LOAN AND SECURITY AGREEMENT

                            Dated as of June 30, 1998

                                      Among

                     THE FINANCIAL INSTITUTIONS NAMED HEREIN

                                 as the Lenders

                                       and

                        BANKAMERICA BUSINESS CREDIT, INC.

                                  as the Agent

                                       and

                             MERISEL AMERICAS, INC.


                                 as the Borrower


<PAGE>
<TABLE>
<CAPTION>
                                TABLE OF CONTENTS
                                                                                                             PAGE

<S>        <C>                                                                                                  <C> 

ARTICLE 1         INTERPRETATION OF THIS AGREEMENT................................................................1

1.1        Definitions............................................................................................1
1.2        Accounting Terms......................................................................................24
1.3        Other Terms...........................................................................................24
1.4        Other Interpretive Provisions.........................................................................24

ARTICLE 2         LOANS AND LETTERS OF CREDIT....................................................................25

2.1        Total Facility........................................................................................25
2.2        Revolving Loans.......................................................................................26
2.3        Letters of Credit.....................................................................................32
2.4        Foreign Exchange Transactions.........................................................................38

ARTICLE 3         INTEREST AND FEES..............................................................................38

3.1        Interest..............................................................................................38
3.2        Conversion and Continuation Elections.................................................................39
3.3        Maximum Interest Rate.................................................................................40
3.4        Facility Fee..........................................................................................41
3.5        Unused Line Fee.......................................................................................41
3.6        Letter of Credit Fee..................................................................................41
3.7        Collateral Management Fee.............................................................................42
3.8        Foreign Exchange Risk Fee.............................................................................42

ARTICLE 4         PAYMENTS AND PREPAYMENTS.......................................................................42

4.1        Revolving Loans.......................................................................................42
4.2        Termination of Facility...............................................................................43
4.3        Payments by the Borrower..............................................................................43
4.4        Payments as Revolving Loans...........................................................................44
4.5        Apportionment, Application and Reversal of Payments...................................................44
4.6        Indemnity for Returned Payments.......................................................................45
4.7        Agent's and Lenders' Books and Records; Monthly Statements............................................45

ARTICLE 5         TAXES, YIELD PROTECTION AND ILLEGALITY.........................................................46

5.1        Taxes.................................................................................................46
5.2        Illegality............................................................................................48
5.3        Increased Costs and Reduction of Return...............................................................48
5.4        Funding Losses........................................................................................49
5.5        Inability to Determine Rates..........................................................................49
5.6        Certificates of Lenders...............................................................................49
5.7        Survival..............................................................................................49
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
<S>        <C>                                                                                                  <C>

ARTICLE 6         COLLATERAL.....................................................................................50

6.1        Grant of Security Interest............................................................................50
6.2        Perfection and Protection of Security Interest........................................................50
6.3        Location of Collateral................................................................................51
6.4        Title to, Liens on, and Sale and Use of Collateral....................................................51
6.5        Appraisals............................................................................................52
6.6        Access and Examination; Confidentiality...............................................................52
6.7        Collateral Reporting..................................................................................53
6.8        Accounts..............................................................................................54
6.9        Collection of Accounts; Payments......................................................................55
6.10       Inventory; Perpetual Inventory........................................................................55
6.11       Documents, Instruments, and Chattel Paper.............................................................56
6.12       Right to Cure.........................................................................................56
6.13        Power of Attorney....................................................................................56
6.14       The Agent's and Lenders' Rights, Duties and Liabilities...............................................57

ARTICLE 7         BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES..............................................57

7.1        Books and Records.....................................................................................57
7.2        Financial Information.................................................................................57
7.3        Notices to the Lenders................................................................................59

ARTICLE 8         GENERAL WARRANTIES AND REPRESENTATIONS.........................................................61

8.1        Authorization, Validity, and Enforceability of this Agreement and the Loan Documents..................61
8.2        Validity and Priority of Security Interest............................................................62
8.3        Organization and Qualification........................................................................62
8.4        Corporate Name; Prior Transactions....................................................................62
8.5        Subsidiaries and Affiliates...........................................................................62
8.6        Financial Statements and Projections..................................................................62
8.7        Intentionally Omitted.................................................................................63
8.8        Solvency..............................................................................................63
8.9        Debt..................................................................................................63
8.10       Distributions.........................................................................................63
8.11       Title to Property.....................................................................................63
8.12       Real Estate; Leases...................................................................................63
8.13       Intentionally Omitted.................................................................................63
8.14       Trade Names...........................................................................................63
8.15       Litigation............................................................................................64
8.16       Intentionally Omitted.................................................................................64
8.17       Labor Disputes........................................................................................64
8.18       Environmental Laws....................................................................................64
8.19       No Violation of Law...................................................................................65
8.20       No Default............................................................................................65
8.21       ERISA Compliance......................................................................................65

</TABLE>

<PAGE>
<TABLE>
<CAPTION>
<S>        <C>                                                                                                  <C>

8.22       Taxes.................................................................................................66
8.23       Regulated Entities....................................................................................66
8.24       Use of Proceeds; Margin Regulations...................................................................66
8.25       Copyrights, Patents, Trademarks and Licenses, etc.....................................................66
8.26       No Material Adverse Change............................................................................67
8.27       Governmental Authorization............................................................................67
8.28       Year 2000 Compliance..................................................................................67

ARTICLE 9         AFFIRMATIVE AND NEGATIVE COVENANTS.............................................................67

9.1        Taxes and Other Obligations...........................................................................67
9.2        Corporate Existence and Good Standing.................................................................67
9.3        Compliance with Law and Agreements; Maintenance of Licenses...........................................68
9.4        Maintenance of Property...............................................................................68
9.5        Insurance.............................................................................................68
9.6        [Intentionally omitted]...............................................................................69
9.7        Environmental Laws....................................................................................69
9.8        Compliance with ERISA.................................................................................69
9.9        Mergers, Consolidations or Sales......................................................................69
9.10       Distributions; Capital Change; Restricted Investments.................................................69
9.11       Transactions Affecting Collateral or Obligations......................................................70
9.12       Intentionally Omitted.................................................................................70
9.13       Debt..................................................................................................70
9.14       [Intentionally Omitted]...............................................................................70
9.15       Transactions with Affiliates..........................................................................70
9.16       Investment Banking and Finder's Fees..................................................................71
9.17       Business Conducted....................................................................................72
9.18       Liens.................................................................................................72
9.19       [Intentionally Omitted]...............................................................................72
9.20       Intentionally Omitted.................................................................................72
9.21       Fiscal Year...........................................................................................72
9.22       Minimum Adjusted Net Earnings from Operations.........................................................72
9.23       Interest Coverage Ratio...............................................................................72
9.24       Use of Proceeds.......................................................................................72
9.25       Further Assurances....................................................................................72

ARTICLE 10        CONDITIONS OF LENDING..........................................................................72

10.1       Conditions Precedent to Making of Loans on the Closing Date...........................................72
10.2       Conditions Precedent to Each Loan.....................................................................75

ARTICLE 11        DEFAULT; REMEDIES..............................................................................75

11.1       Events of Default.....................................................................................75
11.2       Remedies..............................................................................................78

ARTICLE 12        TERM AND TERMINATION...........................................................................79

12.1       Term and Termination..................................................................................79

</TABLE>


<PAGE>
<TABLE>
<CAPTION>
<S>        <C>                                                                                                  <C>

ARTICLE 13        AMENDMENTS; WAIVER; PARTICIPATIONS;
                  ASSIGNMENTS; SUCCESSORS........................................................................80

13.1       No  Waivers Cumulative Remedies.......................................................................80
13.2       Amendments and Waivers................................................................................80
13.3       Assignments; Participations...........................................................................81

ARTICLE 14        THE AGENT......................................................................................83

14.1       Appointment and Authorization.........................................................................83
14.2       Delegation of Duties..................................................................................83
14.3       Liability of Agent....................................................................................84
14.4       Reliance by Agent.....................................................................................84
14.5       Notice of Default.....................................................................................84
14.6       Credit Decision.......................................................................................85
14.7       Indemnification.......................................................................................85
14.8       Agent in Individual Capacity..........................................................................85
14.9        Successor Agent......................................................................................86
14.10      Withholding Tax.......................................................................................86
14.11      Collateral Matters....................................................................................87
14.12      Restrictions on Actions by Lenders; Sharing of Payments...............................................88
14.13      Agency for Perfection.................................................................................89
14.14      Payments by Agent to Lenders..........................................................................89
14.15      Concerning the Collateral and the Related Loan Documents..............................................89
14.16      Field Audit and Examination Reports; Disclaimer by Lenders............................................89
14.17      Relation Among Lenders................................................................................90

ARTICLE 15        MISCELLANEOUS..................................................................................90

15.1       Cumulative Remedies; No Prior Recourse to Collateral..................................................90
15.2       Severability..........................................................................................91
15.3       Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.................................91
15.4       WAIVER OF JURY TRIAL..................................................................................93
15.5       Survival of Representations and Warranties............................................................93
15.6       Other Security and Guaranties.........................................................................93
15.7       Fees and Expenses.....................................................................................93
15.8       Notices...............................................................................................94
15.9       Waiver of Notices.....................................................................................95
15.10      Binding Effect........................................................................................95
15.11      Indemnity of the Agent and the Lenders by the Borrower................................................95
15.12      Limitation of Liability...............................................................................96
15.13      Final Agreement.......................................................................................96
15.14      Counterparts..........................................................................................96
15.15      Captions..............................................................................................97
15.16      Right of Setoff.......................................................................................97

</TABLE>

<PAGE>

                           LOAN AND SECURITY AGREEMENT


         Loan and  Security  Agreement,  dated as of June 30,  1998,  among  the
financial  institutions  listed on the  signature  pages hereof (such  financial
institutions,  together  with  their  respective  successors  and  assigns,  are
referred to hereinafter each  individually as a "Lender" and collectively as the
"Lenders"),  BankAmerica  Business Credit, Inc., a Delaware corporation ("BABC")
with an office at 40 East 52nd Street,  New York,  New York 10022,  as agent for
the Lenders (in its capacity as agent, the "Agent"), and Merisel Americas, Inc.,
a Delaware corporation,  with offices at 200 Continental Boulevard,  El Segundo,
California (the "Borrower").

                               W I T N E S S E T H

         WHEREAS,  the Borrower has requested  the Lenders to make  available to
the  Borrower a  revolving  line of credit for loans and letters of credit in an
amount not to exceed  $100,000,000  and which  extensions of credit the Borrower
will use for its working capital needs and general business purposes;

         WHEREAS,  the Lenders  have agreed to make  available to the Borrower a
revolving  credit  facility  upon the  terms  and  conditions  set forth in this
Agreement.

         NOW,   THEREFORE,   in  consideration  of  the  mutual  conditions  and
agreements set forth in this Agreement, and for good and valuable consideration,
the receipt of which is hereby  acknowledged,  the Lenders,  the Agent,  and the
Borrower hereby agree as follows.

                                    ARTICLE 1

                        INTERPRETATION OF THIS AGREEMENT

         1.1  Definitions.  As used herein:

                  "Accounts"  means all of the Borrower's now owned or hereafter
acquired  accounts  (as  defined in the UCC)  arising  from the sale or lease of
Inventory  or  rendition  of  services,  whether or not they have been earned by
performance, other than Excluded Assets.

                  "Account Debtor" means each Person obligated in any way on or 
in connection with an Account.

                  "Adjusted Net Earnings from Operations" means, with respect to
any fiscal  period of the Parent,  the  Parent's  consolidated  net income after
provision for income taxes for such fiscal  period,  as determined in accordance
with GAAP and reported on the Financial  Statements  for such period,  excluding
(without  duplication) any and all of the following included in such net income:
(a) gain (net of any taxes paid or accrued for in accordance  with GAAP) or loss
arising from the sale of any capital assets; (b) gain (net of any deferred taxes
liability  accrued for in accordance with GAAP) arising from any write-up in the
book value of any asset or loss  arising from any write down of any asset (other
than Inventory,  Accounts or accounts  payable);  (c) earnings (net of any taxes

<PAGE>

paid or  accrued  for in  accordance  with  GAAP) or losses of any  corporation,
substantially  all the assets of which have been  acquired  by the Parent in any
pooling  of  interests  transaction,  to  the  extent  realized  by  such  other
corporation   prior  to  the  date  of   acquisition;   (d)   earnings   of  any
nonconsolidated  business  entity in which the Parent has an ownership  interest
unless (and only to the extent) such earnings  shall actually have been received
by the  Parent  in the  form of cash  distributions  (net of any  taxes  paid or
accrued for in  accordance  with GAAP);  (e) earnings  (net of any taxes paid or
accrued for in accordance  with GAAP) of any Person to which a substantial  part
of the assets of the Parent shall have been sold, transferred or disposed of, or
into which the Parent shall have been merged, or which has been a party with the
Parent to any consolidation or other form of  reorganization,  prior to the date
of  such  transaction;  (f)  gain  (net of any  taxes  paid  or  accrued  for in
accordance  with GAAP) or loss  arising from the  acquisition  of debt or equity
securities of the Parent or from  cancellation  or  forgiveness of debt; and (g)
any other  extraordinary  non-recurring  gains (net of any taxes paid or accrued
for in accordance with GAAP) or losses (other than losses arising from any write
down of Inventory, Accounts or accounts payable).

                  "Affiliate"  means, as to any Person,  any other Person which,
directly or  indirectly,  is in control of, is controlled by, or is under common
control with, such Person or which owns, directly or indirectly, fifteen percent
(15%) or more of the outstanding  equity interest of such Person. A Person shall
be  deemed  to  control  another  Person if the  controlling  Person  possesses,
directly  or  indirectly,  the power to direct  or cause  the  direction  of the
management  and policies of the other Person,  whether  through the ownership of
voting securities, by contract, or otherwise.

                  "Agent" means BankAmerica Business Credit, Inc., solely in its
capacity as agent for the Lenders, and any successor agent.

                  "Agent Advances" has the meaning specified in Section 2.2(i).

                  "Agent's  Liens" means the Liens in the Collateral  granted to
the Agent,  for the ratable benefit of the Lenders,  BABC, and Agent pursuant to
this Agreement and the other Loan Documents.

                  "Agent-Related  Persons"  means the  Agent  and any  successor
agent, together with their respective Affiliates,  and the officers,  directors,
employees, agents and attorneys-in-fact of such Persons and Affiliates.

                  "Aggregate Revolver  Outstandings" means, at any time: the sum
of (a) the unpaid  balance  of  Revolving  Loans,  (b) the  aggregate  amount of
Pending Revolving Loans, (c) one hundred percent (100%) of the aggregate undrawn
face amount of all outstanding  Letters of Credit,  and (d) the aggregate amount
of any unpaid reimbursement obligations in respect of Letters of Credit.

                  "Agreement" means this Loan and Security Agreement.

                  "Anniversary Date" means each anniversary of the Closing Date.


<PAGE>

                  "Applicable  Margin"  means  (i)  with  respect  to Base  Rate
Revolving  Loans,  0%; and (ii) with respect to LIBOR  Revolving Loans except as
otherwise  provided in the  immediately  succeeding  sentence the percentage set
forth below which  corresponds to the Interest  Coverage  Ratio.  On the Closing
Date and  thereafter for the period ending on the last day of the month in which
the Agent  receives the quarterly  financial  statements  for the fiscal quarter
ended June 30, 1998, the Applicable Margin with respect to LIBOR Revolving Loans
shall be 2.0%. The Applicable Margin shall thereafter be adjusted following each
delivery  to the  Agent of the  quarterly  financial  statements  of the  Parent
required  pursuant to Section 7.2(c) (together with the  corresponding  Interest
Coverage Ratio  Certificate)  for the period of two consecutive  quarters ending
June 30,  1998,  for the  period of three  consecutive  fiscal  quarters  ending
September  30, 1998,  and for each period of four  consecutive  fiscal  quarters
ending on December 31, 1998 and thereafter, each such adjustment to be effective
on the first day of the first full calendar month after each such delivery.


          Interest Coverage Ratio       LIBOR Revolving Loan Applicable Margin

          Greater than or               1.875%
          equal to 2.0:1.0

          Greater than or               2.0%
          equal to 1.25:1.0 but less
          than 2.0:1.0

          Less than 1.25:1.0            2.25%


         Notwithstanding anything in this definition to the contrary, (i) before
any reductions in the Applicable  Margin with respect to LIBOR  Revolving  Loans
will be instituted and maintained,  the Availability  (calculated without regard
to the Maximum Revolver Amount) must be greater than or equal to $50,000,000.00;
(ii) in the event  that the  Agent  shall  fail to  receive  any such  financial
statements and the related  Interest  Coverage Ratio  Certificate for any fiscal
quarter of the Parent  within  fifty-five  (55) days  following  the end of such
fiscal quarter (within  one-hundred  (100) days following the end of such fiscal
quarter if such fiscal  quarter is the last fiscal  quarter of any Fiscal Year),
then  the  Applicable   Margin  shall,  at  the  end  of  such   fifty-fifth  or
one-hundredth  day, as  appropriate,  immediately  and without notice or further
action be the Applicable  Margin then in effect (such Applicable Margin to be in
effect  until the first day of the first  full  calendar  month  after the Agent
receives the quarterly financial statements of the Parent required under Section
7.2(c) for the most recent fiscal quarter of the Parent and the related Interest
Coverage  Ratio  Certificate ) and (iii) in the event,  with respect to any four
(4)  fiscal  quarter  period of the Parent  which  shall be a Fiscal  Year,  the
audited  financial  statements of the Parent  required  under Section 7.2(a) for
such Fiscal Year shall  indicate  an Interest  Coverage  Ratio for such four (4)
fiscal  quarter  period (as determined by the Agent) less than that reflected in
the Interest Coverage Ratio Certificate delivered to the Agent for such four (4)
fiscal quarter period, the Applicable Margin shall be adjusted retroactively (to

<PAGE>

the effective date of the Applicable  Margin which was determined based upon the
delivery of such Interest  Coverage Ratio  Certificate and the related quarterly
financial  statements of the Parent delivered pursuant to Section 7.2(c) for the
last quarter of such four (4) fiscal  quarter  period) to reflect an  Applicable
Margin  based upon the  Interest  Coverage  Ratio  determined  from the  audited
financial statements and the Borrower shall make payments to the Agent on behalf
of the Lenders to reflect such adjustment.

                  "Assignee" has the meaning specified in Section 13.3(a).

                  "Assignment and Acceptance" has the meaning specified in 
Section 13.3(a).

                  "Attorney  Costs"  means and  includes  all  reasonable  fees,
expenses and  disbursements of any law firm or other external counsel engaged by
the Agent,  the allocated  cost of internal  legal services of the Agent and all
reasonable expenses and disbursements of internal counsel of the Agent.

                  "Availability" means, at any time, (x) the lesser of: (a) the 
Maximum Revolver Amount or (b) the Borrowing Base, less (y) the sum of:

                  (i) the Aggregate Revolver Outstandings;

                  (ii) the Rent Reserve; and

                  (iii) all other  reserves  which the Agent deems  necessary in
the exercise of its reasonable  credit  judgment to maintain with respect to the
Borrower's account, including, without limitation, reserves for any amount which
the Agent or any Lender may be obligated to pay in the future for the account of
the Borrower.

                  "BABC" means BankAmerica Business Credit, Inc.

                  "BABC Loan" and "BABC Loans" have the meanings specified in 
Section 2.2(h).

                  "Bank of  America"  means Bank of America  National  Trust and
Savings  Association,  a national banking  association,  or any successor entity
thereto.

                  "Bankruptcy Code" means Title 11 of the United States Code 
(11 U.S.C. ss. 101 et seq.).

                  "Base Rate" means, for any day, the rate of interest in effect
for such day as publicly  announced  from time to time by Bank of America in San
Francisco,  California,  as its "reference  rate" (the "reference  rate" being a
rate  set by Bank of  America  based  upon  various  factors  including  Bank of
America's  costs and  desired  return,  general  economic  conditions  and other
factors,  and is used as a reference point for pricing some loans,  which may be
priced at, above,  or below such  announced  rate).  Any change in the reference
rate  announced by Bank of America  shall take effect at the opening of business
on the day specified in the public  announcement  of such change.  Each Interest
Rate based upon the Base Rate shall be adjusted  simultaneously  with any change
in the Base Rate.


<PAGE>

                  "Base Rate  Revolving  Loan" means a Revolving Loan during any
period in which it bears interest based on the Base Rate.

                  "Borrowing"   means  a  borrowing   hereunder   consisting  of
Revolving  Loans made on the same day by the Lenders to the Borrower (or by BABC
in the case of a Borrowing  funded by BABC Loans) or by the Agent in the case of
a Borrowing consisting of an Agent Advance.

                  "Borrowing  Base" means (a) the sum of fifty  percent (50%) of
Eligible  Domestic  Inventory,  plus forty  percent  (40%) of Eligible  Imported
Inventory;  less  (b) the sum of the  Inventory  Mix  Reserve,  the  Liquidation
Expense Reserve, the Foreign Exchange Reserve and the Vendor Lien Reserve.

                  "Borrowing  Base   Certificate"   means  a  certificate  by  a
Responsible Officer of the Borrower,  substantially in the form of Exhibit A (or
another form  acceptable  to the Agent)  setting  forth the  calculation  of the
Availability,  including a calculation  of each component  thereof,  all in such
detail as shall be satisfactory to the Agent.  All  calculations of Availability
in connection  with the  preparation  of any Borrowing  Base  Certificate  shall
originally  be made by the Borrower and certified to the Agent;  provided,  that
the Agent  shall have the right to review and  adjust,  in the  exercise  of its
reasonable  credit  judgment,  any such  calculation  to the  extent  that  such
calculation is not in accordance with this Agreement.

                  "Business  Day"  means  (a)  any day  that is not a  Saturday,
Sunday,  or a day on which banks in San Francisco,  California,  are required or
permitted to be closed,  and (b) with  respect to all  notices,  determinations,
fundings  and  payments  in  connection  with the LIBOR Rate or LIBOR  Revolving
Loans,  any day that is a Business  Day pursuant to clause (a) above and that is
also a day on which trading in Dollars is carried on by and between banks in the
London interbank market.

                  "Capital Adequacy Regulation" means any guideline,  request or
directive of any central bank or other Governmental Authority, or any other law,
rule or  regulation,  whether  or not  having  the force of law,  in each  case,
regarding capital adequacy of any bank or of any corporation controlling a bank.

                  "Capital  Expenditures"  means all expenditures of Borrower or
its Subsidiaries  (excluding barter transactions effected in the ordinary course
of business)  which should be  capitalized  in accordance  with GAAP,  provided,
however,  that Capital  Expenditures for the Borrower and its Subsidiaries shall
not  include  (a)  expenditures  to the  extent  made with the  proceeds  of the
issuance  of  capital  stock  of  Parent  or  the  Borrower  or  the  Borrower's
Subsidiaries,  (b)  expenditures of the Borrower and its  Subsidiaries  that are
paid by a third party and for which  neither the Borrower nor any  Subsidiary of
the  Borrower  has  provided  or is  required  to provide or incur,  directly or
indirectly, any consideration or obligation to such third party and (c) the book
value of any asset owned by the Borrower and its Subsidiaries prior to or during
any relevant  period to the extent that such book value is included as a Capital
Expenditure  during such period as a result of the Borrower and its Subsidiaries
reusing  or  beginning  to  reuse  such  asset  during  such  period  without  a
corresponding expenditure actually having been made in such period.


<PAGE>

                  "Capital  Lease"  means any lease of property by the  Borrower
which,  in accordance with GAAP, is or should be reflected as a capital lease on
the balance sheet of Borrower.

                  "Change of Control" means (a) the  acquisition by any "person"
or "group" (as such terms are used in Section 13(d) and 14(d)(2) of the Exchange
Act (other than Stonington  Capital  Appreciation  1994 Fund, L.P. or any of its
Affiliates)  of  beneficial  ownership  (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Exchange Act) of 35% or more of the
outstanding  shares of voting  stock of the Parent;  (b) during any period of 12
consecutive  calendar  months,  commencing  on the date of this  Agreement,  the
ceasing of those individuals (the "Continuing Directors") who (i) were directors
of the Parent on the first day of each such period or (ii)  subsequently  became
directors of the Parent and whose  initial  election or initial  nomination  for
election  subsequent  to that date was approved by a majority of the  Continuing
Directors  then on the board of directors of the Parent to constitute a majority
of the  board  of  directors  of the  Parent;  or (c) the  Parent's  failure  to
beneficially  own at  least  51% of all of the  shares  of  common  stock of the
Borrower and to control the board of directors and management of the Borrower.

                  "Closing Date" means the date of this Agreement.

                  "Code"  means the Internal  Revenue  Code of 1986,  as amended
from  time to time,  and any  successor  statute,  and  regulations  promulgated
thereunder.

                  "Collateral" has the meaning specified in Section 6.1.

                  "Collateral Management Fee" has the meaning specified in 
Section 3.7.

                  "Commitment"  means, at any time with respect to a Lender, the
principal  amount  set  forth  beside  such  Lender's  name  under  the  heading
"Commitment"  on the signature  pages of this Agreement or on the signature page
of the Assignment  and Acceptance  pursuant to which such Lender became a Lender
hereunder in accordance  with the provisions of Section 13.3, as such Commitment
may be adjusted from time to time in accordance  with the  provisions of Section
13.3,  and  "Commitments"  means,  collectively,  the  aggregate  amount  of the
commitments of all of the Lenders.

                  "Consolidated  Net Worth" means, with respect to any Person at
any date of determination,  the consolidated stockholders' equity represented by
the  shares  of  such  Person's  capital  stock  outstanding  at such  date,  as
determined on a consolidated basis in accordance with GAAP.

                  "Credit Support" has the meaning specified in Section 2.3(a).

                  "Contaminant" means any waste, pollutant, hazardous substance,
toxic substance,  hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos in any form or condition, polychlorinated biphenyls
("PCBs"), or any constituent of any such substance or waste.


<PAGE>

                  "Debt" means, as to any Person,  (i) indebtedness for borrowed
money or as evidenced by notes,  bonds,  debentures or similar  evidences of any
such Debt of such Person, the deferred and unpaid purchase price of any property
or business (other than trade accounts  payable  incurred in the ordinary course
of business and  constituting  current  liabilities);  (ii) all  obligations and
liabilities of any other Person (other than such Person's  Subsidiaries) secured
by any Lien on such  Person's  property,  even though such Person shall not have
assumed or become liable for the payment thereof;  provided,  however,  that all
such obligations and liabilities  which are limited in recourse to such property
shall be included in Debt only to the extent of the book value of such  property
as would be shown on a balance sheet of such Person  prepared in accordance with
GAAP; (iii) all obligations or liabilities  created or arising under any Capital
Lease or  conditional  sale or other title  retention  agreement with respect to
property used or acquired by such Person, even if the rights and remedies of the
lessor,  seller  or  lender  thereunder  are  limited  to  repossession  of such
property; provided, however, that all such obligations and liabilities which are
limited in  recourse  to such  property  shall be  included  in Debt only to the
extent of the book value of such  property as would be shown on a balance  sheet
of such Person  prepared  in  accordance  with GAAP;  and (iv)  obligations  and
liabilities under Guaranties.

                  "Default"  means any  event or  circumstance  which,  with the
giving of notice,  the lapse of time, or both,  would (if not cured or otherwise
remedied during such time) constitute an Event of Default.

                  "Defaulting Lender" has the meaning specified in Section 
2.2(g)(2).

                  "Default Rate" means a fluctuating  per annum interest rate at
all times equal to the sum of (a) the  otherwise  applicable  Interest Rate plus
(b) two percent (2.0%). Each Default Rate shall be adjusted  simultaneously with
any change in the applicable Interest Rate. In addition, with respect to Letters
of Credit,  the Default  Rate shall mean an increase in the Letter of Credit Fee
by two percent (2.0%).

                  "Distribution"  means, in respect of any corporation:  (a) the
payment or making of any dividend or other  distribution  of property in respect
of  capital  stock  (or  any  options  or  warrants  for  such  stock)  of  such
corporation,  other  than  distributions  in  capital  stock (or any  options or
warrants for capital stock);  or (b) the redemption or other acquisition by such
corporation  of any capital stock (or any options or warrants for such stock) of
such corporation.

                  "DOL" means the United States Department of Labor or any 
successor department or agency.

                  "Dollar" and "$" means dollars in the lawful currency of the 
United States.

                  "Eligible Domestic Inventory" means Eligible Inventory that is
located in the United States.


<PAGE>

                  "Eligible  Imported  Inventory"  means Imported  Inventory (i)
which would constitute  Eligible  Inventory  (except for it being in transit and
not located in the United  States),  (ii) which is covered by letters of credit,
(iii) with respect to which the  documents of title are  consigned to the Agent,
and (iv) which is subject to a first perfected Agent's Lien.

                  "Eligible Inventory" means Inventory,  valued by FIFO weighted
average cost, that  constitutes  raw materials and first quality  finished goods
and that,  unless the Agent in its sole  discretion  elects:  (a) is not, in the
Agent's reasonable  opinion,  obsolete,  slow moving, or unmerchantable;  (b) is
located at premises  owned or leased by the  Borrower  or on premises  otherwise
reasonably  acceptable to the Agent; (c) upon which the Agent for the benefit of
the Lenders has a first priority  perfected  security  interest (subject only to
those certain Liens set forth in clauses (a), (d), (g) and (o) of the definition
of Permitted  Liens);  (d) is not  work-in-process,  spare parts,  packaging and
shipping materials,  supplies,  bill-and-hold Inventory, prepaid but undelivered
Inventory,  returned Inventory subject to any Securitization Facility, defective
Inventory, Inventory held for return to suppliers, or Inventory delivered to the
Borrower on consignment; (e) is not in-transit Inventory (except Inventory being
transported  between storage facilities of the Borrower);  and (f) the Agent, in
the exercise of its  reasonable  commercial  discretion,  deems  eligible as the
basis for Revolving  Loans based on such  collateral and credit  criteria as the
Agent may from time to time establish. If any Inventory at any time ceases to be
Eligible  Inventory,   such  Inventory  shall  promptly  be  excluded  from  the
calculation of Eligible Inventory.

                  "Environmental  Claims" means all claims, however asserted, by
any  Governmental  Authority or other  Person  alleging  potential  liability or
responsibility for violation of any Environmental Law, or for Releases or injury
to the environment.

                  "Environmental  Laws" means all federal,  state or local laws,
statutes, common law duties, rules, regulations,  ordinances and codes, together
with  all   administrative   orders,   directed  duties,   requests,   licenses,
authorizations and permits of, and agreements with, any Governmental  Authority,
in each case relating to environmental, health, safety and land use matters.

                  "Environmental Lien" means a Lien in favor of any Governmental
Authority for (1) any  liability  under any  Environmental  Laws, or (2) damages
arising from, or costs incurred by such Governmental Authority in response to, a
Release or threatened Release of a Contaminant into the environment.

                  "Environmental  Property  Transfer  Act" means any  applicable
requirement  of law  that  conditions,  restricts,  prohibits  or  requires  any
notification  or  disclosure  triggered  by the  closure of any  property or the
transfer,  sale or lease of any  property or deed or title for any  property for
environmental   reasons,   including,   but  not  limited   to,  any   so-called
"Environmental  Cleanup  Responsibility Acts" or "Responsible  Property Transfer
Acts."

                  "Equipment"   means  all  of  the  Borrower's  now  owned  and
hereafter acquired machinery, equipment, furniture,  furnishings,  fixtures, and
other tangible  personal property (except  Inventory),  including motor vehicles
with respect to which a certificate  of title has been issued,  aircraft,  dies,
tools,  jigs,  and office  equipment,  as well as all of such types of  property
leased by the  Borrower  and all of the  Borrower's  rights and  interests  with

<PAGE>

respect thereto under such leases  (including,  without  limitation,  options to
purchase);  together  with all  present  and  future  additions  and  accessions
thereto,  replacements therefor, component and auxiliary parts and supplies used
or to be used  in  connection  therewith,  and  all  substitutes  for any of the
foregoing, and all manuals, drawings,  instructions,  warranties and rights with
respect thereto; wherever any of the foregoing is located.

                  "ERISA" means the Employee  Retirement  Income Security Act of
1974, and regulations promulgated thereunder.

                  "ERISA  Affiliate" means any trade or business (whether or not
incorporated)  under  common  control  with the  Borrower  within the meaning of
Section  414(b) or (c) of the Code (and Sections  414(m) and (o) of the Code for
purposes of provisions relating to Section 412 of the Code).

                  "ERISA  Event" means (a) a Reportable  Event with respect to a
Pension  Plan;  (b) a withdrawal by the Borrower or any ERISA  Affiliate  from a
Pension Plan subject to Section 4063 of ERISA during a plan year in which it was
a  substantial  employer  (as  defined  in  Section  4001(a)(2)  of  ERISA) or a
cessation  of  operations  which is treated as such a withdrawal  under  Section
4062(e) of ERISA;  (c) a complete or partial  withdrawal  by the Borrower or any
ERISA Affiliate from a Multiemployer  Plan or notification that a Multi-employer
Plan is in  reorganization;  (d) the filing of a notice of intent to  terminate,
the treatment of a Plan  amendment as a termination  under Section 4041 or 4041A
of ERISA, or the  commencement of proceedings by the PBGC to terminate a Pension
Plan or  Multiemployer  Plan; (e) the occurrence of an event or condition  which
might  reasonably be expected to constitute  grounds under Section 4042 of ERISA
for the  termination  of, or the  appointment  of a trustee to  administer,  any
Pension  Plan or  Multiemployer  Plan;  or (f) the  imposition  of any  material
liability  under  Title IV of ERISA,  other than for PBGC  premiums  due but not
delinquent  under  Section  4007  of  ERISA,  upon  the  Borrower  or any  ERISA
Affiliate.

                  "Event of Default" has the meaning specified in Section 11.1.

                  "Excess Cash Flow" for any period  means (a) the  consolidated
net  income of the  Borrower  and its  Subsidiaries  for such  period,  plus the
following to the extent deducted in calculating  such  consolidated  net income:
(i) income tax expense or provision  for taxes,  (ii)  interest  expense,  (iii)
depreciation  expense,  (iv)  amortization  expense  and (v) all  other  noncash
charges, in each case for such period; less (b) the sum of (i) interest expense,
(ii) Capital  Expenditures not financed by any other Person, (iii) taxes paid in
cash, and (iv) scheduled payments of principal indebtedness.

                  "Exchange Act" means the Securities  Exchange Act of 1934, and
regulations promulgated thereunder.

                  "Excluded   Asset"  shall  be  any  (i)  accounts   receivable
transferred  by  Borrower  in  connection  with  any   Securitization   Facility
including, without limitation any Returned Goods and Receivables Assets (as such
terms are defined in the Intercreditor Agreement), (ii) accounts receivable that
are due from the Borrower's  vendors,  (iii)  inventory  which as of the Closing

<PAGE>

Date is subject to agreements with vendors or floor plan creditors that prohibit
the granting of an Agent's  Lien  therein and which are listed on Schedule  1.1,
and (iv)  Inventory  which after the date of this Agreement  becomes  subject to
agreements with vendors or floor plan creditors that prohibit the granting of an
Agent's  Lien on  inventory  sold by such  vendor or financed by such floor plan
creditor,  provided that upon the Agent's receiving written notice from Borrower
(by  overnight  mail or confirmed  facsimile)  of the entering  into of any such
agreement,  the Agent's Lien in such Inventory shall be released on the eleventh
day  following  the Agent's  receipt of such notice;  provided that such release
(and the exclusion  from Inventory  described in the preceding  clause (iii) and
this  clause  (iv))  shall  only be for the period  any such  prohibition  is in
effect.

                  "Facility Fee" has the meaning specified in Section 3.4.

                  "FDIC" means the Federal Deposit  Insurance  Corporation,  and
any Governmental Authority succeeding to any of its principal functions.

                  "Federal Funds Rate" means, for any day, the rate set forth in
the  weekly  statistical  release  designated  as  H.15(519),  or any  successor
publication,  published by the Federal  Reserve Bank of New York  (including any
such successor,  "H.15(519)") on the preceding Business Day opposite the caption
"Federal  Funds  (Effective)";  or, if for any  relevant day such rate is not so
published on any such preceding  Business Day, the rate for such day will be the
arithmetic mean as determined by the Agent of the rates for the last transaction
in overnight  Federal funds  arranged prior to 9:00 a.m. (New York City time) on
that day by each of three leading  brokers of Federal funds  transactions in New
York City selected by the Agent.

                  "Federal  Reserve  Board"  means the Board of Governors of the
Federal Reserve System or any successor thereto.

                  "Fee Letter"  means that certain  agreement  between Agent and
Borrower  reflecting  certain  fees  owed to the Agent in  connection  with this
Agreement and the transactions contemplated hereby.

                  "Financial  Statements"  means,  according  to the  context in
which it is used,  the  financial  statements  referred to in Section 8.6 or any
other financial  statements required to be given to the Lenders pursuant to this
Agreement (other than the Latest Projections).

                  "Fiscal Year" means the  Borrower's  fiscal year for financial
accounting  purposes.  The current  Fiscal Year of the Borrower  will end on the
Saturday closest to December 31, 1998.

                  "Fixed Assets" means Equipment and Real Estate of the 
Borrower.

                  "Foreign  Exchange  Reserve"  means a reserve equal to the sum
of:  (a) five  percent  (5%) of the  notional  amount  of all  Foreign  Exchange
Transactions in $ Canadian,  plus (b) a percentage of the notional amount of all
Foreign  Exchange  Transactions  outstanding,  as determined by the Agent in its
reasonable  discretion,  for (i) currency other than $ Canadian, or (ii) Foreign
Exchange  Transactions  greater than 90 days;  plus (c) on any Business Day, the

<PAGE>

amount  of the  settlement  risk on the  next  Business  Day  less  any  amounts
deposited by Borrower with Agent on account of such settlement risk at least one
Business Day before such settlement day, provided, however, that such reserve on
account of this clause (c) shall not exceed $5,000,000 on any Business Day; plus
(d) a reserve to be  established  on the day a Foreign  Exchange  Transaction is
entered into in an amount by which such settlement risk relating to such Foreign
Exchange Transaction exceeds $5,000,000.

