MERISEL INC /DE/
PRES14A, 1997-10-06
COMPUTERS & PERIPHERAL EQUIPMENT & SOFTWARE
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<PAGE>
 
    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 6, 1997
 
                                                                FILE NO. 0-17156
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 
                                  SCHEDULE 14A
                                 (RULE 14A-101)
 
                    INFORMATION REQUIRED IN PROXY STATEMENT
 
                            SCHEDULE 14A INFORMATION
 
          PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
                    EXCHANGE ACT OF 1934 (AMENDMENT NO.   )
 
FILED BY THE REGISTRANT [X]
FILED BY A PARTY OTHER THAN THE REGISTRANT [_]
 
                           CHECK THE APPROPRIATE BOX:
 
[X] PRELIMINARY PROXY STATEMENT           [_CONFIDENTIAL]FOR USE OF THE
                                            COMMISSION ONLY (AS PERMITTED BY
                                            RULE 14A-6(E)(2))
 
[_]DEFINITIVE PROXY STATEMENT
                                          [_]DEFINITIVE ADDITIONAL MATERIALS
[_]SOLICITING MATERIALS PURSUANT TO RULE 14A-11(C) OR RULE 14A-12
 
                                 MERISEL, INC.
                (NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
     (NAME OF PERSON FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
 
Payment of Filing Fee (Check the appropriate box):
[X]No fee required.
[_]Fee computed on the table below per Exchange Act Rule 14a-6(i)(1) and 0-11.
  (1) Title of each class of securities to which transaction applies:
  (2) Aggregate number of securities to which transaction applies:
  (3) Per unit price or other underlying value of transaction computed
      pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
      filing fee is calculated and state how it was determined):
  (4) Proposed maximum aggregate value of transaction:
  (5) Total fee paid:
[_]Fee paid previously with preliminary materials:
[_]Check box if any part of the fee is offset as provided by Exchange Act Rule
   0-11(a)(2) and identify the filing for which the offsetting fee was paid
   previously. Identify the previous filing by registration statement number,
   or the form or schedule and the date of its filing.
  (1) Amount Previously Paid:
  (2) Form, Schedule or Registration Statement No.:
  (3) Filing Party:
  (4) Date Filed:
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
 
                               Preliminary Copy
 
                                [MERISEL LOGO]
 
                                                                         , 1997
 
Dear Stockholder:
 
  You are cordially invited to attend a special meeting of stockholders of
Merisel, Inc. (the "Company") to be held at the Company's headquarters located
at 200 Continental Boulevard, El Segundo, California on      , 1997, at 10:00
a.m., Los Angeles time. At the meeting you will be asked to consider and vote
on certain proposals related to the financial restructuring of the Company
whereby Phoenix Acquisition Company II, L.L.C. ("Phoenix"), a Delaware limited
liability company whose sole member is Stonington Capital Appreciation 1994
Fund, L.P., would convert its $137.1 million unsecured Convertible Promissory
Note (the "Convertible Note"), dated September 19, 1997, as amended and
restated as of October 3, 1997, into common stock ("Common Stock"), par value
$.01 per share, of the Company.
 
  On September 19, 1997, the Company and its wholly-owned, operating
subsidiary Merisel Americas, Inc. ("Merisel Americas") entered into a Stock
and Note Purchase Agreement (as amended, the "Stock and Note Purchase
Agreement"), with Phoenix. Pursuant to the terms of that agreement, Phoenix
acquired the Convertible Note for $137.1 million and 4,901,316 shares of
Common Stock for $14,900,000. Upon a favorable stockholder vote and certain
other conditions, the Convertible Note will automatically convert (the
"Stonington Conversion") into Common Stock. Based upon the number of shares
currently outstanding and the 4,901,316 shares already owned by Phoenix, the
Stonington Conversion will result in Phoenix owning approximately 62.4% of the
then outstanding shares of Common Stock. Phoenix has also agreed to defer
interest payments on the Convertible Note (and to forgive such deferred
interest payments upon conversion) pending a stockholder vote on the
Stonington Conversion.
 
  The Company and Merisel Americas used the proceeds of the debt and equity
investment to retire substantially all of the senior and subordinated
indebtedness of Merisel Americas (other than trade payables). Phoenix has
agreed to assist the Company in obtaining up to a $100 million working capital
facility and, if Phoenix is unable to obtain such financing, it has agreed to
provide, upon consummation of the Stonington Conversion, a $50 million, six-
month working capital facility.
 
  Specifically, stockholders will be asked to consider and vote upon proposals
(the "Proposals") to:
 
    (i) amend the Company's Restated Certificate of Incorporation, as
  amended, to increase the number of authorized shares of Common Stock from
  50,000,000 to 100,000,000 shares,
 
    (ii) approve the issuance of up to 45,098,684 shares (subject to
  customary antidilution adjustments) of Common Stock to Phoenix upon
  conversion of the Convertible Note, and
 
    (iii) approve the adoption of the Merisel, Inc. 1997 Stock Award and
  Incentive Plan.
 
  THE BOARD OF DIRECTORS EVALUATED THE TRANSACTIONS CONTEMPLATED BY THE STOCK
AND NOTE PURCHASE AGREEMENT WITH THE ASSISTANCE OF DONALDSON, LUFKIN &
JENRETTE SECURITIES CORPORATION WHICH ADVISED THE BOARD OF DIRECTORS THAT,
BASED UPON AND SUBJECT TO THE ASSUMPTIONS, LIMITATIONS AND QUALIFICATIONS SET
FORTH IN THEIR OPINION, THE CONSIDERATION TO BE RECEIVED BY THE COMPANY IN
SUCH TRANSACTIONS WAS FAIR TO THE COMPANY FROM A FINANCIAL POINT OF VIEW. THE
BOARD OF DIRECTORS BELIEVES THAT THE PROPOSALS ARE IN THE BEST INTERESTS OF
THE COMPANY'S STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
FOR THE APPROVAL OF THE PROPOSALS.
<PAGE>
 
  Regardless of the size of your holdings, it is important that your shares be
voted at the Stockholders' Meeting. Whether or not you plan to attend the
Stockholders' Meeting, please sign and return your proxy in the enclosed
envelope to assure that your shares will be voted with respect to the
Proposals.
 
                                          Sincerely,
 
                                          Dwight A. Steffensen
                                          Chairman of the Board and
                                           Chief Executive Officer
<PAGE>
 
                                 MERISEL, INC.
 
                   NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
                         TO BE HELD ON [      ], 1997
 
  NOTICE IS HEREBY GIVEN that a special meeting of stockholders
("Stockholders") of Merisel, Inc. (the "Company") will be held at the
Company's headquarters located at 200 Continental Boulevard, El Segundo,
California on [      ], 1997, at 10:00 a.m., Los Angeles time (including any
adjournments or postponements thereof, the "Stockholders' Meeting"), for the
purpose of approving the issuance of up to 45,098,684 shares of common stock,
par value $.01 per share ("Common Stock"), of the Company (subject to certain
adjustments as described in the accompanying Proxy Statement) pursuant to the
conversion (the "Stonington Conversion") of the Convertible Promissory Note
(the "Convertible Note"), dated September 19, 1997, as amended and restated as
of October 3, 1997, of the Company and Merisel Americas, Inc., issued pursuant
to the Stock and Note Purchase Agreement, dated September 19, 1997, as
amended, among Phoenix Acquisition Company II, L.L.C. ("Phoenix"), a Delaware
limited liability company whose sole member is Stonington Capital Appreciation
1994 Fund, L.P., the Company and Merisel Americas, Inc., (the "Stock and Note
Purchase Agreement"). Specifically, Stockholders will be asked to consider and
vote upon the following, all of which are more fully described in the
accompanying Proxy Statement:
 
  1. An amendment (the "Charter Amendment") to the Company's Restated
     Certificate of Incorporation, as amended, which would increase the
     number of authorized shares of Common Stock of the Company from
     50,000,000 shares to 100,000,000 shares;
 
  2. The issuance of up to 45,098,684 shares of Common Stock (subject to
     certain adjustments as described in the accompanying Proxy Statement) to
     Phoenix (or any transferee of the Convertible Note) upon conversion of
     the Convertible Note pursuant to the terms of the Convertible Note;
 
  3. The Merisel, Inc. 1997 Stock Award and Incentive Plan (the "Stock Award
     and Incentive Plan"); and
 
  4. Such other business as may properly come before the Stockholders'
     Meeting or any adjournments or postponements thereof.
 
  The proposed text of the Charter Amendment is set forth in Annex I of the
accompanying Proxy Statement. The proposed text of the Stock Award and
Incentive Plan is set forth in Annex II of the accompanying Proxy Statement.
 
  The Stonington Conversion will not become effective unless and until the
Charter Amendment and the Stonington Conversion are approved at the
Stockholders' Meeting and the Charter Amendment is filed with the Secretary of
State of the State of Delaware. If approved, the Stock Award and Incentive
Plan will be implemented regardless of whether the Stonington Conversion
occurs or the Charter Amendment is implemented.
 
  The Board of Directors of the Company has fixed the close of business on [
   ], 1997 as the record date ("Record Date") for the determination of
Stockholders entitled to notice of and to vote at the Stockholders' Meeting
and any adjournments or postponements thereof. Only Stockholders of record at
the close of business on such date are entitled to notice of and to vote at
the Stockholders' Meeting.
 
  The Common Stock is the only security of the Company whose holders are
entitled to vote upon the proposals to be presented at the Stockholders'
Meeting.
 
  Your vote is important regardless of the number of shares you own. Each
Stockholder, even though such Stockholder may currently plan to attend the
Stockholders' Meeting, is requested to sign, date and return the enclosed
proxy, without delay in the enclosed postage-paid envelope. You may revoke
your proxy at any time prior to its exercise. Any Stockholder present at the
Stockholders' Meeting or at any adjournments or
<PAGE>
 
postponements thereof may revoke such Stockholder's proxy and vote personally
on each matter brought before the Stockholders' Meeting.
 
                                          By Order of the Board of Directors,
 
                                          Karen A. Tallman
                                          Secretary
 
[      ], 1997
 
                     THE BOARD OF DIRECTORS RECOMMENDS THAT
                       YOU VOTE FOR EACH OF THE PROPOSALS
 
                  PLEASE DATE AND SIGN THE ENCLOSED PROXY AND
                        MAIL IT PROMPTLY IN THE ENCLOSED
                          POSTAGE-PAID RETURN ENVELOPE
<PAGE>
 
                               PRELIMINARY COPY
 
[LOGO]
 
                                 MERISEL, INC.
 
                                PROXY STATEMENT
 
  This Proxy Statement (this "Proxy Statement") is being furnished to holders
("Stockholders") of common stock, par value $.01 per share ("Common Stock"),
of Merisel, Inc., a Delaware corporation (the "Company"), in connection with
the solicitation of proxies by the Board of Directors of the Company (the
"Board") for use at a special meeting of Stockholders to be held on [      ],
1997 at 10:00 a.m., Los Angeles time, at the Company's headquarters located at
200 Continental Boulevard, El Segundo, California, (including any adjournments
or postponements thereof, the "Stockholders' Meeting"). References herein to
the "Company" shall, unless the context otherwise requires, refer to Merisel,
Inc. and its operating subsidiaries. References to the "Operating Companies"
shall mean the operating subsidiaries of the Company.
 
  The Board is soliciting proxies to be voted at the Stockholders' Meeting.
The Stockholders' Meeting will be held to consider the proposals (the
"Proposals") described herein to approve the issuance of up to 45,098,684
shares (subject to certain adjustments described herein) of Common Stock
pursuant to the conversion of the Convertible Promissory Note (the
"Convertible Note"), dated September 19, 1997, as amended and restated on
October 3, 1997, of the Company and Merisel Americas, Inc., a Delaware
corporation ("Merisel Americas"), issued pursuant to the Stock and Note
Purchase Agreement, dated September 19, 1997, as amended (the "Stock and Note
Purchase Agreement"), among Phoenix Acquisition Company II, L.L.C.
("Phoenix"), a Delaware limited liability company whose sole member is
Stonington Capital Appreciation 1994 Fund, L.P. (the "Fund"), the Company and
Merisel Americas, the Company's main operating subsidiary. The Fund is managed
by Stonington Partners, Inc., a Delaware corporation and a New York-based
private investment firm ("Stonington" the term Stonington as used herein shall
mean Stonington, the Fund or Phoenix, as the context requires). Specifically,
Stockholders will be asked to consider and vote upon (1) an amendment (the
"Charter Amendment") to the Company's Restated Certificate of Incorporation,
as amended (the "Certificate of Incorporation"), which would authorize an
increase in the number of authorized shares of Common Stock of the Company
from 50,000,000 to 100,000,000; (2) the issuance of shares of Common Stock to
Phoenix (or any subsequent holder of the Convertible Note) upon conversion of
the Convertible Note pursuant to its terms (the "Stonington Conversion"); and
(3) the Merisel, Inc. 1997 Stock Award and Incentive Plan (the "Stock Award
and Incentive Plan"). The Company's executive officers and directors, as a
group, own 960,844 shares of the outstanding Common Stock and have advised the
Company that they intend to vote in favor of each of the Charter Amendment,
the Stonington Conversion and the Stock Award and Incentive Plan. In addition,
Stonington, which owns 4,901,316 shares of the outstanding Common Stock, has
advised the Company that it intends to vote in favor of each of the Proposals.
A copy of the proposed text of the Charter Amendment is attached hereto as
Annex I, and a copy of the Stock Award and Incentive Plan is attached hereto
as Annex II, each of which is incorporated herein by reference.
 
  Assuming all of the conditions to conversion are satisfied or, to the extent
permitted, waived, the Stonington Conversion will result in Stonington
receiving an aggregate of 45,098,684 shares of Common Stock, subject to
customary antidilution adjustments. Based upon the number of shares of Common
Stock outstanding on the Record Date and the 4,901,316 shares already owned by
Stonington, upon the occurrence of the Stonington Conversion, Stonington would
own approximately 62.4% of the outstanding shares of Common Stock. Phoenix is
the sole holder of the Convertible Note, and Phoenix may not transfer the
Convertible Note or any portion thereof without the consent of the Company
until January 31, 1998 or the earlier termination of the Stock and Note
Purchase Agreement.
<PAGE>
 
  The Stonington Conversion is conditioned, among other things, on approval by
the Stockholders of both the Charter Amendment and the Stonington Conversion.
The Stonington Conversion will not take place unless and until the Charter
Amendment is approved at the Stockholders' Meeting and filed with the
Secretary of State of the State of Delaware.
 
  The purpose of the Stonington Conversion is to convert all of the
$137,100,000 principal amount of the Convertible Note into Common Stock. Such
conversion would avoid the requisite initial principal repayment in the amount
of $123,900,000 otherwise due on January 31, 1998, and the interest payments
on such outstanding debt of 11.5% per annum, increasing by an additional 1% at
the end of each month commencing at the end of November 1997 (up to a maximum
of 18%).
 
  The Common Stock is listed for trading on the Nasdaq National Market.
Application will be made to list the Common Stock to be issued to Phoenix
pursuant to the Stonington Conversion for trading on the Nasdaq National
Market. On October 2, 1997, the closing sale price for the Common Stock on the
Nasdaq National Market was $4 13/32 per share.
 
  This Proxy Statement and the accompanying proxy card ("Proxy") are first
being mailed to Stockholders on or about [      ], 1997.
 
                                       2
<PAGE>
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                                                           PAGE
                                                                           ----
<S>                                                                        <C>
STOCKHOLDERS' MEETING, VOTING RIGHTS AND PROXIES..........................   5
  Date, Time and Place of Stockholders' Meeting...........................   5
  Solicitation of Proxies; Record Date....................................   5
  Purpose of Stockholders' Meeting........................................   5
  Voting of Proxies.......................................................   5
  Voting Rights; Quorum...................................................   6
  No Dissenters' Rights...................................................   6
  Revocation of Proxies...................................................   6
BACKGROUND OF THE STONINGTON RESTRUCTURING................................   7
  The Noteholder Restructuring............................................   7
  The Original Stonington Proposal........................................   8
  Negotiations for a Revised Noteholder Restructuring.....................   9
  The August 8 Stonington Proposal........................................  10
  The August 10 Stonington Proposal.......................................  11
  The August 11 Stonington Proposal.......................................  11
  The August 29 Stonington Proposal.......................................  11
  Litigation with Noteholders.............................................  12
  The Stonington Restructuring............................................  13
CERTAIN CONSIDERATIONS RELATING TO THE STONINGTON RESTRUCTURING...........  13
  Risk of Nonconsummation of the Stonington Conversion....................  13
  Certain Restrictions Under Indenture Governing the 12.5% Notes..........  13
  Restrictions Under the Convertible Note.................................  14
  Limitation on Use of Net Operating Losses...............................  15
  Change of Control.......................................................  15
  Potential De-listing of the Common Stock................................  15
DESCRIPTION OF STONINGTON.................................................  16
REASONS FOR THE STONINGTON RESTRUCTURING; RECOMMENDATION OF THE BOARD OF
 DIRECTORS................................................................  17
OPINION OF FINANCIAL ADVISOR TO THE COMPANY...............................  18
MARKET AND TRADING INFORMATION............................................  24
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON...................  24
  Interest of Certain Executive Officers..................................  24
  Interest of Stonington..................................................  25
  Interest of Financial Advisor...........................................  25
DISCUSSION OF THE PROPOSALS...............................................  26
  Charter Amendment.......................................................  26
  Stonington Conversion...................................................  26
  Stock Award and Incentive Plan..........................................  27
DESCRIPTION OF COMMON STOCK...............................................  33
DESCRIPTION OF CONVERTIBLE NOTE AND STOCK AND NOTE PURCHASE AGREEMENT.....  33
  The Convertible Note....................................................  33
  The Stock and Note Purchase Agreement...................................  39
  Registration Rights.....................................................  41
</TABLE>
 
 
                                       3
<PAGE>
 
<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION....................   42
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS...........   44
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
 OPERATIONS ..............................................................   50
</TABLE>
 
<TABLE>
<S>                                                                          <C>
MANAGEMENT..................................................................  58
  Directors.................................................................  58
  Board of Directors, Meetings and Committees...............................  59
  Post-Stonington Conversion Board Configuration............................  59
  Executive Officers........................................................  60
  Section 16 Matters........................................................  61
MANAGEMENT COMPENSATION.....................................................  62
OWNERSHIP OF COMMON STOCK...................................................  68
CERTAIN AFFILIATE TRANSACTIONS..............................................  69
ANNEXES
  Proposed Text of the Charter Amendment....................................   I
  Stock Award and Incentive Plan............................................  II
  Opinion of Financial Advisor to the Company............................... III
  Form of Proxy.............................................................  IV
</TABLE>
 
                                       4
<PAGE>
 
               STOCKHOLDERS' MEETING, VOTING RIGHTS AND PROXIES
 
DATE, TIME AND PLACE OF STOCKHOLDERS' MEETING
 
  The Stockholders' Meeting will be held at the Company's headquarters located
at 200 Continental Boulevard, El Segundo, California, on [   ], 1997, at 10:00
a.m., Los Angeles time. The Stockholder votes with respect to the Stonington
Conversion will not be effective unless and until the Charter Amendment is
approved at the Stockholders' Meeting and the Charter Amendment has been filed
with the Secretary of State of the State of Delaware. If approved, the
Stockholder votes with respect to the Stock Award and Incentive Plan will be
effective regardless of whether the Charter Amendment or the Stonington
Conversion are approved.
 
SOLICITATION OF PROXIES; RECORD DATE
 
  This Proxy Statement is furnished in connection with the solicitation by the
Board of proxies to be voted at the Stockholders' Meeting. The record date for
purposes of determining which holders of Common Stock are eligible to vote at
the Stockholders' Meeting is [      ], 1997 (the "Record Date"). On the Record
Date there were [34,979,811] shares of Common Stock outstanding, of which
there were [  ] holders of record. The Company's executive officers and
directors, as a group, own 960,844 shares of the outstanding Common Stock and
have advised the Company that they intend to vote in favor of each of the
Charter Amendment, the Stonington Conversion and the Stock Award and Incentive
Plan. In addition, Stonington, which owns 4,901,316 shares of the outstanding
Common Stock, has advised the Company that it intends to vote in favor of each
of the Proposals.
 
