     (2,085) 
   Proceeds from issuance of common stock ..................................       --      44,464      28,585  
   Payments to acquire and retire treasury stock ...........................       --        (205)       (222) 
                                                                             --------    --------    --------  
       Net cash provided by financing activities ...........................       --      34,493      38,604  
                                                                             --------    --------    --------  
Effect of exchange-rate changes on cash ....................................      (98)         (5)         71  
                                                                             --------    --------    --------  
       Net increase (decrease) in cash and cash equivalents ................       19        (269)       (179) 
Cash and cash equivalents, beginning of year ...............................      670         939       1,118  
                                                                             --------    --------    --------  
Cash and cash equivalents, end of year ..................................... $    689    $    670    $    939  
                                                                             ========    ========    ========  
Supplemental disclosures of cash flow information:                                                             
Cash paid during the year for:                                                                                 
       Interest ............................................................ $     --    $     --    $     41  
                                                                             ========    ========    ========  
       Income taxes, net of refunds ........................................ $     --    $     --    $      1  
                                                                             ========    ========    ========  

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:            

In October 1997, the parent issued 33,799 Class A common shares to    
employees under the 1997 Employee Stock Purchase Plan at $6.035 per share in    
exchange for a reduction in advances owed by subsidiaries of $204.              

     During 1997, the parent recognized $28 of compensation expense (included in
equity in losses of subsidiaries) associated with the 1997 Directors Stock      
Option Plan.                                                                    

   During 1997, the parent retired treasury stock totalling $555 in exchange
for a reduction in advances owed by subsidiaries. A subsidiary remitted this    
amount to the affected stockholders.                                            

See accompanying notes to condensed financial information.

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 PROSOURCE, INC. (PARENT ONLY)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO CONDENSED FINANCIAL INFORMATION
DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995

(1)      BASIS OF PRESENTATION                                                  

In the parent company-only financial statements, the Company's
investment in subsidiaries is stated at cost plus equity in undistributed       
earnings (losses) of subsidiaries since the date of acquisition. The parent     
company-only financial statements should be read in conjunction with the        
ProSource, Inc. consolidated financial statements.                              

(2)      STOCKHOLDERS' EQUITY                                                   

In November 1996, the Parent changed its capital structure to 
10,000,000 authorized shares of $0.01 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 $0.01 par value Class B Common Stock. Each share of Class A
Common Stock is entitled to one vote per share and each share of Class B Common 
Stock is entitled to ten votes. In addition, each share of Class B Common Stock 
is convertible at the option of the holder thereof into one share of Class A    
Common Stock and will automatically convert into one share of Class A Common    
Stock upon certain events.                                                      

       In November 1996, the Parent's board of directors declared a 100-to-1
stock split. The Parent's additional paid-in capital account and the Class B    
Common Stock account have been restated to retroactively reflect the stock      
split.                                                                          

      On November 15, 1996, the Parent completed the issuance of 3,400,000
shares of Class A Common Stock (at a price of $14 per share) through an initial 
public offering, resulting in net proceeds of approximately $43.2 million, after
deducting underwriting discounts and commissions, and other offering costs of   
approximately $4.4 million. The net proceeds of the offering were partially used
to pay a $10 million subordinated note and the remainder was advanced as a      
capital contribution to ProSource Services Corporation, a wholly-owned          
subsidiary.                                                                     

(3)      TERMINATION OF CONTRACT AGREEMENTS                                     

       In connection with the initial public offering, the Parent incurred a
noncash charge of $4 million resulting from the issuance to Onex of 285,714     
shares of 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, previously paid in cash, for management services rendered to the Company.  

     In November 1996, the Parent amended the ProSource, Inc. Management
Option Plan (1995) to provide for unvested options to vest at a rate of 10% per 
year through December 31, 1999, when all remaining options will vest. In        
connection with this amendment, the Parent Company recorded a pre-tax charge of 
$1.2 million reflecting the difference between the market price of the Company's
Class A Common Stock on the date of amendment and the exercise price of such    
options.                                                                        

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 PROSOURCE, INC. (PARENT ONLY)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO CONDENSED FINANCIAL INFORMATION (CONTINUED)
DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995

(4)      RECLASSIFICATION                                                       

     Certain amounts previously presented in the financial statements of
prior years have been reclassified to conform to the current year presentation. 