                  "Foreign Exchange Transactions" means (a) the foreign exchange
line of $100,000,000  (notional value) from Bank of America for foreign exchange
contracts in $ Canadian,  and (b) any other foreign exchange line of credit with
Bank of America or a Lender and for any currency; provided that, with respect to
(a) and (b) above,  the  settlement  risk shall not  exceed  $10,000,000  on any
settlement day.

                  "Funding Date" means the date on which a Borrowing occurs.

                  "GAAP" means  generally  accepted  accounting  principles  set
forth from time to time in the opinions  and  pronouncements  of the  Accounting
Principles Board and the American  Institute of Certified Public Accountants and
statements and  pronouncements of the Financial  Accounting  Standards Board (or
agencies with similar  functions of comparable  stature and authority within the
U.S. accounting profession), which are applicable to the circumstances as of the
Closing Date.

                  "GECC" means General Electric Capital Corporation.

                  "Governmental  Authority" means any nation or government,  any
state or other  political  subdivision  thereof,  any  central  bank (or similar
monetary or regulatory  authority)  thereof,  any entity  exercising  executive,
legislative,  judicial,  regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled,  through
stock or capital ownership or otherwise, by any of the foregoing.

                  "Guaranty" means, with respect to any Person,  all obligations
of such Person which in any manner  directly or indirectly  guarantee or assure,
or  in  effect   guarantee  or  assure,   the  payment  or  performance  of  any
indebtedness, dividend or other obligations of any other Person (the "guaranteed
obligations"),  or assure  or in  effect  assure  the  holder of the  guaranteed
obligations against loss in respect thereof, including,  without limitation, any
such obligations incurred through an agreement,  contingent or otherwise: (a) to
purchase  the  guaranteed  obligations  or any  property  constituting  security
therefor;  (b) to advance  or supply  funds for the  purchase  or payment of the
guaranteed  obligations or to maintain a working  capital or other balance sheet
condition; or (c) to lease property or to purchase any debt or equity securities
or other property or services.

                  "Impaired  Inventory  Percentage"  means at any time,  without
duplication, the sum of (i) Excluded Assets consisting of Inventory plus (ii)
the Vendor Lien Reserve plus (iii) the amount of Inventory described in clause
(g) of the definition of Permitted Liens and that is not Eligible Inventory
solely as a result thereof, expressed as a percentage of the aggregate at such
time of Eligible Inventory plus the amount of Excluded Assets consisting of
Inventory.

<PAGE>

                  "Imported Inventory" means Inventory that is in the process of
being  imported  into the  United  States  which (i) has been  purchased  from a
foreign supplier, (ii) is in the process of being shipped, and (iii) has not yet
been delivered to the Borrower.

                  "Included Vendor  Inventory"  means the Inventory  included in
the Borrowing Base which is subject to Liens securing Vendor Obligations.

                  "Indenture"  means that certain  Indenture dated as of October
15,  1994  between  the  Parent  and The Bank of New York,  with  respect to the
issuance of 12-1/2% Senior Notes Due 2004 in the aggregate  principal  amount of
$125,000,000.

                  "Intercompany  Accounts"  means all  assets  and  liabilities,
however  arising,  which are due to the  Borrower  from,  which are due from the
Borrower to, or which otherwise arise from any transaction by the Borrower with,
the Parent or any of its Subsidiaries.

                  "Intercreditor  Agreement"  means that  certain  Intercreditor
Agreement  dated  as of June  30,  1998,  among  Agent,  the  Borrower,  Redwood
Receivables Corporation, Merisel Capital Funding, Inc. and GECC.

                  "Interest  Coverage Ratio" means, for any period, the ratio of
(a) Adjusted Net Earnings  from  Operations  for such period plus the sum of the
following  to the extent  deducted  in  computing  Adjusted  Net  Earnings  from
Operations:  (i) tax expense or provision for taxes, (ii) total interest expense
net  of  interest  income,   (iii)  total  amortization   expense,   (iv)  total
depreciation  expense,  and (v) other  non-cash  expenses  deducted in computing
Adjusted Net Earnings from  Operations,  over (b) total interest  expense during
such period (net of interest income).

                  "Interest Coverage Ratio Certificate" means a certificate of a
Responsible  Officer of the Borrower  setting forth the Interest  Coverage Ratio
for the four (4) fiscal  quarter  period of the Parent ending on the last day of
each fiscal quarter of the Parent,  together with such supporting  documentation
and  calculations  as the Agent may  reasonably  request  with  respect  to such
Interest Coverage Ratio.

                  "Interest  Period" means,  as to any LIBOR Revolving Loan, the
period   commencing   on   the   Funding   Date   of   such   Loan   or  on  the
Conversion/Continuation Date on which the Loan is converted into or continued as
a LIBOR  Revolving  Loan,  and ending on the date one, two,  three or six months
thereafter  as selected by the  Borrower in its Notice of Borrowing or Notice of
Conversion/Continuation; provided that:

                           (i) if any Interest Period would otherwise end on a 
day that is not a Business Day,  that  Interest  Period shall be extended to the
following  Business  Day unless the result of such  extension  would be to carry
such Interest  Period into another  calendar month, in which event such Interest
Period shall end on the preceding Business Day;

                           (ii)any Interest Period pertaining to a LIBOR 
Revolving Loan that begins on the last Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the calendar month at
the end of such  Interest  Period)  shall  end on the last  Business  Day of the
calendar month at the end of such Interest Period; and

<PAGE>

                           (iii) no  Interest  Period  shall  extend  beyond the
Stated Termination Date.

                  "Interest  Rate"  means  each  or any of the  interest  rates,
including the Default Rate, set forth in Section 3.1.

                  "Inventory"   means  all  of  the  Borrower's  now  owned  and
hereafter  acquired  inventory  (as  defined  in  the  UCC),  wherever  located,
including without limitation, and to the extent not prohibited by the Indenture,
all returned  goods,  materials and supplies of any kind,  nature or description
which are or might be consumed in the Borrower's  business or used in connection
with the  packing,  shipping,  advertising,  selling or finishing of such goods,
merchandise and such other personal  property,  all chattel paper,  documents of
title or other documents representing Inventory and all books, records,  account
ledgers,  data  processing  records or systems,  computer  software  and similar
rights or  interests  related  to the  Inventory  and  customarily  required  or
utilized by lenders under revolving credit  facilities  secured by inventory and
accounts in order to realize upon such security.  Notwithstanding the foregoing,
Inventory shall not include any Excluded Assets.

         "Inventory  Mix Reserve"  means at any time,  the amount  determined by
reference to clause (a) of the  definition of Borrowing  Base  multiplied by the
Inventory Mix Reserve Percentage at such time.

         "Inventory Mix Reserve Percentage" means the quotient, expressed as a 
percentage, of the following:

                                 1 - 85% *(OLV);
                                       50

         where OLV means the amount  determined  by the Agent as the  realizable
         value  of  Eligible  Inventory  (expressed  as a  percentage  of  cost)
         calculated  based on the  methodology of the Dovetech,  Inc.  appraisal
         most  recently  submitted to Agent  pursuant to Section 6.5;  provided,
         however,  that  (i) the  Inventory  Mix  Reserve  Percentage  shall  be
         re-determined  if, when the Borrowing  Base  Certificate  for the prior
         fiscal  month-end  is  delivered,  the  ratio  of (x) the  value of the
         Inventory  described  in clauses  (iii) and (iv) of the  definition  of
         Excluded Assets to (y) the value of Eligible  Inventory,  first exceeds
         10% of the value of Eligible Inventory and thereafter,  when such ratio
         is (a) greater than or equal to the next highest  integral  multiple of
         5% in excess of such ratio for the immediately  preceding  fiscal month
         and (b) less than or equal to the highest integral  multiple of 5% that
         is less than such ratio for the  immediately  preceding  fiscal  month;
         (ii) as of the Closing Date, the Inventory Mix Reserve Percentage shall
         be  9.90%;  and  (iii)  at no time  shall  the  Inventory  Mix  Reserve
         Percentage be less than zero.



<PAGE>

                  "IRS" means the Internal  Revenue Service and any Governmental
Authority succeeding to any of its principal functions under the Code.

                  "Landlord  Waivers" means an agreement,  in form and substance
reasonably  satisfactory to the Agent, executed by a landlord of Premises leased
by the Borrower where Inventory is located.

                  "Latest  Projections"  means:  (a) on  the  Closing  Date  and
thereafter until the Agent receives new projections  pursuant to Section 7.2(f),
the projections of the Borrower's  financial  condition,  results of operations,
and cash flow,  dated  November 13, 1997 and delivered to the Agent prior to the
Closing Date (including the revised projection, provided in May 1998, of Capital
Expenditures  in the  amount of $45  million  for  Fiscal  Year  1998);  and (b)
thereafter,  the  projections  most recently  received by the Agent  pursuant to
Section 7.2(f).

                  "Lender"  and  "Lenders"  have the  meanings  specified in the
introductory  paragraph  hereof and shall include the Agent to the extent of any
Agent Advance  outstanding and BABC to the extent of any BABC Loan  outstanding;
provided  that no such Agent Advance or BABC Loan shall be taken into account in
determining any Lender's Pro Rata Share.

                  "Letter of Credit"  means a letter of credit  issued or caused
to be issued for the account of the Borrower pursuant to Section 2.3.

                  "Letter of Credit Fee" has the meaning specified in Section 
3.6.

                  "LIBOR  Interest  Payment  Date"  means (i) with  respect to a
LIBOR Revolving Loan subject to a one, two or three month Interest  Period,  the
last day of each Interest  Period  applicable to such Loan and (ii) with respect
to a LIBOR Revolving Loan subject to a six month Interest  Period,  the 90th day
and the last day of each Interest Period applicable to such Loan.

                  "LIBOR Rate" means, for any Interest  Period,  with respect to
LIBOR Revolving Loans comprising part of the same Borrowing,  the rate appearing
on  Page  3750  of the  Dow  Jones  Telerate  Service  (or on any  successor  or
substitute  page of such service,  or any  successor to or  substitute  for such
service,  providing rate quotations  comparable to those  currently  provided on
such page of such  service,  as  determined  by the Agent  from time to time for
purposes of providing quotations of interest rates applicable to dollar deposits
in the London interbank  market) at approximately  11:00 a.m.,  London time, two
Business Days prior to the commencement of such Interest Period, as the rate for
dollar deposits with a maturity comparable to such Interest Period. In the event
that such rate is not  available  at such time for any reason,  the "LIBOR Rate"
with respect to such LIBOR  Revolving Loan for such Interest Period shall be the
rate at which dollar  deposits  approximately  equal in principal  amount to the
amount  of such  LIBOR  Revolving  Loan and for a  maturity  comparable  to such
Interest Period are offered to the principal London office of Bank of America in
immediately  available  funds in the London  interbank  market at  approximately
11:00 a.m.,  London time,  two Business Days prior to the  commencement  of such
Interest Period.


<PAGE>

                  "LIBOR  Revolving  Loan"  means a  Revolving  Loan  during any
period in which it bears interest based on the LIBOR Rate.

                  "Lien"  means:  (a)  any  interest  in  property  securing  an
obligation  owed  to,  or a claim  by,  a Person  other  than  the  owner of the
property,  whether  such  interest  is  based on the  common  law,  statute,  or
contract, and including without limitation, a security interest,  charge, claim,
or  lien  arising  from  a  mortgage,  deed  of  trust,   encumbrance,   pledge,
hypothecation,  assignment, deposit arrangement,  agreement, security agreement,
conditional  sale or trust  receipt  or a lease,  consignment  or  bailment  for
security  purposes;  and (b) to the extent not  included  under  clause (a), any
reservation,   exception,   encroachment,   easement,  right-of-way,   covenant,
condition,  restriction, lease or other title exception or encumbrance affecting
property.

                  "Liquidation  Expense  Reserve" means a reserve of $8,400,000,
subject to adjustment upwards and downwards by the Agent based on changes in the
Borrower's operating expenses.

                  "Loan Account" means the loan account of the Borrower, which 
account shall be maintained by the Agent.

                  "Loan  Documents"  means this Agreement,  the Fee Letter,  the
Intercreditor  Agreement, the Payment Account Agreement, the Post-Closing Letter
(if any) and any other agreements, instruments, and documents heretofore, now or
hereafter  evidencing,  securing,  guaranteeing  or  otherwise  relating  to the
Obligations, the Collateral, or this Agreement.

                  "Loans" means, collectively, all loans and advances provided 
for in Article 2.

                  "Majority  Lenders"  means at anytime  Lenders  whose Pro Rata
shares  aggregate more than 50% of the Commitments  or, if no Commitments  shall
then be in effect,  Lenders  who hold more than 50% of the  aggregate  principal
amount of the Loans then outstanding.

                  "Margin Stock" means "margin stock" as such term is defined in
Regulation T, U or X of the Federal Reserve Board.

                  "Material  Adverse Effect" means (a) a material adverse change
in, or a material adverse effect upon, the operations,  business,  properties or
condition (financial or otherwise) of the Borrower or the Collateral (taken as a
whole); (b) a material  impairment of the ability of the Borrower to perform its
material  obligations under any Loan Document and to avoid any Event of Default;
or (c) a material adverse effect upon the legality,  validity, binding effect or
enforceability against the Borrower of any Loan Document.

                  "Maximum  Merisel  Canada Loan" means,  until Merisel  Canada,
Inc.  obtains a revolving  working capital facility from any Person which is not
an Affiliate of the Borrower,  $55,000,000;  provided, however, that such amount
shall increase by $10,000,000  (i) on the closing date of such facility and (ii)
on each anniversary of such date.

                  "Maximum Revolver Amount" means $100,000,000.


<PAGE>

                  "Multi-employer Plan" means a "multi-employer plan" as defined
in Section  4001(a)(3)  of ERISA  which is or was at any time during the current
year or the immediately  preceding six (6) years  contributed to by the Borrower
or any ERISA Affiliate.

                  "Notice of Borrowing" has the meaning specified in Section 
2.2(b).

                  "Notice of Conversion/Continuation" has the meaning specified 
in Section 3.2(b).

                  "Obligations"   means  all   loans,   advances,   liabilities,
obligations, covenants, duties, and debts now or hereafter owing by the Borrower
to the Agent and/or any Lender,  arising under or pursuant to this  Agreement or
any of the other Loan Documents,  whether or not evidenced by any note, or other
instrument or document,  whether arising from an extension of credit, opening of
a letter of credit,  acceptance,  loan, guaranty,  indemnification or otherwise,
whether direct or indirect  (including,  without  limitation,  those acquired by
assignment from others),  absolute or contingent,  due or to become due, primary
or secondary, as principal or guarantor, and including,  without limitation, all
principal,  interest,  charges, expenses, fees, attorneys' fees, filing fees and
any other sums  chargeable  to the Borrower  hereunder or under any of the other
Loan  Documents.  "Obligations"  includes,  without  limitation,  (a) all debts,
liabilities,  and  obligations  now or hereafter  owing from the Borrower to the
Agent  and/or any Lender under or in  connection  with the Letters of Credit and
(b) all debts,  liabilities  and  obligations  now or  hereafter  owing from the
Borrower to the Agent and Lenders  arising  from or related to Foreign  Exchange
Transactions pursuant to the indemnity provided in Section 2.4 hereof.

                  "Other Taxes" means any present or future stamp or documentary
taxes  or any  other  excise  or  property  taxes,  charges  or  similar  levies
(including  any  interest,  penalties and additions to tax) which arise from any
payment made hereunder or from the execution,  delivery or  registration  of, or
otherwise with respect to, this Agreement or any other Loan Documents, provided,
however,  that Other Taxes shall not include such taxes (including  income taxes
or franchise taxes) as are imposed on or measured by each Lender's net income by
the jurisdiction (or any political  subdivision thereof) under the laws of which
the Lender or the Agent, as the case may be, is organized or maintains a lending
office.

                  "Parent" means Merisel, Inc., a Delaware corporation.

                  "Participant  Lender"  means any  Person  who shall  have been
granted the right by any Lender to participate in the financing provided by such
Lender under this  Agreement,  and who shall have  entered into a  participation
agreement in form and substance satisfactory to such Lender.

                  "Payment Account" shall have the meaning set forth in Section 
6.9.

                  "Payment   Account   Agreement"   means  the  Payment  Account
Agreement required to be delivered pursuant to Section 6.9.

                  "PBGC" means the Pension Benefit  Guaranty  Corporation or any
Governmental Authority succeeding to the functions thereof.


<PAGE>

                  "Pending  Revolving  Loans" means,  at any time, the aggregate
principal  amount of all Revolving Loans requested in any Notice(s) of Borrowing
received by the Agent which have not yet been advanced.

                  "Pension  Plan"  means a pension  plan (as  defined in Section
3(2) of  ERISA)  subject  to Title  IV of ERISA  which  the  Borrower  sponsors,
maintains,   or  to  which  it  makes,  is  making,  or  is  obligated  to  make
contributions, or in the case of a Multiple-employer Plan has made contributions
at any time during the immediately preceding five (5) plan years.

                  "Permitted Liens" means:

                           (a) Liens for taxes not delinquent or statutory Liens
for taxes,  provided that the payment of such taxes which are due and payable is
being contested in good faith and by appropriate  proceedings diligently pursued
and as to which adequate  financial reserves have been established on Borrower's
books and  records and an action to enforce  such Lien has not been  taken,  and
provided further that if the amount of such taxes which are subject to statutory
Liens for taxes that remain unpaid past the date when due,  exceeds  $2,500,000,
the Agent may establish a reserve  pursuant to clause (iv) of the  definition of
Availability;
                           (b) the Agent's Liens;

                           (c) deposits under worker's compensation,unemployment
insurance,  social security and other similar laws, or to secure the performance
of bids,  tenders or contracts  (other than for the repayment of borrowed money)
or to secure  indemnity,  performance or other similar bonds for the performance
of bids,  tenders or contracts  (other than for the repayment of borrowed money)
or to secure  statutory  obligations  (other than liens  arising  under ERISA or
Environmental  Liens)  or  surety  or  appeal  bonds,  or to  secure  indemnity,
performance or other similar bonds in the ordinary course of business;

                           (d)  Liens   securing   the   claims  or  demands  of
materialmen,  mechanics,  carriers,  warehousemen,   landlords  and  other  like
Persons,  provided  that if any such Lien  arises  from the  nonpayment  of such
claims or demand when due,  such claims or demands are being  contested  in good
faith and by appropriate proceedings diligently pursued;

                           (e)  Reservations,    exceptions,    encroachments,
easements,  rights of way,  covenants  running with the land,  and other similar
title exceptions or encumbrances  affecting any Real Estate;  provided that they
do not in the aggregate  materially detract from the value of the Real Estate or
materially  interfere  with its use in the  ordinary  conduct of the  Borrower's
business;
                           (f)       Judgment and other similar Liens arising in
connection with court proceedings to the extent the attachment or enforcement of
such Liens would not result in an Event of Default hereunder;


<PAGE>

                            (g)      Liens constituting vendor or floor plan 
creditor liens existing on the Closing Date (the Agent's Lien shall be junior to
such Liens,  provided that the  applicable  agreement  between  Borrower and the
vendor or floor plan  creditor  thereof does not prohibit the granting of junior
liens) and Liens  created  after the Closing  Date on any  Inventory in favor of
such vendor thereof or floor plan creditor  relating to such Inventory  securing
the unpaid purchase price owing to such vendor or floor plan creditor; provided,
however,  that the  Vendor  Obligations  and  amounts of  Inventory  that at any
relevant  time are subject to the Liens  described in this clause (g),  shall be
reflected  on  applicable  Borrowing  Base  Certificates  and that the  Impaired
Inventory Percentage shall not exceed 50%;
                            
                            (h)      Liens set forth on Schedule 8.9;

                            (i)      Liens securing purchase money Debt on 
property other than Collateral;

                            (j)      Liens securing obligations in connection 
with real property mortgage financings,  synthetic leases of property other than
Collateral and sale-leasebacks of property other than Collateral;

                            (k)      Liens on the assets or property of a 
Subsidiary  of the  Borrower  existing  at the  time  such  Subsidiary  became a
Subsidiary  of the Borrower  and not  incurred as a result of (or in  connection
with or in  anticipation  of)  such  Subsidiary  becoming  a  Subsidiary  of the
Borrower, provided that such Liens do not extend to or cover (A) any property or
assets of the Borrower or any of its other Subsidiaries (other than the property
or assets so acquired) or (B) Collateral;
                            
                            (l)      Liens created pursuant to a Securitization 
Facility;

                            (m)      Liens on equipment and related property and
assets (other than Collateral) to secure Capital Lease obligations;

                            (n)      Liens securing Debt which is incurred to 
extend, refinance, renew, replace, defease or refund Debt which has been secured
by a Lien  permitted  under this  Agreement  and is  permitted  to be  extended,
refinanced,  renewed,  replaced,  defeased  or  refunded  under this  Agreement,
provided  that such  Liens do not  extend to or cover any types of  property  or
assets of the  Borrower  or any of its  Subsidiaries  not  securing  the Debt so
extended, refinanced, renewed, replaced, defeased or refunded;
                                     
                            (o)      Liens in favor of customs and revenue 
authorities  arising by operation of law to secure  payment of customs duties in
connection  with the  importation of goods,  which custom duties are not overdue
for a period of more than 60 days;
                                     
                            (p)      Liens in favor of the Borrower or any 
Subsidiary of the Borrower on the assets of any Subsidiary of the Borrower;

                            (q)      Liens on property other than Collateral 
securing Debt of the Borrower and its Subsidiaries,  provided that the aggregate
amount of  outstanding  Debt  secured by such Liens  shall not exceed at any one
time 20% of the Consolidated Net Worth of the Borrower and its Subsidiaries;


<PAGE>

                            (r)      Liens for property taxes on real property 
which is to be abandoned for which the sole recourse for such tax, assessment or
governmental charge or levy is to such property;

                            (s)      licenses, leases or subleases granted to 
other Persons in the ordinary course of business not materially interfering with
the conduct of the  business of the  Borrower  and its  Subsidiaries  taken as a
whole or affecting any Collateral;

                            (t)      Liens arising from precautionary UCC 
financing  statement  filings  regarding  operating  leases  entered into by the
Borrower or any of its Subsidiaries;
                                
                            (u)      any interest or title of a lessor, 
sublessor, licensee or licensor under any personal property lease, sublease or 
license agreement;

                            (v)      Liens in favor of a banking or other 
financial  institutions  encumbering  deposits  (including the right of set-off)
held by such banking or other  financial  institutions  incurred in the ordinary
course of business;

                            (w)      deposits (including rights of set-off) made
in the  ordinary  course of  business  to secure  liabilities  for  premiums  to
insurance carriers;
                            (x)      Liens on accounts that are due from the 
Borrower's vendors;

                            (y)      Liens on assets of Subsidiaries of the 
Borrower (other than Collateral) to secure working capital facilities; and

                            (z)      Liens on deposits to secure standby letters
of credit.

                  "Person"   means   any   individual,    sole   proprietorship,
partnership,  joint venture, trust,  unincorporated  organization,  association,
corporation, Governmental Authority, or any other entity.

                  "Plan"  means an employee  benefit plan (as defined in Section
3(3) of ERISA) which the Borrower sponsors or maintains or to which the Borrower
makes, is making, or is obligated to make contributions and includes any Pension
Plan.

                  "Post-Closing Letter" means a letter agreement dated as of the
Closing Date between the Borrower and the Agent.


<PAGE>

                  "Premises"  means the land identified by addresses on Schedule
8.12,  together with all buildings,  improvements,  and fixtures thereon and all
tenements, hereditaments, and appurtenances belonging or in any way appertaining
thereto.

                  "Promissory Notes" means those certain Promissory Notes of 
Merisel  Properties,  Inc.  payable to Heller  Financial,  Inc. in the aggregate
amount of approximately $7,600,000.

                  "Pro Rata Share" means,  with respect to a Lender,  a fraction
(expressed  as a  percentage),  the  numerator  of which is the  amount  of such
Lender's  Commitment  and the  denominator of which is the sum of the amounts of
all of  the  Lenders'  Commitments,  or if no  Commitments  are  outstanding,  a
fraction  (expressed as a  percentage),  the numerator of which is the amount of
Obligations  owed to such Lender and the  denominator  of which is the aggregate
amount of the Obligations owed to the Lenders.

                  "Real Estate" means all of the present and future interests of
the  Borrower,  as owner,  lessee,  or otherwise,  in the  Premises,  including,
without limitation, any interest arising from an option to purchase or lease the
Premises or any portion thereof.

                  "Reduction" has the meaning specified in Section 2.1(b).

                  "Release" means a release, spill, emission,  leaking, pumping,
injection, deposit, disposal,  discharge,  dispersal, leaching or migration of a
Contaminant into the outdoor environment, including the movement of Contaminants
through or in the air, soil, surface water,  groundwater or Real Estate or other
property.

                  "Rent  Reserve"  means a reserve equal to the sum of, for each
and every leased  Premise  where  Inventory is located,  the amount of three (3)
months rent;  provided that the reserve  calculation  hereunder will not include
(i) leased  Premises  located in states where the applicable law does not give a
landlord a priority  lien on the  inventory  located on such  property  and (ii)
those Premises subject to an executed Landlord Waiver.

                  "Reportable  Event"  means,  any of the  events  set  forth in
Section  4043(b)  of ERISA or the  regulations  thereunder,  other than any such
event for which the 30-day  notice  requirement  under  ERISA has been waived in
regulations issued by the PBGC.

                  "Required  Lenders"  means at any time Lenders  whose Pro Rata
Shares  aggregate more than 66 2/3% of the  Commitments  or, if no Commitments
shall then be in effect,  Lenders who hold more than  66 2/3% of the aggregate
principal amount of the Loans then outstanding.

                  "Requirement  of  Law"  means,  as  to  any  Person,  any  law
(statutory  or  common),  treaty,  rule or  regulation  or  determination  of an
arbitrator or of a Governmental Authority, in each case applicable to or binding
upon the  Person or any of its  property  or to which  the  Person or any of its
property is subject.


<PAGE>

                  "Responsible  Officer" means the chief executive officer,  the
president,  the chief operating  officer,  the chief financial  officer,  or the
treasurer or the  assistant  treasurer  of the  Borrower,  or any other  officer
having substantially the same authority and responsibility.

                  "Restricted   Investment"   means,  as  to  any  Person,   any
acquisition of stock or indebtedness,  or a loan, advance, capital contribution,
or subscription for capital stock, except the following: (a) accounts receivable
arising  from the sale or lease of goods or the  rendition  of  services  in the
ordinary  course of business of the  Borrower and its  Subsidiaries;  (b) direct
obligations  of the  United  States  of  America,  or  any  agency  thereof,  or
obligations  guaranteed  by the United  States of  America,  provided  that such
obligations  mature within one year from the date of  acquisition  thereof;  (c)
certificates  of deposit  maturing within one year from the date of acquisition,
bankers'  acceptances,  Eurodollar bank deposits, or overnight bank deposits, in
each case issued by, created by, or with a bank or trust company organized under
the laws of the United  States or any state thereof  having  capital and surplus
aggregating at least  $100,000,000;  (d) commercial paper given a rating of "A2"
or  better  by  Standard  & Poor's  Corporation  or "P2" or  better  by  Moody's
Investors  Service,  Inc.  and  maturing  not more than 90 days from the date of
creation  thereof;  (e) investments in money market funds  substantially  all of
whose assets are comprised of  securities of the types  described in clauses (b)
through  (d)  above;  (f)  demand  deposit  accounts  of the  Borrower  and  its
Subsidiaries  maintained in the ordinary course of business;  (g) in the case of
any Subsidiary  organized under the laws of a jurisdiction other than a State of
the United States (A) direct  obligations of the sovereign nation (or any agency
thereof) in which such Subsidiary is organized and is conducting  business or in
obligations  fully and  unconditionally  guaranteed by such sovereign nation (or
any agency  thereof),  (B)  investments  of the type and  maturity  described in
clauses (b) through (d) above of foreign obligors, which investments or obligors
(or the direct or indirect  parents of such obligors) have ratings  described in
such clauses or equivalent ratings from comparable foreign rating agencies,  (C)
investments of the type and maturity  described in clauses (b) through (d) above
of foreign obligors (or the direct or indirect parents of such obligors),  which
investments or obligors (or the direct or indirect parents of such obligors) are
not rated as provided in such clauses but which are, in the reasonable  judgment
of the Borrower or its  Subsidiaries,  comparable in investment  quality to such
investments and obligors (or the direct or indirect parent of such obligors), or
(D)  investments  in money  market funds  substantially  all of whose assets are
comprised of  securities  of the types  described in this clause (g); (h) stock,
debt, securities or other property received in connection with the bankruptcy or
reorganization  of, or in settlement of delinquent  obligations  of, or disputes
with  or  otherwise  managed  to  enhance  yield  or to  facilitate  payment  of
obligations  by,  customers  and  suppliers  arising in the  ordinary  course of
business;  (i)  acquisitions  of  stock or  indebtedness  of the  Parent  by the
Borrower  or any other  Subsidiary  of the  Parent or of any  Subsidiary  of the
Parent by the Borrower or any other Subsidiary of the Parent or loans, advances,
capital  contributions or  subscriptions  for capital stock to the Parent or any
Subsidiary  of the Parent,  in each case to the extent  permitted  under Section
9.15; (j)  acquisition of stock or indebtedness of Persons other than the Parent
and its Subsidiaries in an amount not to exceed $2 million in any Fiscal Year or
$7.5  million  in  aggregate  during  the  term of this  Agreement;  (k)  loans,
advances,  capital  contributions or subscriptions  for capital stock to Persons
other than the Parent,  the Borrower or  Subsidiaries of the Parent in an amount
not to exceed $2 million in any Fiscal Year or $7.5 million in aggregate  during

<PAGE>

the term of this  Agreement;  (l) advances or loans to directors or employees in
the  ordinary  course of business;  (m) to the extent  permitted by Section 9.9,
investments in stock or indebtedness of Persons that are not Subsidiaries of the
Borrower if as a result thereof such Person becomes a Subsidiary of the Borrower
or is merged or  consolidated  with or into the  Borrower  or  transfers  all or
substantially  all of its assets to the  Borrower or its  Subsidiaries;  and (n)
obligations  under  interest  rate and  currency  rate  protection  arrangements
entered into in the ordinary course of business.

                  "Revolving Loans" has the meaning specified in Section 2.2 and
includes each Agent Advance and BABC Loan.

                  "Securitization  Facility"  means (i) the Amended and Restated
Receivables  Purchase and  Servicing  Agreement  dated as of September  27, 1996
among Merisel  Capital  Funding,  Inc.,  Redwood  Receivables  Corporation,  the
Borrower and General Electric Capital Corporation, (ii) the Amended and Restated
Receivables  Transfer  Agreement  dated as of  September  27,  1996  between the
Borrower and Merisel  Capital  Funding,  Inc.,  (iii) the  Receivables  Purchase
Agreement  dated  December  15, 1995  between  Merisel  Canada Inc. and Canadian
Master Trust and (iv) all  documents,  agreements and  instruments  entered into
connection with the foregoing, and as any of the same may be amended,  restated,
supplemented,   modified,   renewed,  replaced  or  refinanced,   including  any
agreements  restructuring  or adding Persons to such agreements or documents and
whether with the same or other financial institutions (and including any related
agreements or instruments).

                  "Settlement" and "Settlement Date" have the meanings specified
in Section 2.2(j)(l).

                  "Significant  Subsidiary"  of Borrower  shall mean (i) Merisel
Canada,  Inc.  and  (ii)  any  other  Subsidiary  of  Borrower  that  would be a
"significant  subsidiary"  of  Borrower  as  defined  in Article 1, Rule 1-02 of
Regulation S-X,  promulgated pursuant to the Exchange Act, as such Regulation is
in effect on the date hereof.

                  "Solvent"  means when used with  respect to any Person that at
the time of determination:

                           (i) the assets of such Person, at a fair valuation, 
are in excess of the total amount of its debts (including,  without  limitation,
contingent liabilities); and

                           (ii)the present fair saleable value of its assets is 
greater than its probable  liability on its existing  debts as such debts become
absolute and matured; and

                           (iii)    it is then able and expects to be able to 
pay its  debts  (including,  without  limitation,  contingent  debts  and  other
commitments) as they mature; and

                           (iv)it has capital sufficient to carry on its 
business as conducted and as proposed to be conducted.


<PAGE>

                  For purposes of determining  whether a Person is Solvent,  the
amount of any  contingent  liability  shall be computed as the amount  that,  in
light of all the facts and circumstances  existing at such time,  represents the
amount that can reasonably be expected to become an actual or matured liability.

                  "Stated Termination Date" means June 30, 2003.

                  "Subsidiary" of a Person means any  corporation,  association,
partnership,  joint  venture or other  business  entity of which more than fifty
percent  (50%) of the voting  stock or other  equity  interests  (in the case of
Persons other than corporations),  is owned or controlled directly or indirectly
by  the  Person,  or one  or  more  of the  Subsidiaries  of  the  Person,  or a
combination thereof.  Unless the context otherwise clearly requires,  references
herein to a "Subsidiary" refer to a Subsidiary of the Borrower.

                  "Taxes"  means any and all  present or future  taxes,  levies,
imposts, deductions, charges or withholdings (including any interest, penalties,
or  additions  to tax)  imposed  by the  United  States or any State  therein or
imposed by any foreign jurisdiction ("Foreign Taxes");  provided,  however, that
Foreign  Taxes (x) shall not  include  any such  taxes  that would not have been
imposed by any such foreign  jurisdiction but for a present or former connection
between the jurisdiction of the government or taxation  authority  imposing such
taxes and the Agent or such Lender (including,  without limitation, a connection
arising  from the Agent or such Lender or related  person being or having been a
citizen or resident  of such  jurisdiction,  or being or having been  organized,
present or engaged in a trade or business in such  jurisdiction,  or office) but
(y)  notwithstanding  the  foregoing  clause (x),  shall  include any such taxes
imposed by a foreign  jurisdiction  because of any present or former  connection
between the jurisdiction of the government or taxation  authority  imposing such
taxes  and the  Borrower;  but,  in the case of any  domestic  or  Foreign  Tax,
excluding,  in the case of each  Lender  and the Agent,  such  taxes  (including
income taxes or franchise  taxes) as are imposed on or measured by each Lender's
net income by the jurisdiction (or any political  subdivision thereof) under the
laws of which such  Lender or the  Agent,  as the case may be, is  organized  or
maintains a lending office.

                  "Termination  Date"  means  the  earliest  to occur of (i) the
Stated  Termination  Date, (ii) the date the Total Facility is terminated either
by the Borrower  pursuant to Section 4.2 or by the Majority  Lenders pursuant to
Section 11.2, and (iii) the date this Agreement is otherwise  terminated for any
reason whatsoever.

                  "Total Facility" has the meaning specified in Section 2.1.

                  "UCC"  means the  Uniform  Commercial  Code (or any  successor
statute) of the State of  California or of any other state the laws of which are
required by Section 9-103 thereof to be applied in connection  with the issue of
perfection of security interests.

                  "Unfunded  Pension  Liability"  means  the  excess of a Plan's
benefit  liabilities under Section  4001(a)(16) of ERISA, over the current value
of that Plan's assets,  determined in accordance with the  assumptions  used for
funding the Pension Plan pursuant to Section 412 of the Code for the  applicable
plan year.


<PAGE>

                  "Unrelated   Person"   means  any  Person  other  than  (a)  a
Subsidiary  of the  Parent  or (b) an  employee  stock  ownership  plan or other
employee benefit plan covering the employees of the Parent or its Subsidiaries.

                  "Unused Letter of Credit Subfacility" means an amount equal to
$25,000,000 minus the sum of (a) the aggregate undrawn amount of all outstanding
Letters of Credit plus (b) the aggregate unpaid  reimbursement  obligations with
respect to all Letters of Credit.

                  "Unused Line Fee" has the meaning specified in Section 3.5.

                  "Vendor Lien Reserve'  means the amount of Vendor  Obligations
owing to any vendor who has a Lien on such vendor's  inventory  sold to Borrower
but only if  Borrower  includes  such  inventory  (to the extent it  constitutes
Eligible Domestic Inventory) in the calculation of the Borrowing Base.

                  "Vendor  Obligations"  means the amount of the  obligations of
the Borrower owed to vendors and secured by Inventory, to the extent such vendor
is entitled to apply such security towards payment of such obligations.

                  "Year 2000 Problem" means the risk that computer  applications
may not be able to properly perform date sensitive  functions after December 31,
1999.

         1.2 Accounting  Terms. Any accounting term used in this Agreement shall
have, unless otherwise  specifically  provided herein,  the meaning  customarily
given in accordance with GAAP, and all financial computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
as  consistently  applied and using the same method for  inventory  valuation as
used in the preparation of the Financial Statements.

         1.3 Other Terms.  All other undefined terms contained in this Agreement
shall, unless the context indicates otherwise, have the meanings provided for by
the UCC to the extent the same are used or defined therein. Wherever appropriate
in the context,  terms used herein in the singular also include the plural,  and
vice versa, and each masculine,  feminine,  or neuter pronoun shall also include
the other genders.

         1.4  Other Interpretive Provisions.  (a)  The meanings of defined terms
are equally applicable to the singular and plural forms of the defined terms.

                  (b) The words  "hereof,"  "herein,"  "hereunder"  and  similar
words refer to this Agreement as a whole and not to any particular  provision of
this Agreement; and Subsection,  Section, Schedule and Exhibit references are to
this Agreement unless otherwise specified.

                  (c) (i) The term "documents" includes any and all instruments,
documents,  agreements,  certificates,  indentures,  notices and other writings,
however evidenced.

                      (ii)  The term "including" is not limiting and means 
"including without limitation."


<PAGE>

                      (iii)  In  the  computation  of  periods  of  time  from a
specified date to a later specified
date,  the word "from"  means "from and  including,"  the words "to" and "until"
each mean "to but excluding" and the word "through" means "to and including."

                  (d) Unless otherwise expressly provided herein, (i) references
to agreements (including this Agreement) and other contractual instruments shall
be deemed to include all subsequent amendments and other modifications  thereto,
but  only  to the  extent  such  amendments  and  other  modifications  are  not
prohibited by the terms of any Loan Document, and (ii) references to any statute
or regulation  are to be construed as including  all  statutory  and  regulatory
provisions consolidating, amending, replacing, supplementing or interpreting the
statute or regulation.