  WHETHER OR NOT YOU ARE ABLE TO ATTEND THE STOCKHOLDERS' MEETING, YOUR VOTE
BY PROXY IS VERY IMPORTANT. STOCKHOLDERS ARE ENCOURAGED TO MARK, SIGN AND DATE
THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
 
  Proxies are being solicited by and on behalf of the Board. All expenses of
this solicitation, including the cost of preparing and mailing this Proxy
Statement, will be borne by the Company. In addition to solicitation by use of
the mails, proxies may be solicited by directors, officers and employees of
the Company in person or by telephone, telegram or other means of
communication. Such directors, officers and employees will not be additionally
compensated, but may be reimbursed for out-of-pocket expenses in connection
with such solicitation. Arrangements will also be made with custodians,
nominees and fiduciaries for forwarding of proxy solicitation material to
beneficial owners of Common Stock held of record by such persons, and the
Company may reimburse such custodians, nominees and fiduciaries for reasonable
expenses incurred in connection therewith. To assure the presence in person or
by proxy of the largest number of Stockholders possible, MacKenzie Partners,
Inc. has been engaged to solicit Proxies on behalf of the Company for a
customary fee plus reasonable out-of-pocket expenses.
 
PURPOSE OF STOCKHOLDERS' MEETING
 
  The purpose of the Stockholders' Meeting is to consider the Proposals set
forth herein to approve the Charter Amendment, the Stonington Conversion and
the Stock Award and Incentive Plan. See "REASONS FOR THE STONINGTON
RESTRUCTURING; RECOMMENDATION OF THE BOARD OF DIRECTORS" and "DISCUSSION OF
THE PROPOSALS."
 
VOTING OF PROXIES
 
  All shares represented by a properly executed Proxy will be voted at the
Stockholders' Meeting in accordance with the directions on such Proxy. If no
direction is indicated on a properly executed Proxy, the shares covered
thereby will be voted in favor of the Charter Amendment, the Stonington
Conversion and the Stock Award and Incentive Plan.
 
 
                                       5
<PAGE>
 
  In the event that sufficient votes in favor of the Charter Amendment and the
Stonington Conversion are not received by the time scheduled for the
Stockholders' Meeting, the persons named as proxies may propose one or more
adjournments of the Stockholders' Meeting to permit further solicitation of
Proxies with respect to the Proposals. Any such adjournment will require the
affirmative vote of a majority of the voting power present or represented at
the Stockholders' Meeting.
 
VOTING RIGHTS; QUORUM
 
  Pursuant to the Certificate of Incorporation, Stockholders will be entitled
to one vote per share at the Stockholders' Meeting. The presence, either in
person or by properly executed Proxy, of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote is necessary to
constitute a quorum at the Stockholders' Meeting.
 
NO DISSENTERS' RIGHTS
 
  Stockholders have no appraisal or dissenters' rights with respect to the
Charter Amendment, the Stonington Conversion or the Stock Award and Incentive
Plan.
 
REVOCATION OF PROXIES
 
  A Stockholder who has executed and returned a Proxy may revoke it at any
time before it is voted by executing and returning a Proxy bearing a later
date, by giving written notice of revocation to the Secretary of the Company
or by attending the Stockholders' Meeting and voting in person.
 
                                       6
<PAGE>
 
                  BACKGROUND OF THE STONINGTON RESTRUCTURING
 
  Due to operating losses incurred in 1995, the Company was required in April
1996 to negotiate with the lenders under its various financing agreements to
amend such agreements and to waive certain defaults, which amendments and
waivers were obtained.
 
  In connection with such negotiations, the Company developed and implemented
a business plan for the remainder of fiscal 1996 (the "1996 Business Plan")
that focused on maximizing cash flow by (i) controlling costs, (ii) curtailing
non-essential capital expenditures, (iii) limiting investments, (iv)
concentrating on its more profitable areas of operations and product lines and
(v) slowing growth in its less profitable areas of operations. The 1996
Business Plan assumed that the Company would not return to profitability until
the fourth quarter of 1996. At the same time, the Company recognized that, in
order to meet its obligations in 1997, it needed to engage in some combination
of asset sales, refinancing of its borrowings and obtaining new sources of
financing.
 
  Concurrently with the implementation of the 1996 Business Plan, the Company,
with the assistance of Merrill Lynch & Co., actively explored all of its
strategic options, including the sale of the Company. This ultimately led to
the Company's sale of its European, Mexican and Latin American operations in
September of 1996 after attempts to sell the entire Company proved
unsuccessful. In connection with this sale Merisel Americas and certain of its
lenders agreed in October 1996 to amend (1) the Amended and Restated Revolving
Credit Agreement, dated as of December 23, 1993, as amended, among Merisel
Americas and Merisel Europe as borrowers, the Company as guarantor, and the
lenders party thereto (the "Revolving Credit Agreement"), and (2) the Amended
and Restated Senior Note Purchase Agreement, dated as of December 23, 1993, as
amended, by and among each of the purchasers named therein, Merisel Americas
as issuer, and the Company, as guarantor (the "Senior Note Purchase
Agreement", and, together with the Revolving Credit Agreement, the "Operating
Companies' Senior Debt") and (3) the Amended and Restated Subordinated Note
Purchase Agreement, dated as of December 23, 1993, as amended, by and among
each of the purchasers named therein and Merisel Americas (the "Subordinated
Note Purchase Agreement" and, together with the Operating Companies' Senior
Debt, the "Operating Companies' Loan Agreements").
 
  The Operating Companies' Loan Agreements provided for the repayment of
$40,000,000 of the aggregate principal amount of the indebtedness under the
Operating Companies' Senior Debt if the Company made the June 30, 1997
interest payment on the Company's 12 1/2% Senior Notes due 2004 (the "12.5%
Notes" and the holders thereof, the "Noteholders") and the prepayment of an
additional $30,000,000 aggregate principal amount of the indebtedness under
the Operating Companies' Senior Debt if the Company made the December 31, 1997
interest payment on the 12.5% Notes. Although, consistent with the 1996
Business Plan, the Company was profitable for the fourth quarter of 1996, the
Company did not believe that it could satisfy these obligations without a
restructuring of the debt evidenced by the 12.5% Notes and/or the Operating
Companies' Loan Agreements.
 
 The Noteholder Restructuring
 
  In January 1997, the Company retained Donaldson, Lufkin and Jenrette
Securities Corporation ("DLJ") as its financial advisor to assist it in
restructuring its debt. Shortly thereafter, the Company commenced negotiations
with an ad hoc committee of holders of 12.5% Notes (the "Ad Hoc Noteholders'
Committee"). On April 14, 1997, the Company entered into an agreement (the
"Limited Waiver Agreement") among the Company and the holders of over 75% of
the outstanding principal amount of the 12.5% Notes (the "Consenting
Noteholders") and commenced the financial restructuring of the Company as
contemplated thereby (the "Noteholder Restructuring"). Pursuant to the terms
of the Limited Waiver Agreement, upon the fulfillment of certain conditions,
the Consenting Noteholders would exchange their 12.5% Notes for Common Stock
representing approximately 80% of the Company's outstanding Common Stock. The
Limited Waiver Agreement provided that, immediately after the consummation of
the Noteholder Restructuring, the Company would issue warrants (the
"Warrants") to purchase up to 17.5% of the shares of Common Stock outstanding
immediately after the Noteholder Restructuring to the existing holders of
Common Stock. The Warrants would be issued in two series
 
                                       7
<PAGE>
 
and would have exercise prices of $1.43 and $1.74 per share, respectively (or
$7.15 and $8.68, respectively, after giving effect to the one-for-five reverse
stock split contemplated by the Noteholder Restructuring). Assuming both
series of the Warrants were "in the money" and exercised for an aggregate
exercise price of $41.7 million, the Stockholders as of immediately prior to
the consummation of the Noteholder Restructuring would have retained 31.9% of
the outstanding Common Stock after such exercise.
 
  While the Limited Waiver Agreement was in effect, the Consenting Noteholders
agreed to waive any default arising from the nonpayment of interest due in
1997 on the 12.5% Notes, but upon the occurrence of an Agreement Termination
Event (as defined in the Limited Waiver Agreement), the interest would be due
and payable immediately in accordance with the terms of the Indenture
governing the 12.5% Notes (the "12.5% Note Indenture"). The Company prepared
and filed a Registration Statement reflecting the Noteholder Restructuring
(the "Registration Statement") on May 19, 1997.
 
 The Original Stonington Proposal
 
  In late May 1997, while awaiting comments on the Registration Statement from
the staff of the Commission (the "Staff"), and with the knowledge of
representatives of the Consenting Noteholders, the Company decided to explore
with other parties the possibility of an equity infusion or debt financing
following, or in conjunction with, the consummation of the Noteholder
Restructuring. The Company intended to use any investment to reduce or
refinance the outstanding debt obligations of the Operating Companies and to
implement its business strategy following the Noteholder Restructuring. The
Company was aware that under the terms of the Limited Waiver Agreement and a
related waiver and extension agreement with respect to the Operating
Companies' Loan Agreements, the Company would be obligated to refinance such
indebtedness under the Operating Companies' Loan Agreements in full on or
prior to January 1999 and would be required to pay significant additional fees
and higher interest to the holders of such indebtedness to the extent such
debt remained outstanding during 1998. Accordingly, the Company believed that
the refinancing of such Operating Companies' indebtedness was a critical
element in completing its capital restructuring, whether or not the Noteholder
Restructuring was implemented.
 
  On June 12, 1997, the Company met with several prospective investors,
including Stonington, a New York-based private investment firm, for the
purpose of making an informational presentation concerning the Company's
business and prospects following the Noteholder Restructuring. Stonington and
at least one other prospective investor suggested to the Company that a
preferable alternative to the Noteholder Restructuring might be an equity
investment that would allow the Company to repay the debt outstanding under
the Operating Companies' Loan Agreements in full and leave outstanding the
12.5% Notes, if such an alternative could be accomplished consistent with the
terms of the Limited Waiver Agreement. In order to determine the financial
feasibility of such an alternative, the Company and Stonington entered into a
confidentiality agreement to allow Stonington to commence a due diligence
investigation of the Company to determine whether to make a proposal for such
an investment. During the course of Stonington's due diligence investigation,
representatives of the Company and Stonington discussed the need to obtain the
approval of the Consenting Noteholders to any transaction that would be an
alternative to the Noteholder Restructuring. They also discussed whether
Stonington would be interested in an equity investment that would be a
supplement to, rather than be in lieu of, the Noteholder Restructuring.
 
  In early July 1997, Stonington met with the Company to discuss the terms on
which it might be willing to make a proposal for an equity investment in the
Company. On the evening of July 14, 1997, the Company received a formal
proposal from Stonington (the "Original Stonington Proposal"). The Original
Stonington Proposal provided that Stonington would make an investment in the
Company of $152 million in cash in exchange for 70% of the Common Stock,
subject to the approval of the Noteholders and Stockholders, and also included
an offer by Stonington to make a six-month bridge loan for $50 million to the
Operating Companies to fund their working capital requirements in the event
that similar financing was not obtained from a third party. The Original
Stonington Proposal was subject to certain conditions, including the execution
of a definitive agreement, Stockholder approval and agreement of the
Consenting Noteholders to (i) terminate the Limited
 
                                       8
<PAGE>
 
Waiver Agreement, and (ii) waive interest payments due on the 12.5% Notes
until the earlier of the closing of such transaction or October 31, 1997.
Stonington initially agreed to keep the Original Stonington Proposal open
until September 4, 1997.
 
  The Company promptly notified the Ad Hoc Noteholders' Committee of the
details of the Original Stonington Proposal. The Ad Hoc Noteholders' Committee
informed the Company that it would not agree to negotiate with the Company to
terminate or modify the Limited Waiver Agreement in order to allow the
Original Stonington Proposal to be accepted. Accordingly, the Company
announced that it intended to proceed with a Stockholder vote on the existing
Noteholder Restructuring and commenced a Stockholder solicitation and an
exchange offer to Noteholders with respect to the proposed Noteholder
Restructuring in late July 1997, after the Registration Statement required for
such solicitation was declared effective. On July 24, 1997, members of the Ad
Hoc Noteholders' Committee commenced a legal action against Stonington
alleging tortious interference of contract with respect to the Noteholder
Restructuring.
 
 Negotiations for a Revised Noteholder Restructuring
 
  Shortly following the mailing of solicitation materials with respect to the
Noteholder Restructuring, representatives of the Ad Hoc Noteholders' Committee
expressed their willingness to discuss amending the terms of the Noteholder
Restructuring to provide for Stockholders to retain a higher percentage of the
outstanding equity of the Company following the Noteholder Restructuring.
Representatives of the Company and the Ad Hoc Noteholders' Committee engaged
in extensive negotiations regarding the terms of a revised Noteholder
Restructuring and a definitive agreement reflecting the revised terms was
fully negotiated. The economic terms of the last proposal made by the Ad Hoc
Noteholders' Committee which was under discussion prior to August 29, 1997,
the originally scheduled date for the Stockholders' meeting to consider the
Noteholders Restructuring, provided that the Noteholders would receive 70% of
the shares of Common Stock outstanding immediately following consummation of
the Noteholder Restructuring, and Stockholders would retain 30% of such shares
of Common Stock. Stockholders would also receive warrants to purchase up to
7.5% of the shares of Common Stock outstanding immediately following
consummation of the Noteholder Restructuring at an exercise price of $13.71
per share (or $2.74 per share before giving effect to the proposed one-for-
five reverse stock split contemplated by the Noteholder Restructuring).
Assuming such Warrants were "in the money" and exercised for an aggregate
exercise price of $20.6 million, the Stockholders as of immediately prior to
the consummation of such transaction would have retained 34.9% of the
outstanding Common Stock after such exercise. In addition, this proposal
contemplated a rights offering following such transaction to allow
Stockholders to purchase $50 million of Common Stock from the Company at 15%
below the market price of the Common Stock at such time.
 
  While the Company expressed its willingness to enter into an agreement with
the foregoing terms, the Ad Hoc Noteholders' Committee conditioned its
willingness to execute such an agreement upon the written agreement of
Stonington to withdraw all outstanding proposals and Stonington's agreement
not to purchase or make any offers to purchase any stock of the Company until
the earlier of the consummation of the Noteholder Restructuring or June 25,
1998, in exchange for a release from the Noteholders of their claims against
Stonington for tortious interference of contract. Representatives of both the
Company and the Ad Hoc Noteholders' Committee requested such an agreement from
Stonington but Stonington declined to sign such an agreement. Notwithstanding
this rejection by Stonington, the Company reiterated its willingness to enter
into the previously negotiated agreement, and reaffirmed its willingness to
cease all further discussions with Stonington with respect to any alternative
transaction. However, the Ad Hoc Noteholders' Committee continued to insist on
such an agreement from Stonington or, as an alternative to an agreement from
Stonington, the Ad Hoc Noteholders' Committee proposed that the Company agree
to pay a termination fee of $25 million, and to give the Noteholders a right
to cause the Company to repurchase their 12.5% Notes for 120% of their par
value (or $150 million in the aggregate) plus accrued and unpaid interest, if
the Company terminated its agreement with the Noteholders in order to pursue a
transaction with any other party or if the Prepackaged Plan was not confirmed
by the United States Bankruptcy Court with which it was filed. The Company
rejected this proposal because, among other reasons, it did not believe that
agreeing to pay fees of such magnitude would be consistent with its fiduciary
 
                                       9
<PAGE>
 
duties to Stockholders. The Company proceeded with the solicitation with
respect to the Noteholder Restructuring in order to allow Stockholders the
opportunity to make an informed decision about the Company's restructuring
alternatives.
 
  While negotiations with the Ad Hoc Noteholders' Committee were ongoing, on
August 8, 1997, August 10, 1997, August 11, 1997 and August 29, 1997,
Stonington made modifications to the Original Stonington Proposal described
below in order to make its proposal more attractive to the Noteholders, the
Stockholders and the Company.
 
 The August 8 Stonington Proposal
 
  On August 8, 1997, the Company received a new proposal from Stonington (the
"August 8 Stonington Proposal"), which amended the Original Stonington
Proposal. The August 8 Stonington Proposal was made subject to execution of
definitive agreements and the termination of the Limited Waiver Agreement
either with the Consenting Noteholders' consent or by a negative Stockholder
vote with respect to the proposed one-for-five reverse stock split and the
Prepackaged Plan. Assuming such conditions were met, under the August 8
Stonington Proposal, as an alternative to a direct equity investment of $152
million in the Company, Stonington would loan $152 million to the Company in
the form of a convertible debt instrument to refinance the debt outstanding
under the Operating Companies' Loan Agreements. A portion of the convertible
debt would be immediately convertible into 19.9% of the Common Stock then
outstanding and the remainder of the debt would be convertible subject to
Stockholder approval at a Stockholders' meeting for an aggregate total of
63.5% of the Common Stock with Stockholders retaining 36.5% of the Common
Stock. The August 8 Stonington Proposal also permitted the Company to offer
certain incentives to the Noteholders, including (i) the payment of $100 per
$1,000 face amount of 12.5% Notes outstanding, (ii) the conversion of up to
$67.5 million in principal amount of 12.5% Notes into Common Stock at a
conversion price of $14.50 per share (after giving effect to the proposed one-
for-five reverse stock split) (the "Incentive Conversion") and (iii) the
elimination of the optional redemption feature of the 12.5% Note Indenture, in
exchange for their agreement to support the August 8 Stonington Proposal. As
an additional incentive to Noteholders, Stonington permitted the Company to
offer an additional $100 per $1,000 face amount of 12.5% Notes to Noteholders
that elected not to convert to Common Stock pursuant to the Incentive
Conversion.
 
  The convertible debt would act as a bridge loan, with $138.8 million of such
convertible notes maturing on January 31, 1998 and $4.4 million maturing on
each of March 10, 1998, March 10, 1999 and March 10, 2000, if not earlier
converted. The convertible debt would bear an initial interest rate of 11.5%
per annum, increasing at the rate of an additional 1% per month commencing two
months after the issuance of the convertible debt, subject to a cap of 18% per
annum. Such interest would be payable either in cash or with additional debt.
The convertible debt would be redeemable in whole but not in part at any time
prior to maturity at the option of the Company at par plus accrued interest
plus a prepayment premium of 8% (collectively the "Redemption Price"). Upon a
change of control of the Company or an agreement by the Company to effect a
change of control, the holders of the convertible debt would have the right to
require the Company to purchase the convertible debt at the Redemption Price.
In addition, pursuant to the August 8 Stonington Proposal, Stonington would
assist the Company in obtaining a permanent working capital facility and would
provide the Company with a $50 million bridge loan if such financing was not
available from a third-party.
 
  The Company shared the August 8 Stonington Proposal with the Ad Hoc
Noteholders' Committee, and presented to them for their consideration the
incentives described in the August 8 Stonington Proposal. Representatives of
the Ad Hoc Noteholders' Committee advised the Company that they would not
terminate the Limited Waiver Agreement to permit the August 8 Stonington
Proposal to be implemented and they rejected the incentives offered thereby.
 
 
                                      10
<PAGE>
 
 The August 10 Stonington Proposal
 
  On August 10, 1997, Stonington made another alternative proposal (the
"August 10 Stonington Proposal"). The August 10 Stonington Proposal increased
the incentive provisions for Noteholders contained in the August 8 Stonington
Proposal by (i) increasing the potential payment to Noteholders to $150 per
$1,000 face amount of 12.5% Notes if such Noteholders were to agree to
terminate the Limited Waiver, and (ii) permitting the Company to offer
warrants exercisable for a nominal amount over a five-year period to purchase
up to approximately 5% of the Common Stock. Upon exercise of such warrants,
Stonington, the Noteholders and the Stockholders as of immediately prior to
the consummation of the transaction would have owned approximately 60.4%, 5%
and 34.6% of the Common Stock, respectively.
 
