LOAN AGREEMENT







                                 by and between

                     CONGRESS FINANCIAL CORPORATION (CANADA)

                                    as Agent

                                       and

                     THE FINANCIAL INSTITUTIONS NAMED HEREIN

                                   as Lenders

                                       and

                               MERISEL CANADA INC.

                                   as Borrower

                             Dated: January 12, 2001

                   Cdn. $100,000,000 Revolving Credit Facility







<PAGE>


                                     - 80 -

                                 LOAN AGREEMENT

         This Loan  Agreement  dated  January  12,  2001 is entered  into by and
between Congress Financial  Corporation  (Canada), an Ontario corporation in its
capacity as  administrative  and collateral agent for Lenders (together with its
successors in such capacity,  "Agent"),  the financial institutions from time to
time parties  hereto as lenders,  whether by  execution of this  Agreement or an
Assignment  and  Acceptance  (each  individually,  a "Lender" and,  collectively
"Lenders"), and Merisel Canada Inc., an Ontario corporation ("Borrower").

                              W I T N E S S E T H:

         WHEREAS,  Borrower  has  requested  that Agent and  Lenders  enter into
certain financing  arrangements with Borrower pursuant to which Lenders may make
loans and provide other financial accommodations to Borrower; and

         WHEREAS, each Lender is willing to agree (severally and not jointly) to
make such loans and provide such financial  accommodations  to Borrower on a pro
rata basis  according  to its  Commitment  (as  defined  below) on the terms and
conditions  set forth herein and Agent is willing to act as  administrative  and
collateral  agent for Lenders on the terms and  conditions  set forth herein and
the other Financing Agreements;

         NOW,   THEREFORE,   in  consideration  of  the  mutual  conditions  and
agreements set forth herein, and for other good and valuable consideration,  the
receipt and  sufficiency  of which is hereby  acknowledged,  the parties  hereto
agree as follows:

Article 1
                                   DEFINITIONS

1.1      Definitions

         All terms  used  herein  which are  defined  in the  Personal  Property
Security Act (Ontario)  shall have the meanings given therein  unless  otherwise
defined in this  Agreement.  All references to the plural herein shall also mean
the singular and to the singular  shall also mean the plural  unless the context
otherwise requires. All references to Borrower, Agent and any Lender pursuant to
the definitions set forth in the recitals hereto, or to any other person herein,
shall include  their  respective  successors  and assigns.  The words  "hereof",
"herein", "hereunder", "this Agreement" and words of similar import when used in
this  Agreement  shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may hereafter be
amended, modified,  supplemented,  extended,  renewed, restated or replaced. The
word  "including"  when used in this Agreement  shall mean  "including,  without
limitation".  References  herein to any statute or any provision thereof include
such statute or provision as amended, revised,  re-enacted,  and/or consolidated
from time to time and any successor  statute  thereto or provision  thereof.  An
Event of Default  shall exist or continue or be  continuing  until such Event of
Default  is  waived  in  accordance  with  Section  11.3 or is cured in a manner
satisfactory to Agent,  if such Event of Default is capable of being cured.  Any
accounting  term used herein unless  otherwise  defined in this Agreement  shall
have the  meanings  customarily  given to such  term in  accordance  with  GAAP.
Canadian Dollars and the sign "$" mean lawful money of Canada.  "US Dollars" and
the sign "US$" mean lawful money of the United  States of America.  For purposes
of this Agreement,  the following terms shall have the respective meanings given
to them below:

(a)  "Accounts"  shall mean all present and future rights of Borrower to payment
     for goods sold or leased or for services rendered, whether or not evidenced
     by instruments or chattel paper,  and whether or not earned by performance,
     but in any event,  excluding  Accounts due from  Borrower's  suppliers  for
     services  rendered by Borrower  to such  suppliers  to the extent that such
     Accounts are not assignable without the consent of such suppliers.

(b)  "Adjusted Eurodollar Rate" shall mean, with respect to each Interest Period
     for any  Eurodollar  Rate Loan,  the rate per annum  (rounded  upwards,  if
     necessary, to the next one-sixteenth (1/16) of one (1%) percent) determined
     by dividing  (i) the  Eurodollar  Rate for such  Interest  Period by (ii) a
     percentage  equal to (A) one (1)  minus  (B) the  Reserve  Percentage.  For
     purposes hereof,  "Reserve  Percentage" shall mean the reserve  percentage,
     expressed as a decimal,  prescribed by any United States or foreign banking
     authority  for  determining  the reserve  requirement  which is or would be
     applicable to deposits of United States  dollars in a non-United  States or
     an  international  banking  office  of US  Reference  Bank  used  to fund a
     Eurodollar  Rate Loan or any Eurodollar Rate Loan made with the proceeds of
     such deposit,  whether or not the US Reference  Bank actually  holds or has
     made any such  deposits or loans.  The  Adjusted  Eurodollar  Rate shall be
     adjusted  on and as of the  effective  day  of any  change  in the  Reserve
     Percentage.

(c)  "Adjusted  Net  Worth"  shall  mean  as to  any  Person,  at any  time,  in
     accordance with GAAP (except as otherwise specifically set forth below), on
     a  consolidated  basis for such Person and its  Subsidiaries  (if any), the
     Canadian  Dollar  Amount  equal to:  (a) the  difference  between:  (i) the
     aggregate  net book value of all assets other than  goodwill of such Person
     and its  Subsidiaries,  calculating  the book value of  inventory  for this
     purpose on a weighed  average cost basis,  after  deducting  from such book
     values all  appropriate  reserves in accordance  with GAAP  (including  all
     reserves  for  doubtful   receivables,   obsolescence,   depreciation   and
     amortization)  and (ii) the  aggregate  amount  of  Indebtedness  and other
     liabilities  of such Person and its  Subsidiaries  (including tax and other
     proper  accruals) plus (b) Indebtedness of such Person and its Subsidiaries
     which is Subordinated Indebtedness.

(d)  "Affiliates" shall mean, with respect to a specified Person, a partnership,
     corporation or any other person which  directly or indirectly,  through one
     or more  intermediaries,  controls or is  controlled  by or is under common
     control  with such  Person,  and without  limiting  the  generality  of the
     foregoing,  includes (i) any Person which  beneficially  owns or holds five
     (5%)  percent or more of any class of Voting  Stock of such Person or other
     equity  interests  in such  Person,  (ii) any Person of which  such  Person
     beneficially owns or holds five (5%) percent or more of any class of Voting
     Stock or in which such Person  beneficially owns or holds five (5%) percent
     or more of the  equity  interests  and (iii) any  director  or  officer  of
     Merisel,  Inc.  or any of its  direct  or  indirect  Subsidiaries.  For the
     purposes of this definition, the term "control" (including with correlative
     meanings,  the terms  "controlled by" and "under common control with"),  as
     used  with  respect  to any  Person,  means  the  possession,  directly  or
     indirectly, of the power to direct or cause the direction of the management
     and policies of such Person,  whether through the ownership of Voting Stock
     or by contract or otherwise.

(e)  "Agent" shall mean Congress Financial  Corporation (Canada) in its capacity
     as administrative and collateral Agent on behalf of Lenders pursuant to the
     terms hereof and any replacement or successor administrative and collateral
     Agent hereunder.

(f)  "Agent's  Cash  Dominion"  shall  mean  any time  that  funds  received  or
     deposited in Blocked Accounts are being  transferred to the Payment Account
     pursuant to a notice given by Agent under Section 6.3(2) hereof.

(g)  "Assignment and Acceptance" shall mean an Assignment and Acceptance in form
     and substance  satisfactory  to Agent delivered to Agent in connection with
     an  assignment  of a Lender's  interest  hereunder in  accordance  with the
     provisions of Section 13.5 thereof.

(h)  "Availability  Reserves" shall mean, as of any date of determination,  such
     amounts as Agent may from time to time  establish  and revise  reducing the
     amount of Revolving Loans and Letter of Credit  Accommodations  which would
     otherwise be available to Borrower  under the lending  formula(s)  provided
     for  herein:  (a) to reflect  events,  conditions,  contingencies  or risks
     which,  as determined by Agent,  do or may reasonably be expected to affect
     either (i) the  Collateral  or its value,  (ii) the assets or  business  of
     Borrower or any Obligor or (iii) the security interests and other rights of
     Agent  and  Lenders  in  the  Collateral   (including  the  enforceability,
     perfection  and  priority  thereof);  or (b) to reflect  Agent's good faith
     belief that any collateral report or financial  information furnished by or
     on behalf of  Borrower  or any  Obligor to Agent and Lenders is or may have
     been incomplete,  inaccurate or misleading in any material respect;  or (c)
     to reflect  outstanding  Letter of Credit  Accommodations  as  provided  in
     Section 2.2 hereof;  or (d) to reflect  Agent's good faith  estimate of the
     amount of any Priority  Payables  Reserve,  or (e) $700,000  plus any other
     amounts  required to reflect  Agent's  estimate of rent or the payments due
     and unpaid or which Agent reasonably expects will not be paid when due with
     respect to premises  occupied by Borrower where  Collateral is located;  or
     (f) to reflect  monies due to vendors or suppliers  of Borrower  which have
     been  accrued on  Borrower's  general  ledger as  royalties,  fees or other
     similar charges or as a general  reserve for a "safety factor"  relating to
     cross-border  foreign  currency  adjustments;  or (g)  as  the  Syndication
     Reserve;  or (h) in respect of any state of facts  which  Agent  determines
     constitutes an Event of Default or would, with notice or passage of time or
     both,  constitute  an Event of  Default.  The  amount  of any  Availability
     Reserve  established by Agent shall have a reasonable  relationship  to the
     event,  condition or circumstance  which is the basis for such Availability
     Reserve as determined by Agent in good faith.

(i)  "BIA" shall mean the Bankruptcy and Insolvency Act (Canada).

(j)  "Blocked Accounts" shall have the meaning set forth in Section 6.3 hereof.

(k)  "Business Day" shall mean a day (other than a Saturday, Sunday or statutory
     holiday  in  Ontario  or New York) on which  Agent's  Toronto  office,  the
     Canadian  Reference  Bank's main Toronto  office and banks in New York City
     are open for business in the normal course,  except that if a determination
     of a Business  Day shall  relate to any  Eurodollar  Rate  Loans,  the term
     Business  Day shall  also  exclude  any day on which  banks are  closed for
     dealings  in  dollar  deposits  in the  London  interbank  market  or other
     applicable Eurodollar Rate market.

(l)  "Canadian  Dollar  Amount"  shall mean,  at any time,  (a) as to any amount
     denominated in Canadian  Dollars,  the amount thereof at such time, and (b)
     as to any amount  denominated in any other currency,  the equivalent amount
     in Canadian Dollars as determined by Agent at such time on the basis of the
     Spot Rate for the purchase of Canadian Dollars with such currency.

(m)  "Canadian  Prime Rate" shall mean, at any time, the greater of (i) the rate
     from time to time publicly  announced by the Canadian Reference Bank as its
     prime rate in effect for  determining  interest  rates on  Canadian  Dollar
     denominated  commercial  loans  in  Canada,  and (ii)  the  annual  rate of
     interest  equal  to the sum of (A) the CDOR  Rate at such  time and (B) one
     (1%) percent per annum.

(n)  "Canadian  Prime  Rate  Loans"  shall  mean any  Loans or  portion  thereof
     denominated  in Canadian  Dollars and on which interest is payable based on
     the Canadian Prime Rate in accordance with the terms hereof.

(o)  "Canadian  Reference  Bank" shall mean Bank of Montreal,  or its successors
     and assigns, or such other bank as Agent may from time to time designate.

(p)  "Capital Leases" shall mean, as applied to any Person, any lease of (or any
     agreement  conveying the right to use) any property (whether real, personal
     or  mixed) by such  Person as lessee  which in  accordance  with  GAAP,  is
     required  to be  reflected  as a  liability  on the  balance  sheet of such
     Person.

(q)  "Capital Stock" shall mean, with respect to any Person, any and all shares,
     interests,  participations,  limited  liability  company interests or other
     equivalents (however designated) of such Person's capital stock at any time
     outstanding,  and any and all rights,  warrants or options exchangeable for
     or convertible into such capital stock or interests (but excluding any debt
     security that is exchangeable for or convertible into such capital stock).

(r)  "Cash Equivalents" shall mean any of the following  denominated in Canadian
     Dollars or US Dollars,:

(i)  any evidence of  Indebtedness  with a maturity  date of one hundred  eighty
     (180) days or less issued or directly  and fully  guaranteed  or insured by
     the United States of America or any agency or instrumentality  thereof,  or
     Canada or any agency or instrumentality  thereof;  provided, that, the full
     faith and credit of the United States of America or Canada, as the case may
     be, is pledged in support thereof;

(ii) certificates  of deposit or  bankers'  acceptances  with a maturity  of one
     hundred eighty (180) days or less (after the date of the purchase  thereof)
     of any financial institution that is a member of the Federal Reserve System
     or a bank organized  under the laws of Canada,  in any case having combined
     capital and surplus and undivided profits of not less than the
                           Canadian Dollar Amount of $250,000,000;

(iii)commercial paper (including  variable rate demand notes) with a maturity of
     one  hundred  eighty  (180) days or less  (after  the date of the  purchase
     thereof)  issued or  guaranteed  by a  corporation  (except an Affiliate of
     Borrower  or any  Obligor)  organized  under  the laws of any  State of the
     United States of America, the District of Columbia,  Canada or any Province
     thereof,  or a bank  organized  under the laws of any  State of the  United
     States of America or the laws of Canada or constituting a national  banking
     association  under the laws of the United  States of America,  in each case
     having a rating of at least A-1 by  Standard & Poor's  Ratings  Service,  a
     division of The  McGraw-Hill  Companies,  Inc. or the Canadian  Bond Rating
     Service or at least P-1 by Moody's Investors Service, Inc.

(iv) repurchase obligations with a term of not more than thirty (30) days (after
     the date of the purchase  thereof) for  underlying  securities of the types
     described in clause (i) above entered into with any  financial  institution
     having combined capital and surplus and undivided  profits of not less than
     the Canadian Dollar Amount of $250,000,000;

(v)  repurchase   agreements  and  reverse  repurchase  agreements  relating  to
     marketable direct obligations  issued or unconditionally  guaranteed by the
     United  States of  America or Canada or issued by any  governmental  agency
     thereof  and backed by the full  faith and  credit of the United  States of
     America or Canada,  in each case maturing  within one hundred  eighty (180)
     days or less from the date of  acquisition;  provided,  that,  the terms of
     such  agreements  comply  with the  guidelines  set  forth  in the  Federal
     Financial Agreements of Depository Institutions with Securities Dealers and
     Others,  as adopted by the Comptroller of the Currency on October 31, 1985;
     and

(vi) investments   in  money   market   funds  and  mutual  funds  which  invest
     substantially  all of their assets in securities of the types  described in
     clauses (i) through (v) above.

(s)  "CCAA" shall mean the Companies' Creditors Arrangement Act (Canada).

(t)  "CDOR Rate" shall mean,  on any day,  the annual rate of interest  which is
     the rate based on an  average 30 day rate  applicable  to  Canadian  Dollar
     bankers'  acceptances  appearing  on the  "Reuters  Screen  CDOR  Page" (as
     defined in the International Swap Dealer Association,  Inc, definitions, as
     modified  and  amended  from  time to time) as of 10:00  a.m.  on such day;
     provided that if such rate does not appear on the Reuters  Screen CDOR Page
     as  contemplated,  then the CDOR  Rate on any day  shall be the 30 day rate
     applicable  in Canadian  Dollar  bankers'  acceptances  quoted by any major
     Schedule I chartered bank selected by Agent as of 10:00 a.m. on such day.

(u)  "Closing  Date"  shall mean the date of the first to occur of the making of
     the  initial  Loan  or  the  issuance  of  the  initial  Letter  of  Credit
     Accommodations.

(v)  "Closing Intercompany  Indebtedness" shall mean Intercompany  Indebtedness,
     the proceeds of which have been  advanced on the Closing Date to or for the
     account of Borrower  by Merisel  Americas,  Inc. in the amount  approved by
     Agent.

(w)  "Collateral" shall mean,  collectively,  Collateral as such term is defined
     in the General Security Agreement and Collateral as such term is defined in
     the Hypothec.

(x)  "Commitment"  shall mean,  at any time,  as to each Lender,  the  principal
     amount set forth  below such  Lender's  signature  on the  signature  pages
     hereto  designated as the Commitment or on Schedule 1 to the Assignment and
     Acceptance  Agreement  pursuant  to  which  such  Lender  became  a  Lender
     hereunder in accordance with the provisions of Section 13.5 hereof,  as the
     same may be adjusted from time to time in accordance with the terms hereof;
     sometimes being collectively referred to herein as "Commitments".

(y)  "Congress" shall mean Congress Financial  Corporation  (Canada), an Ontario
     corporation, in its individual capacity and its successors and assigns.

(z)  "Credit Facility" shall mean the Loans and Letter of Credit  Accommodations
     provided to Borrower pursuant to Sections 2.1 and 2.2 hereof.

(aa) "Defaulting  Lender"  shall  have the  meaning  set forth in  Section  6.10
     hereof.

(bb) "Eligible  Accounts" shall mean Accounts  created by Borrower which satisfy
     the following criteria:

(i)  such Accounts arise from the actual and bona fide sale of goods by Borrower
     or  rendition  of services by  Borrower  to Persons  other than  vendors or
     suppliers  of  Borrower  in  the  ordinary  course  of its  business  which
     transactions  are  completed in  accordance  with the terms and  provisions
     contained in any documents related thereto;

(ii) such  Accounts have credit terms not  exceeding  forty-five  (45) days from
     invoice  date and are not unpaid more than  forty-five  (45) days after the
     original due date thereof;

(iii)such  Accounts  comply with the terms and  conditions  contained in Section
     7.2(c) of this Agreement;

(iv) such Accounts do not arise from sales on consignment, guaranteed sale, sale
     and return,  sale on  approval,  or other terms under which  payment by the
     account  debtor may be  conditional  or  contingent  (other than any of the
     foregoing to the extent  related to stock rotation  programs  customary for
     the industry and in the ordinary course of business of Borrower);

(v)  the chief  executive  office of the  account  debtor  with  respect to such
     Accounts is located in Canada or United States of America,  or, the Account
     is payable in Canadian Dollars or US Dollars and, at Agent's option, if the
     chief  executive  officer of the  account  debtor is located  other than in
     Canada or United States of America,  then if either: (i) the account debtor
     has  delivered  to  Borrower  an  irrevocable  letter of  credit  issued or
     confirmed by a bank satisfactory to Agent and payable only in Canada in the
     currency  in which the  Account is  denominated,  sufficient  to cover such
     Account,  in form and substance  satisfactory  to Agent and, if required by
     Agent, the original of such letter of credit has been delivered to Agent or
     Agent's  agent and the issuer  thereof  notified of the  assignment  of the
     proceeds of such letter of credit to Agent, or (ii) such Account is subject
     to credit insurance  payable to Agent issued by an insurer and on terms and
     in an amount  acceptable  to Agent,  or (iii)  such  Account  is  otherwise
     acceptable in all respects to Agent  (subject to such lending  formula with
     respect thereto as Agent may determine);

(vi) such Accounts do not consist of progress  billings,  bill and hold invoices
     or retainage invoices,  except as to bill and hold invoices, if Agent shall
     have received an agreement in writing from the account debtor,  in form and
     substance  reasonably  satisfactory to Agent,  confirming the unconditional
     obligation of the account debtor to take the goods related  thereto and pay
     such invoice;

(vii)the account  debtor with  respect to such  Accounts has not asserted a bona
     fide  counterclaim,  defense  or  dispute  and does not have,  and does not
     engage in transactions  which may give rise to, any right of setoff against
     such  Accounts  (but the portion of the Accounts of such account  debtor in
     excess of the amount at any time and from time to time owed by  Borrower to
     such account  debtor or claimed  owed by such account  debtor may be deemed
     Eligible Accounts);

(viii) there are no facts,  events or occurrences known to Borrower or any Agent
     which   would   materially   impair   the   validity,   enforceability   or
     collectability  of such  Accounts  or reduce  the  amount  payable or delay
     payment thereunder;

(ix) such  Accounts  are  subject  to the first  priority,  valid and  perfected
     security interest of Lender;

(x)  neither  the  account  debtor nor any  officer or  employee  of the account
     debtor with  respect to such  Accounts is an  Affiliate  of Borrower or any
     Obligor;

(xi) the  account  debtors  with  respect to such  Accounts  are not any foreign
     government,  the federal  government  of Canada,  any  Province,  political
     subdivision,  department,  agency or instrumentality  thereof unless,  upon
     Lender's request, the Financial  Administration Act (Canada) or any similar
     foreign,  provincial or local law, if applicable, has been complied with in
     a manner satisfactory to Agent;

(xii)there are no proceedings or actions known to Borrower,  Agent or any Lender
     which are threatened or pending against the account debtors with respect to
     such Accounts which might  reasonably be expected to result in any material
     adverse change in any such account debtor's financial condition;

(xiii) such  Accounts  of a  single  account  debtor  or its  affiliates  do not
     constitute more than twenty-five  percent (25%) (or such greater percentage
     as may be approved by Congress) of all otherwise Eligible Accounts (but the
     portion  of the  Accounts  not in excess of such  percentage  may be deemed
     Eligible Accounts);

(xiv)such  Accounts are not owed by an account  debtor who has  Accounts  unpaid
     more than  forty-five  (45) days after the original due date thereof  which
     constitute  more than fifty  percent  (50%) of the total  Accounts  of such
     account debtor; and
(xv) such  Accounts  are owed by account  debtors  whose total  indebtedness  to
     Borrower  does not  exceed the credit  limit with  respect to such  account
     debtors as determined by Agent,  acting reasonably,  from time to time (but
     the portion of the Accounts not in excess of such credit limit may still be
     deemed Eligible Accounts).

General criteria for Eligible  Accounts may be established and revised from time
     to time by  Agent in the  good  faith  exercise  of its  reasonable  credit
     judgement.  Any Accounts which are not Eligible Accounts shall nevertheless
     be part of the Collateral.

(cc) "Eligible  Hardware"  shall mean  finished  goods  Inventory  consisting of
     finished goods (including components) other than Eligible Software.

(dd) "Eligible  Inventory"  shall mean Eligible  Hardware and Eligible  Software
     held for resale in the  ordinary  course of the  business of  Borrower  and
     which satisfy the criteria set forth below. In general,  Eligible Inventory
     shall not include (a) raw materials;  (b)  work-in-process;  (c) components
     which are not part of finished goods; (d) spare parts for Equipment used by
     Borrower;  (e)  packaging  and shipping  materials;  (f)  supplies  used or
     consumed in Borrower's  business;  (g) Inventory at premises  which are not
     owned and  controlled  by Borrower,  except if Agent shall have received an
     agreement in writing from the person in possession of such Inventory and/or
     the owner or operator of such  premises  in form and  substance  reasonably
     satisfactory  to  Agent  acknowledging   Agent's  first  priority  security
     interest in the Inventory,  waiving or  subordinating  security  interests,
     hypothecs and claims by such person  against the  Inventory and  permitting
     Agent access to, and the right to remain on, the premises so as to exercise
     Agent's  rights and remedies and otherwise  deal with the  Collateral;  (h)
     Inventory subject to a security  interest,  hypothec or lien (including any
     purchase money security interest) in favour of any Person other than Lender
     except for purchase money security  interests on Inventory supplied by such
     vendors and  suppliers in favour of Borrower's  vendors or suppliers  which
     have  been  subordinated  to Agent  and  Lenders  on terms  and  conditions
     satisfactory to Agent; (i) bill and hold goods; (j) unserviceable, obsolete
     or slow moving  Inventory;  (k) Inventory which is not subject to the first
     priority, valid and perfected security interest, lien or hypothec of Agent;
     (l) damaged and/or defective Inventory;  (m) Inventory purchased or sold on
     consignment;  and (n)  Inventory  in transit  from  vendors to Borrower not
     purchased  with Letter of Credit  Accommodations  and  Inventory in transit
     between locations of Borrower for more than one (1) week.  General criteria
     for Eligible  Inventory may be established and revised from time to time by
     Agent in the good faith exercise of its reasonable  credit  judgement.  Any
     Inventory which is not Eligible Inventory shall nevertheless be part of the
     Collateral.

(ee) "Eligible  Software"  shall mean  finished  goods  Inventory  consisting of
     software products and applications  including  operating  systems,  desktop
     applications, virus and security programs, financial programs and games.

(ff) "Eligible  Transferee"  shall mean (a) any Lender;  (b) any  Affiliate of a
     Lender;  and  (c) any  other  commercial  bank,  financial  institution  or
     "accredited  investor"  (as defined in  Regulation  D under the  Securities
     Exchange  Act) or any Canadian  Subsidiary  thereof  approved by Agent and,
     unless an Event of Default has occurred and is  continuing  at the time any
     assignment  is  effected  hereunder,  Borrower,  such  approval  not  to be
     unreasonably  withheld,  conditioned  or  delayed  by  Borrower,  and  such
     approval to be deemed  given by Borrower if no objection  from  Borrower is
     received by the  assigning  Lender and Agent within five (5) Business  Days
     after notice of such proposed assignment has been provided by the assigning
     Lender or Agent to  Borrower;  provided,  that,  neither  Borrower  nor any
     Affiliate of Borrower shall qualify as an Eligible Transferee.

(gg) "Environmental  Laws"  shall mean with  respect to any Person all  Canadian
     federal, state,  provincial,  district,  local, municipal and foreign laws,
     statutes,  rules, regulations,  ordinances,  orders,  directives,  permits,
     licenses  and  consent  decrees  relating  to  health,  safety,  hazardous,
     dangerous  or  toxic   substances,   waste  or  material,   pollution   and
     environmental  matters,  as  now  or  at  any  time  hereafter  in  effect,
     applicable  to such Person and/or its business and  facilities  (whether or
     not  owned  by it),  including  laws  relating  to  emissions,  discharges,
     releases or threatened releases of pollutants, contamination, chemicals, or
     hazardous,  toxic or  dangerous  substances,  materials  or wastes into the
     environment  (including,  without  limitation,  ambient air, surface water,
     ground water, land surface or subsurface  strata) or otherwise  relating to
     the generation,  manufacture,  processing,  distribution,  use,  treatment,
     storage,  disposal,  transport  or  handling of  pollutants,  contaminants,
     chemicals,  or  hazardous,  toxic or  dangerous  substances,  materials  or
     wastes.

(hh) "Equipment"  shall mean all of Borrower's now owned and hereafter  acquired
     equipment, machinery, computers and computer hardware and software (whether
     owned or licensed),  vehicles, tools, furniture, fixtures, all attachments,
     accessions  and  property  now or  hereafter  affixed  thereto  or  used in
     connection therewith, and substitutions and replacements thereof,  wherever
     located (but excluding Borrower's Inventory).

(ii) "Eurodollar  Rate"  shall mean with  respect to the  Interest  Period for a
     Eurodollar  Rate Loan,  the interest rate per annum equal to the arithmetic
     average of the rates of interest per annum (rounded upwards,  if necessary,
     to the next one-sixteenth (1/16) of one (1%) percent) at which US Reference
     Bank is offered  deposits of United States dollars in the London  interbank
     market (or other  Eurodollar  Rate market selected by Borrower and approved
     by Agent) on or about 9:00 a.m. (New York time) two (2) Business Days prior
     to the commencement of such Interest Period in amounts  substantially equal
     to the  principal  amount of the  Eurodollar  Rate Loans  requested  by and
     available to Borrower in accordance with this Agreement, with a maturity of
     comparable duration to the Interest Period selected by Borrower.

(jj) "Eurodollar  Rate Loans"  shall mean any Loans or portion  thereof on which
     interest is payable  based on the Adjusted  Eurodollar  Rate in  accordance
     with the terms hereof.

(kk) "Event of Default"  shall mean the  occurrence or existence of any event or
     condition described in Section 10.1 hereof.

(ll) "Excess  Availability" shall mean the Canadian Dollar Amount, as determined
     by Agent,  calculated  at any time,  equal to:  (a) the  lesser of: (i) the
     aggregate  amount of the Revolving  Loans  available to Borrower as of such
     time  under  Section  2.1(1)  subject  to the  sublimits  and  Availability
     Reserves (except that the Syndication  Reserve shall not be included in the
     Availability Reserves for the purpose of calculating Excess Availability on
     the Closing Date) from time to time  established  by Agent  hereunder,  and
     (ii) the  Maximum  Credit  minus (b) the sum of: (i) the amount of all then
     outstanding and unpaid  Obligations,  plus (ii) the aggregate amount of all
     due but unpaid Tax  obligations  and trade  payables of Borrower  which are
     more  than 60 days  past  due as of  such  time  (other  than  those  being
     contested in good faith by appropriate  proceedings  diligently pursued and
     available to Borrower and  appropriate  reserves  therefor  established  in
     accordance with GAAP).

(mm) "Fee Letter"  shall mean the letter  agreement,  dated on or about the date
     hereof,  between Borrower and Agent,  setting forth certain fees payable by
     Borrower  to Agent for the benefit of itself and  Lenders,  as the same now
     exists or may  hereafter  be  amended,  modified,  supplemented,  extended,
     renewed, restated or replaced.

(nn) "Financing  Agreements"  shall  mean,  collectively,  this  Agreement,  the
     General Security Agreement,  the Hypothec, the guarantee by Merisel Inc. of
     the  Obligations in favour of Agent,  and all notes,  guarantees,  security
     agreements and other  agreements,  documents and  instruments now or at any
     time  hereafter  executed  and/or  delivered  by Borrower or any Obligor in
     connection with this  Agreement,  as the same now exist or may hereafter be
     amended, modified, supplemented, extended, renewed, restated or replaced.