                  (e)  The  captions  and  headings  of this  Agreement  are for
convenience  of reference only and shall not affect the  interpretation  of this
Agreement.

                  (f) This  Agreement  and other Loan  Documents may use several
different  limitations,  tests or  measurements  to regulate the same or similar
matters.  All such limitations,  tests and measurements are cumulative and shall
each be performed in accordance with their terms.

                  (g) This Agreement and the other Loan Documents are the result
of  negotiations  among and have been  reviewed  by counsel  to the  Agent,  the
Borrower  and  the  other  parties,   and  are  the  products  of  all  parties.
Accordingly, they shall not be construed against the Lenders or the Agent merely
because of the Agent's or Lenders' involvement in their preparation.


                                    ARTICLE 2

                           LOANS AND LETTERS OF CREDIT

         2.1 (a) Total  Facility.  Subject to all of the terms and conditions of
this  Agreement,  the Lenders  severally  agree to make available a total credit
facility of up to $100,000,000  (as such amount may be reduced from time to time
pursuant to Section  2.1(b),  the "Total  Facility") for the Borrower's use from
time to time  during the term of this  Agreement.  The Total  Facility  shall be
comprised  of a  revolving  line of credit  consisting  of  revolving  loans and
letters of credit up to the Maximum  Revolver  Amount,  as described in Sections
2.2 and 2.3.

              (b) Permanent  Reductions.  The Borrower shall have the right,  at
any time from time to time,  without premium or penalty,  to permanently  reduce
the Total Facility,  the Maximum  Revolver  Amount and the  Commitments  (each a
"Reduction"), and the Commitment of each Lender shall be reduced by its Pro Rata
Share of each Reduction,  if all of the following  conditions are met as to each
requested Reduction:

                  (i) The Borrower  shall give the Agent at least five (5) days'
prior written notice of the requested Reduction;


<PAGE>

                  (ii)The  aggregate  amount  of such  Reduction  and all  prior
Reductions shall not exceed $25,000,000.

                  (iii) Each  requested  Reduction must be in an amount not less
than $5,000,000 or that is an integral multiple of $1,000,000 in excess thereof;

                  (iv)The requested  Reduction shall not require a payment to be
made pursuant to the last sentence of Section 4.1.

                  (v) The amount of each requested Reduction shall be applied at
the option of the Borrower  (as  designated  to the Agent in the written  notice
required under clause (i) above) to reduce (A) the Maximum Revolver Amount,  (B)
the Unused Letter of Credit Facility, or (C) any combination thereof,  provided,
that,  each Reduction in (A) or (B) shall:  (x) be in an amount of $5,000,000 or
an integral multiple  thereof,  (y) not cause the Maximum Revolver Amount, if so
reduced,  to be less than the Aggregate Revolver  Outstandings at such time; and
(z) not cause the Unused Letter of Credit Subfacility, if so reduced, to be less
than the sum of the aggregate  undrawn  amount of Letters of Credit at such time
and the aggregate amount of any unpaid  reimbursement  obligations in respect of
Letters of Credit at such time.

         2.2  Revolving Loans.

                  (a) Amounts.  Subject to the  satisfaction  of the  conditions
precedent  set forth in Article  10,  each  Lender  severally  agrees,  upon the
Borrower's  request from time to time on any Business Day during the period from
the  Closing  Date  to the  Termination  Date,  to  make  revolving  loans  (the
"Revolving  Loans") to the Borrower,  in amounts not to exceed  (except for BABC
with respect to BABC Loans or Agent  Advances)  such  Lender's Pro Rata Share of
the Borrower's  Availability.  The Lenders,  however,  in their discretion,  may
elect to make Revolving Loans or participate (as provided for in Section 2.3(f))
in the credit support or enhancement  provided  through the Agent to the issuers
of Letters of Credit in excess of the Availability on one or more occasions, but
if they do so, neither the Agent nor the Lenders shall be deemed thereby to have
changed the limits of the Maximum  Revolver Amount or the  Availability or to be
obligated  to exceed such limits on any other  occasion.  If at any time (i) the
Aggregate Revolver  Outstanding  exceeds the Availability (with the Availability
for  purposes  of  this  clause  (i)  calculated  as if the  Aggregate  Revolver
Outstandings were zero), or (ii) the Availability is less than $50,000,000 (with
availability  for  purposes  of this clause (ii)  calculated  without  regard to
Maximum  Revolver  Amount),  then the  Lenders  may refuse to make or  otherwise
restrict  the making of  Revolving  Loans as the  Lenders  determine  until such
excess has been  eliminated  (in the case of clause (i)) or such  deficiency has
been eliminated (in the case of clause (ii)),  subject to the Agent's authority,
in its sole discretion,  to make Agent Advances pursuant to the terms of Section
2.2(i).

                  (b) Procedure for Borrowing.

                           (1) Each Borrowing  shall be made upon the Borrower's
irrevocable  written  notice  delivered  to the Agent in the form of a notice of
borrowing  substantially  in the  form of  Exhibit  C  ("Notice  of  Borrowing")

<PAGE>

together with a Borrowing Base Certificate  reflecting sufficient  Availability,
(which must be received by the Agent prior to 10:00 a.m.  (Pacific  time) (i) at
least three  Business Days prior to the  requested  Funding Date, in the case of
LIBOR  Revolving  Loans and (ii) no later than 10:00 a.m.  (Pacific time) on the
requested Funding Date, in the case of Base Rate Revolving Loans, specifying:

                                    (A) the amount of the Borrowing  (which,  in
the  case of  LIBOR  Revolving  Loans,  shall  be in an  amount  not  less  than
$2,500,000, and which shall be in integral multiples of $250,000);

                                    (B) the requested  Funding Date, which shall
be a Business Day;

                                    (C) whether the  Revolving  Loans  requested
are to be Base Rate Revolving Loans
or LIBOR Revolving Loans; and

                                    (D) the duration of the  Interest  Period if
the requested  Revolving Loans are to be LIBOR Revolving Loans. If the Notice of
Borrowing fails to specify the duration of the Interest Period for any Borrowing
comprised of LIBOR Revolving Loans, such Interest Period shall be one month;

                           (2)  With  respect  to  any  request  for  Base  Rate
Revolving Loans, in lieu of delivering the  above-described  Notice of Borrowing
the  Borrower  may give the  Agent  telephonic  notice  of such  request  by the
required time, with such telephonic  notice to be confirmed in writing within 24
hours of the giving of such  notice but the Agent  shall be  entitled to rely on
the telephonic notice in making such Revolving Loans. If it receives  telephonic
notice by 10:00 a.m.  (Pacific  time),  the Agent shall use its best  efforts to
initiate the funding of Base Rate Revolving  Loans by 12:00 noon (Pacific time).

                           (3) With respect to any request for LIBOR Revolving
Loans, no more than ten (10) LIBOR Revolving Loans may be outstanding at any one
time.
                  (c) Reliance upon  Authority.  On or prior to the Closing Date
and  thereafter  prior to any  change  with  respect  to any of the  information
contained in the following  clauses (i) and (ii),  the Borrower shall deliver to
the Agent a writing  setting  forth (i) the account of the Borrower to which the
Agent is authorized to transfer the proceeds of the  Revolving  Loans  requested
pursuant to this Section 2.2,  and (ii) the names of the persons  authorized  to
request  Revolving Loans on behalf of the Borrower,  and shall provide the Agent
with a specimen  signature of each such  person.  The Agent shall be entitled to
rely  conclusively  on such  person's  authority to request  Revolving  Loans on
behalf of the Borrower,  the proceeds of which are to be  transferred  to any of
the accounts  specified by the Borrower  pursuant to the  immediately  preceding
sentence,  until the Agent receives  written  notice to the contrary.  The Agent
shall have no duty to verify the identity of any individual  representing him or
herself as one of the officers  authorized by the Borrower to make such requests
on its behalf.

                  (d) No  Liability.  The Agent shall not incur any liability to
the  Borrower  as a result of acting  upon any notice  referred  to in  Sections
2.2(b) and (c), which notice the Agent believes in good faith to have been given
by an officer duly authorized by the Borrower to request  Revolving Loans on its

<PAGE>

behalf or for  otherwise  acting in good faith under this  Section  2.2, and the
crediting of Revolving Loans to the Borrower's  deposit account,  or transmittal
to such Person as the Borrower shall direct,  shall  conclusively  establish the
obligation of the Borrower to repay such Revolving Loans as provided herein.

                  (e) Notice Irrevocable. Any Notice of Borrowing (or telephonic
notice in lieu thereof) made pursuant to Section 2.2(b) shall be irrevocable and
the Borrower shall be bound to borrow the funds requested  therein in accordance
therewith.

                  (f) Agent's  Election.  Promptly  after receipt of a Notice of
Borrowing (or telephonic notice in lieu thereof) pursuant to Section 2.2(b), the
Agent shall elect,  in its  discretion,  (i) to have the terms of Section 2.2(g)
apply to such requested  Borrowing,  or (ii) to request BABC to make a BABC Loan
pursuant  to the  terms  of  Section  2.2(h)  in  the  amount  of the  requested
Borrowing;  provided,  however,  that if BABC declines in its sole discretion to
make a BABC Loan pursuant to Section  2.2(h),  the Agent shall elect to have the
terms of Section 2.2(g) apply to such requested Borrowing.

                  (g) Making of Revolving Loans.

                           (1) In the event that the Agent  shall  elect to have
the terms of this Section 2.2(g) apply to a requested  Borrowing as described in
Section  2.2(f),  then  promptly  after  receipt  of a Notice  of  Borrowing  or
telephonic notice pursuant to Section 2.2(b), the Agent shall notify the Lenders
by telecopy,  telephone or other similar form of transmission,  of the requested
Borrowing.  Each Lender shall make the amount of such Lender's Pro Rata Share of
the  requested  Borrowing  available  to the  Agent in same day  funds,  to such
account of the Agent as the Agent may  designate,  not later  than  12:00  noon,
(Pacific time) on the Funding Date applicable thereto. After the Agent's receipt
of the proceeds of such Revolving  Loans,  upon  satisfaction  of the applicable
conditions  precedent set forth in Article 10, the Agent shall make the proceeds
of such Revolving Loans available to the Borrower on the applicable Funding Date
by  transferring  same day funds equal to the proceeds of such  Revolving  Loans
received by the Agent to the account of the  Borrower,  designated in writing by
the Borrower and acceptable to the Agent; provided,  however, that the amount of
Revolving Loans so made on any date shall in no event exceed the Availability of
the Borrower on such date.
                           (2) Unless the Agent receives notice from a Lender on
or prior to the Closing Date or, with respect to any Borrowing after the Closing
Date, at least one Business Day prior to the date of such  Borrowing,  that such
Lender will not make  available as and when required  hereunder to the Agent for
the account of the  Borrower  the amount of that  Lender's Pro Rata Share of the
Borrowing,  the Agent may assume that each Lender has made such amount available
to the Agent in  immediately  available  funds on the Funding Date and the Agent
may (but shall not be so  required),  in  reliance  upon such  assumption,  make
available to the  Borrower on such date a  corresponding  amount.  If and to the
extent any Lender shall not have made its full amount  available to the Agent in
immediately  available  funds  and the  Agent  in such  circumstances  has  made
available  to the Borrower  such  amount,  that Lender shall on the Business Day
following  such Funding Date make such amount  available to the Agent,  together

<PAGE>

with  interest at the  Federal  Funds Rate for each day during  such  period.  A
notice of the Agent  submitted to any Lender with respect to amounts owing under
this subsection shall be conclusive, absent manifest error. If such amount is so
made available, such payment to the Agent shall constitute such Lender's Loan on
the payment date for all purposes of this Agreement.  If such amount is not made
available to the Agent on the Business Day following the Funding Date, the Agent
will notify the Borrower of such failure to fund and,  upon demand by the Agent,
the  Borrower  shall  pay such  amount to the  Agent  for the  Agent's  account,
together  with  interest  thereon  for each day  elapsed  since the date of such
Borrowing, at a rate per annum equal to the Interest Rate applicable at the time
to the Loans  comprising such  Borrowing.  The failure of any Lender to make any
Loan on any Funding  Date (any such Lender,  prior to the cure of such  failure,
being  hereinafter  referred to as a "Defaulting  Lender") shall not relieve any
other Lender of any  obligation  hereunder to make a Loan on such Funding  Date,
but no Lender shall be  responsible  for the failure of any other Lender to make
the Loan to be made by such other Lender on any Funding Date.

                           (3) The Agent shall not be obligated to transfer to a
Defaulting  Lender any payments made by Borrower to the Agent for the Defaulting
Lender's  benefit;  nor shall a Defaulting  Lender be entitled to the sharing of
any payments hereunder.  Amounts payable to a Defaulting Lender shall instead be
paid to or  retained by the Agent.  The Agent may hold and,  in its  discretion,
re-lend to Borrower the amount of all such  payments  received or retained by it
for the  account  of such  Defaulting  Lender.  Any  amounts  so  re-lent to the
Borrower shall bear interest at the rate applicable to Base Rate Revolving Loans
and for all other  purposes of this  Agreement  shall be treated as if they were
Revolving Loans, provided, however, that for purposes of voting or consenting to
matters with respect to the Loan Documents and determining Pro Rata Shares, such
Defaulting  Lender  shall be deemed  not to be a  "Lender"  and such  Defaulting
Lender's  Commitment and the principal amount of Loans owed to such Lender shall
be deemed to be zero (-0-).  Until a Defaulting Lender cures its failure to fund
its Pro Rata Share of any  Borrowing  (1) such  Defaulting  Lender  shall not be
entitled to any portion of the Unused Line Fee and (2) the Unused Line Fee shall
accrue in favor of the  Lenders  which have  funded  their  respective  Pro Rata
Shares of such requested  Borrowing and shall be allocated among such performing
Lenders ratably based upon their relative Commitments. This section shall remain
effective with respect to such Lender until such time as the  Defaulting  Lender
shall no longer be in default of any of its  obligations  under this  Agreement.
The terms of this Section shall not be construed to increase or otherwise affect
the  Commitment  of any  Lender,  or relieve or excuse  the  performance  by the
Borrower of its duties and obligations hereunder.

                  (h) Making of BABC Loans.

                           (1) In the  event  the Agent  shall  elect,  with the
consent of BABC,  to have the terms of this Section  2.2(h) apply to a requested
Borrowing as described in Section  2.2(f),  BABC shall make a Revolving  Loan in
the  amount of such  Borrowing  (any  such  Revolving  Loan made  solely by BABC
pursuant  to this  Section  2.2(h)  being  referred to as a "BABC Loan" and such
Revolving Loans being referred to collectively as "BABC Loans") available to the
Borrower on the Funding Date applicable  thereto by transferring  same day funds
to an account  of the  Borrower,  designated  in  writing  by the  Borrower  and

<PAGE>

acceptable to the Agent.  Each BABC Loan is a Revolving Loan hereunder and shall
be subject to all the terms and conditions  applicable to other  Revolving Loans
except  that all  payments  thereon  shall be payable to BABC solely for its own
account (and for the account of the holder of any  participation  interest  with
respect to such  Revolving  Loan).  The Agent shall not request BABC to make any
BABC Loan if (i) the Agent shall have received  written  notice from any Lender,
or otherwise has actual knowledge, that one or more of the applicable conditions
precedent set forth in Article 10 will not be satisfied on the requested Funding
Date for the applicable Borrowing,  or (ii) the requested Borrowing would exceed
the  Availability of the Borrower on such Funding Date. BABC shall not otherwise
be required to determine whether the applicable  conditions  precedent set forth
in Article 10 have been  satisfied or the requested  Borrowing  would exceed the
Availability  of the Borrower on the Funding Date  applicable  thereto  prior to
making, in its sole discretion, any BABC Loan.

                           (2)  The  BABC   Loans   shall  be   secured  by  the
Collateral,  shall  constitute  Revolving Loans and Obligations  hereunder,  and
shall bear interest at the rate  applicable to the Revolving  Loans from time to
time.
                  (i) Agent Advances.

                           (1) Subject to the limitations set forth in the 
provisos contained in this Section 2.2(i), the Agent is hereby authorized by the
Borrower and the Lenders, from time to time in the Agent's sole discretion,  (1)
after the  occurrence  of a Default or an Event of  Default,  or (2) at any time
that any of the other  applicable  conditions  precedent set forth in Article 10
have not been  satisfied,  to make Revolving  Loans to the Borrower on behalf of
the  Lenders  which  the  Agent,  in its  reasonable  business  judgment,  deems
necessary or desirable (A) to preserve or protect the Collateral, or any portion
thereof,  (B) to enhance the likelihood of, or maximize the amount of, repayment
of the Loans and other Obligations, or (C) to pay any other amount chargeable to
the  Borrower  pursuant  to the  terms  of this  Agreement,  including,  without
limitation,  costs,  fees and  expenses as described in Section 15.7 (any of the
advances  described in this  Section  2.2(i)  being  hereinafter  referred to as
"Agent  Advances");  provided,  that the Required Lenders may at any time revoke
the  Agent's  authorization  contained  in this  Section  2.2(i)  to make  Agent
Advances,  any  such  revocation  to be  in  writing  and  to  become  effective
prospectively upon the Agent's receipt thereof;

                           (2) The Agent  Advances  shall be repayable on demand
and secured by the Collateral,  shall constitute Revolving Loans and Obligations
hereunder, and shall bear interest at the rate applicable to the Revolving Loans
from time to time.  The Agent  shall  notify each Lender in writing of each such
Agent Advance.
                  (j) Settlement. It is agreed that each Lender's funded portion
of the  Revolving  Loan is  intended  by the Lenders to be equal at all times to
such Lender's Pro Rata Share of the outstanding Revolving Loans. Notwithstanding
such agreement,  the Agent,  BABC, and the other Lenders agree (which  agreement
shall not be for the benefit of or enforceable by the Borrower) that in order to
facilitate the  administration  of this Agreement and the other Loan  Documents,
settlement  among them as to the Revolving  Loans,  the BABC Loans and the Agent
Advances shall take place on a periodic  basis in accordance  with the following
provisions:


<PAGE>

                          (1) The Agent shall request settlement  ("Settlement")
with the Lenders on a weekly basis, or on a more frequent basis if so determined
by the Agent, (1) on behalf of BABC, with respect to each outstanding BABC Loan,
(2) for itself,  with  respect to each Agent  Advance,  and (3) with  respect to
collections  received,  in each case, by notifying the Lenders of such requested
Settlement by telecopy, telephone or other similar form of transmission, of such
requested  Settlement,  no later than 11:00 a.m.  (Pacific  time) on the date of
such requested Settlement (the "Settlement Date"). Each Lender (other than BABC,
in the case of BABC Loans) shall make the amount of such Lender's Pro Rata Share
of the  outstanding  principal  amount of the BABC Loans and Agent Advances with
respect to which  Settlement is requested  available to the Agent, for itself or
for the account of BABC, in same day funds,  to such account of the Agent as the
Agent may designate,  not later than 1:00 p.m. (Pacific time), on the Settlement
Date  applicable  thereto,  regardless  of  whether  the  applicable  conditions
precedent  set forth in Article 10 have then been  satisfied.  Such amounts made
available  to the Agent shall be applied  against the amounts of the  applicable
BABC Loan or Agent  Advance and,  together with the portion of such BABC Loan or
Agent  Advance  representing  BABC's Pro Rata Share  thereof,  shall  constitute
Revolving Loans of such Lenders. If any such amount is not made available to the
Agent by any Lender on the Settlement Date applicable  thereto,  the Agent shall
be entitled to recover  such  amount on demand  from such Lender  together  with
interest thereon at the Federal Funds Rate for the first three (3) days from and
after the Settlement Date and thereafter at the Interest Rate then applicable to
the Revolving Loans.
                           (2) Notwithstanding the foregoing,  not more than one
(1) Business Day after demand is made by the Agent (whether  before or after the
occurrence  of a Default or an Event of Default  and  regardless  of whether the
Agent has requested a Settlement  with respect to a BABC Loan or Agent Advance),
each other Lender shall  irrevocably  and  unconditionally  purchase and receive
from  BABC or the  Agent,  as  applicable,  without  recourse  or  warranty,  an
undivided  interest and  participation in such BABC Loan or Agent Advance to the
extent of such Lender's Pro Rata Share  thereof by paying to the Agent,  in same
day funds,  an amount equal to such Lender's Pro Rata Share of such BABC Loan or
Agent Advance.  If such amount is not in fact made available to the Agent by any
Lender,  the Agent shall be entitled to recover  such amount on demand from such
Lender  together with  interest  thereon at the Federal Funds Rate for the first
three (3) days from and after such demand and  thereafter  at the Interest  Rate
then applicable to the Revolving Loans.

                           (3) From and  after the  date,  if any,  on which any
Lender  purchases an undivided  interest and  participation  in any BABC Loan or
Agent  Advance  pursuant  to  subsection  (ii) above,  the Agent shall  promptly
distribute to such Lender at such address as such Lender may request in writing,
such  Lender's Pro Rata Share of all payments of principal  and interest and all
proceeds  of  Collateral  received  by the Agent in respect of such BABC Loan or
Agent Advance.

<PAGE>

                           (4)  Between  Settlement  Dates,  the  Agent,  to the
extent no Agent Advances or BABC Loans are outstanding, may pay over to BABC any
payments  received  by the  Agent,  which in  accordance  with the terms of this
Agreement  would  be  applied  to the  reduction  of the  Revolving  Loans,  for
application  to  BABC's  other  outstanding  Revolving  Loans.  If,  as  of  any
Settlement  Date,  collections  received  since the then  immediately  preceding
Settlement  Date have been applied to BABC's other  outstanding  Revolving Loans
other than to BABC Loans or Agent  Advances,  as  provided  for in the  previous
sentence,  BABC shall pay to the Agent for the  accounts of the  Lenders,  to be
applied to the outstanding  Revolving Loans of such Lenders, an amount such that
each Lender  shall,  upon receipt of such amount,  have,  as of such  Settlement
Date,  its Pro Rata Share of the  Revolving  Loans.  During  the period  between
Settlement  Dates,  BABC with  respect to BABC Loans,  the Agent with respect to
Agent  Advances,  and each Lender with respect to the Revolving Loans other than
BABC Loans and Agent  Advances,  shall be entitled to interest at the applicable
rate or rates payable under this Agreement on the actual average daily amount of
funds employed by BABC, the Agent and the other Lenders.

                  (k)  Notation.  The  Agent  shall  record  on  its  books  the
principal amount of the Revolving Loans owing to each Lender, including the BABC
Loans owing to BABC,  and the Agent  Advances  owing to the Agent,  from time to
time. In addition,  each Lender is authorized,  at such Lender's option, to note
the date and amount of each payment or  prepayment of principal of such Lender's
Revolving Loans in its books and records, including computer records, such books
and records constituting rebuttably presumptive evidence, absent manifest error,
of the accuracy of the information contained therein.

                  (l)  Lenders'  Failure to Perform.  All Loans (other than BABC
Loans and Agent  Advances)  shall be made by the Lenders  simultaneously  and in
accordance with their Pro Rata Shares. It is understood that (a) no Lender shall
be responsible  for any failure by any other Lender to perform its obligation to
make any Loans hereunder, nor shall any Commitment of any Lender be increased or
decreased  as a result  of any  failure  by any  other  Lender  to  perform  its
obligation to make any Loans hereunder,  (b) no failure by any Lender to perform
its  obligation to make any Loans  hereunder  shall excuse any other Lender from
its  obligation to make any Loans  hereunder,  and (c) the  obligations  of each
Lender hereunder shall be several, not joint and several.

         2.3  Letters of Credit.

                  (a)  Agreement  to Cause  Issuance.  Subject  to the terms and
conditions  of this  Agreement,  and in reliance  upon the  representations  and
warranties of the Borrower herein set forth, the Agent agrees to (i) cause to be
issued  by  Bank  of  America  for  the  account  of the  Borrower  standby  and
documentary  letters of credit  ("Letters of Credit"),  and (ii) provide  credit
support or other  enhancement to banks acceptable to Agent,  which issue Letters
of  Credit  for  the  account  of the  Borrower  (any  such  credit  support  or
enhancement  being herein referred to as a "Credit  Support") in accordance with
this Section 2.3 from time to time during the term of this Agreement.


<PAGE>

                  (b) Amounts; Outside Expiration Date. The Agent shall not have
any  obligation  to take  steps to cause to be issued any Letter of Credit or to
provide  Credit Support for any Letter of Credit at any time if: (1) the maximum
undrawn  amount of the  requested  Letter of Credit is  greater  than the Unused
Letter of Credit Subfacility at such time; (2) the maximum undrawn amount of the
requested Letter of Credit would exceed the Availability of the Borrower at such
time;  or (3) any  standby  Letter of Credit  has an  expiration  date more than
twelve (12) months from the date of issuance.

                  (c) Other  Conditions.  In  addition  to being  subject to the
satisfaction of the applicable conditions precedent contained in Article 10, the
obligation  of the Agent to cause  Bank of America to issue any Letter of Credit
or to  provide  Credit  Support  for any  Letter  of Credit  is  subject  to the
following conditions precedent having been satisfied in a manner satisfactory to
the Agent:

                           (1) The Borrower shall have delivered to the proposed
issuer of such Letter of Credit,
at such  times and in such  manner as such  proposed  issuer may  prescribe,  an
application in form and substance  satisfactory  to such proposed issuer and the
Agent for the  issuance of the Letter of Credit and such other  documents as may
be reasonably required pursuant to the terms thereof,  and the form and terms of
the proposed Letter of Credit shall be reasonably  satisfactory to the Agent and
such proposed issuer; and

                           (2) As of the  date  of  issuance,  no  order  of any
court, arbitrator or Governmental
Authority  shall  purport by its terms to enjoin or restrain  money center banks
generally  from  issuing  letters of credit of the type and in the amount of the
proposed  Letter of Credit,  and no law, rule or regulation  applicable to money
center banks  generally  and no request or directive  (whether or not having the
force of law) from any  Governmental  Authority  with  jurisdiction  over  money
center banks generally  shall  prohibit,  or request that the proposed issuer of
such Letter of Credit refrain from, the issuance of letters of credit  generally
or the issuance of such Letters of Credit.

                  (d) Issuance of Letters of Credit.

                           (1) Request for Issuance.  The Borrower shall give 
the Agent at least two (2) Business Days' prior written notice of the Borrower's
request for the issuance of a Letter of Credit. Such notice shall be irrevocable
and shall  specify the original  face amount of the Letter of Credit  requested,
the  effective  date  (which  date shall be a Business  Day) of issuance of such
requested  Letter of  Credit,  whether  such  Letter of Credit may be drawn in a
single or in partial draws, the date on which such requested Letter of Credit is
to expire  (which  date shall be a Business  Day),  the  purpose  for which such
Letter of Credit is to be issued, and the beneficiary of the requested Letter of
Credit. The Borrower shall attach to such notice the proposed form of the Letter
of Credit. 

                           (2) Responsibilities of the Agent; Issuance. The
Agent  shall  determine,  as of  the  Business  Day  immediately  preceding  the
requested  effective  date of  issuance of the Letter of Credit set forth in the
notice from the Borrower  pursuant to Section  2.3(d)(1),  (i) the amount of the

<PAGE>

applicable Unused Letter of Credit  Subfacility and (ii) the Availability of the
Borrower as of such date. If (i) the undrawn  amount of the requested  Letter of
Credit is not greater than the  applicable  Unused Letter of Credit  Subfacility
and (ii) the  issuance of such  requested  Letter of Credit would not exceed the
Availability of the Borrower, the Agent shall cause Bank of America to issue the
requested Letter of Credit on such requested effective date of issuance.

                           (3) Notice of Issuance.  On each  Settlement Date the
Agent shall give notice to each Lender of the  issuance of all Letters of Credit
issued since the last Settlement Date.

                           (4) No Extensions or Amendment.  The Agent shall not 
be obligated to cause any Letter of Credit to be extended or amended  unless the
requirements  of this  Section  2.3(d)  are met as though a new Letter of Credit
were being  requested  and issued.  With  respect to any Letter of Credit  which
contains any "evergreen" or automatic  renewal  provision,  each Lender shall be
deemed to have consented to any such extension or renewal unless any such Lender
shall have  provided to the Agent,  not less than 30 days prior to the last date
on  which  the  applicable  issuer  can in  accordance  with  the  terms  of the
applicable  Letter of Credit  decline to extend or renew such  Letter of Credit,
written  notice that it declines  to consent to any such  extension  or renewal,
provided,  that if all of the  requirements  of this  Section 3.4 are met and no
Default or Event of Default  exists,  no Lender shall  decline to consent to any
such extension or renewal.

                  (e) Payments Pursuant to Letters of Credit.

                           (1) Payment of Letter of Credit Obligations.  The 
Borrower  agrees to reimburse the issuer for any draw under any Letter of Credit
and the Agent for the  account of the Lenders  upon any payment  pursuant to any
Credit Support  immediately upon demand,  and to pay the issuer of the Letter of
Credit the amount of all other  obligations  and other  amounts  payable to such
issuer under or in connection  with any Letter of Credit  immediately  when due,
irrespective of any claim, setoff, defense or other right which the Borrower may
have at any time against such issuer or any other Person.

                           (2) Revolving Loans to Satisfy Reimbursement 
Obligations.  In the event that the issuer of any Letter of Credit honors a draw
under such Letter of Credit or the Agent shall have made any payment pursuant to
any Credit  Support  and the  Borrower  shall not have repaid such amount to the
issuer of such Letter of Credit or the Agent, as applicable, pursuant to Section
2.3(e)(1),  the Agent shall, upon receiving notice of such failure,  notify each
Lender of such failure, and each Lender shall  unconditionally pay to the Agent,
for the account of such issuer or the Agent, as applicable, as and when provided
hereinbelow,  an amount  equal to such  Lender's Pro Rata Share of the amount of
such  payment in Dollars  and in same day funds.  If the Agent so  notifies  the
Lenders  prior to 11:00 a.m.  (Pacific  time) on any Business  Day,  each Lender
shall make available to the Agent the amount of such payment, as provided in the
immediately  preceding sentence,  on such Business Day. Such amounts paid by the
Lenders to the Agent shall  constitute  Revolving Loans which shall be deemed to
have been  requested  by the  Borrower  pursuant  to Section 2.2 as set forth in
Section 4.7.

<PAGE>

                  (f) Participations.

                           (1) Purchase of Participations.  Immediately upon 
issuance of any Letter of Credit in accordance with Section 2.3(d),  each Lender
shall be deemed to have irrevocably and  unconditionally  purchased and received
without  recourse or warranty,  an undivided  interest and  participation in the
Letter of Credit or the Credit Support provided through the Agent to such issuer
in connection with the issuance of such Letter of Credit, equal to such Lender's
Pro Rata Share of the face amount of such Letter of Credit or the amount of such
Credit Support (including,  without limitation,  all obligations of the Borrower
with respect thereto, and any security therefor or guaranty pertaining thereto).

                           (2) Sharing of Reimbursement Obligation Payments.  
Whenever  the  Agent  receives  a  payment  from  the  Borrower  on  account  of
reimbursement  obligations in respect of a Letter of Credit or Credit Support as
to which the Agent has previously received for the account of the issuer thereof
payment from a Lender  pursuant to Section  2.3(e)(2),  the Agent shall promptly
pay to such  Lender  such  Lender's  Pro  Rata  Share of such  payment  from the
Borrower  in  Dollars.  Each  such  payment  shall  be made by the  Agent on the
Business Day on which the Agent receives  immediately  available  funds from the
Borrower pursuant to the immediately  preceding  sentence,  if received prior to
1:00  p.m.  (Pacific  time)  on such  Business  Day and  otherwise  on the  next
succeeding Business Day.

                           (3)  Documentation.  Upon the  request of any Lender,
the  Agent  shall  furnish  to such  Lender  copies  of any  Letter  of  Credit,
reimbursement  agreements executed in connection therewith,  application for any
Letter of Credit and credit support or enhancement provided through the Agent in
connection  with  the  issuance  of  any  Letter  of  Credit,   and  such  other
documentation as may reasonably be requested by such Lender.

                           (4) Obligations Irrevocable.  The obligations of each
Lender to make  payments  to the Agent  with  respect to any Letter of Credit or
with respect to any Credit Support  provided through the Agent with respect to a
Letter of Credit,  and the  obligations  of the Borrower to make payments to the
Agent,  for the  account  of the  Lenders  in  connection  therewith,  shall  be
irrevocable,  not  subject  to  any  qualification  or  exception  whatsoever  ,
including, without limitation, any of the following circumstances:

                                    (i) any lack of validity or enforceability 
of this Agreement or any of the other Loan Documents;

                                    (ii)the existence of any claim, setoff, 
defense  or other  right  which  the  Borrower  may have at any time  against  a
beneficiary  named in a Letter  of  Credit or any  transferee  of any  Letter of
Credit (or any Person for whom any such  transferee may be acting),  any Lender,
the Agent, the issuer of such Letter of Credit, or any other Person,  whether in
connection  with  this  Agreement,   any  Letter  of  Credit,  the  transactions
contemplated  herein or any unrelated  transactions  (including  any  underlying
transactions  between the Borrower or any other Person and the beneficiary named
in any Letter of Credit);

<PAGE>

                                    (iii)   any draft, certificate or any other 
document presented under the Letter of Credit proving to be forged,  fraudulent,
invalid or insufficient in any respect or any statement  therein being untrue or
inaccurate in any respect;

                                    (iv)the surrender or impairment of any 
security for the  performance  or  observance  of any of the terms of any of the
Loan Documents; or
                                    (v) the occurrence of any Default or Event 
of Default.

                  (g)  Recovery  or  Avoidance  of  Payments.  In the  event any
payment by or on behalf of the  Borrower  received by the Agent with  respect to
any Letter of Credit or Credit Support provided for any Letter of Credit (or any
guaranty by the Borrower or  reimbursement  obligation of the Borrower  relating
thereto)  and  distributed  by the  Agent to the  Lenders  on  account  of their
respective  participations therein is thereafter set aside, avoided or recovered
from the Agent in connection  with any  receivership,  liquidation or bankruptcy
proceeding,  the Lenders shall, upon demand by the Agent, pay to the Agent their
respective  Pro Rata  Shares of such  amount  set aside,  avoided or  recovered,
together  with  interest  at the rate  required to be paid by the Agent upon the
amount required to be repaid by it.

                  (h) Compensation for Letters of Credit.

                           (1) Letter of Credit Fee. The  Borrower agrees to pay
to the Agent with  respect  to each  Letter of  Credit,  for the  account of the
Lenders, the Letter of Credit Fee specified in, and in accordance with the terms
of, Section 3.6.

                           (2) Issuer Fees and Charges.  The Borrower shall pay 
to the issuer of any Letter of Credit,  or to the Agent,  for the account of the
issuer of any such Letter of Credit, solely for such issuer's account, such fees
and other  charges as are charged by such issuer for letters of credit issued by
it, including, without limitation, its standard fees for issuing, administering,
amending,  renewing,  paying and canceling  letters of credit and all other fees
associated with issuing or servicing  letters of credit, as and when assessed as
such fees are determined in accordance with Schedule 3.6.

                  (i) Indemnification; Exoneration; Power of Attorney

                           (1) Indemnification.  In addition to amounts payable 
as  elsewhere  provided in this  Section  2.3,  the  Borrower  hereby  agrees to
protect,  indemnify,  pay and save the Lenders and the Agent  harmless  from and
against  any and all  claims,  demands,  liabilities,  damages,  losses,  costs,
charges and expenses (including  reasonable attorneys' fees) which any Lender or
the Agent may incur or be subject to as a  consequence,  direct or indirect,  of
the issuance of any Letter of Credit or the  provision of any credit  support or
enhancement  in connection  therewith.  The agreement in this Section  2.3(i)(1)
shall survive payments of all Obligations.


<PAGE>

                           (2) Assumption of Risk by the Borrower.  As among the
Borrower, the Lenders, and the Agent, the Borrower assumes all risks of the acts
and omissions  of, or misuse of any of the Letters of Credit by, the  respective
beneficiaries of such Letters of Credit. In furtherance and not in limitation of
the foregoing,  the Lenders and the Agent shall not be responsible  for: (A) the
form,  validity,  sufficiency,  accuracy,  genuineness  or legal  effect  of any
document  submitted by any Person in  connection  with the  application  for and
issuance of and  presentation  of drafts  with  respect to any of the Letters of
Credit,  even  if it  should  prove  to be  in  any  or  all  respects  invalid,
insufficient,  inaccurate, fraudulent or forged; (B) the validity or sufficiency
of any instrument  transferring or assigning or purporting to transfer or assign
any Letter of Credit or the rights or benefits  thereunder or proceeds  thereof,
in whole or in part,  which  may  prove to be  invalid  or  ineffective  for any
reason;  (C) the  failure of the  beneficiary  of any Letter of Credit to comply
duly with conditions  required in order to draw upon such Letter of Credit;  (D)
errors, omissions,  interruptions,  or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise,  whether or not they be
in cipher;  (E) errors in  interpretation  of technical  terms;  (F) any loss or
delay in the transmission or otherwise of any document  required in order make a
drawing  under  any  Letter  of  Credit  or of the  proceeds  thereof;  (G)  the
misapplication by the beneficiary of any Letter of Credit of the proceeds of any
drawing under such Letter of Credit; or (H) any consequences arising from causes
beyond the control of the Lenders or the Agent,  including,  without limitation,
any act or omission,  whether rightful or wrongful,  of any present or future de
jure or de facto  Governmental  Authority.  None of the foregoing  shall affect,
impair or prevent the vesting of any rights or powers of the Agent or any Lender
under this Section 2.3(i).

                           (3)  Exoneration.  In furtherance and extension,  and
not in limitation, of the specific
provisions  set forth  above,  any  action  taken or omitted by the Agent or any
Lender under or in  connection  with any of the Letters of Credit or any related
certificates,  if taken or omitted in the absence of gross negligence or willful
misconduct,  shall not put the Agent or any Lender under any resulting liability
to the Borrower or relieve the Borrower of any of its  obligations  hereunder to
any such Person.