 The August 11 Stonington Proposal
 
  On August 11, 1997, Stonington made an alternative proposal (the "August 11
Stonington Proposal"), conditioned on execution of definitive documentation
and on the Consenting Noteholders agreeing (i) to terminate the Limited Waiver
Agreement and (ii) not to exercise their right under the 12.5% Note Indenture
to cause the Company to purchase their 12.5% Notes upon a change of control of
the Company such as the acquisition contemplated by the August 8 Stonington
Proposal. Assuming such conditions were met, the August 11 Stonington Proposal
provided that Stonington would loan $152 million to the Company in the form of
a convertible debt instrument to refinance the debt outstanding under the
Operating Companies' Loan Agreements. Pursuant to the terms of this
convertible debt instrument, Stonington would be able to convert such debt
into approximately 62.6% of the shares of Common Stock outstanding immediately
following the conversion of such convertible debt. The August 11 Stonington
Proposal contained the same incentive provisions for the Noteholders as the
August 8 Stonington Proposal, except that it increased the potential payment
to Noteholders to $250 per $1,000 face amount of 12.5% Notes outstanding and,
in addition, permitted the Company to offer warrants exercisable for a nominal
amount over a five-year period to purchase up to approximately 7.2% of the
Common Stock. Upon exercise of such warrants, Stonington, the Noteholders and
the Stockholders as of immediately prior to the consummation of the
transaction would have owned approximately 58.1%, 7.2% and 34.7% of the Common
Stock, respectively.
 
  The Company shared the August 11 Stonington Proposal with the Ad Hoc
Noteholders' Committee and presented to them for their consideration the
incentives described in the August 11 Stonington Proposal. The Ad Hoc
Noteholders Committee advised the Company that it would not terminate the
Limited Waiver Agreement notwithstanding the provisions of the August 11
Stonington Proposal. Because the August 11 Stonington Proposal was conditioned
upon the Noteholders' consenting to terminate the Limited Waiver Agreement,
the August 11 Stonington Proposal was subsequently withdrawn.
 
 The August 29 Stonington Proposal
 
  On August 29, 1997, Stonington made a new, alternative proposal (the "August
29 Stonington Proposal") which amended the August 8 Stonington Proposal. The
August 29 Stonington Proposal was similar to the August 8 Stonington Proposal
except that existing Stockholders would retain 37.6% of the common stock of
the Company. The August 29 Stonington Proposal also eliminated all proposed
incentive payments to the Noteholders.
 
  The August 29 Stonington Proposal was to have expired on September 4, 1997,
but on such date, the Company received a letter from Stonington extending the
termination date of the August 29 Stonington Proposal to the later of (i)
September 22, 1997 and (ii) three days following the date of termination of
the Limited Waiver Agreement, but in no event later than October 31, 1997. In
exchange for this extension, the Company modified the circumstances in which
it would pay the fees and expenses of Stonington in the amounts previously
agreed to upon the expiration or, under certain circumstances, termination of
the August 29 Stonington Proposal.
 
                                     * * *
 
  In order to allow the Company additional time to revise its public
disclosure to describe and disseminate to Stockholders information with
respect to these developments, at the Company's request the Consenting
 
                                      11
<PAGE>
 
Noteholders agreed to waive until September 18, 1997 the Agreement Termination
Event which would have occurred under the Limited Waiver Agreement on
September 1, 1997. However, based on conversations with the Staff after filing
a post-effective amendment to the Registration Statement on September 4, 1997,
in order to permit the Staff sufficient time to review such revised disclosure
and to allow sufficient time for adequate dissemination to Stockholders of the
information contained in the post-effective amendment, the Company was
required to request a further waiver of the Agreement Termination Event under
the Limited Waiver Agreement. The Company was advised by representatives of
the Consenting Noteholders that they would not grant this request and,
therefore, the Limited Waiver Agreement would terminate in accordance with its
terms on September 19, 1997.
 
 Litigation with Noteholders
 
  Prior to the termination of the Limited Waiver Agreement on September 19,
1997, certain disagreements arose between the Company and the Noteholders over
the interpretation of the Company's obligations under the Limited Waiver
Agreement, including that the Limited Waiver Agreement did not require either
the Board of Directors of the Company (the "Board") or the Company to
recommend proposals relating to the Noteholder Restructuring to Stockholders
and that the Company was not obligated to seek confirmation of a "prepackaged
plan" of reorganization (the "Prepackaged Plan") by means of the "cramdown"
provisions of the Bankruptcy Code. On September 4, 1997, the Company filed
suit in Delaware Chancery Court (the "Delaware Action") seeking a declaratory
judgment with respect to these issues. The Company believes its claims are
meritorious and intends to vigorously prosecute its claims in the Delaware
Action. There can be no assurance, however, that the Company will ultimately
be successful with respect to its claims.
 
  On September 11, 1997, certain Consenting Noteholders filed an answer to the
Company's complaint in the Delaware Action as well as a counterclaim against
the Company asserting claims for breach of the Limited Waiver Agreement,
unjust enrichment and a declaratory judgment. The counterclaim also asserts a
claim for unjust enrichment against Dwight A. Steffensen, the Company's Chief
Executive Officer (the "Noteholder Suit"). The Noteholder Suit seeks damages
in excess of $100 million from the Company. The Company's alleged breaches
include, among other things, that the Board changed its recommendation to
Stockholders with respect to proposals relating to the Limited Waiver
Agreement. The Board changed its recommendation with respect to these
proposals in light of the Company's receipt of a proposal from Stonington
substantially similar to the Stonington Restructuring which, in the Board's
determination, was economically superior for Stockholders to the Noteholder
Restructuring. The Company and Mr. Steffensen believe that they have strong
defenses to each of the claims asserted and intend to defend themselves
vigorously.
 
  In addition, on September 19, 1997, the Company received notice from
representatives of the lenders under the Operating Companies' Loan Agreements
that, in connection with the Company's repayment of the indebtedness under the
Operating Companies' Loan Agreement, such lenders believe that they are owed
approximately $2.7 million in fees. The Company does not believe any such fee
is owed and has so notified the lenders.
 
  Regardless of the ultimate outcome of the Noteholder Suit, the fact that the
Noteholder suit remains pending may create uncertainty over the financial
condition of the Company, which may cause vendors to restrict the terms on
which they supply products to the Company. As of the date hereof, the Company
has not experienced any restriction in terms from vendors in connection with
the Noteholder Suit. Moreover, no assurance can be given that the ultimate
outcome of the Noteholder Suit would not be materially adverse to the Company.
 
                                      12
<PAGE>
 
 The Stonington Restructuring
 
  Shortly prior to the termination of the Limited Waiver Agreement on
September 19, 1997, the Company negotiated with Stonington the definitive
terms of the Stonington Restructuring. On September 19, 1997, as required by
the 12.5% Note Indenture, approximately $8 million was deposited with the
12.5% Note Indenture trustee for payment of interest that had previously been
waived, and all outstanding indebtedness under the Operating Companies' Loan
Agreements was paid in full with the proceeds from the sale of the Common
Stock and issuance of the Convertible Note to Phoenix pursuant to the Stock
and Note Purchase Agreement. The Company believes that, given such deposit for
payment, it is in full compliance with all of its obligations under the 12.5%
Indenture. See "Certain Considerations Relating to the Stonington
Restructuring--Certain Restrictions Under Indenture Governing the 12.5%
Notes."
 
  On September 19, 1997, the Company and Merisel Americas entered into the
Stock and Note Purchase Agreement with Phoenix. Pursuant to the Stock and Note
Purchase Agreement, Phoenix acquired the Convertible Note for $137.1 million
and 4,901,316 shares of Common Stock (the "Initial Shares") for $14,900,000.
The Convertible Note is an unsecured obligation of the Company and Merisel
Americas with an initial principal payment of $123,900,000, due January 31,
1998 and additional principal payments of $4,400,000 due on each of March 10,
1998, 1999 and 2000 if the Convertible Note is not converted into Common Stock
prior to that time. The Convertible Note provides that, upon a favorable
Stockholder vote and satisfaction of certain other conditions, the Convertible
Note will automatically convert into approximately 45.1 million shares of
Common Stock (subject to certain adjustments). The Conversion Shares and the
Initial Shares would together represent 50,000,000 shares of Common Stock, or
approximately 62.4% of the Common Stock outstanding immediately following
consummation of the Stonington Conversion (based on the number of shares of
Common Stock outstanding as of the Record Date). See "DESCRIPTION OF
CONVERTIBLE NOTE AND STOCK AND NOTE PURCHASE AGREEMENT."
 
  The Company and Merisel Americas used the proceeds from the issuance of the
Initial Shares and the Convertible Note to repay substantially all of the
indebtedness outstanding under the Operating Companies' Loan Agreements.
 
                      CERTAIN CONSIDERATIONS RELATING TO
                         THE STONINGTON RESTRUCTURING
 
 Risk of Nonconsummation of the Stonington Conversion
 
  The Convertible Note has a principal amount of $137,100,000 and bears
interest initially at a rate of 11.5% per annum, which rate increases by an
additional 1% per annum each month commencing at the end of November 1997, up
to a maximum of 18% per annum. As permitted under the terms of the Convertible
Note, the Company and Merisel Americas have elected to defer payment of
interest on the Convertible Note. An initial principal payment of $123,900,000
is due on January 31, 1998, and additional principal payments of $4,400,000
will be due on March 10, 1998, 1999 and 2000, if not earlier converted. If
certain conditions are met, the entire principal amount of the Convertible
Note will be converted into Common Stock, and the accrued and unpaid interest
due thereon shall be forgiven. If the Stonington Conversion does not occur,
the Company will be obligated to pay principal and interest on the Convertible
Note when due. In such case, the Company would attempt to refinance the entire
amount due under the Convertible Note. There can be no assurance that the
Company would be able to obtain such refinancing. Should the Company be unable
to refinance the debt outstanding under the Convertible Note prior to January
31, 1998, the Company will be unable to repay the $123,900,000 principal
amount due on such date and such default would likely cause a material adverse
change in its operations and financial stability and could result in the
Company becoming subject to a case under the Federal bankruptcy laws. See
"DESCRIPTION OF CONVERTIBLE NOTE AND STOCK AND NOTE PURCHASE AGREEMENT."
 
 Certain Restrictions Under Indenture Governing the 12.5% Notes
 
  As of the Record Date, the Company had outstanding $125,000,000 principal
amount of the 12.5% Notes. The 12.5% Notes bear interest at the rate of 12.5%
per annum payable semiannually. By virtue of being an
 
                                      13
<PAGE>
 
obligation of the Company, the 12.5% Notes are effectively subordinated to all
liabilities of the Company's subsidiaries, including the Convertible Note and
trade payables, and are not guaranteed by any of the Operating Companies.
Pursuant to the Stock and Note Purchase Agreement, Phoenix has agreed to
assist the Company in obtaining additional working capital and to provide,
upon consummation of the Stonington Conversion, a $50 million, six-month
working capital facility in the event such financing has not been provided by
a third-party at such time; however, the 12.5% Note Indenture contains certain
covenants that, among other things, limit the type and amount of additional
indebtedness that may be incurred by the Company or its subsidiaries and
impose limitations on investments, loans, advances, sales or transfers of
assets, the making of dividends and other payments, the creation of liens,
sale-leaseback transactions with affiliates and certain mergers. While the
Company believes that it is currently in compliance with all covenants under
the 12.5% Note Indenture, such covenants could restrict the Company's ability
to borrow money (including the working capital facility to be provided by a
third-party or Phoenix) in the future for its operations. Upon consummation of
the Stonington Conversion, the Company will be able to borrow more money than
it could otherwise borrow under the terms of the 12.5% Note Indenture prior to
the Stonington Conversion.
 
  Except under certain conditions described below, the 12.5% Notes may not be
redeemed at the option of the Company prior to December 31, 1999. After that
date, however, all or any of the 12.5% Notes will be redeemable, in whole or
in part, at the option of the Company with certain redemption premiums. In
addition to such optional redemption, prior to December 31, 1997, the Company
may use the net proceeds of an equity offering, such as the Stonington
Conversion, to redeem up to 35% of the originally issued aggregate principal
amount of the 12.5% Notes at a redemption price of 110% of the principal
amount thereof plus accrued and unpaid interest to the redemption date. The
Company has not yet determined whether it will use any of the proceeds of the
Stonington Conversion to effect such a redemption.
 
  In addition, should the Stonington Conversion be consummated, each of the
Noteholders would have the right during a 30 day offer period to cause the
Company to purchase such holders' 12.5% Notes for 101% of the par value
thereof plus accrued and unpaid interest. Phoenix has agreed to use its
reasonable best efforts to obtain on behalf of the Company an executed
commitment letter from one or more financial institutions for a stand-by
credit or remarketing facility (the "Standby Facility") in order to repurchase
or remarket any 12.5% Notes put to the Company. Based upon recent trading
prices of the 12.5% Notes, however, the Company believes that it is unlikely
that a significant portion of the outstanding 12.5% Notes would be tendered,
although a change in the financial condition of the Company, or a change in
other factors, could lead to a different result. The conversion of the
Convertible Note is expressly conditioned upon obtaining the commitment letter
for a Standby Facility, and no assurance can be given that the Standby
Facility will be obtained. See "DESCRIPTION OF CONVERTIBLE NOTE AND STOCK AND
NOTE PURCHASE AGREEMENT--The Convertible Note--Conversion Rights."
 
 Restrictions Under the Convertible Note
 
  The Convertible Note contains certain restrictions on the Company and
contains requirements that the Company achieve and maintain certain financial
ratios. Such restrictions are substantially similar to those contained in the
debt instruments that were refinanced with the proceeds of the issuance of the
Convertible Note and include, among other things, limitations on the ability
of the Company and its subsidiaries to incur additional indebtedness, to
create, incur or permit the existence of certain liens, to make certain
investments, to make capital expenditures above certain levels, to make
certain sales of assets, to make certain payments with respect to its
outstanding stock, to effect certain fundamental changes and to enter into
certain other types of transactions. Although the Company was in compliance
with these restrictions as of the Record Date, there can be no assurance that
the Company will be able to maintain compliance with the prescribed financial
ratio tests or other requirements of the Convertible Note. Failure to maintain
compliance with such financial ratio tests or other requirements under the
Convertible Note would result in a default and could lead to the acceleration
of the Company's obligations under the Convertible Note as well as the
acceleration of other indebtedness of the Company which, by the terms of the
instruments creating, evidencing or governing such indebtedness, would be
 
                                      14
<PAGE>
 
triggered upon an acceleration under the Convertible Note (including the 12.5%
Notes). The acceleration of any such indebtedness would result in its becoming
immediately due and payable and, in the event the Company was unable to
refinance such indebtedness, would likely cause a material adverse change in
the Company's operations and financial stability and could result in the
Company becoming subject to a case under the Federal bankruptcy laws.
 
 Limitation on Use of Net Operating Losses
 
  Upon the consummation of the Stonington Conversion, the Company will undergo
an ownership change for Federal income tax purposes and, accordingly, the
Company will be limited in its ability to use its net operating loss
carryovers ("NOLs") to offset future taxable income. Such limitation will
generally be determined by multiplying the value of the Company's equity
before the ownership change by the long-term tax-exempt rate (currently
[5.33%]). This is likely to limit significantly the Company's use of its NOLs
in any one year, however, such limitation would be no more significant than
the limitation that would have resulted from the consummation of the
Noteholder Restructuring.
 
 Change of Control
 
  Following consummation of the Stonington Conversion, the Company will be
controlled by Stonington and the Board of Directors of the Company will be
reconstituted to consist of three current directors (Messrs. Dwight .
Steffensen, Dr. Arnold Miller and Lawrence J. Schoenberg), three Stonington
designees (Messrs. Albert J. Fitzgibbons III, Bradley J. Hoecker and Stephen
M. McLean), two additional management nominees (Messrs. James E. Illson and
Robert J. McInerney) and one to three additional independent directors.
Pursuant to its stock ownership position following the Stonington Conversion,
however, Stonington will have the ability to reconstitute the Board over time.
The Stonington designees and the employee directors will not receive any fees
from the Company for serving as directors. See "MANAGEMENT--Post-Stonington
Conversion Board Configuration."
 
 Potential De-listing of the Common Stock
 
  On August 7, 1997, the Company met with representatives of the Nasdaq Stock
Market, Inc. ("Nasdaq") regarding the potential de-listing of the Common Stock
in connection with the Company's current non-compliance with the minimum net
tangible assets test (the "Net Assets Test") required for continued listing on
the Nasdaq National Market. Nasdaq granted the Company an exception with
respect to the Net Assets Test (the "Exception") until October 1, 1997, by
which time the Company was required to make a public filing with the
Securities and Exchange Commission (the "Commission") and Nasdaq demonstrating
compliance with all requirements for continued listing on the Nasdaq National
Market. The Exception has since been extended to October 31, 1997. Should the
Company fail to demonstrate full compliance with the Net Assets Test by
October 31, 1997, Nasdaq has indicated that the Company's securities will be
immediately de-listed from the Nasdaq National Market.
 
  Despite the equity infusion of $14.9 million the Company received as a
result of the sale of 4,901,316 shares of Common Stock to Phoenix on September
19, 1997, the Company continues not to meet the Net Assets Test. This is
because the impact of the equity infusion was partially offset by the
recognition of an extraordinary loss on the extinguishment of the indebtedness
under the Operating Companies' Loan Agreements (as defined below), the write-
off of certain fees related to the Noteholder Restructuring, and certain
intangible assets recorded as part of the issuance of the Convertible Note.
 
   The Company believes that, upon consummation of the Stonington Conversion,
it will be in full compliance with all applicable listing criteria of the
Nasdaq National Market. However, because the Stonington Conversion will not
occur prior to October 31, 1997, the Company has requested a further extension
to December 31, 1997 to permit time for a Stockholder vote on the Stonington
Conversion at the Stockholders' Meeting. No assurance can be given, however,
that Nasdaq will extend the Exception to a date after the date of the
Stockholders' Meeting. If the Common Stock were de-listed from the Nasdaq
National Market, there could be an adverse effect on the liquidity of the
market for the Common Stock and the Company would be required to seek a waiver
from Stonington of the Nasdaq listing as a condition to the Stonington
Conversion.
 
                                      15
<PAGE>
 
                           DESCRIPTION OF STONINGTON
 
  Phoenix is a Delaware limited liability company whose sole member is the
Fund.
 
  The Fund is a Delaware limited partnership managed by Stonington and was
organized by Stonington to finance investments in industrial and other
companies. The Fund's principal investors include major pension funds, United
States and foreign banks, insurance companies and corporations.
 
  Stonington was formed in 1993 and, through the Fund, has raised $1 billion in
funds available for investments. The senior principals of Stonington have been
organizing investments since 1981, having closed an aggregate of 48
transactions with total consideration of approximately $21 billion.
 
  Since its formation, Stonington has structured and managed the acquisition by
the Fund of Dictaphone Corporation, Goss Graphic Systems, Inc. and Packard
BioScience Company. Dictaphone Corporation, which was formerly owned by Pitney
Bowes Inc., is a leader in the development, manufacture, marketing, service and
support of integrated voice and data management systems and software, which
includes communications recording, dictation, voice processing, voice response,
unified messaging and records management. Goss Graphic Systems, Inc. formerly
the graphics systems business of Rockwell International Inc., is the world's
leading supplier of printing press systems to newspaper publishers and a
significant supplier to magazine, advertising insert, catalogue and other
commercial publishers. Packard BioScience Company is a leading developer,
manufacturer and marketer of analytical instruments and related products and
services for use in the drug discovery and molecular biology segments of the
life sciences industry and in the nuclear instrumentation industry. References
in this Proxy Statement to "Stonington" shall include Phoenix and the Fund
unless the context otherwise requires.
 
 
                                       16
<PAGE>
 
                   REASONS FOR THE STONINGTON RESTRUCTURING;
                   RECOMMENDATION OF THE BOARD OF DIRECTORS
 
  The purpose of the Stonington Restructuring is to enhance the long term
viability of the Company and to contribute to its success by significantly
deleveraging Merisel Americas, the main operating subsidiary of the Company,
through the conversion of substantially all of its debt into Common Stock. At
the same time the Stonington Conversion allows current Stockholders to retain
an equity interest in the Company equal to 37.6% of the post-Stonington
Conversion Common Stock (excluding employee incentive options) and eliminates
the need for any prepackaged plan of reorganization, such as that contemplated
by the Noteholder Restructuring. In addition, Stonington has agreed to assist
the Company in obtaining additional working capital and, should the Stonington
Conversion be consummated, to provide a $50 million, six-month working capital
facility in the event such financing is unavailable from a third-party prior
to such conversion. See "DESCRIPTION OF THE CONVERTIBLE NOTES--Conversion
Rights."
 