(oo) "GAAP" shall mean generally accepted accounting  principles in Canada as in
     effect from time to time as set forth in the opinions and pronouncements of
     the relevant  Canadian public and private  accounting boards and institutes
     which are applicable to the  circumstances  as of the date of determination
     consistently  applied.  If at any time any change in GAAP would  affect the
     computation  of the  financial  covenant  set forth in Section 9.13 of this
     Agreement,  and  Borrower,  Agent or  Requisite  Lenders  shall so request,
     Agent,  Lenders and  Borrower  shall  negotiate in good faith to amend such
     covenant to preserve the original intent thereof in light of such change in
     GAAP (subject to the approval of Requisite  Lenders),  provided that, until
     so amended,  such covenant shall continue to be computed in accordance with
     GAAP prior to such change  therein and Borrower  shall provide to Agent and
     Lenders reconciliation statements.

(pp) "General  Security  Agreement" shall mean the general security
     agreement  dated on or about the date hereof given by Borrower
     in favour of Agent in respect of the Obligations.

(qq) "Governmental  Authority" shall mean any nation or government,
     any state,  province,  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.

(rr) "Hazardous  Materials"  shall  mean  any  hazardous,   toxic  or  dangerous
     substances,   materials   and  wastes,   including,   without   limitation,
     hydrocarbons  (including  naturally  occurring  or man-made  petroleum  and
     hydrocarbons),    flammable   explosives,   asbestos,   urea   formaldehyde
     insulation,  radioactive materials, biological substances,  polychlorinated
     biphenyls,  pesticides,  herbicides  and  any  other  kind  and/or  type of
     pollutants or contaminants (including, without limitation,  materials which
     include hazardous constituents),  sewage, sludge, industrial slag, solvents
     and/or any other similar substances, materials, or wastes and including any
     other  substances,  materials or wastes that are or become  regulated under
     any  Environmental  Law  (including  any that are or become  classified  as
     hazardous or toxic under any Environmental Law).

(ss) "Hedging  Obligations" shall mean, with respect to any Person,
     the  obligations  of such  Person  under any of the  following
     agreements  or  arrangements  to the extent  that the  primary
     purpose  thereof is the reduction of risk for  fluctuations in
     interest rates or currency or commodity values relating to its
     customary  business  and not  for  speculative  purposes:  (i)
     interest rate swap  agreements,  interest rate cap  agreements
     and interest rate collar  agreements and (ii) other agreements
     or  arrangements  designed  to  protect  such  person  against
     fluctuations  in  interest  rates  or  currency  or  commodity
     values.

(tt) "Hypothec"  shall mean the hypothec on movable  property dated
     on or about the date  hereof  given by  Borrower  in favour of
     Congress in respect of the Obligations.

(uu) "Indebtedness" shall mean, with respect to any Person, any liability,

(i)   in  respect of  borrowed  money  (whether  or not the
      recourse  of the lender is to the whole of the assets
      of  such  Person  or only to a  portion  thereof)  or
      evidenced  by bonds,  notes,  indentures  or  similar
      instruments;

(ii)  representing  the balance  deferred and unpaid of the
      purchase  price of any  property or  services,  other
      than  ordinary   course   compensation  to  employees
      (except  any such  balance  that (A)  constitutes  an
      account payable in the ordinary course of business of
      such  Person  in  connection  with  obtaining  goods,
      materials or services,  to the extent such balance is
      not  unpaid  more  than  ninety  (90)  days  past the
      original   invoice  date  therefor  unless  otherwise
      agreed  by Agent or (B) is  being  contested  in good
      faith by appropriate proceedings diligently pursued);

(iii)    all Capital Leases;

(iv) any contractual obligations, contingent or otherwise, of such Person to pay
     or be  liable  for  the  payment  of any  indebtedness  described  in  this
     definition  of another  Person,  including,  without  limitation,  any such
     indebtedness,  directly or indirectly guaranteed,  endorsed (other than for
     collection  or  deposit in the  ordinary  course of  business),  co-made or
     discounted  or sold with  recourse by such  Person,  or in respect of which
     such  Person  is  otherwise  directly  or  indirectly   liable,   including
     contractual  obligations  (contingent  or  otherwise)  arising  through any
     agreement to purchase,  repurchase, or otherwise acquire such indebtedness,
     obligation or liability or any security  therefor,  or to provide funds for
     the payment or discharge  thereof (whether in the form of loans,  advances,
     stock  purchases,  capital  contributions  or  otherwise),  or to  maintain
     solvency, assets, level of income, or other financial condition, or to make
     payment other than for value received;

(v)    all obligations  with respect to redeemable stock and
       redemption  or  repurchase   obligations   under  any
       Capital  Stock or other equity  securities  issued by
       such  Person,  to the extent the holder  thereof  may
       require  redemption  prior to the termination of this
       Agreement;

(vi)   all reimbursement  obligations and other liabilities,
       contingent or otherwise,  of such Person with respect
       to bonds, letters of credit,  banker's acceptances or
       similar  documents  or  instruments  issued  for such
       Person's account;

(vii)  all   indebtedness  of  such  Person  in  respect  of
       indebtedness  of another Person for borrowed money or
       indebtedness of another Person otherwise described in
       this  definition  which is  secured  by any  security
       interest in, or mortgage or lien upon the interest in
       any  asset  of  such  Person,  whether  or  not  such
       obligations,  liabilities or indebtedness are assumed
       by or are a personal liability of such Person, all as
       of such time; and

(viii) all obligations, liabilities and indebtedness of such
       Person  (marked  to  market)   constituting   Hedging
       Obligations.

(vv)   Information    Certificate"   shall   mean   the   Information
       Certificate   of  Borrower   constituting   Exhibit  A  hereto
       containing material information with respect to Borrower,  its
       business  and assets  provided  by or on behalf of Borrower to
       Agent in connection with the preparation of this Agreement and
       the other Financing Agreements and the financing  arrangements
       provided for herein.

(ww) "Intellectual  Property"  shall  mean  Borrower's  now owned and  hereafter
     arising  or  acquired:   patents,   patent  rights,   patent  applications,
     copyrights,  works which are the subject  matter of  copyrights,  copyright
     registrations, trademarks, trade names, trade styles, trademark and service
     mark applications, and licenses and rights to use any of the foregoing; all
     extensions,    renewals,   reissues,    divisions,    continuations,    and
     continuations-in-part  of any of the foregoing; all rights to sue for past,
     present and future infringement of any of the foregoing;  inventions, trade
     secrets, formulae,  processes,  compounds,  drawings, designs,  blueprints,
     surveys, reports, manuals, and operating standards;  goodwill; customer and
     other lists in whatever form  maintained;  trade secret  rights,  copyright
     rights,  rights in works of  authorship,  and contract  rights  relating to
     computer software programs, in whatever form created or maintained.

(xx) "Intercompany  Indebtedness" means unsecured Indebtedness owing by Borrower
     to Merisel,  Inc. or Merisel  Americas,  Inc.  or any other  Subsidiary  of
     Merisel, Inc.

(yy)  "Interest  Period" shall mean for any Eurodollar  Rate Loan, a
      period of approximately  one (1), two (2), or three (3) months
      duration  as  Borrower  may elect,  the exact  duration  to be
      determined  in accordance  with the customary  practice in the
      applicable Eurodollar Rate market; provided that, Borrower may
      not elect an Interest Period which will end after the last day
      of the then-current term of this Agreement.

(zz) "Interest  Rate"  shall  mean,  as to  Canadian  Prime Rate Loans and other
     non-contingent  Obligations  denominated  in  Canadian  Dollars,  a rate of
     three-quarters  of one percent  (3/4%) per annum in excess of the  Canadian
     Prime Rate, as to US Prime Rate Loans and other non-contingent  Obligations
     denominated  in US Dollars  (except for Eurodollar  Rate Loans),  a rate of
     one-quarter of one percent (1/4%) per annum in excess of the US Prime Rate,
     as to Eurodollar Rate Loans, a rate of two (2%) percent per annum in excess
     of the Adjusted  Eurodollar  Rate (based on the Eurodollar  Rate applicable
     for the  Interest  Period  selected  by  Borrower  as in  effect  three (3)
     Business  Days after the date of  receipt by Agent of the  request by or on
     behalf of Borrower for such  Eurodollar  Rate Loans in accordance  with the
     terms hereof, whether such rate is higher or lower than any rate previously
     quoted to Borrower; provided that, the Interest Rate shall mean the rate of
     three  percent  (3%) per annum in excess of the  Canadian  Prime Rate as to
     Canadian Prime Rate Loans and other non-contingent  Obligations denominated
     in  Canadian  Dollars,  the rate of two and  one-half  percent (2 1/2%) per
     annum  in  excess  of the US  Prime  Rate as to US Prime  Loans  and  other
     non-contingent Obligations denominated in US Dollars (except for Eurodollar
     Rate Loans), the rate of four and one-quarter (4 1/4%) percent per annum in
     excess of the Adjusted  Eurodollar  Rate,  as to  Eurodollar  Rate Loans at
     Agent's option, without notice, (a) on Loans and non-contingent Obligations
     (i) for the  period  on and after the date of  termination  or  non-renewal
     hereof  until such time as Agent and Lenders have  received  full and final
     payment of all such  Obligations and (ii) for the period from and after the
     date of the  occurrence  of an Event of  Default  so long as such  Event of
     Default  is  continuing  (notwithstanding  entry  of any  judgment  against
     Borrower) and (b) on the Revolving Loans at any time  outstanding in excess
     of the amounts  available to Borrower  under Article 2 hereof (unless Agent
     and Lenders have  consented  in writing to making such amount  available to
     Borrower).

(aaa)  "Inventory"  shall  mean  all  of  Borrower's  now  owned  and
       hereafter existing or acquired raw materials, work in process,
       finished goods and all other  inventory of whatsoever  kind or
       nature, wherever located.

(bbb)  "Lenders"  shall  mean  the  financial  institutions  who  are
       signatories  hereto as lenders and other  persons made a party
       to this Agreement as a Lender in accordance  with Section 13.5
       hereof, and their respective successors and assigns; sometimes
       being referred to herein individually as a "Lender".

(xx)   "Letter of Credit  Accommodations"  shall mean the  letters of
       credit,  merchandise purchase or other guarantees  denominated
       in Canadian  Dollars or US Dollars which are from time to time
       either  (a)  issued or opened by Agent or any  Lender  for the
       account of  Borrower  or any  Obligor  or (b) with  respect to
       which Agent on behalf of Lenders has agreed to  indemnify  the
       issuer or guaranteed to the issuer the performance by Borrower
       of its obligations to such issuer.

(yy)   Loans" shall mean the Revolving Loans.

(zz) "Material  Adverse Effect" shall mean a material  adverse effect on (i) the
     financial  condition,  business,  performance,  operations or properties of
     Borrower,  or  (ii)  the  legality,  validity  or  enforceability  of  this
     Agreement or any of the other  Financing  Agreements;  (iii) the  legality,
     validity, enforceability,  perfection or priority of the security interests
     and liens of Agent or any Lender upon the  Collateral or any other property
     which is security for the  Obligations;  (iv) the Collateral of Borrower or
     the value of the  Collateral;  (v) the  ability  of  Borrower  to repay the
     Obligations  or of  Borrower or  Merisel,  Inc. to perform its  obligations
     under this Agreement or any of the other Financing Agreements;  or (vi) the
     ability of Agent or any Lender to enforce the  Obligations  or realize upon
     the  Collateral  or  otherwise  with  respect to the rights and remedies of
     Agent or any Lender  under  this  Agreement  or any of the other  Financing
     Agreements.

(aaa)  "Maximum   Credit"   shall  mean  an  amount   not   exceeding
       $100,000,000  or  such  other  lesser  amount   determined  in
       accordance   with  Section  2.5  less,   in  each  case,   the
       Syndication Reserve.

(bbb) "Monthly Average Excess  Availability" shall have the meaning set forth in
Section 6.3(2).

(ccc)  "Net  Amount  of  Eligible  Accounts"  shall  mean  the  gross
       Canadian  Dollar  Amount of Eligible  Accounts less (a) sales,
       excise or similar Taxes included in the amount thereof and (b)
       until applied to reduce Eligible Accounts, returns, discounts,
       claims,  credits  and  allowances  of any  nature  at any time
       issued, owing, granted, outstanding, available with respect to
       such Eligible  Accounts and bona fide claims made with respect
       to such Eligible Accounts;  provided that the amounts deducted
       under clauses (a) or (b) to reduce such gross amount shall not
       duplicate  items for  which  Availability  Reserves  have been
       established by Agent.

(ddd)   "Net OLV" shall mean the Canadian Dollar Amount to be realized
        from any orderly  liquidation  of  Inventory at such time on a
        "going out of  business  sale"  basis as set forth in the most
        recent acceptable appraisal of Inventory received by Lender in
        accordance  with  Section  7.3,  net  of  deductions  for  all
        commissions,  taxes, duties, delivery,  operating expenses and
        other liquidation costs.

(eee)   "Net  Recovery  Cost  Percentage"  shall  mean  the  fraction,
        expressed as a  percentage,  (a) the numerator of which is Net
        OLV of such Inventory, and (b) the denominator of which is the
        cost determined on a weighted average cost basis in accordance
        with GAAP of the aggregate amount of Inventory subject to such
        appraisal.

(fff)"Obligations"  shall  mean any and all  Revolving  Loans,  Letter of Credit
     Accommodations and all other  obligations,  liabilities and indebtedness of
     every kind, nature and description owing by Borrower to Agent or any Lender
     arising under this Agreement or the other Financing  Agreements,  including
     principal,  interest, charges, fees, costs and expenses, however evidenced,
     whether as principal, surety, endorser, guarantor or otherwise, whether now
     existing or hereafter arising,  whether arising before, during or after the
     initial or any renewal term of this Agreement or after the  commencement of
     any  proceeding  with respect to Borrower or any Obligor under the BIA, the
     CCAA, or any similar statute in any jurisdiction  (including the payment of
     interest  and other  amounts  which would accrue and become due but for the
     commencement of such proceeding, whether or not such amounts are allowed or
     allowable  in  whole  or in part in such  proceeding),  whether  direct  or
     indirect, absolute or contingent, joint or several, due or not due, primary
     or secondary, liquidated or unliquidated, secured or unsecured.

(ggg)"Obligor"  shall mean Merisel,  Inc. and any other  guarantor,
     endorser,  acceptor, surety or other person liable on, or with
     respect to the Obligations or who is the owner of any property
     which is security for the Obligations, other than Borrower.

(hhh)"Other  Taxes"  shall  mean any  present  or  future  stamp or
     documentary  taxes or any  other  excise  or  property  taxes,
     charges or similar  levies  which arise from any payment  made
     hereunder or from the execution,  delivery or registration of,
     or  otherwise  with  respect to, this  Agreement or any of the
     other Financing Agreements.

(iii)"Participant"  shall  mean  any  financial   institution  that
     acquires and holds a  participation  in the interest of Lender
     in any of the Loans and  Letter  of Credit  Accommodations  in
     conformity  with  the  provisions  of  Section  13.8  of  this
     Agreement governing participations.

(jjj) "Payment Account" shall have the meaning set forth in Section 6.3 hereof.

(kkk) "Pension  Plans"  means  each of the  pension  plans,  if any,
      registered  in  accordance  with the Income  Tax Act  (Canada)
      which Borrower  sponsors or administers or into which Borrower
      makes contributions.

(lll) "Person"  or  "person"   shall  mean  any   individual,   sole
      proprietorship, partnership, limited partnership, corporation,
      limited  liability  company,  business  trust,  unincorporated
      association, joint stock corporation,  trust, joint venture or
      other   entity   or   any   government   or  any   agency   or
      instrumentality or political subdivision thereof.

(mmm) "PPSA"  shall mean the  Personal  Property  Security Act as in
      effect in the Province of Ontario, the Civil Code of Quebec as
      in effect  in the  Province  of  Quebec or any other  Canadian
      Federal or  Provincial  statute  pertaining  to the  granting,
      perfecting,  priority or ranking of security interests, liens,
      hypothecs on personal  property,  and any successor  statutes,
      together with any regulations  thereunder,  in each case as in
      effect from time to time.

(nnn)"Priority  Payables  Reserve"  shall mean, at any time,  the full amount of
     the  liabilities  at such time  which have a trust  imposed to provide  for
     payment or security interest,  lien or charge ranking or capable of ranking
     senior to or pari passu with security interests,  liens or charges securing
     the Obligations on any of the Collateral under federal, provincial,  state,
     county,  municipal, or local law including,  but not limited, to claims for
     unremitted and  accelerated  rents,  Taxes,  wages,  workers'  compensation
     obligations,   vacation   pay,   government   royalties   or  pension  fund
     obligations,  together with the aggregate  value,  determined in accordance
     with GAAP,  of all  Eligible  Inventory  which  Agent,  acting  reasonably,
     considers may be or may become  subject to a right of a supplier to recover
     possession  thereof  under  any  federal  or  provincial  law,  where  such
     supplier's  right may have priority over the security  interests,  liens or
     charges securing the Obligations  including,  without limitation,  Eligible
     Inventory  subject to a right of a supplier to repossess  goods pursuant to
     Section 81.1 of the BIA.

(ooo) "Pro Rata  Share"  shall mean as to any Lender,  the  fraction
      (expressed  as a  percentage)  the  numerator of which is such
      Lender's  Commitment  and  the  denominator  of  which  is the
      aggregate  amount of all of the  Commitments  of  Lenders,  as
      adjusted from time to time in accordance  with the  provisions
      of Section 13.5 hereof;  provided,  that,  if the  Commitments
      have been terminated, the numerator shall be the unpaid amount
      of such  Lender's  Loans  and its  interest  in the  Letter of
      Credit   Accommodations  and  the  denominator  shall  be  the
      aggregate  amount of all  unpaid  Loans  and  Letter of Credit
      Accommodations.

(ppp) "Records"  shall  mean all of  Borrower's  present  and future
      books of account of every  kind or nature,  purchase  and sale
      agreements,  invoices, ledger cards, bills of lading and other
      shipping  evidence,  statements,  correspondence,   memoranda,
      credit files and other data relating to the  Collateral or any
      account debtor,  together with the tapes, disks, diskettes and
      other  data and  software  storage  media  and  devices,  file
      cabinets or containers in or on which the foregoing are stored
      (including   any  rights  of  Borrower  with  respect  to  the
      foregoing maintained with or by any other person).

(qqq) "Renewal Date" shall have the meaning set forth in Section 13.1(1) hereof.

(rrr) "Required  Lenders"  shall mean,  at any time,  those  Lenders
      whose  Pro Rata  Shares  aggregate  sixty-six  and  two-thirds
      (662/3%)  percent or more of the aggregate of the  Commitments
      of  all  Lenders,  or  if  the  Commitments  shall  have  been
      terminated,  Lenders to whom at least sixty-six and two-thirds
      (662/3%)  percent  of the  then  outstanding  Obligations  are
      owing.

(sss) "Revolving  Loans" shall mean the loans now or hereafter  made
      by Lenders to or for the  benefit of  Borrower  on a revolving
      basis (involving  advances,  repayments and readvances) as set
      forth in Section 2.1 hereof.

(ttt) "Special Agent Advances" shall have the meaning set forth in Section 12.10
hereof.

(uuu) "Spot Rate" shall mean,  with respect to a currency,  the rate
      quoted by the Canadian Reference Bank as the spot rate for the
      purchase by the Canadian  Reference Bank of such currency with
      another  currency at the close of business on the Business Day
      immediately  preceding the date on which the foreign  exchange
      computation is made.

(vvv) "Subordinated  Indebtedness"  shall mean  Indebtedness  of any
      Person that is unsecured and that is  subordinated in right of
      payment to the full and final  payment of all  Obligations  on
      terms  and  conditions  acceptable  to Agent  and  irrevocably
      designated in writing to Agent as "Subordinated  Indebtedness"
      by Borrower and the holder of such Indebtedness.

(www)"Subsidiary"  shall  mean,  with  respect to any Person,  any  corporation,
     limited or general partnership, trust, association or other business entity
     of which an  aggregate  of at least a majority of the  outstanding  Capital
     Stock or other  interests  entitled to vote in the election of the board of
     directors  of such  corporation  (irrespective  of  whether,  at the  time,
     Capital Stock of any other class or classes of such corporation  shall have
     or might have voting power by reason of the happening of any  contingency),
     managers,   trustees  or  other  controlling   persons,  or  an  equivalent
     controlling  interest therein,  of such Person is, at the time, directly or
     indirectly,  owned by such Person and/or one or more  Subsidiaries  of such
     Person.

(xxx) "Syndication Reserve" shall mean an amount of $5,000,000 to be
      included  as  an  Availability  Reserve  until  such  time  as
      Congress has reduced its Commitment to an amount not exceeding
      $62,500,000.

(yyy) "Taxes"  shall  mean  any and all  present  or  future  taxes,
      levies, imposts, deductions,  charges or withholdings, and all
      liabilities  with respect thereto,  excluding,  in the case of
      any Lender,  such taxes  (including  income  taxes,  franchise
      taxes or capital  taxes) as are imposed on or measured by such
      Lender's  net income or capital  by any  jurisdiction  (or any
      political subdivision thereof).

(zzz)    "Transferee" shall have the meaning set forth in Section 6.5 hereof.

(aaaa)   "US  Prime  Rate"  shall  mean  the rate  announced  by the US
         Reference Bank,  from time to time as its prime rate,  whether
         or not such  announced rate is the best rate available at such
         bank.

(bbbb)   "US Prime Rate Loans"  shall mean any Loan or portion  thereof
         denominated  in US Dollars  and on which  interest  is payable
         based  on the US  Prime  Rate in  accordance  with  the  terms
         hereof.

(cccc)   "US GAAP" shall mean generally accepted accounting  principles
         in the United States of America as in effect from time to time
         as  set  forth  in  the  opinions  and  pronouncements  of the
         Accounting  Principles  Board and the  American  Institute  of
         Certified   Public   Accountants   and  the   statements   and
         pronouncements  of the Financial  Accounting  Standards Boards
         which are  applicable to the  circumstances  as of the date of
         determination consistently applied.

(dddd)   "US Reference  Bank" shall mean First Union  National Bank, or
         its  successors  and assigns,  or such other bank as Agent may
         from time to time designate, acting reasonably.

(eeee)   "Value" shall mean,  with respect to  Inventory,  the Canadian
         Dollar  Amount  of the  lower  of  (a)  cost  determined  on a
         weighted average cost basis in accordance with GAAP or (b) net
         realizable  value  calculated by Borrower in  accordance  with
         GAAP.

(ffff)   "Voting Stock" shall mean with respect to any Person,  (i) one
         (1) or more  classes of Capital  Stock of such  Person  having
         general  voting  powers  to elect at least a  majority  of the
         board of  directors,  managers  or  trustees  of such  Person,
         irrespective of whether at the time Capital Stock of any other
         class or classes  have or might have voting power by reason of
         the happening of any  contingency,  and (ii) any Capital Stock
         of such Person convertible or exchangeable without restriction
         or further investment at the option of the holder thereof into
         Capital  Stock of such Person  described in clause (i) of this
         definition.

Article 2
                                CREDIT FACILITIES

2.1      Revolving Loans

(1) Subject to, and upon the terms and conditions  contained herein, each Lender
severally (and not jointly) agrees to fund its Pro Rata Share of Revolving Loans
by way of Canadian  Prime Rate Loans,  US Prime Rate Loans and  Eurodollar  Rate
Loans to Borrower  from time to time in amounts  requested by Borrower up to the
aggregate principal amount equal to the sum of:

(a)      eighty-five (85%) percent of the Net Amount of Eligible Accounts,

                           plus

(b)      the lesser of:

(i)      the sum of (A) the lesser of (x) fifty (50%)  percent
         of the  Value of  Eligible  Inventory  consisting  of
         Eligible  Hardware and (y) 80% of the Net OLV of such
         Eligible   Inventory   and  (B)  the   least  of  (x)
         twenty-five  (25%)  percent of the Value of  Eligible
         Inventory consisting of Eligible Software, (y) 80% of
         the  Net  OLV of  such  Eligible  Inventory  and  (z)
         $5,000,000, and

(ii)     $20,000,000

                           less

(c)      any Availability Reserves.

(2) Agent may,  in its  discretion  acting  reasonably,  from time to time,  (a)
reduce the percentage  referred to in Section 2.1(1)(a) to the extent that Agent
determines: that the dilution with respect to the Accounts for any period (based
on the ratio of (1) the aggregate amount of reductions in Accounts other than as
a result of payments  in cash to (2) the  aggregate  amount of total  sales) has
increased or may be reasonably  anticipated to increase above five (5%) percent,
(in which case such percentage shall be decreased by an amount not to exceed the
excess of such dilution ratio over 5%) or (b) reduce the percentages referred to
in Section 2.1(1)(b)(i) to the extent that Agent determines that: (i) the number
of days of the  turnover  of the  Inventory  for any period  has  changed in any
material respect or (ii) the liquidation value of the Eligible Inventory, or any
category  thereof,  has decreased in any material  respect,  or (iii) there is a
decrease in the Net Recovery Cost Percentage after the date hereof,  or (iv) the
nature and quality of the Inventory has deteriorated.  In determining whether to
reduce the  applicable  percentage(s),  Agent may consider  events,  conditions,
contingencies  or  risks  which  are also  considered  in  determining  Eligible
Accounts,  Eligible  Inventory or in  establishing  Availability  Reserves.  The
amount of any  reduction  in any advance  percentage  by Agent  pursuant to this
Section  2.1(2) shall have a  reasonable  relationship  to the matter  described
herein which is the basis for such reduction in the good faith  determination of
Agent. To the extent an Availability  Reserve shall have been established  which
is sufficient to address any event, condition or matter in a manner satisfactory
to Agent, in its good faith  determination,  Agent shall not exercise its rights
under this  Section  2.2(2) to reduce the advance  percentage,  to address  such
event, condition or matter.

(3) Except in Agent's discretion, with the consent of all Lenders, the aggregate
Canadian  Dollar  Amount of the Loans  and the  Letter of Credit  Accommodations
outstanding at any time shall not exceed the Maximum  Credit.  In the event that
the  outstanding  Canadian  Dollar Amount of any component of the Loans,  or the
aggregate  Canadian Dollar Amount of the outstanding  Loans and Letter of Credit
Accommodations,  exceed the amounts  available under the lending  formulas,  the
sublimits for Letter of Credit Accommodations set forth in Section 2.2(4) or the
Maximum Credit,  as applicable,  such event shall not limit,  waive or otherwise
affect any rights of Agent or any Lender in that  circumstance  or on any future
occasions and Borrower  shall,  upon demand by Lender,  which may be made at any
time or from time to time,  immediately  repay to Agent the entire amount of any
such excess(es) for which payment is demanded.

(4) The aggregate amount of each Lender's Pro Rata Share of the Loans and Letter
of  Credit   Accommodations  shall  not  exceed  the  amount  of  such  Lender's
Commitment,  as the same  may  from  time to time be  amended  with the  written
acknowledgment of Agent.

(5)  Subject  to the  terms of this  Agreement,  Agent  shall  exclude  Eligible
Inventory being purchased with Letter of Credit Accommodations from the Value of
Eligible  Inventory  for the purpose of Section  2.1(1)(b)  and shall reduce the
amount of Loans available to Borrower by the then undrawn amounts of outstanding
Letter of Credit  Accommodations  for the purpose of  purchasing  such  Eligible
Inventory as Revolving Loans to the extent required by Section 2.2(3)(a).

2.2      Letter of Credit Accommodations

(1)  Subject  to, and upon the terms and  conditions  contained  herein,  at the
request of Borrower, Agent agrees, for the ratable risk of each Lender according
to its Pro Rata Share, to provide or arrange for Letter of Credit Accommodations
for  the  account  of  Borrower  containing  terms  and  conditions   reasonably
acceptable  to Agent and the issuer  thereof.  Any payments made by Agent or any
Lender to any issuer  thereof  and/or  related  parties in  connection  with the
Letter of Credit  Accommodations shall constitute additional Canadian Prime Rate
Loans or US Prime Rate  Loans,  as  applicable,  to  Borrower  pursuant  to this
Article 2. Agent shall administer Letter of Credit  Accommodations in accordance
with its customary practises and policies as from time to time in effect.

(2) In addition to any usual and customary charges,  fees or expenses charged by
any bank or  issuer in  connection  with the  Letter  of Credit  Accommodations,
Borrower shall pay to Agent, for the benefit of Lenders,  a letter of credit fee
at a rate equal to  three-quarters  of one (3/4%) percent per annum on the daily
outstanding  balance of the Letter of Credit  Accommodations for the immediately
preceding  month (or part  thereof),  payable  in arrears as of the first day of
each succeeding month,  except that Agent may, and upon the written direction of
Required  Lenders shall,  require Borrower to pay to Agent such letter of credit
fee at a rate equal to three (3%)  percent  per annum on such daily  outstanding
balance  for:  (i)  the  period  from  and  after  the  date of  termination  or
non-renewal  hereof until Agent and Lenders have received full and final payment
of all Obligations  (notwithstanding  entry of a judgment against  Borrower) and
(ii) the period from and after the date of the occurrence of an Event of Default
for so long as such Event of Default is  continuing.  Such  letter of credit fee
shall be  calculated  on the basis of a three  hundred sixty five (365) day year
and actual  days  elapsed and the  obligation  of Borrower to pay such fee shall
survive the termination or non-renewal of this Agreement.

(3) No Letter of Credit  Accommodations shall be available unless on the date of
the  proposed  issuance of any Letter of Credit  Accommodations,  the  Revolving
Loans available to Borrower  (subject to the Maximum Credit and any Availability
Reserves)  are equal to or greater  than:  (a) if the proposed  Letter of Credit
Accommodation is for the purpose of purchasing  Eligible  Inventory which is not
being air freighted and all  negotiable  documents of title with respect to such
Eligible  Inventory  have been  consigned  to the issuer of the Letter of Credit
Accommodation, the sum of (i) the percentage equal to one hundred (100%) percent
minus the then applicable percentages set forth in Section 2.1(1)(b)(i) above of
the Value of such Eligible Inventory,  plus (ii) freight,  taxes, duty and other
amounts which Agent  estimates  must be paid in connection  with such  Inventory
upon  arrival  and for  delivery to one of  Borrower's  locations  for  Eligible
Inventory  within Canada and (b) if the proposed Letter of Credit  Accommodation
is for any other purpose or the documents of title with respect thereto have not
been  consigned to the issuer,  an amount equal to one hundred (100%) percent of
the face amount thereof and,  without  duplication,  all other  commitments  and
obligations  made or  incurred  by Agent or any  Lender  with  respect  thereto.
Effective  on  the  issuance  of  each  Letter  of  Credit   Accommodation,   an
Availability  Reserve shall be established in the applicable amount set forth in
Section 2.2(3)(a) or Section 2.2(3)(b).