                           (4)  Power  of  Attorney.   In  connection  with  all
Inventory financed by Letters of
Credit, the Borrower hereby appoints the Agent, or the Agent's designee,  as its
attorney,  with  full  power  and  authority:  (a) to sign  and/or  endorse  the
Borrower's name upon any warehouse or other receipts relating to Inventory;  (b)
to sign the Borrower's name on bills of lading and negotiable documents relating
to Inventory;  (c) following the  occurrence  and during the  continuance  of an
Event of  Default,  to clear  Inventory  through  customs in the  Agent's or the
Borrower's name, and to sign and deliver to customs officials powers of attorney
in the Borrower's name for such purpose; (d) following the occurrence and during
the  continuance  of an Event of Default,  to complete in the  Borrower's or the
Agent's name, any order, sale, or transaction relating to the Inventory,  obtain
the  necessary  documents  in  connection  therewith,  and collect the  proceeds
thereof; and (e) following the occurrence and during the continuance of an Event
of Default, to do such other acts and things as are necessary in order to enable
the Agent to  obtain  possession  of the  Inventory.  Neither  the Agent nor its
designee, as the Borrower's attorney,  will be liable for any acts or omissions,
nor for any error of  judgement  or mistakes of fact or law.  This power,  being
coupled with an interest,  is irrevocable  until all Obligations  have been paid
and satisfied.


<PAGE>

                           (5) Account Party.  The Borrower hereby authorizes 
and  directs  any  issuer  of a Letter of  Credit  to name the  Borrower  as the
"Account  Party"  therein  and to deliver to the Agent  (copies of which will be
forwarded to the Borrower)  all  instruments,  documents and other  writings and
property received by the issuer pursuant to the Letter of Credit,  and to accept
and rely upon the  Agent's  instructions  and  agreements  with  respect  to all
matters  arising  in  connection  with the  Letter of Credit or the  application
therefor.
                           (6)  Control of  Inventory.  In  connection  with all
Inventory  financed  by Letters of Credit,  the  Borrower  will,  following  the
occurrence  and during  the  continuance  of an Event of Default at the  Agent's
request,  instruct all  suppliers,  carriers,  forwarders,  warehouses or others
receiving or holding cash, checks, Inventory,  documents or instruments in which
the Agent holds a security  interest to deliver them to the Agent and/or subject
to the Agent's order, and if they shall come into the Borrower's possession,  to
deliver them, upon request, to the Agent in their original form.

                           (7) Agent as Consignee.  The Borrower  shall also, at
the Agent's request, designate the Agent as the consignee on all bills of lading
and other negotiable and non-negotiable documents relating to Inventory.

                  (j)  Supporting  Letter of  Credit.  If,  notwithstanding  the
provisions  of  Section  2.3(b)  and  Section  12.1  any  Letter  of  Credit  is
outstanding  upon the termination of this Agreement,  then upon such termination
the Borrower shall deposit with the Agent,  for the ratable benefit of the Agent
and the  Lenders,  with  respect to each  Letter of Credit then  outstanding,  a
standby letter of credit (a "Supporting Letter of Credit") in form and substance
reasonably   satisfactory  to  the  Agent,   issued  by  an  issuer   reasonably
satisfactory  to the Agent in an amount equal to the  greatest  amount for which
such Letter of Credit may be drawn plus any fees and  expenses  associated  with
such  Letter of Credit,  under  which  Supporting  Letter of Credit the Agent is
entitled to draw amounts  necessary  to reimburse  the Agent and the Lenders for
payments  made by the Agent and the Lenders under such Letter of Credit or under
any credit  support  or  enhancement  provided  through  the Agent with  respect
thereto and any fees and expenses associated with such Letter of Credit.

         2.4 Foreign  Exchange  Transactions.  The  Borrower may request and the
Agent shall use  reasonable  efforts to arrange for the  Borrower to obtain from
Bank of America Foreign Exchange  Transactions (to the extent Bank of America is
able to provide such  transactions).  The Borrower  agrees to indemnify and hold
the Agent and the Lenders harmless from any and all obligations now or hereafter
owing by the  Agent  and the  Lenders  to (a) Bank of  America  arising  from or
related to such Foreign Exchange Transactions pursuant to the indemnity referred
to in clause (z) below,  or (b) to any other  Lender  that enters into a Foreign
Exchange  Transaction  pursuant  to any  indemnity  that  the  Agent in its sole
discretion  elects to provide to such other  Lender with respect to such Foreign
Exchange  Transaction.  Immediately  upon the Agent issuing any indemnity to the
Bank of  America  or such  other  Lender in  connection  with  Foreign  Exchange
Transactions,   each   Lender   shall  be   deemed  to  have   irrevocably   and
unconditionally  purchased an undivided  interest and  participation in any such
indemnity  provided by the Agent equal to such  Lender's  Pro Rata Share of such

<PAGE>

indemnity (including,  without limitation,  all obligations of the Borrower with
respect  thereto).  The  Borrower  agrees to pay the Bank of America all amounts
owing to the  Bank of  America  or such  Lender  pursuant  to  Foreign  Exchange
Transactions.  In the  event  the  Borrower  shall  not have paid to the Bank of
America or such Lender  such  amounts,  the Agent and the Lenders  shall pay the
Bank of  America  or such  Lender  any  amounts  required  to be paid  under the
applicable  indemnity  and such  amounts  when paid by the Agent and the Lenders
shall  constitute a Revolving  Loan which shall be deemed to have been requested
by the  Borrower.  The Borrower  acknowledges  and agrees that the  obtaining of
Foreign Exchange  Transactions  from Bank of America (x) is in the discretion of
Bank of America, (y) is subject to all rules and regulations of Bank of America,
and (z) is due to Bank of America  relying on the indemnity of the Agent and the
Lenders to Bank of America  with respect to  obligations  of the Borrower to the
Bank of America in connection with the Foreign Exchange Transactions.



                                    ARTICLE 3

                                INTEREST AND FEES

         3.1 Interest.

                  (a) Interest Rates. All outstanding  Loans shall bear interest
on the unpaid  principal amount thereof  (including,  to the extent permitted by
law,  on  interest  thereon  not paid when due) from the date made until paid in
full in cash at a rate  determined  by  reference  to the Base Rate or the LIBOR
Rate and  Sections  3.1(a)(i)  or (ii),  as  applicable,  but not to exceed  the
Maximum Rate described in Section 3.3. Subject to the provisions of Section 3.2,
any of the Loans may be converted  into,  or continued  as, Base Rate  Revolving
Loans or LIBOR  Revolving Loans in the manner provided in Section 3.2. If at any
time Loans are  outstanding  with respect to which notice has not been delivered
to the Agent in accordance with the terms of this Agreement specifying the basis
for determining the interest rate applicable thereto,  then those Loans shall be
Base Rate  Revolving  Loans and shall  bear  interest  at a rate  determined  by
reference  to the Base Rate until  notice to the  contrary has been given to the
Agent in accordance  with this  Agreement and such notice has become  effective.
Except as otherwise  provided herein,  the outstanding Loans shall bear interest
as follows:

                           (i) For all Base Rate Revolving Loans at a 
fluctuating per annum rate equal to the Base Rate plus the Applicable Margin;

                           (ii)For all Libor Revolving Loans at a per annum rate
equal to the Libor Rate plus the Applicable Margin.

Each change in the Base Rate shall be reflected in the interest  rate  described
in clause  (i)  above as of the  effective  date of such  change.  All  interest
charges  shall be  computed  on the basis of a year of 360 days and actual  days
elapsed (which results in more interest being paid than if computed on the basis
of a 365-day year).  Interest  accrued on all Base Rate Revolving  Loans will be
payable in arrears on the first day of each month hereafter. Interest accrued on
all LIBOR Revolving Loans will be payable on the LIBOR Interest Payment Date.


<PAGE>

                  (b)  Default  Rate.  If any  Event of  Default  occurs  and is
continuing and the Majority  Lenders in their  discretion so elect,  then, while
any such Event of  Default is  outstanding,  all of the  Obligations  shall bear
interest at the Default Rate applicable thereto; provided,  however, that if any
Obligations  other than Loans are not paid when due, they shall bear interest at
the Default Rate applicable thereto.

         3.2  Conversion and Continuation Elections.  (a)  The Borrower may, 
upon  irrevocable  written  notice to the Agent in  accordance  with  Subsection
3.2(b):
                           (i) elect, as of any Business Day, in the case of 
Base Rate  Revolving  Loans to convert any such Loans (or any part thereof in an
amount not less than $2,500,000,  or that is in an integral multiple of $250,000
in excess thereof) into LIBOR Revolving Loans; or

                           (ii)elect, as of the last day of the applicable 
Interest  Period,  to continue any LIBOR Revolving Loans having Interest Periods
expiring on such day (or any part thereof in an amount not less than $2,500,000,
or that is in an integral multiple of $250,000 in excess thereof);

provided,  that if at any time the aggregate  amount of LIBOR Revolving Loans in
respect of any Borrowing is reduced,  by payment,  prepayment,  or conversion of
part  thereof to be less than  $2,500,000,  such  LIBOR  Revolving  Loans  shall
automatically convert into Base Rate Revolving Loans, and on and after such date
the right of the  Borrower  to continue  such Loans as, and  convert  such Loans
into, LIBOR Revolving Loans, as the case may be, shall terminate.

                  (b)   The    Borrower    shall    deliver    a    notice    of
conversion/continuation ("Notice of Conversion/Continuation"),  substantially in
the form of Exhibit D attached  hereto,  to be  received  by the Agent not later
than 10:00 a.m.  (Pacific  time) at least three  Business Days in advance of the
Conversion/Continuation Date, if the Loans are to be converted into or continued
as LIBOR Revolving Loans and specifying:

                           (i) the proposed Conversion/Continuation Date;

                           (ii)the aggregate amount of Loans to be converted or 
renewed;

                           (iii)    the type of Loans resulting from the 
proposed conversion or continuation; and

                           (iv)the duration of the requested Interest Period.

                  (c) If upon the expiration of any Interest  Period  applicable
to LIBOR  Revolving  Loans,  the  Borrower  has  failed to  select  timely a new
Interest  Period to be  applicable to LIBOR  Revolving  Loans or if any Event of
Default  then exists,  the  Borrower  shall be deemed to have elected to convert
such LIBOR  Revolving  Loans into Base Rate Revolving  Loans effective as of the
expiration date of such Interest Period.


<PAGE>

                  (d) The Agent will promptly  notify each Lender of its receipt
of a Notice of Conversion/Continuation.  All conversions and continuations shall
be made ratably according to the respective outstanding principal amounts of the
Loans with respect to which the notice was given held by each Lender.

                  (e) During the existence of a Default or Event of Default, the
Borrower  may not elect to have a Loan  converted  into or  continued as a LIBOR
Revolving Loan.

                  (f) After giving effect to any conversion or  continuation  of
Loans, there may not be more than ten (10) different Interest Periods in effect.

         3.3 Maximum Interest Rate. In no event shall any interest rate provided
for  hereunder  exceed the maximum rate legally  chargeable  by any Lender under
applicable  law for  loans of the type  provided  for  hereunder  (the  "Maximum
Rate"). If, in any month, any interest rate, absent such limitation,  would have
exceeded the Maximum  Rate,  then the interest  rate for that month shall be the
Maximum Rate,  and, if in future months,  that interest rate would  otherwise be
less than the Maximum Rate,  then that interest rate shall remain at the Maximum
Rate until such time as the amount of interest paid hereunder  equals the amount
of interest  which would have been paid if the same had not been  limited by the
Maximum Rate. In the event that,  upon payment in full of the  Obligations,  the
total amount of interest  paid or accrued  under the terms of this  Agreement is
less than the total amount of interest  which  would,  but for this Section 3.3,
have been paid or  accrued if the  interest  rates  otherwise  set forth in this
Agreement  had at all times  been in effect,  then the  Borrower  shall,  to the
extent  permitted  by  applicable  law,  pay the Agent,  for the  account of the
Lenders,  an amount  equal to the  excess of (a) the lesser of (i) the amount of
interest  which would have been  charged if the Maximum  Rate had, at all times,
been in effect over (ii) the amount of interest which would have accrued had the
interest  rates  otherwise set forth in this  Agreement,  at all times,  been in
effect  over (b) the amount of  interest  actually  paid or  accrued  under this
Agreement. In the event that a court determines that the Agent and/or any Lender
has received interest and other charges hereunder in excess of the Maximum Rate,
such excess shall be deemed received on account of, and shall  automatically  be
applied to reduce, the Obligations other than interest,  in the inverse order of
maturity,  and if there are no  Obligations  outstanding,  the Agent and/or such
Lender shall refund to the Borrower such excess.

         3.4 Facility  Fee. The  Borrower  agrees to pay the Agent,  for its own
account,  a facility fee (the "Facility Fee") in the amount set forth in the Fee
Letter,  which  Facility  Fee shall be fully  earned by the Agent on the Closing
Date.

         3.5 Unused Line Fee. Until the  Obligations  have been paid in full and
the Agreement  terminated,  the Borrower agrees to pay, on the first day of each
month and on the Termination  Date, to the Agent, for the ratable account of the
Lenders,  an unused line fee equal to  three-eighths  of one percent (.375%) per
annum on the average  daily amount by which,  during the  immediately  preceding
month or shorter  period if  calculated  on the  Termination  Date,  the Maximum
Revolver Amount exceeded the sum of (i) the average daily outstanding  amount of
Revolving  Loans,  (ii) the undrawn  face amount of all  outstanding  Letters of
Credit and (iii) the average daily amount of the Foreign Exchange  Reserve,  but

<PAGE>

only to the extent the  Borrowing  Base  Availability  is less than the  Maximum
Revolver Amount. The unused line fee shall be computed on the basis of a 360-day
year for the actual number of days elapsed.  All payments  received by the Agent
on account of Accounts or as proceeds of other  Collateral shall be deemed to be
credited to the Borrower's Loan Account immediately upon receipt for purposes of
calculating the unused line fee pursuant to this Section 3.5.

         3.6  Letter of Credit Fee.

                  (a) Subject to the provisions of Section 3.6(b),  the Borrower
agrees to pay to the Agent,  for the ratable  account of the  Lenders,  for each
Letter of Credit, a fee (the "Letter of Credit Fee") equal to:

                  (i) 1.875%, if the Interest Coverage Ratio is greater than or 
equal to 2.0:1;

                  (ii)2.00%, if the Interest Coverage Ratio is less than 2.0:1 
and greater than or equal to 1.25:1; and

                      (iii)    2.25%, if the Interest Coverage Ratio is less 
than 1.25:1;

per annum of the undrawn  face  amount of each  Letter of Credit  issued for the
Borrower's account at the Borrower's request, plus all reasonable  out-of-pocket
costs,  fees  and  expenses  incurred  by  the  Agent  in  connection  with  the
application for, issuance of, or amendment to any Letter of Credit, as such fees
are  determined  according  to Schedule  3.6.  The Letter of Credit Fee shall be
payable monthly in arrears on the first day of each month following any month in
which a Letter of Credit was issued  and/or in which a Letter of Credit  remains
outstanding.  The  Letter of  Credit  Fee  shall be  computed  on the basis of a
360-day  year for the  actual  number of days  elapsed.  If any Event of Default
occurs and is continuing and the Majority  Lenders in their discretion so elect,
then, while any Event of Default is outstanding,  the Letter of Credit Fee shall
be increased to the Default Rate.

                  (b) The per annum  Letter of Credit Fee payable on the Closing
Date and for the  period  ending on the last day of the month in which the Agent
receives the quarterly  financial  statements  for the fiscal quarter ended June
30, 1998,  shall be 2.0%. The Letter of Credit Fee shall  thereafter be adjusted
following  each delivery to the Agent of the quarterly  financial  statements of
the Parent required  pursuant to Section 7.2(c) (together with the corresponding
Interest  Coverage Ratio  Certificate) for the period of two consecutive  fiscal
quarters  ending  June 30,  1998,  for the  period of three  consecutive  fiscal
quarters  ending  September  30, 1998,  and for each period of four  consecutive
fiscal  quarters ending on December 31, 1998 and thereafter each such adjustment
to be  effective  on the first day of the first full  calendar  month after each
such  delivery.  Notwithstanding  anything in this section to the contrary,  (i)
before  any  reductions  in the  Letter of  Credit  Fee will be  instituted  and
maintained,  the Availability (calculated without regard to the Maximum Revolver
Amount)  must be greater than  $50,000,000.00;  (ii) in the event that the Agent
shall fail to receive any such  financial  statements  and the related  Interest
Coverage  Ratio  Certificate  for  any  fiscal  quarter  of  the  Parent  within
fifty-five   (55)  days  following  the  end  of  such  fiscal  quarter  (within
one-hundred  (100) days  following the end of such fiscal quarter if such fiscal
quarter  is the last  fiscal  quarter of any  Fiscal  Year),  then the Letter of

<PAGE>

Credit  Fee shall,  at the end of such  fifty-fifth  or  one-hundredth  day,  as
appropriate,  immediately  and without notice or further action be the Letter of
Credit Fee then in effect  (such  Letter of Credit Fee to be in effect until the
first  day of the first  full  calendar  month  after  the  Agent  receives  the
quarterly  financial  statements of the Parent required under Section 7.2(c) for
the most recent fiscal quarter of the Parent and the related  Interest  Coverage
Ratio  Certificate ) and (iii) in the event, with respect to any four (4) fiscal
quarter period of the Parent which shall be a Fiscal Year, the audited financial
statements  of the Parent  required  under  Section  7.2(a) for such Fiscal Year
shall  indicate  an  Interest  Coverage  Ratio for such four (4) fiscal  quarter
period (as  determined  by the Agent) less than that  reflected  in the Interest
Coverage  Ratio  Certificate  delivered  to the Agent  for such four (4)  fiscal
quarter period, the Letter of Credit Fee shall be adjusted retroactively (to the
effective date of the Letter of Credit Fee which was  determined  based upon the
delivery of such Interest  Coverage Ratio  Certificate and the related quarterly
financial  statements of the Parent delivered pursuant to Section 7.2(c) for the
last  quarter  of such four (4)  fiscal  quarter  period) to reflect a Letter of
Credit Fee based upon the Interest  Coverage Ratio  determined  from the audited
financial statements and the Borrower shall make payments to the Agent on behalf
of the Lenders to reflect such adjustment.

         3.7 Collateral Management Fee. The Borrower agrees to pay to the Agent,
for its own  account,  an  annual  collateral  management  fee (the  "Collateral
Management  Fee") in the  amount  of  $50,000  on the  Closing  Date and on each
Anniversary Date thereafter.

         3.8 Foreign  Exchange Risk Fee. The Borrower agrees to pay $50 for each
assumption  of  settlement  risk by the  Agent  pursuant  to  clause  (c) of the
definition of Foreign Exchange Reserve.

                                    ARTICLE 4

                            PAYMENTS AND PREPAYMENTS

         4.1 Revolving Loans. The Borrower shall repay the outstanding principal
balance of the Revolving Loans, plus all accrued but unpaid interest thereon, on
the Termination  Date. The Borrower may prepay  Revolving Loans at any time, and
reborrow subject to the terms of this Agreement;  provided,  however,  that with
respect  to any LIBOR  Revolving  Loans  prepaid  by the  Borrower  prior to the
expiration date of the Interest Period applicable thereto, the Borrower promises
to pay to the Agent for account of the Lenders the amounts  described in Section
5.4; provided,  however, if at any time the prepayment of Loans pursuant to this
Agreement would result, in the Borrower  incurring  breakage costs under Section
5.4 as a result of LIBOR  Revolving  Loans being  prepaid other than on the last
day of an Interest Period applicable thereto (the "Affected LIBOR Loans"),  then
the Borrower may in its sole discretion initially deposit a portion (up to 100%)
of the amounts  that  otherwise  would have been paid in respect of the Affected
LIBOR  Loans  with the Bank of America or an  Affiliate  for the  benefit of the
Agent  (which  deposit,  after  giving  effect to  interest to be earned on such
deposit prior to the last day of the relevant Interest Periods, must be equal in
amount to the amount of Affected LIBOR Loans not immediately prepaid) to be held
as  security  for the  obligations  of the  Borrower  hereunder  pursuant  to an
agreement to be entered into in form and substance  reasonably  satisfactory  to

<PAGE>

the Agent,  with such cash  collateral  to be  directly  applied  upon the first
occurrence  (or  occurrences)  thereafter of the last day of an Interest  Period
applicable to the relevant Loans that are LIBOR Revolving Loans (or such earlier
date or dates as shall be  requested  by the  Borrower),  to repay an  aggregate
principal  amount of such Loans equal to the Affected  LIBOR Loans not initially
repaid  pursuant to this  sentence.  Notwithstanding  anything  to the  contrary
contained in the immediately  preceding sentence,  all amounts deposited as cash
collateral pursuant to the immediately  preceding sentence shall be held for the
sole benefit of the Lenders whose Loans would  otherwise  have been  immediately
repaid with the amounts deposited and upon the taking of any action by the Agent
or the Lenders  pursuant to the remedial  provisions  of Section 11, any amounts
held as cash  collateral  pursuant  to this  Section  4.1 shall,  subject to the
requirements  of applicable  law, be immediately  applied to the relevant Loans.
Following repayment of the relevant Loans, any remaining cash collateral will be
returned to the Borrower.  In addition,  and without  limiting the generality of
the  foregoing,  upon demand and no later than the next  Business Day  following
such  demand,  the  Borrower  promises  to pay to the Agent,  for account of the
Lenders,  the  amounts,  without  duplication,  by  which  at any  time  (a) the
Aggregate Revolver  Outstanding  exceeds the Availability (with Availability for
purposes of this clause (a) calculated as if the Aggregate Revolver Outstandings
were zero), and (b) the Availability is less than $50,000,000 (with Availability
for purposes of this clause (b) calculated  without  regard to Maximum  Revolver
Amount).

         4.2  Termination of Facility. The  Borrower may  terminate  this  
Agreement  upon at least  ten (10)  Business  Days'  notice to the Agent and the
Lenders,  upon  (a) the  payment  in full of all  outstanding  Revolving  Loans,
together with accrued interest thereon,  and the cancellation of all outstanding
Letters of Credit,  (b) the payment in full in cash (or as otherwise provided in
Section  2.3(j))of all other Obligations then due together with accrued interest
thereon, and (c) with respect to any LIBOR Revolving Loans prepaid in connection
with  such  termination  prior to the  expiration  date of the  Interest  Period
applicable thereto, the payment of the amounts described in Section 5.4.

         4.3  Payments by the Borrower.

                  (a) All  payments  to be made by the  Borrower  shall  be made
without  set-off,  recoupment  or  counterclaim.  Except as otherwise  expressly
provided herein, all payments by the Borrower shall be made to the Agent for the
account of the Lenders at the Agent's  address  set forth in Section  15.8,  and
shall be made in Dollars and in immediately available funds, no later than 11:30
a.m.  (Pacific time) on the date specified  herein.  Any payment received by the
Agent  later  than  11:30  a.m..  (Pacific  time)  shall be  deemed to have been
received on the following Business Day and any applicable  interest or fee shall
continue to accrue.

                  (b) Subject to the  provisions  set forth in the definition of
"Interest  Period"  herein,  whenever  any  payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the  computation of interest
or fees, as the case may be.


<PAGE>

                  (c) Unless the Agent  receives  notice from the Borrower prior
to the date on which any payment is due to the Lenders  that the  Borrower  will
not make such  payment in full as and when  required,  the Agent may assume that
the  Borrower  has  made  such  payment  in full to the  Agent  on such  date in
immediately available funds and the Agent may (but shall not be so required), in
reliance  upon such  assumption,  distribute  to each Lender on such due date an
amount  equal to the  amount  then due such  Lender.  If and to the  extent  the
Borrower has not made such payment in full to the Agent, each Lender shall repay
to the Agent on demand such amount  distributed  to such Lender,  together  with
interest  thereon  at the  Federal  Funds  Rate for each day from the date  such
amount is distributed to such Lender until the date repaid.

         4.4 Payments as Revolving Loans.  All payments of principal,  interest,
reimbursement  obligations in connection with Letters of Credit,  fees, premiums
and other sums  payable  hereunder,  including  all  reimbursement  for expenses
pursuant  to  Section  15.7,  may,  at the  option  of the  Agent,  in its  sole
discretion,  subject  only to the terms of this  Section  4.4,  be paid from the
proceeds of Revolving Loans made hereunder,  whether made following a request by
the  Borrower  pursuant to Section  2.2 or a deemed  request as provided in this
Section 4.4. [The Borrower hereby irrevocably authorizes the Agent to charge the
Loan  Account  for the  purpose  of paying  principal,  interest,  reimbursement
obligations in connection with Letters of Credit,  fees, premiums and other sums
payable hereunder,  including reimbursing expenses pursuant to Section 15.7, and
agrees that all such amounts charged shall constitute Revolving Loans (including
BABC Loans and Agent  Advances) and that all such Revolving  Loans so made shall
be  deemed  to  have  been  requested  by  Borrower  pursuant  to  Section  2.2.
Notwithstanding  this Section 4.4, if no Base Rate Loans are  outstanding  as of
the close of business on the date that any (i) fees payable hereunder, including
the Facility Fee, the Unused Line Fee, the Letter of Credit Fee, the  Collateral
Management  Fee and the Foreign  Exchange Risk Fee,  (ii) amounts  payable under
Article 5, (iii) indemnity  payments to Section 15.11 and (iv) reimbursement for
expenses  pursuant to Section  15.7(e),  (g) and (h), are due from any Borrower,
the Agent shall  notify the Borrower of the  aggregate  amount of such sums then
owing by the Borrower and provided  that the Borrower  pays such amount into the
Agent's  Account by federal wire  transfer by the next  Business  Day  following
delivery of such notice,  then such payment shall be deemed to have been paid on
the date of such notice and no interest on such amount shall accrue.

         4.5  Apportionment,  Application  and Reversal of  Payments.  Aggregate
principal and interest  payments shall be apportioned  ratably among the Lenders
(according to the unpaid  principal  balance of the Loans to which such payments
relate held by each Lender) and payments of the fees shall,  as  applicable,  be
apportioned  ratably  among the Lenders.  All payments  shall be remitted to the
Agent and all such  payments  not  relating to principal or interest of specific
Loans,  or not  constituting  payment of  specific  fees,  and all  proceeds  of
Accounts or other Collateral  received by the Agent, shall be applied,  ratably,
subject to the provisions of this Agreement, first, to pay any fees, indemnities
or expense  reimbursements  including any amounts  relating to Foreign  Exchange
Transactions then due to the Agent from the Borrower; second, to pay any fees or
expense reimbursements then due to the Lenders from the Borrower;  third, to pay
interest due in respect of all Revolving  Loans,  including BABC Loans and Agent
Advances;  fourth,  to pay or  prepay  principal  of the BABC  Loans  and  Agent
Advances;  fifth, to pay or prepay  principal of the Revolving Loans (other than
BABC Loans and Agent Advances) and (without  duplication)  unpaid  reimbursement

<PAGE>

obligations  in respect of Letters of Credit;  and sixth,  to the payment of any
other Obligation due to the Agent or any Lender by the Borrower. Notwithstanding
anything to the contrary contained in this Agreement,  unless so directed by the
Borrower,  or unless an Event of Default is  outstanding,  neither the Agent nor
any Lender  shall apply any  payments  which it receives to any LIBOR  Revolving
Loan, except (a) on the expiration date of the Interest Period applicable to any
such LIBOR  Revolving  Loan, or (b) in the event,  and only to the extent,  that
there are no  outstanding  Base Rate Revolving  Loans.  The Agent shall promptly
distribute to each Lender, pursuant to the applicable wire transfer instructions
received  from each  Lender in  writing,  such  funds as it may be  entitled  to
receive,  subject to a Settlement  delay as provided for in Section 2.2(j).  The
Agent and the Lenders shall have the continuing and exclusive right to apply and
reverse and reapply any and all such proceeds and payments to any portion of the
Obligations.

         4.6 Indemnity for Returned  Payments.  If, after receipt of any payment
of, or proceeds  applied to the payment of, all or any part of the  Obligations,
the Agent or any Lender is for any reason compelled to surrender such payment or
proceeds to any  Person,  because  such  payment or  application  of proceeds is
invalidated,  declared fraudulent,  set aside, determined to be void or voidable
as a preference, impermissible setoff, or a diversion of trust funds, or for any
other  reason,  then the  Obligations  or part thereof  intended to be satisfied
shall be revived and continue and this Agreement shall continue in full force as
if such payment or proceeds  had not been  received by the Agent or such Lender,
and the Borrower shall be liable to pay to the Agent,  and hereby does indemnify
the Agent and the Lenders and hold the Agent and the Lenders  harmless  for, the
amount of such payment or proceeds  surrendered.  The provisions of this Section
4.6 shall be and remain effective  notwithstanding any contrary action which may
have been  taken by the Agent or any  Lender in  reliance  upon such  payment or
application of proceeds,  and any such contrary action so taken shall be without
prejudice to the Agent's and the Lenders'  rights under this Agreement and shall
be deemed to have been  conditioned upon such payment or application of proceeds
having become final and  irrevocable.  The  provisions of this Section 4.6 shall
survive the termination of this Agreement.

         4.7 Agent's and Lenders'  Books and Records;  Monthly  Statements.  The
Borrower agrees that the Agent's and each Lender's books and records showing the
Obligations and the  transactions  pursuant to this Agreement and the other Loan
Documents shall be admissible in any action or proceeding arising therefrom, and
shall constitute rebuttably  presumptive proof thereof,  irrespective of whether
any Obligation is also evidenced by a promissory note or other  instrument.  The
Agent will provide to the Borrower a monthly statement of Loans,  payments,  and
other  transactions  pursuant to this Agreement.  Such statement shall be deemed
correct, accurate, and binding on the Borrower and an account stated (except for
reversals  and  reapplications  of payments  made as provided in Section 4.5 and
corrections of errors discovered by the Agent), unless the Borrower notifies the
Agent in writing to the contrary within thirty (30) days after such statement is
rendered.  In the event a timely  written  notice of  objections is given by the
Borrower, only the items to which exception is expressly made will be considered
to be disputed by the Borrower.


<PAGE>

                                    ARTICLE 5

                     TAXES, YIELD PROTECTION AND ILLEGALITY

         5.1 Taxes.

                  (a) Subject to Section  5.1(c)  hereof,  and unless  otherwise
required by applicable  law, any and all payments by the Borrower to each Lender
or the Agent under this Agreement and any other Loan Document shall be made free
and clear of, and without  deduction or withholding  for any Taxes. In addition,
the Borrower shall pay all Other Taxes.

                  (b) Subject to Section 5.1(c) hereof,  the Borrower  agrees to
indemnify  and hold  harmless  each  Lender and the Agent for the full amount of
Taxes  or Other  Taxes  (including  any  Taxes or  Other  Taxes  imposed  by any
jurisdiction  on amounts  payable  under this Section) paid by the Lender or the
Agent.  In the event that the  imposition of any such tax or Other Tax for which
indemnification  is being  requested  hereunder  may not have been  correctly or
legally  asserted (a "Disputed  Tax"), the parties shall cooperate to contest or
otherwise  endeavor to settle with the relevant tax  authority any such Disputed
Tax. Payment under this  indemnification  shall be made within 30 days after the
date the Lender or the Agent makes written demand  therefor;  provided that such
demand  must be made  within 120 days  after the date such Taxes or Other  Taxes
were paid by the Lender or the Agent and (ii) set forth in reasonable detail the
basis of the Borrower's obligation to indemnify such Lender or Agent pursuant to
this Section 5.1(b) and the computation of such indemnifiable amount.

                  (c) The Borrower  shall not be required to pay any  additional
amounts to, or otherwise  indemnify,  the Agent,  any Lender,  or any  Assignee,
pursuant to this Section 5.1 unless the Agent,  Lender or Assignee,  as the case
may be is, on the Closing date, or on the Assignment and Acceptance  Date in the
case of an Assignee,  either (i) a "United States person" for purposes of United
States  federal  income  taxation and is subject to United States federal income
taxation on a net income basis or (ii) a non-"United States person" for purposes
of United States federal income  taxation and has certified to the Borrower,  on
the Closing  Date or on the  Assignment  and  Acceptance  Date in the case of an
Assignee  (and,  but for a change in  applicable  law,  at such  other  times as
specified  in Section  14.10  hereof),  that it is  completely  exempt  from the
imposition of United States withholding  taxation by delivery to the Borrower of
the forms specified in Section 14.10 hereof.

                  (d) If the  Borrower  shall be  required  by law to  deduct or
withhold  any  Taxes  or  Other  Taxes  from or in  respect  of any sum  payable
hereunder to any Lender or the Agent, then:

                           (i) the sum payable shall be increased as necessary 
so that after making all required deductions and withholdings such Lender or the
Agent,  as the case may be,  receives  an amount  equal to the sum it would have
received had no such deductions or withholdings been made;

                           (ii)the Borrower shall make such deductions and 
withholdings; and


<PAGE>

                           (iii)    the Borrower shall pay the full amount 
deducted or withheld to the  relevant  taxing  authority  or other  authority in
accordance with applicable law;

                  (e)  Within  90 days  after  the  date of any  payment  by the
Borrower of Taxes or Other Taxes, the Borrower shall use its reasonable  efforts
to furnish the Agent with evidence of payment thereof reasonably satisfactory to
the Agent.

                  (f) If the Borrower is required to pay  additional  amounts to
any Lender or the Agent  pursuant to subsection  (c) of this Section,  then such
Lender  shall use  reasonable  efforts  (consistent  with  legal and  regulatory
restrictions)  to change the  jurisdiction of its lending office so as to reduce
or eliminate any such  additional  payment by the Borrower  which may thereafter
accrue,  if  such  change  in the  reasonable  judgment  of such  Lender  is not
otherwise materially disadvantageous to such Lender.

                  (g) Each Lender  agrees  that (i) it will take all  reasonable
actions  necessary  to maintain  all  exemptions,  if any,  available to it from
United  States  withholding  taxation  (whether  available  by treaty,  existing
administrative  waiver,  or by virtue of the jurisdiction of its lending office)
and (ii) otherwise  cooperate with the Borrower to minimize any amounts  payable
by the  Borrower  under this  Section 5.1. In the event that any such payment of
Taxes or indemnification of Taxes under this Section 5.1 results in a tax credit
to such  Lender  under the laws of a  jurisdiction  other than that to which the
Taxes are paid,  the Lender  shall  promptly  notify the Borrower and pay to the
Borrower an amount equal to any net tax benefit  (after  taking into account any
related tax detriment relating to such payment) resulting from such credit.

                  (h) In the event that the amount that the Borrower is required
to pay to or for the account of any Lender is increased in any material  respect
as a result of any  payments  required  to be made by the  Borrower  under  this
Section 5.1 (any such Lender being referred to herein as an "Affected  Lender"),
the  Borrower  shall have the right,  subject to the  consent of the Agent which
consent shall not be unreasonably withheld, upon notice to such Affected Lender,
to (i) prepay the principal  amount or any portion thereof held by such Affected
Lender plus all interest,  fees, and other amounts owing to such Affected Lender
as of the date of such prepayment or (ii) require such Affected Lender to assign
to one or more assignees specified by the Company who are willing to so purchase
from such Affected Lender all, or any portion thereof, of such Affected Lender's
rights and  obligations  under this  Agreement  provided  that such  assignee or
assignees  shall  pay  to  such  Affected  Lender,  in  consideration  for  such
assignment, an amount equal to all principal,  interest, fees, and other amounts
owing to such Affected Lender, plus any out-of-pocket  transaction costs related
thereto  incurred by such Affected  Lender,  that is allocable to the portion of
such rights and obligations being assigned as of the date of such assignment.

         5.2  Illegality.

                  (a) If any  Lender  determines  that the  introduction  of any
Requirement  of  Law,  or  any  change  in any  Requirement  of  Law,  or in the
interpretation  or  administration  of any  Requirement  of  Law,  has  made  it
unlawful, or that any central bank or other Governmental  Authority has asserted
that it is unlawful,  for any Lender or its  applicable  lending  office to make
LIBOR  Revolving  Loans,  then, on notice  thereof by the Lender to the Borrower

<PAGE>

through the Agent,  any obligation of that Lender to make LIBOR  Revolving Loans
shall be suspended until the Lender notifies the Agent and the Borrower that the
circumstances giving rise to such determination no longer exist.

                  (b) If a Lender determines that it is unlawful to maintain any
LIBOR  Revolving  Loan, the Borrower  shall,  upon its receipt of notice of such
fact and demand from such Lender (with a copy to the Agent), prepay in full such
LIBOR  Revolving Loans of that Lender then  outstanding,  together with interest
accrued  thereon and one-half of the amounts  required under Section 5.4, either
on the last day of the  Interest  Period  thereof,  if the Lender  may  lawfully
continue to maintain such LIBOR Revolving Loans to such day, or immediately,  if
the Lender may not lawfully  continue to maintain such LIBOR  Revolving Loan. If
the  Borrower  is  required  to  so  prepay  any  LIBOR   Revolving  Loan,  then
concurrently  with such prepayment,  the Borrower shall borrow from the affected
Lender, in the amount of such repayment, a Base Rate Revolving Loan.

         5.3  Increased Costs and Reduction of Return.

                  (a) If any  Lender  determines  that,  due to  either  (i) the
introduction of or any change in the  interpretation of any law or regulation or
(ii) the  compliance  by that  Lender  with any  guideline  or request  from any
central bank or other Governmental Authority (whether or not having the force of
law) issued after the date of this Agreement, there shall be any increase in the
cost (other than any increase in cost  arising  from,  in  connection  with,  or
related to the imposition of any taxes,  which event shall be governed solely by
Section 5.1  hereof) to such  Lender of  agreeing to make or making,  funding or
maintaining  any LIBOR Revolving  Loans,  then the Borrower shall be liable for,
and shall from time to time,  upon demand (with a copy of such demand to be sent
to the  Agent),  pay to the Agent for the  account  of such  Lender,  additional
amounts as are sufficient to compensate such Lender for such increased costs.

                  (b)  If  any  Lender  shall  have   determined  that  (i)  the
introduction of any Capital Adequacy Regulation,  (ii) any change in any Capital
Adequacy Regulation, (iii) any change in the interpretation or administration of
any  Capital  Adequacy  Regulation  by any  central  bank or other  Governmental
Authority charged with the  interpretation or  administration  thereof,  or (iv)
compliance  by the Lender or any  corporation  or other entity  controlling  the
Lender with any Capital Adequacy Regulation changed or introduced after the date
of this  Agreement,  affects or would  affect the amount of capital  required or
expected  to be  maintained  by the Lender or any  corporation  or other  entity
controlling  the Lender and (taking  into  consideration  such  Lender's or such
corporation's  or other entity's  policies with respect to capital  adequacy and
such Lender's desired return on capital)  reasonably  determines that the amount
of such capital is  increased  as a  consequence  of its  Commitment[s],  loans,
credits or obligations under this Agreement, then, upon demand of such Lender to
the Borrower through the Agent, the Borrower shall pay to the Lender,  from time
to time as specified by the Lender,  additional amounts sufficient to compensate
the Lender for such increase.