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 PROSOURCE, INC.
 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 30, 1995,
DECEMBER 28, 1996 AND DECEMBER 27,
 1997 (DOLLARS IN THOUSANDS)

                                                                [Download Table]

ALLOWANCE FOR DOUBTFUL ACCOUNTS                                
                                                               
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 
         Additions charged to costs and expenses         1,682 
         Recoveries ............................           709 
         Write-offs ............................        (2,642)
                                                       ------- 

BALANCE, December 28, 1996 .....................       $ 2,334 
         Additions charged to costs and expenses         2,275 
         Recoveries ............................           268 
         Reclassifications .....................         1,160 
         Write-offs ............................        (1,952)
                                                       ------- 
BALANCE, December 27, 1997 .....................       $ 4,085 
                                                       ======= 

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ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND       
FINANCIAL DISCLOSURE.                                                           

None.                                                         

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.                   

Set forth below are the directors and executive officers of the Company.        

                                                        [Enlarge/Download Table]

Name                          Age             Position                                            
-----                      --------  ----------------------------------                           
                                                                                                  
David R. Parker               54     Chairman of the Board of Directors                           
Thomas C. Highland            56     President, Chief Executive Officer and Director              
Daniel J. Adzia               55     Vice-Chairman, Chief Marketing Officer and Director          
Gerald W. Schwartz            55     Director                                                     
Anthony R. Melman             50     Director                                                     
Michael Carpenter             50     Director                                                     
Anthony Munk                  37     Director                                                     
C. Lee Johnson                65     Director                                                     
R. Geoffrey P. Styles         67     Director                                                     
William F. Evans              50     Executive Vice President, Chief Financial Officer            
Robert S. Donaldson           42     Executive Vice President, Chief Operating Officer, ProSource 
                                        Distribution Operations                                   
Paul A. Garcia de Quevedo     43     Vice President, Treasurer and Secretary                      
Maurice L. Ambler             50     Senior Vice President, Human Resources                       
Dennis T. Andruskiewicz       44     Senior Vice President, Operations Support                    
Bruce O. Burnham              54     Senior Vice President, Procurement and Supply Chain Services 
John E. Foley                 48     Senior Vice President, Chief Information Officer             
John P. Gainor                40     Senior Vice President, Logistics and Chief Operating Officer,
                                         PSD Transportation Services                              

   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 from BKC. 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., SunTrust Bank,
Miami, N.A. and Tupperware Corporation.                                         

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.                                                              

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        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.                                                

         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. He is Vice-Chairman and Member of the      
Executive Committee of Mount Sinai Hospital and is a Director or Governor of a  
number of other organizations, including Junior Achievement, Canadian Council of
Christians and Jews, and The Starlight Foundation.                              

      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. Mr. Melman serves on the Board of  
Directors of Purolator Courier Ltd., Celestica, Inc., BT Bank of Canada and     
AlphaNet Telecom, Inc.                                                          

         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.

     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 of The Horsham Corporation, a Canadian based company which
has interests in gold, real estate and refining ventures, and is currently a    
Director of Barrick Gold Corporation.                                           

    C. Lee Johnson Mr. Johnson has served as a Director of the Company
since October 1992. Since October 1997, he has been President Emeritus of       
Limited Distribution Services (a subsidiary of The Limited, Inc.), where he was 
President from 1986 to 1997. From 1984 to 1986, he was Senior Vice President,   
Beatrice U.S. Food Corporation and the President, Beatrice Distribution, Inc.   
Mr. Johnson serves on the Executive Committee and Board of Directors of the     
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. From          
1990-1996, he served as Chairman of the Board of Directors of Drivers Jonas     
(Canada) Ltd. He serves as Chairman and Director of Grosvenor International     
Holdings Limited and is on the Boards of Directors of Royal Trust Company, The  
Geon Company, Echo Bay Mines Ltd., Fairwater Capital Corporation and Working    
Ventures Canadian Fund Inc.                                                     

    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.                                                                   

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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      
Interim Services, Inc. Mr. Evans is a certified public accountant.              