(4) Except in  Agent's  discretion,  with the  consent  of all  Lenders  (i) the
Canadian Dollar Amount of all outstanding  Letter of Credit  Accommodations  and
all other commitments and obligations made or incurred by Agent or any Lender in
connection  therewith,  shall not at any time exceed  $10,000,000 at the time of
the issuance thereof. At any time an Event of Default exists or has occurred and
is  continuing,   upon  Agent's  request,  Borrower  will  either  furnish  cash
collateral to secure the  reimbursement  obligations to the issuer in connection
with any Letter of Credit Accommodations or furnish cash collateral to Agent for
the Letter of Credit  Accommodations,  and in either case,  the Revolving  Loans
otherwise  available  to  Borrower  shall not be reduced as  provided in Section
2.2(3) to the extent of such cash collateral.

(5)  Borrower  shall  indemnify  and hold Agent and  Lenders  harmless  from and
against any and all losses,  claims,  damages,  liabilities,  costs and expenses
which Agent or any Lender may suffer or incur in  connection  with any Letter of
Credit Accommodations and any documents, drafts or acceptances relating thereto,
including, but not limited to, any losses, claims, damages,  liabilities,  costs
and expenses due to any action taken by any issuer or correspondent with respect
to any Letter of Credit Accommodation except to the extent that any such losses,
claims, damages,  liabilities,  costs or expenses relate to the gross negligence
or  wilful  misconduct  of  Agent  and  Lenders  as  determined  by a final  and
non-appealable order of a court of competent jurisdiction.  Borrower assumes all
risks with respect to the acts or  omissions of the drawer under or  beneficiary
of any  Letter of  Credit  Accommodation  and for such  purposes  the  drawer or
beneficiary shall be deemed  Borrower's  agent.  Borrower assumes all risks for,
and agrees to pay, all foreign, federal,  provincial and local taxes, duties and
levies relating to any goods subject to any Letter of Credit  Accommodations  or
any documents,  drafts or acceptances  thereunder.  Borrower hereby releases and
holds Lender  harmless  from and against any acts,  waivers,  errors,  delays or
omissions,  whether  caused  by  Borrower,  by any  issuer or  correspondent  or
otherwise  with  respect to or  relating  to any Letter of Credit  Accommodation
except  as caused  by  Lender's  own gross  negligent  or wilful  misconduct  as
determined  by a  final  and  non-appealable  order  of  a  court  of  competent
jurisdiction. The provisions of this Section 2.2(5) shall survive the payment of
Obligations and the termination or non-renewal of this Agreement.

(6) Nothing  contained herein shall be deemed or construed to grant Borrower any
right or authority to pledge the credit of Agent or Lenders in any manner. Agent
and Lenders  shall have no  liability  of any kind with respect to any Letter of
Credit  Accommodation  provided by an issuer other than Lenders unless Agent has
duly  executed and  delivered to such issuer the  application  or a guarantee or
indemnification in writing with respect to such Letter of Credit  Accommodation.
Borrower shall be bound by any  interpretation  made in good faith by Agent,  or
any other  issuer or  correspondent  under or in  connection  with any Letter of
Credit  Accommodation  or  any  documents,  drafts  or  acceptances  thereunder,
notwithstanding   that  such   interpretation   may  be  inconsistent  with  any
instructions  of  Borrower.  Agent shall have the sole and  exclusive  right and
authority to, and Borrower shall not: (a) at any time an Event of Default exists
or has  occurred  and is  continuing,  (i) approve or resolve any  questions  of
non-compliance  of  documents,  (ii) give any  instructions  as to acceptance or
rejection of any  documents or goods or (iii)  execute any and all  applications
for steamship or airway  guaranties,  indemnities or delivery orders, and (b) at
any time without  Lender's  written  consent,  (i) grant any  extensions  of the
maturity  of,  time of payment  for,  or time of  presentation  of, any  drafts,
acceptances,  or  documents,  and  (ii)  agree  to  any  amendments,   renewals,
extensions,  modifications,  changes  or  cancellations  of any of the  terms or
conditions  of any of the  applications,  Letter  of Credit  Accommodations,  or
documents, drafts or acceptances thereunder or any letters of credit included in
the  Collateral.  Agent  may  take  such  actions  either  in its own name or in
Borrower's name provided that if Agent proposes to take any action in Borrower's
name prior to an Event of Default,  Agent will use reasonable  efforts to obtain
Borrower's consent to such action prior to the taking thereof.

(7) Any  rights,  remedies,  duties or  obligations  granted  or  undertaken  by
Borrower to any issuer or  correspondent  in any  application  for any Letter of
Credit  Accommodation,  or any  other  agreement  in  favour  of any  issuer  or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by Borrower to Agent.  Any duties or obligations
undertaken by Agent to any issuer or  correspondent  in any  application for any
Letter of Credit Accommodation, or any other agreement by Agent in favour of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall be
deemed to have been undertaken by Borrower to Agent,  for the ratable benefit of
Lenders  and to  apply in all  respects  to  Borrower  so long as  Borrower  has
consented to the terms thereof.

2.3      Commitments

         The  aggregate  amount of each Lender's Pro Rata Share of the Loans and
Letter of Credit  Accommodations  shall not exceed  the amount of such  Lender's
Commitment,  as the same  may  from  time to time be  amended  with the  written
acknowledgment of Agent.

2.4      Availability Reserves

         All Revolving  Loans  otherwise  available to Borrower  pursuant to the
lending formulas and subject to the Maximum Credit and other  applicable  limits
hereunder shall be subject to Lender's  continuing right to establish and revise
Availability Reserves.

2.5      Changes in Maximum Credit

(1) If Borrower has reduced the Maximum Credit pursuant to Section 2.5(2), Agent
may from time to time increase the amount of the Maximum  Credit by  $25,000,000
up to an amount not to exceed $100,000,000 and each Lender's Commitment shall be
increased  by its Pro Rata Share of such  increase if  Borrower  requests a Loan
which, if made,  would cause the aggregate  amount of Loans and Letter of Credit
Accommodations outstanding to exceed the then existing Maximum Credit subject to
the following:

(a)  no Event of Default or event  which with  notice or passage of time or both
     would constitute an Event of Default exists or has occurred; and

(b)  Borrower  shall pay to Lender a fee of $125,000 which shall be fully earned
     as of and payable on the date of such increase.

(2) Borrower may upon not less than five (5) Business  Days notice (which notice
shall be irrevocable)  to Agent,  reduce from time to time the Maximum Credit to
an amount  not less  than  $50,000,000  and each  Lender's  Commitment  shall be
reduced proportionately subject to the following:

(a)  no Event of Default or event  which with  notice or passage of time or both
     would constitute an Event of Default exists or has occurred; and

(b)  any such  reduction  shall be in an amount not less than  $10,000,000 or an
     integral multiple of $1,000,000 in excess thereof; and

         (c)      Borrower  shall pay to Agent a fee equal to one-quarter of one
                  percent (1/4 %) of the amount of such reduction which shall be
                  fully  earned and payable as of the date of notice is given by
                  Borrower with respect to such reduction.

Article 3
                                INTEREST AND FEES

3.1      Interest

(1) Borrower shall pay to Agent interest on the outstanding  principal amount of
Loans and other  non-contingent  Obligations not paid when due at the applicable
Interest Rate. All interest accruing  hereunder on and after an Event of Default
or termination or non-renewal hereof shall be payable at the applicable Interest
Rate on demand.

(2)  Borrowers  may from time to time request  Eurodollar  Rate Loans or that US
Prime Rate Loans be  converted  to  Eurodollar  Rate Loans or that any  existing
Eurodollar Rate Loans continue for an additional  Interest Period.  Such request
from or on behalf of  Borrower  shall  specify  the  amount of the US Prime Rate
Loans which will  constitute  Eurodollar  Rate Loans  (subject to the limits set
forth below) and the Interest  Period to be applicable to such  Eurodollar  Rate
Loans.  Subject to the terms and conditions contained herein, three (3) Business
Days  after  receipt by Agent of such a request  from or on behalf of  Borrower,
such  Eurodollar  Rate  Loans  shall be made or US  Prime  Rate  Loans  shall be
converted to Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue,
as the case may be, provided,  that, (i) no Event of Default,  or act, condition
or event which with notice or passage of time or both would  constitute an Event
of Default  exists or has occurred and is  continuing,  (ii) no Interest  Period
shall extend  beyond the then current  Renewal Date or if any party hereto shall
have sent any notice of termination of this  Agreement,  the date of termination
of this  Agreement,  (iii)  Borrower  shall have  complied  with such  customary
procedures as are  established  by Agent and specified by Agent to Borrower from
time to time for requests by Borrower for  Eurodollar  Rate Loans,  (iv) no more
than  five  (5)  Interest  Periods  may be in  effect  at any one  time  (unless
otherwise  agreed  by Agent  and  Borrower),  (v) the  aggregate  amount  of the
Eurodollar  Rate  Loans  to  Borrower  must  be  in  an  amount  not  less  than
US$5,000,000 or an integral multiple of US$1,000,000 in excess thereof, (vi) the
maximum amount of the  Eurodollar  Rate Loans at any time requested by Borrower,
shall not exceed  eighty  (80%)  percent of the lowest  principal  amount of the
Loans,  which  it is  anticipated  will be  outstanding  during  the  applicable
Interest Period,  in each case as determined by Agent (but with no obligation of
Agent or any Lender to make such Loans),  and (vii) Agent shall have  determined
that the Interest Period or Adjusted Eurodollar Rate is available to the Lenders
and can be readily determined as of the date of request for such Eurodollar Rate
Loan by Borrower.  Any request by Borrower for any  Eurodollar  Rate Loans or to
convert US Prime Rate Loans to Eurodollar Rate Loans or to continue any existing
Eurodollar  Rate Loans  shall be  irrevocable.  Notwithstanding  anything to the
contrary  contained  herein,  Agent,  Lenders and US Reference Bank shall not be
required to  purchase  United  States  Dollar  deposits in the London  interbank
market or other  applicable  Eurodollar  Rate market to fund any Eurodollar Rate
Loans, but the provisions  hereof shall be deemed to apply as if Agent,  Lenders
and US Reference Bank had purchased  such deposits to fund the  Eurodollar  Rate
Loans.

(3) Any Eurodollar Rate Loans shall automatically convert to US Prime Rate Loans
upon the last day of the applicable  Interest Period,  unless Agent has received
and approved a request to continue such  Eurodollar Rate Loan at least three (3)
Business  Days prior to such last day in accordance  with the terms hereof.  Any
Eurodollar Rate Loans shall, unless otherwise agreed by Agent, at the end of the
applicable  Interest Period convert to US Prime Rate Loans in the event that the
then current Renewal Date or the termination  date of this Agreement would occur
before the expiration of the next applicable Interest Period.
(4) Interest shall be payable by Borrower to Lender monthly in arrears not later
than the first day of each  calendar  month and shall be calculated on the basis
of a three hundred sixty five (365) day year in the case of Canadian  Prime Rate
Loans and a three  hundred  and sixty  (360)  year in the case of US Prime  Rate
Loans and Eurodollar Loans, as applicable and actual days elapsed.  The interest
rate on  non-contingent  Obligations  (other than  Eurodollar  Rate Loans) shall
increase  or  decrease  by an amount  equal to each  increase or decrease in the
Canadian Prime Rate or US Prime Rate, as applicable,  effective on the first day
of the month after any change in such Prime Rate is  announced.  The increase or
decrease  shall  be based  on the  Canadian  Prime  Rate or US  Prime  Rate,  as
applicable,  in effect  on the last day of the  month in which  any such  change
occurs. In no event shall charges  constituting  interest payable by Borrower to
Lender exceed the maximum amount or the rate permitted  under any applicable law
or  regulation,   and  if  any  part  or  provision  of  this  Agreement  is  in
contravention  of any such law or  regulation,  such part or provision  shall be
deemed amended to conform thereto.

(5) For purposes of disclosure  under the Interest Act (Canada),  where interest
is  calculated  pursuant  hereto at a rate based upon a 360 or 365 day year (the
"First Rate"),  it is hereby agreed that the rate or percentage of interest on a
yearly basis is equivalent to such First Rate multiplied by the actual number of
days in the year divided by 360 or 365, as applicable.

(6)  Notwithstanding  the provisions of this Article 3 or any other provision of
this  Agreement,  in no event shall the  aggregate  "interest"  (as that term is
defined in Section  347 of the  Criminal  Code  (Canada))  exceed the  effective
annual rate of interest on the "credit  advanced" (as defined therein)  lawfully
permitted under Section 347 of the Criminal Code (Canada).  The effective annual
rate of interest  shall be  determined  in accordance  with  generally  accepted
actuarial  practices and principles over the term of the applicable Loan, and in
the event of a dispute,  a certificate of a Fellow of the Canadian  Institute of
Actuaries  appointed  by  Agent  will be  conclusive  for the  purposes  of such
determination.

(7) A certificate  of an authorized  signing  officer of Agent as to each amount
and/or  each rate of  interest  payable  hereunder  from  time to time  shall be
conclusive evidence of such amount and of such rate, absent manifest error.

(8) For greater  certainty,  whenever any amount is payable under this Agreement
or any  Financing  Agreement by Borrower as interest or as a fee which  requires
the  calculation of an amount using a percentage  per annum,  each party to this
Agreement acknowledges and agrees that such amount shall be calculated as of the
date payment is due without application of the "deemed  reinvestment  principle"
or the "effective yield method". As an example,  when interest is calculated and
payable  monthly,  the rate of interest  payable per month is 1/12 of the stated
rate of interest per annum.

3.2      Unused Line Fee

         Borrower  shall pay to Agent  monthly  an unused  line fee in  Canadian
Dollars  equal at a rate equal to  one-quarter  of one (1/4%)  percent per annum
calculated  upon the amount by which Maximum  Credit then in effect  exceeds the
average daily  principal  balance (in Canadian Dollar Amount) of the outstanding
Revolving  Loans and  Letter of Credit  Accommodations  during  the  immediately
preceding  month (or part thereof)  while this Agreement is in effect and for so
long thereafter as any of the Obligations  are  outstanding,  which fee shall be
payable on the first day of each month in arrears with the first payment thereof
to be made on February 1, 2001.

3.3      Other Fees

         Borrower  shall pay to Agent for the  benefit of itself and  Lenders as
set forth  therein  the fees and other  amounts  set forth in the Fee  Letter by
Borrower and Agent in the amounts and at the times specified therein.

3.4      Payments

         Unless  otherwise  specified  by Agent,  all  interest,  fees and other
payments  by  Borrower  hereunder  shall  be  in  the  currency  in  which  such
Obligations are denominated.

3.5      Changes in Laws and Increased Costs of Loans

(1)  Notwithstanding  anything to the contrary  contained herein, all Eurodollar
Rate Loans shall, upon notice by Agent to Borrower, (a) convert to US Prime Rate
Loans in the event  that any  change in  applicable  law or  regulation  (or the
interpretation or  administration  thereof) shall make it unlawful for a Lender,
US Reference Bank or any  Participant to make or maintain  Eurodollar Rate Loans
or to comply with the terms hereof in connection with the Eurodollar Rate Loans,
or (b)  convert  to US Prime Rate  Loans at the end of the  applicable  Interest
Period in the event  that any change in  applicable  law or  regulation  (or the
interpretation or administration thereof shall either (i) result in the increase
in the costs to a Lender,  US  Reference  Bank or any  Participant  of making or
maintaining any Eurodollar Rate Loans by an amount  reasonably  deemed by Lender
to be material,  or (ii) reduce the amounts received or receivable by any Lender
or Participant in respect  thereof,  by an amount deemed by Agent to be material
or (c) convert to US Prime Loans at the end of the applicable Interest Period if
the cost to a Agent, US Reference Bank or any Lender or Participant of making or
maintaining  any  Eurodollar  Rate Loans shall  otherwise  increase by an amount
deemed by Agent to be material. Borrower shall pay to Agent, for ratable benefit
of the  Lenders,  upon demand by Agent (or Agent may, at its option,  charge any
loan account of Borrower) any amounts required to compensate  Agent, any Lender,
the US  Reference  Bank or any  Participant  for  any  loss  (including  loss of
anticipated profits), cost or expense incurred by such person as a result of the
foregoing,  including,  without  limitation,  any  such  loss,  cost or  expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired  by such person to make or maintain  the  Eurodollar  Rate Loans or any
portion  thereof.  A certificate  of Agent or any Lender setting forth the basis
for the  determination  of such amount  necessary to  compensate  such Lender as
aforesaid  shall be  delivered  to  Borrower  and  shall be  conclusive,  absent
manifest error.

(2) If any payments or prepayments  in respect of the Eurodollar  Rate Loans are
received by Agent other than on the last day of the applicable  Interest  Period
(whether  pursuant to acceleration,  upon maturity or otherwise),  including any
payments  pursuant to the  application of  collections  under Section 6.3 or any
other payments made with the proceeds of Collateral, Borrower shall pay to Agent
for the ratable  benefit of Lenders,  upon demand by Agent (or Agent may, at its
option,  charge any loan account of Borrower) any amounts required to compensate
Agent, such Lender,  the US Reference Bank or any Participant for any additional
loss (including loss of anticipated  profits),  cost or expense incurred by such
person as a result of such prepayment or payment, including, without limitation,
any loss, cost or expense  incurred by reason of the liquidation or reemployment
of  deposits or other  funds  acquired  by such person to make or maintain  such
Eurodollar Rate Loans or any portion thereof.

Article 4
                              CONDITIONS PRECEDENT

4.1      Conditions Precedent to Initial Loans and Letter of Credit
Accommodations

         Each of the following is a condition  precedent to Lenders (or Agent on
behalf of Lenders)  making the initial Loans and providing the initial Letter of
Credit Accommodations hereunder:

(1) Agent shall have  received  evidence  (including,  without  limitation,  any
subordinations  or  releases of any other  liens or  security  interests  in the
Collateral required by Agent), in form and substance satisfactory to Agent, that
(a) Agent has valid perfected and first priority security interests in and liens
upon the  Collateral and any other property which is intended to be security for
the Obligations or the liability of any Obligor in respect thereof, subject only
to the security  interests and liens permitted  herein or in the other Financing
Agreements; and (b) any purchase money security interest in Borrower's Inventory
existing on the date hereof does not extend to the proceeds  thereof (other than
insurance   proceeds  and  cash  proceeds  not  constituting   Accounts,   where
applicable)  unless such purchase money security  interest has been subordinated
to the  security  interests  of Agent  and  Lenders  in such  assets in a manner
satisfactory to Agent.

(2) all requisite  corporate  action and  proceedings  in  connection  with this
Agreement and the other Financing Agreements shall be reasonably satisfactory in
form and substance to Agent,  and Agent shall have received all  information and
copies of all documents,  including,  without  limitation,  records of requisite
corporate  action and  proceedings  which Agent may have requested in connection
therewith,  such  documents  where  requested  by  Agent  or its  counsel  to be
certified by appropriate corporate officers or Governmental Authorities;

(3) no act,  condition or event shall have  occurred in the assets,  business or
prospects  of  Borrower  or  Obligor  since  the date of  Agent's  latest  field
examination which has or is reasonably likely to have a Material Adverse Effect;

(4) Agent shall have  completed a field review of the  Borrower's  reporting and
record keeping methods,  Records and such other  information with respect to the
Collateral  as Agent may  require to  determine  the amount of  Revolving  Loans
available to Borrower,  the results of which shall be satisfactory to Agent, not
more than three (3) Business Days prior to the date hereof;

(5) Agent shall have received, in form and substance  satisfactory to Agent, all
consents,  waivers,  acknowledgements  and other  agreements  from third persons
which Lender may deem  necessary  or  desirable in order to permit,  protect and
perfect its security interests in and liens upon the Collateral or to effectuate
the provisions or purposes of this Agreement and the other Financing Agreements,
including  acknowledgements  by lessors,  mortgagees and warehousemen of Agent's
security interests in the Collateral,  waivers or subordinations by such persons
of any  security  interests,  liens  or  other  claims  by such  persons  to the
Collateral  and agreements  permitting  Agent access to, and the right to remain
on, the premises to exercise its rights and remedies and otherwise deal with the
Collateral;

(6) Agent shall have received evidence of insurance and loss payee  endorsements
required  hereunder  and  under  the  other  Financing  Agreements,  in form and
substance  satisfactory to Agent, and certificates of insurance  policies and/or
endorsements naming Agent as first loss payee and additional insured as required
by Agent;

(7) the terms and conditions of the material  distribution  arrangements between
Borrower and Compaq Canada,  Hewlett Packard Canada,  Toshiba Canada,  Microsoft
and IBM Canada shall be satisfactory to Agent and its counsel;

(8) the  arrangements  for  termination  of Borrower's  existing  receivables
securitization  program and the satisfaction of Borrower's outstanding
obligations thereunder shall be satisfactory to Agent;

(9) Agent shall have  received,  in form and substance  satisfactory  to Lender,
such opinion letters of counsel to Borrower and the Obligors with respect to the
Financing Agreements and such other matters as Agent may request;

(10) the other Financing  Agreements and all instruments and documents hereunder
and thereunder shall have been duly executed and delivered to Agent, in form and
substance satisfactory to Lender;

(11)  the  Excess  Availability  as  determined  by  Agent  shall  be  at  least
$25,000,000  after giving  effect to the initial  Revolving  Loans and Letter of
Credit Accommodations made or to be made hereunder;

(12) Agent shall have  received,  in form and substance  satisfactory  to Agent,
evidence that Merisel, Inc. shall have (a) repurchased all of its outstanding 12
1/2% Senior  Notes due 2004 (the "Senior  Notes") or (b) received the  necessary
consents from the holders of the Senior Notes  satisfactory to Agent required to
permit the  transactions  contemplated  hereby or (c)  deposited  with an escrow
agent satisfactory to Agent an amount equal to the outstanding  principal amount
of the Senior  Notes on or before the Closing Date plus any  repayment  premiums
and other amounts  required to retire the Senior Notes,  that such amounts to be
used for the sole purpose of funding the repurchase of Senior Notes and the cash
control and escrow  arrangements  satisfactory to Agent have been established or
(d) deposited an amount  sufficient to redeem or defease the outstanding  Senior
Notes pursuant to the terms of the indenture governing the Senior Notes; and

(13)  Borrower  shall have  established  the  Blocked  Accounts  and  drawcheque
arrangements and Agent shall have received,  in form and substance  satisfactory
to Agent,  all agreements with the depository banks and Borrower with respect to
such Blocked Account as Agent may require  pursuant to Section 6.3 hereof,  duly
authorized, executed and delivered by such depository banks and Borrower.

4.2      Conditions Precedent to All Loans and Letter of Credit Accommodations

         Each of the following is an additional condition precedent to Loans and
Letter of Credit  Accommodations  to Borrower,  including  the initial Loans and
Letter of  Credit  Accommodations  and any  future  Loans  and  Letter of Credit
Accommodations:

(1)  all  representations  and  warranties  contained  herein  and in the  other
Financing Agreements shall be true and correct in all material respects with the
same effect as though such  representations  and warranties had been made on and
as of the date of the making of each such Loan or providing  each such Letter of
Credit  Accommodation and after giving effect thereto (except to the extent such
representations  and warranties  relate to an earlier date, in which case,  such
representations  and  warranties  shall  be true  and  correct  in all  material
respects as of such earlier date);

(2) no Event of Default and no event or condition which,  with notice or passage
of time or both,  would  constitute  an Event of  Default,  shall  exist or have
occurred and be  continuing  on and as of the date of the making of such Loan or
providing  each such  Letter of Credit  Accommodation  and after  giving  effect
thereto; and

(3) no law, regulation,  order, judgment or decree of any Governmental Authority
shall exist  which,  and neither  Agent nor any Lender  shall have  received any
notice that any action, suit, investigation, litigation or proceeding is pending
or threatened in any court or before any  arbitrator or  Governmental  Authority
which (A) purports to enjoin,  prohibit,  restrain or  otherwise  affect (1) the
making of the Loans or the provision of Letter of Credit  Accommodations  or (2)
the consummation of the transactions  contemplated  pursuant to the terms hereof
of the Financing Agreements,  or (B) has or could reasonably be expected to have
a Material Adverse Effect.

Article 5
                              INTENTIONALLY DELETED

Article 6
                          COLLECTION AND ADMINISTRATION

6.1      Borrower's Loan Account

         Agent shall maintain one or more loan  account(s) on its books in which
shall be  recorded  (a) all  Loans,  Letter of Credit  Accommodations  and other
Obligations  and the  Collateral,  (b) all  payments  made  by or on  behalf  of
Borrower  and (c) all other  appropriate  debits and credits as provided in this
Agreement, including fees, charges, costs, expenses and interest. All entries in
the loan account(s) shall be made in accordance with Agent's customary practices
as in effect from time to time.

6.2      Statements

         Agent shall render to Borrower each month a statement setting forth the
balance in the  Borrower's  loan  account(s)  maintained  by Agent for  Borrower
pursuant to the provisions of this  Agreement,  including  principal,  interest,
fees,  costs and  expenses.  Each such  statement  may be subject to  subsequent
adjustment by Agent and notice of such adjustment shall be given to Borrower but
each such statement  shall,  absent manifest errors or omissions,  be considered
correct and deemed accepted by Borrower and  conclusively  binding upon Borrower
as an account  stated except to the extent that Agent  receives a written notice
from Borrower of any specific  exceptions of Borrower thereto within thirty (30)
days after the date such statement has been deemed to have been given or made by
Agent in  accordance  with  Section  13.2.  Until such time as Agent  shall have
rendered  to Borrower a written  statement  as  provided  above,  the balance in
Borrower's loan account(s) shall be presumptive  evidence of the amounts due and
owing to Agent by Borrower.

6.3      Collection of Accounts

(1) Borrower shall establish and maintain,  at its expense,  blocked accounts or
lockboxes and related blocked accounts (in either case, "Blocked Accounts"),  as
Agent may specify,  and Agent may  establish and maintain bank accounts of Agent
("Payment  Accounts")  in each case with such banks as are  acceptable  to Agent
into which Borrower  shall, in accordance  with Agent's  instructions,  promptly
deposit and direct its account  debtors that remit payments by electronic  funds
transfers  to  directly  remit,  all  payments  on  Accounts  and  all  payments
constituting  proceeds of Inventory or other Collateral in the identical form in
which such payments are made, whether by cash, cheque or other manner. The banks
at which the Blocked Accounts are established shall enter into an agreement,  in
form and substance  satisfactory to Agent,  providing that all items received or
deposited  in the Blocked  Accounts are subject to the first  priority  security
interest of Agent, that the depository bank has no lien upon, or right to setoff
against the Blocked  Accounts,  the items received for deposit  therein,  or the
funds from time to time on deposit  therein  and that the  depository  bank will
wire, or otherwise  transfer,  on a daily basis after receipt of written  notice
from Agent, in immediately available funds, all funds received or deposited into
the Blocked Accounts to the Payment Accounts or such other bank account of Agent
as Agent may from time to time designate for such purpose.  Borrower agrees that
all  payments  made to such  Blocked  Accounts  shall be  subject  to the  first
priority  security  interest of Agent and that all payments made to such Payment
Accounts or other funds received and collected by Agent, whether on the Accounts
or as  proceeds of  Inventory  or other  Collateral  or  otherwise  shall be the
property of Agent.

(2)  From the date of this  Agreement  and  until  such  time as the Four  Month
Average  calculated by Agent is at least  $20,000,000 and provided that no Event
at Default has occurred and is  continuing  and no event,  act, or condition has
occurred which has or is reasonably  likely to have a Material  Adverse  Effect,
Agent shall  instruct  the  depository  banks at which the  Blocked  Accounts of
Borrower are  maintained to transfer all funds  received or deposited  into such
Blocked  Accounts to the Payment  Account at any time that there are outstanding
Loans  made  to or  Letters  of  Credit  Accommodations  provided  to  Borrower.
Thereafter,  Agent  shall  instruct  the  depository  banks at which the Blocked
Accounts of Borrower  are  maintained  to transfer  the funds on deposit in such
Blocked  Accounts to such operating bank account of Borrower as the Borrower may
specify in writing to Agent until such time as Agent shall notify the depository
bank  otherwise.  Agent may from time to time further  instruct  the  depository
banks at which the Blocked  Accounts of Borrower are  maintained to transfer all
funds received or deposited into such Blocked Accounts to the Payment Account at
any time  that the  there  are  outstanding  Loans  made to, or Letter of Credit
Accommodations  provided for,  Borrower,  if any of the following have occurred:
(i) an Event of Default shall exist or have occurred and be continuing,  or (ii)
the Four Month  Average  calculated by Agent is less than  $20,000,000  or (iii)
Excess  Availability  is  less  than  $20,000,000  for  a  period  of  ten  (10)
consecutive  days or (iv) Excess  Availability  is less than  $10,000,000 on any
day. For the purposes of this Section  6.3(2),  "Four Month  Average"  means the
quotient of (x) the sum of the Monthly  Average for each fiscal month during any
period of four (4) consecutive months divided by (y) four (4). "Monthly Average"
means the average daily Excess Availability during any fiscal month.

(3) For purposes of calculating  the amount of the Loans  available to Borrower,
such  payments  will be  applied  (conditional  upon  final  collection)  to the
Obligations  on the  Business Day of receipt by Agent of  immediately  available
funds in the Payment  Account  provided  such  payments  and notice  thereof are
received in accordance  with Agent's usual and customary  practices as in effect
from time to time and within  sufficient time to credit  Borrower's loan account
on such day,  and if not,  then on the next  business  day.  For the purposes of
calculating  interest on the Obligations,  such payments or other funds received
will be applied  (conditional  upon final  collection) to the Obligations on the
date of receipt of immediately  available  funds by Agent in the Payment Account
provided  such  payments  or other  funds and notice  thereof  are  received  in
accordance with Agent's usual and customary  practices as in effect from time to
time and within  sufficient time to credit  Borrower's loan account on such day,
and if not, then on the next Business Day.