  In making its decision, the Board considered several alternatives including
financing the requisite amortization payments under the Operating Companies'
Loan Agreement out of cash flow and refinancing the indebtedness outstanding
under the Operating Companies' Loan Agreements with the proceeds of a rights
offering. In analyzing its alternatives, the Board determined in consultation
with DLJ that the Stonington Restructuring is economically more attractive to
Stockholders than the Noteholder Restructuring and is fair to the stockholders
from a financial point of view. See "OPINION OF FINANCIAL ADVISOR TO THE
COMPANY." The Board also considered the following favorable effects of
consummation of the Stonington Restructuring:
 
  (1) The favorable impact that a substantial investment of new capital could
      have on the Company's customers and suppliers, which in turn could
      improve the Company's profitability through improved credit terms and
      manufacturer incentives, as well as the deleveraging of Merisel
      Americas upon the Stonington Conversion.
 
  (2) The availability of at least $50 million of additional working capital
      to be used to finance future operations and Stonington's willingness to
      assist the Company in obtaining additional permanent working capital.
 
  (3) The ability to satisfy all listing criteria of the Nasdaq National
      Market upon the Stonington Conversion.
 
  (4) The ability to avoid the possible uncertainty and negative effects
      typically encountered in connection with the filing of a case under the
      Federal Bankruptcy Code, as contemplated by the Noteholder
      Restructuring.
 
  The Board also considered the following potential negative effects of the
Stonington Restructuring:
 
  (1) The risk that the conditions to the Stonington Conversion would not be
      satisfied, which would require the Company to refinance the Convertible
      Note prior to January 31, 1998 to avoid a default. See "CERTAIN
      CONSIDERATIONS RELATING TO THE STONINGTON RESTRUCTURING--Restrictions
      Under Convertible Note" and "DESCRIPTION OF THE CONVERTIBLE NOTES--
      Conversion Rights."
 
  (2) The requirement that the Company (i) pay certain fees and reimburse
      Stonington for certain expenses in connection with entering into the
      Stock and Note Purchase Agreement, and (ii) pay a break-up fee and
      reimburse Stonington for certain additional expenses in the event the
      Company accepted a proposal which it believed, in the exercise of its
      fiduciary duties, provided greater value to Stockholders than the
      Stonington Restructuring, although the Company is not presently aware
      of any such proposals. See "DESCRIPTION OF CONVERTIBLE NOTE AND STOCK
      AND NOTE PURCHASE AGREEMENT--The Convertible Note--Termination."
 
  (3) The fact that the Stonington Conversion will constitute a change in
      control of the Company and would foreclose the future sale of control
      without Stonington's consent, although Stonington has agreed to grant
      "tag-along" rights to Stockholders in the event that it sells a certain
      amount of its equity in the
 
                                      17
<PAGE>
 
     Company. See "DESCRIPTION OF CONVERTIBLE NOTE AND STOCK AND NOTE
     PURCHASE AGREEMENT--The Stock and Note Purchase Agreement--Tag-Along
     Rights."
 
  (4) The issuance of shares of Common Stock to Stonington at $3.04, a price
      that was below the then current market price of the Common Stock,
      although the Board recognized that, prior to the announcement of the
      Original Stonington Proposal, the Common Stock was trading at lower
      prices than the purchase price represented by the Stonington
      Restructuring for the Common Stock. See "CERTAIN CONSIDERATIONS
      RELATING TO THE STONINGTON CONVERSION."
 
  (5) The risk of de-listing of the Common Stock from the Nasdaq National
      Market caused by the delay required by the Stonington Conversion. See
      "CERTAIN CONSIDERATIONS RELATING TO THE STONINGTON CONVERSION--
      Potential De-listing of the Common Stock."
 
  For additional information on the consequences of implementing the
Stonington Conversion, see "CERTAIN CONSIDERATIONS RELATING TO THE STONINGTON
RESTRUCTURING."
 
  In analyzing these factors the Board did not assign relative weights to any
particular factor but concluded that, based upon all the facts and
circumstances at the time, the Stonington Restructuring represented the best
alternative available to the Company and its Stockholders. ACCORDINGLY, THE
BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE CHARTER AMENDMENT AND THE
STONINGTON CONVERSION.
 
                  OPINION OF FINANCIAL ADVISOR TO THE COMPANY
 
  DLJ, as part of its role as financial advisor to the Board of Directors of
the Company, was asked by the Board to render an opinion to the Board as to
whether the consideration to be received by the Company pursuant to the
Stonington Restructuring is fair to the Company from a financial point of
view. On September 18, 1997, DLJ rendered to the Board its opinion, later
confirmed in writing (the "DLJ Opinion"), that, as of such date, and based
upon and subject to the assumptions, limitations and qualifications set forth
in such opinion, the consideration to be received by the Company in the
Stonington Restructuring was fair to the Company from a financial point of
view.
 
  THE FULL TEXT OF THE DLJ OPINION IS ATTACHED HERETO AS ANNEX III.
STOCKHOLDERS OF THE COMPANY ARE URGED TO READ THE DLJ OPINION IN ITS ENTIRETY
FOR ASSUMPTIONS MADE, PROCEDURES FOLLOWED, OTHER MATTERS CONSIDERED AND THE
LIMITS OF THE REVIEW BY DLJ.
 
  The DLJ Opinion was prepared for the Board and is directed only to the
fairness of the consideration received by the Company in the Stonington
Restructuring. The DLJ Opinion does not constitute a recommendation to any
Stockholder of the Company as to how such Stockholder should vote on the
Stonington Restructuring. The DLJ Opinion does not address the Board's
decision to proceed with the Stonington Restructuring.
 
  DLJ was not requested by the Board to make, nor did DLJ make, any
recommendation as to the amount of the consideration to be sought by the
Company. No restrictions or limitations were imposed by the Board upon DLJ
with respect to the investigation made or the procedures followed by DLJ in
rendering its opinion.
 
  In arriving at its opinion, DLJ reviewed the Stock and Note Purchase
Agreement, the Limited Waiver and Agreement to Amend with the holders of
indebtedness under the Operating Companies' Loan Agreements, the Limited
Waiver Agreement, the Registration Statement and financial and other
information that was publicly available or furnished to DLJ by the Company,
including information provided during discussions with its management.
Included in the information provided during discussions with management were
certain financial projections of the Company for the period beginning January
1, 1997 and ending December 31, 2001 prepared by management of the Company. In
addition, DLJ compared certain financial aspects of the Stonington
 
                                      18
<PAGE>
 
Restructuring and the Noteholder Restructuring, compared certain financial and
securities data of the Company with various other companies whose securities
are traded in public markets, reviewed the historical stock prices and trading
volumes of the Company's Common Stock, reviewed prices and premiums paid in
certain other business combinations and conducted such other financial
studies, analyses and investigations as DLJ deemed appropriate for purposes of
its opinion. In rendering its opinion, DLJ relied upon and assumed the
accuracy and completeness of all of the financial and other information that
was available to it from public sources, that was provided to it by the
Company or its representatives, or that was otherwise reviewed by it. With
respect to the financial projections supplied to DLJ, DLJ assumed that they
were reasonably prepared on the basis reflecting the best currently available
estimates and judgments of the management of the Company as to the future
operating and financial performance of the Company. DLJ did not assume any
responsibility for making an independent evaluation of the Company's assets or
liabilities or for making any independent verification of any of the
information reviewed by it.
 
  The DLJ Opinion is necessarily based on economic, market, financial and
other conditions as they exist on, and on the information made available to it
as of, the date of the opinion. The following is a summary of certain
financial analyses performed by DLJ and presented to the Board at its
September 18, 1997 meeting.
 
  Performance of the Common Stock. DLJ's analysis of the performance of the
Company's Common Stock consisted of a comparison of the closing prices of the
Company's Common Stock from September 12, 1996 through September 14, 1997 to
the effective buy-in price Stonington offered of $3.04 per share. For all days
from September 12, 1996 to August 24, 1997, the price of the Common Stock was
below $3.04 and for all days from August 25, 1997 through September 14, 1997,
the price of the Common Stock was above $3.04.
 
  Comparison of the Stonington Restructuring and the Noteholder
Restructuring. DLJ compared certain financial aspects of the Stonington
Restructuring and the Noteholder Restructuring and noted that the Stonington
Restructuring would result in a change of control of the Company whereas the
Noteholder Restructuring would have resulted in a number of new stockholders
instead of one large stockholder. DLJ also compared the implied total equity
values of the Company under each of the Stonington Restructuring and the
Noteholder Restructuring. The Stonington Restructuring implied a total equity
value of $243.4 million, which equals the amount of the Stonington investment
of $152 million divided by the percentage of the Company that Stonington would
own under the Stonington Restructuring of 62.4%. The Noteholder Restructuring
implied a total equity value of $211.6 million, which equals the sum of (i)
the principal amount of the 12.5% Notes of $125 million multiplied by a recent
trading price of 125% of face value and (ii) estimated accrued interest for
ten months of $13 million divided by the percentage of the Company that the
Noteholders would own under the Restructuring of 80%. DLJ also calculated the
equity value attributable to existing Stockholders at assumed total equity
values of the Company of $200 million, $250 million and $300 million under
both the Stonington Restructuring and the Noteholder Restructuring. The per
share equity value and the aggregate equity value attributable to the existing
Stockholders were calculated by adding the existing Stockholders' share of the
pro forma equity to the estimated value of the Warrants under the Noteholder
Restructuring. The estimated value of the Warrants was calculated in two ways:
(i) by estimating the market value of the Warrants and (ii) by determining the
intrinsic value of the Warrants. The market value of the Warrants was
estimated using the Black-Scholes option valuation model assuming (i) a
volatility of the Company of 50.2%, which equals the average of the volatility
of Ingram Micro, Inc. (from Ingram Micro, Inc's initial public offering on
November 1, 1996 through September 2, 1997) and Tech Data Corporation (from
August 30, 1996 through September 2, 1997) and (ii) a seven year risk free
treasury rate of 6.255%. The intrinsic value of the Warrants was determined by
subtracting the exercise price of the Warrants from the market price of the
Common Stock where the market price of the Common Stock exceeded the exercise
price of the Warrants.
 
  The actual volatility of the Common Stock from August 30, 1996 through
September 2, 1997 was 111.2%. However, over this period, the Company was much
more leveraged than it would be as a result of the consummation of either of
the Stonington Restructuring or the Noteholder Restructuring. In addition,
over this period the price of the Common Stock averaged $2 per share, implying
a total equity value of the Company of $60.2 million.
 
                                      19
<PAGE>
 
  The following table presents a summary of the results of such calculations.
 
<TABLE>
<CAPTION>
                                   ASSUMING                     ASSUMING                     ASSUMING
                                 $200 MILLION                 $250 MILLION                 $300 MILLION
                                 EQUITY VALUE                 EQUITY VALUE                 EQUITY VALUE
                          ---------------------------  ---------------------------  ---------------------------
                           STONINGTON    NOTEHOLDER     STONINGTON    NOTEHOLDER     STONINGTON    NOTEHOLDER
                          RESTRUCTURING RESTRUCTURING  RESTRUCTURING RESTRUCTURING  RESTRUCTURING RESTRUCTURING
                          ------------- -------------  ------------- -------------  ------------- -------------
<S>                       <C>           <C>            <C>           <C>            <C>           <C>
Total Shares of Common
 Stock Held by
 Stockholders of Record
 on September 18, 1997..       30.1          30.1           30.1          30.1           30.1          30.1
Total Warrants
 Outstanding(1).........          0          26.3(2)           0          13.2(3)           0             0(4)
Total Shares of Common
 Stock Outstanding Post-
 Transaction............       80.1         150.4(2)        80.1         163.6(3)        80.1         176.7(4)
Existing Stockholder
 Ownership Percentage
 Post-Transaction.......       37.6%         20.0%(2)       37.6%         26.4%(3)       37.6%         31.9%(4)
Equity Value
 Attributable to
 Existing Stockholders:
Per-Share Equity Value
 Including Estimated
 Market Value of
 Warrants(5)............      $2.50        $ 1.93          $3.12        $ 2.48         $ 3.75        $ 3.05
Per-Share Equity Value
 Including Estimated
 Intrinsic Value of
 Warrants...............      $2.50        $ 1.33          $3.12        $ 1.74         $ 3.75        $ 2.24
Aggregate Equity Value
 Including Estimated
 Market Value of
 Warrants(6)............      $75.1        $ 58.0          $93.9        $ 74.7         $112.7        $ 91.6
Aggregate Equity Value
 Including Estimated
 Intrinsic Value of
 Warrants...............      $75.1        $ 40.0          $93.9        $ 52.3         $112.7        $ 67.4
</TABLE>
- -------
(1) The Warrants under the Noteholder Restructuring were to be issued in two
    series, Series A Warrants and Series B Warrants. The Series A Warrants had
    a strike price of $1.43 and thus would be "in the money" at a total equity
    value of $215 million. The Series B Warrants had a strike price of $1.74
    and thus would be "in the money" at a total equity value of $265 million.
(2) Assumes both the Series A Warrants and the Series B Warrants are "out of
    the money" and unexercised.
(3) Assumes only the Series A Warrants are "in the money" and exercised for an
    aggregate exercise price of $18.8 million.
(4) Assumes both the Series A Warrants and the Series B Warrants are "in the
    money" and exercised for an aggregate exercise price of $41.7 million.
(5) Assumes 50.2% volatility. At a 111.2% volatility, which equals the
    volatility of the Company from August 30, 1996 through September 2, 1997,
    and at total equity values of $200, $250 and $300 million, the per share
    equity value including the estimated market value of the Warrants would be
    $2.27, $2.85 and $3.44. However, in light of the improved capital
    structure under either restructuring, the Company believes that its
    volatility will be significantly lower than recent historical values.
(6) Assumes 50.2% volatility. At a 111.2% volatility and at total equity
    values of $200, $250 and $300 million, the aggregate equity value
    including the estimated market value of the Warrants would be $68.2
    million, $85.8 million, and $103.5 million, respectively.
 
  DLJ compared the pro forma capitalization of the Company under the
Stonington Restructuring and the Noteholder Restructuring. Such analysis
indicated a pro forma capitalization of approximately $313.1 million,
consisting of approximately 50.4% debt and 49.6% stockholders' equity, under
the Stonington Restructuring and a pro forma capitalization of approximately
$300.4 million, consisting of approximately 51.7% debt and 48.3% stockholders'
equity, under the Noteholder Restructuring. DLJ also performed a leverage
analysis, which indicated ratios of total operating company debt to EBITDA (as
defined below) and total debt to EBITDA of 0.9x and 4.2x under the Stonington
Restructuring and 4.2x and 4.2x under the Noteholder Restructuring. The
leverage analysis also indicated ratios of total operating company debt plus
 
                                      20
<PAGE>
 
asset securitization balance to EBITSDA (as defined below) and total debt plus
asset securitization balance to EBITSDA of 5.4x and 7.9x under the Stonington
Restructuring and 7.8x and 7.8x under the Noteholder Restructuring.
 
  Comparison of Selected Publicly Traded Comparable Companies. DLJ analyzed
the operating performance of the Company relative to eight sets of companies
deemed to be reasonably comparable to the Company because they possess general
business, operating and financial characteristics similar to the Company
(collectively, the "Comparable Companies"). The Comparable Companies consisted
of (i) Full Line Computer Distribution Companies including Ingram Micro and
Tech Data, (ii) Aggregators including Inacom Corporation, MicroAge, CompuCom
and Vanstar Corporation, (iii) Electronics Distribution Companies including,
Arrow Electronics, Avnet, Marshall Industries and Pioneer Standard
Electronics, (iv) Automotive Parts Distribution Companies including APS
Holding, Genuine Parts and TBC Corporation, (v) Drug/Medical Distribution
Companies including Bergen Brunswig, Bindley Western, Cardinal Health and
McKesson Corporation, (vi) Food Distribution Companies including Fleming
Companies, JP Foodservice, Performance Food and SYSCO, (vii) Industrial
Distribution Companies including Anixter, Applied Industrial Technologies and
Grainger and (viii) Office Products Distribution Companies including Boise
Cascade, Corporate Express and Viking Office Products.
 
  DLJ compared certain market trading statistics with the Comparable Companies
including total enterprise value (defined as market value of common equity
plus book value of total debt less cash and cash equivalents) (based on
reported closing prices for the Comparable Companies on September 12, 1997) as
a multiple of the latest twelve months ("LTM") revenues, LTM earnings before
interest, taxes, depreciation, amortization and loss (gain) on the disposition
of fixed assets ("EBITDA"), LTM earnings before interest and taxes ("EBIT"),
price to earnings ratios ("P/E") based on the estimated calendar years ended
1997 and 1998 EPS (as estimated by First Call Corporation).
 
  DLJ analyzed the operating performance of the Company for the latest twelve
months ended June 30, 1997 and the total enterprise value as implied by both
the Stonington Restructuring and the Noteholder Restructuring two ways for
each proposed transaction. First, DLJ calculated the total enterprise value of
the Company by excluding the balance of the Company's off-balance sheet
accounts receivable securitization program from total debt ("Excluding
Accounts Receivable Securitization") but subtracting the securitization fees
paid to utilize this program from earnings before interest, taxes,
securitization fees, depreciation and amortization ("EBITSDA") to get EBITDA.
Second, DLJ calculated the total enterprise value of the Company by including
the balance of the Company's off-balance sheet accounts receivable
securitization program in total debt ("Including Accounts Receivable
Securitization") but excluding securitization fees from the calculation and
utilizing EBITSDA for multiple calculation. That is, DLJ calculated (i) total
enterprise value (excluding the off-balance sheet accounts receivable
securitization program as debt) as a multiple of EBITDA and (ii) total
enterprise value (including the off-balance sheet accounts receivable
securitization program as debt) as a multiple of EBITSDA.
 
  As of September 12, 1997 the analysis resulted in a total enterprise value
to LTM revenues for the Company if the Stonington Restructuring was assumed of
0.11x Excluding Accounts Receivable Securitization or 0.18x Including Accounts
Receivable Securitization and in a total enterprise value to LTM revenues for
the Company if the Noteholder Restructuring was assumed of 0.10x Excluding
Accounts Receivable Securitization or 0.17x Including Accounts Receivable
Securitization compared to total enterprise value to LTM revenues for (i) Full
Line Computer Distribution Companies average of 0.6x, (ii) Aggregators average
of 0.24x, (iii) Electronics Distribution Companies average of 0.56x, (iv)
Automotive Parts Distribution Companies average of 0.63x, (v) Drug/Medical
Distribution Companies average of 0.34x, (vi) Food Distribution Companies
average of 0.34x, (vii) Industrial Distribution Companies average of 0.70x and
(viii) Office Products Distribution Companies average of 0.97x.
 
  The analysis resulted in a total enterprise value to LTM EBITDA for the
Company if the Stonington Restructuring was assumed of 10.6x Excluding
Accounts Receivable Securitization or 12.5x Including Accounts Receivable
Securitization and total enterprise value to LTM EBITDA for the Company if the
Noteholder Restructuring was assumed of 9.7x Excluding Accounts Receivable
Securitization or 11.8x Including Accounts
 
                                      21
<PAGE>
 
Receivable Securitization compared to total enterprise value to LTM EBITDA for
(i) Full Line Computer Distribution Companies average of 13.7x, (ii)
Aggregators average of 8.2x, (iii) Electronics Distribution Companies average
of 9.1x, (iv) Automotive Parts Distribution Companies average of 15.8x, (v)
Drug/Medical Distribution Companies average of 15.7x, (vi) Food Distribution
Companies average of 9.6x, (vii) Industrial Distribution Companies average of
8.9x and (viii) Office Products Distribution Companies average of 14.2x.
 
  The analysis resulted in a total enterprise value to LTM EBIT for the
Company if the Stonington Restructuring was assumed of 15.6x Excluding
Accounts Receivable Securitization or 25.5x Including Accounts Receivable
Securitization and total enterprise value to LTM EBIT for the Company if the
Noteholder Restructuring was assumed of 14.3x Excluding Accounts Receivable
Securitization or 24.2x Including Accounts Receivable Securitization compared
to total enterprise value to LTM EBIT for (i) Full Line Computer Distribution
Companies average of 15.8x, (ii) Aggregators average of 11.0x, (iii)
Electronics Distribution Companies average of 10.5x, (iv) Automotive Parts
Distribution Companies (average was not meaningful), (v) Drug/Medical
Distribution Companies average of 21.0x, (vi) Food Distribution Companies
average of 13.6x, (vii) Industrial Distribution Companies average of 11.5x and
(viii) Office Products Distribution Companies average of 18.7x.
 