         5.4 Funding  Losses.  The Borrower shall reimburse each Lender and hold
each Lender  harmless from any net loss or expense  arising from the liquidation

<PAGE>

or reemployment of funds obtained by it to maintain its LIBOR Revolving Loans or
from fees payable to terminate  the deposits from which such funds were obtained
which the Lender may sustain or incur as a consequence of:

                  (a) the failure of the  Borrower to make on a timely basis any
payment of principal of any LIBOR Revolving Loan;

                  (b) the failure of the Borrower to borrow, continue or convert
a Loan  after the  Borrower  has given (or is deemed to have  given) a Notice of
Borrowing or a Notice of Conversion/ Continuation; or

                  (c)  the   prepayment  or  other  payment   (including   after
acceleration  thereof) of an LIBOR  Revolving Loan on a day that is not the last
day of the relevant Interest Period.

         5.5 Inability to Determine Rates. If the Agent determines that adequate
and  reasonable  means do not  exist  for  determining  the  LIBOR  Rate for any
requested  Interest  Period with respect to a proposed LIBOR  Revolving Loan, or
that the LIBOR Rate for any requested Interest Period with respect to a proposed
LIBOR  Revolving  Loan does not  adequately  and fairly  reflect the cost to the
Lenders of funding such Loan, the Agent will promptly so notify the Borrower and
each Lender. Thereafter, the obligation of the Lenders to make or maintain LIBOR
Revolving Loans hereunder shall be suspended until the Agent revokes such notice
in writing.  Upon receipt of such notice,  the Borrower may revoke any Notice of
Borrowing  or Notice of  Conversion/Continuation  then  submitted  by it. If the
Borrower  does not revoke  such  Notice,  the  Lenders  shall  make,  convert or
continue the Loans, as proposed by the Borrower,  in the amount specified in the
applicable  notice  submitted  by the  Borrower,  but such Loans  shall be made,
converted or continued as Base Rate Revolving  Loans instead of LIBOR  Revolving
Loans.

         5.6 Certificates of Lenders; Treatment of Borrower. Any Lender claiming
reimbursement or compensation under this Article 5 shall deliver to the Borrower
(with a copy to the Agent) a certificate  setting forth in reasonable detail the
amount payable to the Lender hereunder and such certificate  shall be conclusive
and binding on the Borrower in the absence of manifest error.  Each Lender shall
be entitled to be compensated for amounts  pursuant to Sections 5.1, 5.2 and 5.3
only to the extent that such Lender makes the same kinds of demands to its other
borrowers who are similarly situated and face similar circumstances.

         5.7 Survival.  The agreements  and  obligations of the Borrower in this
Article 5 shall survive the payment of all other Obligations.

                                    ARTICLE 6

                                   COLLATERAL

         6.1 Grant of Security Interest.

                  (a) As security  for all present and future  Obligations,  the
Borrower  hereby grants to the Agent,  for the ratable  benefit of the Agent and

<PAGE>

the Lenders,  a continuing  security  interest in, lien on,  assignment  of, and
right of set-off against, all of the following property of the Borrower, whether
now owned or existing or  hereafter  acquired  or arising,  regardless  of where
located (in all cases excluding the Excluded Assets):

                           (i) all Inventory;

                           (ii)all Accounts;

                           (iii)    all accessions to and proceeds of any of the
foregoing, including, without limitation and to the extent not prohibited by the
Indenture, claims against carriers, shippers and other third parties, and rights
under  letters  of  credit  or  guaranties  with  respect  to  all or any of the
foregoing.

All of the foregoing,  and all other property of the Borrower in which the Agent
or any Lender may at any time be granted a Lien, is herein collectively referred
to as the "Collateral."

                  (b) All of the  Obligations  shall  be  secured  by all of the
Collateral.

         6.2  Perfection and Protection of Security Interest.

                  (a) The  Borrower  shall,  at its  expense,  perform all steps
reasonably requested by the Agent at any time to perfect, maintain, protect, and
enforce the Agent's  Liens,  including,  without  limitation:  (i) executing and
filing financing or continuation statements, and amendments thereof, in form and
substance  satisfactory to the Agent; (ii) delivering to the Agent the originals
of all  instruments,  documents,  and chattel  paper which the Agent  reasonably
determines it should have physical possession of in order to perfect and protect
the Agent's  security  interest in the  Collateral,  duly  pledged,  endorsed or
assigned to the Agent without  restriction;  (iii)  following the occurrence and
during the  continuance  of an Event of  Default,  (A)  delivering  to the Agent
warehouse  receipts covering any portion of the Collateral located in warehouses
and for which warehouse  receipts are issued and  certificates of title covering
any portion of the Collateral for which  certificates of title have been issued,
(B)  transferring  Inventory  to  warehouses  designated  by the Agent,  and (C)
placing  notations  on the  Borrower's  books of account to disclose the Agent's
security  interest  subject to the  Securitization  Facility;  (iv) upon request
delivering to the Agent all letters of credit relating to Inventory on which the
Borrower  is named  beneficiary;  and (v) taking  such other steps as are deemed
necessary or  desirable by the Agent to maintain and protect the Agent's  Liens.
To the extent  permitted  by  applicable  law,  the Agent may file,  without the
Borrower's  signature,  one or more financing statements  disclosing the Agent's
Liens,  but the  Agent  shall  provide  the  Borrower  with a copy  of any  such
financing  statement  not signed by the  Borrower.  The  Borrower  agrees that a
carbon, photographic, photostatic, or other reproduction of this Agreement or of
a financing statement is sufficient as a financing statement.

                  (b) If any  Collateral  is at any  time in the  possession  or
control  of  any  warehouseman,  bailee  or  any of  the  Borrower's  agents  or
processors,  then the Borrower shall notify the Agent thereof and shall,  at the
request of Agent,  notify such Person of the Agent's  security  interest in such

<PAGE>

Collateral and instruct such Person to hold all such  Collateral for the Agent's
account  subject to the Agent's  instructions.  If at any time any Collateral is
located on any  operating  facility  of the  Borrower  which is not owned by the
Borrower,  then the Borrower shall, at the request of the Agent, make reasonable
efforts to obtain written waivers, in form and substance reasonably satisfactory
to the Agent,  of all present  and future  Liens to which the owner or lessor of
such premises may be entitled to assert against the Collateral.

                  (c) From time to time,  the Borrower  shall,  upon the Agent's
reasonable  request,   execute  and  deliver  confirmatory  written  instruments
pledging to the Agent, for the ratable benefit of the Agent and the Lenders, the
Collateral  with respect to the Borrower,  but the  Borrower's  failure to do so
shall not affect or limit any security interest or any other rights of the Agent
or any Lender in and to the Collateral with respect to the Borrower.  So long as
this Agreement is in effect and until all Obligations have been fully satisfied,
the  Agent's  Liens shall  continue  in full force and effect in all  Collateral
(whether or not deemed eligible for the purpose of calculating the  Availability
or as the basis for any advance,  loan,  extension of credit, or other financial
accommodation).

         6.3 Location of Collateral. The Borrower represents and warrants to the
Agent and the Lenders  that:  (a) Schedule 6.3 is a correct and complete list of
the Borrower's  chief  executive  office,  the location of its books and records
relating to the Collateral, and the locations of the Collateral and (b) Schedule
6.3 correctly identifies any of such facilities and locations that are not owned
by the Borrower and sets forth the names of the owners and lessors or sublessors
of such facilities and locations. The Borrower covenants and agrees that it will
not (i)  maintain any  Collateral  at any  location  other than those  locations
listed for the Borrower on Schedule 6.3, (ii) otherwise  change or add to any of
such locations,  or (iii) change the location of its chief executive office from
the  location  identified  in Schedule  6.3,  unless it gives the Agent at least
thirty  (30)  days'  prior  written  notice  thereof  and  executes  any and all
financing  statements and other documents that the Agent reasonably  requests in
connection  therewith.  Without limiting the foregoing,  the Borrower represents
that all of its  Inventory  (other than  Inventory in transit) is, and covenants
that all of its Inventory  will be,  located either (a) on Premises owned by the
Borrower,  (b) on premises leased by the Borrower,  provided that the Agent has,
if  requested  by the Agent,  received  an  executed  landlord  waiver  from the
landlord of such premises in form and substance satisfactory to the Agent or has
established  a Rent Reserve with  respect to such  Premises,  or (c) in a public
warehouse,  provided that the Agent has, if requested by the Agent,  received an
executed  bailee  letter from the  applicable  public  warehouseman  in form and
substance satisfactory to the Agent.

         6.4 Title to,  Liens on, and Sale and Use of  Collateral.  The Borrower
represents  and  warrants to the Agent and the Lenders and agrees with the Agent
and the Lenders that: (a) all of the Collateral is and will continue to be owned
by the Borrower  free and clear of all Liens  whatsoever,  except for  Permitted
Liens;  (b) the Agent's Liens in the Collateral will not be subject to any prior
Lien,  except for those certain Liens described in subsections (a), (d), (g) and
(o) of the definition of Permitted  Liens; (c) the Borrower will use, store, and
maintain the Collateral  with all reasonable  care and will use such  Collateral
for lawful  purposes  only;  and (d) the Borrower will not,  without the Agent's
prior written approval, not to be unreasonably withheld,  sell, or dispose of or
permit  the sale or  disposition  of any of the  Collateral  except for sales of

<PAGE>

Inventory in the ordinary  course of business  (including,  without  limitation,
liquidation  sales  and  markdowns  with  respect  to  obsolete  or  slow-moving
Inventory),  and  sales  or  dispositions  permitted  under  Section  9.15.  The
inclusion of proceeds in the  Collateral  shall not be deemed to constitute  the
Agent's  or any  Lender's  consent  to any  sale  or  other  disposition  of the
Collateral except as expressly permitted herein.

         6.5 Appraisals.  Whenever a Default or Event of Default exists,  and at
such  other  times  not more  frequently  than  once a year (or  twice a year if
Aggregate Revolver  Outstandings exceed  $50,000,000;  provided that the cost of
such second  appraisal to be paid by the Borrower  shall not exceed  $10,000) as
the Agent requests  (and,  upon the Agent's  request,  at any one time after the
Impaired  Inventory  Percentage  exceeds (i) 25%;  (ii) 35%; or (iii) 45%),  the
Borrower shall, at its expense and upon the Agent's  request,  provide the Agent
with  appraisals  or  updates  thereof of any or all of the  Collateral  from an
appraiser, and prepared on a basis, reasonably satisfactory to the Agent.

         6.6  Access and Examination; Confidentiality.

                  (a) The Agent,  accompanied by any Lender which so elects, may
at all reasonable  times during  regular  business hours (and at any time when a
Default or Event of Default exists and is continuing)  have access to,  examine,
audit,  make extracts from or copies of and inspect any or all of the Borrower's
records,  files,  and books of  account  and the  Collateral,  and  discuss  the
Borrower's  affairs with the Borrower's  officers and  management.  The Borrower
will  deliver  to the Agent  any  instrument  necessary  for the Agent to obtain
records from any service bureau maintaining records for the Borrower.  The Agent
may,  and at the  direction of the Majority  Lenders  shall,  at any time when a
Default or Event of Default exists, and at the Borrower's  expense,  make copies
of all of the Borrower's  books and records,  or require the Borrower to deliver
such copies to the Agent.  The Agent may, without expense to the Agent, use such
of  the  Borrower's  respective  personnel,  supplies,  and  premises  as may be
reasonably  necessary for maintaining or enforcing the Agent's Liens.  After the
occurrence and during the  continuance  of an Event of Default,  the Agent shall
have the right,  at any time, in the Agent's name or in the name of a nominee of
the Agent,  to verify the validity,  amount or any other matter  relating to the
Accounts, Inventory, or other Collateral, by mail, telephone, or otherwise.

                  (b) The Borrower agrees that,  subject to the Borrower's prior
consent for uses other than in a traditional tombstone,  which consent shall not
be  unreasonably  withheld  or  delayed,  the Agent and each  Lender may use the
Borrower's  name in  advertising  and  promotional  material and in  conjunction
therewith  disclose  the  general  terms of this  Agreement.  The Agent and each
Lender agree to take normal and reasonable  precautions and exercise due care to
maintain the  confidentiality  of all confidential  information  provided to the
Agent or such Lender by or on behalf of the  Borrower,  under this  Agreement or
any other Loan Document, and neither the Agent, nor such Lender nor any of their
respective  Affiliates shall use any such  information  other than in connection
with or in enforcement of this Agreement and the other Loan Documents, except to
the extent that such information (i) was or becomes  generally  available to the
public other than as a result of disclosure by the Agent or such Lender, or (ii)
was or becomes available on a nonconfidential basis from a source other than the

<PAGE>

Borrower,  provided that such source is not bound by a confidentiality agreement
with the Borrower known to the Agent or such Lender; provided, however, that the
Agent and any  Lender  may  disclose  such  information  (1) at the  request  or
pursuant to any requirement of any Governmental  Authority to which the Agent or
such Lender is subject or in connection with an examination of the Agent or such
Lender by any such  Governmental  Authority;  (2)  pursuant to subpoena or other
court process;  (3) when required to do so in accordance  with the provisions of
any  applicable  requirement  of law; (4) to the extent  reasonably  required in
connection with any litigation or proceeding (including, but not limited to, any
bankruptcy  proceeding)  to which the  Agent,  any  Lender  or their  respective
Affiliates  may be party;  (5) to the extent  reasonably  required in connection
with the exercise of any remedy hereunder or under any other Loan Document;  (6)
to the Agent's or such Lender's independent auditors, accountants, attorneys and
other professional advisors who shall be bound by the confidentiality provisions
of this Section 6.6 and who shall utilize such information  solely in connection
with this  Agreement  (but who shall have the benefit of clauses (1) through (5)
above); (7) to any prospective  Participant or assignee under any Assignment and
Acceptance,  actual or potential,  provided that such prospective Participant or
assignee  agrees  to keep  such  information  confidential  to the  same  extent
required  of the Agent and the Lenders  hereunder;  (8) as  expressly  permitted
under the terms of any other document or agreement regarding  confidentiality to
which the  Borrower is party or is deemed  party with the Agent or such  Lender,
and (9) to its Affiliates who shall be bound by the  confidentiality  provisions
of this Section 6.6 and who shall utilize such information  solely in connection
with this  Agreement  (but who shall have the benefit of clauses (1) through (5)
above).

         6.7 Collateral Reporting. The Borrower shall provide the Agent with the
following  documents at the following times in form  reasonably  satisfactory to
the Agent:  (a) on a monthly  basis no later than the 20th day of the  following
month,  or more frequently (but not more frequently than weekly) if requested by
the Agent at any time that the Aggregate  Revolver  Outstandings are $50,000,000
or more,  a  Borrowing  Base  Certificate,  a  summary  report  listing  on hand
Inventory  balances  by  vendor  and  accounts  payable  owing to any  vendor or
supplier who has a Lien on any Inventory,  summary Inventory reports by category
and location (and, if requested by the Agent,  additional  detail thereof);  (b)
upon request,  a statement of the balance of each of the Intercompany  Accounts;
(c) upon the occurrence and during the continuance of an Event of Default,  on a
weekly basis no later than the third Business Day of the following week (or more
frequently if requested by the Agent),  Borrowing  Base  certificates,  and on a
monthly  basis (or more  frequently  if  requested  by the  Agent),  an aging of
accounts  payable which is not aged by vendor credit terms, an aging of Accounts
reconciled  against the previous month's aging and the Borrower's general ledger
and copies of invoices  and purchase  orders as requested by the Agent;  and (d)
such other  reports as to the  Collateral  of the  Borrower  as the Agent  shall
reasonably  request  from  time to time.  If any of the  Borrower's  records  or
reports of the Collateral are prepared by an accounting  service or other agent,
the Borrower  hereby  authorizes  such service or agent to deliver such records,
reports,  and related  documents to the Agent,  for distribution to the Lenders.
For the  purposes of this  Section  6.7,  the word  "month"  shall mean  "fiscal
month."


<PAGE>

         6.8  Accounts.

                  (a) The Borrower  hereby  represents and warrants to the Agent
and the  Lenders,  with  respect  to the  Borrower's  Accounts,  that:  (i) each
existing Account represents, and each future Account will represent, a bona fide
sale or lease and delivery of goods by the Borrower, or rendition of services by
the  Borrower,  in the ordinary  course of the  Borrower's  business;  (ii) each
existing  Account is, and each future  Account will be, for a liquidated  amount
payable by the  Account  Debtor  thereon  on the terms set forth in the  invoice
therefor or in the schedule thereof delivered to the Agent,  without any offset,
deduction,  defense, or counterclaim except those arising in the ordinary course
of business or known to the Borrower and  disclosed to the Agent and the Lenders
pursuant to this  Agreement;  (iii) no payment will be received  with respect to
any Account, and no credit,  discount,  or extension,  or agreement therefor has
been granted on any Account, except in the ordinary course of business.

                  (b) Upon an  acceleration  of the  Obligations  following  the
occurrence of an Event of Default:

                      (i) The  Borrower  shall  not  accept  any  note or  other
instrument (except a check or other
instrument  for the  immediate  payment of money)  with  respect to any  Account
without the Agent's  written  consent  except to the extent that the Borrower is
obligated  to do so.  If  the  Agent  consents  to the  acceptance  of any  such
instrument or the Borrower is obligated to accept any such instrument,  it shall
be  considered  as  evidence  of the  Account  and not  payment  thereof and the
Borrower will  promptly  deliver such  instrument to the Agent,  endorsed by the
Borrower  to the Agent in a manner  satisfactory  in form and  substance  to the
Agent.  Regardless of the form of  presentment,  demand,  notice of protest with
respect thereto,  the Borrower shall remain liable thereon until such instrument
is paid in full.

                      (ii) The Borrower  shall notify the Agent  promptly of all
disputes and claims in excess of
$1,000,000 with any Account  Debtor,  and agrees to settle,  contest,  or adjust
such  dispute or claim at no expense to the Agent or any  Lender.  No  discount,
credit or  allowance  shall be granted to any such  Account  Debtor  without the
Agent's prior written consent, except for discounts, credits and allowances made
or given in the  ordinary  course of the  Borrower's  business  when no Event of
Default exists hereunder. The Collateral information reported to the Agent under
Section 6.7 shall give effect to credit  memoranda,  discounts,  and allowances.
The Agent may, and at the  direction of the Majority  Lenders  shall,  settle or
adjust  disputes and claims  directly with Account  Debtors for amounts and upon
terms which the Agent or the Majority  Lenders,  as  applicable,  shall consider
advisable and, in all cases,  the Agent will credit the Borrower's  Loan Account
with only the net amounts received by the Agent in payment of any Accounts.

                      (iii)  Subject  to the  provisions  of  the  Intercreditor
Agreement,  in the event any Account Debtor  returns  Inventory to the Borrower,
the Borrower,  upon request of the Agent, shall: (i) hold the returned Inventory
in trust for the Agent;  (ii)  segregate all returned  Inventory from all of its
other property;  (iii) dispose of the returned Inventory solely according to the
Agent's written instructions;  and (iv) not issue any credits or allowances with
respect  thereto  without  the  Agent's  prior  written  consent.  All  returned
Inventory shall be subject to the Agent's Liens thereon.


<PAGE>

         6.9 Collection of Accounts;  Payments. The Borrower shall establish and
maintain a bank account ("Payment  Account") with a bank acceptable to the Agent
pursuant to an agreement among the bank, the Borrower and the Agent, in form and
substance   reasonably   satisfactory   to  the  Agent  (the  "Payment   Account
Agreement").  Subject to the  provisions  of the  Intercreditor  Agreement,  the
Borrower shall deposit in the Payment Account all proceeds of Collateral and all
funds received from Merisel Capital Funding,  Inc. or other Person in connection
with any  Securitization  Facility to which the Borrower is the originator.  The
Payment  Account  Agreement  shall provide,  inter alia, that upon notice to the
bank by the Agent that an Event of Default and  acceleration  of the Obligations
have  occurred,  the bank is  authorized  to  transfer  all funds in the Payment
Account to the Agent.  The notice to the Agent  shall  confirm  that the Agent's
Lien does not  extend to the  Payment  Account  itself,  but does  extend to the
extent  contemplated  in  this  Agreement,  to the  proceeds  of the  Borrower's
Inventory and Accounts which are deposited into the Payment Account.  Unless and
until the Agent gives such notice,  the Borrower shall be free to withdraw funds
from the Payment  Account in such amount and with  frequency as the Borrower may
from time to time  determine,  without notice to or the consent of the Agent. In
the event such notice of  acceleration  is given  (subject to the  Intercreditor
Agreement): (a) the Borrower shall cease transferring any accounts receivable in
connection with any Securitization  Facility;  (b) the proceeds of such accounts
receivable  and of all other  Accounts  which are not  transferred in connection
with the Securitization  Facility shall be delivered in their original form duly
endorsed  in blank into the  Payment  Account;  (c) if the Agent  requests,  the
Borrower  shall  establish a lock-box  service for  collections of Accounts at a
bank  acceptable  to  the  Agent  and  pursuant  to   documentation   reasonably
satisfactory  to the Agent;  (d) if such lock-box  service is  established,  the
Borrower shall instruct all Account Debtors to make all payments directly to the
address established for such service; (e) if, notwithstanding such instructions,
the Borrower  receives any proceeds of Accounts,  it shall receive such payments
as the Agent's trustee, and shall immediately deliver such payments to the Agent
in their  original  form duly endorsed in blank or deposit them into the Payment
Account,  as the Agent may  direct;  (f) the Agent or the Agent's  designee  may
notify Account  Debtors that the Accounts have been assigned to the Agent and of
the Agent's  security  interest  therein,  and may collect them directly and the
collection  costs  and  expenses  shall  constitute  Obligations;  and  (g)  the
Borrower,  at the Agent's  request,  shall execute and deliver to the Agent such
documents  as the Agent  shall  require  to grant  the Agent  access to any post
office box in which collections of Accounts are received.

         6.10  Inventory;  Perpetual  Inventory.  The  Borrower  represents  and
warrants  to the Agent and the Lenders and agrees with the Agent and the Lenders
that all of the Inventory  owned by the Borrower is and will be held for sale or
lease, or to be furnished in connection  with the rendition of services,  in the
ordinary  course  of the  Borrower's  business,  and is and will be fit for such
purposes.  The Borrower will keep its Inventory in good and marketable condition
subject  to  ordinary  wear and tear,  at its own  expense.  Borrower  will not,
without the prior written consent of the Agent,  acquire or accept any Inventory
on  consignment  or approval  (except in the ordinary  course of business).  The

<PAGE>

Borrower agrees that all Inventory produced by the Borrower in the United States
will be produced in  accordance  with the Federal  Fair Labor  Standards  Act of
1938,  as  amended,  and all  rules,  regulations,  and orders  thereunder.  The
Borrower  will maintain  accurate  records of Inventory and will (i) continue to
perform  "cycle"  counts  in a manner  consistent  with past  practices  or (ii)
conduct a physical count of the inventory at least once during each Fiscal Year.
The  Borrower  will also  conduct a physical  count of the  Inventory  after and
during the  continuation  of an Event of  Default,  at such time or times as the
Agent requests.The Borrower will maintain a perpetual inventory reporting system
at all times.

         6.11 Documents, Instruments, and Chattel Paper. The Borrower represents
and warrants to the Agent and the Lenders that to the best of its knowledge,  or
unless otherwise  disclosed to the Agent, all material  documents,  instruments,
and chattel paper describing, evidencing, constituting or relating to Inventory,
and all signatures and endorsements  thereon,  are and will be complete,  valid,
and genuine.

         6.12 Right to Cure. Following the occurrence and during the continuance
of an Event of  Default  the Agent may,  in its  discretion,  and shall,  at the
direction of the Majority Lenders,  pay any amount or do any act required of the
Borrower  hereunder  or under  any other  Loan  Document  in order to  preserve,
protect,  maintain or enforce the  Obligations,  the  Collateral  or the Agent's
Liens  therein,  and which the Borrower fails to pay or do,  including,  without
limitation, payment of any judgment against the Borrower, any insurance premium,
any warehouse charge,  any finishing or processing charge, any landlord's claim,
and any other Lien upon or with respect to the  Collateral;  provided,  however,
that the Agent may pay,  upon two Business  Days prior  notice to the  Borrower,
without regard to the existence of any Event of Default,  any insurance  premium
which is due and  payable  within ten days of the  expiration  of any  insurance
policy required under Section 9.5 according to any notice received by Agent from
an insurer.  All  payments  that the Agent makes under this Section 6.12 and all
out-of-pocket  costs and  expenses  that the Agent pays or incurs in  connection
with any action taken by it hereunder  shall be charged to the  Borrower's  Loan
Account as a Revolving  Loan . Any  payment  made or other  action  taken by the
Agent under this Section 6.12 shall be without  prejudice to any right to assert
an Event of Default hereunder and to proceed thereafter as herein provided.

         6.13 Power of Attorney.  The Borrower hereby appoints the Agent and the
Agent's designee as the Borrower's attorney,  with power: (a) from and after the
acceleration of the Obligations following the occurrence of an Event of Default,
and subject to the  provisions of the  Intercreditor  Agreement,  to endorse the
Borrower's name on notices of assignment and on any checks, notes,  acceptances,
money  orders,  or other forms of payment or security that come into the Agent's
or any Lender's  possession in connection  with  perfecting  any Agent's Lien on
Collateral;  (b) to sign the Borrower's  name on financing  statements and other
public  records and to file any such  financing  statements by electronic  means
with or without a signature  as  authorized  or required  by  applicable  law or
filing  procedure  to the extent  necessary  to perfect the Agent's  Lien on the
Collateral; (c) from and after the acceleration of the Obligations following the
occurrence  of an Event of  Default,  to notify the post office  authorities  to
change the address for delivery of the Borrower's mail to an address  designated
by the Agent and to  receive,  open and  dispose  of all mail  addressed  to the
Borrower,  and to send  requests  for  verification  of Accounts to customers or
Account Debtors;  and (d) after the occurrence and during the continuance of any

<PAGE>

Event of Default,  to sign the Borrower's  name on any invoice,  bill of lading,
warehouse  receipt or other  document of title  relating to any  Collateral,  on
drafts against customers and on assignments of Accounts.  None of the Lenders or
the Agent nor their  attorneys  will be liable for any acts or  omissions or for
any error of judgment or mistake of fact or law. This power,  being coupled with
an interest,  is irrevocable  until this  Agreement has been  terminated and the
Obligations have been fully satisfied.

         6.14 The Agent's  and  Lenders'  Rights,  Duties and  Liabilities.  The
Borrower assumes all  responsibility  and liability  arising from or relating to
the use, sale or other disposition of the Collateral.  The Obligations shall not
be  affected  by any  failure  of the  Agent or any  Lender to take any steps to
perfect  the Agent's  Liens or to collect or realize  upon the  Collateral,  nor
shall loss of or damage to the  Collateral  release the Borrower from any of the
Obligations.  Following the occurrence and  continuation of an Event of Default,
the Agent may (but  shall  not be  required  to),  and at the  direction  of the
Majority Lenders shall, without notice to or consent from the Borrower, sue upon
or otherwise collect,  extend the time for payment of, modify or amend the terms
of, compromise or settle for cash,  credit,  or otherwise upon any terms,  grant
other indulgences,  extensions, renewals, compositions, or releases, and take or
omit to take any other  action  with  respect to the  Collateral,  any  security
therefor,  any agreement relating thereto,  any insurance applicable thereto, or
any  Person  liable  directly  or  indirectly  in  connection  with  any  of the
foregoing,  without  discharging  or otherwise  affecting  the  liability of the
Borrower for the  Obligations or under this Agreement or any other agreement now
or hereafter existing between the Agent and/or any Lender and the Borrower.

                                    ARTICLE 7

                BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES

         7.1 Books and  Records.  The  Borrower  shall  maintain,  at all times,
books,  records and accounts in which  materially  complete,  correct and timely
entries  are  made  of  its   transactions   in  accordance  with  GAAP  applied
consistently  with the audited  Financial  Statements  required to be  delivered
pursuant to Section 7.2(a). The Borrower shall, by means of appropriate entries,
reflect in such accounts and in all Financial  Statements proper liabilities and
reserves for all taxes and proper provision for depreciation and amortization of
property and bad debts, all in accordance with GAAP. The Borrower shall maintain
at all times books and records,  which are accurate and complete in all material
respects, pertaining to the Collateral including, but not limited to, records of
(a) all payments received and all credits and extensions granted with respect to
the Accounts; and (b) the return, rejections, repossession, stoppage in transit,
loss, damage, or destruction of any Inventory.

         7.2 Financial  Information.  The Borrower will furnish to the Agent, in
sufficient  copies for distribution by the Agent to each Lender,  in such detail
as the Agent or the Lenders shall reasonably request, the following:

                  (a) As soon as available,  but in any event not later than one
hundred  (100) days after the close of each Fiscal  Year,  consolidated  audited
balance sheets, and statements of income and expense, cash flow and statement of
changes in  stockholders'  equity for the Parent and its  Subsidiaries  for such

<PAGE>

Fiscal Year, and the accompanying  notes thereto,  setting forth in each case in
comparative form figures for the previous Fiscal Year, all in reasonable detail,
fairly  presenting  the financial  position and the results of operations of the
Parent and its  consolidated  Subsidiaries  as at the date  thereof  and for the
Fiscal Year then ended,  and prepared in  accordance  with GAAP,  and  unaudited
balance  sheets and  statements  of income and  expense  of the  Borrower.  Such
audited  statements  shall be examined in  accordance  with  generally  accepted
auditing  standards  by  and,  in the  case of such  statements  performed  on a
consolidated  basis,  accompanied  by a report  thereon  unqualified as to scope
(including not qualified due to possible  failure to take all appropriate  steps
to successfully address the Year 2000 Problem) of Deloitte & Touche LLP or other
nationally  recognized  independent certified public accountants selected by the
Borrower.

                  (b) As soon as available after the end of each fiscal month, a
monthly  financial report in substantially  the form of Exhibit F, setting forth
certain unaudited financial information of the Parent and its Subsidiaries (with
such changes to such Exhibit F as Parent may adopt from time to time).

                  (c) As soon as  available,  but in any event  not  later  than
fifty-five  (55) days  after the close of each  fiscal  quarter  other  than the
fourth quarter of a Fiscal Year,  consolidated  unaudited  balance sheets of the
Parent and its  consolidated  Subsidiaries  as at the end of such  quarter,  and
consolidated  unaudited  statements  of income and expense and statement of cash
flows for the Parent and its  Subsidiaries  for such  quarter and for the period
from  the  beginning  of the  Fiscal  Year to the end of  such  quarter,  all in
reasonable  detail,  fairly  presenting  the  financial  position and results of
operation of the Borrower  and its  Subsidiaries  as at the date thereof and for
such  periods,  prepared in  accordance  with GAAP  consistent  with the audited
Financial  Statements  required to be delivered  pursuant to Section 7.2(a), and
unaudited  balance  sheets and statements of income and expense of the Borrower.
Such  financial  statements of the Parent shall be  accompanied by a certificate
signed by the Parent's chief financial officer,  treasurer,  assistant treasurer
or, in their  absence,  a  controller  of the  Borrower  or Parent that all such
statements  have been  prepared  in  accordance  with GAAP and  present  fairly,
subject to normal year-end  adjustments,  the Parent's  financial position as at
the dates thereof and its results of operations for the periods then ended.

                  (d)  With  each  of the  Financial  Statements  of the  Parent
delivered  pursuant to Section  7.2(a) and (c), a certificate  of the treasurer,
assistant  treasurer  or chief  financial  officer  of the  Parent  or, in their
absence,  a controller of the Borrower or Parent (i) setting forth in reasonable
detail  the  calculations  required  to  establish  that  the  Borrower  was  in
compliance  with the  covenants  set forth in Sections  9.22 and 9.23 during the
period covered in such Financial  Statements and as at the end thereof, and (ii)
stating that, except as explained in reasonable detail in such certificate,  (A)
all of the  representations  and  warranties  of the Borrower  contained in this
Agreement and the other Loan  Documents are correct and complete in all material
respects as at the date of such certificate as if made at such time,  except for
those that speak as of a  particular  day,  (B) the  Borrower is, at the date of
such  certificate,  in  compliance  in all  material  respects  with  all of its
respective  covenants  and  agreements  in this  Agreement  and the  other  Loan
Documents,  and (C) no Default or Event of Default then exists or existed during

<PAGE>

the period covered by such Financial  Statements.  If such certificate discloses
that a representation or warranty is not correct or complete, or that a covenant
has not been  complied  with,  or that a Default or Event of Default  existed or
exists,  such certificate  shall set forth what action the Borrower has taken or
proposes to take with respect thereto.

                  (e) Within two weeks of  preparation,  and,  in any event,  no
later than ninety (90) days after the end of each  Fiscal Year  (beginning  with
Fiscal Year 1998) annual forecasts (to include  forecasted  consolidated and, if
available,  consolidating balance sheets,  statements of income and expenses and
statements  of cash flow) for the Parent and its  Subsidiaries  as at the end of
and for each month of such Fiscal Year.

                  (f) Upon  request,  after  filing with the PBGC and the IRS, a
copy of each annual  report or other  filing  filed with respect to each Plan of
the Borrower.

                  (g)  Promptly  upon the  filing  thereof,  copies  of all Form
10-Ks, Form 10-Qs,  Form 8-Ks Schedule 13Ds and any other material  reports,  if
any,  filed by the Parent or any of its  Subsidiaries  with the  Securities  and
Exchange Commission under the Exchange Act.

                  (h) As soon as  available,  but in any event not later than 15
days after the Borrower's  receipt thereof, a copy of all management reports and
management  letters,  together  with  management's  response,  prepared  for the
Borrower  by  Deloitte & Touche LLP or any other  independent  certified  public
accountants of the Borrower.

                  (i) Upon  request,  a copy of each annual tax return  filed by
the Borrower or by any of its Subsidiaries with the IRS.

                  (j) Such additional information as the Agent and/or any Lender
may from time to time  reasonably  request  regarding the financial and business
affairs of the Borrower or any Subsidiary.

         7.3 Notices to the Lenders. The Borrower shall notify the Agent and the
Lenders, in writing of the following matters at the following times:

                  (a)  Promptly  but no later than three  Business  Days after a
Responsible Officer becomes aware of any Default or Event of Default.

                  (b)  Promptly  but no later than three  Business  Days after a
Responsible  Officer becomes aware of the assertion by the holder of any capital
stock  of the  Borrower  or  Subsidiary  thereof  or of any  Debt in  excess  of
$10,000,000  that a default exists with respect  thereto or that the Borrower is
not in compliance with the terms thereof,  or the threat or commencement by such
holder  of  any  enforcement   action  because  of  such  asserted   default  or
non-compliance.

                  (c)  Promptly  but no later than three  Business  Days after a
Responsible  Officer  becomes  aware  of  any  material  adverse  change  in the
Borrower's or any  Subsidiary's  property,  business,  operations,  or condition
(financial or otherwise).


<PAGE>

                  (d)  Promptly  but no later than three  Business  Days after a
Responsible  Officer  becomes aware of any pending or threatened  action,  suit,
proceeding,  or counterclaim by any Person that could  reasonably be expected to
result in a Material Adverse Effect, or any pending or threatened  investigation
by a  Governmental  Authority  which may  materially  and  adversely  affect the
Collateral, the repayment of the Obligations, the Agent's or any Lender's rights
under the Loan  Documents,  or the  Borrower's and its  Subsidiaries'  property,
business, operations, or condition (financial or otherwise), taken as a whole.

                  (e)  Promptly  but no later than three  Business  Days after a
Responsible  Officer  becomes  aware of any pending or threatened  strike,  work
stoppage,  unfair labor  practice  claim,  or other labor dispute  affecting the
Borrower  or any of its  Subsidiaries  in a manner  which  could  reasonably  be
expected to have a Material Adverse Effect.

                  (f)  Promptly  but no later than three  Business  Days after a
Responsible  Officer  becomes  aware  of  any  violation  of any  law,  statute,
regulation,  or ordinance of a  Governmental  Authority  affecting  the Borrower
which could reasonably be expected to have a Material Adverse Effect.

                  (g)  Promptly  but no later  than  three  Business  Days after
receipt by a Responsible  Officer of any notice of any violation by the Borrower
or any of its  Subsidiaries of any  Environmental  Law which could reasonably be
expected to have a Material  Adverse Effect or that any  Governmental  Authority
has asserted  that the Borrower or any  Subsidiary  thereof is not in compliance
with any Environmental Law (where such non-compliance may reasonably be expected
to result in liability over  $2,500,000) or is  investigating  the Borrower's or
such Subsidiary's compliance therewith.

                  (h)  Promptly  but no later  than  three  Business  Days after
receipt by a Responsible  Officer of any written notice that the Borrower or any
of its  Subsidiaries is or may reasonably be expected to be liable to any Person
as a result of the Release or threatened  Release of any Contaminant or that the
Borrower  or any  Subsidiary  is subject to  investigation  by any  Governmental
Authority  evaluating  whether any  remedial  action is needed to respond to the
Release or  threatened  Release of any  Contaminant  which,  in either case,  is
reasonably likely to give rise to liability in excess of $2,500,000.

                  (i)  Promptly  but no later  than  three  Business  Days after
receipt by a Responsible  Officer of any written notice of the imposition of any
Environmental  Lien  against  any  property  of  the  Borrower  or  any  of  its
Subsidiaries.

                  (j) Any change in the Borrower's name, state of incorporation,
or form of  organization,  trade  names  under  which  the  Borrower  will  sell
Inventory or create Accounts, or to which instruments in payment of Accounts may
be made payable, in each case at least thirty (30) days prior thereto.


<PAGE>

                  (k) Within ten  Business  Days after the Borrower or any ERISA
Affiliate  knows or has  reason  to know,  that an ERISA  Event or a  prohibited
transaction  (as  defined  in  Sections  406 of ERISA  and 4975 of the Code) has
occurred, and, when known, any action taken or threatened by the IRS, the DOL or
the PBGC with respect thereto.