(4) Borrower and all of its affiliates, subsidiaries,  shareholders,  directors,
employees or agents  shall,  acting as trustee for Agent and  Lenders,  receive,
subject to the first priority security  interest of Agent, any monies,  cheques,
notes,  drafts or any other payment  relating to and/or  proceeds of Accounts or
other  Collateral  which come into their  possession  or under their control and
immediately  upon  receipt  thereof,  shall  deposit  or  cause  the  same to be
deposited  in the  Blocked  Accounts,  or remit the same or cause the same to be
remitted,  in kind, to Agent to the extent Borrower would be required to deposit
same in Blocked  Accounts or remit same to Agent under this  Agreement  provided
that  Borrower  may  transfer  funds in Blocked  Accounts as provided in Section
6.3(2).  In no event shall the same be commingled  with Borrower's own funds not
held in the Blocked  Accounts.  Borrower agrees to reimburse Agent on demand for
any amounts owed or paid to any bank at which a Blocked  Account is  established
or any other bank or person  involved  in the  transfer  of funds to or from the
Blocked Accounts arising out of Agent's payments to or  indemnification  of such
bank or person.  The obligation of Borrower to reimburse  Agent for such amounts
pursuant to this Section 6.3 shall survive the  termination  or  non-renewal  of
this Agreement.

6.4      Payments

(1) All  Obligations  shall be payable to the  Payment  Account as  provided  in
Section 6.3 or such other place as Agent may designate from time to time.  Agent
shall apply  payments  received or collected from Borrower or Obligor or for the
account of  Borrower  (including  the  monetary  proceeds of  collections  or of
realization upon any Collateral) as follows: first, to pay any fees, indemnities
or expense reimbursements then due to Agent or any Lender from Borrower; second,
to pay  interest due in respect of any Loans;  third,  to pay  principal  due in
respect of the Loans;  fourth, to pay or prepay any other Obligations whether or
not then due,  in such  order and  manner as Agent  determines.  Notwithstanding
anything to the  contrary  contained  in this  Agreement,  unless so directed by
Borrower,  or unless an Event of Default  shall  exist or have  occurred  and be
continuing,  Agent and Lenders shall not apply any payments which it receives to
any Eurodollar  Rate Loans,  except (i) on the  expiration  date of the Interest
Period  applicable to any such  Eurodollar Rate Loans, or (ii) in the event that
there are no  outstanding  Prime Rate Loans.  At Agent  option,  all  principal,
interest, fees, costs, expenses and other charges provided for in this Agreement
or the other Financing Agreements may be charged directly to the loan account(s)
of  Borrower.  To the  extent  Agent or any  Lender  receives  any  payments  or
collections  in respect of the  Obligations  in a currency  other than  Canadian
Dollars or US  Dollars,  Agent may,  at its option  (but is not  obligated  to),
convert such other currency to Canadian  Dollars or US Dollars at the conversion
rate on such date and in such market as Agent may reasonably select  (regardless
of whether such rate is the best available  rate).  Borrower shall pay the costs
of such  conversion (or Agent may, at its option,  charge such costs to the loan
account of Borrower maintained by Agent).  Payments and collections  received in
any currency other than the currency in which any  outstanding  Obligations  are
denominated will be accepted and/or applied at the discretion of Agent. At Agent
option,  all  principal,  interest,  fees,  costs,  expenses  and other  charges
provided for in this Agreement or the other Financing  Agreements may be charged
directly to the loan account(s) of Borrower. Borrower shall make all payments to
Agent and Lenders free and clear of, and without deduction or withholding for or
on account of, any setoff, counterclaim or defense of any kind.

(2) If after receipt of any payment of, or proceeds of Collateral applied to the
payment of, any of the Obligations, Agent or any Lender is required to surrender
or return  such  payment or  proceeds  to any Person  for any  reason,  then the
Obligations  intended  to be  satisfied  by such  payment or  proceeds  shall be
reinstated  and continue  and this  Agreement  shall  continue in full force and
effect as if such payment or proceeds had not been received by Lender.  Borrower
shall be liable to pay to Agent and Lenders and does hereby  indemnify  and hold
Agent  and  Lenders  harmless  for  the  amount  of  any  payments  or  proceeds
surrendered  or  returned to the extent  that such  Obligations  are not validly
reinstated   and   collectible.   This  Section  6.4  shall   remain   effective
notwithstanding  any  contrary  action  which may be taken by Lender in reliance
upon such payment or proceeds. This Section 6.4 shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.

6.5      Taxes.

(1) Any and all  payments  by or on behalf of Borrower  hereunder  and under any
other Financing Agreement shall be made, in accordance with Section 6.4 free and
clear of and without deduction for any and all Taxes, excluding (i) income taxes
imposed on the net income of any Lender (or any  transferee  or assignee of such
Lender,  including  any  Participant,  any such  transferee  or  assignee  being
referred to as a  "Transferee"),  and (ii)  capital,  franchise or similar taxes
imposed on or determined by reference to the net income or capital of any Lender
(or Transferee), in each case by Canada or by the jurisdiction under the laws of
which such Lender (or Transferee) (A) is organized or any political  subdivision
thereof, or (B) has its applicable lending office located. In addition, Borrower
agrees  to  pay  to the  relevant  Governmental  Authority  in  accordance  with
applicable law any Other Taxes.

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

(i)    the sum payable  shall be  increased  as necessary so
       that  after  making  all  required   deductions   and
       withholdings  (including  deductions and withholdings
       applicable  to  additional  sums  payable  under this
       Section)  such  Lender  (or  Agent on  behalf of such
       Lender)  receives an amount equal to the sum it would
       have received had no such  deductions or withholdings
       been made;

(ii)     Borrower shall make such deductions and withholdings;

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

(iv)     to the extent not paid to Agent and Lenders  pursuant
         to clause (i) above,  the Borrower  shall also pay to
         Agent or any  Lender,  at the time  interest is paid,
         all  additional  amounts  which  Agent or any  Lender
         specifies  as  necessary  to preserve  the  after-tax
         yield such Lender  would have  received if such Taxes
         had not been imposed.

(3) Within  thirty  (30) days after the date of any payment by Borrower of Taxes
or Other Taxes, upon Agent request, Borrower shall furnish to Agent the original
or a certified copy of a receipt evidencing  payment thereof,  or other evidence
of payment reasonably satisfactory to Agent.

(4) Borrower will  indemnify  Agent and each Lender or  Transferee  for the full
amount of Taxes and Other Taxes paid by Agent or such Lender (or Transferee,  as
applicable).  If Agent or such Lender  receives a refund in respect of any Taxes
or Other  Taxes for which  Lender (or  Transferee)  has  received  payment  from
Borrower  hereunder,  shall credit to the loan account of Borrower the amount of
such  refund plus any  interest  received  (but only to the extent of  indemnity
payments  made, or additional  amounts paid, by Borrower  under this Section 6.5
with respect to the Taxes (to the extent lender  determines  that such refund is
allocable  to such  Taxes or Other  Taxes) or Other  Taxes  giving  rise to such
refund).

(5) Borrower  shall not be required to indemnify any  Non-Canadian  Lender or to
pay any additional  amounts to any  Non-Canadian  Lender,  in respect of federal
withholding  tax pursuant to subsections (1) or (3) above to the extent that the
(i) the  obligation  to  withhold  amounts  with  respect  to  Canadian  federal
withholding  tax was  applicable on the date such  Non-Canadian  Lender became a
party to this Agreement (or, in the case of a Transferee  that is a Participant,
on the date such  Participant  became a Transferee  hereunder)  or,  that,  this
subsection (4) shall not apply (A) to any  Transferee  that becomes a Transferee
as a result of an assignment, participation, transfer or designation made at the
request of Borrower.

6.6      Authorization to Make Loans

         Agent and each Lender is  authorized  to make the Loans and provide the
Letter of Credit  Accommodations  (a) based upon written  instructions  received
from anyone  purporting to be an officer of Borrower or other person  authorized
in writing by Borrower or (b) at the discretion of Agent, in accordance with the
provisions  of this  Agreement,  if such  Loans are  necessary  to  satisfy  any
Obligations. All requests for Loans or Letter of Credit Accommodations hereunder
shall specify the date on which the requested advance is to be made or Letter of
Credit  Accommodations  established  (which day shall be a business day) and the
amount of the requested Loan. Requests received after 12:00 noon Toronto time on
any day shall be deemed to have been made as of the  opening of  business on the
immediately   following   Business   Day.   All  Loans  and   Letter  of  Credit
Accommodations under this Agreement shall be conclusively  presumed to have been
made to, and at the request of and for the benefit of,  Borrower when  deposited
to the credit of Borrower or otherwise  disbursed or  established  in accordance
with the instructions of Borrower or in accordance with the terms and conditions
of this Agreement.

6.7      Use of Proceeds

         Borrower  shall  use the  initial  proceeds  of the Loans  provided  by
Lenders to  Borrower  hereunder  only for:  (a)  payments to each of the persons
listed in the disbursement direction letter furnished by Borrower to Agent on or
about the Closing Date and (b) costs,  expenses and fees in connection  with the
preparation, negotiation, execution and delivery of this Agreement and the other
Financing  Agreements.  All other Loans made or Letter of Credit  Accommodations
provided by Lenders to Borrower  pursuant to the provisions hereof shall be used
by  Borrower  only for  general  operating,  working  capital  and other  proper
corporate purposes of Borrower not otherwise prohibited by the terms hereof.

6.8      Pro Rata Treatment.

         Except to the extent  otherwise  provided  in this  Agreement:  (a) the
making and  conversion  of Loans shall be made among the Lenders  based on their
respective  Pro Rata Shares as to the Loans,  and (b) each payment on account of
any  Obligations  to or for the  account of one or more of Lenders in respect of
any  Obligations  due on a particular  day shall be allocated  among the Lenders
entitled to such payments based on their respective Pro Rata Shares and shall be
distributed accordingly.

6.9      Sharing of Payments, Etc.
(1) Borrower  agrees that, in addition to (and without  limitation of) any right
of setoff, banker's lien or counterclaim any Agent or Lender may otherwise have,
each  Lender  shall be  entitled,  at its option  when an Event of  Default  has
occurred and is existing hereof (but subject, as among Agent and Lenders, to the
provisions of Section 12.3(2)), to offset balances held by it for the account of
Borrower at any of its offices, in dollars or in any other currency, against any
principal  of or interest  on any Loans owed to such Lender or any other  amount
payable  to such  Lender  hereunder,  that is not paid when due  (regardless  of
whether such balances are then due to Borrower), in which case it shall promptly
notify Borrower and Agent thereof; provided, that, such Lender's failure to give
such notice  shall not affect the  validity  thereof.  If any Lender  (including
Agent) shall obtain from Borrower payment of any principal of or interest on any
Loan owing to it or payment of any other amount  under this  Agreement or any of
the other  Financing  Agreements  through  the  exercise of any right of setoff,
banker's lien or  counterclaim  or similar  right or otherwise  (other than from
Agent as provided herein),  and, as a result of such payment,  such Lender shall
have received more than its Pro Rata Share of the principal of the Loans or more
than its  share of such  other  amounts  then due  hereunder  or  thereunder  by
Borrower  to such  Lender  than the  percentage  thereof  received  by any other
Lender,  it shall promptly pay to Agent, for the benefit of Lenders,  the amount
of  such  excess  and   simultaneously   purchase  from  such  other  Lenders  a
participation  in the Loans or such other amounts,  respectively,  owing to such
other  Lenders  (or  such  interest  due  thereon,  as the  case may be) in such
amounts,  and  make  such  other  adjustments  from  time to time  as  shall  be
equitable,  to the end that all  Lenders  shall share the benefit of such excess
payment (net of any expenses that may be incurred by such Lender in obtaining or
preserving  such excess  payment) in accordance  with their  respective Pro Rata
Shares or as  otherwise  agreed by Lenders.  To such end all Lenders  shall make
appropriate adjustments among themselves (by the resale of participation sold or
otherwise) if such payment is rescinded or must otherwise be restored.

(2)  Borrower  agrees that any Lender so  purchasing  such a  participation  (or
direct  interest) may exercise,  in a manner  consistent with this Section,  all
rights of setoff,  banker's lien, counterclaim or similar rights with respect to
such  participation  as fully as if such Lender were a direct holder of Loans or
other  amounts  (as the case may be) owing to such  Lender in the amount of such
participation.

(3) Nothing contained herein shall require any Lender to exercise any such right
or shall affect the right of any Lender to exercise,  and retain the benefits of
exercising,  any such right with respect to any other Indebtedness or obligation
of Borrower.  If, under any applicable  bankruptcy,  insolvency or other similar
law,  any  Lender  receives  a secured  claim in lieu of a setoff to which  this
Section  applies,  such Lender  shall,  to the extent  practicable,  assign such
rights to Agent for the  benefit of Lenders  and,  in any  event,  exercise  its
rights in respect of such secured claim in a manner  consistent  with the rights
of Lenders  entitled under this Section to share in the benefits of any recovery
on such secured claim.

6.10     Settlement Procedures

(a)      In order to  administer  the Credit  Facility in an  efficient
         manner and to minimize the transfer of funds between Agent and
         Lenders, Agent may, subject to the terms of this Section, make
         available,  on behalf of Lenders, the full amount of the Loans
         requested  or  charged  to  Borrower's   loan   account(s)  or
         otherwise  to be  advanced  by Lenders  pursuant  to the terms
         hereof,  without any requirement of prior notice to Lenders of
         the proposed Loans.

(b)  With respect to all Loans made by Agent on behalf of Lenders as provided in
     this Section, the amount of each Lender's Pro Rata Share of the outstanding
     Loans shall be computed weekly, and shall be adjusted upward or downward on
     the basis of the amount of the  outstanding  Loans as of 5:00 p.m.  Toronto
     time on the Business Day immediately  preceding the date of each settlement
     computation; provided, that Agent retains the absolute right at any time or
     from time to time to make the above described adjustments at intervals more
     frequent  than weekly,  but in no event more than twice in any week.  Agent
     shall deliver to each of the Lenders after the end of each week, or at such
     lesser period or periods as Agent shall determine,  a summary  statement of
     the amount of outstanding Loans for such period (such week or lesser period
     or periods being hereinafter referred to as a "Settlement  Period"). If the
     summary  statement  is sent by Agent and received by a Lender prior to 2:00
     p.m.  Toronto  time,  then such Lender shall make the  settlement  transfer
     described  in this  Section by no later than 2:00 p.m.  Toronto time on the
     next Business Day  following the date of receipt.  If, as of the end of any
     Settlement  Period,  the  amount  of a  Lender's  Pro  Rata  Share  of  the
     outstanding  Loans  is more  than  such  Lender's  Pro  Rata  Share  of the
     outstanding  Loans as of the end of the previous  Settlement  Period,  then
     such Lender shall  forthwith (but in no event later than the time set forth
     in  the  preceding   sentence)  transfer  to  Agent  by  wire  transfer  in
     immediately available funds the amount of the increase.  Alternatively,  if
     the amount of a Lender's  Pro Rata  Share of the  outstanding  Loans in any
     Settlement  Period is less than the amount of such  Lender's Pro Rata Share
     of the outstanding Loans for the previous  Settlement  Period,  Agent shall
     forthwith transfer to such Lender by wire transfer in immediately available
     funds the amount of the decrease.  The obligation of each of the Lenders to
     transfer such funds and effect such  settlement  shall be  irrevocable  and
     unconditional and without recourse to or warranty by Agent.  Agent and each
     Lender  agrees to mark its books and records at the end of each  Settlement
     Period to show at all times the dollar  amount of its Pro Rate Share of the
     outstanding  Loans and Letter of Credit  Accommodations.  Each Lender shall
     only be entitled to receive  interest on its Pro Rata Share of the Loans to
     the extent such Loans have been funded by such Lender. Because the Agent on
     behalf of Lenders may be advancing  and/or may be repaid Loans prior to the
     time when  Lenders  will  actually  advance  and/or be repaid  such  Loans,
     interest  with respect to Loans shall be  allocated by Agent in  accordance
     with the amount of Loans actually advanced by and repaid to each Lender and
     the Agent and shall  accrue from and  including  the date such Loans are so
     advanced to but excluding the date such Loans are either repaid by Borrower
     or  actually  settled  with the  applicable  Lender  as  described  in this
     Section.

(c)  To the  extent  that  Agent  has made any such  amounts  available  and the
     settlement  described above shall not yet have occurred,  upon repayment of
     any Loans by Borrower,  Agent may apply such amounts repaid directly to any
     amounts made  available by any Agent  pursuant to this Section.  In lieu of
     weekly or more  frequent  settlements,  Agent may at any time  require each
     Lender to provide Agent with immediately  available funds  representing its
     Pro Rata Share of each Loan,  prior to Agent  disbursement  of such Loan to
     Borrower.  In such event,  all Loans under this Agreement  shall be made by
     the Lenders simultaneously and proportionately to their Pro Rata Shares. No
     Lender  shall be  responsible  for any  default by any other  Lender in the
     other Lender's  obligation to make a Loan requested hereunder nor shall the
     Commitment  of any  Lender be  increased  or  decreased  as a result of the
     default by any other Lender in the other Lender's obligation to make a Loan
     hereunder.

(d)  If Agent is not  funding a  particular  Loan to  Borrower  pursuant to this
     Section  above on any day,  Agent may  assume  that each  Lender  will make
     available to Agent such  Lender's  Pro Rata Share of the Loan  requested or
     otherwise made on such day and Agent may, in its discretion,  but shall not
     be  obligated  to,  cause a  corresponding  amount to be made  available to
     Borrower on such day. If Agent makes such corresponding amount available to
     such Borrower and such  corresponding  amount is not in fact made available
     to  Agent  by  such  Lender,  Agent  shall  be  entitled  to  recover  such
     corresponding  amount on demand from such  Lender  together  with  interest
     thereon for each day from the date such payment was due until the date such
     amount is paid to Agent at the  Interest  Rate.  During the period in which
     such   Lender   has  not  paid   such   corresponding   amount   to  Agent,
     notwithstanding anything to the contrary contained in this Agreement or any
     of the other  Financing  Agreements,  the  amount so  advanced  by Agent to
     Borrower shall,  for all purposes  hereof,  be a Loan made by Agent for its
     own account.  Upon any such  failure by a Lender to pay Agent,  Agent shall
     promptly  thereafter  notify  Borrower of such failure and  Borrower  shall
     immediately pay such  corresponding  amount to Agent for its own account. A
     Lender  who  fails to pay  Agent  its Pro  Rata  Share  of any  Loans  made
     available by the Agent on such Lender's behalf,  or any Lender who fails to
     pay any other amount owing by its Agent,  is a "Defaulting  Lender".  Agent
     shall not be obligated to transfer to a Defaulting Lender any payments made
     by or on behalf of  Borrower  or any  Obligor  to 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  Agent.  Agent  may hold  and,  in its
     discretion,  relend to Borrower the amount of all such payments received or
     retained by it for the account of such Defaulting  Lender.  For purposes of
     voting or  consenting  to matters  with respect to this  Agreement  and the
     other Financing Agreements and determining Pro Rata Shares, such Defaulting
     Lender  shall be deemed not to be a "Lender" and such  Lender's  Commitment
     shall be deemed to be zero (0).  This Section shall remain  effective  with
     respect to a Defaulting  Lender until such default is cured.  The operation
     of this Section shall not be construed to increase or otherwise  affect the
     Commitment of any Lender,  or relieve or excuse the performance by Borrower
     or Obligor of their duties and obligations hereunder.

(e)   Nothing in this Section or elsewhere in this  Agreement or the
      other Financing Agreements shall be deemed to require Agent to
      advance funds on behalf of any Lender or to relieve any Lender
      from its obligation to fulfill its Commitment  hereunder or to
      prejudice any rights that Borrower may have against any Lender
      as a  result  of  any  default  by  any  Lender  hereunder  in
      fulfilling its Commitment.

Article 7
                       COLLATERAL REPORTING AND COVENANTS

7.1      Collateral Reporting

         Borrower  shall provide  Agent with the  following  documents in a form
satisfactory to Lender:

(a)      with respect to Accounts:

(i)    summary  aged  trial  balance  of  Accounts  for  all
       customers  with  Account  balances  in  excess of the
       Canadian Dollar Amount of $1,000,000 by due date on a
       weekly basis as of the last Business Day of each week
       by the second Business Day of the next week;

(ii)   an  aggregate  aged balance of Accounts for all other
       customers  by due  date on a  weekly  basis as of the
       last Business Day of each week by the second Business
       Day of the next week;

(iii)  a summary aged trial  balance for all  customers on a
       monthly  basis  as of the  last  Business  Day of the
       preceding  month within 20 days after the end of each
       month;

(iv)   a roll forward of Accounts which includes total daily
       sales,   total  daily   credits,   total  daily  cash
       applications  and total  daily  write-offs  as of the
       close of business of the  preceding  Business  Day by
       11:00 a.m. each Business Day; and

(v)    a listing of all credit  notes for  amounts in excess
       of the Canadian Dollar Amount of $500,000 on a weekly
       basis to the extent not  previously  provided  by the
       second Business Day of each week.

(b)      on a monthly  basis within  twenty (20) days after the end of each
         month end or more  frequently  as Agent may request:

(i)      perpetual Inventory reports;

(ii)     Inventory reports by category, location, vendor aging and average
         costs;

(iii)    summary aged trial balance of accounts payable based on invoice date;

(iv)     Priority Payables report by category and amount;

(v)      Inventory obsolescence report; and

(vi)     general ledger trial balance of Borrower  (except for
         the last month of each fiscal quarter) and such other
         amount as Agent may  reasonably  request with respect
         to Borrower's general ledger accruals.

(c)       a listing of Inventory  subject to any purchase money security
          interest  by vendor and average  cost on a weekly  basis as of
          the last Business Day of each week by the second  Business Day
          of the next week.

(d)      upon Agent's reasonable request:

(i)      copies of customer  statements  and credit memos,  remittance  advices
         and reports,  and copies of deposit slips and bank statements;

(ii)     copies of shipping and delivery documents; and

(iii)    copies of  purchase  orders,  invoices  and  delivery
         documents for  Inventory  and  Equipment  acquired by
         Borrower.

(e)      such  other  reports  as to  the  Collateral  as  Agent  shall
         reasonably  request  from time to time.  If any of  Borrower's
         records  or  reports  of  the   Collateral   are  prepared  or
         maintained by an accounting  service,  contractor,  shipper or
         other  agent,  Borrower  hereby  irrevocably  authorizes  such
         service, contractor, shipper or agent to deliver such records,
         reports,  and related documents to Agent and to follow Agent's
         instructions with respect to further services at any time that
         an Event of Default exists or has occurred and is continuing.

7.2      Accounts Covenants

(a)  Borrower  shall  notify  Agent  promptly  of:  (a) any  material  delay  in
     Borrower's  performance of any of its  obligations to any account debtor or
     the  assertion of any claims,  offsets,  defenses or  counterclaims  by any
     account debtor,  or any disputes with account  debtors,  or any settlement,
     adjustment  or  compromise  thereof,  in each case,  involving an amount in
     excess of the  Canadian  Dollar  Amount of $500,000 in  aggregate,  (b) all
     information  relating  to  a  material  adverse  change  in  the  financial
     condition  of any  account  debtor  with an  Account  balance  in excess of
     $500,000 to the extent known to Borrower and (c) any event or  circumstance
     which,  to  Borrower's  knowledge  would cause  Agent to consider  any then
     existing  Account in an amount in excess of the Canadian  Dollar  Amount of
     $500,000  as  no  longer  constituting  an  Eligible  Account.  No  credit,
     discount,  allowance or extension  or  agreement  for any of the  foregoing
     shall be granted to any account debtor without Agent's  consent,  except in
     the ordinary course of Borrower's business in accordance with practices and
     policies  previously  disclosed in writing to Agent. So long as no Event of
     Default  exists or has occurred and is  continuing,  Borrower shall settle,
     adjust or compromise any claim,  offset,  counterclaim  or dispute with any
     account debtor. At any time that an Event of Default exists or has occurred
     and is continuing,  Agent shall, at its option, have the exclusive right to
     settle,  adjust or compromise any claim,  offset,  counterclaim  or dispute
     with account debtors or grant any credits, discounts or allowances.

(b)  Without   limiting  the   obligation  of  Borrower  to  deliver  any  other
     information to Lender,  Borrower shall promptly  report to Agent any return
     of Inventory by any one account debtor if the Inventory so returned in such
     case has a value in  excess of  $500,000.  At any time  that  Inventory  is
     returned,  reclaimed or repossessed to or for the account of Borrower,  the
     Account (or portion  thereof)  which arose from the sale of such  returned,
     reclaimed or repossessed Inventory shall not be deemed an Eligible Account.
     In the event any account debtor returns  Inventory when an Event of Default
     under Section 10.1(1)(a) exists or has occurred and is continuing, Borrower
     shall, upon Agent's request, not issue any credits, discounts or allowances
     with respect  thereto  without  Agent's prior written consent except to the
     extent that Borrower is obligated to do so pursuant to  agreements  entered
     into with such account  debtor in the ordinary  course of business prior to
     the occurrence of or such Event of Default.

(c)  With respect to each Eligible Account: (a) the amounts shown on any invoice
     delivered to Agent or schedule thereof delivered to Agent shall be true and
     complete, (b) no payments shall be made thereon except payments immediately
     delivered to Agent or Borrower  pursuant to Section 6.3 of this  Agreement,
     (c) no credit, discount, allowance or extension or agreement for any of the
     foregoing  shall be granted to any  account  debtor  except as  reported to
     Agent in accordance with this Agreement and except for credits,  discounts,
     allowances or extensions made or given in the ordinary course of Borrower's
     business in accordance with practices and policies previously  disclosed to
     Lender,  (d) there  shall be no  setoffs,  deductions,  contras,  defences,
     counterclaims or disputes  existing or asserted with respect thereto except
     as reported to Agent in  accordance  with the terms of this  Agreement  (e)
     none of the  transactions  giving rise thereto will violate any  applicable
     federal or  provincial  laws or  regulations,  all  documentation  relating
     thereto will be legally  sufficient under such laws and regulations and all
     such  documentation  will be legally  enforceable  in  accordance  with its
     terms,  subject  to  bankruptcy,  insolvency,  reorganization,  winding-up,
     moratorium  and  other  similar  laws  generally  affecting  the  rights of
     creditors  and the  fact  that  specific  performance  and  injunction  are
     equitable  remedies  available  only in the discretion of the court and the
     fact that a  Canadian  court  will  render  judgement  denominated  only in
     Canadian Dollars.

(d)   Agent  shall have the right at any time or times,  in the name
      of  a  nominee  of  Agent,  or  in  Agent's  name,  after  the
      occurrence  of an Event of  Default  to verify  the  validity,
      amount or any other  matter  relating  to any Account or other
      Collateral,  by mail,  telephone,  facsimile  transmission  or
      otherwise.

(e)   Upon Agent's  request,  Borrower  shall deliver or cause to be
      delivered  to  Agent,   with   appropriate   endorsement   and
      assignment,   with  full   recourse  to  Borrower   until  the
      Obligations are  indefeasibly  paid in full, all chattel paper
      and  instruments  which  Borrower  now owns or may at any time
      acquire promptly upon Borrower's  receipt  thereof,  except as
      Agent may otherwise agree.

(f)  Agent  may,  at any time or times  that an Event of  Default  exists or has
     occurred and is continuing,  (a) notify any or all account debtors that the
     Accounts  have  been  assigned  to Agent  and  that  Agent  has a  security
     interest, lien or hypothec therein and Agent may direct any or all accounts
     debtors to make payment of Accounts  directly to Agent, (b) extend the time
     of payment of,  compromise,  settle or adjust for cash,  credit,  return of
     merchandise  or otherwise,  and upon any terms or  conditions,  any and all
     Accounts  or other  obligations  included  in the  Collateral  and  thereby
     discharge  or release the  account  debtor or any other party or parties in
     any  way  liable  for  payment  thereof   without   affecting  any  of  the
     Obligations, (c) demand, collect or enforce payment of any Accounts or such
     other  obligations,  but  without any duty to do so, and Agent shall not be
     liable for its failure to collect or enforce  the  payment  thereof nor for
     the negligence of its agents or attorneys with respect thereto and (d) take
     whatever  other  action  Agent  may deem  necessary  or  desirable  for the
     protection  of its  interests.  At any time  that an Event of  Default  has
     occurred and is continuing, at Agent's request, all invoices and statements
     sent to any account  debtor  shall state that the  Accounts  and such other
     obligations  have been assigned to Agent and are payable  directly and only
     to Agent and Borrower  shall  deliver to Agent such  originals of documents
     evidencing  the sale and delivery of goods or the  performance  of services
     giving rise to any Accounts as Agent may require.

(g)    Borrower shall provide Agent with evidence  satisfactory to it
       within  30 days  after the  Closing  Date  that  Borrower  has
       established  a  transactional  coding system  satisfactory  to
       Agent.