Robert S. Donaldson Mr. Donaldson has served as Executive Vice
President Chief Operating Officer, ProSource Distribution Operations since      
January 1998. From January 1995 to January 1998, he served as Senior Vice       
President, Field Operations of the Company. 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.             

    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.       

     Maurice L. Ambler Mr. Ambler has served as Senior Vice President of
Human Resources of the Company since January 1997. From July 1992 to December   
1996, Mr. Ambler served as Vice President of Human Resources. Prior to such     
time, Mr. Ambler was Senior Director of Human Resources of BKDS from April 1991 
to June 1992, and Director of Human Resources for BKDS from July 1990 to April  
1991. Prior to joining BKDS, Mr. Ambler held various human resources positions  
at ITT Sheraton, Pepsico Inc.'s Pizza Hut and Frito-Lay divisions and Miller    
Brewing Company.                                                                

     Dennis T. Andruskiewicz Mr. Andruskiewicz has served as Senior Vice
President, Operations Support of the Company since September 1996 and           
Vice-President, Field Operations 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 1987 to  
1990.                                                                           

      Bruce O. Burnham Mr. Burnham joined the Company in December 1997 and
serves as the Senior Vice President, Procurement and Supply Chain Services. Mr. 
Burnham has twenty years of experience in distribution, supply chain management 
and strategic purchasing. From July 1994 to December 1997, Mr. Burnham served as
Vice President, Purchasing and Distribution for Boston Chicken, Inc. From May   
1990 to July 1994, Mr. Burnham served as Corporate Vice President of Procurement
for Service America Corporation.                                                

    John E. Foley Mr. Foley has served as Senior Vice President, Chief
Information Officer since January 1998. From August 1995 to January 1998, he    
served as Senior Vice President, Operations Development of the Company 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 BKC from 1990 to 1992.                 

John P. Gainor Mr. Gainor has served as Senior Vice President,
Logistics and Chief Operating Officer, PSD Transportation Services, the         
Company's transportation subsidiary, since January 1998, Senior Vice President, 
Logistics and Purchasing from November 1995 to January 1998, 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.                                              

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     Each director is elected annually by the Company's stockholders and
holds office until the next annual meeting of stockholders and until his        
successor is elected and qualified. Each executive officer is elected annually  
by the Board of Directors and holds office until his successor is elected and   
qualified. There are no family relationships among any of the directors or      
executive officers of the Company.                                              

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE                         

       Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who beneficially own more than ten percent of the        
Company's Class A Common Stock, to file reports of ownership and changes in     
ownership with the Securities and Exchange Commission ("SEC"). Officers,        
directors and greater than ten percent stockholders are required by SEC         
regulation to furnish the Company with copies of all Section 16(a) forms they   
file.                                                                           

       Based solely on its review of the copies of such forms received by it
and written representations from certain reporting persons that no Form 5s were 
required for those persons, the Company believes that, except for the Initial   
Statement on Form 3 for Maurice L. Ambler, Senior Vice President, Human         
Resources, which was filed late, all filing requirements applicable to its      
officers, directors and greater than ten percent stockholders were complied with
during the year ended December 27, 1997.                                        

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ITEM 11.  EXECUTIVE COMPENSATION.                                               

The following table sets forth certain information regarding  
compensation earned during the Company's three most recently completed fiscal   
years by the chief executive officer and each of the five other most highly     
compensated executive officers during 1997, including one former executive      
officer (the "Named Executive Officers").                                       

SUMMARY COMPENSATION TABLE

                                                        [Enlarge/Download Table]