  The analysis resulted in a P/E based on 1997 EPS for the Company if the
Stonington Restructuring was assumed of 27.0x and in a P/E based on 1997 EPS
for the Company if the Noteholder Restructuring was assumed of 23.7x compared
to the P/E based on 1997 EPS for (i) Full Line Computer Distribution Companies
average of 24.4x, (ii) Aggregators average of 18.3x, (iii) Electronics
Distribution Companies average of 14.9x, (iv) Automotive Parts Distribution
Companies average of 15.4x, (v) Drug/Medical Distribution Companies average of
25.9x, (vi) Food Distribution Companies average of 19.3x, (vii) Industrial
Distribution Companies average of 18.4x and (viii) Office Products
Distribution Companies average of 28.3x.
 
  The analysis resulted in a P/E based on 1998 EPS for the Company if the
Stonington Restructuring was assumed of 12.9x and in a P/E based on 1998 EPS
for the Company if the Noteholder Restructuring was assumed of 12.5x compared
to the P/E based on 1998 EPS for (i) Full Line Computer Distribution Companies
average of 20.4x, (ii) Aggregators average of 13.0x, (iii) Electronics
Distribution Companies average of 12.7x, (iv) Automotive Parts Distribution
Companies average of 10.9x, (v) Drug/Medical Distribution Companies average of
21.1x, (vi) Food Distribution Companies average of 17.1x, (vii) Industrial
Distribution Companies average of 15.3x and (viii) Office Products
Distribution Companies average of 20.3x.
 
  Analysis of Selected Transactions in the Computer Distribution Industry. DLJ
reviewed publicly available information for five selected merger and
acquisition transactions in the computer distribution industry and announced
subsequent to April 21, 1996 (the "Selected Computer Distribution
Transactions"). The Selected Computer Distribution Transactions reviewed were:
(i) Corporate Express Inc./ASAP Software Express, Inc., (ii) General Electric
Capital Services/AmeriData Technologies Inc., (iii) Synnex Information
Technologies/Merisel FAB, (iv) Tech Data Corporation/Macotron AG and (v)
Ingram Micro Inc./Intelligent Electronics, Inc. DLJ reviewed the consideration
paid in such transactions in terms of the total enterprise value as a multiple
of LTM revenues, EBITDA and EBIT of the acquired entity prior to its
acquisition. The analysis resulted in (i) a range of 0.02x to 0.52x and an
average (excluding high and low values) of 0.19x total enterprise value to LTM
revenues compared to 0.11x Excluding Accounts Receivable Securitization or
0.18x Including Accounts Receivable Securitization under the Stonington
Restructuring and 0.10x Excluding Accounts Receivable Securitization or 0.17x
Including Accounts Receivable Securitization under the Noteholder
Restructuring, (ii) a range of 3.9x to 8.8x and an average (excluding high and
low values) of 7.2x total enterprise value to LTM EBITDA compared to 10.6x
Excluding Accounts Receivable Securitization or 12.5x Including Accounts
Receivable Securitization under the Stonington Restructuring and 9.7x
Excluding Accounts Receivable Securitization or 11.8x Including Accounts
Receivable Securitization under the Noteholder Restructuring, and (iii) a
range of 8.1x to 34.2x and an average (excluding high and low values) of 9.7x
total enterprise value to LTM EBIT compared to 15.6x Excluding Accounts
Receivable Securitization or 25.5x Including Accounts Receivable
Securitization under the Stonington Restructuring and 14.3x Excluding Accounts
Receivable Securitization or 24.2x Including Accounts Receivable
Securitization under the Noteholder Restructuring.
 
                                      22
<PAGE>
 
  Premium Analysis. DLJ reviewed publicly available information to determine
the premiums paid in selected transactions ranging in size from $100 million
to $300 million in equity value completed subsequent to January 1, 1994 (the
"Selected Transactions"). DLJ reviewed the percentage premium in each
transaction represented by the offer prices over the trading prices one day,
one week and one month prior to the announcement date of each respective
transaction. The average percentage amount by which the offer prices exceeded
the closing stock prices one day, one week and one month prior to the
announcement date for the Selected Transactions was approximately 34.2%, 39.4%
and 48.4%, respectively. This compares to the percentage amounts by which the
Stonington Restructuring exceed the closing stock price of the Company one
day, one week and one month prior to July 15, 1997, the date of the press
release announcing the Original Stonington Proposal, of 49.7%, 54.4% and
49.7%, respectively.
 
  The summary set forth above does not purport to be a complete description of
the analyses performed by DLJ, but describes in summary form the principal
elements of the presentation made by DLJ to the Board on September 18, 1997.
The preparation of a fairness opinion involves various determinations as to
the most appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances and, therefore,
such an opinion is not readily summarized. Each of the analyses conducted by
DLJ was carried out in order to provide a different perspective on the
transaction and add to the total mix of information available. DLJ did not
form a conclusion as to whether any individual analysis, considered in
isolation, supported or failed to support its conclusion. DLJ considered the
results of each analysis in light of each other and ultimately reached its
opinion based on the results of all analyses taken as a whole. Accordingly,
notwithstanding the separate factors summarized above, DLJ believes that its
analyses must be considered as a whole and that selecting portions of its
analyses and the factors considered by it, without considering all analyses
and factors, could create an incomplete or misleading view of the evaluation
process underlying its opinion. In performing its analyses, DLJ made numerous
assumptions with respect to industry performance, business and economic
conditions and other matters. The analyses performed by DLJ are not
necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses.
 
  DLJ was selected to render an opinion in connection with the Stonington
Restructuring based upon DLJ's qualifications, expertise and reputation in
restructuring and reorganization contexts, including the fact that DLJ, as
part of its investment banking services, is regularly engaged in the valuation
of businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes.
 
  Pursuant to the terms of the July 3, 1997 amendment to the engagement
letter, dated January 16, 1997, agreed to by both DLJ and the Company (the
"DLJ Agreement") the Company agreed to pay DLJ (i) a retainer fee of $100,000,
payable upon execution of the letter and $75,000 per month, thereafter (the
"DLJ Retainer Fee"), (ii) a fee of $500,000 at the time DLJ notifies the Board
that it was prepared to deliver DLJ's opinion and $50,000 for each additional
or updated opinion delivered by DLJ with respect to a transaction (the "DLJ
Opinion Fee") and (iii) a financing fee of (a) four percent of the gross
proceeds received by the Company in connection with the issuance and sale by
the Company of equity securities (which would amount to $6.08 million in
connection with the Stonington Restructuring) and (b) three percent of the
gross proceeds received by the Company in connection with the issuance and
sale by the Company of debt securities (which, including a restructuring fee,
would have amounted to approximately $5.7 million in connection with the
Noteholder Restructuring if the $l49.2 million of debt outstanding under the
Operating Companies' Loan Agreements on a pro forma basis as of June 30, 1997
were refinanced), less the DLJ Retainer Fee and the DLJ Opinion Fee. The
Company has agreed to reimburse DLJ for certain out-of-pocket expenses and to
indemnify DLJ and certain related persons for certain potential liabilities
and expenses relating to its services provided to the Board.
 
  DLJ provides a full range of financial, advisory and brokerage services and
in the course of its normal trading activities may from time to time effect
transactions and hold positions in the securities or options on the securities
of the Company for its own account and for the account of customers.
 
 
                                      23
<PAGE>
 
                        MARKET AND TRADING INFORMATION
 
  The following table sets forth the quarterly high and low sale prices for
the Common Stock as reported by the Nasdaq National Market.
 
<TABLE>
<CAPTION>
                                                                 HIGH     LOW
                                                               -------- --------
   <S>                                                         <C>      <C>
   FISCAL YEAR 1995
     First quarter............................................ $8 1/2   $3 7/8
     Second quarter...........................................  7 3/4    4 1/2
     Third quarter............................................  8 3/8    5 1/2
     Fourth quarter...........................................  6 5/8    4 1/8
   FISCAL YEAR 1996
     First quarter............................................  5 7/8    2 1/4
     Second quarter...........................................  5 1/16   2 1/16
     Third quarter............................................  3 13/16  1 13/16
     Fourth quarter...........................................  2 5/16   1 9/16
   FISCAL YEAR 1997
     First quarter............................................  2 1/2    1 9/16
     Second quarter...........................................  2 1/2    1 1/32
     Third quarter............................................  4 11/16  1 7/8
     Fourth quarter through [      ]..........................
</TABLE>
 
  On July 14, 1997, the trading day immediately prior to the date that the
Company announced the terms of the Original Stonington Proposal, the closing
sale price for the Common Stock was $2 1/32 per share. On September 18, 1997,
the day immediately prior to the date that the Company announced that it
entered into the Stock and Note Purchase Agreement with Phoenix and issued the
Convertible Note, the closing sale price for the Common Stock was $4 9/32 per
share. On October [2], 1997, the closing sale price for the Common Stock was
$4 13/32 per share.
 
  The Common Stock is currently traded on the over-the-counter market and is
quoted on the Nasdaq National Market under the symbol "MSEL." The Company has
never declared or paid and does not expect to declare or pay dividends in the
near future on the outstanding Common Stock. Restrictions contained in the
instruments governing the outstanding indebtedness of the Company restrict its
ability to provide funds that might otherwise be used by the Company for the
payment of dividends on the Common Stock. See "CERTAIN CONSIDERATIONS RELATING
TO THE STONINGTON RESTRUCTURING" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS--Liquidity and Capital
Resources."
 
            INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
 
INTEREST OF CERTAIN EXECUTIVE OFFICERS
 
  Pursuant to his employment agreement with the Company, effective for three
years commencing February 12, 1997, Dwight A. Steffensen serves as Chairman of
the Board of Directors and Chief Executive Officer of the Company and is
entitled to continue to vest on a deferred basis in 500,000 stock appreciation
rights ("SARs") granted to him under his former employment contract. The SARs
have an exercise price of $2.8175 per share and become fully vested in the
event of a transaction involving the sale of the Company, such as would occur
upon consummation of the Stonington Conversion. Once vested, Mr. Steffensen
has the right to convert (and Mr. Steffensen has expressed his intention to
convert) his SARs into options to purchase an equivalent number of shares
under the Company's 1991 Employees Stock Option Plan (subject to the
availability of shares under the plan and to the extent permitted under
applicable law). The agreement also provides Mr. Steffensen with a lump-sum
bonus of $790,000 in the event of such a transaction during the term of Mr.
Steffensen's agreement
 
                                      24
<PAGE>
 
with the Company provided that the right to receive this payment will not
survive past February 12, 1998 unless approved by the Board. Mr. Steffensen is
subject to specified covenants of noncompetition, nonsolicitation and
confidentiality, and is entitled to receive a lump-sum payment of $1,010,000
in consideration for his compliance with such covenants in the event of such a
transaction.
 
  If his employment is terminated by the Company during the term of the
agreement, other than for "cause" (as defined in Mr. Steffensen's agreement
with the Company), Mr. Steffensen will be entitled to receive his base salary
for the remainder of such term and a prorated share of any performance bonus
payable for the quarter in which the termination occurs. In addition, if such
a termination occurs when negotiations for the sale of the Company are under
way, Mr. Steffensen will be entitled to full vesting in his SARs and to
payment of the lump sum bonus and the covenant consideration described above.
If any payment to Mr. Steffensen becomes subject to an excise tax under
Section 4999 of the Code, he will receive a gross-up payment from the Company
equal to 75% of such tax.
 
INTEREST OF STONINGTON
 
  Whether or not the Company consummates the Stonington Conversion, it has
paid Stonington a Transaction Fee of $3 million (as hereinafter described)
pursuant to the Stock and Note Purchase Agreement. Furthermore, the Company
has agreed to reimburse Stonington for all out-of-pocket legal fees and
expenses incurred by Stonington in defending the tortious interference suit
which has been brought against Stonington by certain Consenting Noteholders.
However, this obligation does not obligate the Company to indemnify Stonington
for the amount of any adverse judgment entered against Stonington or amounts
paid in settlement. In addition, if the Stonington Conversion is not
consummated and certain other conditions are met, the Company could be
required to pay Stonington a termination fee of $7.5 million and reimburse
Stonington for all out-of-pocket fees and expenses incurred in connection with
the transactions contemplated by the Stock and Note Purchase Agreement and the
Convertible Note (excluding amounts payable with respect to an adverse
judgment on settlement of any pending or threatened legal proceeding against
Stonington). See "DESCRIPTION OF CONVERTIBLE NOTE AND STOCK AND NOTE PURCHASE
AGREEMENT--Transaction Fee" and "--Termination."
 
  On September 19, 1997, Phoenix, became the holder of 4,901,316 shares of
Common Stock. Prior to the Stonington Conversion but after termination or
expiration of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") (which waiting period was terminated
on September 29, 1997), Phoenix may convert a portion of its Convertible Note
into Common Stock representing, together with the Initial Shares, up to 19.9%
of the Common Stock outstanding immediately prior to the Initial Issuance (the
"Initial Conversion" and the shares issued pursuant thereto, the "Initial
Conversion Shares"). Based on the number of shares of Common Stock outstanding
on the Record Date, up to 1,084,305 Initial Conversion Shares could be issued
pursuant to the Initial Conversion, for an aggregate ownership of 5,985,621
shares of Common Stock. Phoenix will be eligible to vote all of the Initial
Shares and if issued prior to the Record Date, the Initial Conversion Shares
at the Stockholders' Meeting and Stonington has indicated its intention to
cause Phoenix to vote all of such shares, or approximately 16.67% of the
outstanding Common Stock, FOR each of the Proposals.
 
  Should the Stockholders approve the Charter Amendment and the Stonington
Conversion and certain other conditions are satisfied or waived, the
Stonington Conversion will be effected automatically. The Convertible Note
would be converted at the Conversion Rate of 328.9473684211 shares of Common
Stock for each $1,000 principal amount of the Convertible Note (and all
deferred interest payments shall be forgiven) which represents approximately
$3.04 plus a pro rata share of such deferred and unpaid interest per share of
Common Stock. On the Record Date, the closing sale price for the Common Stock
was $[   ] per share. See "MARKET AND TRADING INFORMATION" and "DESCRIPTION OF
CONVERTIBLE NOTE AND STOCK AND NOTE PURCHASE AGREEMENT."
 
INTEREST OF FINANCIAL ADVISOR
 
  Pursuant to the DLJ Agreement, if the Stonington Conversion is consummated,
the Company would owe DLJ $6.08 million, reduced by the amount of certain fees
previously paid. In addition to this fee, the Company has
 
                                      25
<PAGE>
 
been paying DLJ a monthly fee of $75,000 (which commenced February 15, 1997),
which is payable pursuant to and to be credited against fees relating to the
Stonington Restructuring. The Company has also agreed to pay DLJ a fee in cash
of $500,000 in connection with the Board's request for a fairness opinion
related to the Stonington Restructuring. However, such fee would be netted
against the above-referenced $6.08 million fee. The Company has also agreed to
pay DLJ's reasonable out-of-pocket expenses and to indemnify DLJ on certain
terms and conditions.
 
                          DISCUSSION OF THE PROPOSALS
 
CHARTER AMENDMENT
 
  The Board has unanimously adopted resolutions proposing that the Company's
Certificate of Incorporation be amended by the Charter Amendment. The purpose
of the Charter Amendment is to increase the number of authorized but unissued
shares of Common Stock so as to ensure that a sufficient number of such shares
are available for issuance pursuant to the Stonington Conversion and for future
corporate purposes. Should the Stonington Conversion be approved by the
requisite vote of Stockholders and thereafter consummated, an aggregate of
45,098,685 shares of Common Stock (subject to customary anti-dilution
adjustments) will be issued to Phoenix upon the conversion. As of the Record
Date, the Company had authorized capital stock of 51,000,000 shares, including
50,000,000 shares of Common Stock and 1,000,000 shares of preferred stock, $.01
par value. Also as of such date, the Company had [34,979,811] shares of Common
Stock outstanding, leaving only [15,020,189] authorized but unissued shares of
Common Stock.
 
  The Charter Amendment, upon filing with the Secretary of State of Delaware,
would amend the Certificate of Incorporation to increase the number of
authorized shares of Common Stock from 50,000,000 to 100,000,000 shares. The
Charter Amendment will not affect the number of authorized shares of preferred
stock of the Company or the par value per share of common stock or preferred
stock. If the requisite approval by the Stockholders is obtained, the Charter
Amendment will be effective upon the date of filing of the Charter Amendment
with the Delaware Secretary of State. The voting and other rights of the Common
Stock will not be altered by the Charter Amendment.
 
  The Charter Amendment will not be effective unless and until it is filed with
the Secretary of State of the State of Delaware. The Board has reserved the
right, pursuant to Section 242(c) of the DGCL, to abandon such amendment even
if the Charter Amendment is authorized by the Stockholders. However, if the
Charter Amendment is authorized by a vote of the Company's Stockholders, the
Board intends to file the Charter Amendment with the Delaware Secretary of
State.
 
  The Charter Amendment is set forth in its entirety in Annex I to this Proxy
Statement. The final text of the Charter Amendment is subject to change in
order to meet the requirements as to form that may be requested or required by
the Secretary of State's Office of the State of Delaware.
 
  THE AFFIRMATIVE VOTE OF THE MAJORITY OF THE OUTSTANDING SHARES OF COMMON
STOCK ENTITLED TO VOTE ON THE CHARTER AMENDMENT IS REQUIRED FOR APPROVAL OF THE
CHARTER AMENDMENT. ACCORDINGLY, ABSTENTIONS AND BROKER NON-VOTES WILL HAVE THE
EFFECT OF A VOTE AGAINST THE CHARTER AMENDMENT. UNLESS INSTRUCTED TO THE
CONTRARY IN THE PROXY, THE SHARES REPRESENTED BY THE PROXIES WILL BE VOTED FOR
THE CHARTER AMENDMENT.
 
  THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE CHARTER AMENDMENT.
 
STONINGTON CONVERSION
 
  The Board has unanimously adopted a resolution approving, as part of the
Stonington Conversion, the issuance of up to 45,098,685 shares of Common Stock,
subject to adjustment pursuant to customary antidilution provisions. Upon
conversion of its Convertible Note into shares of Common Stock, Phoenix would
hold, together with the Initial Shares, an aggregate of 50,000,000 shares of
Common Stock, which would represent approximately 62.4% of the outstanding
Common Stock based on the number of outstanding shares of Common Stock on the
Record Date and excluding shares issuable thereafter pursuant to the exercise
of outstanding or new employee stock options. The approval by the Stockholders
of the issuance of Common Stock pursuant to the Stonington Conversion is
required by the applicable rules of Nasdaq.
 
                                       26
<PAGE>
 
  The Stonington Conversion will not take effect unless and until the Charter
Amendment is approved by Stockholders at the Stockholders' Meeting and filed
with the Secretary of State of the State of Delaware.
 
  THE AFFIRMATIVE VOTE OF THE MAJORITY OF THE SHARES OF COMMON STOCK ENTITLED
TO VOTE AND REPRESENTED AT THE STOCKHOLDERS' MEETING, PROVIDED A QUORUM IS
PRESENT, IS REQUIRED FOR APPROVAL OF THE STONINGTON CONVERSION. ACCORDINGLY,
ABSTENTIONS OR BROKER NON-VOTES WILL NOT AFFECT THE OUTCOME OF THE VOTE ON THE
STONINGTON CONVERSION. UNLESS INSTRUCTED TO THE CONTRARY IN THE PROXY, THE
SHARES REPRESENTED BY THE PROXIES WILL BE VOTED FOR THE PROPOSAL TO APPROVE
THE STONINGTON CONVERSION.
 
  THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE STONINGTON CONVERSION.
 
STOCK AWARD AND INCENTIVE PLAN
 
  The Board has adopted, subject to Stockholder approval, the Merisel, Inc.
1997 Stock Award and Incentive Plan, which provides for the grant of various
types of stock-based compensation to directors, officers and employees of the
Company and its subsidiaries which have participants in the Stock Award and
Incentive Plan. The Stock Award and Incentive Plan is designed to comply with
the requirements for "performance-based compensation" under Section 162(m)
("Section 162(m)") of the Internal Revenue Code of 1986, as amended (the
"Code"), and the conditions for exemption from the short-swing profit recovery
rules under Rule 16b-3 ("Rule 16b-3") of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). The summary that follows is subject to the
actual terms of the Stock Award and Incentive Plan, a copy of which is
attached hereto as Annex II. Capitalized terms used but not otherwise defined
in the summary that follows shall have the respective meanings ascribed to
them in the Stock Award and Incentive Plan.
 