                  (l) Within three Business Days after the  occurrence  thereof:
(i) any changes in the benefits of any existing  Pension Plan which increase the
Borrower's  annual  costs  with  respect  thereto  by an  amount  in  excess  of
$5,000,000,  or the establishment of any new Pension Plan or the commencement of
contributions  to any Plan to which the Borrower or any ERISA  Affiliate was not
previously  contributing;  or (ii) any  failure  by the  Borrower  or any  ERISA
Affiliate to make a required  installment  in excess of  $2,000,000 or any other
required  payment in excess of  $2,000,000  under  Section 412 of the Code on or
before the due date for such installment or payment.

                  (m) Within three Business Days after the Borrower or any ERISA
Affiliate  knows or has reason to know that any of the  following  events has or
will occur: (i) a Multi-employer  Plan has been or will be terminated;  (ii) the
administrator  or plan sponsor of a  Multi-employer  Plan intends to terminate a
Multi-employer  Plan;  or  (iii)  the  PBGC  has  instituted  or will  institute
proceedings under Section 4042 of ERISA to terminate a Multi-employer Plan.

                  Each  notice  given  under this  Section  shall  describe  the
subject matter thereof in reasonable detail, and shall set forth the action that
the Borrower, its Subsidiary,  or any ERISA Affiliate, as applicable,  has taken
or proposes to take with respect thereto.

                                    ARTICLE 8

                     GENERAL WARRANTIES AND REPRESENTATIONS

         The Borrower  warrants and represents to the Agent and the Lenders that
except as  hereafter  disclosed  to and  accepted by the Agent and the  Majority
Lenders in writing:

         8.1 Authorization,  Validity,  and Enforceability of this Agreement and
the Loan  Documents.  The  Borrower  has the  corporate  power and  authority to
execute,  deliver and perform this  Agreement and the other Loan  Documents,  to
incur  the  Obligations,  and to  grant to the  Agent  Liens  upon and  security
interests in the  Collateral.  The Borrower  has taken all  necessary  corporate
action (including without limitation,  obtaining approval of its stockholders if
necessary)  to  authorize  its  execution,  delivery,  and  performance  of this
Agreement and the other Loan  Documents to which it is a party.  This  Agreement
and the other  Loan  Documents  have been duly  executed  and  delivered  by the
Borrower,  and  constitute  the  legal,  valid and  binding  obligations  of the
Borrower,  enforceable  against it in accordance  with their  respective  terms,
except as the  enforceability  hereof and thereof  may be limited by  applicable
bankruptcy,  insolvency,  reorganization,   moratorium  or  other  similar  laws
affecting  creditors'  rights  generally  and by  general  principles  of equity
(regardless  of  whether  enforcement  is  sought  in  equity  or at  law).  The
Borrower's execution,  delivery, and performance of this Agreement and the other
Loan  Documents do not and will not  materially  conflict  with, or constitute a
violation or breach of, or constitute a default under, or result in the creation
or  imposition  of any Lien  upon the  property  of the  Borrower  or any of its
Subsidiaries  by  reason of the terms of (a) any  material  contract,  mortgage,
Lien,  lease,  agreement,  indenture,  or  instrument to which the Borrower is a

<PAGE>

party or which is  binding  upon it  (except  for Liens  created  under the Loan
Documents and except for any conflicts,  violations, breaches, defaults or Liens
that could not  reasonably  be expected to materially  and adversely  affect the
Borrower),  (b) any  Requirement of Law applicable to the Borrower or any of its
Subsidiaries,  the noncompliance  with which could not reasonably be expected to
result in a  Material  Adverse  Effect or (c) the  certificate  or  articles  of
incorporation or by-laws of the Borrower or any of its Subsidiaries.

         8.2 Validity and Priority of Security Interest.  The provisions of this
Agreement and the other Loan  Documents  create legal and valid Liens on all the
Collateral in favor of the Agent,  for the ratable  benefit of the Agent and the
Lenders,  and such  Liens,  upon  filing of UCC-1  Financing  Statements  in all
relevant  jurisdictions,  to the extent  perfection  may be  achieved by filing,
constitute  perfected  and  continuing  Liens on all the  Collateral  covered by
Article 9 of the UCC,  having  priority over all other Liens on the  Collateral,
(other than liens listed in clauses (a),  (d), (g) and (o) of the  definition of
Permitted  Liens)  securing all the  Obligations,  and  enforceable  against the
Borrower and all third parties.

         8.3   Organization  and   Qualification.   The  Borrower  (a)  is  duly
incorporated  and organized and validly existing in good standing under the laws
of the state of its  incorporation,  (b) as of the Closing Date, is qualified to
do  business  as  a  foreign   corporation  and  is  in  good  standing  in  the
jurisdictions  set forth on  Schedule  8.3 which are the only  jurisdictions  in
which the  failure to so  qualify or be in good  standing  could  reasonably  be
expected to result in a Material Adverse Effect, and (c) has all requisite power
and authority to conduct its business and to own its property.

         8.4  Corporate  Name;  Prior  Transactions.  As of the Closing Date the
Borrower  has not,  during  the past five (5)  years,  been known by or used any
other corporate or fictitious name, or, within the past two years,  been a party
to any merger or  consolidation,  or acquired  all or  substantially  all of the
assets of any Person (other than mergers between Subsidiaries of the Parent), or
acquired any of its property outside of the ordinary course of business.

         8.5 Subsidiaries and Affiliates. Schedule 8.5 is a correct and complete
list of the name and  relationship to the Borrower of each and all of the Parent
and  Parent's  Subsidiaries.  Each  Subsidiary  is  (a)  duly  incorporated  (or
otherwise  created,  if not a corporation) and validly existing in good standing
under the laws of its state of  organization  set forth on Schedule 8.5, and (b)
qualified to do business as a foreign  corporation  and in good standing in each
jurisdiction  in which the  failure to so qualify or be in good  standing  could
reasonably  be  expected  to  have  a  material   adverse  effect  on  any  such
Subsidiary's  business,   operations,   property,  or  condition  (financial  or
otherwise) and (c) has all requisite power and authority to conduct its business
and own its property.

         8.6  Financial  Statements  and  Projections.   (a)  The  Borrower  has
delivered  to the Agent and the Lenders the  audited  balance  sheet and related
statements of income, retained earnings, cash flows, and changes in stockholders
equity for the Parent and its consolidated Subsidiaries as of December 31, 1997,
and for the Fiscal Year then  ended,  accompanied  by the report  thereon of the
Parent's  independent  certified public accountants,  Deloitte & Touche LLP. The

<PAGE>

Parent has also  delivered  to the Agent and the Lenders the  unaudited  balance
sheet and  related  statements  of income  and cash flows for the Parent and its
consolidated  Subsidiaries  as of March 31, 1998. All such financial  statements
have been prepared in accordance with GAAP and present accurately and fairly the
financial  position of the Parent and its  consolidated  Subsidiaries  as at the
dates  thereof  and their  results  of  operations  for the  periods  then ended
(subject to year end adjustments in the case of the unaudited  balance sheet and
related statements of income and cash flows as of March 31, 1998).

                  (b) The Latest  Projections  when  submitted to the Lenders as
required herein (or when prepared with respect to the Latest  Projections  dated
November  13,  1997)  represented  the  Borrower's  best  estimate of the future
financial performance of the Borrower and its consolidated  Subsidiaries for the
periods set forth  therein.  The Latest  Projections  have been  prepared on the
basis of the  assumptions  set forth therein,  which the Borrower  believed were
fair and  reasonable  in light of the then  current and  reasonably  foreseeable
business  conditions  at the time  submitted to the Lender (it being  understood
that the projections are subject to significant uncertainties and contingencies,
many of which are beyond the control of the Borrower,  and that no assurance can
be given that the projections will be realized).

         8.7  [Intentionally Omitted].

         8.8 Solvency.  The Borrower is Solvent prior to and after giving effect
to the  making of the  Revolving  Loans to be made on the  Closing  Date and the
issuance of the Letters of Credit to be issued on the Closing Date.

         8.9 Debt.  As of the Closing  Date,  the Borrower and its  Subsidiaries
have  no  Debt,  except  (a) the  Obligations,  (b) the  obligations  under  the
Securitization  Facility,  (c) the  obligations  under  the  Indenture,  (d) the
obligations  under the  Promissory  Notes,  (e) Debt for  borrowed  money not in
excess of $5,000,000,  (f) Capital Lease obligations,  and (g) Debt described on
Schedule 8.9.

         8.10  Distributions.  As of the Closing Date,  since March 31, 1998, no
Distribution has been declared,  paid, or made upon or in respect of any capital
stock or other securities of the Borrower or any of its Subsidiaries,  except as
would be permitted by Section 9.10.

         8.11 Title to Property.  The Borrower has good and marketable  title in
fee simple to its real  property  listed as being owned in Schedule 8.12 hereto,
and the Borrower has good and  merchantable  title to all of its other  property
material to its business free of all Liens except Permitted Liens.

         8.12 Real Estate;  Leases.  Schedule 8.12 sets forth, as of the Closing
Date,  a correct and  complete  list of all Real Estate owned by the Borrower or
any of its  Subsidiaries  where any of the  Collateral  is stored,  and all Real
Estate  leased or  subleased by the  Borrower or its  Subsidiaries  as lessee or
sublessee  where  any of the  Collateral  is  stored.  Each of such  leases  and
subleases is valid and  enforceable in accordance  with its terms and is in full
force and effect,  and no material  default by Borrower  under any such lease or
sublease  exists  which would  entitle  the lessor or  sublessor  thereunder  to
terminate such lease or sublease.


<PAGE>

         8.13 [Intentionally omitted]

         8.14 Trade  Names.  All trade names under which the  Borrower or any of
its Subsidiaries sells Inventory or creates Accounts, or to which instruments in
payment of Accounts may be made payable, are listed on Schedule 8.14.

         8.15 Litigation.  Except as set forth on Schedule 8.15 or Parent's Form
10-Q for the quarter ended March 31, 1998 filed with the Securities and Exchange
Commission,  there is no  pending or (to the best of the  Borrower's  knowledge)
threatened,  action,  suit,  proceeding,  or  counterclaim  by  any  Person,  or
investigation  by any  Governmental  Authority,  or  any  basis  for  any of the
foregoing,  which  could  reasonably  be  expected  to cause a Material  Adverse
Effect.
         8.16 [Intentionally Omitted]

         8.17 Labor Disputes. Except as set forth on Schedule 8.17, (a) there is
no collective bargaining agreement or other labor contract covering employees of
the  Borrower  or any of its  Subsidiaries,  (b) no such  collective  bargaining
agreement or other labor contract is scheduled to expire during the term of this
Agreement,  (c) no union or other labor organization is seeking to organize,  or
to be recognized as, a collective  bargaining  unit of employees of the Borrower
or any of its  Subsidiaries  or for any  similar  purpose,  and (d)  there is no
pending or (to the best of the Borrower's  knowledge)  threatened,  strike, work
stoppage,  material unfair labor practice claim, or other material labor dispute
against or affecting the Borrower or its  Subsidiaries  or their employees which
could reasonably be expected to result in a Material Adverse Effect.

         8.18 Environmental Laws.Except as otherwise disclosed on Schedule 8.18:

                  (a) The Borrower  and its  Subsidiaries  have  complied in all
material  respects with all  Environmental  Laws  applicable to its Premises and
business,  and neither the  Borrower nor any  Subsidiary  nor any of its present
Premises  or  operations,  nor to the  best of  Borrower's  knowledge  its  past
property or operations,  is subject to any  enforcement  order from or liability
agreement  with any  Governmental  Authority or private  Person  respecting  (i)
compliance  with any  Environmental  Law or (ii) any potential  liabilities  and
costs or remedial  action  arising from the Release or  threatened  Release of a
Contaminant  except where any of the foregoing  would not reasonably be expected
to result in a Materially Adverse Effect.

                  (b)  The  Borrower  and its  Subsidiaries  have  obtained  all
permits necessary for their current operations under Environmental Laws, and all
such permits are in good standing and the Borrower and its  Subsidiaries  are in
compliance with all terms and conditions of such permits except where failure to
obtain or maintain  such permits in good standing or to comply  therewith  would
not reasonably be expected to result in a Materially Adverse Effect.

                  (c) Neither the Borrower nor any of its Subsidiaries,  nor, to
the best of the Borrower's knowledge,  any of its predecessors in interest, has,
in violation of  applicable  law,  stored,  treated or disposed of any hazardous
waste on any Premises,  as defined pursuant to 40 CFR Part 261 or any equivalent
Environmental  Law except where such  violation of law would not  reasonably  be
expected to result in a Materially Adverse Effect.
<PAGE>

                  (d)  Neither  the  Borrower  nor any of its  Subsidiaries  has
received any  outstanding  summons,  complaint,  order or similar written notice
that it is not currently in compliance with, or that any Governmental  Authority
is investigating  its compliance with, any  Environmental  Laws or that it is or
may be liable to any other Person as a result of a Release or threatened Release
of a  Contaminant  except where any of the  foregoing  would not  reasonably  be
expected to result in a Materially Adverse Effect.

                  (e)  Neither  the  Borrower  nor any of its  Subsidiaries  has
received any written  notice that any of the present or past  operations  of the
Borrower and its  Subsidiaries is the subject of any on going  investigation  by
any Governmental  Authority  evaluating whether any remedial action is needed to
respond  to a  Release  or  threatened  Release  of a  Contaminant,  except  for
potential remedial actions that would not be reasonably  expected to result in a
Material Adverse Effect.

                  (f) Neither the Borrower nor any of its Subsidiaries has filed
any notice  under any  requirement  of  Environmental  Law  reporting a spill or
accidental  and  unpermitted  release or  discharge  of a  Contaminant  into the
environment  except where any of the foregoing  would not reasonably be expected
to result in a Materially Adverse Effect.

                  (g)  Neither  the  Borrower  nor any of its  Subsidiaries  has
entered  into  any  negotiations  or  settlement   agreements  with  any  Person
(including,  without  limitation,  the prior owner of its property) imposing any
outstanding  material  obligations  or liabilities on the Borrower or any of its
Subsidiaries with respect to any remedial action in response to the Release of a
Contaminant  or   environmentally   related  claim  except  for  obligations  or
liabilities  that  would not  reasonably  be  expected  to result in a  Material
Adverse Effect.

                  (h) None of the products manufactured,  distributed or sold by
the Borrower or any of its Subsidiaries contain asbestos containing material.

                  (i) No  Environmental  Lien has attached to any Premises owned
in fee simple by the Borrower or any of its Subsidiaries.

         8.19  No  Violation  of  Law.  Neither  the  Borrower  nor  any  of its
Subsidiaries  is in  violation  of  any  law,  statute,  regulation,  ordinance,
judgment,  order, or decree applicable to it which violation could reasonably be
expected to have a Material Adverse Effect.

         8.20 No Default. Neither the Borrower nor any of its Subsidiaries is in
default with respect to any note, indenture,  loan agreement,  mortgage,  lease,
deed, or other  agreement to which the Borrower or such Subsidiary is a party or
by which it is bound,  which  default  could  reasonably  be  expected to have a
Material Adverse Effect.

         8.21 ERISA  Compliance.  Except as  specifically  disclosed in Schedule
8.21:

                  (a)  Each  Pension  Plan  is in  compliance  in  all  material
respects with the applicable  provisions of ERISA, the Code and other federal or
state law except where such  noncompliance  would not  reasonably be expected to
cause a Material  Adverse  Effect.  Each Plan which is intended to qualify under

<PAGE>

Section  401(a) of the Code has received a favorable  determination  letter from
the IRS and to the best  knowledge of the Borrower,  nothing has occurred  which
would  cause  the  loss of such  qualification.  The  Borrower  and  each  ERISA
Affiliate  has made all  required  contributions  to any Pension Plan subject to
Section 412 of the Code, and no application for a funding waiver or an extension
of any  amortization  period  pursuant  to Section 412 of the Code has been made
with respect to any Pension Plan.

                  (b)  There  are no  pending  or,  to  the  best  knowledge  of
Borrower,  threatened claims, actions or lawsuits, or action by any Governmental
Authority,  with respect to any Plan which has resulted or could  reasonably  be
expected to result in a Material  Adverse  Effect.  There has been no non-exempt
prohibited  transaction or violation of the fiduciary  responsibility rules with
respect to any Plan which has resulted or could reasonably be expected to result
in a Material Adverse Effect.

                  (c) (i) No ERISA  Event has  occurred  or,  to the  Borrower's
knowledge,  is  reasonably  expected  to  occur;  (ii) no  Pension  Plan has any
Unfunded  Pension  Liability  which could  reasonably be expected to result in a
Material Adverse Effect;  (iii) neither the Borrower nor any ERISA Affiliate has
incurred,  or reasonably expects to incur, any liability under Title IV of ERISA
with respect to any Pension Plan which could reasonably be expected to result in
a Material  Adverse  Effect  (other than premiums due and not  delinquent  under
Section 4007 of ERISA);  (iv) neither the Borrower nor any ERISA  Affiliate  has
incurred,  or  reasonably  expects  to incur,  any  liability  (and no event has
occurred  which,  with the giving of notice under  Section 4219 of ERISA,  would
result in such liability)  under Section 4201 or 4243 of ERISA with respect to a
Multi  employer Plan which could  reasonably be expected to result in a Material
Adverse Effect; and (v) neither the Borrower nor any ERISA Affiliate has engaged
in a transaction that could be subject to Section 4069 or 4212(c) of ERISA.

         8.22 Taxes. The Borrower and its  Subsidiaries  have filed all material
federal and other tax returns and reports required to be filed, and have paid or
adequately  accrued  or  reserved  for all  material  federal  and other  taxes,
assessments,  fees and other governmental charges levied or imposed upon them or
their properties, income or assets otherwise due and payable.

         8.23 Regulated Entities. None of the Borrower, or any Subsidiary of the
Borrower,  is an  "Investment  Company"  required  to be  registered  within the
meaning of the  Investment  Company Act of 1940.  The Borrower is not subject to
regulation  under the Public  Utility  Holding  Company Act of 1935, the Federal
Power Act, any state public utilities code or law, or any other federal or state
statute or regulation limiting its ability to incur indebtedness.

         8.24 Use of Proceeds; Margin Regulations. The proceeds of the Loans are
to be used for working capital  purposes and general  business  purposes and for
loans to Merisel  Canada,  Inc. (as  permitted  under  Section 9.15) Neither the
Borrower nor any Subsidiary  will use proceeds of the Loans to purchase or carry
Margin Stock.

         8.25 Copyrights,  Patents,  Trademarks and Licenses,  etc. The Borrower
owns or is  licensed  or  otherwise  has the  right  to use all of the  patents,
trademarks,  service marks,  trade names,  copyrights,  contractual  franchises,

<PAGE>

authorizations and other rights that are reasonably  necessary for the operation
of its businesses,  without conflict with the rights of any other Person. To the
best knowledge of the Borrower, no slogan or other advertising device,  product,
process, method,  substance, part or other material now employed by the Borrower
or any Subsidiary  infringes upon any rights held by any other Person.  No claim
or  litigation  regarding any of the foregoing is pending or to the knowledge of
Borrower threatened, and no patent, invention, device, application, principle or
any  statute,  law,  rule,  regulation,  standard  or code is pending or, to the
knowledge of the Borrower,  proposed, which, in either case, could reasonably be
expected to have a Material Adverse Effect.

         8.26 No  Material  Adverse  Change.  No  Material  Adverse  Effect  has
occurred since the later of (i) the date of the Financial Statements referred to
in Section 8.6(a), and (ii) the latest financial  statements  delivered pursuant
to Section 7.2(a) or (c).

         8.27  Governmental  Authorization.  No  approval,  consent,  exemption,
authorization,   or  other  action  by,  or  notice  to,  or  filing  with,  any
Governmental  Authority or other  person is necessary or required in  connection
with the execution,  delivery or performance  by, or  enforcement  against,  the
Borrower or any of its Subsidiaries of this Agreement or any other Loan Document
except those filings that may be required in connection  with the  perfection of
security  interests  granted under this  Agreement  and in  connection  with the
Payment Account Agreement.

         8.28 Year 2000  Compliance.  As of the Closing  Date,  the  Borrower is
conducting a comprehensive  review and assessment of its computer  applications.
The Borrower does not believe the Year 2000 Problem will have a Material Adverse
Effect.

                                    ARTICLE 9

                       AFFIRMATIVE AND NEGATIVE COVENANTS

         The Borrower  covenants  to the Agent and each Lender that,  so long as
any of the Obligations remain outstanding or this Agreement is in effect:

         9.1 Taxes and Other  Obligations.  The Borrower shall,  and shall cause
each of its  Subsidiaries  to,  (a)  file  when  due (as  such  due  date may be
extended)  all  material tax returns and other  reports  which it is required to
file; (b) pay, or provide for the payment, prior to delinquency, of all material
taxes, fees,  assessments and other governmental  charges against it or upon its
property,  income and  franchises,  make all required  material  withholding and
other tax deposits,  and establish adequate reserves for the payment of all such
items,  and provide to the Agent and the  Lenders,  upon  request,  satisfactory
evidence of its timely compliance with the foregoing; provided, however, so long
as the Borrower has notified the Agent in writing,  neither the Borrower nor any
of its Subsidiaries need pay any tax, fee,  assessment,  or governmental  charge
that (i) it is contesting in good faith by  appropriate  proceedings  diligently
pursued,  (ii) the Borrower or any of its Subsidiaries,  as the case may be, has
established  proper  reserves for as provided in GAAP, and (iii) the non-payment
of which would not result in a Lien (other than a Lien  described  in clause (a)
of the definition of Permitted Lien).


<PAGE>

         9.2 Corporate  Existence and Good  Standing.  The Borrower  shall,  and
shall cause each of its  Subsidiaries  to, maintain its corporate  existence and
its qualification and good standing in all jurisdictions in which the failure to
maintain such existence and  qualification  or good standing could reasonably be
expected to have a Material Adverse Effect;  provided that any Subsidiary of the
Borrower may merge,  consolidate,  reorganize,  liquidate,  wind-up, dissolve or
transfer all or substantially all of its assets as permitted under Section 9.9.

         9.3 Compliance  with Law and Agreements;  Maintenance of Licenses.  The
Borrower  shall  comply,  and shall  cause each  Subsidiary  to  comply,  in all
material  respects with all  Requirements of Law of any  Governmental  Authority
having  jurisdiction  over it or its business  (including the Federal Fair Labor
Standards Act) except where such non-compliance could not reasonably be expected
to result in a Material Adverse Effect. The Borrower shall, and shall cause each
of its Subsidiaries to, obtain and maintain all licenses,  permits,  franchises,
and governmental authorizations necessary to own its property and to conduct its
business as conducted on the Closing Date (except where the failure to obtain or
maintain such could not  reasonably be expected to result in a Material  Adverse
Effect).  The  Borrower  shall not  modify,  amend or alter its  certificate  or
article of incorporation  other than in a manner which does not adversely affect
the rights of the Lenders or the Agent.

         9.4 Maintenance of Property.  The Borrower shall,  and shall cause each
of its Subsidiaries to, maintain all of its property necessary and useful in the
conduct of its business,  in good operating condition and repair,  ordinary wear
and tear excepted  (except where the failure to so maintain such property  could
not reasonably be expected to result in a Material Adverse Effect).

         9.5  Insurance.

                  (a) The Borrower shall  maintain,  and shall cause each of its
Subsidiaries to maintain, with financially sound and reputable insurers having a
rating of at least A-VII or better by Best Rating Guide,  insurance against loss
or damage to  Inventory  as is  customary  for  Persons  engaged  in the same or
similar business.

                  (b) The  Borrower  shall  cause  the  Agent,  for the  ratable
benefit  of the Agent and the  Lenders,  to be named  with  respect to each such
policy relating to any Inventory,  as loss payee or as an additional insured, in
a manner reasonably acceptable to the Agent. Each such policy of insurance shall
contain a clause or  endorsement  requiring  the  insurer  to give not less than
thirty (30) days' prior written notice to the Agent in the event of cancellation
of the policy for any reason whatsoever and a clause or endorsement stating that
the  interest of the Agent shall not be  impaired or  invalidated  by any act or
neglect of the Borrower or any of its  Subsidiaries or the owner of any premises
for purposes more hazardous than are permitted by such policy.  All premiums for
such  insurance  shall be paid by the  Borrower  when due, and  certificates  of
insurance  and,  if  requested  by the Agent or any Lender,  photocopies  of the
policies,  shall be delivered to the Agent, in each case in sufficient  quantity
for  distribution by the Agent to each of the Lenders.  If the Borrower fails to
procure such insurance or to pay the premiums  therefor when due, the Agent may,
and at the direction of the Majority  Lenders shall,  do so from the proceeds of
Revolving Loans.


<PAGE>

                  (c) The  Borrower  shall  promptly  notify  the  Agent and the
Lenders of any material loss, damage, or destruction to the Collateral in excess
of $10,000,000 arising from its use, whether or not covered by insurance.

         9.6  [Intentionally omitted].

         9.7 Environmental Laws. The Borrower shall, and shall cause each of its
Subsidiaries to, conduct its business in compliance with all Environmental  Laws
applicable  to  it,  including,   without  limitation,  those  relating  to  the
generation,  handling,  use, storage,  and disposal of any Contaminant except as
such  non-compliance as would not reasonably be expected to result in a Material
Adverse Effect. The Borrower shall, and shall cause each of its Subsidiaries to,
take prompt and  appropriate  action to respond to any  material  non-compliance
with  Environmental  Laws  and  shall  regularly  report  to the  Agent  on such
response.

         9.8 Compliance with ERISA.  The Borrower shall, and shall cause each of
its ERISA  Affiliates  to: (a) maintain  each Pension Plan in  compliance in all
material  respects with the applicable  provisions of ERISA,  the Code and other
federal or state  law;  (b) cause each Plan  which is  qualified  under  Section
401(a)  of the Code to  maintain  such  qualification;  (c)  make  all  required
contributions  to any Plan subject to Section 412 of the Code; (d) not engage in
a  non-exempt  prohibited  transaction  (as defined in Section 4975 of the Code)
which could reasonably be expected to result in a Material  Adverse Effect;  and
(e) not engage in a transaction that could be subject to Section 4069 or 4212(c)
of ERISA.

         9.9 Mergers,  Consolidations or Sales. (a) Neither the Borrower nor any
of its Subsidiaries shall enter into any transaction of merger,  reorganization,
or consolidation,  or transfer, sell, assign, lease, or otherwise dispose of all
or any substantial part of its property,  or wind up, liquidate or dissolve,  or
agree to do any of the  foregoing,  except  (i) for  sales of  Inventory  in the
ordinary course of its business,  (ii) subject to the  Intercreditor  Agreement,
for  accounts  receivable   transferred  in  connection  with  a  Securitization
Facility,  (iii) for sales or other dispositions of Equipment or other assets in
the ordinary course of business that are obsolete or no longer useable or useful
by  Borrower  in its  business;  (iv) for any  merger  or  consolidation  of the
Borrower or its  Subsidiaries  with, or the acquisition of all or  substantially
all of the assets of, any Person  other than the Parent or a  Subsidiary  of the
Parent if (A) the Borrower or  Subsidiary  of the Borrower  party thereto is the
surviving  entity  or the  transferee,  as the  case may be,  (B)  such  merger,
consolidation  or acquisition  would not result in a Default or Event of Default
after giving pro forma effect  thereto for the prior four fiscal  quarters,  (C)
such Person is engaged in the same or similar  business,  (D) in any Fiscal Year
of the  Borrower  the book  value of the  inventory  of such  Person or  Persons
acquired  pursuant to any such merger,  consolidation  or acquisition  shall not
exceed an amount equal to 30% of Borrower's  Eligible  Inventory  (calculated at
the time of such merger or consolidation),  (F) all UCC searches and filings are
made and all releases of liens are obtained as the Agent may reasonably  require
to ensure  that the extent and  priority of the  Agent's  Lien is not  adversely
affected by the merger, consolidation or acquisition, and (G) the Agent is given
10 days' prior written notice of such merger,  consolidation or acquisition and,
upon the Agent's request,  copies of the merger agreement and related documents;
and (v) as permitted under Section 9.15.


<PAGE>

         9.10 Distributions; Capital Change; Restricted Investments. Neither the
Borrower nor any of its Subsidiaries shall (i) directly or indirectly declare or
make, or incur any liability to make,  any  Distribution,  except  Distributions
permitted  under  Section  9.15,  (ii) make any change in its capital  structure
which  could  have a  Material  Adverse  Effect  or (iii)  make  any  Restricted
Investment except as permitted under Section 9.15.

         9.11  Transactions  Affecting  Collateral or  Obligations.  Neither the
Borrower  nor any of its  Subsidiaries  shall enter into any  transaction  which
would be reasonably expected to have a Material Adverse Effect.

         9.12 [Intentionally Omitted].

         9.13 Debt. Neither the Borrower nor any of its Subsidiaries shall incur
or maintain any Debt, other than: (a) the Obligations; (b) obligations under the
Securitization  Facility;  (c) obligations under the Indenture;  (d) obligations
under the Promissory  Notes; (e) other Debt existing on the Closing Date; (f) if
no Default or Event of Default would occur after giving effect to the incurrence
thereof:  (i) Capital  Lease  obligations,  (ii) the purchase  money Debt,  real
property  mortgage  financings and  sale/leaseback  transactions  referred to in
clauses (i), (j) and (k) of the definition of Permitted  Liens,  and (iii) other
Debt  the  aggregate  principal  amounts  outstanding  of  which  do not  exceed
$20,000,000;  (g)  Guarantees  by the  Borrower  or  its  Subsidiaries  of  Debt
otherwise  permitted to be incurred under this Agreement;  (h) Guarantees by the
Borrower or any of its  Subsidiaries of the obligations of any of the Borrower's
Subsidiaries  incurred in the ordinary  course of  business;  (i) Debt issued in
exchange for, or the net proceeds of which are used to extend, refinance, renew,
replace, defease or refund Debt permitted to be incurred under this Agreement or
outstanding  on the  Closing  Date,  (j) Debt in respect of  performance  bonds,
bankers'  acceptances,  letters of credit or surety or appeal bonds entered into
by the Borrower and its  Subsidiaries  in the ordinary  course of business;  (k)
Debt  arising from the honoring by a bank or other  financial  institution  of a
check,  draft, or similar instrument  inadvertently  drawn against  insufficient
funds;  (l) Debt of a  Subsidiary  of the  Borrower  existing  at the time  such
Subsidiary  became a Subsidiary  of the Borrower and not incurred as a result of
(or in  connection  with or in  anticipation  of)  such  Subsidiary  becoming  a
Subsidiary of the Borrower; (m) Debt relating to the consignment of inventory to
the Borrower by Finova Capital Corporation  provided that no interest thereon or
with respect  thereto  becomes  payable or accrues at a per annum rate of 12% or
more for a period of more  than ten  days;  (n) any  revolving  working  capital
facility obtained by Merisel Canada, Inc. from any Person not an Affiliate;  (o)
Debt  permitted  under  Section 9.15;  and (p) Debt incurred in connection  with
interest  rate  or  currency  rate  protection  agreements  entered  into in the
ordinary course of business.

         9.14 [Intentionally Omitted].

         9.15 Transactions with Affiliates.  Except as set forth below,  neither
the Borrower nor any of its Subsidiaries shall, sell, transfer,  distribute,  or
pay any money or property,  including,  but not limited to, any fees or expenses
of any  nature  (including,  but  not  limited  to,  any  fees or  expenses  for
management services),  to any Affiliate, or lend or advance money or property to
any Affiliate,  or invest in (by capital  contribution or otherwise) or purchase
or repurchase any stock or indebtedness,  or any property, of any Affiliate,  or
become  liable  on  any  Guaranty  of  the  indebtedness,  dividends,  or  other
obligations of any Affiliate. Notwithstanding the foregoing:
<PAGE>

                  (a) without  regard to the existence or  effectiveness  of the
Indenture:  (i) the Borrower may make loans or advances to Merisel Canada,  Inc.
from the  proceeds  of Loans  under  this  Agreement  up to a maximum  amount of
$25,000,000, provided, however, that in no event shall the aggregate outstanding
principal  amounts of the Borrower's  loans and advances to Merisel Canada (such
loans and advances for purposes of this clause (i)  including  the amount of any
trade payables owing by Merisel  Canada,  Inc. to Borrower  (other than any such
payables  in  dispute),  that are not paid  within  55 days from the date of the
invoices  relating  thereto and interest not paid when due),  exceed the Maximum
Merisel  Canada  Loan at one time;  (ii) the  Borrower's  Subsidiaries  may make
distributions  to the Borrower;  (iii) the Borrower and its Subsidiaries may pay
cash  dividends  or  other  advances  or  distributions  to the  Parent:  to pay
interest,  principal  and other  amounts in respect  of notes  issued  under the
Indenture,  to pay taxes owed by the Parent and other  expenses  incurred by the
Parent in the ordinary  course of its  business,  and otherwise in the amount of
fifty percent of the  Borrower's  Excess Cash Flow;  (iv) any  Subsidiary of the
Borrower may merge, consolidate,  reorganize or transfer, sell, assign, lease or
otherwise  dispose  all or  substantially  all of its  property or assets to the
Borrower (if the  Borrower is the  surviving  corporation  of any such merger or
consolidation)  or any other  Subsidiary of the Borrower;  (v) any Subsidiary of
the  Borrower  may be  liquidated  or  dissolved  or  wound-up if such would not
reasonably  be expected  to result in a Material  Adverse  Effect;  and (vi) the
Borrower or its  Subsidiaries  may,  subject to clause (a)(i)  above,  engage in
other  transactions  with the Parent or Subsidiaries of the Parent in good faith
in the  ordinary  course of  business,  including,  without  limitation,  loans,
investments  and the  transfer of accounts  receivable  in  connection  with the
Securitization Facility;

                  (b) so long as the  Indenture  is in effect:  (i) the Borrower
and its Subsidiaries may pay dividends and make  distributions,  lend to and pay
indebtedness  of , and transfer  property or assets to, the Parent or any of its
Subsidiaries  to the extent such  actions are  required  to be  permitted  under
Section 4.16 of the Indenture, (ii) Borrower agrees to give Agent advance notice
of the taking of such actions, and (iii) if any such actions are taken which are
not also  permitted to be taken under clause (a) above,  the Agent may refuse to
make or otherwise  restrict the making of new Revolving Loans or cause not to be
issued or restrict the issuance of new Letters of Credit; and

                  (c)  subject  to  clause  (a)  above,  the  Borrower  and  its
Subsidiaries  may engage in  transactions  with  Affiliates in good faith in the
ordinary course of business,  and on terms no less favorable to the Borrower and
its Subsidiaries than would be obtained in a comparable arm's-length transaction
with a  Person  who is  not an  Affiliate  and,  with  respect  to  transactions
involving consideration in excess of $1,000,000, in amounts and upon terms fully
disclosed to the Agent.

         9.16 Investment Banking and Finder's Fees. Neither the Borrower nor any
of its Subsidiaries shall pay or agree to pay, or reimburse any other party with
respect to, any investment banking or similar or related fee, underwriter's fee,

<PAGE>

finder's  fee, or broker's fee to any Person in connection  with this  Agreement
except  as  contemplated  by the Fee  Letter.  The  Borrower  shall  defend  and
indemnify  the Agent and the  Lenders  against and hold them  harmless  from all
claims of any Person that the  Borrower is  obligated  to pay for any such fees,
and all costs and  expenses  (including  without  limitation,  attorneys'  fees)
incurred by the Agent and/or any Lender in connection therewith.

         9.17 Business  Conducted.  The Borrower  shall not and shall not permit
any of its  Subsidiaries  to,  engage  directly  or  indirectly,  in any line of
business  other than the  businesses in which the Borrower and its  Subsidiaries
are engaged on the Closing Date and businesses related thereto.

         9.18 Liens.  Neither the  Borrower  nor any of its  Subsidiaries  shall
create,  incur, assume, or permit to exist any Lien on any property now owned or
hereafter acquired by any of them, except Permitted Liens.

         9.19 [Intentionally Omitted]

         9.20 [Intentionally Omitted].

         9.21 Fiscal Year.  The Borrower shall not change its Fiscal Year.

         9.22 Minimum  Adjusted Net Earnings  from  Operations.  The Parent will
maintain Adjusted Net Earnings from Operations, determined as of the last day of
each Fiscal Year, of not less than $3,000,000.

         9.23  Interest  Coverage  Ratio.  The Parent will  maintain an Interest
Coverage Ratio of 1.1: 1.0 for (a) the period of two consecutive fiscal quarters
ending June 30, 1998; (b) the period of the three  consecutive  fiscal  quarters
ending  September  30,  1998;  and (c) each  period of four  consecutive  fiscal
quarters ending December 31, 1998 and thereafter.

         9.24 Use of Proceeds.  The Borrower  shall not, and shall not suffer or
permit any  Subsidiary  to, use any  portion of the Loan  proceeds,  directly or
indirectly,  (i) to purchase or carry Margin  Stock,  (ii) to repay or otherwise
refinance  indebtedness  of the Borrower or others incurred to purchase or carry
Margin  Stock,  (iii) to extend credit for the purpose of purchasing or carrying
any Margin  Stock,  or (iv) to acquire any security in any  transaction  that is
subject to Section 13 or 14 of the Exchange Act.

         9.25 Further  Assurances.  The Borrower  shall execute and deliver,  or
cause to be  executed  and  delivered,  to the Agent  and/or  the  Lenders  such
documents and agreements,  and shall take or cause to be taken such actions,  as
the Agent or any Lender may, from time to time,  reasonably request to maintain,
protect, preserve, establish and perfect the Agent's Liens on the Collateral.


<PAGE>

                                   ARTICLE 10

                              CONDITIONS OF LENDING

         10.1  Conditions  Precedent to Making of Loans on the Closing Date. The
obligation  of the  Lenders to make the initial  Revolving  Loans on the Closing
Date,  and the  obligation of the Agent to cause to be issued or provide  Credit
Support for any Letter of Credit on the Closing Date and the  obligation  of the
Lenders to  participate  in Letters of Credit  issued on the Closing  Date or in
Credit  Support  for  any  Letters  of  Credit,  are  subject  to the  following
conditions precedent having been satisfied in a manner satisfactory to the Agent
and each Lender:

                  (a) This  Agreement  and the other  Loan  Documents  have been
executed  by each  party  thereto  and the  Borrower  shall have  performed  and
complied with all covenants,  agreements and conditions contained herein and the
other Loan Documents  which are required to be performed or complied with by the
Borrower before or on such Closing Date.

