Prosource Inc – ‘8-K’ for 1/29/98 – EX-2.1

As of:  Monday, 2/2/98   ·   For:  1/29/98   ·   Accession #:  950123-98-751   ·   File #:  0-21677

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Current Report   —   Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K         Prosource Inc.                                         4     14K 
 2: EX-2.1      Agreement and Plan of Merger                          37    181K 
 3: EX-10.1     Voting Agreement                                      11     43K 
 4: EX-99.1     Press Release                                          3     11K 

EX-2.1   —   Agreement and Plan of Merger
Exhibit Table of Contents

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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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 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.......................................    3
SECTION 2.2.    Surrender and Payment......................................    3
SECTION 2.3.    Dissenting Shares..........................................    5
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.....................................    7

ARTICLE IV

 REPRESENTATIONS AND WARRANTIES OF THE COMPANY

SECTION 4.1.    Organization, Standing and Corporate Power.................    7
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............................................   10
SECTION 4.6.    Disclosure Documents.......................................   10
SECTION 4.7.    Property; Sufficiency of Assets............................   11
SECTION 4.8.    Absence of Certain Changes or Events.......................   11
SECTION 4.9.    Litigation.................................................   13
SECTION 4.10.   Compliance with Laws, Etc..................................   13

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SECTION 4.11.   Absence of Changes in Stock or Benefit Plans...............   13
SECTION 4.12.   ERISA Compliance...........................................   14
SECTION 4.13.   Tax Matters................................................   16
SECTION 4.14.   Debt Instruments...........................................   17
SECTION 4.15.   Insurance..................................................   17
SECTION 4.16.   Labor Matters..............................................   18
SECTION 4.17.   No Restrictive Agreements..................................   18
SECTION 4.18.   Interests of Officers and Directors........................   18
SECTION 4.19.   Brokers....................................................   19

 ARTICLE V

REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY

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

ARTICLE VI

COVENANTS OF THE COMPANY

SECTION 6.1.    Conduct of Business........................................   21
SECTION 6.2.    Shareholder Meeting; Proxy Material........................   22
SECTION 6.3.    Access to Information......................................   23
SECTION 6.4.    Covenants Regarding Certain Benefit Plans..................   23
SECTION 6.5.    Cooperation in Arrangements with Lenders...................   24

 ARTICLE VII

 COVENANTS OF PARENT

SECTION 7.1.    Confidentiality............................................   24
SECTION 7.2.    Obligations of Merger Subsidiary...........................   25
SECTION 7.3.    Voting of Shares...........................................   25
SECTION 7.4.    Director and Officer Liability.............................   25

ARTICLE VIII

 COVENANTS OF PARENT AND THE COMPANY

SECTION 8.1.    HSR Act Filings; Reasonable Efforts; Notification..........   26
SECTION 8.2.    Public Announcements.......................................   28

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SECTION 8.3.    No Solicitation............................................   28

ARTICLE IX

CONDITIONS TO THE MERGER

SECTION 9.1.    Conditions to the Obligations of Each Party................   28
SECTION 9.2.    Conditions to the Obligations of Parent and Merger              
                   Subsidiary..............................................   28
SECTION 9.3.    Conditions to the Obligations of the Company...............   30

 ARTICLE X

 TERMINATION

SECTION 10.1.   Termination................................................   30
SECTION 10.2.   Effect of Termination......................................   31

ARTICLE XI

 MISCELLANEOUS

SECTION 11.1.   Notices....................................................   31
SECTION 11.2.   Survival of Representations and Warranties.................   32
SECTION 11.3.   Amendments; No Waivers.....................................   32
SECTION 11.4.   Fees and Expenses..........................................   32
SECTION 11.5.   Successors and Assigns; Parties in Interest................   33
SECTION 11.6.   Governing Law..............................................   33
SECTION 11.7.   Counterparts; Effectiveness; Interpretation................   33

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INDEX OF DEFINED TERMS

                               Page                                         Page
Agreement.........................1          Governmental Entity...............8
Benefit Plans....................12          HSR Act...........................9
CA Act............................9          indebtedness.....................16
Certificate of Merger.............2          Indemnified Parties..............23
Class A Shares....................1          Material Adverse Effect...........6
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...........9          Option Plans......................5
Company Shareholder Approval......8          Parent............................1
Company Shareholder Meeting......21          Parent Material Adverse Effect...18
Consents..........................8          person............................4
Constituent Corporations..........2          Plans............................13
Controlled Group Liability.......13          Preferred Shares..................7
DGCL..............................1          Qualified Plans..................13
Dissenting Shares.................4          SEC...............................9
Effective Time....................2          SEC Documents.....................9
ERISA............................13          Securities Act....................9
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
arrangements made by or on behalf of the Company or any of its subsidiaries.  No

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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

-32-

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘8-K’ Filing		Date		First		Last			Other Filings
		12/31/98		27
		7/1/98		33
Filed on:		2/2/98
For Period End:		1/29/98		1		6			3,  SC 13G
		1/1/98		31
		12/31/97		12
		9/27/97		15		17			10-Q
		12/28/96		17					10-K405
		1/1/96		14
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