  The Stock Award and Incentive Plan provides for the granting of "incentive
stock options" as described in Section 422 of the Code ("ISOs"), non-qualified
stock options ("NSOs") or both (collectively, "Options"). Options granted
under the Stock Award and Incentive Plan may be accompanied by stock
appreciation rights ("SARs"), limited stock appreciation rights ("LSARs") or
both (collectively, "Rights"). Rights may also be granted independently of
Options. The Stock Award and Incentive Plan also provides for the granting of
restricted stock, deferred stock and performance shares (collectively,
"Restricted Awards") and other stock- and cash-based awards. The Stock Award
and Incentive Plan also permits the plan administrator to authorize loans to
Grantees in connection with the grant of awards, on terms and conditions
determined solely by the plan administrator. Each of the foregoing awards
("Awards") will be evidenced by an agreement setting forth the terms and
conditions applicable thereto.
 
 Purposes of the Stock Award and Incentive Plan
 
  The purposes of the Stock Award and Incentive Plan are to reinforce the
long-term commitment to the Company's success of those directors, officers,
and employees of the Company and its subsidiaries who are or will be
responsible for such success; to facilitate the ownership of the Company's
stock by such individuals, thereby aligning their interests with those of the
Company's stockholders; and to assist the Company in attracting and retaining
officers and other employees with experience and ability.
 
 Eligibility
 
  Awards may be made by the Committee to any director, officer, or other
employee of the Company who is eligible to participate in the Stock Award and
Incentive Plan, consistent with the purposes of the Stock Award and Incentive
Plan; provided that, ISOs may only be granted to employees of the Company.
 
 Plan Administration
 
  The Stock Award and Incentive Plan is administered by the Board or a
committee of the Board the composition of which will at all times comply with
the requirements of Rule 16b-3 under the Exchange Act (the "Committee").
Subject to the terms of the Stock Award and Incentive Plan, the Committee has
the right to grant
 
                                      27
<PAGE>
 
awards to eligible participants and to determine the terms and conditions of
Award agreements, including the vesting schedule and exercise price of such
Awards, and the effect, if any, of a Change in Control (as defined in the
Stock Award and Incentive Plan) on such Awards.
 
 Shares Subject to the Stock Award and Incentive Plan
 
  The Stock Award and Incentive Plan covers a maximum of 8,000,000 shares of
Common Stock representing approximately 10% of the shares outstanding after
giving effect to the Stonington Conversion), or 3,000,000 shares of Common
Stock if the Stonington Conversion does not occur; provided that, such number
of shares shall be decreased to the extent that shares of Common Stock remain
subject to outstanding Option grants under any of the Company's other stock-
based incentive plans. Shares obtainable upon exercise may be treasury,
authorized but unissued shares or shares reacquired by the Company. In order
to prevent dilution or enlargement of the rights of Grantees, the Stock Award
and Incentive Plan permits the Committee to make adjustments to the aggregate
number of shares subject to the Stock Award and Incentive Plan or any Award,
and to the purchase price to be paid or the amount to be received in
connection with the realization of any Award. The Committee has the authority,
in the event of any such adjustment, to provide for the cancellation of any
outstanding award in exchange for payment in cash or other property.
 
 Terms and Conditions of Options
 
  Options will vest and become exercisable over the exercise period, at such
times and upon such conditions as the Committee determines and sets forth in
the Award agreement. The Committee may accelerate the exercisability of any
outstanding Option at such time and under such circumstances as it deems
appropriate. Options that are not exercised within ten years from the date of
grant, however, will expire without value. Options are exercisable during a
Grantee's lifetime only by the Grantee. The Award agreements will contain
provisions regarding the exercise of Options following termination of
employment with or service to the Company, including terminations due to the
death, disability or retirement of the Grantee, or upon a Change in Control.
In addition to the terms and conditions governing NSOs, ISOs awarded under the
Stock Award and Incentive Plan must comply with the requirements of Section
422 of the Code.
 
  The Option Price will be as determined by the Committee and may be fully
paid in cash, by delivery of Common Stock previously owned by the Grantee
equal in value to the Option Price, by means of a loan from the Company, or by
having shares of Common Stock with a Fair Market Value (on the date of
exercise), equal to the Option Price, withheld by the Company or sold by a
broker-dealer under qualifying circumstances (or in any combination of the
foregoing). A Grantee of an Option Award (and any tandem SAR or LSAR) will not
have the rights of a stockholder until certificates for the option shares are
actually received.
 
 Stock Appreciation Rights and Limited Stock Appreciation Rights
 
  Unless the Committee determines otherwise, a SAR or LSAR (1) granted in
tandem with an NSO may be granted at the time of grant of the related NSO or
at any time thereafter or (2) granted in tandem with an ISO may be granted
only at the time of grant of the related ISO. A SAR will be exercisable only
to the extent the underlying Option is exercisable. Tandem SARs and LSARs will
terminate upon the termination or exercise of the pertinent portion of the
related Option, and the pertinent portion of the related Option will terminate
upon the exercise of any such SAR or LSAR.
 
  Upon exercise of a SAR, the Grantee will receive, with respect to each share
subject thereto, an amount equal in value to the excess of (1) the Fair Market
Value of one share of Common Stock on the date of exercise over (2) the grant
price of the SAR (which in the case of a SAR granted in tandem with an Option
will be the Option Price, and which in the case of any other SAR will be the
price determined by the Committee).
 
  Upon exercise of a LSAR, the grantee will receive, with respect to each
share subject thereto, automatically upon the occurrence of a Change in
Control, an amount equal in value to the excess of (1) the Change in Control
 
                                      28
<PAGE>
 
Price of one share of Common Stock on the date of such Change in Control
(which in the case of a LSAR granted in tandem with an ISO will be the Fair
Market Value), over (2) the grant price of the LSAR (which in the case of a
LSAR granted in tandem with an Option will be the Option Price, and which in
the case of any other LSAR will be the price determined by the Committee). An
LSAR Grantee who is subject to the reporting requirements of Section 16(a) of
the Exchange Act, however, will only be entitled to receive such amount if the
LSAR has been outstanding for at least six (6) months on the Change in Control
date.
 
 Restricted Awards
 
  A restricted stock award is an award of Common Stock that may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of for a
period of ten years, or such shorter period as the Committee determines, from
the date on which the Award is granted (the "Restricted Period"). The
Committee may also impose such other restrictions and conditions on such Award
as it deems appropriate. The Committee may provide that the foregoing
restrictions will lapse with respect to specified percentages of the awarded
shares on successive anniversaries of the date of the Award. In addition, the
Committee has the authority to cancel all or any portion of any restrictions
prior to the expiration of the Restricted Period. A grant of deferred stock
creates a right to receive Common Stock at the end of a specified deferral
period. Performance shares are shares of Common Stock subject to restrictions
based upon the attainment of performance objectives. Such performance
objectives may be based on various financial measures of the Company's
performance. In addition, performance goals may be based upon a Grantee's
attainment of specific objectives set by the Company for that Grantee's
performance.
 
  Upon the award of any restricted stock or performance shares, the Grantee
will have the rights of a stockholder with respect to the shares, including
dividend rights, subject to the conditions and restrictions generally
applicable to restricted stock or specifically set forth in the Grantee's
Award agreement. Upon an award of deferred stock, the Grantee will not have
stockholder rights, other than the right to receive dividends, during the
specified deferral period.
 
 Other Stock- or Cash-Based Awards
 
  The Committee may grant Common Stock as a bonus or in lieu of Company
commitments to pay cash under other plans or compensatory arrangements of the
Company. The Committee may also grant other stock- or cash-based awards as an
element of or supplement to any other Award under the Stock Award and
Incentive Plan. Such Awards may be granted with value and payment contingent
upon the attainment of specified individual or Company financial goals, or
upon any other factors designated by the Committee. The Committee may
determine the terms and conditions of such Awards at the date of grant or
thereafter.
 
 Death--Termination of Employment--Restrictions on Transfer
 
  The Award agreements will state whether and to what extent Awards will be
exercisable upon termination of employment or service for any reason,
including death or disability. In no event may any Option be exercisable more
than ten years from the date it is granted. Except as otherwise determined by
the Committee in accordance with Rule 16b-3, Options and Rights are not
transferable and are exercisable during the Grantee's lifetime only by the
Grantee.
 
 Amendment; Termination
 
  The Board may terminate or amend the Stock Award and Incentive Plan at any
time, except that stockholder approval is required for any such amendment
required to fulfill the conditions of Rule 16b-3, Section 162(m) and any other
applicable laws (but only if the Company intends to fulfill such
requirements). Termination or amendment of the Stock Award and Incentive Plan
will not affect previously granted Awards, which will continue in effect in
accordance with their terms.
 
                                      29
<PAGE>
 
 Anti-Takeover Effect
 
  The Stock Award and Incentive Plan is designed to provide incentive
compensation to management employees of the Company while aligning the
interests of management with that of the Stockholders. To achieve these goals,
the Stock Award and Incentive Plan provides for the distribution of up to 10%
of the outstanding shares of the Company's common stock. Although such options
may vest automatically upon a Change of Control if so provided by the Board or
the Committee and may increase the cost of a takeover of the Company, however,
the Company does not believe that the implementation and operation of the Stock
Award and Incentive Plan will have any material anti-takeover effect.
 
 Certain Federal Income Tax Considerations
 
  THE FOLLOWING DISCUSSION OF CERTAIN RELEVANT FEDERAL INCOME TAX EFFECTS
APPLICABLE TO AWARDS GRANTED UNDER THE STOCK AWARD AND INCENTIVE PLAN IS A
SUMMARY ONLY, AND REFERENCE IS MADE TO THE CODE FOR A COMPLETE STATEMENT OF ALL
RELEVANT FEDERAL TAX PROVISIONS. HOLDERS OF AWARDS SHOULD CONSULT THEIR TAX
ADVISORS BEFORE REALIZATION OF ANY SUCH AWARDS, AND HOLDERS OF COMMON STOCK
PURSUANT TO AWARDS SHOULD CONSULT THEIR TAX ADVISORS BEFORE DISPOSING OF ANY
SUCH SHARES. SECTION 16 INDIVIDUALS SHOULD NOTE THAT SOMEWHAT DIFFERENT RULES
THAN THOSE DESCRIBED BELOW MAY APPLY TO THEM. Under current Federal income tax
laws, Awards under the Stock Award and Incentive Plan will generally have the
following tax consequences:
 
  Non-Qualified Stock Options. A Grantee will generally not be taxed upon the
grant of an NSO. Rather, at the time of exercise of such NSO (and in the case
of an untimely exercise of an ISO), the Grantee will recognize ordinary income
for Federal income tax purposes in an amount equal to the excess, if any, of
the Fair Market Value of the shares purchased, over the Option Price and will
have a tax basis in such shares equal to the Option Price, plus the amount
taxable as ordinary income to the Grantee. The Company will generally be
entitled to a tax deduction at such time and in the same amount as the Grantee
recognizes ordinary income.
 
  If shares acquired upon exercise of an NSO (or upon untimely exercise of an
ISO) are later sold or exchanged, then the difference between the sales price
and the Fair Market Value of such shares on the date that ordinary income was
recognized with respect thereto will generally be taxable as capital gain or
loss (if the Common Stock is a capital asset of the Grantee).
 
  Incentive Stock Options. A Grantee will generally not be taxed upon the grant
of an ISO or upon its timely exercise. Exercise of an ISO will be timely if
made during its term and if the Grantee remains an employee of the Company at
all times during the period beginning on the date of grant of the ISO and
ending on the date three months before the date of exercise (or one year before
the date of exercise in the case of a disabled employee). Exercise of an ISO
will also be timely, if made by the legal representative of a Grantee who dies
(1) while in the employ of the Company or (2) within three months after
termination of employment. The tax consequences of an untimely exercise of an
ISO is the same as those described for NSOs above.
 
  If Common Stock acquired pursuant to a timely exercised ISO is later disposed
of, the Grantee will, except as noted below with respect to a "disqualifying
disposition," recognize capital gain or loss at the time of the disposition (if
the Common Stock is a capital asset of the employee) equal to the difference
between the amount realized upon such sale and the Option Price. The Company,
under these circumstances, will not be entitled to any Federal income tax
deduction in connection with either the exercise of the ISO or the sale of such
Common Stock by the Grantee.
 
  If, however, a Grantee disposes of Common Stock acquired pursuant to the
exercise of an ISO (1) prior to the expiration of two years from the date of
grant of the ISO or (2) within one year from the date such Common Stock is
transferred to him upon exercise (a "disqualifying disposition"), generally (a)
the Grantee will realize ordinary income at the time of the disposition in an
amount equal to the excess, if any, of the Fair Market Value of the shares at
the time of exercise (or, if less, the amount realized on such disqualifying
disposition) over the Option Price, and (b) if the Common Stock is a capital
asset of the Grantee, any additional gain recognized will be taxed as capital
gain. At the time of such disqualifying disposition, the Company may claim a
Federal income tax deduction only for the amount taxable to the Grantee as
ordinary income.
 
                                       30
<PAGE>
 
  The amount by which the Fair Market Value of the shares on the exercise date
of an ISO exceeds the Option Price will be an item of adjustment for purposes
of the "alternative minimum tax" imposed by Section 55 of the Code.
 
  Exercise with Shares. Special rules may pertain to a Grantee who exercises
an Option and pays the Option Price with shares already owned.
 
  Rights. A Grantee will not be taxed at the time of grant of SARs or LSARs.
Upon the exercise of SARs or LSARs (other than a Free Standing Right that is
an LSAR), the amount of any cash and the Fair Market Value as of the date of
exercise of Common Stock received is taxable to the Grantee as ordinary
income. With respect to a Free Standing Right that is an LSAR, however, a
Grantee should be required to include as taxable income on the date of a
Change in Control an amount equal to the amount of cash that could be received
upon the exercise of the LSAR, even if the LSAR is not exercised until a date
subsequent to the date of the Change in Control. The Company will generally be
entitled to a deduction at the same time and in an amount equal to the amount
included in the Grantee's income. Upon the sale of shares acquired upon the
exercise of SARs or LSARs, a Grantee will recognize capital gain or loss
(assuming such Common Stock was held as a capital asset) in an amount equal to
the difference between the amount realized upon such sale and the Fair Market
Value of such Common Stock on the date that governs the determination of his
ordinary income.
 
  Restricted Awards. In the case of a restricted award, generally, a Grantee
will not be taxed upon the grant of such an Award. The Grantee will recognize
ordinary income in an amount equal to (i) the Fair Market Value of the Common
Stock at the time the shares become transferable or are otherwise no longer
subject to a substantial risk of forfeiture (as defined in the Code), minus
(ii) the price, if any, paid by the Grantee to purchase such stock. The
Company will be entitled to a deduction at the time when, and in the amount
that, the Grantee recognizes ordinary income. However, a Grantee may elect
(not later than 30 days after acquiring such shares) to recognize ordinary
income at the time the restricted shares are awarded in an amount equal to
their Fair Market Value at that time, notwithstanding the fact that such
shares are subject to restrictions on transfer and a substantial risk of
forfeiture. If such an election is made, no additional taxable income will be
recognized by the Grantee at the time the restrictions lapse. The Company will
be entitled to a tax deduction at the time when, and to the extent that,
income is recognized by the Grantee. However, if shares in respect of which
such election was made are later forfeited, no tax deduction is allowable to
the Grantee for the forfeited shares, and the Company will be deemed to
recognize ordinary income equal to the amount of the deduction allowed to the
Company at the time of the election.
 
  Post-Stonington Conversion Stock Option Grants. No awards have been made
under the Stock Award and Incentive Plan. However, if the Stonington
Conversion is consummated the Company intends, subject to the approval of the
post-Stonington Conversion Board of Directors, to issue options under the
Stock Award and Incentive Plan (the "New Options") to purchase shares of
Common Stock in exchange for employee stock options and stock appreciation
rights ("SARs") that are currently outstanding and that have an exercise price
above the market price of the Common Stock on the date of grant. Such
currently outstanding options would then be cancelled. Currently outstanding
options and SARs with an exercise price below the market price of the Common
Stock on the date of the initial grant of New Options will remain outstanding.
As of October 3, 1997, employee stock options and SARs with respect to
2,152,277 shares of Common Stock were outstanding. In addition, New Options
for up to approximately 4,250,000 shares of Common Stock (excluding New
Options issued in exchange for currently outstanding options) would be granted
following the consummation of the Stonington Conversion. These New Options,
when aggregated with all other outstanding employee stock options and SARs,
will not exceed 8% of the outstanding Common Stock. Other than Mr. Illson and
Mr. Jenson, no executive officer of the Company will, as a result of such
grants of New Options, increase his or her total options and SARs as a
percentage of the outstanding Common Stock. If the Stonington Conversion is
consummated, the New Options issued immediately after the date of the
consummation of the Stonington Conversion (the "Conversion Date") would have
an exercise price equal to the closing price of the Common Stock on Nasdaq (or
such other exchange or over the counter market on which the Common Stock is
trading) on the date of grant. Each issuance of New Options issued immediately
after the Conversion Date would be exercisable for seven
 
                                      31
<PAGE>
 
years and would vest 20% on the date such options are granted and 20%, 20% and
40% on the first, second and third anniversary of such date, respectively. The
New Options issued immediately after the Conversion Date may include a
provision providing for automatic acceleration of vesting in the event of a
Change in Control (as defined in the Stock Award and Incentive Plan).
 
  The options and SARs held by the Company's executive officers and executive
officers as a group and the New Options to be issued to the Company's
executive officers and executive officers as a group are set forth in the
table below.
 
<TABLE>
<CAPTION>
                                                          AVERAGE
                            CURRENT     CURRENT NUMBER EXERCISE PRICE    AVERAGE
                           NUMBER OF      OF "OUT OF     OF "IN THE   EXERCISE PRICE OPTIONS TO TOTAL OPTIONS
                         "IN THE MONEY"   THE MONEY"       MONEY"     OF "OUT OF THE BE GRANTED   AND SARS
                            OPTIONS      OPTIONS AND    OPTIONS AND   MONEY" OPTIONS UNDER THE    AFTER NEW
          NAME              AND SARS         SARS           SARS         AND SARS     NEW PLAN  OPTION GRANT
          ----           -------------- -------------- -------------- -------------- ---------- -------------
<S>                      <C>            <C>            <C>            <C>            <C>        <C>
Dwight A. Steffensen....    500,000          4,000         $2.818        $11.000       500,000    1,000,000
Robert J. McInerney.....    200,000              0          2.000            N/A       300,000      500,000
James E. Illson.........     85,000              0          2.588            N/A       415,000      500,000
Timothy N. Jenson.......     17,000         27,500          2.047          9.222       133,000      150,000
Thomas P. Reeves........     70,571        135,135          2.902          8.054       349,429      420,000
Karen A. Tallman........     75,000              0          1.625            N/A        75,000      150,000
Executive officers as a
 group..................    947,571        166,500          2.523          8.318     1,772,429    2,720,000
</TABLE>
 
  Maximum Tax Rates Applicable to Capital Gain. Under the recently enacted
Taxpayer Relief Act of 1997, net capital gain (i.e., generally, capital gain
in excess of capital loss) recognized by a Grantee upon the disposition of
Common Stock that has been held for more than 18 months will generally be
subject to tax at a rate not to exceed 20%. Net capital gain recognized by a
Grantee upon the disposition of Common Stock that has been held for more than
12 months but for not more than 18 months will continue to be subject to tax
at a rate not to exceed 28% and net capital gain recognized from the
disposition of Common Stock that has been held for 12 months or less will
continue to be subject to tax at ordinary income tax rates.
 