                  (b) Upon making the  Revolving  Loans on the Closing  Date and
with all its  obligations  current,  the Borrower would have  Availability in an
amount no less than $50,000,000.

                  (c) All  representations  and warranties made hereunder and in
the other Loan Documents  shall be true and correct in all material  respects as
of the  Closing  Date  as if  made  on such  date  (except  representations  and
warranties  which are made as of a  specified  date shall only be required to be
true and correct in all material respects as of such specified date).

                  (d) No Default or Event of Default  shall exist on the Closing
Date, or would exist after giving effect to the Loans to be made on such date.

                  (e) The  Agent  and  the  Lenders  shall  have  received  such
opinions of counsel for the  Borrower and its  Subsidiaries  as the Agent or any
Lender shall request,  each such opinion to be in a form,  scope,  and substance
satisfactory to the Agent, the Lenders, and their respective counsel.

                  (f) The Agent shall have received:

                           (i) duly executed copies of proper financing 
statements,  suitable  for filing  under the UCC of all  jurisdictions  that the
Agent may deem necessary or desirable in order to perfect the Agent's Lien; and

                           (ii)[Intentionally Omitted]

                           (iii)    Certified copies of resolutions of the Board
of Directors of the Borrower  approving  (A) the  execution  and delivery of the
Loan  Documents to which the  Borrower is a party,  (B) the  performance  of the
Obligations  incurred  by the  Borrower  under Loan  Documents  to which it is a
party,  and (C) the  consummation of the  transactions  contemplated by the Loan
Documents;


<PAGE>

                           (iv)A certificate of the Secretary or an Assistant 
Secretary  of the  Borrower  certifying  the  names and true  signatures  of the
officers of the Borrower, authorized to sign the Loan Documents; 

                           (v)     A copy of the  Certificate  of  Incorporation
of  the  Borrower,  certified  by  the  Secretary  of  State  of  the  State  of
incorporation as of a recent date;

                           (vi)A copy of the Bylaws of the Borrower, certified 
by the Secretary or an Assistant  Secretary of the  Borrower,  as of the date of
this Agreement as being accurate and complete;

                           (vii)    A Certificate of the Secretary of State of 
the State of incorporation  for the Borrower  certifying that the Borrower is in
good standing as of a recent date; and

                           (viii) A pro  forma  balance  sheet  of the  Borrower
dated as of April 30,  1998  (which  balance  sheet  shall  reflect no  material
adverse  changes  from the  Borrower's  most  recent  pro  forma  balance  sheet
previously delivered to the Agent).

                  (g) There shall have occurred no material  adverse  change (as
determined by the Agent in its reasonable  discretion) in (i) the assets,  books
and  records  of the  Borrower  since  June  15,  1998;  (ii)  in the  business,
operations, profits of the Borrower since March 31, 1998.

                  (h)  The  Agent  shall  have  received  a  certificate  from a
Responsible  Officer of the Borrower certifying that the Borrower has materially
met the financial performance projections (taken as a whole) previously provided
to the Agent  dated  November  13,  1997  (including  the  revised  projections,
provided in May 1998, of Capital  Expenditures  in the amount of  $45,000,000 in
fiscal year 1998).

                  (i) All documentation relating to the Securitization  Facility
that GECC is a party to shall be reasonably satisfactory to the Agent.

                  (j) Except as  previously  disclosed  by the  Borrower  to the
Agent or in filings with the  Securities  and Exchange  Commission,  there shall
exist no action,  suit,  investigation,  litigation,  or  proceeding  pending or
threatened in any court or before any arbitrator or governmental instrumentality
that in the Agent's reasonable judgment (i) could be expected to have a material
adverse effect on the business, condition (financial or otherwise),  operations,
performance,  or  properties  of the Borrower or which could  impair  Borrower's
ability to perform satisfactorily under this Agreement.

                  (k) The Agent shall have  received  copies of all  consents or
approvals  of any  Governmental  Authority  or  other  Person  which  the  Agent
reasonably   determines  is  required  in  connection   with  the   transactions
contemplated by this Agreement.

                  (l) The  Borrower  shall  have  paid all  reasonable  fees and
expenses of the Agent and the Attorney Costs incurred in connection  with any of

<PAGE>

the Loan  Documents  and the  transactions  contemplated  thereby  to the extent
invoiced  and to the  extent  the  Borrower  is  obligated  to pay such fees and
expenses under Section 15.7 and pursuant to the Fee Letter.

                  (m) The Agent shall have received  evidence,  in form,  scope,
and substance,  reasonably  satisfactory to the Agent, of all insurance coverage
as required by this Agreement.

                  (n) The Agent and the Lenders  shall have had an  opportunity,
if they so choose,  to examine the books of account and other  records and files
of the Borrower and to make copies thereof,  and to conduct a pre-closing  audit
which shall include,  without limitation,  verification of Inventory,  Accounts,
and Availability,  and the results of such examination and audit shall have been
satisfactory to the Agent and the Lenders in all respects.

                  (o) All proceedings  taken in connection with the execution of
this  Agreement,  all other Loan Documents and all documents and papers relating
thereto shall be satisfactory in form, scope, and substance to the Agent and the
Lenders.

         The  acceptance  by the  Borrower of any Loans made on the Closing Date
shall be deemed to be a representation  and warranty made by the Borrower to the
effect  that all of the  conditions  precedent  to the  making of such Loans set
forth in Section 10.2 have been  satisfied,  with the same effect as delivery to
the Agent and the Lenders of a certificate  signed by a  Responsible  Officer of
the Borrower, dated the Closing Date, to such effect.

         Execution  and  delivery to the Agent by a Lender of a  counterpart  of
this  Agreement  shall  be  deemed  confirmation  by such  Lender  that  (i) all
conditions   precedent  in  this  Section  10.1  have  been   fulfilled  to  the
satisfaction  of such Lender and (ii) the decision of such Lender to execute and
deliver to the Agent an executed  counterpart of this Agreement was made by such
Lender independently and without reliance on the Agent or any other Lender as to
the satisfaction of any condition precedent set forth in this Section 10.1.

         10.2  Conditions  Precedent to Each Loan. The obligation of the Lenders
to make each Loan,  including the initial  Revolving  Loans on the Closing Date,
and the obligation of the Agent to take  reasonable  steps to cause to be issued
or to provide  Credit Support for any Letter of Credit and the obligation of the
Lenders to  participate  in Letters of Credit or Credit  Support  for Letters of
Credit,  shall be subject to the further conditions  precedent that on and as of
the date of any such extension of credit:

                  (a) the following statements shall be true, and the acceptance
by the Borrower of any  extension of credit shall be deemed to be a statement to
the  effect  set  forth in  clauses  (i) and (ii),  with the same  effect as the
delivery to the Agent and the Lenders of a  certificate  signed by a Responsible
Officer, dated the date of such extension of credit, stating that:

                           (i) The representations and warranties contained in 
this Agreement and the other Loan Documents are correct in all material respects
on and as of the date of such  extension  of credit as though  made on and as of
such date,  other than any such  representation  or warranty  which relates to a
specified  prior date and except to the  extent the Agent and the  Lenders  have
been notified by the Borrower that any representation or warranty is not correct
and the Majority Lenders have explicitly waived in writing  compliance with such
representation or warranty; and


<PAGE>

                           (ii)No event has occurred and is continuing, or would
result from such extension of credit, which constitutes a Default or an Event of
Default; and

                  (b)  without  limiting  Section  10.1(b),  the  amount  of the
Availability  shall be sufficient to make such Revolving Loan without  exceeding
the Availability, provided, however, that the foregoing conditions precedent are
not conditions to each Lender  participating in or reimbursing BABC or the Agent
for such  Lenders' Pro Rata Share of any BABC Loan or Agent Advance or Revolving
Loan as provided in Sections 2.2(h), (i) and (j) and Section 2.3(e)(2).

                                   ARTICLE 11

                                DEFAULT; REMEDIES

         11.1 Events of Default. It shall constitute an event of default ("Event
of Default") if any one or more of the following shall occur for any reason:

                  (a) any failure to pay the  principal of the Loans when due or
interest on any of the Obligations within one Business Day of the date when due,
whether upon demand or otherwise;

                  (b) any  representation or warranty made or deemed made by the
Borrower  in  this  Agreement  or by the  Borrower  in any  of  the  other  Loan
Documents, any Financial Statement, or any certificate furnished by the Borrower
or the Parent at any time to the Agent or any Lender shall prove to be untrue in
any material respect as of the date on which made, deemed made, or furnished;

                  (c) any default shall occur in the  observance or  performance
by the  Borrower  of any of the  covenants  and  agreements  contained  in  this
Agreement  and such  default  shall  continue  for  thirty  (30) days  after the
Borrower  has  been  notified  by the  Agent  (either  written  or  oral) of the
occurrence of such default (except that (i) a three-day  period shall apply to a
default  with respect to Section  6.7;  (ii) a five-day  period shall apply to a
default with respect to Sections  6.6(a),  6.10 and 7.2 (other than (f), (g) and
(h)  thereof);  (ii) a ten-day  period  shall apply to a default with respect to
Sections 6.2, 6.3 or 7.3; and (iii) no thirty-day or other period shall apply to
a default  with respect to Sections  6.4,  6.9,  9.2 (as to the  Borrower),  9.5
(other than insurance  unrelated to the  Collateral),  9.9 through and including
9.17 and 9.21 through and  including  9.24),  any other Loan  Documents,  or any
other agreement  entered into at any time to which the Borrower,  the Parent, or
any of Parent's other  Subsidiaries and the Agent or any Lender are party, or if
any such agreement or document shall  terminate  (other than in accordance  with
its terms or the terms  hereof or with the written  consent of the Agent and the
Majority  Lenders) or become void or  unenforceable  other than as a result of a
change in  applicable  law or any action or inaction by the Agent or the Lender,
without the written consent of the Agent and the Majority Lenders;


<PAGE>

                  (d) default  shall occur with  respect to any Debt (other than
the Obligations) in an outstanding  principal amount which exceeds  $10,000,000,
or under any  agreement or  instrument  under or pursuant to which any such Debt
may have been issued,  created,  assumed,  or guaranteed  by the  Borrower,  the
Parent,  or any of the  Borrower's  Significant  Subsidiaries,  and such default
shall continue for more than the period of grace, if any, therein specified,  if
the effect  thereof  (with or without  the giving of notice or further  lapse of
time or both) is to  accelerate,  or to permit  the  holders of any such Debt to
accelerate,  the  maturity of any such Debt;  or any such Debt shall be declared
due  and  payable  or be  required  to be  prepaid  (other  than  by a  required
prepayment) prior to the stated maturity thereof;

                  (e) the Borrower, the Parent, or any of Borrower's Significant
Subsidiaries  shall  (i)  file a  voluntary  petition  in  bankruptcy  or file a
voluntary  petition or an answer or otherwise  commence any action or proceeding
seeking  reorganization,  arrangement  or  readjustment  of its debts or for any
other relief under the federal  Bankruptcy Code, as amended,  or under any other
bankruptcy  or  insolvency  act or  law,  state  or  federal,  now or  hereafter
existing, or consent to, approve of, or acquiesce in, any such petition,  action
or  proceeding;  (ii) apply for or acquiesce in the  appointment  of a receiver,
assignee,  liquidator,  sequestrator,  custodian,  monitor,  trustee  or similar
officer for it or for all or any part of its property;  (iii) make an assignment
for the benefit of  creditors;  or (iv) be unable  generally to pay its debts as
they become due;

                  (f) an  involuntary  petition or proposal shall be filed or an
action or proceeding  otherwise commenced seeking  reorganization,  arrangement,
consolidation or readjustment of the debts of the Borrower,  the Parent,  or any
of Borrower's Significant Subsidiaries or for any other relief under the federal
Bankruptcy Code, as amended,  or under any other bankruptcy or insolvency act or
law, state or federal,  now or hereafter  existing and either (i) such petition,
proposal,  action or proceeding shall not have been dismissed within a period of
sixty (60) days after its  commencement  or (ii) an order for relief against the
Borrower,  the Parent,  or such other Subsidiary shall have been entered in such
proceeding;

                  (g) a receiver, assignee, liquidator, sequestrator, custodian,
monitor,  trustee or similar  officer for the  Borrower,  the Parent,  or any of
Borrower's Significant Subsidiaries or for all or any part of its property shall
be appointed or a warrant of attachment,  execution or similar  process shall be
issued against any part of the property of the Borrower,  the Parent,  or any of
Borrower's Significant Subsidiaries;

                  (h) the Borrower, the Parent, or any of Borrower's Significant
Subsidiaries  shall file a certificate of dissolution under applicable state law
or shall  be  liquidated,  dissolved  or  wound-up  or  shall  commence  or have
commenced  against it any action or proceeding  for  dissolution,  winding-up or
liquidation, or shall take any corporate action in furtherance thereof;

                  (i) [Intentionally omitted];

                  (j) one or more  judgments  or orders for the payment of money
aggregating in excess of $5,000,000,  which amount shall not be fully covered by
insurance,  shall be  rendered  against  the  Borrower,  the  Parent,  or any of

<PAGE>

Borrower's  Significant  Subsidiaries  and such  judgments  shall  be final  and
non-appealable or shall not be vacated,  discharged, or stayed or bonded pending
appeal for any period of 60 consecutive days;

                  (k) any  loss,  theft,  damage or  destruction  of any item or
items of  Collateral  or other  property  of the  Borrower  occurs  which is not
covered by insurance and will have a Material Adverse Effect;

                  (l) there is filed  against  the  Borrower  or the  Parent any
criminal  action,  suit or  proceeding  under any federal or state  racketeering
statute  (including,  without limitation,  the Racketeer  Influenced and Corrupt
Organization Act of 1970), which action, suit or proceeding (1) is not dismissed
within one hundred  twenty (120) days,  and (2) could  reasonably be expected to
result  in the  confiscation  or  forfeiture  of  any  material  portion  of the
Collateral;

                  (m) for any reason other than the failure of the Agent to take
any action available to it to maintain perfection of the Agent's Liens, pursuant
to the Loan  Documents,  any Loan Document ceases to be in full force and effect
or any Lien with respect to any material  portion of the Collateral  intended to
be secured  thereby ceases to be, or is not,  valid,  perfected and prior to all
other Liens (other than the Liens listed in clauses (a), (d), (g) and (o) of the
definition of Permitted Liens) or is terminated, revoked or declared void;

                  (n) an ERISA Event shall occur with  respect to a Pension Plan
or  Multi-employer  Plan which has resulted or could  reasonably  be expected to
result in liability of the Borrower under Title IV of ERISA to the Pension Plan,
Multi-employer Plan or the PBGC in an aggregate amount in excess of $5,000,000 ;
(ii) the aggregate amount of Unfunded Pension  Liability among all Pension Plans
at any time exceeds  $2,000,000  ; or (iii) the Borrower or any ERISA  Affiliate
shall fail to pay when due, after the expiration of any applicable grace period,
any installment  payment with respect to its withdrawal  liability under Section
4201 of ERISA under a  Multi-employer  Plan in an aggregate  amount in excess of
$2,000,000 ; or

                  (o)  a   Facility   Termination   Date  (as   defined  in  the
Intercreditor Agreement) occurs with respect to Securitization Facility; or

                  (p) there occurs a Change of Control.

         11.2 Remedies. (a) If an Event of Default exists, the Agent may, in its
discretion,  and shall, at the direction of the Majority Lenders, do one or more
of the  following  at any time or times and in any order,  without  notice to or
demand on the Borrower:  (i) reduce the Maximum Revolver Amount,  or the advance
rates against Eligible Accounts and/or Eligible  Inventory used in computing the
Availability,  or reduce one or more of the other elements used in computing the
Availability; (ii) restrict the amount of or refuse to make Revolving Loans; and
(iii)  restrict or refuse to arrange for or provide  Letters of Credit or Credit

<PAGE>

Support.  If an Event of Default exists and is continuing,  the Agent shall,  at
the  direction  of the Majority  Lenders,  do one or more of the  following,  in
addition to the actions  described  in the  preceding  sentence,  at any time or
times  and in any  order,  without  notice to or  demand  on the  Borrower:  (a)
terminate the Commitments and this Agreement; (b) declare any or all Obligations
to be immediately due and payable;  provided,  however, that upon the occurrence
of any Event of Default  with  respect to the  Borrower  described  in  Sections
11.1(e),   11.1(g),   or  11.1(h),   the  Commitments  shall  automatically  and
immediately  expire and all Obligations shall  automatically  become immediately
due and payable  without  notice or demand of any kind; and (c) pursue its other
rights and remedies under the Loan Documents and applicable law.

                  (b) If an Event of Default has occurred and is continuing: (i)
the Agent  shall have for the benefit of the  Lenders,  in addition to all other
rights of the Agent and the Lenders,  the rights and remedies of a secured party
under  the UCC;  (ii)  the  Agent  may,  at any  time,  take  possession  of the
Collateral  and keep it on the Borrower's  premises,  at no cost to the Agent or
any Lender,  or remove any part of it to such other place or places as the Agent
may desire,  or the Borrower shall,  upon the Agent's demand,  at the Borrower's
cost,  assemble  the  Collateral  and make it  available to the Agent at a place
reasonably convenient to the Agent; and (iii) the Agent may sell and deliver any
Collateral at public or private sales,  for cash,  upon credit or otherwise,  at
such  prices  and upon such  terms as the  Agent  deems  advisable,  in its sole
discretion,  and may, if the Agent deems it reasonable,  postpone or adjourn any
sale of the  Collateral by an  announcement  at the time and place of sale or of
such postponed or adjourned sale without giving a new notice of sale. Without in
any way  requiring  notice to be given in the  following  manner,  the  Borrower
agrees  that any  notice by the  Agent of sale,  disposition  or other  intended
action  hereunder  or in  connection  herewith,  whether  required by the UCC or
otherwise,  shall constitute reasonable notice to the Borrower if such notice is
mailed by  registered  or certified  mail,  return  receipt  requested,  postage
prepaid, or is delivered  personally against receipt, at least ten (10) Business
Days prior to such action to the Borrower's  address specified in or pursuant to
Section 15.8.  If any  Collateral is sold on terms other than payment in full at
the time of sale,  no credit shall be given  against the  Obligations  until the
Agent or the Lenders receive payment,  and if the buyer defaults in payment, the
Agent may resell the Collateral  without further notice to the Borrower.  In the
event the Agent seeks to take possession of all or any portion of the Collateral
by judicial process,  the Borrower  irrevocably  waives:  (a) the posting of any
bond, surety or security with respect thereto which might otherwise be required;
(b) any demand for possession prior to the commencement of any suit or action to
recover the Collateral; and (c) any requirement that the Agent retain possession
and not  dispose of any  Collateral  until after  trial or final  judgment.  The
Borrower  agrees  that the Agent has no  obligation  to  preserve  rights to the
Collateral or marshal any Collateral for the benefit of any Person. The Agent is
hereby granted a license or other right to use,  without charge,  the Borrower's
labels, patents,  copyrights,  name, trade secrets, trade names, trademarks, and
advertising  matter,  or any similar  property,  in  completing  production  of,
advertising  or selling any  Collateral,  and the  Borrower's  rights  under all
licenses and all  franchise  agreements  shall inure to the Agent's  benefit for
such  purpose.  The  proceeds of sale shall be applied  first to all expenses of
sale,  including  attorneys' fees, and then to the Obligations in whatever order
the Agent  elects.  The Agent will  return any  excess to the  Borrower  and the
Borrower shall remain liable for any deficiency.

                  (c) If an Event of Default occurs,  the Borrower hereby waives
all  rights to notice  and  hearing  prior to the  exercise  by the Agent of the
Agent's  rights to  repossess  the  Collateral  without  judicial  process or to
replevy, attach or levy upon the Collateral without notice or hearing.


<PAGE>

                                   ARTICLE 12

                              TERM AND TERMINATION

         12.1 Term and Termination.  The term of this Agreement shall end on the
Stated  Termination Date. The Agent upon direction from the Majority Lenders may
terminate  this  Agreement  without  notice upon the  occurrence  and during the
continuance  of an Event of Default.  Upon the effective  date of termination of
this Agreement for any reason whatsoever,  all Obligations  (including,  without
limitation,  all unpaid  principal,  accrued  interest and, if  applicable,  any
amounts  payable  pursuant  to Section  5.4) shall  become  immediately  due and
payable and the  Borrower  shall  immediately  arrange for the  cancellation  of
Letters of Credit then  outstanding.  Notwithstanding  the  termination  of this
Agreement,  until all Obligations are indefeasibly paid and performed in full in
cash or cash  equivalents  acceptable  to the Agent,  the Borrower  shall remain
bound by the terms of this  Agreement  and shall not be  relieved  of any of its
Obligations  hereunder,  and the Agent and the  Lenders  shall  retain all their
rights and remedies hereunder (including,  without limitation, the Agent's Liens
in  and  all  rights  and  remedies  with  respect  to  all  then  existing  and
after-arising Collateral).

                                   ARTICLE 13

                     AMENDMENTS; WAIVER; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS

         13.1 No  Waivers  Cumulative  Remedies.  No failure by the Agent or any
Lender to exercise  any right,  remedy,  or option  under this  Agreement or any
present or future supplement thereto, or in any other agreement between or among
the  Borrower  and the Agent  and/or  any  Lender,  or delay by the Agent or any
Lender in exercising the same, will not operate as a waiver  thereof.  No waiver
by the Agent or any Lender will be effective  unless it is in writing,  and then
only to the extent specifically stated. No waiver by the Agent or the Lenders on
any  occasion  shall  affect or diminish  the Agent's and each  Lender's  rights
thereafter  to require  strict  performance  by the Borrower of any provision of
this  Agreement  (except to the extent  waived).  The Agent's and each  Lender's
rights under this  Agreement  will be cumulative  and not exclusive of any other
right or remedy which the Agent or any Lender may have.

         13.2 Amendments and Waivers. No amendment or waiver of any provision of
this  Agreement or any other Loan  Document,  and no consent with respect to any
departure by the Borrower therefrom, shall be effective unless the same shall be
in writing  and signed by the  Majority  Lenders (or by the Agent at the written
request of the  Majority  Lenders)  and the Borrower and then any such waiver or
consent  shall be effective  only in the specific  instance and for the specific
purpose for which given; provided,  however, that no such waiver,  amendment, or
consent shall,  unless in writing and signed by all the Lenders and the Borrower
and acknowledged by the Agent, do any of the following:

                  (a) increase or extend the Commitment of any Lender;

                  (b) postpone or delay any date fixed by this  Agreement or any
other Loan  Document  for any  payment  of  principal,  interest,  fees or other
amounts due to the Lenders  (or any of them)  hereunder  or under any other Loan
Document;

                  (c) reduce the principal of, or the rate of interest specified
herein on any Loan, or any fees or other amounts payable  hereunder or under any
other Loan Document;

                  (d)  change  the  percentage  of  the  Commitments  or of  the
aggregate unpaid principal amount of the Loans which is required for the Lenders
or any of them to take any action hereunder;

                  (e)  increase  any  of  the   percentages  set  forth  in  the
definition of Borrowing Base;

                  (f) amend  this  Section  or any  provision  of the  Agreement
providing for consent or other action by all Lenders;

                  (g)  release  Collateral  other than as  permitted  by Section
14.11;

                  (h) change the definitions of "Majority  Lenders" or "Required
Lenders";

                  (i) increase the Maximum Revolver Amount and Unused Letter of 
Credit Subfacility.

and, provided  further,  that no amendment,  waiver or consent shall,  unless in
writing and signed by the Agent,  affect the rights or duties of the Agent under
this Agreement or any other Loan Document.

         13.3 Assignments; Participations.

                  (a) Any Lender may,  with  Borrower's  consent,  which consent
shall not be unreasonably withheld (and which consent shall not be required upon
the  occurrence  or during  the  continuance  of an Event of  Default,  it being
understood  that the refusal to grant such consent  shall be  reasonable  if the
contemplated  assignment  could  reasonably be expected to result in or increase
the risk to the Borrower of the payment of amounts to such assignee  pursuant to
Article V), and with the written  consent of the Agent,  assign and  delegate to
one or more assignees (provided that no written consent of the Borrower or Agent
shall be required in connection  with any  assignment and delegation by a United
States Lender to a United States  Affiliate of such Lender) (each an "Assignee")
all, or any ratable  part of all, of the Loans,  the  Commitments  and the other
rights  and  obligations  of such  Lender  hereunder,  in a  minimum  amount  of
$10,000,000  but any  assignment of less than the entire amount of such Lender's
Commitment  shall not cause such Lender's  remaining  Commitment to be less than
$10,000,000;  provided, however, that the Borrower and the Agent may continue to
deal solely and  directly  with such Lender in  connection  with the interest so
assigned to an Assignee, and such assignment shall be treated as a participation
as  described  in  Section  13.3(e)  hereof,  until (i)  written  notice of such
assignment,   together   with  payment   instructions,   addresses  and  related
information with respect to the Assignee,  shall have been given to the Borrower

<PAGE>

and the Agent by such Lender and the Assignee; (ii) such Lender and its Assignee
shall have  delivered to the Borrower and the Agent an Assignment and Acceptance
in the form of Exhibit E ("Assignment and Acceptance") (the date upon which such
Assignment  and Acceptance  has been  delivered  hereinafter  referred to as the
"Assignment and Acceptance  Date") and (iii) the assignor Lender or Assignee has
paid to the Agent a processing  fee in the amount of $3,000.  The Borrower shall
cooperate with the Agent with respect to any assignment or  participation  under
this Section 13.3, including,  upon the reasonable request of the Agent, meeting
with any prospective Lender.

                  (b) From and  after  the date  that  the  Agent  notifies  the
assignor  Lender that it has received an executed  Assignment and Acceptance and
payment of the  above-referenced  processing  fee, (i) the  Assignee  thereunder
shall  be a party  hereto  and,  to the  extent  that  rights  and  obligations,
including,  but not  limited to, the  obligation  to  participate  in Letters of
Credit and Credit  Support have been assigned to it pursuant to such  Assignment
and Acceptance, shall have the rights and obligations of a Lender under the Loan
Documents,  and (ii) the assignor  Lender  shall,  to the extent that rights and
obligations  hereunder and under the other Loan  Documents have been assigned by
it pursuant to such  Assignment  and  Acceptance,  relinquish  its rights and be
released  from  its  obligations  under  this  Agreement  (and in the case of an
Assignment and Acceptance  covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto).

                  (c) By executing and delivering an Assignment and  Acceptance,
the assigning Lender thereunder and the Assignee thereunder confirm to and agree
with each  other and the other  parties  hereto as  follows:  (1) other  than as
provided in such  Assignment  and  Acceptance,  such  assigning  Lender makes no
representation  or warranty  and assumes no  responsibility  with respect to any
statements,  warranties or  representations  made in or in connection  with this
Agreement or the execution,  legality,  validity,  enforceability,  genuineness,
sufficiency  or value of this  Agreement  or any other Loan  Document  furnished
pursuant hereto;  (2) such assigning Lender makes no  representation or warranty
and assumes no  responsibility  with respect to the  financial  condition of the
Borrower  or  the  performance  or  observance  by  the  Borrower  of any of its
obligations under this Agreement or any other Loan Document  furnished  pursuant
hereto;  (3)  such  Assignee  confirms  that  it has  received  a copy  of  this
Agreement,  together with such other  documents and information as it has deemed
appropriate  to make its own credit  analysis  and  decision  to enter into such
Assignment and  Acceptance;  (4) such Assignee will,  independently  and without
reliance upon the Agent, such assigning Lender or any other Lender, and based on
such  documents  and  information  as it shall  deem  appropriate  at the  time,
continue to make its own credit  decisions in taking or not taking  action under
this Agreement; (5) such Assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise  such powers under this  Agreement
as are delegated to the Agent by the terms hereof,  together with such powers as
are reasonably  incidental  thereto;  and (6) such Assignee  agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement are required to be performed by it as a Lender.

                  (d) After the  Borrower's  receipt of notice by the Agent that
it has received from an Assignee an executed  Assignment  and Acceptance and the
payment of the  processing  fee, and effective upon such  Assignee's  making its
processing fee payment under the Assignment and Acceptance, this Agreement shall

<PAGE>

be deemed to be amended to the  extent,  but only to the  extent,  necessary  to
reflect  the  addition  of the  Assignee  and the  resulting  adjustment  of the
Commitments arising therefrom.  The Commitment  allocated to each Assignee shall
reduce such Commitments of the assigning Lender pro tanto.

                  (e) Any Lender may at any time sell to one or more  commercial
banks, financial  institutions,  or other Persons not Affiliates of the Borrower
(a "Participant")  participating  interests in any Loans, the Commitment of that
Lender  and the  other  interests  of that  Lender  (the  "originating  Lender")
hereunder and under the other Loan Documents;  provided,  however,  that (i) the
originating  Lender's  obligations  under this Agreement shall remain unchanged,
(ii) the originating  Lender shall remain solely responsible for the performance
of such  obligations,  (iii) the Borrower  and the Agent shall  continue to deal
solely  and  directly  with  the  originating  Lender  in  connection  with  the
originating  Lender's rights and obligations  under this Agreement and the other
Loan  Documents,  and (iv) no Lender shall  transfer or grant any  participating
interest under which the  Participant has rights to approve any amendment to, or
any  consent  or waiver  with  respect  to,  this  Agreement  or any other  Loan
Document,  and all amounts payable by the Borrower hereunder shall be determined
as if such  Lender  had not sold such  participation;  except  that,  if amounts
outstanding under this Agreement are due and unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event of Default,
each Participant  shall be deemed to have the right of set-off in respect of its
participating  interest in amounts owing under this Agreement to the same extent
and  subject  to the  same  limitation  as if the  amount  of its  participating
interest were owing directly to it as a Lender under this Agreement.

                  (f) Notwithstanding any other provision in this Agreement, any
Lender may at any time  create a  security  interest  in, or pledge,  all or any
portion of its  rights  under and  interest  in this  Agreement  in favor of any
Federal Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury
Regulation  31 CFR  ss.203.14,  and such  Federal  Reserve Bank may enforce such
pledge or security interest in any manner permitted under applicable law.

                                   ARTICLE 14

                                    THE AGENT

         14.1 Appointment and  Authorization.  Each Lender hereby designates and
appoints BankAmerica Business Credit, Inc. as its Agent under this Agreement and
the other Loan Documents and each Lender hereby irrevocably authorizes the Agent
to take such action on its behalf under the  provisions  of this  Agreement  and
each other Loan  Document and to exercise such powers and perform such duties as
are expressly  delegated to it by the terms of this  Agreement or any other Loan
Document,  together with such powers as are reasonably  incidental thereto.  The
Agent agrees to act as such on the express conditions  contained in this Article
14. The  provisions  of this  Article 14 are solely for the benefit of the Agent
and  the  Lenders  and  the  Borrower  shall  have no  rights  as a third  party
beneficiary  of any of the  provisions  contained  herein.  Notwithstanding  any
provision to the contrary contained  elsewhere in this Agreement or in any other
Loan Document,  the Agent shall not have any duties or responsibilities,  except

<PAGE>

those expressly set forth herein,  nor shall the Agent have or be deemed to have
any fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities,  duties,  obligations or  liabilities  shall be read into this
Agreement  or any other Loan  Document  or  otherwise  exist  against the Agent.
Without limiting the generality of the foregoing  sentence,  the use of the term
"agent" in this Agreement with reference to the Agent is not intended to connote
any  fiduciary or other  implied (or express)  obligations  arising under agency
doctrine of any applicable law. Instead, such term is used merely as a matter of
market  custom,  and is  intended  to create or reflect  only an  administrative
relationship  between  independent  contracting  parties.  Except  as  expressly
otherwise provided in this Agreement,  the Agent shall have and may use its sole
discretion  with  respect  to  exercising  or  refraining  from  exercising  any
discretionary  rights or taking or refraining  from taking any actions which the
Agent is expressly entitled to take or assert under this Agreement and the other
Loan Documents,  including,  without  limitation,  (a) the  determination of the
applicability of  ineligibility  criteria with respect to the calculation of the
Availability,  (b) the making of Agent Advances pursuant to Section 2.2(i),  and
(c) the exercise of remedies  pursuant to Section 11.2,  and any action so taken
or not taken shall be deemed consented to by the Lenders.

         14.2  Delegation  of Duties.  The Agent may  execute  any of its duties
under this Agreement or any other Loan Document by or through agents,  employees
or  attorneys-in-fact  and shall be entitled to advice of counsel concerning all
matters  pertaining to such duties.  The Agent shall not be responsible  for the
negligence  or misconduct  of any agent or  attorney-in-fact  that it selects as
long as such selection was made without gross negligence or willful misconduct.

         14.3 Liability of Agent. None of the Agent-Related Persons shall (i) be
liable  for any  action  taken or omitted to be taken by any of them under or in
connection  with this  Agreement or any other Loan Document or the  transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be  responsible  in any manner to any of the  Lenders  for any  recital,
statement,  representation or warranty made by the Borrower or any Subsidiary or
Affiliate of the Borrower,  or any officer thereof,  contained in this Agreement
or in any other Loan Document, or in any certificate, report, statement or other
document  referred to or  provided  for in, or received by the Agent under or in
connection  with,  this Agreement or any other Loan  Document,  or the validity,
effectiveness,  genuineness,  enforceability or sufficiency of this Agreement or
any other Loan  Document,  or for any failure of the Borrower or any other party
to any Loan  Document to perform its  obligations  hereunder or  thereunder.  No
Agent-Related Person shall be under any obligation to any Lender to ascertain or
to  inquire  as to the  observance  or  performance  of  any  of the  agreements
contained in, or conditions of, this Agreement or any other Loan Document, or to
inspect  the  properties,  books  or  records  of  the  Borrower  or  any of the
Borrower's Subsidiaries or Affiliates.

         14.4  Reliance by Agent.  (a) The Agent shall be entitled to rely,  and
shall be fully  protected  in relying,  upon any  writing,  resolution,  notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone
message,  statement  or other  document  or  conversation  believed  by it to be
genuine and correct and to have been signed,  sent or made by the proper  Person
or Persons,  and upon advice and statements of legal counsel  (including counsel
to the  Borrower),  independent  accountants  and other experts  selected by the
Agent.  The Agent  shall be fully  justified  in failing or refusing to take any

<PAGE>

action  under this  Agreement or any other Loan  Document  unless it shall first
receive  such  advice  or  concurrence  of  the  Majority  Lenders  as it  deems
appropriate  and,  if it so  requests,  it  shall  first be  indemnified  to its
satisfaction  by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action. The
Agent shall in all cases be fully  protected in acting,  or in  refraining  from
acting,  under this  Agreement or any other Loan Document in  accordance  with a
request or consent of the Majority Lenders and such request and any action taken
or failure to act pursuant thereto shall be binding upon all of the Lenders.

                  (b) For purposes of determining compliance with the conditions
specified in Section 10.1, each Lender that has executed this Agreement shall be
deemed to have consented to,  approved or accepted or to be satisfied with, each
document or other  matter  either sent by the Agent to such Lender for  consent,
approval,  acceptance or satisfaction, or required thereunder to be consented to
or approved by or acceptable or satisfactory to the Lender.

         14.5 Notice of Default. The Agent shall not be deemed to have knowledge
or notice of the  occurrence  of any  Default or Event of  Default,  except with
respect to defaults in the payment of  principal,  interest and fees required to
be paid to the Agent for the account of the Lenders, unless the Agent shall have
received  written  notice  from a  Lender  or the  Borrower  referring  to  this
Agreement,  describing  such  Default or Event of Default and stating  that such
notice is a "notice  of  default."  The Agent  will  notify  the  Lenders of its
receipt of any such  notice.  The Agent shall take such  action with  respect to
such Default or Event of Default as may be requested by the Majority  Lenders in
accordance with Section 11; provided,  however,  that unless and until the Agent
has received  any such  request,  the Agent may (but shall not be obligated  to)
take such  action,  or refrain  from taking such  action,  with  respect to such
Default or Event of Default as it shall deem advisable.

         14.6  Credit  Decision.  Each  Lender  acknowledges  that  none  of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Agent hereinafter  taken,  including any review of the affairs of the
Borrower and its Affiliates, shall be deemed to constitute any representation or
warranty by any  Agent-Related  Person to any Lender.  Each Lender represents to
the Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made  its own  appraisal  of and  investigation  into the  business,  prospects,
operations,  property, financial and other condition and creditworthiness of the
Borrower and its Affiliates, and all applicable bank regulatory laws relating to
the transactions  contemplated  hereby,  and made its own decision to enter into
this Agreement and to extend credit to the Borrower. Each Lender also represents
that it will,  independently and without reliance upon any Agent-Related  Person
and based on such documents and information as it shall deem  appropriate at the
time,  continue to make its own credit  analysis,  appraisals  and  decisions in
taking or not taking action under this  Agreement and the other Loan  Documents,
and to make such investigations as it deems necessary to inform itself as to the
business,  prospects,  operations,  property,  financial and other condition and
creditworthiness of the Borrower and its Affiliates. Except for notices, reports
and other documents  expressly herein required to be furnished to the Lenders by
the Agent,  the Agent shall not have any duty or  responsibility  to provide any

<PAGE>

Lender with any credit or other information concerning the business,  prospects,
operations,  property,  financial and other condition or creditworthiness of the
Borrower and its  Affiliates  which may come into the  possession  of any of the
Agent-Related Persons.

         14.7  Indemnification.  Whether  or not the  transactions  contemplated
hereby  are   consummated,   the  Lenders  shall   indemnify   upon  demand  the
Agent-Related  Persons  (to the  extent  not  reimbursed  by or on behalf of the
Borrower  and without  limiting  the  obligation  of the Borrower to do so), pro
rata,  from and  against  any and all  Indemnified  Liabilities  as such term is
defined in Section 15.11; provided,  however, that no Lender shall be liable for
the  payment to the  Agent-Related  Persons of any  portion of such  Indemnified
Liabilities  resulting  solely from such  Person's  gross  negligence or willful
misconduct. Without limitation of the foregoing, each Lender shall reimburse the
Agent upon demand for its ratable share of any costs or  out-of-pocket  expenses
(including  Attorney  Costs)  incurred  by the  Agent  in  connection  with  the
preparation,  execution, delivery,  administration,  modification,  amendment or
enforcement (whether through  negotiations,  legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities  under, this Agreement,
any other Loan Document,  or any document contemplated by or referred to herein,
to the extent that the Agent is not reimbursed for such expenses by or on behalf
of the Borrower.  The  undertaking  in this Section shall survive the payment of
all Obligations hereunder and the resignation or replacement of the Agent.