                                                                                           LONG-TERM                
                                                                                          COMPENSATION              
                                                                                             AWARDS/                
                                                                           OTHER ANNUAL    SECURITIES     ALL OTHER 
                                               FISCAL        ANNUAL        COMPENSATION    UNDERLYING   COMPENSATION
NAME AND PRINCIPAL POSITION                    YEAR       COMPENSATION        ($)(1)     OPTIONS(#)(2)     ($)(3)   
---------------------------                    ------   -----------------  ------------  -------------  ------------
                                                         SALARY     BONUS                                           
                                                         ($)       ($)                                              
                                                        --------   ------                                           
                                                                                                                    
                                               1997     450,000         -        (4)              -          7,950  
David R. Parker                                1996     324,038         -     35,148         25,000         90,500  
   Chairman of the Board of Directors........  1995     300,000   150,000        (4)          5,000        153,120  
                                               1997     450,000         -        (4)              -          7,950  
Thomas C. Highland                             1996     324,038         -     33,104         25,000         90,500  
   President, Chief Executive Officer........  1995     300,000   150,000        (4)          3,750        103,120  
                                               1997     320,000         -     47,406              -          7,950  
Daniel J. Adzia                                1996     310,000         -     61,448         15,000         15,000  
   Vice Chairman, Chief Marketing Officer....  1995(5)  225,385   112,500        (4)         22,500         21,410  
William F. Evans                               1997     315,000         -     60,333              -          7,950  
   Executive Vice President, Chief Financial   1996     287,500         -     44,548         15,000        135,051  
   Officer...................................  1995(6)  116,346    82,282        (4)         22,500              -  
Robert S. Donaldson                            1997     199,550         -        (4)              -         25,155  
   Executive Vice President, Chief Operating   1996     175,961         -        (4)         10,000         30,601  
   Officer, ProSource Distribution Operations  1995     157,500    58,575        (4)              -         13,749  
William G. Berryman                            1997     177,187    35,000        (4)              -         43,689  
   Senior Vice President, Information          1996     117,789    35,000        (4)         10,000         75,320  
   Technology(7).............................                                                                       

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

(1)      The amounts shown in the "Other Annual Compensation" column consist of 
        the following (i) Mr. Parker: For 1996, $14,000 car allowance, $13,000
    perquisite allowance and $8,148 of interest paid by the Company in
      respect of an outstanding loan, (ii) Mr. Highland: For 1996, $14,000
         car allowance, $13,000 perquisite allowance and $6,104 of interest paid
        by the Company in respect of an outstanding loan, (iii) Mr. Adzia: For
        1997 and 1996, respectively, $14,400 and $4,528 car allowance, $13,000
      and $16,283 perquisite allowance and $20,006 and $40,637 of interest
     paid by the Company in respect of an outstanding loan, and (iv) Mr.
 Evans: For 1997 and 1996, respectively, $14,400 and $11,100 car
   allowance, $5,000 and $5,000 perquisite allowance and $40,933 and
      $28,448 of interest paid by the Company in respect of an outstanding
         loan. The loans referred to in the previous sentence were provided by a
     third party lender to finance, in part, certain purchases of Common
      Stock by employees, including the Named Executive Officers, and were
         guaranteed by the Company. Effective as of March 21, 1997 (November 20,
       1997 with respect to Mr. Adzia), the lender released the Company from
        its guaranty of such loans and took a pledge of the shares as security
  for the loans. As of December 27, 1997, the Company continued to
guarantee the loan to Mr. Evans.                              

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(2)      Options to acquire shares of Class B Common Stock.                     

(3)      The amounts shown in the "All Other Compensation" column for each Named
Executive Officer in 1997 consist of $7,950 in the Company's  
 contributions to its defined contribution plan, plus $17,205 in
   educational payments in the case of Mr. Donaldson, and $35,739 in
relocation payments, in the case of Mr. Berryman. See "Defined
      Contribution Plans." Amounts for 1995 and 1996 have been restated to
         reflect the reversal of accruals previously made for the benefit of the
    Named Executive Officers under the Company's proposed Supplemental
       Executive Retirement Plan. The Company subsequently determined not to
adopt such plan.                                              

(4)      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 the Named Executive Officer.      