7.3      Inventory Covenants

         With respect to the Inventory: (a) Borrower shall at all times maintain
inventory records reasonably satisfactory to Agent, keeping correct and accurate
records  itemizing  and  describing  the kind,  type,  quality  and  quantity of
Inventory,   Borrower's  cost  therefor  and  daily  withdrawals  therefrom  and
additions  thereto;  (b) Borrower shall conduct cycle counts in accordance  with
its current  practice  such that each stock  keeping  unit ("SKU") is counted at
least once each year,  but at any time or times as Agent may request on or after
an Event of Default,  and promptly  following  each such cycle  count,  Borrower
shall supply Agent with a report in the form and with such specificity as may be
reasonably satisfactory to Agent concerning such cycle count; (c) Borrower shall
not remove any  Inventory  from the  locations  set forth or  permitted  herein,
without  the prior  written  consent  of Agent,  except  for sales or returns of
Inventory in the ordinary  course of Borrower's  business and Inventory  that is
under  repair by a third party and except to move  Inventory  directly  from one
location  set forth or  permitted  herein to  another  such  location;  (d) upon
Agent's request, Borrower shall, at its expense, no more than once in any twelve
(12) month period,  but at any time or times as Agent may request on or after an
Event of Default,  deliver or cause to be delivered to Agent written  reports or
appraisals  as to the  Inventory in form,  scope and  methodology  acceptable to
Agent and by an appraiser acceptable to Agent,  addressed to Agent or upon which
Agent is expressly  permitted to rely; (e) Borrower  shall,  at its expense,  no
more than once as  directed by Agent in any three (3) month  period,  but at any
time or times as Agent may request on or after an Event of  Default,  deliver or
cause to be delivered to Agent written desktop appraisals as to the Inventory in
form, scope and methodology  acceptable to Agent and by an appraiser  acceptable
to Agent and upon which Agent is expressly permitted to rely; (f) Borrower shall
produce,  use,  store and maintain the Inventory,  with all reasonable  care and
caution and in  accordance  with  applicable  standards of any  insurance and in
conformity in all material  respects with applicable  laws; (g) Borrower assumes
all  responsibility  and liability  arising from or relating to the  production,
use, sale or other  disposition  of the  Inventory;  (h) Borrower shall keep the
Inventory  in good  and  marketable  condition  (ordinary  wear  and  tear,  and
defective or damaged Inventory upon receipt  excepted);  (i) Borrower shall not,
without  prior  written  notice to Agent,  acquire  or accept any  Inventory  on
consignment or approval; and (j) Borrower shall notify Agent in writing at least
ten (10) days in advance if it intends to acquire  Inventory  from Compaq Canada
Inc. or an Affiliate  thereof if such Inventory is not clearly  identifiable  as
Compaq product.

7.4      Equipment Covenants

         With respect to the Equipment:  (a) Borrower shall, at its expense,  at
any time or times as Agent may request on or after an Event of Default,  deliver
or cause to be  delivered  to Agent  written  reports  or  appraisals  as to the
Equipment in form, scope and methodology acceptable to Agent and by an appraiser
acceptable  to Agent;  (b)  Borrower  shall keep the  Equipment  in good  order,
repair,  running and marketable  condition as necessary to carry on its business
as currently conducted (ordinary wear and tear excepted); (c) Borrower shall use
the  Equipment  with all  reasonable  care and  caution and in  accordance  with
applicable standards of any insurance and in conformity in all material respects
with all  applicable  laws; (d) the Equipment is and shall be used in Borrower's
business and not primarily for personal,  family,  household or farming use; (e)
Borrower  shall  not  remove  any  Equipment  from the  locations  set  forth or
permitted herein,  except to the extent necessary to have any Equipment repaired
or  maintained  in the  ordinary  course of the  business of Borrower or to move
Equipment  directly  from one location set forth or permitted  herein to another
such  location and except for the movement of motor  vehicles used by or for the
benefit of Borrower in the ordinary  course of business  and obsolete  Equipment
not necessary for  Borrower's  business or Equipment  permitted to be sold under
Section 9.7; (f) the  Equipment  is now and shall remain  personal  property and
Borrower shall not permit any of the Equipment  having a book value in excess of
$250,000 to be or become a part of or affixed to real property; and (g) Borrower
assumes all responsibility and liability arising from the use of the Equipment.

7.5      Power of Attorney

         Borrower  hereby  irrevocably  designates  and appoints  Agent (and all
persons designated by Agent) as Borrower's true and lawful attorney-in-fact, and
authorizes Agent, in Borrower's or Agent's name, to: (a) at any time an Event of
Default  exists or has occurred and is continuing (i) demand payment on Accounts
or other  proceeds of Inventory  or other  Collateral,  (ii) enforce  payment of
Accounts by legal  proceedings  or otherwise,  (iii)  exercise all of Borrower's
rights and  remedies to collect any  Account or other  Collateral,  (iv) sell or
assign any Account upon such terms, for such amount and at such time or times as
the Agent deems advisable,  (v) settle, adjust,  compromise,  extend or renew an
Account,  (vi) discharge and release any Account,  (vii) prepare,  file and sign
Borrower's  name on any proof of claim in bankruptcy  or other similar  document
against an account  debtor,  (viii) to have  access to any postal box into which
Borrower's mail is deposited and to notify the post office authorities to change
the address for delivery of Borrower's  mail to an address  designated by Agent,
and open and dispose of all mail addressed to Borrower, and (ix) do all acts and
things  which are  necessary,  in Agent's  determination,  to fulfil  Borrower's
obligations  under this  Agreement and the other  Financing  Agreements and sign
Borrower's  name on any  verification of Accounts and notices thereof to account
debtors and (b) at any time an Event of Default  exists or has  occurred  and is
continuing or Agent's Cash Dominion  exists (i) to take control in any manner of
any item of payment or proceeds  thereof,  (ii) to have access to any lockbox of
Borrower, (iii) to endorse Borrower's name upon any items of payment or proceeds
thereof  and deposit the same in the  Agent's  account  for  application  to the
Obligations,  (iv) endorse  Borrower's  name upon any chattel  paper,  document,
instrument, invoice, or similar document or agreement relating to any Account or
any goods pertaining  thereto or any other Collateral,  and (c) execute and file
any PPSA or other  financing  statements  or  amendments  thereto  necessary  or
desirable  to protect  or  preserve  Agent's  security  interest  or lien in the
Collateral Agent;  provided that Agent shall provide Borrower with a copy of any
such filings.  Borrower  hereby  releases Agent and Lenders and their  officers,
employees and designees from any liabilities  arising from any act or acts under
this power of  attorney  and in  furtherance  thereof,  whether of  omission  or
commission,  except as a result of Agent's or Lender's own gross  negligence  or
wilful misconduct as determined  pursuant to a final  non-appealable  order of a
court of competent jurisdiction.

7.6      Right to Cure

         Agent may,  at its option,  (a) cure any default by Borrower  under any
agreement  with a third  party or pay or bond on  appeal  any  judgment  entered
against  Borrower  which  default has or could  reasonably be expected to have a
Material Adverse Effect, (b) discharge Taxes, liens, security interests or other
encumbrances  at any time levied on or existing  with respect to the  Collateral
that are not permitted  hereunder  and (c) pay any amount,  incur any expense or
perform any act which,  in Agent's  judgment,  is  necessary or  appropriate  to
preserve,  protect,  insure or maintain the  Collateral  and the rights of Agent
with respect  thereto.  Agent may add any amounts so expended to the Obligations
and charge Borrower's account therefor, such amounts to be repayable by Borrower
on demand.  Agent shall be under no obligation  to effect such cure,  payment or
bonding and shall not, by doing so, be deemed to have assumed any  obligation or
liability  of  Borrower.  Any payment  made or other action taken by Agent under
this  Section  shall be  without  prejudice  to any  right to assert an Event of
Default hereunder and to proceed accordingly.  Nothing in this Section 7.6 shall
limit Agent's right to exercise any remedy available to it under Section 10.2 if
an Event of Default has occurred.

7.7      Access to Premises

         From time to time as  requested  by Agent,  at the cost and  expense of
Borrower,  (a)  Agent or its  designee  shall  have  complete  access  to all of
Borrower's  premises  during normal business hours and after notice to Borrower,
or at any time and without  notice to Borrower if an Event of Default  exists or
has occurred and is continuing,  for the purposes of  inspecting,  verifying and
auditing the  Collateral  and all of  Borrower's  books and records,  including,
without  limitation,  the Records,  and (b) Borrower shall  promptly  furnish to
Agent such copies of such books and records or extracts  therefrom  as Agent may
request subject to the limitation that Agent shall be required to act reasonably
in making such request prior to the  occurrence of an Event of Default,  and (c)
use during  normal  business  hours  such of  Borrower's  personnel,  equipment,
supplies and premises as may be reasonably necessary for the foregoing and if an
Event of Default  exists or has occurred and is continuing for the collection of
Accounts and realization of other Collateral.

Article 8
                         REPRESENTATIONS AND WARRANTIES

         Borrower hereby  represents and warrants to Agent and Lenders as of the
Closing  Date and  each  making  of  Loans or  provision  of  Letter  of  Credit
Accommodations  hereunder the following  (which shall survive the Closing Date),
the  truth and  accuracy  of which in all  material  respects  are a  continuing
condition of the making of Loans and providing  Letter of Credit  Accommodations
by Lenders to Borrower:

8.1      Corporate Existence, Power and Authority; Subsidiaries

         Borrower is a corporation duly incorporated,  validly existing and duly
organized  under  the  laws of its  jurisdiction  of  incorporation  and is duly
qualified or  registered  as a foreign or  extra-provincial  corporation  in all
provinces,  states or other  jurisdictions  where the  nature  and extent of the
business  transacted by it or the  ownership of assets makes such  qualification
necessary,  except for those  jurisdictions  in which the  failure to so qualify
would  not  have  a  Material  Adverse  Effect.  The  execution,   delivery  and
performance  of this  Agreement  and, the other  Financing  Agreements  to which
Borrower is a party and the transactions  contemplated  hereunder and thereunder
are all within Borrower's  corporate  powers,  have been duly authorized and are
not in  contravention of law which  contravention  would have a Material Adverse
Effect or the terms of Borrower's  certificate  of  incorporation,  by-laws,  or
other organizational documentation,  or any indenture,  agreement or undertaking
to which  Borrower is a party or by which  Borrower or its  property  are bound.
This Agreement and the other Financing  Agreements  constitute legal,  valid and
binding obligations of Borrower  enforceable in accordance with their respective
terms subject to bankruptcy, insolvency, reorganization,  winding-up, moratorium
and other laws  affecting  the rights of  creditors  and the fact that  specific
performance  and  injunction  are  equitable  remedies  available  only  in  the
discretion of the court and the fact that a Canadian court will render  judgment
demonstrated only in Canadian  Dollars.  Borrower does not have any subsidiaries
except as set forth on the Information Certificate.
8.2      Financial Statements; No Material Adverse Change

         All financial  statements  relating to Borrower or Merisel,  Inc. which
have been or may  hereafter be delivered by Borrower to Agent have been prepared
in accordance  with GAAP or US GAAP, as the case may be, and fairly  present the
financial  condition and the results of operation of Borrower or Merisel,  Inc.,
as the case may be,  as at the  dates  and for the  periods  set  forth  therein
(provided that monthly or quarterly  statements  are subject to normal  year-end
adjustments  and may not  contain  footnotes  required  by GAAP or US  GAAP,  as
applicable).  Except as disclosed in any interim financial  statements furnished
by Borrower  to Lender  prior to the date of this  Agreement,  there has been no
event, condition or act which has had or is reasonably likely to have a Material
Adverse Effect, since the date of the most recent financial statements furnished
by Borrower to Agent prior to the date of this Agreement.

8.3      Chief Executive Office; Collateral Locations

         The  chief  executive   office  of  Borrower  and  Borrower's   Records
concerning Accounts are located only at the address set forth at the end of this
Agreement and its only other places of business and the only other  locations of
Collateral,  if any, are the addresses set forth in the Information Certificate,
subject to the right of Borrower to establish new  locations in accordance  with
Section 9.2 below. The Information  Certificate correctly identifies any of such
locations  which are not owned by  Borrower  and sets  forth the  owners  and/or
operators thereof.

8.4      Priority of Liens; Title to Properties

         The security  interests and liens granted to Agent,  for itself and the
ratable  benefit  of  Lenders,  under  this  Agreement  and the other  Financing
Agreements  constitute  valid and perfected  first  priority  liens and security
interests  in and upon the  Collateral  subject  only to the liens  indicated on
Schedule  8.4 hereto  (except to the extent that Agent  requires  the  discharge
thereof prior to the Closing Date) and the other liens  permitted  under Section
9.8  hereof.  Borrower  has good and  marketable  title to,  or valid  leasehold
interests  in, all of its  properties  and assets that are owned or leased by it
subject  to  no  liens,  mortgages,  pledges,  security  interests,   hypothecs,
encumbrances or charges of any kind,  except those granted to Agent,  for itself
and the ratable benefit of Lenders,  and such others as are specifically  listed
on Schedule 8.4 hereto  (except to the extent that Agent  requires the discharge
thereof prior to the Closing Date) or permitted under Section 9.8 hereof.

8.5      Tax Returns

         Borrower has filed,  or caused to be filed,  in a timely manner all tax
returns,  reports and declarations which are required to be filed by it (without
requests for extension except as previously  disclosed in writing to Agent). All
information  in such tax  returns,  reports and  declarations  is  complete  and
accurate in all material respects. To the best of Borrower's knowledge, Borrower
has paid or  caused  to be paid all Taxes due and  payable  or  claimed  due and
payable in any assessment received by it, except Taxes the validity of which are
being contested in good faith by appropriate  proceedings diligently pursued and
available to Borrower and with respect to which adequate  reserves have been set
aside on its books in accordance with GAAP. Adequate provision has been made for
the payment of all accrued and unpaid  federal,  provincial,  municipal,  local,
foreign  and other  Taxes  whether or not yet due and payable and whether or not
disputed.

8.6      Litigation

         Except as set forth on the Information Certificate,  there is as of the
date hereof no present  investigation by any governmental  agency pending, or to
the best of Borrower's knowledge threatened,  against or affecting Borrower, its
assets or  business  and there is no action,  suit,  proceeding  or claim by any
Person  pending,  or to the best of  Borrower's  knowledge  threatened,  against
Borrower or its assets or  goodwill,  or against or affecting  any  transactions
contemplated by this Agreement,  which if adversely  determined against Borrower
would reasonably be expected to have a Material Adverse Effect.

8.7      Compliance with Other Agreements and Applicable Laws

         Borrower is not in default  under,  or in violation of any of the terms
of, any agreement,  contract,  instrument, lease or other commitment to which it
is a party or by which it or any of its  assets  are  bound and  Borrower  is in
compliance with all applicable provisions of laws, rules, regulations, licenses,
permits,  approvals  and orders of any  foreign,  federal,  provincial  or local
Governmental Authority except in each case as set forth on Schedule 8.7 or where
such  default,  violation  or  non-compliance  does  not  have or  could  not be
reasonably expected to have a Material Adverse Effect.

8.8      Bank Accounts

         All of the deposit accounts,  investment  accounts or other accounts in
the  name of or used by  Borrower  maintained  at any  bank or  other  financial
institution  are set  forth on  Schedule  8.8  hereto,  subject  to the right of
Borrower to establish new accounts in accordance with Section 9.15 below.

8.9      Accuracy and Completeness of Information

         All  information  furnished  by or on behalf of  Borrower in writing to
Agent in connection with this Agreement or any of the other Financing Agreements
or any transaction contemplated hereby or thereby,  including all information on
the Information  Certificate is true and correct in all material respects on the
date as of which such  information  is dated or certified  and does not omit any
material fact necessary in order to make such  information not misleading in any
material  respect.  No event or circumstance has occurred which has had or could
reasonably  be expected  to have a Material  Adverse  Effect  which has not been
fully and accurately disclosed to Agent in writing.

8.10     Status of Pension Plans

         To the extent any Pension Plans are established  after the date hereof,
to the best knowledge of Borrower:

(1)  Each  of The  Pension  Plans  are  duly  registered  under  all  applicable
provincial pension benefits legislation.

(2) All obligations of Borrower (including  fiduciary,  funding,  investment and
administration  obligations)  required to be  performed in  connection  with the
Pension Plans or the funding agreements therefor have been performed in a timely
fashion.  There are no outstanding  material disputes concerning the assets held
pursuant to any such funding agreement.

(3) All contributions or premiums required to be made by Borrower to the Pension
Plans  have been made in a timely  fashion in  accordance  with the terms of the
Pension  Plans  and  applicable  laws  and   regulations,   other  than  current
contributions not in arrears.

(4) All employee  contributions  to the Pension Plans required to be made by way
of authorized  payroll  deduction  have been  properly  withheld by Borrower and
fully  paid into the  Pension  Plans in a timely  fashion,  other  than  current
contributions not in arrears.

(5) All reports and  disclosures  relating to the Pension Plans  required by any
applicable  laws or  regulations  have  been  filed or  distributed  in a timely
fashion other than current contributions not in arrears.

(6) There have been no improper withdrawals, or applications of, the assets of
any of the Pension Plans.

(7) No amount is owing by any of the  Pension  Plans  under the  Income  Tax Act
(Canada) or any provincial taxation statute.

(8) The Pension Plans which are not defined  contribution plans are fully funded
both on an ongoing basis and on a solvency  basis (using  actuarial  assumptions
and  methods  which are  consistent  with the  valuations  last  filed  with the
applicable  governmental  authorities  and which are  consistent  with generally
accepted  actuarial  principles)  as at the  date of the most  recent  actuarial
report filed with the applicable Governmental Authorities.

(9) Borrower, after diligent enquiry, has neither any knowledge, nor any grounds
for believing, that any of the Pension Plans is the subject of an investigation,
any other proceeding, an action or a claim. There exists no state of facts which
after notice or lapse of time or both could  reasonably be expected to give rise
to any such proceeding, action or claim.

8.11     Environmental Compliance

(1)  Borrower  has  not   generated,   used,   stored,   treated,   transported,
manufactured,  handled,  produced or disposed of any Hazardous Materials,  on or
off its  premises  (whether or not owned by it) in any manner  which at any time
violates any applicable Environmental Law or any license,  permit,  certificate,
approval or similar  authorization  thereunder  and the  operations  of Borrower
comply in all material  respects with all  Environmental  Laws and all licenses,
permits, certificates, approvals and similar authorizations thereunder except to
the extent any of  foregoing  have not or could not  reasonably  be  expected to
result in a Material Adverse Effect.

(2) There has been no investigation,  proceeding,  complaint,  order, directive,
claim, citation or notice by any governmental  authority or any other person nor
is any pending or to the best of Borrower's knowledge  threatened,  with respect
to any non-compliance with or violation of the requirements of any Environmental
Law by Borrower or the release, spill or discharge, threatened or actual, of any
Hazardous Material or the generation, use, storage,  treatment,  transportation,
manufacture,  handling, production or disposal of any Hazardous Materials or any
other  environmental,  health or safety  matter,  which affects  Borrower or its
business,  operations  or  assets  or  any  properties  at  which  Borrower  has
transported,  stored or disposed of any Hazardous Materials except to the extent
any of  foregoing  have not or could not  reasonably  be expected to result in a
Material Adverse Effect.

(3) Borrower has no material  liability  (contingent or otherwise) in connection
with a release,  spill or  discharge,  threatened  or actual,  of any  Hazardous
Materials  or  the  generation,   use,   storage,   treatment,   transportation,
manufacture,  handling, production or disposal of any Hazardous Materials except
to the extent any of foregoing  have not or could not  reasonably be expected to
result in a Material Adverse Effect.

(4)  Borrower  has all  licenses,  permits,  certificates,  approvals or similar
authorizations  required  to  be  obtained  or  filed  in  connection  with  the
operations of Borrower  under any  Environmental  Law and all of such  licenses,
permits, certificates, approvals or similar authorizations are valid and in full
force and effect  except to the extent  any of  foregoing  have not or could not
reasonably be expected to result in a Material Adverse Effect.

8.12     Survival of Warranties; Cumulative

         All representations  and warranties  contained in this Agreement or any
of the other  Financing  Agreements  shall survive the execution and delivery of
this  Agreement and shall be deemed to have been made again to Agent and Lenders
on the date of each additional borrowing or other credit accommodation hereunder
and shall be conclusively  presumed to have been relied on by Lender  regardless
of any  investigation  made or information  possessed by Agent and Lenders.  The
representations  and  warranties  set forth  herein shall be  cumulative  and in
addition to any other  representations or warranties which Borrower shall now or
hereafter give, or cause to be given, to Agent and Lenders.

Article 9
                       AFFIRMATIVE AND NEGATIVE COVENANTS

9.1      Maintenance of Existence

         Borrower shall at all times preserve, renew and keep in full, force and
effect its corporate existence and rights and franchises  necessary with respect
thereto and maintain in full force and effect all permits, licenses, trademarks,
tradenames, approvals,  authorizations,  leases and contracts necessary to carry
on the business as presently or proposed to be  conducted.  Borrower  shall give
Agent at least thirty (30) days prior written  notice of any proposed  change in
its corporate name, which notice shall set forth the new name and Borrower shall
deliver to Agent and Lender a certified  copy of the  Articles of  Amendment  of
Borrower providing for the name change immediately following its filing.

9.2      New Collateral Locations

         Borrower may open any new location within Canada provided  Borrower (a)
gives  Agent at least  thirty  (30) days prior  written  notice of the  intended
opening of any such new  location if new  security  filings  will be required to
maintain Agent's lien for collateral and, if no filing is required, at least ten
(10) days prior written notice of such opening and (b) executes and delivers, or
causes to be executed and delivered, to Lender such agreements,  documents,  and
instruments as Lender may deem reasonably  necessary or desirable to protect its
interests in the Collateral at such  location,  including  landlord  agreements,
PPSA and other  financing  statements  and such  other  evidence  as Lender  may
require of the  perfection of Lender's  first  priority  security  interests and
liens in the Collateral where required by Lender.

9.3      Compliance with Laws, Regulations, Etc.

(1) Borrower shall, at all times, comply in all material respects with all laws,
rules, regulations, licenses, permits, approvals and orders applicable to it and
duly observe all requirements of any federal,  provincial or local  governmental
authority,  including  all statutes,  rules,  regulations,  orders,  permits and
stipulations relating to environmental pollution and employee health and safety,
including  all  Environmental  Laws  except  for any  matter  that  Borrower  is
contesting in good faith by appropriate proceedings diligently pursued and which
is not reasonably expected to have a Material Adverse Effect.

(2) Borrower shall give both oral and written notice to Agent  immediately  upon
Borrower's receipt of any notice of, or Borrower's otherwise obtaining knowledge
(except to the extent that any of the following could not reasonably be expected
to result in a Material  Adverse  Effect)  of, (a) the  occurrence  of any event
involving  the  release,  spill  or  discharge,  threatened  or  actual,  of any
Hazardous  Material  or (b) any  investigation,  proceeding,  complaint,  order,
directive,  claims,  citation or notice with respect to: (i) any  non-compliance
with or  violation  of any  Environmental  Law by Borrower or (ii) the  release,
spill or discharge, threatened or actual, of any Hazardous Material or (iii) the
generation,  use, storage,  treatment,  transportation,  manufacture,  handling,
production   or  disposal  of  any   Hazardous   Materials  or  (iv)  any  other
environmental,  health or safety matter, which affects Borrower or its business,
operations or assets or any properties at which Borrower transported,  stored or
disposed of any Hazardous Materials.

(3) Borrower  shall  indemnify  and hold  harmless  Agent,  each Lender and, its
directors, officers, employees, agents, representatives, successors and assigns,
from and against any and all losses, claims,  damages,  liabilities,  costs, and
expenses  (including legal fees and expenses) directly or indirectly arising out
of or attributable to the use, generation,  manufacture,  reproduction, storage,
release,  threatened  release,  spill,  discharge,  disposal  or  presence  of a
Hazardous Material, for which Borrower is responsible including the costs of any
required or necessary repair, cleanup or other remedial work with respect to any
property of Borrower  and the  preparation  and  implementation  of any closure,
remedial or other required  plans except to the extent any such losses,  claims,
damages,  liabilities,  costs or expenses  related  gross  negligence  or wilful
misconduct  of  Agent  or the  applicable  Lender  or its  directors,  officers,
employees,   agents,   successors   and  assigns  as   determined   by  a  final
non-appealable order of a court of competent jurisdiction.  All representations,
warranties,  covenants and indemnifications in this Section 9.3(3) shall survive
the  payment of the  Obligations  and the  termination  or  non-renewal  of this
Agreement.

9.4      Payment of Taxes and Claims

         Borrower   shall  duly  pay  and  discharge  all  Taxes,   assessments,
contributions  and governmental  charges upon or against it or its properties or
assets, except for Taxes, assessments, contributions and charges the validity of
which are being  contested in good faith by appropriate  proceedings  diligently
pursued and  available to Borrower and with respect to which  adequate  reserves
have been set aside on its books in  accordance  with  GAAP.  Borrower  shall be
liable for any tax or penalties  imposed on Lender as a result of the  financing
arrangements  provided  for herein and  Borrower  agrees to  indemnify  and hold
Lender harmless with respect to the foregoing,  and to repay to Lender on demand
the amount  thereof,  and until paid by Borrower  such amount shall be added and
deemed part of the Loans,  provided,  that,  nothing  contained  herein shall be
construed to require Borrower to pay any income or franchise Taxes  attributable
to the income of Lender from any amounts  charged or paid  hereunder  to Lender.
The foregoing  indemnity  shall survive the payment of the  Obligations  and the
termination or non-renewal of this Agreement.

9.5      Insurance

         Borrower  shall,  at all times,  maintain  with  financially  sound and
reputable  insurers  insurance  with respect to the  Collateral  against loss or
damage  and all other  insurance  of the kinds  and in the  amounts  customarily
insured against or carried by corporations of established  reputation engaged in
the  same or  similar  businesses  and  similarly  situated.  Said  policies  of
insurance  shall be  reasonably  satisfactory  to Agent as to form,  amount  and
insurer. Borrower shall furnish certificates,  policies or endorsements to Agent
as Agent shall require as proof of such insurance,  and, if Borrower fails to do
so,  Agent is  authorized,  but not  required,  to obtain such  insurance at the
expense of Borrower.  All policies  (except policies for directors and officers'
insurance, surety bonds, kidnap and ransom coverage, employed lawyers' liability
and  worker's  compensation)  shall  provide for at least thirty (30) days prior
written  notice to Agent of any  cancellation  or reduction of coverage and that
Agent may act as attorney for Borrower (in the absence of evidence  satisfactory
to Agent  that  Borrower  will  obtain the  insurance  required  hereunder),  in
obtaining,  and at any time an Event of Default  exists or has  occurred  and is
continuing,   adjusting,  settling,  amending  and  cancelling  such  insurance.
Borrower shall cause Agent to be named as a loss payee or an additional  insured
as determined  appropriate  (but without any  liability for any premiums)  under
such insurance policies and Borrower shall obtain non-contributory lender's loss
payable   endorsements   to  all  insurance   policies  in  form  and  substance
satisfactory  to Agent (except  policies for directors and officers'  insurance,
surety  bonds,  kidnap and ransom  coverage,  employed  lawyers'  liability  and
worker's  compensation).  Such lender's loss payable  endorsements shall specify
that the proceeds of such  insurance  shall be payable to Agent,  for benefit of
Lenders,  as its  interests  may appear and further  specify that Agent shall be
paid regardless of any act or omission by Borrower or any of its affiliates.  At
its option, Agent may apply any insurance proceeds received by Agent at any time
to the cost of repairs or  replacement  of  Collateral  and/or to payment of the
Obligations,  whether or not then due,  in any order and in such manner as Agent
may determine or hold such proceeds as cash collateral for the  Obligations.  In
the absence of an Event of Default,  Agent shall make  insurance  proceeds in an
amount less than the Canadian Dollar Amount of $1,500,000, available to Borrower
for replacement or repair of the Collateral.

9.6      Financial Statements and Other Information.

(1)  Borrower  shall keep proper  books and  records in which true and  complete
entries shall be made of all dealings or  transactions  of or in relation to the
Collateral  and the  business  of  Borrower  and its  Subsidiaries  (if  any) in
accordance  with GAAP and  Borrower  shall  furnish or cause to be  furnished to
Agent:  (a) within  thirty (30) days after the end of each fiscal  month  (other
than a month which is the last month of a fiscal  quarter) and within fifty (50)
days  after  the  month  which is the last  month of a fiscal  quarter,  monthly
unaudited  consolidated  financial  statements  (including  in each case balance
sheets and  statements  of income and loss,  all in  reasonable  detail,  fairly
presenting the financial  position and the results of the operations of Borrower
and its  subsidiaries  as of the end of and through such fiscal month subject to
year-end  adjustments and the absence of footnotes)  together with a calculation
of Adjusted  Net Worth as of the end of such  month;  and (b) within one hundred
and twenty (120) days after the end of the fiscal year ending December 31, 2000,
financial statements for the fiscal year ending December 31, 2000, together with
an  unaudited  balance  sheet as at December  31,  2000 and a review  engagement
report of Deloitte & Touche LLP or another independent chartered accountant firm
selected by Borrower  and  reasonably  acceptable  to Agent;  and (c) within one
hundred and twenty (120) days after the end of each fiscal year  commencing with
the fiscal  year  ending  December  31,  2001,  audited  consolidated  financial
statements  (including  in each case balance  sheets,  statements  of income and
loss,   statements   of  changes  in  financial   position  and   statements  of
shareholders'   equity)  and,  if  Borrower  has  any  Subsidiaries,   unaudited
consolidating  financial  statements  of Borrower and its  subsidiaries  and the
accompanying  notes thereto,  all in reasonable  detail,  fairly  presenting the
financial  position  and the  results  of the  operations  of  Borrower  and its
subsidiaries  as of the end of and for such fiscal year  (subject in the case of
such consolidating  financial statements to the absence of footnotes),  together
with the  unqualified  opinion  of  Deloitte  & Touche  LLP or  another  firm of
independent  chartered  accountants,  which  accountants shall be an independent
accounting  firm selected by Borrower and reasonably  acceptable to Agent,  that
such audited consolidated  financial statements have been prepared in accordance
with GAAP, and present fairly the results of operations and financial  condition
of Borrower and its  subsidiaries  as of the end of and for the fiscal year then
ended.