 Vote
 
  THE AFFIRMATIVE VOTE OF THE MAJORITY OF THE SHARES OF COMMON STOCK ENTITLED
TO VOTE AND REPRESENTED AT THE STOCKHOLDERS' MEETING, PROVIDED A QUORUM IS
PRESENT, IS REQUIRED FOR APPROVAL OF THE STOCK AWARD AND INCENTIVE PLAN.
ACCORDINGLY, ABSTENTIONS AND BROKER NON-VOTES WILL NOT AFFECT THE OUTCOME OF
THE VOTE ON THE STOCK AWARD AND INCENTIVE PLAN. UNLESS INSTRUCTED TO THE
CONTRARY IN THE PROXY, THE SHARES REPRESENTED BY THE PROXIES WILL BE VOTED
"FOR" THE PROPOSAL TO APPROVE THE STOCK AWARD AND INCENTIVE PLAN.
 
                                      32
<PAGE>
 
  THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE STOCK AWARD AND INCENTIVE
PLAN.
 
                          DESCRIPTION OF COMMON STOCK
 
  As of the Record Date, there were [34,979,811] shares of Common Stock, par
value $.01 per share, issued and outstanding and held of record by [   ]
Stockholders. Upon consummation of the Stonington Conversion, the Company will
have 100,000,000 shares of Common Stock authorized, of which [80,078,495]
shares would be issued and outstanding based on the number of shares
outstanding on the Record Date.
 
  Subject to such preferential rights as may be granted by the Board of
Directors in connection with future issuances of Preferred Stock, holders of
shares of Common Stock are entitled to one vote per share on all matters to be
voted on by Stockholders, including the election of Directors, and are
entitled to receive ratably such dividends as may be declared by the Board of
Directors in its discretion from funds legally available therefor. In the
event of a liquidation, dissolution or winding up of the Company, holders of
Common Stock are entitled to share ratably in all assets remaining after
payment of liabilities and any liquidation preference owed to holders of
preferred stock. Holders of Common Stock have no preemptive rights and have no
rights to convert their Common Stock into any other securities. Matters
submitted for stockholder approval generally require a majority vote. The
outstanding shares of Common Stock are, and the Common Stock to be outstanding
upon consummation of the Stonington Conversion will be, fully paid and
nonassessable.
 
                        DESCRIPTION OF CONVERTIBLE NOTE
                     AND STOCK AND NOTE PURCHASE AGREEMENT
 
  The Convertible Note was issued under the Stock and Note Purchase Agreement.
Copies of the Stock and Note Purchase Agreement and the Convertible Note were
filed as exhibits to a Current Report of the Company on Form 8-K dated
September 19, 1997. The following summary of certain provisions of the
Convertible Note and the Stock and Note Purchase Agreement does not purport to
be complete and is subject to, and qualified in its entirety by reference to,
the Convertible Note and the Stock and Note Purchase Agreement.
 
                             THE CONVERTIBLE NOTE
 
GENERAL
 
  The Convertible Note was issued pursuant to the Stock and Note Purchase
Agreement on September 19, 1997 to Phoenix and was amended and restated as of
October 3, 1997. The Convertible Note may be transferred by Phoenix to other
entities under certain circumstances. See "--Transfers."
 
MATURITY, INTEREST AND PRINCIPAL
 
  The Convertible Note is a general, unsecured obligation of the Company and
Merisel Americas. The Convertible Note has an aggregate principal amount of
$137,100,000, of which $123,900,000 will mature on January 31, 1998 and an
additional $4,400,000 will mature on each of March 10, 1998, 1999 and 2000, in
each case, if not earlier converted.
 
  Interest on the outstanding portion of the Convertible Note is payable at
the interest rate of 11.5% per annum, increasing by an additional 1% at the
end of each month commencing at the end of November 1997, but with a maximum
interest rate of 18% per annum. Pursuant to the terms of the Convertible Note,
the Company and Merisel Americas have elected to defer payment of interest on
the Convertible Note. Deferred interest, together with accrued interest
thereon, shall become payable in full in cash upon the due date for payment or
earlier redemption or repayment of the principal amount to which such interest
relates. However, should the Stonington Conversion be consummated, such
interest shall be forgiven."
 
                                      33
<PAGE>
 
REDEMPTION
 
  Optional Redemption. The Convertible Note may be redeemed at the option of
the Company, in whole but not in part, at any time prior to maturity and after
the termination of the Stock and Note Purchase Agreement upon not less than 20
nor more than 40 days' notice mailed to each holder of any portion of the
Convertible Note (a "Holder"), at a redemption price equal to 108% of the
principal amount of the Convertible Note to be redeemed plus accrued interest,
deferred interest and interest on deferred interest, if any, to the due date
for redemption specified in such notice; provided that such redemption price
will be reduced by the aggregate amount of the Transaction Fee, the
Termination Fee and Expenses (as such terms are defined in the Stock and Note
Purchase Agreement) paid to Stonington. See "--The Stock and Note Purchase
Agreements."
 
  Repayment upon Change of Control. Within 15 days of a Change of Control (as
defined below) or upon the occurrence of an event that will result in the
Termination Fee being payable pursuant to the Stock and Note Purchase
Agreement (see "--The Stock and Note Purchase Agreement--Termination"), each
Holder has the right to notify the Company and Merisel and Merisel Americas
(together the "Co-Issuers") requiring the repayment of all or, at the option
of the Holder, a portion of the aggregate principal amount of the Convertible
Note held by such Holder at a price equal to 100% of the principal amount
thereof, and the Co-Issuers shall pay on such date such amounts plus accrued
interest, deferred interest and interest on deferred interest, if any, on the
principal amount to be repaid to the due date for payment specified in such
notice. In the case of repayment of a portion only of the aggregate principal
amount of the Convertible Note held by the Holder, such Holder shall determine
in the notice referred to above the maturity dates of the Convertible Note to
be repaid. For purposes of the Convertible Note, Change of Control means
either (i) Merisel Americas ceases to be a wholly-owned subsidiary of the
Company or the Company enters into a definitive agreement with respect to the
foregoing; or (ii) any Person (as defined in the Convertible Note) or any two
or more Persons acting in concert shall have acquired, or shall have entered
into a definitive agreement providing for the acquisition of, beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company (or other securities convertible
into such Securities), other than the Convertible Note, representing 50% or
more of the combined voting power of all securities of the Company entitled to
vote in the election of directors.
 
  Other Redemption. The Company and Merisel Americas are required to use 60%
of Net Asset Sale Proceeds (as defined in the Convertible Note) of certain
Asset Sales (as defined in the Convertible Note) occurring after January 31,
1998 to redeem a portion of the Convertible Note.
 
CONVERSION RIGHTS
 
  Automatic Conversion. Upon the satisfaction or waiver of the General
Conversion Conditions and the Additional Conversion Conditions (each as
defined below), the full unpaid principal amount of the Convertible Note shall
be automatically converted into fully paid and nonassessable shares of Common
Stock (the "Automatic Conversion"), and deferred and unpaid interest thereon
shall be forgiven and the Convertible Note shall cease to represent debt and
shall instead be deemed to represent rights to receive the Common Stock
issuable upon conversion of the Convertible Note. See "DESCRIPTION OF COMMON
STOCK."
 
  Conversion at the Option of Holders. In addition, any Holder may at any
time, at its option upon the satisfaction or waiver of the General Conversion
Conditions, convert a portion of such Holder's Convertible Note and deferred
and unpaid interest thereon into fully paid and nonassessable shares of Common
Stock by delivery to the Company of proper notice (the "Optional Conversion").
The maximum aggregate principal amount of the Convertible Note that may be
converted by all holders pursuant to any Optional Conversion is limited to the
amount that may be converted into 19.9% of the Common Stock issued and
outstanding immediately prior to the Initial Issuance. See "DESCRIPTION OF
COMMON STOCK."
 
  Conditions to Conversion. Conditions to both the Automatic Conversion and
the Optional Conversion (the "General Conversion Conditions") include the
following: (i) that there exist no legal restraints or prohibitions on such
conversion, (ii) all necessary consents, approvals and authorizations have
been obtained, (iii) the applicable waiting period under the HSR Act has
expired or been terminated (which waiting period has been
 
                                      34
<PAGE>
 
terminated), (iv) the Company has a sufficient number of authorized shares of
Common Stock to effect such Conversion, and (v) the shares of Common Stock to
be issued in such conversion have been authorized for listing on the Nasdaq
National Market.
 
  Conditions applicable only to the Automatic Conversion (the "Additional
Conditions") include the following: (i) each of the representations and
warranties made by the Company and Merisel Americas in the Stock and Note
Purchase Agreement are true and correct as of the Conversion Date as though
made as of the Conversion Date (or an earlier date where applicable), (ii) no
Event of Default (as defined below) or event which would constitute an Event
of Default but for the requirement that notice be given or time elapse or both
(an "Incipient Default") under the Convertible Note shall have occurred or be
in effect, (iii) there shall have been no Material Adverse Effect (as defined
in the Convertible Note), (iv) the Company shall have received any requisite
Stockholder approvals for the Stonington Conversion, (v) there shall be no (A)
governmental injunction, order or similar restraint that imposes limitations
on any Holders' ability to exercise full rights of ownership with respect to
the shares of Common Stock to be issued in the Stonington Conversion or (B)
finding that the Company has breached or is in breach of any material
obligation under either the Limited Waiver Agreement or the Limited Waiver and
Agreement to Amend, among the Company and the lenders under the Operating
Companies' Loan Agreements, and (vi) that Phoenix shall have delivered to the
Company an executed commitment letter from one or more financial institutions
for a standby credit or remarketing facility (the "Standby Facility") having
commercially reasonable terms and conditions for the repurchase or remarketing
of any 12.5% Notes that the Company is required to repurchase pursuant to the
applicable terms of the 12.5% Note Indenture following the Automatic
Conversion; and (vii) that Phoenix shall have delivered to the Company either
(A) an executed commitment letter from one or more financial institutions
reasonably satisfactory to the Company for a revolving credit facility to
provide working capital for the operating subsidiaries of the Company
following the Conversion Date (a "Commitment Letter") in the aggregate amount
of at least $50,000,000 and otherwise having terms and conditions which are
commercially reasonable and reasonably satisfactory to the Company and Phoenix
or (B) a six-month revolving credit facility to provide working capital for
the operating subsidiaries of the Company following the Conversion Date in the
aggregate amount of $50,000,000 and otherwise having terms and conditions
substantially similar to those set forth in the Stock and Note Purchase
Agreement (the "Stonington Working Capital Facility").
 
  Conversion Rate. The initial conversion rate is 328.9473684211 shares of
Common Stock for each $1,000 principal amount of the Convertible Note subject
to adjustment pursuant to customary antidilution provisions (the "Conversion
Rate"). The number of shares of Common Stock issuable upon conversion of the
Convertible Note is determined by (i) dividing the principal amount of the
Convertible Note or portion thereof to be converted by $1,000, (ii)
multiplying the result by the Conversion Rate in effect on the Conversion Date
and (iii) rounding the result to the nearest 1/1,000 of a share.
 
  Taxes on Conversion. The Company shall pay any documentary, stamp or similar
issue or transfer tax due on the issuance of shares of Common Stock upon any
conversion under the Convertible Note. The Holder shall pay any such tax that
is due as a result of such Holder's request to have the shares of Common Stock
issuable upon such conversion issued in a name other than such converting
Holder's name.
 
  The Company to Provide Common Stock. The Company has agreed that, from and
after the date the Charter Amendment becomes effective, it shall at all times
reserve and keep available, free from preemptive rights, out of its authorized
but unissued Common Stock, for the purpose of effecting the Stonington
Conversion, the full number of shares of Common Stock then deliverable upon
the Stonington Conversion.
 
  Order of Conversion. In case of an Optional Conversion of a portion only of
a Holder's Convertible Note, such Convertible Note shall be converted in
reverse maturity date order, commencing with the portion of the Convertible
Note with the latest maturity dates.
 
                                      35
<PAGE>
 
COVENANTS OF THE COMPANY AND MERISEL AMERICAS
 
  Affirmative Covenants. The Company has agreed, subject to certain conditions
and exceptions set forth in the Convertible Note, to certain covenants which
are substantially similar to those contained in the Revolving Credit Agreement
pursuant to the Convertible Note, including, among others, the following:
 
    (a) to comply with all applicable laws, rules, regulations and orders
  noncompliance with which could materially adversely affect the business or
  credit of the Company or the ability to perform under the Convertible Note,
  the Stock and Note Purchase Agreement and any other documents relating
  thereto (the "Loan Documents");
 
    (b) to take and fulfill all actions necessary to preserve the corporate
  existence of the Company and to qualify to do business as a foreign
  corporation in all jurisdictions where the failure to do so would result in
  a material adverse effect;
 
    (c) to maintain and cause each of its subsidiaries to maintain its
  property in good condition;
 
    (d) to maintain at certain levels specified in the Convertible Note; (i)
  consolidated adjusted tangible net worth, (ii) aggregate consolidated
  earnings before interest, taxes, fees on securitized accounts receivable,
  depreciation and amortization ("Consolidated EBITSDA"); (iii) the Company's
  ratio of (A) consolidated EBITSDA to (B) consolidated interest charges;
  (iv) the Company's ratio of (A) consolidated EBITSDA to (B) to consolidated
  interest charges; (v) the Company's inventory turnover ratio; and (vi) the
  Company's accounts payable to inventory ratio;
 
    (e) to furnish, under certain circumstances, to each Holder statements
  setting forth Events of Default, Incipient Defaults or adverse
  developments, standard internal monthly reports, certain financial
  statements and certain other statements of condition, reports and notices;
 
    (f) to deposit and maintain all excess cash and excess cash equivalents
  in the name of Merisel, Inc.; and
 
    (g) to deliver further documents and do such other acts and things as
  Holders of at least 60% of the outstanding principal amount of the
  Convertible Note (the "Majority Holders") shall reasonably request.
 
 Negative Covenants.
 
  The Company has further agreed, also subject to certain conditions and
exceptions set forth in the Convertible Note, to certain other covenants which
are also substantially similar to those contained in the Revolving Credit
Agreement pursuant to the Convertible Note, including, among others, the
following:
 
    (a) not to assume or permit any of its subsidiaries to assume any lien
  with respect to any of its properties, or file or permit any of its
  subsidiaries to file a financing statement under the Uniform Commercial
  Code which names the Company or any of its subsidiaries as debtor, or sign,
  or permit any of its subsidiaries to sign, any security agreement
  authorizing any secured party thereunder to file such financing statement,
  or assign, or permit any of its subsidiaries to assign, any accounts
  receivable, or enter into or permit any of its subsidiaries to enter into,
  any agreement prohibiting the creation or assumption of any lien upon its
  respective properties or assets, whether now owned or hereafter acquired,
  excluding, however, from the operation of the foregoing restrictions the
  following:
 
      (i) liens for certain taxes and in favor of certain customs and
    revenue authorities;
 
      (ii) liens imposed by law arising in the ordinary course of business;
 
      (iii) pledges or deposits to secure obligations under workmen's
    compensation laws or to secure public or statutory obligations of the
    Company or any of its subsidiaries;
 
      (iv) certain utility easements, building restrictions and other
    encumbrances or charges against real property;
 
      (v) liens caused by judgments not resulting in an Event of Default;
 
                                      36
<PAGE>
 
      (vi) liens in favor of the Holders of any portion of the Convertible
    Note, in connection with debt of Merisel Americas and the Company
    incurred under the Convertible Note and certain liens consisting of
    security interests in accounts receivable;
 
      (vii) liens in favor of the Company or Merisel Americas on the assets
    of any of their respective subsidiaries;
 
      (viii) liens in favor of customs and revenue authorities;
 
      (vix) liens as of September 19, 1997;
 
      (x) liens in connection with certain sale and leaseback transactions;
 
      (xi) liens securing obligations of the Company and its subsidiaries
    under foreign exchange hedging arrangements or similar arrangements;
 
      (xii) liens otherwise agreed to among the Company, Merisel Americas
    and Phoenix;
 
      (xiii) liens on inventory purchased from vendors pursuant to specific
    vendor inventory financing and purchase programs; and
 
      (xiv) liens incurred in connection with certain capital leases and
    certain other liens;
 
    (b) not to create, or permit any of its subsidiaries to create, any new
  debt with certain exceptions, including (i) a revolving credit facility in
  a maximum amount of $50,000,000; (ii) refinancings of debt otherwise
  permitted provided that (x) the terms of such refinanced debt shall not
  either (1) increase materially the obligations of the obligor or (2) confer
  additional rights on the holder of such debt which in the aggregate could
  be materially adverse to the Company, Merisel Americas or the Holder and
  (y) after giving effect to such refinancing, there would not result an
  Incipient Default or Event of Default: (iii) debt otherwise permitted by
  certain provisions of the Convertible Note; (iv) debt incurred to vendors
  pursuant to specific vendor inventory financing and purchase programs; and
  (v) capital leases in an aggregate amount of $5,000,000 at any time
  outstanding in addition to those in existence of the date of initial
  issuance of the Convertible Note;
 
    (c) subject to certain exceptions, not to assume, or permit any of its
  subsidiaries to assume, certain direct or indirect liabilities, including
  contingent obligations, with respect to third parties;
 
    (d) not to declare or pay any dividends, purchase, redeem, retire, or
  otherwise acquire for value any of its capital stock now or hereafter
  outstanding, return any capital to its subsidiaries as such, or make any
  distribution of assets to Stockholders as such, or permit any of its
  subsidiaries to purchase, redeem, retire or otherwise acquire for value any
  stock of the Company, except that:
 
      (i) the Company may declare and deliver dividends and distributions
    payable only in Common Stock; and
 
      (ii) any direct or indirect wholly-owned subsidiary of the Company
    may declare and deliver dividends and distributions payable in cash,
    common stock or other assets to its respective parent;
 
    (e) not to merge with or into or consolidate with or into, or convey,
  transfer, lease or otherwise dispose of all or substantially all of its
  assets to, or acquire all or substantially all of the assets of, any other
  party, or permit any subsidiary to do so, but not including transactions
  among only the Company and/or its subsidiaries;
 
    (f) subject to certain exceptions, not to dispose of, or permit any of
  its subsidiaries to dispose of, material portions of its assets;
 
    (g) not to make, or permit any of its subsidiaries to make, any loan or
  advance to third parties, or purchase or otherwise acquire, or permit any
  of its subsidiaries to purchase or otherwise acquire, any capital stock,
  obligations or other securities of, make any capital contribution to, or
  otherwise invest in, third parties;
 
    (h) not to make or incur or permit any of its subsidiaries to make or
  incur consolidated capital expenditures in an amount exceeding $18,000,000
  in fiscal 1997, $35,000,000 in fiscal 1998 and $35,000,000 in fiscal 1999;
  provided that up to 50% of such maximum amount for any year, if unused in
  such year, may be used to increase the maximum amount available for the
  next following year;
 
                                      37
<PAGE>
 
    (i) not to become liable, or permit any of its subsidiaries to become
  liable, for the obligations of the lessee under any operating lease,
  unless, immediately after giving effect to the incurrence of liability with
  respect to such lease, the Consolidated Rental Payments (as defined in the
  Convertible Note) for the Company and its subsidiaries at any time in
  effect during the then current fiscal year shall not exceed $35,000,000;
 
    (j) not to dispose of (with or without recourse) or otherwise refinance,
  or permit any of its subsidiaries to dispose of (with or without recourse)
  or otherwise finance, accounts receivable, with certain exceptions;
 
    (k) not pay any sum for any payment or prepayment of principal of,
  premium, if any, or interest on, or a redemption, purchase, retirement
  defeasance, sinking fund or similar payment with respect to any
  Subordinated Debt (as defined on the Convertible Note);
 
    (l) not to amend, waive or otherwise change the terms of, or permit any
  subsidiary to amend, waive or otherwise change the terms of, any debt, if
  the effect of such amendment or change is to increase the interest rate on
  such debt or result in other adverse changes;
 
    (m) not to violate any laws, ordinances, governmental rules or
  regulations to which it is or may become subject or fail to obtain or
  maintain any patents, trademarks, service marks, trade names, copyrights,
  design patents, licenses, permits, franchises or other governmental
  authorizations necessary to the ownership of its property or the conduct of
  its business, in either case where such failure would have a material
  adverse effect on the Company or affect the ability of the Company or
  Merisel Americas to perform its obligations under any of the Loan
  Documents;
 
    (n) not to enter into or permit any direct or indirect subsidiary of the
  Company to enter into any transaction with any holder of 5% or more of any
  class of equity securities of the Company, or with any affiliate of the
  Company (excluding any subsidiaries of the Company and excluding Phoenix)
  or any such holder on terms that are not fair and reasonable in the
  circumstances or that are less favorable to the Company those which might
  be obtained at the time from third parties;
 
    (o) not to permit any subsidiary to enter into any material contractual
  obligation without the consent of the Company;
 
    (p) not to enter into or permit any of its subsidiaries to enter into any
  interest rate agreements except those entered into for non-speculative
  purposes to protect the Company or any of its subsidiaries against
  fluctuations in interest rates;
 
    (q) not to engage, or permit any subsidiary to engage, in any business
  other than the business engaged in by each such particular person at the
  date of initial issuance of the Convertible Note or other business directly
  related to the distribution or marketing of computer products, services and
  information;
 
    (r) not change its fiscal year end; and
 
    (s) not to issue, or cause or permit to be issued, securities of the
  Company, or make, or cause or permit to be made, any payment, to or for the
  benefit of the holders of debt of the Company, except for the issuance of
  Common Stock to the holders of the Convertible Note upon the Stonington
  Conversion.
 