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

(6)      Represents amounts paid from July 28, 1995 through the end of 1995.    
Prior to such time Mr. Evans was not employed by the Company. 

(7)      1996 represents amounts paid from April 29, 1996 through the end of    
        1996. Prior to such time Mr. Berryman was not employed by the Company.
        Due to a change in responsibilities, Mr. Berryman was not reelected as
an executive officer in January 1998.                         

EMPLOYMENT 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 T. 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 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 case of Mr. Highland. 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.                         

        Effective April 1, 1998, Mr. Adzia's current employment agreement will
terminate and he will become a consultant to the Company. Under the terms of    
this consulting agreement, Mr. Adzia will receive annual compensation of $75,000
through April 1, 2000. In addition, Mr. Adzia will be eligible for an incentive 
bonus of up to $200,000 based on achieving certain agreed upon targets. All     
benefits, bonuses and other types of compensation previously provided under his 
employment contract, with the exception of medical coverage and existing stock  
options, will terminate on March 31, 1998.                                      

     Each Employee is also subject to a one-year covenant not to compete
effective upon termination of employment for any reason, except in the case of  
Mr. Highland (eighteen months).                                                 

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DIRECTOR COMPENSATION                                                           

        Directors who are not officers or employees of the Company or Onex are
entitled to receive an annual fee of $14,000, plus $1,500 for each Board of     
Directors meeting attended, $1,000 for each committee meeting attended and a    
$2,500 annual fee for serving as chairman of a committee. All directors are     
reimbursed for out-of-pocket expenses.                                          

         1997 Directors Stock Option Plan. Under the 1997 Directors Stock Option
Plan (the "Directors Plan"), each outside director may elect to receive in lieu 
of all or any portion of such director's annual retainer fee, a stock option    
exercisable for a number of shares of Class A Common Stock equal to the amount  
of such fee or portion thereof divided by $4.00. The exercise price for such    
stock option will be equal to $4.00 per share below the Fair Market Value of a  
share of Class A Common Stock on the date of grant; provided, however, that in  
no event will the exercise price of such Stock Option be less than 50% of the   
Fair Market Value of a share of Class A Common Stock on the date of the grant.  
"Fair Market Value" is defined as the average closing price of a share of Class 
A Common Stock on the Nasdaq National Market (or such other exchange on which   
shares of Class A Common Stock are listed) for the five trading days immediately
preceding the applicable date. The duration of the Directors Plan is ten years. 
The number of shares of Class A Common Stock currently available for use in the 
Directors Plan is 89,500.                                                       

       The date of grant of a stock option is the date of the annual meeting
of stockholders of the Company. A stock option vests and becomes exercisable on 
the day prior to the date of the next annual meeting of stockholders after the  
date of grant. In the event that a stock option grantee is not a member of the  
Board on the vesting date, any stock option which has not become vested and     
exercisable as of such time will expire without vesting. Vested stock options   
may be exercised for 10 years from the date of grant.                           

        The Directors Plan may be amended by the Board of Directors; provided,
however, that approval of the stockholders is required to (i) materially        
increase the benefits accruing to participants under the Directors Plan, (ii)   
materially increase the number of securities which may be issued under the      
Directors Plan or (iii) materially modify the requirements as to eligibility for
participation in the Directors Plan. The Directors Plan may be terminated at any
time by the Board of Directors or by the approval of the stockholders.          

 The Directors Plan contains provisions designed to preserve for
directors the benefits of grants in the event of a Change of Control (as defined
in the Directors Plan). Upon a Change of Control any unvested option will vest. 
A director may surrender any option and receive cash equal to the excess of the 
Change of Control Price (as defined in the Directors Plan) over the exercise    
price.                                                                          

        Currently, three members of the Board of Directors (Messrs. Carpenter,
Johnson and Styles) are eligible to participate in the Directors Plan and such  
directors received options totaling 10,500 during 1997. Messrs. Carpenter,      
Johnson and Styles have elected to receive 50%, 100% and 100%, respectively, of 
their annual retainer fee for 1998 in stock options. In light of the fact that, 
if the proposed merger is consummated, the Company will not hold an annual      
meeting in 1998, the Company has waived such elections and in lieu thereof      
agreed to pay the directors the annual retainer to which they would otherwise be
entitled in cash. See "Business--Merger Agreement."                             