(2) Borrower  shall  furnish or cause to be furnished to Agent (a) within thirty
(30) days after the end of each fiscal  month,  (other than a month which is the
last  month  of a  fiscal  quarter)  monthly  unaudited  consolidated  financial
statements  (including  balance sheets and statements of income and loss, all in
reasonable  detail,  fairly presenting the financial position and the results of
the  operations  of  Merisel,  Inc.  and its  Subsidiaries  as of the end of and
through such fiscal  month  subject to year-end  adjustments  and the absence of
footnotes;  (b)  within  fifty (50) days  after the end of each  fiscal  quarter
(other  than  the  last  fiscal  quarter  of  each  year),  quarterly  unaudited
consolidated  financial  statements  (including  balance  sheets,  statements of
income  and  loss  statements  of cash  flow  and  statements  of cash  flow and
statement  of  shareholders'   equity),   all  in  reasonable   detail,   fairly
representing  the  financial  position  and the  results  of the  operations  of
Merisel,  Inc. as of the end and through such fiscal quarter subject to year end
adjustments and the absence of footnotes;  and (c) within 120 days after the end
of each fiscal year of Merisel,  Inc. audited consolidated  financial statements
of Merisel,  Inc.,  (including  balance  sheets,  statements of income and loss,
statements  of changes in financial  position and  statements  of  shareholders'
equity),  and the accompanying notes thereto,  all in reasonable detail,  fairly
presenting the financial  position and the results of the operations of Merisel,
Inc. and its  Subsidiaries  as of the end of and for such fiscal year,  together
with the  unqualified  opinion  of  Deloitte  & Touche  LLP or  another  firm of
independent  certified  public  accountants,   which  accountants  shall  be  an
independent  certified  public  accounting  firm  selected by Merisel,  Inc. and
reasonably  acceptable  to  Agent,  that  such  financial  statements  have been
prepared  in  accordance  with US  GAAP,  and  present  fairly  the  results  of
operations and financial  condition of Merisel,  Inc. and its subsidiaries as of
the end of and for the fiscal year then ended.

(3)  Borrower  shall  furnish or cause to be  furnished to Agent within five (5)
days after the end of each fiscal month a certificate of Borrower specifying the
Monthly Average Excess  Availability for the month just ended and the Four Month
Average  for the four  (4)  month  period  just  ended  together  with  detailed
calculations thereof.

(4) Borrower  shall  promptly  notify Agent in writing of the details of (a) any
loss, damage,  investigation,  action, suit, proceeding or claim relating to the
Collateral  involving an amount in excess of the Canadian Dollar Amount $500,000
or which would result in any Material  Adverse  Effect and (b) the occurrence of
any Event of  Default  or event  which,  with the  passage  of time or giving of
notice or both, would constitute an Event of Default.

(5) Borrower shall promptly after the sending or filing thereof furnish or cause
to be furnished to Agent copies of all reports which Merisel,  Inc. sends to its
shareholders  generally  and, if  applicable,  copies of all public  reports and
registration statements which Merisel, Inc. files with any securities commission
or securities exchange having jurisdiction over Merisel, Inc..

(6)  Borrower  shall  furnish or cause to be  furnished  to Agent such  budgets,
forecasts,  projections and other information with respect to the Collateral and
the business of Borrower,  as Agent may, from time to time,  reasonably request.
Borrower's  annual  forecasts  shall be  prepared  on a monthly  basis and shall
include balance sheets,  income  statements,  cash flows,  Loan and availability
schedules detailing projected monthly capital expenditures,  acquisitions,  Loan
availability  and  financing  requirements.  Such  forecasts  shall be in a form
consistent  with the  forecasts  provided to Lender prior to the date hereof and
shall be delivered to Lender at least 14 days prior to the  commencement of each
fiscal year. It is understood  that such budgets,  forecasts and projections are
subject to  significant  contingencies,  many of which are beyond the control of
Borrower or Obligor and no assurance can be given that such  budgets,  forecasts
or projections will be realized.  Lender is hereby  authorized to deliver a copy
of any financial statement or any other information  relating to the business of
Borrower any Participant or assignee or prospective Participant or assignee that
agrees to maintain the confidentiality thereof pursuant to Section11.4. Borrower
hereby irrevocably authorizes and directs all accountants or auditors to deliver
to Agent, at Borrower's expense,  copies of the financial statements of Borrower
and any reports or management  letters  prepared by such accountants or auditors
on behalf of Borrower and to disclose to Agent such information as they may have
regarding the business of Borrower  which may  reasonably be requested by Agent.
Any  documents,  schedules,  invoices or other papers  delivered to Agent may be
destroyed  or  otherwise  disposed  of by Agent one (1) year  after the same are
delivered  to Agent,  except as  otherwise  designated  by  Borrower to Agent in
writing.

9.7      Sale of Assets, Consolidation, Amalgamation, Dissolution, Etc.

         Borrower  shall not,  directly or indirectly,  (a) amalgamate  with any
other  Person or permit  any other  Person to  amalgamate  with it, or (b) sell,
assign,  lease,  transfer,  abandon  or  otherwise  dispose  of  any  shares  or
indebtedness to any other Person or any of its assets to any other Person except
for (i)  sales  of  Inventory  in the  ordinary  course  of  business;  (ii) the
disposition  of worn-out or obsolete  Equipment  or other  tangible  property or
assets (other than Inventory) or Equipment or other tangible  property or assets
(other than Inventory) no longer used in the business of Borrower so long as (A)
if an Event of Default  exists or has occurred and is  continuing,  any proceeds
are paid to Lender and (B) such sales do not involve Equipment or other tangible
property or assets (other than Inventory)  having an aggregate fair market value
in excess of the  Canadian  Dollar  Amount of $500,000  for all such  Equipment,
property or assets  disposed of in any fiscal year of Borrower),  (iii) sales of
Equipment or other  tangible  property or assets subject to an eminent domain or
condemnation proceeding or an insurance claim, (iv) sales of securities or other
assets received in full or partial  satisfaction of past due accounts so long as
the book value  thereof with  respect to a  particular  sale does not exceed the
Canadian Dollar Amount of $250,000 unless Agent has requested  delivery to it of
such  security  in  accordance  with  Section  7.2(e),  or Section  9.10(m)  (v)
assignments  of leases,  subleases,  licenses or  sublicenses  of real  property
leased by Borrower with at least ten (10) days prior written  notice to Agent or
(vi) except as permitted by Section 9.7(b)(v), assignments of leases, subleases,
licenses or  sublicenses  of property  other than  Inventory or real property of
Borrower with Agent's prior written consent not to be unreasonably  withheld, or
(c) form or acquire any subsidiaries  without Agent's prior written consent,  or
(d) wind up, liquidate or dissolve.

9.8      Encumbrances

         Borrower  shall  not  create,  incur,  assume  or  suffer  to exist any
security interest,  mortgage,  pledge,  lien, charge or other encumbrance of any
nature whatsoever on any of its assets or properties,  including the Collateral,
except:

(a)      liens, security interests and hypothecs of Agent for itself and the
         benefit of Lenders;

(b)      liens securing the payment of Taxes, either not yet overdue or
         the  validity  of which are being  contested  in good faith by
         appropriate  proceedings  diligently  pursued and available to
         Borrower and with respect to which adequate reserves have been
         set aside on its books in accordance with GAAP;

(c)  non-consensual  statutory  liens (other than liens  securing the payment of
     Taxes but including  liens  securing the claims or demands of  materialmen,
     mechanics,  carriers or  warehousemen)  arising in the  ordinary  course of
     Borrower's  business to the extent:  (i) such liens secure  indebtedness or
     obligations which are not overdue or (ii) such liens secure indebtedness or
     obligations  relating to claims or liabilities  which are fully insured and
     being  defended  at the sole cost and  expense  and at the sole risk of the
     insurer  (subject to customary  deductions) or are being  contested in good
     faith by  appropriate  proceedings  diligently  pursued  and  available  to
     Borrower,  in each case prior to the  commencement  of foreclosure or other
     similar  proceedings and with respect to which adequate  reserves have been
     set aside on its books in accordance with GAAP;

(d)   zoning restrictions,  easements, licenses, covenants and other
      restrictions  affecting the use of real property  which do not
      interfere  in any  material  respect with the use of such real
      property  or ordinary  conduct of the  business of Borrower as
      presently  conducted thereon or materially impair the value of
      the real property which may be subject thereto;

(e)   purchase  money  security  interests in  Equipment  (including
      Capital  Leases) and purchase  money  mortgages on real estate
      not to exceed the Canadian  Dollar Amount of $5,000,000 in the
      aggregate  principal amount at any time outstanding so long as
      such  security  interests  and  mortgages  do not apply to any
      property of Borrower  other than the  Equipment or real estate
      so acquired,  and the  indebtedness  secured  thereby does not
      exceed the cost of the  Equipment  or real estate so acquired,
      as the case may be plus related interest, fees and expenses;

(f)   deposits  made in the ordinary  course of business of Borrower
      in  connection  with  payroll  administration  fees,  worker's
      compensation,  unemployment insurance or other types of social
      security  benefits  in each case  consistent  with the current
      practices  of  Borrower  as of the date  hereof or  applicable
      legal requirements;

(g)   liens   arising   from   operating   leases  of  Borrower  and
      precautionary  lien filings in respect  thereof for  Equipment
      having a value not in excess of the Canadian  Dollar Amount of
      $2,000,000 in aggregate;

(h)   purchase money security interests on Inventory and Accounts in
      favour of a vendor of  Inventory  approved  by Agent  securing
      amounts  owing to such  vendor  not  exceeding  the  principal
      amount of  $10,000,000  in  aggregate  (pursuant  to  security
      documents reasonably acceptable to Agent and provided to Agent
      at least  seven (7) days in advance of  execution)  subject to
      the limitation  that such a purchase  money security  interest
      will  only be  permitted  on  Accounts  and  Proceeds  if such
      security interest is subordinated to the security interests of
      the Agent and Lenders in the manner satisfactory to Agent;

(i)   cash deposits  (including  rights of set-off) made by Borrower
      in the ordinary course of business with its insurance carriers
      to  secure  Borrower's   liability  for  premiums  payable  to
      Borrower's  insurance  carriers  in an  aggregate  amount  not
      exceeding the Canadian Dollar Amount of $1,000,000;

(j)   cash deposits with the owner or lessor of premises  leased and
      operated by Borrower in the ordinary course of its business to
      secure  performance by Borrower of its  obligations  under the
      terms of the lease for such  premises in an  aggregate  amount
      not exceeding the Canadian Dollar Amount of $250,000;

(k)   cash deposits with utilities or other providers of services to
      Borrower  made by Borrower in the ordinary  course of business
      to secure  performance by Borrower of its  obligations to such
      utilities  or service  providers  in an  aggregate  amount not
      exceeding the Canadian Dollar Amount of $100,000;

(l)   liens on amounts not to exceed the Canadian  Dollar  Amount of
      $2,000,000  in aggregate in  Borrower's  deposit or investment
      accounts,  investment  securities and Proceeds  thereof (other
      than  accounts  where  Collateral  is held) to secure  Hedging
      Obligations permitted under Section 9.9(g);

(m)   cash deposits with banking or other financial  institutions to
      secure  Borrower's  obligations  to such  banks  or  financial
      institutions   in  respect  of  cash   management  or  payment
      processing arrangements entered into by Borrower and such bank
      or financial  institution in the ordinary course of Borrower's
      business and in an amount not  exceeding  the Canadian  Dollar
      Amount of $250,000 in the aggregate;

(n)   judgments  and other  similar  liens on  property  other  than
      Inventory  or  Accounts   arising  in  connection  with  court
      proceedings  to the extent that such liens do not result in an
      Event of Default under Section 10.1(4);

(o)   any  interest  or title of a lessor,  sublessor,  licensee  or
      licensor  under  any  personal  property  lease,  sublease  or
      license agreement with Borrower as lessee, sublessee, licensor
      or licensee permitted under this Agreement; and

(p)   liens on accounts due from  Borrower's  vendors and  suppliers
      (other than in respect of returned  Inventory)  incurred  with
      the  prior  written  consent  of Agent and  Lender,  not to be
      unreasonably   withheld,  and  securing  Indebtedness  in  the
      aggregate principal amount not exceeding $10,000,000;

(q)   the  security  interests  and liens set forth on Schedule  8.4
      hereto (except to the extent that Agent requires the discharge
      thereof prior to the advance of the initial  Loans  hereunder;
      and

(r)      licenses, leases or subleases entered into by Borrower as permitted
         under Section 9.7 (b)(v) or (vi).

9.9      Indebtedness

         Borrower shall not incur,  create,  assume,  become or be liable in any
manner with  respect to, or permit to exist,  any  Indebtedness,  except (a) the
Obligations;  (b) purchase money indebtedness  (including Capital Leases) to the
extent not incurred or secured by liens (including  Capital Leases) in violation
of any other provision of this Agreement;  and (d) the Indebtedness set forth on
Schedule 9.9 hereto;  provided, that, with respect to the Indebtedness set forth
on Schedule 9.9 (other than the Indebtedness  described in Section  1.1(uu)(ii))
(i)  Borrower  may only make  regularly  scheduled  payments  of  principal  and
interest in respect of such  Indebtedness  in  accordance  with the terms of the
agreement or  instrument  evidencing or giving rise to such  indebtedness  as in
effect on the date hereof, (ii) Borrower shall not, directly or indirectly,  (A)
amend,  modify, alter or change the terms of such indebtedness or any agreement,
document or instrument  related thereto as in effect on the date hereof,  or (B)
redeem, retire, defease, purchase or otherwise acquire such indebtedness, or set
aside or  otherwise  deposit  or  invest  any sums for such  purpose,  and (iii)
Borrower  shall furnish to Agent all notices or demands in connection  with such
indebtedness  either  received by Borrower or on its behalf,  promptly after the
receipt  thereof,  or sent by Borrower or on its behalf,  concurrently  with the
sending  thereof,  as the case may be;  (e)  Subordinated  Indebtedness  bearing
interest at a rate not  exceeding  thirteen  percent (13%) per annum of Borrower
owing to (i)  Merisel,  Inc.  or  Merisel  Americas,  Inc.  or (ii)  subject  to
execution and delivery of an  intercreditor  and  subordination  agreement  with
respect to such  Indebtedness on terms and conditions  satisfactory to Agent, to
an  Affiliate  of  Merisel,  Inc.;  (f)  Intercompany  Indebtedness  (other than
Subordinated  Indebtedness)  bearing  an  interest  rate  which  does not exceed
thirteen 13% per cent per annum; (g) Hedging  Obligations of Borrower consisting
of interest rate protection obligations entered into by Borrower in the ordinary
course of the business of Borrower consistent with current practices of Borrower
as of the date hereof;  provided that such  arrangements are not for speculative
purposes  and such  Indebtedness  is  unsecured  except to the extent  otherwise
permitted  under Section  9.8(l);  and  Indebtedness  secured by liens permitted
under Sections 9.8(b), (c), (f), (g), (h), (i), (j), (k), (m), (n) and (p).

9.10     Loans, Investments, Guarantees, Etc.

         Borrower shall not,  directly or indirectly,  make any loans or advance
money or property to any person, or invest in (by capital contribution, dividend
or otherwise) or purchase or repurchase the shares or  indebtedness  or all or a
substantial part of the assets or property of any person, or guarantee,  assume,
endorse,  or otherwise  become  responsible  for  (directly or  indirectly)  the
indebtedness, performance, obligations or dividends of any Person or agree to do
any of the foregoing,  except: (a) the endorsement of instruments for collection
or deposit in the ordinary  course of  business;  (b)  investments  in: (i) cash
deposited in accounts  permitted under Section 9.15 and Cash Equivalents held in
such  accounts  for a period not  exceeding  five (5)  Business  Days;  and (ii)
investments in cash and Cash  Equivalents  other than as permitted under Section
9.10(b)(i)  provided  that (a) there are no Loans  outstanding  at the time such
investments  are made;  and (b) unless waived in writing by Agent Borrower shall
take such  actions as are deemed  necessary  by Agent to  perfect  the  security
interest  of Agent and  Lenders in such  investments  and such  investments  are
pledged and delivered to Agent upon Agent's request; (c) the loans, advances and
guarantees set forth on Schedule 9.10 hereto;  provided, that, as to such loans,
advances and  guarantees,  (i) Borrower shall not,  directly or indirectly,  (A)
amend, modify,  alter or change the terms of such loans,  advances or guarantees
or any  agreement,  document or instrument  related  thereto,  or (B) as to such
guarantees,   redeem,  retire,  defease,   purchase  or  otherwise  acquire  the
obligations  arising  pursuant  to such  guarantees,  or set aside or  otherwise
deposit or invest any sums for such purpose,  and (ii) Borrower shall furnish to
Agent all  notices  or  demands  in  connection  with such  loans,  advances  or
guarantees or other  indebtedness  subject to such guarantees either received by
Borrower  or on its  behalf,  promptly  after the  receipt  thereof,  or sent by
Borrower or on its behalf,  concurrently  with the sending thereof,  as the case
may be; (d) unsecured guarantees of obligations of Borrower's account debtors to
flooring  plan  providers  relating to the sale of  Inventory  by Borrower in an
amount  not to  exceed  $2,500,000  individually  outstanding  at any time  with
respect to any  account  debtor or  $10,000,000  outstanding  at any time in the
aggregate,  (e) investments in connection with Hedging Obligations to the extent
permitted  under  Sections  9.9(g) and 9.8(l),  (f)  obligations  of Borrower to
repurchase  Inventory from flooring plan providers;  provided that following the
repurchase of Inventory  pursuant to such obligations for an aggregate amount in
excess of $5,000,000, no further such agreements will be entered into until such
Inventory  is sold  for an  aggregate  amount  at least  equal to the  aggregate
purchase  price paid by the  Borrower  upon such  repurchase,  (g)  advances  or
deposits in connection  with  obligations  under payroll  administration  plans,
employee  benefit  programs,  leases or credit  card  plans to the  extent  such
advances  and  deposits  are  permitted  under  Section  9.8(f),  (h)  unsecured
guarantees  issued to credit card providers in a principal  amount not to exceed
$100,000  outstanding  at any  time,  (i)  advances  or  loans to  employees  or
directors of Borrower in the ordinary  course of business in a principal  amount
not to exceed the Canadian Dollar Amount of $500,000 in aggregate outstanding at
any time, for necessary  work-related  travel or other  ordinary  expenses to be
incurred  by such  employees  or  directors  in  connection  with their work for
Borrower;  and necessary relocation expenses of such employees,  (j) stock, debt
and securities or other property  received in connection  with the bankruptcy or
reorganization  of, or in settlement of  delinquent  obligations  of or disputes
with Borrower's customers or suppliers provided,  that, the original of any such
stock or investment  evidencing such obligations shall be promptly  delivered to
Agent,  upon  Agent's  request,  together  with such stock power  assignment  or
endorsement  by Borrower as Agent may request;  and (m)  obligations  of account
debtors to Borrower  arising  from  Accounts  which are past due  evidenced by a
promissory note made by such account debtor payable to Borrower; provided, that,
promptly  upon  the  receipt  of the  original  of any such  promissory  note by
Borrower,  such  promissory note shall be endorsed to the order of Agent and the
rateable benefit of Lenders,  by Borrower and promptly  delivered to Agent as so
endorsed.

9.11     Dividends and Redemptions

         Borrower  shall  not,  directly  or  indirectly,  declare  or  pay  any
dividends on account of any shares of Borrower now or hereafter outstanding,  or
set aside or otherwise  deposit or invest any sums for such purpose,  or redeem,
retire,  defease,  purchase or otherwise acquire any shares of any class (or set
aside or  otherwise  deposit  or  invest  any sums  for  such  purpose)  for any
consideration  other than  common  shares or apply or set apart any sum, or make
any other  distribution (by reduction of capital or otherwise) in respect of any
such shares or agree to do any of the foregoing except that Borrower may declare
and pay dividends in respect of any fiscal year of Borrower  ending December 31,
2002 or thereafter subject to the satisfaction of the following conditions:

(a)               as of the date of the  declaration or payment of such dividend
                  and after giving  effect to the payment of such  dividend,  no
                  Event of Default or act,  condition or event which with notice
                  or  passage  of time or both  would  constitute  an  Event  of
                  Default shall exist or have occurred;

(b)               the  declaration and payment of such dividend shall be done in
                  accordance  with the  requirements  of all applicable laws and
                  regulations  including  section  38 of  the  Ontario  Business
                  Corporations Act;

(c)               Agent shall have received evidence satisfactory to it that (i)
                  for the four (4) months  preceding the date of  declaration or
                  payment of such  dividend the Four Month  Average was at least
                  $20,000,000; (ii) projections establishing to the satisfaction
                  of Agent  that the Four Month  Average  for the month in which
                  the dividend is to be paid and the three (3) months thereafter
                  will be at least  $20,000,000  and (iii)  Excess  Availability
                  after  giving  effect to payment of such  dividend  will be at
                  least $20,000,000; and

(d)               Agent shall have received annual audited financial  statements
                  of Borrower which comply with the  requirements of Section 9.6
                  for the fiscal year  immediately  preceding the fiscal year in
                  which the dividend is to be paid.

9.12     Transactions with Affiliates

         Borrower shall not,  directly or indirectly,  (a) purchase,  acquire or
lease any  property  from,  or sell,  transfer  or lease any  property  to,  any
officer, director, shareholder or any other Affiliate of Borrower, except in the
ordinary  course of and pursuant to the  reasonable  requirements  of Borrower's
business and upon fair and  reasonable  terms no less  favorable to the Borrower
than  Borrower  would obtain in a comparable  arm's  length  transaction  with a
Person  who  is  not an  Affiliate  or (b)  make  any  payments  of  management,
consulting  or  other  fees  for  management  or  similar  services,  or of  any
Indebtedness  owing to any  officer,  employee,  director or other  Affiliate of
Borrower except (i) reasonable compensation to officers, employees and directors
for  services  rendered to Borrower in the  ordinary  course of  business;  (ii)
payments of trade payables owing to Merisel, Inc., Merisel Americas, Inc. or any
Affiliate thereof provided,  that Borrower's Excess  Availability at the time of
such payment is at least  $2,000,000;  (iii)  payments of interest on account of
Subordinated  Indebtedness and Intercompany Indebtedness provided that as of the
date of such  payment  and  after  giving  effect to such  payment,  no Event of
Default or act,  condition or event which with notice or passage of time or both
would  constitute  an Event of Default  shall have  occurred,  (iv)  payments of
principal on account of Intercompany  Indebtedness and Subordinated Indebtedness
subject to satisfaction of the following conditions:

(A)      as of the date of such payment and after giving effect to such
         payment,  no Event of Default or act, condition or event which
         with  notice or passage of time or both  would  constitute  an
         Event of Default shall exist or have occurred;

(B)      such payment shall be done in accordance with the requirements of all
         applicable laws and regulations;

(C)      in the case of principal  payments on account of  Subordinated
         Indebtedness,  Agent shall have received evidence satisfactory
         to it that (i) for the four (4) months  preceding  the date of
         such payment the Four Month Average was at least  $20,000,000;
         (ii)  projections  establishing  to the  satisfaction of Agent
         that the  Four  Month  Average  for the  month  in which  such
         payment is to be paid and the three (3) months thereafter will
         be at least  $20,000,000 and (iii) Excess  Availability  after
         giving effect to such payment will be at least $20,000,000;

(D)      in the  case of  principal  payments  on  account  of  Closing
         Intercompany Indebtedness,  no such payments may be made until
         after  January 12, 2002 and  Borrower  must  maintain  Monthly
         Average  Excess  Availability  of at  least  $5,000,000  for a
         period of twelve (12) consecutive fiscal months after the date
         of such payment;

(iii)  payment to be made to  Merisel,  Inc.,  Merisel  Americas,  Inc. or their
respective Affiliates for management and management information systems services
and the other  services  listed in Schedule 9.12 provided the  arrangements  for
such services comply with Section  9.12(a) in an aggregate  amount not to exceed
$8,000,000 in 2001,  $10,000,000 in 2002 and $12,000,000 in 2003 and except that
such amount may be increased to $15,000,000 for 2003 if Merisel, Inc. materially
upgrades  its SAP system and  provided  that no such  payment may be made at any
time when an Event of Default or act,  condition  or event  which with notice or
the passage of time or both would  constitute an Event of Default shall exist or
have occurred.

9.13     Adjusted Net Worth

         Borrower shall, at all times, that Monthly Average Excess  Availability
as  reported  by  Borrower  or  determined  by Agent is less  than  $20,000,000,
maintain  Adjusted  Net Worth of not less than  $25,000,000.  Adjusted Net Worth
shall be  determined  by  Lender as of the end of each  month in which  Borrower
delivers  the  certificate  contemplated  by Section  9.6(3) based upon the most
recently  delivered monthly  financial  statements of Borrower which comply with
the requirements of Section 9.6 in all respects.

9.14     Intellectual Property

         In the event Borrower obtains or applies for any material  intellectual
property rights or obtains any material licenses with respect thereto,  Borrower
shall immediately  notify Agent thereof and shall provide to Agent copies of all
written materials including,  but not limited to, applications and licenses with
respect to such  intellectual  property rights.  At Lender's  request,  Borrower
shall promptly  execute and deliver to Agent an intellectual  property  security
agreement or other security  documentation in form and substance satisfactory to
Lender,  granting to Lender a perfected  security  interest in such intellectual
property rights.

9.15     Additional Bank Accounts

         Borrower shall not, directly or indirectly, open, establish or maintain
any deposit  account,  investment  account or any other account with any bank or
other financial  institution,  other than the Blocked  Accounts and the accounts
set  forth in  Schedule  8.8  hereto,  except:  (a) as to any new or  additional
Blocked  Accounts and other such new or  additional  accounts  which contain any
Collateral  or proceeds  thereof,  with the prior  written  consent of Agent and
subject  to such  conditions  thereto as Agent may  establish  and (b) as to any
accounts  used  by  Borrower  to  make  payments  of  payroll,  Taxes  or  other
obligations  to third  parties or  established  in  connection  with its Hedging
Obligations, after prior written notice to Agent.

9.16     Applications under the Companies' Creditors Arrangement Act

         Borrower  acknowledges  that its business and  financial  relationships
with Agent and Lenders are unique  from its  relationship  with any other of its
creditors.  Borrower agrees that it shall not file any plan of arrangement under
the CCAA  ("CCAA  Plan")  which  provides  for,  or  would  permit  directly  or
indirectly,  Agent or any Lender to be  classified  with any other  creditor  of
Borrower for purposes of such CCAA Plan or otherwise.

9.17     Operation of Pension Plans

         With respect to any Pension  Plans  established  after the date of this
Agreement:

(1)  Borrower  shall  administer  the  Pension  Plans  in  accordance  with  the
requirements  of the  applicable  pension plan texts,  funding  agreements,  the
Income Tax Act (Canada) and applicable provincial pension benefits legislation.

(2) Borrower shall use reasonable  efforts to deliver to Agent an undertaking of
the funding  agent for each of the Pension  Plans stating that the funding agent
will notify  Lender  within 7 days of  Borrower's  failure to make any  required
contribution to the applicable Pension Plan.

(3)  Borrower  shall not accept  payment of any amount  from any of the  Pension
Plans without the prior written consent of Agent except for the reimbursement of
reasonable expenses.

(4) Without the prior written consent of Agent, Borrower shall not terminate, or
cause to be  terminated,  any of the Pension  Plans (other than defined  benefit
plans), if such plan would have a solvency deficiency on termination.

(5) Borrower shall promptly provide Agent with any documentation relating to any
of the Pension  Plans as Agent may  reasonably  request.  Borrower  shall notify
Lender within 30 days of (a) a material  increase in the  liabilities  of any of
the  Pension  Plans and receipt of an  actuarial  report  disclosing  a material
increase;  (b) the  establishment  of a new  registered  pension  plan;  and (c)
commencing  payment of contributions to a Pension Plan to which Borrower had not
previously been contributing.

9.18     Costs and Expenses

         Borrower shall pay to Lender promptly upon demand all reasonable costs,
expenses,  filing  fees  and  Taxes  paid or  payable  in  connection  with  the
preparation,   negotiation,  execution,  delivery,  recording,   administration,
collection, liquidation,  enforcement and defense of the Obligations, the rights
of Agent and Lenders in the  Collateral,  this  Agreement,  the other  Financing
Agreements  and all other  documents  related  hereto or thereto,  including any
amendments, supplements or consents which may hereafter be contemplated (whether
or not executed) or entered into in respect hereof and thereof,  including:  (a)
all  costs  and  expenses  of  filing or  recording  (including  PPSA  financing
statement and other similar  filing and  recording  fees and Taxes,  documentary
Taxes,  intangibles  Taxes and mortgage  recording Taxes and fees, if applicable
but  excluding  Agent or Lender  franchise or income  taxes);  (b) all insurance
premiums  paid by Agent or any Lender in accordance  with this  Agreement or any
other  Financing  Agreement,  appraisal  fees and  search  fees;  (c)  costs and
expenses  of  remitting  loan  proceeds,  collecting  cheques and other items of
payment, and establishing and maintaining the Blocked Accounts, if any, together
with  Agent's or  Lender's  customary  charges and fees with  respect  thereto -
Congress to advise; (d) charges,  fees or expenses charged by any bank or issuer
in connection with the Letter of Credit  Accommodations;  (e) costs and expenses
of preserving  and  protecting  the  Collateral;  (f) costs and expenses paid or
incurred in connection with obtaining payment of the Obligations,  enforcing the
security interests and liens of Agent for ratable benefit of Lenders, selling or
otherwise realizing upon the Collateral,  and otherwise enforcing the provisions
of this  Agreement  and the other  Financing  Agreements or defending any claims
made or threatened  against Agent or any Lender arising out of the  transactions
contemplated hereby and thereby (including, without limitation, preparations for
and consultations concerning any such matters but excluding any of the foregoing
relating to the gross  negligence  or wilful  misconduct  of Agent or any Lender
with respect to such matter as determined by a final  non-appealable  order of a
court of  competent  jurisdiction);  (g) all  out-of-pocket  expenses  and costs
heretofore  and from  time to time  hereafter  incurred  by Agent or any  Lender
during  the  course  of  periodic  field  examinations  of  the  Collateral  and
Borrower's operations, plus a per diem charge at the rate of $750 per person per
day for Agent's or any Lender's  examiners in the field and office;  and (h) the
reasonable fees and  disbursements of counsel  (including  legal  assistants) to
Agent and Lender in connection with any of the foregoing.