         14.8 Agent in Individual  Capacity.  BABC and its  Affiliates  may make
loans to,  issue  letters of credit for the account of,  accept  deposits  from,
acquire equity interests in and generally engage in any kind of banking,  trust,
financial  advisory,  underwriting  or other  business with the Borrower and its
Subsidiaries  and  Affiliates  as though BABC were not the Agent  hereunder  and
without  notice to or consent of the  Lenders.  The  Lenders  acknowledge  that,
pursuant to such  activities,  BABC or its  Affiliates  may receive  information
regarding  the Borrower or its  Affiliates  (including  information  that may be
subject  to  confidentiality  obligations  in  favor  of the  Borrower  or  such
Subsidiary)  and  acknowledge  that the Agent  shall be under no  obligation  to
provide such information to them. With respect to its Loans, BABC shall have the
same rights and powers under this Agreement as any other Lender and may exercise
the same as though it were not the Agent,  and the terms  "Lender" and "Lenders"
include BABC in its individual capacity.

         14.9  Successor  Agent.  The  Agent may  resign as Agent  upon 30 days'
notice to the  Lenders  and the  Borrower.  In the event  BABC  sells all of its
Commitments and Revolving Loans as part of a sale, transfer or other disposition
by BABC of substantially  all of its loan portfolio,  BABC shall resign as Agent
and such purchaser or transferee shall become the successor Agent hereunder.  If
the Agent resigns under this Agreement,  subject to the proviso in the preceding
sentence,  the Majority  Lenders,  shall with the consent of the Borrower  which
consent  shall not  unreasonably  be withheld,  appoint from among the Lenders a
successor agent for the Lenders. If no successor agent is appointed prior to the
effective  date of the  resignation of the Agent,  the Agent may appoint,  after
consulting  with the Lenders and with the consent of the Borrower  which consent
shall not  unreasonably  be withheld,  a successor agent from among the Lenders.
Upon the  acceptance  of its  appointment  as successor  agent  hereunder,  such
successor  agent  shall  succeed  to all the  rights,  powers  and duties of the
retiring  Agent and the term  "Agent"  shall mean such  successor  agent and the

<PAGE>

retiring  Agent's  appointment,  powers and duties as Agent shall be terminated.
After any retiring  Agent's  resignation  hereunder as Agent,  the provisions of
this Section 14 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this  Agreement.  If no successor  agent
has  accepted  appointment  as Agent by the date  which is 30 days  following  a
retiring Agent's notice of resignation,  the retiring Agent's  resignation shall
nevertheless thereupon become effective and the Lenders shall perform all of the
duties of the Agent hereunder  until such time, if any, as the Majority  Lenders
appoint a successor agent as provided for above.

         14.10  Withholding  Tax.  (a) If any Lender is a "foreign  corporation,
partnership  or trust"  within the  meaning of the Code and such  Lender  claims
exemption  from, or a reduction of, U.S.  withholding tax under Sections 1441 or
1442 of the  Code,  such  Lender  agrees  with and in favor of the Agent and the
Borrower, to deliver to the Agent and the Borrower:

                           (i) if such Lender claims an exemption from, or a 
reduction  of,  withholding  tax  under a United  States  tax  treaty,  properly
completed  IRS  Forms  1001 and W-8 (or  applicable  successor  form) (i) on the
Closing date, or the Assignment  and Acceptance  Date in the case of an Assignee
and (ii) before the payment of any  interest in each third  succeeding  calendar
year during which interest may be paid under this Agreement;

                           (ii)if such Lender claims that interest paid under 
this  Agreement  is exempt  from  United  States  withholding  tax because it is
effectively connected with a United States trade or business of such Lender, two
properly completed and executed copies of IRS Form 4224 (or applicable successor
form) (i) on the Closing Date, or the Assignment and Acceptance Date in the case
of an Assignee and (ii) in each  succeeding  taxable year of such Lender  during
which interest may be paid under this Agreement, and IRS Form W-9 (or applicable
successor form); and

                           (iii)  such  other  form or forms as may be  required
under the Code or other laws of the United  States as a condition  to  exemption
from, or reduction of, United States withholding tax.

Such Lender agrees to promptly  notify the Agent of any change in  circumstances
which would modify or render invalid any claimed exemption or reduction.

                  (b) If any Lender  claims  exemption  from,  or reduction  of,
withholding  tax under a United States tax treaty by providing IRS Form 1001 (or
applicable   successor   form)  and  such  Lender  sells,   assigns,   grants  a
participation  in, or otherwise  transfers all or part of the Obligations of the
Borrower to such Lender, such Lender agrees to notify the Agent and the Borrower
of the  percentage  amount  in which it is no  longer  the  beneficial  owner of
Obligations  of the Borrower to such Lender and such  transfer  shall be treated
either as an  assignment  or a  participation,  as the case may be,  pursuant to
Section 13.3 hereof.  To the extent of such  percentage  amount,  the Agent will
treat such Lender's IRS Form 1001 (or  applicable  successor  form) as no longer
valid.

                  (c) If any Lender is entitled to a reduction in the applicable
withholding  tax, the Agent or the Borrower,  as the case may be (but only based

<PAGE>

on Agent's  determination  that such Lender is entitled to such deduction),  may
withhold  from any interest  payment to such Lender an amount  equivalent to the
applicable  withholding  tax after taking into account  such  reduction.  If the
forms or other documentation  required by subsection (a) of this Section are not
delivered to the Agent or the Borrower,  then the Agent or the Borrower,  as the
case may be, may withhold from any interest payment to such Lender not providing
such  forms  or other  documentation  an  amount  equivalent  to the  applicable
withholding tax until such forms are delivered.

                  (d) If the  IRS or any  other  Governmental  Authority  of the
United  States  or other  jurisdiction  asserts  a claim  that the  Agent or the
Borrower did not  properly  withhold tax from amounts paid to or for the account
of any Lender (because the appropriate form was not delivered,  was not properly
executed,  or  because  such  Lender  failed to notify  either  the Agent or the
Borrower of a change in  circumstances  which  rendered the  exemption  from, or
reduction of,  withholding tax  ineffective,  or (as to the Agent) for any other
reason) such Lender shall  indemnify the Agent or the Borrower,  as the case may
be,  fully for all amounts  paid,  directly or  indirectly,  by the Agent or the
Borrower,  as the case may be,  as tax or  otherwise,  including  penalties  and
interest,  and including any taxes  imposed by any  jurisdiction  on the amounts
payable to the Agent or the Borrower under this Section, together with all costs
and expenses  (including  Attorney  Costs and any similar costs  incurred by the
Borrower). The obligation of the Lenders under this subsection shall survive the
payment of all  Obligations  and the  resignation  or  replacement of the Agent.
Notwithstanding  the  foregoing,  the Lenders shall not be required to indemnify
the Borrower  for amounts that the Borrower is required to pay or indemnify  the
Lenders pursuant to Section 5.1.

         14.11    Collateral Matters.

                  (a) The Lenders hereby irrevocably authorize the Agent, at its
option  and in its  sole  discretion,  to  release  any  Agent's  Lien  upon any
Collateral  (i)  upon  the  termination  of  the  Commitments  and  payment  and
satisfaction in full by Borrower of all Loans and  reimbursement  obligations in
respect of Letters of Credit and  Credit  Support,  and the  termination  of all
outstanding  Letters of Credit (whether or not any of such  obligations are due)
and all other Obligations; (ii) constituting property being sold or disposed of;
or (iii)  constituting  property in which the Borrower  owned no interest at the
time the Lien was granted or at any time  thereafter.  Except as provided above,
the Agent will not release any of the Agent's  Liens  without the prior  written
authorization  of the Lenders;  provided that the Agent may, in its  discretion,
release the Agent's Liens on Collateral valued in the aggregate not in excess of
$25,000,000  in any one year period without the prior written  authorization  of
the Lenders.  Upon request by the Agent or the Borrower at any time, the Lenders
will confirm in writing the Agent's  authority to release any Agent's Liens upon
particular types or items of Collateral pursuant to this Section 14.11.

                  (b) Upon  receipt by the Agent of any  authorization  required
pursuant  to Section  14.11(a)  from the  Lenders of the  Agent's  authority  to
release any Agent's Liens upon particular types or items of Collateral, and upon
at least five (5) Business  Days' prior  written  request by the  Borrower,  the
Agent  shall (and is hereby  irrevocably  authorized  by the Lenders to) execute
such  documents as may be necessary to evidence the release of the Agent's Liens
upon  such  Collateral;  provided,  however,  that (i) the  Agent  shall  not be

<PAGE>

required to execute any such  document on terms which,  in the Agent's  opinion,
would  expose  the Agent to  liability  or create any  obligation  or entail any
consequence  other than the release of such Liens without  recourse or warranty,
and (ii) such release  shall not in any manner  discharge,  affect or impair the
Obligations  or any  Liens  of the  Agent  (other  than  those  expressly  being
released)  upon (or  obligations  of the  Borrower in respect of) all  interests
retained by the Borrower (other than Excluded Assets).

                  (c) The Agent shall have no  obligation  whatsoever  to any of
the Lenders to assure that the Collateral  exists or is owned by the Borrower or
is cared for,  protected or insured or has been encumbered,  or that the Agent's
Liens  have been  properly  or  sufficiently  or  lawfully  created,  perfected,
protected or enforced or are entitled to any particular priority, or to exercise
at all or in any  particular  manner  or under any duty of care,  disclosure  or
fidelity, or to continue exercising,  any of the rights,  authorities and powers
granted or  available  to the Agent  pursuant to any of the Loan  Documents,  it
being  understood  and agreed  that in respect  of the  Collateral,  or any act,
omission or event related  thereto,  the Agent may act in any manner it may deem
appropriate,  in its sole  discretion  given the  Agent's  own  interest  in the
Collateral  in its  capacity as one of the Lenders and that the Agent shall have
no other duty or liability whatsoever to any Lender as to any of the foregoing.

         14.12 Restrictions on Actions by Lenders; Sharing of Payments. (a) Each
of the  Lenders  agrees that it shall not,  without  the express  consent of all
Lenders, and that it shall, to the extent it is lawfully entitled to do so, upon
the request of all Lenders,  set off against the Obligations,  any amounts owing
by such Lender to the  Borrower or any accounts of the Borrower now or hereafter
maintained  with such Lender.  Each of the Lenders  further agrees that it shall
not, unless  specifically  requested to do so by the Agent,  take or cause to be
taken any action to enforce  its rights  under  this  Agreement  or against  the
Borrower,  including,  without  limitation,  the  commencement  of any  legal or
equitable  proceedings,  to  foreclose  any Lien on, or  otherwise  enforce  any
security interest in, any of the Collateral.

                  (b) If at any time or times any Lender  shall  receive  (i) by
payment,  foreclosure,  setoff or  otherwise,  any proceeds of Collateral or any
payments with respect to the  Obligations of the Borrower to such Lender arising
under,  or relating to, this Agreement or the other Loan  Documents,  except for
any such proceeds or payments received by such Lender from the Agent pursuant to
the terms of this  Agreement,  or (ii) payments from the Agent in excess of such
Lender's  ratable portion of all such  distributions  by the Agent,  such Lender
shall  promptly  (1) turn the same  over to the  Agent,  in kind,  and with such
endorsements  as may be required to negotiate the same to the Agent,  or in same
day  funds,  as  applicable,  for  the  account  of all of the  Lenders  and for
application to the Obligations in accordance  with the applicable  provisions of
this  Agreement,  or (2) purchase,  without  recourse or warranty,  an undivided
interest and  participation in the Obligations owed to the other Lenders so that
such excess payment  received  shall be applied  ratably as among the Lenders in
accordance with their Pro Rata Shares; provided, however, that if all or part of
such excess  payment  received by the purchasing  party is thereafter  recovered
from it,  those  purchases of  participations  shall be rescinded in whole or in
part,  as  applicable,  and the  applicable  portion of the purchase  price paid
therefor shall be returned to such purchasing party, but without interest except
to the  extent  that  such  purchasing  party is  required  to pay  interest  in
connection with the recovery of the excess payment.


<PAGE>

         14.13 Agency for  Perfection.  Each Lender  hereby  appoints each other
Lender as agent for the purpose of perfecting the Lenders'  security interest in
assets which,  in accordance  with Article 9 of the UCC can be perfected only by
possession.  Should any Lender (other than the Agent)  obtain  possession of any
such Collateral,  such Lender shall notify the Agent thereof, and, promptly upon
the Agent's  request  therefor shall deliver such  Collateral to the Agent or in
accordance with the Agent's instructions.

         14.14  Payments  by Agent to  Lenders.  All  payments to be made by the
Agent to the Lenders shall be made by bank wire transfer or internal transfer of
immediately  available  funds  to their  respective  accounts  set  forth on the
signature pages hereof, or pursuant to such other wire transfer  instructions as
each party may designate for itself by written notice to the Agent. Concurrently
with each such payment,  the Agent shall  identify  whether such payment (or any
portion  thereof)  represents  principal,  premium or interest on the  Revolving
Loans, or otherwise.

         14.15  Concerning the Collateral and the Related Loan  Documents.  Each
Lender  authorizes  and directs the Agent to enter into this  Agreement  and the
other Loan Documents relating to the Collateral,  for the ratable benefit of the
Agent and the  Lenders.  Each Lender  agrees that any action taken by the Agent,
Majority  Lenders or Required  Lenders,  as applicable,  in accordance  with the
terms of this Agreement or the other Loan Documents  relating to the Collateral,
and the exercise by the Agent, the Majority Lenders, or the Required Lenders, as
applicable,  of their  respective  powers set forth therein or herein,  together
with such other powers that are reasonably incidental thereto,  shall be binding
upon all of the Lenders.

         14.16 Field Audit and Examination  Reports;  Disclaimer by Lenders.  By
signing this Agreement, each Lender:

                  (a) is deemed to have  requested  that the Agent  furnish such
Lender,  promptly  after it becomes  available,  a copy of each  field  audit or
examination report (each a "Report" and collectively, "Reports") prepared by the
Agent;

                  (b) expressly  agrees and  acknowledges  that neither BABC nor
the Agent (i) makes any  representation  or warranty  as to the  accuracy of any
Report, or (ii) shall be liable for any information contained in any Report;

                  (c) expressly agrees and acknowledges that the Reports are not
comprehensive  audits or examinations,  that the Agent or other party performing
any audit or examination  will inspect only specific  information  regarding the
Borrower and will rely significantly  upon the Borrower's books and records,  as
well as on representations of the Borrower's personnel;

                  (d) agrees to keep all Reports  confidential  and strictly for
its  internal  use in  connection  with  this  Agreement  and  the  transactions
contemplated hereunder, and not to distribute except to its participants, or use
any Report in any other manner; and

                  (e)   without   limiting   the   generality   of   any   other
indemnification  provision contained in this Agreement,  agrees: (i) to hold the
Agent and any such other Lender  preparing a Report harmless from any action the

<PAGE>

indemnifying  Lender may take or conclusion the indemnifying Lender may reach or
draw from any Report in connection with any loans or other credit accommodations
that  the  indemnifying  Lender  has made or may  make to the  Borrower,  or the
indemnifying  Lender's  participation in, or the indemnifying  Lender's purchase
of, a loan or loans of the Borrower; and (ii) to pay and protect, and indemnify,
defend and hold the Agent and any such other Lender  preparing a Report harmless
from and against, the claims, actions, proceedings, damages, costs, expenses and
other amounts  (including,  without  limitation  attorney costs) incurred by the
Agent and any such other  Lender  preparing  a Report as the direct or  indirect
result of any third  parties who might obtain all or part of any Report  through
the indemnifying Lender.

         14.17  Relation  Among  Lenders.   The  Lenders  are  not  partners  or
co-venturers,  and no Lender  shall be liable for the acts or  omissions  of, or
(except as otherwise  set forth herein in case of the Agent)  authorized  to act
for, any other Lender.

                                   ARTICLE 15

                                  MISCELLANEOUS

         15.1  Cumulative  Remedies;  No  Prior  Recourse  to  Collateral.   The
enumeration  herein of the Agent's and each Lender's  rights and remedies is not
intended to be  exclusive,  and such rights and  remedies are in addition to and
not by way of  limitation of any other rights or remedies that the Agent and the
Lenders  may have  under  the UCC or other  applicable  law.  The  Agent and the
Lenders  shall have the right,  in their sole  discretion,  to  determine  which
rights and remedies are to be exercised and in which order.  The exercise of one
right or remedy  shall not  preclude  the  exercise of any others,  all of which
shall be cumulative. The Agent and the Lenders may, without limitation,  proceed
directly  against  the  Borrower to collect  the  Obligations  without any prior
recourse to the  Collateral.  No failure to exercise and no delay in exercising,
on the part of the Agent or any Lender,  any right,  remedy,  power or privilege
hereunder,  shall operate as a waiver  thereof;  nor shall any single or partial
exercise of any right,  remedy,  power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege.

         15.2 Severability.  The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not in
any way  affect  or impair  the  legality  or  enforceability  of the  remaining
provisions of this Agreement or any instrument or agreement required hereunder.

         15.3 Governing  Law;  Choice of Forum;  Service of Process;  Jury Trial
Waiver.  (a) THIS AGREEMENT  SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES
OF THE PARTIES  HERETO  DETERMINED  IN  ACCORDANCE  WITH THE  INTERNAL  LAWS (AS
OPPOSED TO THE CONFLICT OF LAWS PROVISIONS  PROVIDED THAT PERFECTION ISSUES WITH
RESPECT TO ARTICLE 9 OF THE UCC MAY GIVE EFFECT TO APPLICABLE CHOICE OR CONFLICT
OF LAW  RULES SET  FORTH IN  ARTICLE  9 OF THE UCC) OF THE STATE OF  CALIFORNIA;
PROVIDED  THAT THE AGENT AND THE LENDERS  SHALL RETAIN ALL RIGHTS  ARISING UNDER
FEDERAL LAW.


<PAGE>

                  (b) ANY  LEGAL  ACTION  OR  PROCEEDING  WITH  RESPECT  TO THIS
AGREEMENT  OR ANY OTHER LOAN  DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF CALIFORNIA OR OF THE UNITED  STATES FOR THE CENTRAL  DISTRICT OF  CALIFORNIA,
AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWER, THE AGENT
AND THE  LENDERS  CONSENTS,  FOR ITSELF AND IN RESPECT OF ITS  PROPERTY,  TO THE
NON-EXCLUSIVE  JURISDICTION OF THOSE COURTS. EACH OF THE BORROWER, THE AGENT AND
THE LENDERS  IRREVOCABLY  WAIVES ANY  OBJECTION,  INCLUDING ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE  GROUNDS OF FORUM NON  CONVENIENS,  WHICH IT MAY
NOW OR  HEREAFTER  HAVE TO THE  BRINGING  OF ANY  ACTION OR  PROCEEDING  IN SUCH
JURISDICTION  IN RESPECT  OF THIS  AGREEMENT  OR ANY  DOCUMENT  RELATED  HERETO.
NOTWITHSTANDING  THE  FOREGOING:  (1) THE AGENT AND THE  LENDERS  SHALL HAVE THE
RIGHT TO BRING ANY ACTION OR PROCEEDING  AGAINST THE BORROWER OR ITS PROPERTY IN
THE COURTS OF ANY OTHER  JURISDICTION THE AGENT OR THE LENDERS DEEM NECESSARY OR
APPROPRIATE  IN ORDER TO REALIZE ON THE  COLLATERAL  OR OTHER  SECURITY  FOR THE
OBLIGATIONS  AND (2) EACH OF THE PARTIES  HERETO  ACKNOWLEDGES  THAT ANY APPEALS
FROM THE COURTS DESCRIBED IN THE IMMEDIATELY  PRECEDING  SENTENCE MAY HAVE TO BE
HEARD BY A COURT LOCATED OUTSIDE THOSE JURISDICTIONS.

                  (c) THE BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS  UPON IT AND  CONSENTS  THAT ALL SUCH  SERVICE OF PROCESS MAY BE MADE BY
REGISTERED  MAIL  (RETURN  RECEIPT  REQUESTED)  DIRECTED TO THE  BORROWER AT ITS
ADDRESS  SET FORTH IN  SECTION  15.8 AND  SERVICE  SO MADE SHALL BE DEEMED TO BE
COMPLETED  FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S.
MAILS.  NOTHING  CONTAINED HEREIN SHALL AFFECT THE RIGHT OF AGENT OR THE LENDERS
TO SERVE LEGAL PROCESS BY ANY OTHER MANNER PERMITTED BY LAW.

                  (d)  NOTWITHSTANDING  ANY OTHER PROVISION OF THIS AGREEMENT TO
THE CONTRARY, ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES, ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT  INCLUDING ANY CLAIM
BASED ON OR ARISING FROM AN ALLEGED  TORT,  SHALL AT THE REQUEST OR EITHER PARTY
HERETO BE DETERMINED BY BINDING ARBITRATION.  The arbitration shall be conducted
in  accordance  with the United  States  Arbitration  Act (Title 9, U.S.  Code),
notwithstanding  any choice of law  provision in this  Agreement,  and under the
Commercial  Rules  of  the  American   Arbitration   Association   ("AAA").  The
arbitrator(s)  shall give effect to statutes of  limitation in  determining  any
claim.  Any  controversy  concerning  whether  an issue is  arbitrable  shall be
determined  by the  arbitrator(s).  Judgment upon the  arbitration  award may be
entered in any court having jurisdiction.  The institution and maintenance of an
action for judicial  relief or pursuant to a  provisional  or  ancillary  remedy
shall  not  constitute  a waiver of the right of  either  party,  including  the
plaintiff,  to submit the controversy or claim to arbitration if any other party
contests such action for judicial relief.


<PAGE>

                  (e)   Notwithstanding   the   provisions  of  (d)  above,   no
controversy  or claim shall be submitted to  arbitration  without the consent of
all parties if, at the time of the  proposed  submission,  such  controversy  or
claim arises from or related to an  obligation to the Lender which is secured by
real  estate  property   collateral   (exclusive  of  real  estate  space  lease
assignments).  If all  the  parties  do not  consent  to  submission  of  such a
controversy  or  claim  to  arbitration,  the  controversy  or  claim  shall  be
determined as provided in Section 15.3(f).

                  (f) At the  request  of either  party a  controversy  or claim
which is not submitted to arbitration as provided and limited in Section 15.3(d)
and (f) shall be determined by judicial reference.  If such an election is made,
the parties shall  designate to the court a referee or referees  selected  under
the  auspices  of the AAA in the same  manner as  arbitrators  are  selected  in
AAA-sponsored proceedings. The presiding referee of the panel, or the referee if
there is a single  referee,  shall  be an  active  attorney  or  retired  judge.
Judgment upon the award rendered by such referee or referees shall be entered in
the court in which such proceeding was commenced.

                  (g) No  provision  of Sections (d) through (g) shall limit the
right of the Agent or the Lenders to exercise self-help remedies such as setoff,
foreclosure  against  or sale of any real or  personal  property  collateral  or
security,  or  obtaining  provisional  or  ancillary  remedies  from a court  of
competent  jurisdiction before, after, or during the pendency of any arbitration
or other proceeding. The exercise of a remedy does not waive the right of either
party to resort to arbitration or reference. At the Agent's option,  foreclosure
under a deed of trust or  mortgage  may be  accomplished  either by  exercise of
power of sale under the deed of trust or mortgage or by judicial foreclosure.

         15.4  WAIVER  OF JURY  TRIAL.  SUBJECT  TO THE  PROVISIONS  OF  SECTION
15.3(d),  THE  BORROWER,  THE LENDERS AND THE AGENT EACH WAIVE THEIR  RESPECTIVE
RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION  BASED UPON OR ARISING
OUT  OF OR  RELATED  TO  THIS  AGREEMENT,  THE  OTHER  LOAN  DOCUMENTS,  OR  THE
TRANSACTIONS  CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES  AGAINST ANY OTHER PARTY OR
ANY  AGENT-RELATED  PERSON,  PARTICIPANT  OR  ASSIGNEE,  WHETHER WITH RESPECT TO
CONTRACT CLAIMS,  TORT CLAIMS, OR OTHERWISE.  THE BORROWER,  THE LENDERS AND THE
AGENT  EACH  AGREE  THAT ANY SUCH  CLAIM OR CAUSE OF ACTION  SHALL BE TRIED BY A
COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING,  THE PARTIES FURTHER
AGREE THAT THEIR  RESPECTIVE  RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF
THIS SECTION AS TO ANY ACTION,  COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN
WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR  ENFORCEABILITY OF THIS AGREEMENT
OR THE OTHER LOAN  DOCUMENTS  OR ANY  PROVISION  HEREOF OR THEREOF.  THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.


<PAGE>

         15.5 Survival of Representations and Warranties.  All of the Borrower's
representations  and warranties  contained in this  Agreement  shall survive the
execution, delivery, and acceptance thereof by the parties,  notwithstanding any
investigation by the Agent or the Lenders or their respective agents.

         15.6 Other Security and Guaranties.  The Agent,  may, without notice or
demand and without affecting the Borrower's obligations hereunder,  from time to
time:  (a) take from any Person  other  than the  Borrower  and hold  collateral
(other  than  the  Collateral)  for  the  payment  of  all or  any  part  of the
Obligations  and  exchange,  enforce  or  release  such  collateral  or any part
thereof;  and (b) accept and hold any  endorsement or guaranty of payment of all
or any part of the  Obligations  and release or substitute  any such endorser or
guarantor,  or any  Person  who has given any Lien in any  other  collateral  as
security  for the  payment of all or any part of the  Obligations,  or any other
Person in any way obligated to pay all or any part of the Obligations.

         15.7 Fees and Expenses.  The Borrower  agrees to pay to the Agent,  for
its benefit,  on demand,  all  reasonable  costs and expenses that Agent pays or
incurs  in   connection   with  the   negotiation,   preparation,   syndication,
consummation,  modification,  enforcement,  and termination of this Agreement or
any of the other Loan Documents,  including,  without  limitation:  (a) Attorney
Costs  (which  shall  not  exceed  $100,000  in the case of the fees of  outside
counsel in connection with the negotiation, preparation and consummation of this
Agreement prior to July 3, 1998); (b) costs and expenses  (including  attorneys'
and paralegals' fees and  disbursements  which shall include the allocated costs
of  Agent's  in-house  counsel  fees  and   disbursements)  for  any  amendment,
supplement,  waiver,  consent, or subsequent closing in connection with the Loan
Documents and the transactions  contemplated  thereby; (c) costs and expenses of
lien and title searches required or advisable in connection with this Agreement;
(d)  taxes,  fees  and  other  charges  for  filing  financing   statements  and
continuations,  and other actions to perfect,  protect, and continue the Agent's
Liens  (including costs and expenses paid or incurred by the Agent in connection
with the consummation of Agreement); (e) sums paid or incurred to pay any amount
or take any action  required of the Borrower  under the Loan  Documents that the
Borrower  fails to pay or take and the Agent is authorized  under this Agreement
to pay or take; (f) costs of appraisals,  inspections,  and verifications of the
Collateral,  including,  without  limitation,  travel,  lodging,  and  meals for
inspections of the  Collateral  and the Borrower's  operations by the Agent plus
the Agent's  then  customary  charge for field  examinations  and audits and the
preparation  of  reports  thereof  (such  charge is  currently  $750 per day (or
portion thereof), plus out of pocket expenses, for each agent or employee of the
Agent with  respect to each field  examination  or audit);  (g)  reasonably  and
customary costs and expenses of forwarding loan proceeds,  collecting checks and
other items of payment,  and establishing  and maintaining  Payment Accounts and
lock boxes;  (h) costs and expenses of preserving and protecting the Collateral;
and (i) Attorneys  Costs paid or incurred to obtain payment of the  Obligations,
enforce the Agent's Liens,  sell or otherwise  realize upon the Collateral,  and
otherwise enforce the provisions of the Loan Documents,  or to defend any claims
made  or  threatened  against  the  Agent  or  any  Lender  arising  out  of the
transactions contemplated hereby (including without limitation, preparations for
and  consultations  concerning  any such  matters).  The foregoing  shall not be
construed to limit any other  provisions of the Loan Documents  regarding  costs
and expenses to be paid by the Borrower. All of the foregoing costs and expenses

<PAGE>

shall be charged to the Borrower's  Loan Account as Revolving Loans as described
in Section 4.4;  provided,  that, such costs and expenses (other than such costs
and expenses  payable on the Closing Date pursuant to Section  10.1(m) and costs
and expenses  described in clauses (e), (g) and (h) above) shall only be charged
to the  Borrower's  Loan  Account  if the  Borrower  fails to pay such costs and
expenses  thirty  (30) days  after the Agent  notifies  the  Borrower  that such
amounts are due.

         15.8 Notices. Except as otherwise provided herein, all notices, demands
and requests  that any party is required or elects to give to any other shall be
in  writing,  or by a  telecommunications  device  capable of creating a written
record,  and any such notice shall become  effective (a) upon personal  delivery
thereof,  including,  but not limited to, delivery by overnight mail and courier
service,  (b) four (4) days  after it shall  have been  mailed by United  States
mail, first class, certified or registered,  with postage prepaid, or (c) in the
case of notice by such a telecommunications  device, when properly  transmitted,
in each case addressed to the party to be notified as follows:

         If to the Agent or to BABC:

              BankAmerica Business Credit, Inc.
              40 East 52nd Street,
              New York, New York 10022,
              Attention:  Division Manager
              Telecopy No. (212) 836-5167

              with copies to:

              Bank of America NT & SA
                  335 Madison Avenue
              New York, New York  10017
              Attention: Legal Department
              Telecopy No. (212) 503-7350

         If to the Borrower:

              Merisel Americas, Inc.
              200 Continental Boulevard
              El Segundo, CA 90245
              Attention: Tim Jenson
              Telecopy No. (310) 615-1234

or to such other  address as each party may designate for itself by like notice.
Failure or delay in delivering copies of any notice, demand,  request,  consent,
approval,  declaration or other communication to the persons designated above to
receive  copies shall not  adversely  affect the  effectiveness  of such notice,
demand, request, consent, approval, declaration or other communication.


<PAGE>

         15.9 Waiver of Notices. Unless otherwise expressly provided herein, the
Borrower  waives  presentment,  protest  and  notice of demand or  dishonor  and
protest as to any instrument, notice of intent to accelerate the Obligations and
notice of acceleration of the Obligations,  as well as any and all other notices
not  specifically  required herein to which it might  otherwise be entitled.  No
notice to or demand on the  Borrower  which the Agent or any Lender may elect to
give shall entitle the Borrower to any or further  notice or demand in the same,
similar or other circumstances.

         15.10 Binding Effect. The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective representatives, successors, and
assigns of the parties hereto; provided, however, that no interest herein may be
assigned by the Borrower  without  prior  written  consent of the Agent and each
Lender, and no interest herein may be assigned by the Lenders except as provided
in Section 13.3 . The rights and benefits of the Agent and the Lenders hereunder
shall,  if such Persons so agree,  inure to any party  acquiring any interest in
the Obligations or any part thereof.

         15.11    Indemnity of the Agent and the Lenders by the Borrower.

                  (a) The  Borrower  agrees to  defend,  indemnify  and hold the
Agent-Related  Persons,  and each  Lender and each of its  respective  officers,
directors,   employees,   counsel,   agents  and  attorneys-in-fact   (each,  an
"Indemnified  Person")  harmless  from  and  against  any and  all  liabilities,
obligations,  losses,  damages,  penalties,  actions,  judgments,  suits, costs,
charges,  expenses and disbursements  (including  Attorney Costs) of any kind or
nature  whatsoever  which  may at any  time  (including  at any  time  following
repayment of the Loans and the  termination,  resignation  or replacement of the
Agent or  replacement  of any  Lender) be imposed  on,  incurred  by or asserted
against any such Person in any way relating to or arising out of this  Agreement
or any  document  contemplated  by or  referred to herein,  or the  transactions
contemplated  hereby, or any action taken or omitted by any such Person under or
in  connection  with  any  of  the  foregoing,  including  with  respect  to any
investigation,  litigation or proceeding (including any Insolvency Proceeding or
appellate  proceeding)  related to or arising out of this  Agreement,  any other
Loan Document,  or the Loans or the use of the proceeds thereof,  whether or not
any Indemnified Person is a party thereto (all the foregoing,  collectively, the
"Indemnified Liabilities"); provided, that the Borrower shall have no obligation
hereunder  to any  Indemnified  Person with respect to  Indemnified  Liabilities
resulting  solely  from the  gross  negligence  or  willful  misconduct  of such
Indemnified  Person. The agreements in this Section shall survive payment of all
other Obligations.

                  (b) The Borrower agrees to indemnify, defend and hold harmless
the Agent and the Lenders  from any loss or  liability  directly  or  indirectly
arising out of the use, generation,  manufacture,  production, storage, release,
threatened  release,  discharge,  disposal or presence of a hazardous  substance
relating to the Borrower's operations, business or property. This indemnity will
apply  whether the  hazardous  substance  is on,  under or about the  Borrower's
property  or  operations  or  property  leased to the  Borrower.  The  indemnity
includes  but is not  limited  to  attorneys'  fees  (including  the  reasonable
estimate of the  allocated  cost of in-house  counsel and staff).  The indemnity

<PAGE>

extends to the Agent and the Lenders,  their parents,  affiliates,  subsidiaries
and all of their directors,  officers, employees, agents, successors,  attorneys
and assigns. "Hazardous substances" means any substance,  material or waste that
is or becomes designated or regulated as "toxic,"  "hazardous,"  "pollutant," or
"contaminant" or a similar designation or regulation under any federal, state or
local law (whether  under  common law,  statute,  regulation  or  otherwise)  or
judicial or administrative  interpretation of such, including without limitation
petroleum or natural gas.  This  indemnity  will survive  repayment of all other
Obligations.

         15.12  Limitation of  Liability.  No claim may be made by the Borrower,
any Lender or other Person  against the Agent,  any Lender,  or the  affiliates,
directors,  officers,  officers,  employees,  or  agents  of any of them for any
special, indirect, consequential or punitive damages in respect of any claim for
breach of contract or any other theory of liability arising out of or related to
the transactions  contemplated by this Agreement or any other Loan Document,  or
any act, omission or event occurring in connection  therewith,  and the Borrower
and each Lender  hereby  waive,  release and agree not to sue upon any claim for
such  damages,  whether or not accrued and whether or not know or  suspected  to
exist in its favor.

         15.13 Final Agreement.  This Agreement and the other Loan Documents are
intended by the Borrower,  the Agent and the Lenders to be the final,  complete,
and  exclusive   expression  of  the  agreement  between  them.  This  Agreement
supersedes any and all prior oral or written agreements  relating to the subject
matter hereof. No modification, rescission, waiver, release, or amendment of any
provision of this Agreement or any other Loan Document shall be made,  except by
a written agreement signed by the Borrower and a duly authorized officer of each
of the Agent and the requisite Lenders.

         15.14  Counterparts.  This  Agreement  may be executed in any number of
counterparts,  and by the  Agent,  each  Lender  and the  Borrower  in  separate
counterparts,  each of  which  shall  be an  original,  but all of  which  shall
together constitute one and the same agreement;  signature pages may be detached
from multiple separate counterparts and attached to a single counterpart so that
all signature pages are physically attached to the same document.

         15.15  Captions.  The  captions  contained  in this  Agreement  are for
convenience of reference only, are without substantive meaning and should not be
construed to modify, enlarge, or restrict any provision.

         15.16 Right of Setoff.  In  addition to any rights and  remedies of the
Lenders  provided by law,  if an Event of Default  exists or the Loans have been
accelerated,  each  Lender  is  authorized  at any time  and from  time to time,
without  prior  notice to the  Borrower,  any such  notice  being  waived by the
Borrower to the fullest  extent  permitted  by law, to set off and apply any and
all deposits (general or special,  time or demand,  provisional or final) at any
time held by, and other indebtedness at any time owing by, such Lender to or for
the credit or the account of the Borrower against any and all Obligations  owing
to such Lender,  now or hereafter  existing,  irrespective of whether or not the
Agent or such Lender  shall have made demand  under this  Agreement  or any Loan
Document and although such  Obligations  may be  contingent  or unmatured.  Each
Lender  agrees  promptly  to notify the  Borrower  and the Agent  after any such
set-off and application made by such Lender; provided, however, that the failure

<PAGE>

to  give  such  notice  shall  not  affect  the  validity  of such  set-off  and
application.  NOTWITHSTANDING THE FOREGOING,  NO LENDER SHALL EXERCISE ANY RIGHT
OF SET-OFF,  BANKER'S LIEN, OR THE LIKE AGAINST ANY DEPOSIT  ACCOUNT OR PROPERTY
OF THE BORROWER  HELD OR  MAINTAINED  BY SUCH LENDER  WITHOUT THE PRIOR  WRITTEN
CONSENT OF THE AGENT.


<PAGE>

         IN WITNESS WHEREOF, the parties have entered into this Agreement on the
date first above written.

                                   "BORROWER"

                                   MERISEL AMERICAS, INC.,
                                   a Delaware corporation
                                   
                                          /s/Timothy N. Jenson
                                   By: ----------------------------
                                          Timothy N. Jenson                    
                                   Name: --------------------------
                                          Senior V.P., Finance and Treasurer   
                                   Title:--------------------------


                                   "AGENT"

                                   BankAmerica Business Credit,Inc.,as the Agent

                                          /s/Richard Levenson
                                   By: ----------------------------
                                          Richard Levenson
                                   Name: --------------------------
                                          Vice President
                                   Title:--------------------------


                                   "LENDERS"

Commitment:  $100,000,000          BankAmerica Business Credit,Inc., as a Lender

                                          /s/Richard Levenson                  
                                   By: ----------------------------
                                          Richard Levenson
                                   Name: --------------------------
                                          Vice President
                                   Title: -------------------------