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION                     

        The Compensation and Nominating Committee consists of Messrs. Johnson,
Melman and Parker. The Equity Compensation Committee (the "Committee") consists 
of Messrs. Carpenter, Johnson and Styles. Mr. Parker is Chairman of the Board of
ProSource.                                                                      

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OPTION PLANS AND OTHER EQUITY BASED COMPENSATION PLANS                          

      Amended Management Option Plan (1995). The 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 Class B Common Stock.   
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, and currently is administered by the Committee. Options      
granted under the 1995 Option Plan are not transferable 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.                 

     At December 27, 1997, options to purchase 295,150 shares of Class B
Common Stock were outstanding. Additionally, during 1997, 53,300 options were   
canceled. No options were granted in 1997, and no additional options will be    
granted under the 1995 Option Plan.                                             

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

         The exercise price for options granted under the 1996 Option Plan is at
least 100% of the fair market value of a share of Class B Common Stock on the   
date of grant. Options vest ratably on each of the first four anniversaries of  
the date of grant. However, notwithstanding such vesting, no option becomes     
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 the five consecutive
trading days immediately preceding the applicable date. Subject to the          
foregoing, vested options may be exercised for a period of up to 10 years from  
the date of grant.                                                              

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        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 Option Plan; provided, however, that, to the
extent required by Rule 16b-3 promulgated under 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.                                                 

     The Company has reserved 550,000 shares of Class B Common Stock for
issuance upon exercise of options granted under the 1996 Option Plan. During    
1997, the Company granted options to purchase 16,000 shares, none of which went 
to Named Executive Officers or directors. At December 27, 1997, options to      
purchase 334,000 shares of Class B Common Stock were outstanding. Additionally, 
40,000 options were canceled during 1997. No options may be granted under the   
1996 Option Plan after the tenth anniversary of the approval of the 1996 Option 
Plan.                                                                           

     1997 Employee Stock Purchase Plan. The 1997 Employee Stock Purchase
Plan (the "Employee Plan") was adopted by the Company's stockholders on April   
29, 1997. The purpose of the Employee Plan is to permit eligible employees to   
purchase Class A Common Stock, through payroll deductions, at a specified       
percentage of the fair market value of the Class A Common Stock. It is intended 
that the Employee Plan qualify as an employee stock purchase plan under Section 
423 of the Code.                                                                

    The Employee Plan is administered by the Committee. Subject to the
express provisions of the Employee Plan, the Committee, by majority action      
thereof, is authorized to interpret and prescribe, amend and rescind rules      
relating to the Employee Plan and to make all other determinations necessary or 
advisable for the administration of the Employee Plan.                          

        The Employee Plan generally operates on the basis of a 12-month period
beginning July 1 of each year (each a "Plan Year"). The first Plan Year         
commenced July 1, 1997. With respect to any Plan Year, all full-time employees  
of the Company and its participating subsidiaries (including officers and       
directors who are also employees) who have been employed continuously for at    
least three months prior to July 1 of such Plan Year are eligible to participate
in the Employee Plan. No eligible employee may participate in the Employee Plan 
if after the purchase such employee would own (or have the right to purchase)   
stock of the Company possessing 5% or more of the total combined voting power or
value of all classes of capital stock of the Company.                           

       An eligible employee electing to participate in the Employee Plan may
contribute funds for the purchase of Class A Common Stock under the Employee    
Plan by directing his or her employer to withhold (in increments of 1%) not less
than 1% and not more than 15% of his or her Base Earnings (as defined in the    
Employee Plan). A participant may elect to reduce (but not increase) the amount 
of rate of withholding for any Plan Year. Amounts withheld will be held by the  
participant's employer and automatically applied to purchase Class A Common     
Stock unless refunded to the participant by written election or direction of    
such participant.                                                               

  Amounts withheld from (and not refunded to) a participant in the
Employee Plan will be used to purchase Class A Common Stock as of the last      
business day of each quarter of the Plan Year at a price equal to 85% of the    
Fair Market Value (as defined in the Employee Plan) of a share of Class A Common
Stock on the first business day of such Plan Year.                              