9.19     Further Assurances

         At the  request  of Agent at any time and from  time to time,  Borrower
shall,  at its expense,  duly execute and deliver,  or cause to be duly executed
and delivered,  such further  agreements,  documents and instruments,  and do or
cause to be done such  further  acts as may be  necessary or proper to evidence,
perfect,  maintain and enforce the security interests and liens and the priority
thereof in the  Collateral and otherwise  reasonably  required to effectuate the
provisions  or  purposes  of  this  Agreement  or  any of  the  other  Financing
Agreements.  Agent may at any time and from time to time  request a  certificate
from an officer of Borrower  representing  that all conditions  precedent to the
making of Loans and providing Letter of Credit  Accommodations  contained herein
are satisfied on the date thereof.  In the event of such request by Agent, Agent
and Lenders may, at their option, cease to make any further Loans or provide any
further  Letter  of  Credit   Accommodations   until  Agent  has  received  such
certificate  and,  in  addition,  Agent has  determined  in good faith that such
conditions are satisfied.  Where permitted by law,  Borrower  hereby  authorizes
Agent to  execute  and file one or more PPSA or other  financing  statements  or
notices  signed only by Lender or Lender's  representative,  provided that Agent
shall provide Borrower with a copy of PPSA or other financing statements.

Article 10
                         EVENTS OF DEFAULT AND REMEDIES

10.1     Events of Default

         The occurrence or existence of any one or more of the following  events
are referred to herein  individually as an "Event of Default",  and collectively
as "Events of Default":

(1) (a) Borrower fails to pay when due any of the Obligations (b) Borrower fails
to perform any of the  covenants  contained in Sections 6.3, 6.7, 7.7, 9.1, 9.2,
9.5, 9.7, 9.8, 9.9, 9.10,  9.11, 9.12 and 9.16 of this Agreement or (c) Borrower
fails to perform any of the terms, covenants, conditions or provisions contained
in this  Agreement  or any of the other  Financing  Agreements  other than those
described in Sections  10.1(1)(a)  and  10.1(1)(b)  above and such failure shall
continue for ten (10) days (except in the case of Section 7.1, 7.2, 7.3 and 9.13
the period shall be five (5) days);  provided,  that,  such five (5) or ten (10)
day period, as applicable, shall not apply in the case of: an intentional breach
by Borrower of any such covenant.

(2) any  representation,  warranty or  statement of fact made by Borrower or any
Obligor to Agent or any Lender in this Agreement, the other Financing Agreements
or any other  agreement,  schedule,  confirmatory  assignment or otherwise shall
when made or deemed made be false or misleading in any material respect;

(3) any  Obligor  revokes,  terminates  or fails to  perform  any of the  terms,
covenants,  conditions  or  provisions of any  guarantee,  endorsement  or other
agreement of such party in favour of Lender;

(4) (a) any judgment or judgments  for the payment of money is rendered  against
Borrower or any Obligor in excess of the Canadian Dollar Amount of $2,000,000 in
any one case or in the aggregate and shall remain  undischarged or unvacated for
a period in excess of  thirty  (30) days or  execution  shall at any time not be
effectively  stayed, or (b) any judgment other than for the payment of money, or
injunction, attachment, garnishment or execution is rendered against Borrower or
any Obligor or any of their assets which  judgment  involves  Collateral  having
value in excess of $500,000, or which would have or could reasonably be expected
to have a Material  Adverse Effect and remains  undischarged  or unvacated for a
period in excess of thirty (30) days or such injunction,  execution,  attachment
or garnishment shall at any time not be effectively stayed;

(5) Borrower or any Obligor, which is a partnership,  limited liability company,
limited partnership,  limited liability partnership or a corporation,  dissolves
or suspends or  discontinues  doing business or gives notice of its intention to
do so;

(6) Borrower or any Obligor  becomes  insolvent  under  applicable law, makes an
assignment  for the benefit of  creditors  or  proposes to make,  makes or sends
notice  of a bulk  sale  or  calls  a  meeting  of its  creditors  or  principal
creditors;

(7) a  petition,  case or  proceeding  under  the  bankruptcy  laws of Canada or
similar laws of any foreign jurisdiction now or hereafter in effect or under any
insolvency, arrangement, reorganization,  moratorium, receivership, readjustment
of debt,  dissolution or liquidation law or statute of any  jurisdiction  now or
hereafter in effect (whether at law or in equity) is filed or commenced  against
Borrower or any Obligor or all or any part of its  properties  and such petition
or application is not dismissed  within  forty-five  (45) days after the date of
its filing or  Borrower or any Obligor  shall file any answer  admitting  or not
contesting   such  petition  or   application   or  indicates  its  consent  to,
acquiescence  in or  approval  of, any such action or  proceeding  or the relief
requested is granted sooner;

(8) a  petition,  case or  proceeding  under  the  bankruptcy  laws of Canada or
similar laws of any foreign jurisdiction now or hereafter in effect or under any
insolvency, arrangement, reorganization,  moratorium, receivership, readjustment
of debt,  dissolution or liquidation law or statute of any  jurisdiction  now or
hereafter  in effect  (whether  at a law or  equity)  is filed or  commenced  by
Borrower or any Obligor for all or any part of its property  including,  without
limitation, if Borrower or any Obligor shall:

(a)      apply for or  consent  to the  appointment  of a  receiver,  trustee
         or  liquidator  of it or of all or a substantial part of its property
         and assets;

(b)      be unable,  or admit in writing its  inability,  to pay its debts as
         they mature,  or commit any other act of bankruptcy;

(c)      make a general assignment for the benefit of creditors;

(d)      file  a  voluntary  petition  or  assignment  in  bankruptcy  or  a
         proposal  seeking  a  reorganization, compromise, moratorium or
         arrangement with its creditors;

(e)      take   advantage  of  any  insolvency  or  other  similar  law
         pertaining  to  arrangements,   moratoriums,   compromises  or
         reorganizations,  or  admit  the  material  allegations  of  a
         petition  or  application  filed  in  respect  of  it  in  any
         bankruptcy, reorganization or insolvency proceeding; or

(f)      take any corporate action for the purpose of effecting any of the
         foregoing;

(9) (a) any default by Borrower  under any agreement  creating a purchase  money
security  interest in its  inventory  in respect of which (i) the  creditor  has
notified  Borrower in writing of such default and its intention to terminate its
relationship  with Borrower and its  intention to  accelerate  all or a material
part of  Indebtedness  due to it or exercise  any other  remedy  available to it
other than  ceasing  to extend  credit to  Borrower  or (ii) such  creditor  has
accelerated such  Indebtedness or exercised any such remedy,  or (b) any default
by Borrower or any Obligor under any agreement,  document or instrument relating
to any  Indebtedness  (other  than as  referenced  to in Section  10.1(1)(a)  or
10.1(9)(a)  owing to any  person  other  than  Agent and  Lenders  or  creditors
referred  to in  Section  10.1(9)(a),  in any case in an amount in excess of the
Canadian Dollar Amount of $2,000,000,  which default continues for more than the
applicable  cure period,  if any,  with respect  thereto,  or (c) any default by
Borrower or any Obligor  under any  material  contract,  distribution  or supply
agreement,  lease,  license or other obligation to any person other than Lender,
which default  continues for more than the applicable cure period,  if any, with
respect  thereto and such default has or could be reasonably  expected to have a
Material Adverse Effect;

(10)     any change in the ownership of Borrower;

(11)  charging  of  Borrower  or any  Obligor  under any  criminal  statute,  or
commencement or threatened commencement of criminal or civil proceedings against
Borrower or any Obligor,  pursuant to which statute or proceedings the penalties
or remedies sought or available  include  forfeiture of any material property of
Borrower or such Obligor;

(12)     there shall be an act, condition or event which has a Material Adverse
Effect after the date hereof;

(13) there shall be a breach or failure to comply with any material provision of
any intercreditor  agreement or subordination agreement with respect to Borrower
or any Obligor by any party thereto other than Agent or any Lender; or

(14) a requirement from the Minister of National Revenue for payment pursuant to
Section 224 or any  successor  section of the Income Tax Act (Canada) or Section
317, or any successor  section or any other Person in respect of Borrower of the
Excise Tax Act (Canada) or any comparable provision of similar legislation shall
have been  received  by Agent or any other  Person in  respect  of  Borrower  or
otherwise issued in respect of Borrower.

10.2     Remedies

(1) At any time an Event of Default  exists or has occurred  and is  continuing,
Agent and Lenders shall have all rights and remedies provided in this Agreement,
the other Financing Agreements,  the PPSA and other applicable law, all of which
rights and remedies may be exercised without notice to or consent by Borrower or
any  Obligor,  except as such  notice  or  consent  is  expressly  provided  for
hereunder or required by applicable law. All rights, remedies and powers granted
to Agent and Lenders hereunder, under any of the other Financing Agreements, the
PPSA or other applicable law, are cumulative, not exclusive and enforceable,  in
Agent and Lender's discretion,  alternatively,  successively, or concurrently on
any one or more occasions, and shall include,  without limitation,  the right to
apply to a court of equity for an  injunction to restrain a breach or threatened
breach by Borrower of this Agreement or any of the other  Financing  Agreements.
Lender  may,  at any time or times,  proceed  directly  against  Borrower or any
Obligor to collect the Obligations without prior recourse to the Collateral.  In
exercising its remedies  hereunder Agent and Lenders shall utilize  commercially
reasonable  efforts  to  preserve  the  value of the  Collateral  to the  extent
required by law.

(2) Without  limiting the  foregoing,  at any time an Event of Default exists or
has occurred and is  continuing,  Agent may, and upon  direction of the Required
Lenders,  Agent shall (a) accelerate the payment of all  Obligations  and demand
immediate  payment thereof to Agent for rateable  benefit of Lenders  (provided,
that, upon the occurrence of any Event of Default  described in Sections 10.1(7)
or 10.1(8),  all  Obligations  shall  automatically  become  immediately due and
payable),  (b) with or  without  judicial  process or the aid or  assistance  of
others,  enter upon any  premises  on or in which any of the  Collateral  may be
located  and  take   possession  of  the  Collateral  or  complete   processing,
manufacturing  and repair of all or any portion of the  Collateral  and carry on
the  business of Borrower,  (c) require  Borrower,  at  Borrower's  expense,  to
assemble and make  available to Lender any part or all of the  Collateral at any
place  and  time  designated  by  Agent,   (d)  collect,   foreclose,   receive,
appropriate,  setoff and realize upon any and all Collateral,  (e) remove any or
all of the  Collateral  from any premises on or in which the same may be located
for the purpose of effecting the sale,  foreclosure or other disposition thereof
or for any  other  purpose,  (f)  sell,  lease,  transfer,  assign,  deliver  or
otherwise dispose of any and all Collateral  (including  entering into contracts
with respect thereto,  public or private sales at any exchange,  broker's board,
at any office of Agent or  elsewhere)  at such prices or terms as Agent may deem
reasonable,  for cash, upon credit or for future delivery, with the Agent having
the right to purchase the whole or any part of the Collateral at any such public
sale, all of the foregoing  being free from any right or equity of redemption of
Borrower,  which right or equity of  redemption is hereby  expressly  waived and
released  by  Borrower,  (g) borrow  money and use the  Collateral  directly  or
indirectly  in carrying  on  Borrower's  business  or as  security  for loans or
advances  for  any  such  purposes,  (h)  grant  extensions  of time  and  other
indulgences, take and give up security, accept compositions,  grant releases and
discharges, and otherwise deal with Borrower, debtors of Borrower,  sureties and
others as Lender may see fit without  prejudice to the  liability of Borrower or
Agent's  right to hold and  realize  the  security  interest  created  under any
Financing  Agreement,  and/or  (i)  terminate  this  Agreement.  If  any  of the
Collateral  is sold or leased by or on behalf of Agent upon credit  terms or for
future delivery,  the Obligations shall not be reduced as a result thereof until
payment  therefor is finally  collected by Agent.  If notice of  disposition  of
Collateral  is required by law,  ten (10) days prior notice by Agent to Borrower
designating  the time and place of any public  sale or the time after  which any
private sale or other intended disposition of Collateral is to be made, shall be
deemed to be reasonable  notice thereof and Borrower waives any other notice. In
the event Agent institutes an action to recover any Collateral or seeks recovery
of any Collateral by way of prejudgment  remedy,  Borrower waives the posting of
any bond which might otherwise be required.

(3) Agent may apply the cash proceeds of Collateral  actually  received by Agent
from any sale,  lease,  foreclosure  or other  disposition  of the Collateral to
payment of the Obligations, in whole or in part and in such order and using such
conversion  rates as Agent may elect,  whether or not then due.  Borrower  shall
remain  liable to Agent and  Lenders  for the  payment  of any  deficiency  with
interest at the highest  rate  provided for herein and all costs and expenses of
collection or enforcement, including legal costs and expenses.

(4) Subject to compliance  with the  requirements  of  Section13.1,  Agent shall
remit any cash proceeds remaining after final payment in full of the Obligations
to Borrower.

(5) Without limiting the foregoing,  upon the occurrence of an Event of Default,
Agent may, and upon the direction of Required Lenders shall, without notice, (a)
cease making Loans or arranging  Letter of Credit  Accommodations  or reduce the
lending   formulas  or  amounts  of   Revolving   Loans  and  Letter  of  Credit
Accommodations  available to Borrower and/or (b) terminate any provision of this
Agreement  providing for any future Loans or Letter of Credit  Accommodations to
be made to Borrower.

(6) Agent may appoint, remove and reappoint any person or persons,  including an
employee or agent of Agent to be a receiver  (the  "Receiver")  which term shall
include  a  receiver  and  manager  of,  or  agent  for,  all or any part of the
Collateral. Any such Receiver shall, as far as concerns responsibilities for his
acts,  be deemed to be the agent of  Borrower  and not of Agent or  Lender,  and
neither  Agent  nor  any  Lender  shall  not in any way be  responsible  for any
misconduct, negligence or non-feasance of such Receiver, his employees or agents
except to the extent  caused by the gross  negligence  or wilful  misconduct  of
Agent or such Lender as determined by a final non-appealable order of a court of
competent  jurisdiction.  Except  as  otherwise  directed  by  Agent,  all money
received by such  Receiver  shall be received in trust for and paid to Agent for
rateable  benefit  of  Lender.  Such  Receiver  shall have all of the powers and
rights of Agents and Lenders  described  in this  Section  10.2(6).  Lender may,
either  directly or through its agents or  nominees,  exercise any or all powers
and rights of a Receiver.

(7)  Borrower  shall pay all costs,  charges and  expenses  incurred by Agent or
Lender or any  Receiver or any nominee or agent of Agent or any Lender,  whether
directly or for services rendered  (including,  without limitation,  solicitor's
costs on a solicitor  and his own client  basis,  auditor's  costs,  other legal
expenses and Receiver  remuneration)  in enforcing  this  Agreement or any other
Financing  Agreement  and in enforcing or  collecting  Obligations  and all such
expenses  together with any money owing as a result of any  borrowing  permitted
hereby  shall be a charge on the  proceeds of  realization  and shall be secured
hereby.

Article 11
           JURY TRIAL WAIVER, OTHER WAIVERS AND CONSENTS, GOVERNING LAW

11.1     Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver

(1) The validity, interpretation and enforcement of this Agreement and the other
Financing Agreements and any dispute arising out of the relationship between the
parties  hereto,  whether  in  contract,  tort,  equity or  otherwise,  shall be
governed by the laws of the  Province of Ontario and the federal  laws of Canada
applicable therein except to the extent that the law of another  jurisdiction is
specified in a Financing  Agreement to be the governing  law for that  Financing
Agreement.

(2)  Borrower,   Agent  and  Lenders  irrevocably  consent  and  submit  to  the
non-exclusive  jurisdiction  of the Ontario  Superior Court of Justice and waive
any objection  based on venue or forum non conveniens with respect to any action
instituted  therein  arising under this Agreement or any of the other  Financing
Agreements or in any way connected with or related or incidental to the dealings
of the parties hereto in respect of this Agreement or any of the other Financing
Agreements or the transactions  related hereto or thereto,  in each case whether
now existing or hereafter  arising,  and whether in  contract,  tort,  equity or
otherwise,  and agree that any dispute with respect to any such matters shall be
heard only in the courts  described above (except that Agent or any Lender shall
have the  right to bring  any  action  or  proceeding  against  Borrower  or its
property in the courts of any other  jurisdiction which Agent deems necessary or
appropriate  in order to realize on the  Collateral or to otherwise  enforce its
rights against Borrower or its property).

(3) To the extent  permitted by law,  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 its address set
forth on the  signature  pages  hereof and service so made shall be deemed to be
completed  five (5) days  after the same  shall  have been so  deposited  in the
Canadian  mails,  or, at Agent's  option,  by service upon Borrower in any other
manner  provided  under the rules of any such  courts.  Within  thirty (30) days
after such service,  Borrower  shall appear in answer to such  process,  failing
which  Borrower shall be deemed in default and judgment may be entered by Lender
against Borrower for the amount of the claim and other relief requested.

(4)  BORROWER,  AGENT AND EACH LENDER  EACH HEREBY  WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY  CLAIM,  DEMAND,  ACTION OR CAUSE OF ACTION (i)  ARISING  UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING  AGREEMENTS OR (ii) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL  TO THE DEALINGS OF THE PARTIES  HERETO IN RESPECT
OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING  AGREEMENTS OR THE  TRANSACTIONS
RELATED  HERETO OR  THERETO  IN EACH CASE  WHETHER  NOW  EXISTING  OR  HEREAFTER
ARISING, AND WHETHER IN CONTRACT,  TORT, EQUITY OR OTHERWISE.  BORROWER,  AGENT,
AND EACH LENDER EACH HEREBY  AGREES AND  CONSENTS  THAT ANY SUCH CLAIM,  DEMAND,
ACTION OR CAUSE OF ACTION  SHALL BE  DECIDED BY COURT  TRIAL  WITHOUT A JURY AND
THAT BORROWER, AGENT OR ANY LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF
THIS AGREEMENT WITH ANY COURT AS WRITTEN  EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

(5) Agent and Lenders shall not have any liability to Borrower (whether in tort,
contract,  equity or  otherwise)  for losses  suffered by Borrower in connection
with, arising out of, or in any way related to the transactions or relationships
contemplated  by this Agreement or any other  Financing  Agreement,  or any act,
omission or event occurring in connection herewith, unless it is determined by a
final and  non-appealable  judgment  or court  order  binding  on Agent and such
Lender, that the losses were the result of acts or omissions  constituting gross
negligence  or  willful  misconduct.  In any such  litigation,  Lender  shall be
entitled  to the  benefit of the  rebuttable  presumption  that it acted in good
faith and with the  exercise of ordinary  care in the  performance  by it of the
terms of this Agreement or any other Financing Agreement.

(6)  Borrower  hereby  expressly  waives all rights of notice and hearing of any
kind prior to the exercise of rights by Lender from and after the  occurrence of
an Event of Default to repossess  the  Collateral  with  judicial  process or to
replevy,  attach  or  levy  upon  the  Collateral  or  other  security  for  the
Obligations.  Borrower  waives the  posting of any bond  otherwise  required  of
Lender  in  connection  with  any  judicial  process  or  proceeding  to  obtain
possession of, replevy, attach or levy upon the Collateral or other security for
the Obligations,  to enforce any judgment or other court order entered in favour
of Lender, or to enforce by specific  performance,  temporary restraining order,
preliminary  or permanent  injunction,  this  Agreement  or any other  Financing
Agreement.

11.2     Waiver of Notices

         Borrower  hereby  expressly  waives  demand,  presentment,  protest and
notice  of  protest  and  notice  of  dishonour  with  respect  to any  and  all
instruments  and  commercial  paper,  included  in  or  evidencing  any  of  the
Obligations or the Collateral,  and any and all other demands and notices of any
kind or nature  whatsoever with respect to the  Obligations,  the Collateral and
this Agreement,  except such as are expressly  provided for herein. No notice to
or demand on Borrower  which Agent may elect to give shall  entitle  Borrower to
any  other  or  further  notice  or  demand  in  the  same,   similar  or  other
circumstances.

11.3     Amendments and Waivers

(1) Neither this Agreement nor any provision hereof shall be amended,  modified,
waived or  discharged  orally or by  course  of  conduct,  but only by a written
agreement signed as provided in Section 11.3(2) hereof.  Agent and Lenders shall
not, by any act,  delay,  omission or otherwise  be deemed to have  expressly or
impliedly waived any of its or their rights,  powers and/or remedies unless such
waiver shall be in writing and signed as provided in Section 11.3(2) hereof. Any
such  waiver  shall be  enforceable  only to the extent  specifically  set forth
therein.  A waiver by Agent or any Lender of any right,  power and/or  remedy on
any one occasion shall not be construed as a bar to or waiver of any such right,
power or remedy  which Agent or any Lender  would  otherwise  have on any future
occasion, whether similar in kind or otherwise.

(2) Neither  this  Agreement  nor any other  Financing  Agreement  nor any terms
hereof or thereof may be changed,  waived,  discharged or terminated unless such
change,  waiver,  discharge or termination is in writing signed by Agent and the
Required Lenders,  and as to amendments to any of the Financing  Agreements,  by
Borrower;  except,  that,  any change,  waiver,  discharge or  termination  with
respect to the following shall require the consent of Agent and all Lenders:

(a)    reduction in the interest rate or any fees or the extension of
       the time of payment of  interest or any fees or  reduction  in
       the  principal   amount  of  any  Loan  or  Letter  of  Credit
       Accommodations or any extensions of the term of this Agreement
       pursuant to Section 13.1(1),

(b)    increase  in the  Commitment  of any  Lender  over the  amount
       thereof  then  in  effect  or  provided  hereunder  except  as
       contemplated  by Section  2.5(1) (it being  understood  that a
       waiver of any Event of Default  shall not  constitute a change
       in the terms of any Commitment of any Lender),

(c)      the release of any  Collateral  (except as expressly  required by the
         Financing  Agreements  and except as permitted under Section 12.10(1)
         hereof),

(d)      the reduction of any percentage specified in the definition of Required
         Lenders,

(e)      the consent to the  assignment  or transfer  by Borrower of any of its
         rights and  obligations  under this Agreement, or

(f)      the increase in the percentage advance rates noted in Section 2.1(a)
         and 2.1(b).

(3) Notwithstanding anything to the contrary contained in Section 11.3(2) above,
in the event that Borrower  requests that this Agreement or any other  Financing
Agreements be amended or otherwise  modified in a manner which would require the
unanimous consent of all of the Lenders and such amendment or other modification
is agreed to by the Required Lenders, then, with the consent of Borrower and the
Required  Lenders,  Borrower and the Required  Lenders may amend this  Agreement
without  the  consent  of the  Lender  or  Lenders  which  did not agree to such
amendment  or other  modification  (collectively,  the  "Minority  Lenders")  to
provide  for (a)  the  termination  of the  Commitment  of each of the  Minority
Lenders,  (b) the addition to this Agreement of one or more other Lenders, or an
increase in the Commitment of one or more of the Required  Lenders,  so that the
Commitments,  after  giving  effect  to such  amendment,  shall  be in the  same
aggregate  amount as the  Commitments  immediately  before giving effect to such
amendment,  (c) if any Loans are outstanding at the time of such amendment,  the
making of such additional Loans by such new Lenders or Required Lenders,  as the
case may be, as may be necessary to repay in full the  outstanding  Loans of the
Minority Lenders immediately before giving effect to such amendment, and (d) the
payment of all interest,  fees and other Obligations payable or accrued in favor
of the  Minority  Lenders  and such other  modifications  to this  Agreement  as
Borrower and the Required Lenders may determine to be appropriate.

(4)  consent of Agent  shall be required  for any  amendment,  waiver or consent
affecting  the  rights or duties  of Agent  hereunder  or under any of the other
Financing  Agreements,  in  addition  to the  consent of the  Lenders  otherwise
required by this Section.

11.4     Confidentiality.

(1) Agent and each Lender shall use all reasonable efforts to keep confidential,
in  accordance   with  its  customary   procedures  for  handling   confidential
information  and safe and sound lending  practices,  any non-public  information
supplied to it by Borrower or any Obligor pursuant to this Agreement,  provided,
that,   nothing  contained  herein  shall  limit  the  disclosure  of  any  such
information:  (a) to the extent required by statute, rule, regulation,  subpoena
or court order,  (b) to bank  examiners and other  regulators,  auditors  and/or
accountants,  (c) in  connection  with any  litigation to which such Lender is a
party,  (d)  to  any  assignee  or  participant  (or  prospective   assignee  or
participant) so long as such assignee or participant (or prospective assignee or
participant)   shall  have  been   instructed  to  treat  such   information  as
confidential  in accordance  with this Section 11.4 and shall have  acknowledged
such instructions and agreed to comply therewith or, (e) to counsel for Agent or
any  Lender or any  participant  or  assignee  (or  prospective  participant  or
assignee) or (f) field auditors,  appraisers and other agents retained by Agent.
In the event  that any  Lender  receives  a request  or demand to  disclose  any
confidential  information  pursuant to any subpoena or court order,  such Lender
agrees  (i) to the  extent  permitted  by  applicable  law  or if  permitted  by
applicable law, statute, rule or regulation to the extent such Lender determines
in good faith that it will not create any risk of liability to such Lender, that
such Lender will promptly  notify  Borrower of such request so that Borrower may
seek a  protective  order or other  appropriate  relief or  remedy,  and (ii) if
disclosure  of such  information  is required,  disclose such  information  and,
subject to  reimbursement  by Borrower  of such  Lender's  reasonable  expenses,
cooperate  with  Borrower  in its  efforts to obtain an order or other  reliable
assurance  that  confidential  treatment will be accorded to such portion of the
disclosed  information which Borrower so designates,  to the extent permitted by
applicable  law or if  permitted  by  applicable  law, to the extent such Lender
determines  in good faith that it will not create any risk of  liability to such
Lender.

(2) In no event shall this Section 11.4 or any other provision of this Agreement
or  applicable  law be  deemed:  (i)  to  apply  to or  restrict  disclosure  of
information  that has been or is made  public by  Borrower  or any  third  party
without breach of this Section 11.4 or otherwise become  generally  available to
the public other than as a result of a disclosure  in  violation  hereof,  or in
violation  of any other  confidentiality  agreement  in favor of Borrower to the
extent Agent has actual knowledge of such agreement and the violation thereof at
the time it receives such information,  (ii) to apply to or restrict  disclosure
of  information  that was or  becomes  available  to Agent  or any  Lender  on a
non-confidential basis from a person other than Borrower other than in violation
of a  confidentiality  agreement  in favor of a Borrower  by such  person to the
extent Agent has actual knowledge of such agreement and the violation thereof at
the time it receives  such  information,  (iii)  require  Agent or any Lender to
return any  materials  furnished  by Borrower  to Agent or any  Lender,  or (iv)
prevent Agent or any Lender from responding to routine informational requests in
accordance  with the Code of  Ethics  for the  Exchange  of  Credit  Information
promulgated  by The  Robert  Morris  Associates  or  other  applicable  industry
standards  relating to the exchange of credit  information.  The  obligations of
Agent and  Lenders  under this  Section  11.4 shall  supersede  and  replace the
obligations  of Agent and any Lender  under any  confidentiality  letter  signed
prior to the date hereof.

11.5     Waiver of Counterclaims

         Borrower waives all rights to interpose any claims, deductions, setoffs
or  counterclaims  of any nature (other than  compulsory  counterclaims)  in any
action or  proceeding  with  respect to this  Agreement,  the  Obligations,  the
Collateral or any matter arising therefrom or relating hereto or thereto.

11.6     Indemnification

         Borrower  shall  indemnify  and hold  Agent  and each  Lender,  and its
directors,  agents, employees and counsel, harmless from and against any and all
losses, claims, damages, liabilities,  costs or expenses imposed on, incurred by
or  asserted   against  any  of  them  in   connection   with  any   litigation,
investigation,  claim or  proceeding  commenced  or  threatened  related  to the
negotiation,  preparation,  execution,  delivery,  enforcement,  performance  or
administration  of  this  Agreement,  any  other  Financing  Agreements,  or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act,  omission,  event  or  transaction  related  or  attendant  thereto,
including, without limitation,  amounts paid in settlement, court costs, and the
fees and  expenses  of  counsel  except to the extent  that any of such  losses,
claims,  damages  or  liabilities,  costs or  expenses  are  caused by the gross
negligence or wilful misconduct of Agent or such Lender or such director, agent,
employee or counsel.  To the extent that the  undertaking to indemnify,  pay and
hold harmless set forth in this Section may be unenforceable because it violates
any law or public  policy,  Borrower  shall pay the maximum  portion which it is
permitted to pay under  applicable law to Lender in  satisfaction of indemnified
matters under this Section. The foregoing indemnity shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.

Article 12
                                    THE AGENT

12.1     Appointment, Powers and Immunities.

         Each Lender  hereby  irrevocably  designates,  appoints and  authorizes
Congress to act as Agent hereunder and under the other Financing Agreements with
such  powers  as are  specifically  delegated  to  Agent  by the  terms  of this
Agreement and of the other Financing Agreements, together with such other powers
as are  reasonably  incidental  thereto.  Agent  (a)  shall  have no  duties  or
responsibilities  except those  expressly set forth in this Agreement and in the
other  Financing  Agreements,  and shall not by reason of this  Agreement or any
other  Financing  Agreement be a trustee or fiduciary for any Lender;  (b) shall
not be responsible to Lenders for any recitals,  statements,  representations or
warranties contained in this Agreement or in any other Financing  Agreement,  or
in any certificate or other document referred to or provided for in, or received
by any of them under,  this Agreement or any other Financing  Agreement,  or for
the value, validity, effectiveness,  genuineness,  enforceability or sufficiency
of this  Agreement  or any  other  Financing  Agreement  or any  other  document
referred to or provided  for herein or therein or for any failure by Borrower or
Obligor  or any other  Person to perform  any of its  obligations  hereunder  or
thereunder;  and (c) shall not be responsible to Lenders for any action taken or
omitted to be taken by it  hereunder or under any other  Financing  Agreement or
under any other  document or  instrument  referred to or provided  for herein or
therein  or in  connection  herewith  or  therewith,  except  for its own  gross
negligence  or  willful  misconduct  as  determined  by a  final  non-appealable
judgment  of a court of  competent  jurisdiction.  Agent may  employ  agents and
attorneys-in-fact  and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact  selected by it in good faith. Agent may
deem and treat  the payee of any note as the  holder  thereof  for all  purposes
hereof unless and until the assignment  thereof pursuant to an agreement (if and
to the extent  permitted  herein) in form and  substance  satisfactory  to Agent
shall have been delivered to and acknowledged by Agent.

12.2     Reliance by Agent.

         Agent shall be entitled to rely upon any certification, notice or other
communication (including any thereof by telephone,  telecopy, telegram or cable)
believed  by it to be genuine  and correct and to have been signed or sent by or
on behalf of the proper  Person or Persons,  and upon advice and  statements  of
legal counsel,  independent  accountants and other experts selected by Agent. As
to any  matters  not  expressly  provided  for by this  Agreement  or any  other
Financing  Agreement,  Agent shall in all cases be fully protected in acting, or
in  refraining   from  acting,   hereunder  or  thereunder  in  accordance  with
instructions  given by the Required  Lenders or all of Lenders as is required in
such circumstance, and such instructions of such Lenders and any action taken or
failure to act pursuant thereto shall be binding on all Lenders.

12.3     Events of Default.

(1) Agent shall not be deemed to have  knowledge or notice of the  occurrence of
an Event of Default or other  failure of a condition  precedent to the Loans and
Letter of Credit Accommodations  hereunder,  unless and until Agent has received
written notice from a Lender,  or Borrower or Obligor  specifying  such Event of
Default or any unfulfilled condition precedent,  and stating that such notice is
a "Notice of Default or Failure of Condition".  In the event that Agent receives
such a Notice of Default or Failure of Condition, Agent shall give prompt notice
thereof to the Lenders.  Agent shall (subject to  Section12.7)  take such action
with respect to any such Event of Default or failure of  condition  precedent as
shall be directed by the  Required  Lenders;  provided,  that,  unless and until
Agent shall have received such directions, Agent may (but shall not be obligated
to) take such action, or refrain from taking such action,  with respect to or by
reason of such Event of Default or failure of condition  precedent,  as it shall
deem advisable in the best interest of Lenders.  Without limiting the foregoing,
and  notwithstanding  the existence or occurrence and continuance of an Event of
Default or any other  failure to satisfy  any of the  conditions  precedent  set
forth in Article 4 of this Agreement to the contrary,  Agent may, but shall have
no obligation to,  continue to make Loans and issue or cause to be issued Letter
of Credit  Accommodations  for the ratable account and risk of Lenders from time
to time if Agent  believes  making such Loans or issuing or causing to be issued
such Letter of Credit Accommodations is in the best interests of Lenders.

(2) Except  with the prior  written  consent  of Agent,  no Lender may assert or
exercise  any  enforcement  right or remedy in respect  of the Loans,  Letter of
Credit  Accommodations or other  Obligations,  as against Borrower or Obligor or
any of the Collateral or other property of Borrower or Obligor.

12.4     Congress in its Individual Capacity.

         With respect to its  Commitment and the Loans made and Letter of Credit
Accommodations  issued or caused to be issued by it (and any successor acting as
Agent), so long as Congress shall be a Lender hereunder,  it shall have the same
rights and powers  hereunder  as any other  Lender and may  exercise the same as
though it were not acting as Agent,  and the term  "Lender" or "Lenders"  shall,
unless the context  otherwise  indicates,  include  Congress  in its  individual
capacity as Lender  hereunder.  Congress (and any successor acting as Agent) and
its Affiliates may (without having to account therefor to any Lender) lend money
to,  make  investments  in and  generally  engage in any kind of  business  with
Borrower and any Obligor (and any of their  Subsidiaries or Affiliates) as if it
were not acting as Agent,  and Congress and its  Affiliates  may accept fees and
other  consideration  from  Borrower and any Obligor for services in  connection
with this  Agreement  or  otherwise  without  having to account  for the same to
Lenders.

12.5     Indemnification.

         Lenders  agree to  indemnify  Agent (to the  extent not  reimbursed  by
Borrower  hereunder and without limiting the Obligations of Borrower  hereunder)
ratably, in accordance with their Pro Rata Shares, for any and all claims of any
kind and nature  whatsoever  that may be imposed  on,  incurred  by or  asserted
against  Agent  (including  by any  Lender)  arising  out of or by reason of any
investigation  in or in any way relating to or arising out of this  Agreement or
any other Financing Agreement or any other documents contemplated by or referred
to  herein  or  therein  or the  transactions  contemplated  hereby  or  thereby
(including  the costs and expenses that Agent is obligated to pay  hereunder) or
the  enforcement  of any of the terms  hereof or  thereof  or of any such  other
documents, provided, that, no Lender shall be liable for any of the foregoing to
the extent it arises  from the gross  negligence  or willful  misconduct  of the
party to be  indemnified as determined by a final  non-appealable  judgment of a
court of competent jurisdiction.

12.6     Non-Reliance on Agent and Other Lenders.

         Each Lender agrees that it has,  independently  and without reliance on
Agent or other Lender,  and based on such  documents and  information  as it has
deemed appropriate, made its own credit analysis of Borrower and Obligor and has
made  its  own  decision  to  enter  into  this  Agreement  and  that  it  will,
independently and without reliance upon Agent or any other Lender,  and based on
such  documents  and  information  as it shall  deem  appropriate  at the  time,
continue to make its own analysis and  decisions in taking or not taking  action
under this Agreement or any of the other Financing  Agreements.  Agent shall not
be required  to keep itself  informed as to the  performance  or  observance  by
Borrower or Obligor of any term or  provision  of this  Agreement  or any of the
other  Financing  Agreements or any other  document  referred to or provided for
herein or therein or to  inspect  the  properties  or books of  Borrower  or any
Obligor.  Agent  will  use  reasonable  efforts  to  provide  Lenders  with  any
information  received by Agent from  Borrower or Obligor which is required to be
provided  to  Lenders  hereunder  and with a copy of any  Notice of  Default  or
Failure of Condition  received by Agent from  Borrower or any Lender;  provided,
that,  Agent shall not be liable to any Lender for any failure to do so,  except
to the extent that such failure is attributable to Agent's own gross  negligence
or willful  misconduct  as determined  by a final  non-appealable  judgment of a
court of competent jurisdiction. Except for notices, reports and other documents
expressly  required to be furnished to Lenders by Agent  hereunder,  Agent shall
not have any duty or  responsibility to provide any Lender with any other credit
or other information concerning the affairs,  financial condition or business of
Borrower or any Obligor that may come into the possession of Agent.

12.7     Failure to Act.

         Except for action  expressly  required of Agent hereunder and under the
other  Financing  Agreements,  Agent  shall in all cases be fully  justified  in
failing or refusing to act  hereunder  and  thereunder  unless it shall  receive
further  assurances to its  satisfaction  from Lenders of their  indemnification
obligations  under Section 12.5 hereof against any and all liability and expense
that may be  incurred by it by reason of taking or  continuing  to take any such
action.

12.8     Concerning the Collateral and the Related Financing Agreements.

         Each Lender  authorizes  and directs Agent to enter into this Agreement
and the other Financing  Agreements relating to the Collateral,  for the ratable
benefit of Lenders and Agent.  Each Lender agrees that any action taken by Agent
or Required  Lenders in accordance with the terms of this Agreement or the other
Financing  Agreements  relating to the Collateral,  and the exercise by Agent or
Required  Lenders  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.

12.9     Field Audit, Examination Reports and other Information; Disclaimer by
         Lenders.

         By signing this Agreement, each Lender:

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

(b)               expressly agrees and acknowledges that Agent (A) does not make
                  any  representation  or  warranty  as to the  accuracy  of any
                  Report,  or  (B)  shall  not be  liable  for  any  information
                  contained in any Report;  provided, that, nothing contained in
                  this Section 12.9 shall be construed to limit the liability of
                  Agent under Section  12.1(c)  hereof in the event of the gross
                  negligence  or  wilful   misconduct  of  Agent  as  determined
                  pursuant  to  a  final  non-appealable  order  of a  court  of
                  competent jurisdiction;

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

(d)               agrees to keep all Reports  confidential  and strictly for its
                  internal  use in  accordance  with the terms of  Section  11.4
                  hereof,  and not to  distribute or use any Report in any other
                  manner.

12.10    Collateral Matters.

(1) Agent  may,  at its  option,  from time to time,  at any time on or after an
Event  of  Default  and  for so  long  as the  same  is  continuing,  make  such
disbursements  and advances  ("Special Agent Advances") which Agent, in its sole
discretion,  deems necessary or desirable  either (i) to preserve or protect the
Collateral or any portion thereof (provided that in no event shall Special Agent
Advances  for such purpose  exceed an amount  equal to ten (10%)  percent of the
then existing Maximum Credit in the aggregate  outstanding at any time), or (ii)
to pay any other  amount  chargeable  to Borrower  pursuant to the terms of this
Agreement  consisting of costs,  fees and expenses and payments to any issuer of
Letter of Credit  Accommodations.  Special Agent  Advances shall be repayable on
demand  and be secured  by the  Collateral.  Special  Agent  Advances  shall not
constitute Loans but shall otherwise  constitute  Obligations  hereunder.  Agent
shall  notify each Lender and  Borrower  in writing of each such  Special  Agent
Advance, which notice shall include a description of the purpose of such Special
Agent Advance.  Without limitation of its obligations  pursuant to Section 6.10,
each Lender agrees that it shall make available to Agent,  upon Agent's  demand,
in immediately available funds, the amount equal to such Lender's Pro Rata Share
of each such  Special  Agent  Advance.  If such funds are not made  available to
Agent by such Lender,  Agent shall be entitled to recover such funds,  on demand
from such Lender together with interest thereon, for each day from the date such
payment was due until the date such amount is paid to Agent at the Interest Rate
then payable by Borrower in respect of the Loans in accordance  with Section 3.1
hereof.

(a)  Lenders  hereby  irrevocably  authorize  Agent,  at its  option  and in its
     discretion to release any security  interest in, mortgage or lien upon, any
     of the Collateral (i) upon  termination of the  Commitments and payment and
     satisfaction  of all of the  Obligations and delivery of cash collateral to
     the extent required under Section 13.1 below, or (ii) constituting property
     being sold or disposed of if Borrower  certifies  to Agent that the sale or
     disposition  is made in  compliance  with Section 9.7 hereof (and Agent may
     rely  conclusively on any such certificate,  without further  inquiry),  or
     (iii)  constituting  property in which  Borrower did not own an interest at
     the time the security interest, mortgage or lien was granted or at any time
     thereafter,  or (iv)  having a value  of less  than  $5,000,000,  or (v) if
     approved,  authorized  or ratified in writing by all of Lenders.  Except as
     provided above,  Agent will not release any security  interest in, mortgage
     or lien upon, any of the Collateral without the prior written authorization
     of all of Lenders (and any Lender may require  that the  proceeds  from any
     sale or other disposition of the Collateral to be so released be applied to
     the Obligations in a manner  satisfactory to such Lender).  Upon request by
     Agent at any  time,  Lenders  will  promptly  confirm  in  writing  Agent's
     authority to release  particular  types or items of Collateral  pursuant to
     this Section.

(b)  Without  in any  manner  limiting  Agent's  authority  to act  without  any
     specific or further  authorization or consent by the Required Lenders, each
     Lender agrees to confirm in writing,  upon request by Agent,  the authority
     to release Collateral conferred upon Agent under this Section.  Agent shall
     (and is hereby irrevocably authorized by Lenders to) execute such documents
     as may be  necessary  to  evidence  the release of the  security  interest,
     mortgage  or liens  granted  to Agent for  itself  and the  benefit  of the
     Lenders upon any Collateral to the extent set forth above; provided,  that,
     (i) Agent  shall not be  required  to execute  any such  document  on terms
     which,  in Agent's  opinion,  would expose Agent to liability or create any
     obligations  or entail  any  consequence  other  than the  release  of such
     security interest, mortgage or liens without recourse or warranty, and (ii)
     such  release  shall not in any  manner  discharge,  affect  or impair  the
     Obligations or any security interest, mortgage or lien upon (or obligations
     of Borrower in respect of) the Collateral retained by Borrower.

(c)  Agent shall have no obligation whatsoever to any Lender or any other Person
     to investigate, confirm or assure that the Collateral exists or is owned by
     Borrower or is cared for,  protected or insured or has been encumbered,  or
     that any  particular  items of  Collateral  meet the  eligibility  criteria
     applicable  in  respect  of the Loans or  Letter  of Credit  Accommodations
     hereunder, or whether any particular reserves are appropriate,  or that the
     liens and security  interests granted to Agent herein or pursuant hereto or
     otherwise  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 Agent in this
     Agreement or in any of the other Financing Agreements,  it being understood
     and agreed that in respect of the Collateral, or any act, omission or event
     related thereto,  Agent may act in any manner it may deem  appropriate,  in
     its  discretion,  given Agent's own interest in the  Collateral as a Lender
     and that Agent  shall  have no duty or  liability  whatsoever  to any other
     Lender.

12.11    Agency for Perfection.

         Agent and each  Lender  hereby  appoints  each  Lender as Agent for the
purpose of perfecting the security interests in and liens upon the Collateral of
Agent for  itself  and the  ratable  benefit  of  Lenders  in assets  which,  in
accordance with the PPSA can be perfected only by possession.  Should any Lender
obtain  possession  of any such  Collateral,  such  Lender  shall  notify  Agent
thereof,  and,  promptly  upon  Agent's  request  therefor  shall  deliver  such
Collateral to Agent or in accordance with Agent's instructions.

Article 13
                        TERM OF AGREEMENT; MISCELLANEOUS

13.1     Term

(1) This Agreement and the other Financing  Agreements shall become effective as
of the date set forth on the first page hereof and shall  continue in full force
and effect for a term ending on the date three (3) years from the date hereof as
it may be extended under this Section 13.1 (the "Renewal  Date"),  unless sooner
terminated  pursuant to the terms hereof;  provided,  that,  Agent,  Lenders and
Borrower  may extend the  Renewal  Date to the date four (4) years from the date
hereof by mutual  agreement  reached at least sixty (60) days prior to the third
anniversary  of this  Agreement.  Thereafter,  the term of this Agreement may be
extended  year to year by  Borrower,  Agent and  Lenders for a period of one (1)
year by  extending  the  Renewal  Date to a date  which is one (1) year from the
anniversary  of the then current  Renewal  Date in any year by mutual  agreement
reached at least  sixty  (60) days prior to then  current  Renewal  Date  unless
sooner  terminated  pursuant to the terms hereof.  Agent or Borrower (subject to
the right of Agent,  Lenders and Borrower to extend the Renewal Date as provided
above) may terminate this Agreement and the other Financing Agreements effective
on the then  current  Renewal  Date in any year by giving to the other  party at
least sixty (60) days prior written notice;  provided,  that, this Agreement and
all other Financing  Agreements must be terminated  simultaneously.  In addition
Borrower may terminate  this  Agreement at any time upon fifteen (15) days prior
written  notice  to Agent  (which  notice  shall be  irrevocable)  and Agent may
terminate  this  Agreement  at any  time  upon an  Event  of  Default.  Upon the
effective  date of  termination  or  non-renewal  of the  Financing  Agreements,
Borrower  shall pay to Agent,  for  rateable  benefit of Lenders,  in full,  all
outstanding  and unpaid  Obligations and shall furnish cash collateral to Agent,
for  rateable  benefit  of  Lenders  in such  amounts  as Agent  determines  are
reasonably  necessary  to secure  Agent  from  loss,  cost,  damage or  expense,
including legal fees and expenses, in connection with any contingent Obligations
(excluding  indemnities  under this Agreement for which no claim has been made),
including issued and outstanding Letter of Credit  Accommodations and cheques or
other  payments  provisionally  credited to the  Obligations  and/or as to which
Agent  for  rateable   benefit  of  Lenders  has  not  yet  received  final  and
indefeasible  payment.  Such  payments  in respect of the  Obligations  and cash
collateral shall be remitted by wire transfer in Canadian Dollars or US Dollars,
as applicable,  to such bank account of Agent,  as Agent may, in its discretion,
designate in writing to Borrower for such purpose.  Interest  shall be due until
and  including  the next Business Day, if the amounts so paid by Borrower to the
bank account  designated  by Lender are received in such bank account later than
12:00 noon, Toronto time.

(2) No  termination of this Agreement or the other  Financing  Agreements  shall
relieve  or  discharge  Borrower  of  its  respective  duties,  obligations  and
covenants under this Agreement or the other Financing Agreements until Agent for
itself and  rateable  benefit  of Lenders  has  received  release  documentation
satisfactory  to it and all Obligations  have been fully and finally  discharged
and paid, and Lender's  continuing  security  interest in the Collateral and the
rights and remedies of Agent and Lender,  hereunder,  under the other  Financing
Agreements  and  applicable  law,  shall  remain in effect  until  such  release
documentation  has been  received and all such  Obligations  have been fully and
finally  discharged  and paid.  Agent shall be required to execute  such release
documentation  satisfactory  to  it  upon  payment  of  all  Obligations.   Upon
termination of this  Agreement in accordance  with this Section,  Agent,  at the
request and expense of Borrower  shall execute such  documents and  instructions
and take such other actions as may be reasonably  required to terminate any lien
or security interest held by Agent and Lenders for itself and shall transfer its
interest therein to Borrower.

(3) If for any reason this  Agreement  is  terminated  (whether  voluntarily  or
involuntarily  or as a result of an Event of  Default) on or prior to the second
anniversary  of the  Closing  Date,  in view of the  impracticality  and extreme
difficulty of ascertaining actual damages and by mutual agreement of the parties
as to a reasonable  calculation  of Lender's  lost profits as a result  thereof,
Borrower  agrees to pay to Agent's and each Lender,  upon the effective  date of
such termination, an early termination fee in the amount set forth below if such
termination is effective in the period indicated:

       Amount                                             Period

(a)  $1,500,000 (1.5% of  $100,000,000)      From  the  Closing   Date  hereof
                                             to and including the first
                                             anniversary thereof

(b)  $750,000 (0.75% of $100,000,000)        Thereafter  to and  including  the
                                             second anniversary of the Closing
                                             Date


Such  early  termination  fee shall be  presumed  to be the  amount  of  damages
sustained by Lender as a result of such early  termination  and Borrower  agrees
that it is reasonable under the circumstances  currently existing.  In addition,
Agent and  Lenders  shall be  entitled  to such early  termination  fee upon the
occurrence  of any Event of Default  described  in Sections  10.1(6) and 10.1(7)
hereof,  even if Agent does not exercise its right to terminate this  Agreement,
but elects, at its option, to provide financing to Borrower or permit the use of
cash collateral under any applicable  reorganization or insolvency  legislation.
The early  termination  fee  provided  for in this  Section 13.1 shall be deemed
included in the Obligations.

         (4) Any reference in this  Agreement to the  termination or non-renewal
of this  Agreement  shall mean the date on which this Agreement is terminated or
expires and not the date on which notice to do so is given.

13.2     Notices

         All notices, requests and demands hereunder shall be in writing and (a)
made to Agent and Lenders at their  addresses set forth below and to Borrower at
its chief  executive  office set forth below with a copy to Merisel,  Inc.,  200
Continental Blvd. El Segundo,  CA 90245,  Fax: (310) 615-6882,  or to such other
address  as  either  party  may  designate  by  written  notice  to the other in
accordance  with this  provision,  and (b) deemed to have been given or made: if
delivered in person,  immediately upon delivery;  if by facsimile  transmission,
immediately  upon sending and upon  confirmation  of receipt;  if by  nationally
recognized  overnight  courier  service  with  instructions  to deliver the next
business day, one (1) business day after  sending;  and if by  registered  mail,
return receipt requested, five (5) days after mailing.

13.3     Partial Invalidity

         If  any  provision  of  this   Agreement  is  held  to  be  invalid  or
unenforceable,  such  invalidity or  unenforceability  shall not invalidate this
Agreement as a whole, but this Agreement shall be construed as though it did not
contain the  particular  provision held to be invalid or  unenforceable  and the
rights and  obligations  of the parties  shall be construed and enforced only to
such extent as shall be permitted by applicable law.

13.4     Successors

         This Agreement,  the other Financing  Agreements and any other document
referred to herein or therein  shall be binding upon and inure to the benefit of
and be enforceable by Lenders, Agent, Borrower and its respective successors and
assigns,  except that  Borrower may not assign its rights under this  Agreement,
the other  Financing  Agreements  and any other  document  referred to herein or
therein  without the prior written  consent of Agent and Lenders.  No Lender may
assign its rights and  obligations  under this  Agreement  (or any part thereof)
without the prior written consent of all Lenders and Agent,  except as permitted
under  Section 13.5 hereof.  Any purported  assignment by a Lender  without such
prior express consent or compliance with Section 13.5 where applicable, shall be
void.  The terms  and  provisions  of this  Agreement  and the  other  Financing
Agreements are for the purpose of defining the relative  rights and  obligations
of Borrower,  Agent and Lenders with  respect to the  transactions  contemplated
hereby and there shall be no third party  beneficiaries  of any of the terms and
provisions of this Agreement or any of the other Financing Agreements.

13.5     Assignments; Participations

(a)  Each  Lender may (i) assign all or a portion of its rights and  obligations
     under  this  Agreement  (including,  without  limitation,  a portion of its
     Commitment,  the Loans  owing to it and its  rights  and  obligations  as a
     Lender  with  respect to Letters  of Credit  Accommodations)  and the other
     Financing  Agreements;  to its parent  company and/or any Affiliate of such
     Lender  which is at least fifty (50%)  percent  owned by such Lender or its
     parent  company or to one or more  Lenders,  or (ii) assign all, or if less
     than all a portion  equal to at least  $5,000,000  in the aggregate for the
     assigning Lender or assigning Lenders, of such rights and obligations under
     this Agreement to one or more Eligible Transferees, each of which assignees
     shall  become a party to this  Agreement  as a Lender  by  execution  of an
     Assignment and Acceptance;  provided,  that, (A) the consent of Agent shall
     be required in connection  with any  assignment  to an Eligible  Transferee
     pursuant to clause (ii) above.

(b)  Agent  shall  maintain a register  of the names and  addresses  of Lenders,
     their Commitments and the principal amount of their Loans (the "Register").
     Agent  shall  also  maintain  a copy  of  each  Assignment  and  Acceptance
     delivered  to and  accepted  by it and shall  modify the  Register  to give
     effect to each Assignment and Acceptance. The entries in the Register shall
     be conclusive  and binding for all purposes,  absent  manifest  error,  and
     Borrower, Agent and Lenders may treat each Person whose name is recorded in
     the Register as a Lender hereunder for all purposes of this Agreement.  The
     Register  shall be available  for  inspection by Borrower and any Lender at
     any reasonable time and from time to time upon reasonable prior notice.

(c)  Upon such execution, delivery, acceptance and recording, from and after the
     effective  date  specified  in  each  Assignment  and  Acceptance,  (i) the
     assignee  thereunder  shall be a party  hereto  and to the other  Financing
     Agreements  and, to the extent that rights and  obligations  hereunder have
     been assigned to it pursuant to such  Assignment and  Acceptance,  have the
     rights and obligations  (including,  without limitation,  the obligation to
     participate in Letter of Credit  Accommodations)  of a Lender hereunder and
     thereunder,  and (ii) the assigning Lender shall, to the extent that rights
     and  obligations  hereunder  have  been  assigned  by it  pursuant  to such
     Assignment and  Acceptance,  relinquish its rights and be released from its
     obligations under this Agreement.

(d)  By execution and delivery of an Assignment and Acceptance, the assignor and
     assignee  thereunder  confirm  to and agree  with each  other and the other
     parties  hereto as follows:  (i) other than as provided in such  Assignment
     and Acceptance,  the 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 any of the
     other  Financing  Agreements or the  execution,  legality,  enforceability,
     genuineness,  sufficiency  or value of this  Agreement  or any of the other
     Financing  Agreements  furnished pursuant hereto, (ii) the assigning Lender
     makes no  representation  or warranty  and assumes no  responsibility  with
     respect to the financial condition of Borrower, any Obligor or any of their
     Subsidiaries or the performance or observance by Borrower or any Obligor of
     any of the Obligations; (iii) such assignee confirms that it has received a
     copy of this Agreement and the other  Financing  Agreements,  together with
     such other documents and information it has deemed  appropriate to make its
     own  credit  analysis  and  decision  to enter  into  such  Assignment  and
     Acceptance,  (iv) such assignee will,  independently  and without  reliance
     upon the  assigning  Lender,  Agent 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 and the other Financing Agreements,  (v) such assignee
     appoints  and  authorizes  Agent to take such action as agent on its behalf
     and to exercise such powers under this  Agreement  and the other  Financing
     Agreements  as are  delegated  to Agent by the terms  hereof  and  thereof,
     together with such powers as are reasonably  incidental  thereto,  and (vi)
     such assignee  agrees that it will perform in  accordance  with their terms
     all of the  obligations  which by the terms of this Agreement and the other
     Financing  Agreements are required to be performed by it as a Lender. Agent
     and Lenders may furnish any information concerning Borrower, any Obligor or
     its Subsidiaries in the possession of Agent or any Lender from time to time
     to assignees and Participants.

(e)  Each Lender may sell  participations to one or more banks or other entities
     in or to  all or a  portion  of  its  rights  and  obligations  under  this
     Agreement  and  the  other   Financing   Agreements   (including,   without
     limitation,  all or a portion of its  Commitments and the Loans owing to it
     and its participation in the Letter of Credit  Accommodations,  without the
     consent of Agent or the other Lenders);  provided,  that, (i) such Lender's
     obligations  under  this  Agreement  (including,  without  limitation,  its
     Commitment  hereunder)  and the other  Financing  Agreements  shall  remain
     unchanged,  (ii) such Lender shall remain solely  responsible  to the other
     parties hereto for the performance of such obligations,  and Borrower,  any
     Obligor,  Agent and the other  Lenders  shall  continue  to deal solely and
     directly  with such  Lender in  connection  with such  Lender's  rights and
     obligations  under this Agreement and the other Financing  Agreements,  and
     (iii) the Participant shall not have any rights under this Agreement or any
     of the other  Financing  Agreements and (the  Participant's  rights against
     such Lender in respect of such  participation  to be those set forth in the
     agreement  executed  by such  Lender in favor of the  Participant  relating
     thereto) and all amounts payable by any Borrower or Obligor hereunder shall
     be determined as if such Lender had not sold such participation,

13.6 Participant's Security Interests.

                  If a Participant shall at any time participate with any Lender
in the Loans and Letter of Credit Accommodations, Borrower hereby grants to such
Participant  and such  Participant  shall have and is hereby given, a continuing
lien on and security  interest in any money,  securities  and other  property of
Borrower in the custody or possession of the Participant, including the right of
setoff, to the extent of the Participant's participation in the Obligations, and
such Participant  shall be deemed to have the same right of setoff to the extent
of its  participation in the  Obligations,  as it would have if it were a direct
Lender.

13.7     Entire Agreement

         This Agreement, the other Financing Agreements,  any supplements hereto
or thereto,  and any  instruments  or documents  delivered or to be delivered in
connection   herewith  or  therewith   represents   the  entire   agreement  and
understanding  concerning  the subject  matter  hereof and  thereof  between the
parties  hereto,  and  supersede  all other  prior  agreements,  understandings,
negotiations  and   discussions,   representations,   warranties,   commitments,
proposals,  offers and contracts  concerning the subject matter hereof,  whether
oral or  written.  In the event of any  inconsistency  between the terms of this
Agreement and any schedule or exhibit hereto,  the terms of this Agreement shall
govern.

13.8     Headings

         The  division of this  Agreement  into  Sections  and the  insertion of
headings and a table of contents are for convenience of reference only and shall
not affect the construction or interpretation of this Agreement.

13.9     Judgment Currency

         To the extent  permitted by applicable law, the obligations of Borrower
in respect of any amount due under this  Agreement  shall,  notwithstanding  any
payment in any other  currency  (the "Other  Currency")  (whether  pursuant to a
judgment or  otherwise),  be discharged  only to the extent of the amount in the
currency  in  which  it is due (the  "Agreed  Currency")  that  Lender  may,  in
accordance  with normal  banking  procedures,  purchase with the sum paid in the
Other  Currency  (after any premium and costs of  exchange)  on the Business Day
immediately after the day on which Lender receives the payment. If the amount in
the Agreed  Currency  that may be so purchased for any reason falls short of the
amount originally due, Borrower shall pay all additional  amounts, in the Agreed
Currency, as may be necessary to compensate for the shortfall. Any obligation of
Borrower  not  discharged  by that  payment  shall,  to the extent  permitted by
applicable  law, be due as a separate  and  independent  obligation  and,  until
discharged as provided in this Section, continue in full force and effect.

13.10    Execution in Counterparts

         This  Agreement  may  be  executed  and  delivered  in  any  number  of
counterparts,  each of which when  executed and delivered is an original but all
of which taken together constitute one and the same instrument.

13.11    Facsimile

         This Agreement may be executed and delivered by facsimile  transmission
and the  parties  may rely on all  such  facsimile  signatures  as  though  such
facsimile signatures were original signatures.

13.12    Choice of Language

         The parties hereto confirm that they have requested that this Agreement
and all  documents  related  hereto be  drafted  in  English.  Les  parties  aux
presentes ont exige que cette  convention ainsi que tout document connexe soient
rediges en anglais.



<PAGE>


         IN WITNESS  WHEREOF,  Agent,  Lenders and  Borrower  have caused  these
presents to be duly executed as of the day and year first above written.


                                CONGRESS FINANCIAL CORPORATION (CANADA)

                                 By:
                                 ---------------------------------------
                                  Name:    Harry Rosenfeld
                                  Title:   Senior Vice President

                                  Address:
                                  -------
                                  141 Adelaide Street West
                                  Suite 1500
                                  Toronto, Ontario
                                  M5H 3L9
                                  Fax:  (416) 364-3990

                                  MERISEL CANADA INC.


                                  By:
                                           -----------------------------------
                                           Name:    Charles Freedman
                                           Title:   Vice President and Treasurer


                                  By:
                                           -----------------------------------
                                           Name:    Karen Tallman
                                           Title:   Vice President and Secretary

                                  Chief Executive Office:
                                  200 Ronson Drive
                                  Etobicoke, Ontario
                                  M9W 5Z9
                                  Fax:  (416) 240-2617

                                  Attention:  Senior Financial Officer