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       No participant in the Employee Plan may purchase Class A Common Stock
under the Employee Plan and all other employee stock purchase plans of the      
Company and any of its subsidiaries at a rate in excess of $25,000 in Fair      
Market Value of such stock (determined as of the first business day of the Plan 
Year with respect to which stock is granted) for each calendar year in which any
such right to purchase stock granted to such participant is outstanding at any  
time. If a participant is not entitled to purchase Class A Common Stock under   
any such other plan during a Plan Year, the total number of shares purchased    
under the Employee Plan for the participant with respect to that Plan Year may  
not exceed (1) $25,000 divided by (ii) the Fair Market Value of a share of Class
A Common Stock on the first day of such Plan Year.                              

       The Board of Directors may at any time terminate, amend or modify the
Employee Plan, provided that approval of stockholders is required to (i)        
increase the total amount of Class A Common Stock which may be offered under the
Employee Plan (except for adjustments in the outstanding shares of Class A      
Common Stock by reason of a stock dividend or split, combination,               
recapitalization, or reclassification), (ii) withdraw the administration of the 
Employee Plan from the Committee or (iii) permit any member of the Committee to 
be eligible to participate in the Employee Plan.                                

      During 1997, 33,799 shares of Class A Common Stock were issued under
this plan. Of this amount, Named Executive Officers accounted for 7,275 shares. 
Currently, 235,865 shares of Class A Common Stock are available to be purchased 
under the Employee Plan.                                                        

         The Employee Plan is scheduled to remain in effect until June 30, 2002.

DEFINED CONTRIBUTION PLANS                                                      

       401(k) Plan. The Company maintains the ProSource Retirement Advantage
Plan (the "401(k) Plan"), a defined contribution retirement plan with a cash or 
deferral arrangement as described in Section 401(k) of the Internal Revenue Code
of 1986, as amended (the "Code"). The 401(k) Plan is intended to be qualified   
under Section 401(a) of the Code. All regular employees who are at least 21     
years old, work at least 1,000 hours a year and are not excluded by a bargaining
agreement are eligible to participate in the 401(k) Plan. The 401(k) Plan       
provides that each participant may make pre-tax elective contributions from 1%  
to 15% of his or her compensation, subject to statutory limits. The Company     
contributes to the 401(k) Plan (i) 2% of an eligible employee's compensation,   
and (ii) fifty cents for every dollar contributed by the employee up to the     
first 6% 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 25% 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 four 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.                                         

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ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.       

         See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" in
the body of the Proxy Statement.                                                

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.                       

    Shareholders Agreements. All of the Company's employees, including
executive officers, and directors who purchased Class B Common Stock from the   
Company prior to the Company's initial public offering are parties to           
shareholders agreements (the "Shareholders Agreements") under which all such    
Class B Common Stock, as well as Class A Common Stock issuable upon conversion  
thereof and securities convertible into shares of Class B Common Stock          
(including shares issued upon exercise of options), held by them are subject to 
certain restrictions on transfer. Such restrictions provide, among other things,
that, in the case of employee stockholders, sales through the public markets are
subject to a right of first offer in favor of the Company, and, if the Company  
declines to purchase the shares, limitations on the amount sold. The            
Shareholders Agreements also provide that, subject to certain exceptions,       
employee stockholders have the right to participate with Onex in certain sales  
of Common Stock and that Onex may compel the sale of Common Stock by such       
stockholders in connection with certain sales of shares by Onex. In addition,   
the Shareholders Agreements provide employee and director stockholders with     
"piggyback" registration rights. The Shareholders Agreements terminate if Onex  
ceases to hold in the aggregate 20% of the outstanding voting capital stock of  
the Company of if another person or group holds in the aggregate a greater      
percentage of the outstanding voting capital stock of the Company than Onex.    

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 PROSOURCE, INC.
1500 San Remo Avenue
 Coral Gables, Florida 33146

THIS PROXY IS SOLICITED BY THE COMPANY'S
BOARD OF DIRECTORS FOR THE
 SPECIAL MEETING OF STOCKHOLDERS
 TO BE HELD ON WEDNESDAY, MAY 20, 1998

       The undersigned holder of Common Stock of ProSource, Inc., a Delaware
corporation (the "Company"), hereby appoints David R. Parker, Thomas C. Highland
and Paul A. Garcia de Quevedo and each of them, as proxies for the undersigned, 
each with full power of substitution, for and in the name of the undersigned to 
act for the undersigned and to vote, as designated below, all of the shares of  
Common Stock of the Company that the undersigned is entitled to vote at the     
Special Meeting of Stockholders of the Company, to be held on Wednesday, May 20,
1998 at 11:30 a.m. local time, at the offices of Kaye, Scholer, Fierman, Hays & 
Handler, LLP, located at 425 Park Avenue, New York, New York, and at any        
adjournment or postponement thereof.                                            

       The Board of Directors recommends a vote FOR approval and adoption of
the Merger Agreement and the transactions contemplated thereby, including the   
Merger.                                                                         

       1. To approve and adopt the Agreement and Plan of Merger, dated as of
January 29, 1998, among AmeriServe Food Distribution, Inc., Steamboat           
Acquisition Corp. ("Merger Sub") and the Company, and to approve the            
transactions contemplated thereby, including the merger of Merger Sub with and  
into the Company, with the Company as the surviving corporation in the Merger   
(the "Merger").                                                                 

 /  /  FOR               /  / AGAINST               /  / ABSTAIN

    2. To transact such other business as may properly come before the
Special Meeting and any adjournments or postponements thereof. In their         
discretion, the persons appointed as proxies are authorized to vote upon such   
other business as may properly come before the Special Meeting and any          
adjournments or postponements thereof; provided that such persons will not      
exercise their discretionary voting authority to vote this proxy in favor of any
adjournments or postponements of the Special Meeting.                           

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       THIS PROXY, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, 
THIS PROXY WILL BE VOTED "FOR" THE PROPOSAL SET FORTH IN ITEM 1 AND WITH REGARD 
TO OTHER MATTERS THAT MAY COME BEFORE THE MEETING OR ANY POSTPONEMENT OR        
ADJOURNMENT THEREOF, IN THE DISCRETION OF THE PROXYHOLDERS AS DESCRIBED IN THE  
PROXY STATEMENT; PROVIDED THAT SUCH PERSONS WILL NOT EXERCISE THEIR             
DISCRETIONARY VOTING AUTHORITY TO VOTE THIS PROXY IN FAVOR OF ANY ADJOURNMENTS  
OR POSTPONEMENTS OF THE SPECIAL MEETING.                                        

      The undersigned hereby acknowledges receipt of the Notice of Special
Meeting of Stockholders and the accompanying Proxy Statement dated April 30,    
1998, relating thereto.                                                         

                                           ___________________________________
                                 (Signature)

                                           ___________________________________
                                             (Signature if held jointly)

                                           Date_________________________, 1998

                                           Please sign exactly as name appears
                                        hereon and mail it promptly even
                                         though you now plan to attend the
                                        Special Meeting of Stockholders.
                                     When shares are held by joint
                                       tenants, both should sign. When
                                      signing as Attorney, Executor,
                                           Administrator, Guardian or Trustee,
                                           please add your full title as such.
                                        If a corporation, please sign in
                                           full corporate name by president or
                                      other authorized officer. If a
                                           partnership or other entity, please
                                            sign in the name of such partnership
                                     or other entity by authorized
               person.

PLEASE MARK, SIGN AND DATE THIS PROXY CARD
AND PROMPTLY RETURN IT IN THE ENVELOPE PROVIDED.
NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES.

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