EVENTS OF DEFAULT
 
  An event of default ("Event of Default") shall occur if any of the following
events shall occur and be continuing if:
 
    (a) the Company fails to pay any installment of principal when due;
 
    (b) any representation or warranty or certification made by the Company
  is proven to have been incorrect in any material respect when made;
 
    (c) the Company fails to perform certain of the covenants identified in
  the Convertible Note;
 
    (d) the Company fails to perform or observe any other term, covenant or
  agreement contained in the Loan Documents and fails to remedy such failure
  within 10 days of notice from any Holder of any such default;
 
                                      38
<PAGE>
 
    (e) the Company fails to pay any principal, interest, or premium with
  respect to any debt of the Company exceeding $5,000,000 when due or a
  default occurs with respect to debt or the securitization of accounts
  receivable of the Company where the effect of such default is to accelerate
  or permit the acceleration of such debt or the termination of such
  securitization of accounts receivable, as the case may be (in all cases
  after giving effect to any applicable grace period relating thereto);
 
    (f) the Company shall evidence its inability to pay its debts or
  bankruptcy proceedings are instituted against the Company;
 
    (g) a judgment in excess of $5,000,000 is rendered against the Company
  and enforcement proceedings are commenced and not stayed or a period of 10
  consecutive days shall pass during which a stay of enforcement is not in
  effect;
 
    (h) the Company is deficient or in violation under ERISA or other laws
  relating to pension plans or similar plans;
 
    (i) the Company releases or is in danger of releasing hazardous materials
  which are likely to materially adversely affect the business or credit of
  the Company or its ability to perform under the Loan Documents; or
 
    (j) a material adverse change in the business, earnings, properties,
  condition (financial or otherwise) or operations of the Company shall have
  occurred since September 19, 1997, the date of initial issuance of the
  Convertible Note.
 
  If an Event of Default occurs, then the Majority Holders may, by notice to
the Company, declare the unpaid principal amount of and accrued interest on
the Convertible Note to be forthwith due and payable, but if an order for
relief with respect to the Company or any of its subsidiaries is entered under
the Federal Bankruptcy Code or similar applicable laws in other jurisdictions,
the Convertible Note shall automatically become and be due and payable,
together with accrued interest thereon. However, if at any time within 15 days
after acceleration of the maturity of the Convertible Note, the Company pays
all arrears of interest and all payments on account of the principal which
shall have become due otherwise than by acceleration and all Events of Default
and Incipient Defaults are remedied or waived by the Majority Holders, then
the Majority Holders may at their option rescind and annul the acceleration of
the Convertible Note and its consequences.
 
TRANSFERS
 
  Prior to the earlier of (i) January 31, 1998 and (ii) the occurrence of an
event resulting in the Termination Fee becoming payable (as described below),
no Holder may transfer any portion of its rights under the Convertible Note
without the consent of the Company. On of after January 31, 1998, each Holder
may by notice to the Company assign to another entity all or a portion of its
rights in the Convertible Note in a manner consistent with the Securities Act
of 1933, as amended (the "Securities Act").
 
                     THE STOCK AND NOTE PURCHASE AGREEMENT
 
  The Stock and Note Purchase Agreement, under which the Convertible Note was
issued to Phoenix, was entered into among the Company, Merisel Americas and
Phoenix on September 19, 1997.
 
COVENANTS OF PHOENIX
 
  Pursuant to the terms of the Stock and Note Purchase Agreement, Phoenix has
agreed to use its reasonable best efforts to obtain the Standby Facility, on
behalf of and at the expense of the Company, prior to the Conversion Date. In
addition, pursuant to the terms of the Stock and Note Purchase Agreement,
Phoenix has agreed to use its reasonable best efforts to obtain a Commitment
Letter in the aggregate amount of $100,000,000 prior to the Conversion Date
or, if unable to do so, to continue to use its reasonable best efforts to
obtain such a Commitment Letter following the Conversion Date and to provide
the Stonington Working Capital Facility. See "--Convertible Note--Conversion
Rights."
 
                                      39
<PAGE>
 
TERMINATION
 
  Under certain conditions, the Stock and Note Purchase Agreement shall
terminate and the Company shall be obligated to pay Stonington a fee (the
"Termination Fee") of $7,500,000 plus reimbursement for all expenses. These
conditions include if (i) the Company enters into a definitive agreement with
respect to a Takeover Proposal (as defined below), (ii) the Board withdraws or
modifies its recommendation in any manner adverse to Phoenix its approvals or
recommendations to the Stockholders of the Stonington Conversion or the
Charter Amendment or approves a Takeover Proposal, (iii) the Stockholders do
not approve the Charter Amendment or the Stonington Conversion and, prior to
the Stockholders' Meeting, a Takeover Proposal has been publicly announced and
not withdrawn, (iv) approval of the Proposals by the Stockholders has not been
obtained by January 31, 1998 and within 12 months following the termination of
the Stock and Note Purchase Agreement, a Takeover Proposal is consummated
(provided that if (x) none of the events described in clauses (i) through
(iii), above, have occurred and (y) the Stockholders have approved the
Proposals, then, if the Stonington Conversion has not taken place by January
31, 1998 because Phoenix has not delivered the Standby Facility by such date,
the Company's obligations to pay the Termination Fee shall terminate). For
purposes of the Stock and Note Purchase Agreement and the Convertible Note
"Takeover Proposal" means any proposal or offer from any person relating to
any direct or indirect acquisition or purchase of a business that constitutes
25% or more of the net revenues, net income or the assets of the Company and
its subsidiaries, taken as a whole, or of 25% or more of any class of equity
securities of the Company or any of its subsidiaries, any tender offer or
exchange offer that if consummated would result in any person beneficially
owning 25% or more of any class of equity securities of the Company or any of
its subsidiaries, or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
the Company or any of its subsidiaries, other than the transactions
contemplated by the Stock and Note Purchase Agreement and the Convertible
Note.
 
TRANSACTION FEE
 
  Pursuant to the terms of the Stock and Note Purchase Agreement, the Company
paid Stonington a transaction fee of $3 million (the "Transaction Fee") on
September 19, 1997.
 
OTHER FEES AND EXPENSES
 
  Pursuant to the Stock and Note Purchase Agreement, all fees and expenses
incurred in connection with the Stock and Note Purchase Agreement and the
transactions contemplated thereby and by the Convertible Note shall be paid by
the party incurring such fees or expenses except that (i) the Company has paid
the Transaction Fee (as described above), (ii) under certain circumstances,
the Company shall pay the Termination Fee (as described above), (iii) provided
that Phoenix has not breached any material term of the Stock and Note Purchase
Agreement, the Company has agreed to reimburse Phoenix and its affiliates for
all expenses (other than the amount of any adverse judgment entered against
Phoenix or its affiliates or amounts paid in settlement) in connection with
any lawsuit commenced against Phoenix, any affiliate of Phoenix, the Company
or Merisel Americas in connection with the transactions contemplated by the
Stock and Note Purchase Agreement.
 
NO SOLICITATION
 
  The Company and Merisel Americas have agreed not to (i) solicit or initiate,
or knowingly encourage (including by way of furnishing information), or take
any other action designed to facilitate, any inquiries or the making of any
proposal which constitutes a Takeover Proposal or (ii) participate in any
discussions or negotiations regarding a Takeover Proposal; provided, however,
that if the Board, after consultation with, and based on the advice of,
outside counsel, determines in good faith that it is necessary to do so in
order to comply with its fiduciary duties to the Company's stockholders under
applicable law, the Company may, in response to a Takeover Proposal that was
not solicited by the Company or which did not otherwise result from a breach
of the applicable provision of the Stock and Note Purchase Agreement, and
subject to the Company providing prior notice to Phoenix of its decision to
take such action and subject to compliance with the applicable provision of
the Stock and Note Purchase Agreement, (x) furnish information with respect to
the Company to any persons pursuant to a confidentiality agreement on terms no
less favorable to the Company than those contained in the confidentiality
agreement with Stonington and (y) participate in discussions or negotiations
regarding such Takeover Proposal.
 
                                      40
<PAGE>
 
TAG-ALONG RIGHTS
 
  So long as Phoenix or any of its affiliates beneficially owns at least 40%
of the issued and outstanding shares of the Common Stock, it has agreed that
it will not sell more than 20% of such shares in one transaction or a series
of related transactions to an unaffiliated third party without causing such
third party to make available to the public stockholders of the Company the
opportunity to sell a proportionate number of their shares on the same terms
and conditions as those on which Phoenix has agreed to sell its shares. In
making any such offer, such third party will comply with the relevant
provisions of the Exchange Act and the Securities Act.
 
                              REGISTRATION RIGHTS
 
  Pursuant to the Registration Rights Agreement, the Company has agreed to use
its best efforts to effect the registration of the Convertible Note and Common
Stock issued pursuant to the Stock and Note Purchase Agreement dated September
19, 1997, amended as of October 3, 1997 under certain circumstances.
 
                                      41
<PAGE>
 
            SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
 
  The following Selected Historical Consolidated Financial Information of the
Company should be read in conjunction with the consolidated financial
statements of the Company and the related notes thereto, and other financial
data included elsewhere herein. The summary financial information presented
below as of and for the years ended December 31, 1992, 1993, 1994, 1995 and
1996 are derived from the audited consolidated financial statements of the
Company. The selected financial information presented below as of and for the
six months ended June 30, 1996 and 1997 has been derived from the Company's
unaudited financial statements. Such unaudited financial statements include
all adjustments (consisting of normal recurring accruals) which are, in the
opinion of management, necessary for a fair presentation of the results for
such periods. Operating results for the six months ended June 30, 1997 may not
be indicative of the results that may be expected for the year ended December
31, 1997.
<TABLE>
<CAPTION>
                                         YEAR ENDED DECEMBER 31,                     SIX MONTHS ENDED
                          -------------------------------------------------------  ----------------------
                                                                                    JUNE 30,    JUNE 30,
                             1992       1993       1994       1995        1996        1996        1997
                          ---------- ---------- ---------- ----------  ----------  ----------  ----------
                                            (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                       <C>        <C>        <C>        <C>         <C>         <C>         <C>
INCOME STATEMENT DATA:
 (1)
Net sales...............  $2,238,715 $3,085,851 $5,018,687 $5,956,967  $5,522,824  $2,979,257  $2,008,855
Cost of sales...........   2,036,292  2,827,315  4,676,164  5,633,278   5,233,570   2,812,447   1,888,224
                          ---------- ---------- ---------- ----------  ----------  ----------  ----------
Gross profit............     202,423    258,536    342,523    323,689     289,254     166,810     120,631
Selling, general &
 administrative
 expenses...............     150,905    187,152    281,796    317,195     295,021     161,558      94,820
Impairment losses (2)...                                       51,383      42,033
Restructuring charge
 (3)....................                                        9,333
                          ---------- ---------- ---------- ----------  ----------  ----------  ----------
Operating income (loss).      51,518     71,384     60,727    (54,222)    (47,800)      5,252      25,811
Interest expense........      15,742     17,810     29,024     37,583      37,431      19,472      16,383
Loss on sale of
 European, Mexican, and
 Latin American
 operations (4).........                                                   33,455
Other expense...........       1,299      2,722     11,752     13,885      20,150      10,766       5,919
                          ---------- ---------- ---------- ----------  ----------  ----------  ----------
Income (loss) before
 income taxes...........      34,477     50,852     19,951   (105,690)   (138,836)    (24,986)      3,509
Provision (benefit) for
 income taxes...........      14,812     20,413      8,341    (21,779)      1,539         (74)        333
                          ---------- ---------- ---------- ----------  ----------  ----------  ----------
Net income (loss).......  $   19,665 $   30,439 $   11,610 $  (83,911) $ (140,375) $  (24,912) $    3,176
                          ========== ========== ========== ==========  ==========  ==========  ==========
SHARE DATA: (5)
Net income (loss) per
 share..................  $     0.67 $     1.00 $     0.38 $    (2.82) $    (4.68) $    (0.83) $     0.11
Weighted average number
 of shares..............      29,274     30,454     30,389     29,806      30,001      29,871      30,078
OTHER DATA:
EBITDA (6)..............  $   59,528 $   79,138 $   65,076 $  (47,598) $  (82,616) $    4,582  $   26,015
BALANCE SHEET DATA:
Working capital.........  $  294,626 $  359,765 $  399,848 $  280,864  $  190,544  $   89,421  $  198,303
Total assets............     667,313    936,283  1,191,870  1,230,334     731,039   1,014,286     687,077
Long-term and
 subordinated debt......     153,433    208,500    357,685    356,271     294,763     156,269     283,568
Total debt..............     179,124    259,429    395,556    382,395     294,950     392,558     283,568
Stockholders' equity....     198,882    223,857    236,164    154,466      14,997     125,624      18,365
</TABLE>
- --------
(1) The Company's fiscal year is the 52- or 53-week period ending on the
    Saturday nearest to December 31. For clarity of presentation throughout
    this document, the Company has described year-ends and quarter-ends
    presented as if the period ended on the last day of the month. Except for
    1992, all fiscal years presented were 52 weeks in duration. The selected
    historical consolidated financial information as set forth above includes
    those balances and activities related to the Company's Australian business
    until its disposal on January 1, 1996 and the Company's European, Mexican
    and Latin American businesses ("EML") until their disposal on October 4,
    1996, effective as of September 27, 1996. It also includes Merisel FAB,
    Inc. ("Merisel FAB") from the date such business was acquired on January
    31, 1994, through the end of March 28, 1997, the date of sale of Merisel
    FAB. (See Note 12 to the consolidated financial statements--"Subsequent
    Events"). See "Management's Discussion and Analysis of Financial Condition
    and Results of Operations."
 
(2) During 1995 and 1996, the Company determined that the carrying value for
    certain of its capitalized costs relating to the installation of a new
    computer operating system and identifiable intangible assets relating to
 
                                      42
<PAGE>
 
   Merisel FAB would not be recovered from their use in future operations.
   Accordingly, these assets were written down to their fair values as of the
   impairment dates.
 
  Additionally, in 1995 and 1996, the Company recognized impairment losses on
  the assets of Merisel FAB and Merisel Pty Ltd. (a wholly owned Australian
  subsidiary) related to the expected sale of substantially all of the assets
  of such subsidiaries. (See Note 4 to the consolidated financial
  statements--"Impairment Losses").
 
(3) During 1995, the Company recorded a restructuring charge associated with
    the resizing of the Company's operations. (See Note 2 to the consolidated
    financial statements--"Restructuring Charge").
 
(4) In October 1996, the Company completed the sale of substantially all of
    its European, Mexican, and Latin American businesses to CHS Electronics,
    Inc. A loss of $33,455,000, which includes approximately $7,400,000 of
    direct costs related to the sale, was recorded on such sale. (See Note 5
    to the consolidated financial statements--"Dispositions").
 
(5) Net income (loss) per share and weighted average number of shares have not
    been adjusted to reflect the issuance of New Common Stock.
 
(6) EBITDA is the sum of income before income taxes and interest, depreciation
    and amortization expense. EBITDA should not be considered as an
    alternative to income from operations or to cash flows from operating
    activities (as determined in accordance with generally accepted accounting
    principles) and should not be construed as an indication of a company's
    operating performance or as a measure of liquidity. However, EBITDA is
    presented because it is a widely used financial indicator of a company's
    ability to service indebtedness and other factors.
 
                                      43
<PAGE>
 
        UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
  The following Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
June 30, 1997 and the Unaudited Pro Forma Condensed Consolidated Statements of
Operations for the fiscal year ended December 31, 1996 and the six-month
period ended June 30, 1997 are based upon the historical financial position
and results of operations as of and for the periods then ended. The pro forma
adjustments to the historical consolidated statements of operations, give
effect to the sale of EML and Merisel FAB ("FAB" and together with EML, the
"former operations") as if each had occurred prior to January 1, 1996
including amendments to existing debt agreements that were entered into as a
direct consequence of the sale of these businesses and related assets.
Additional pro forma adjustments to the historical results of operations
(based on the assumptions set forth below) give effect to the Stonington
Conversion, including (i) the issuance of approximately 50 million shares of
Common Stock to Stonington for 62.4% ownership of the outstanding Common Stock
(ii) the effect on interest expense of the repayment of the Revolving Credit
Agreement, 11.5% Notes and the Subordinated Notes and (iii) the amortization
of fees associated with obtaining the Revolving Credit Agreement. The
following Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June
30, 1997 includes pro forma adjustments as if the Conversion had been
completed on that date.
 
  The pro forma adjustments are based on available information and upon
certain assumptions that the Company believes are reasonable under the
circumstances. The unaudited pro forma condensed consolidated financial
statements and accompanying notes should be read in conjunction with the
historical consolidated financial statements of the Company, including the
notes thereto, and the other information pertaining to the Company appearing
elsewhere in this Prospectus or incorporated herein.
 
  THESE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ARE
PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED TO BE
INDICATIVE OF THE FINANCIAL CONDITIONS OR RESULTS OF OPERATIONS OF THE COMPANY
HAD THE TRANSACTIONS DESCRIBED THEREIN BEEN CONSUMMATED ON THE RESPECTIVE
DATES INDICATED AND ARE NOT INTENDED TO BE PREDICTIVE OF THE FINANCIAL
CONDITION OR RESULTS OF OPERATIONS OF THE COMPANY AT ANY FUTURE DATE OR FOR
ANY FUTURE PERIOD.
 
                                      44
<PAGE>
 
            UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
 
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                     HISTORICAL    PRO FORMA        PRO FORMA
                                    JUNE 30, 1997 ADJUSTMENTS     JUNE 30, 1997
                                    ------------- -----------     -------------
<S>                                 <C>           <C>             <C>
              ASSETS
CURRENT ASSETS:
  Cash and cash equivalents........   $  48,563    $ (17,041)(1)    $  31,522
  Accounts receivable (net of al-
   lowances of $23,105)............     181,809                       181,809
  Inventories......................     346,730                       346,730
  Prepaid expenses and other cur-
   rent assets.....................      20,912       (4,107)(2)       16,805
  Deferred income tax benefit......         478                           478
                                      ---------    ---------        ---------
    Total current assets...........     598,492      (21,148)         577,344
PROPERTY AND EQUIPMENT, NET........      54,866                        54,866
COST IN EXCESS OF NET ASSETS AC-
 QUIRED, NET.......................      25,914                        25,914
OTHER ASSETS.......................       7,805                         7,805
                                      ---------    ---------        ---------
    TOTAL ASSETS...................   $ 687,077    $ (21,148)       $ 665,929
                                      =========    =========        =========
 LIABILITIES AND STOCKHOLDERS' EQ-
                UITY
CURRENT LIABILITIES:
  Accounts payable.................   $ 347,627                     $ 347,627
  Accrued liabilities..............      37,517    $  (1,077)(3)       36,440
  Long-term debt--current..........      10,645       (9,000)(4)        1,645
  Subordinated Debt--Current.......       4,400       (4,400)(5)
                                      ---------    ---------        ---------
    Total Current Liabilities......     400,189      (14,477)         385,712
LONG TERM DEBT.....................     259,723     (125,723)(6)      134,000
SUBORDINATED DEBT..................       8,800       (8,800)(7)
                                      ---------    ---------        ---------
    TOTAL LIABILITIES..............     668,712     (149,000)         519,712
STOCKHOLDERS' EQUITY:
  Preferred stock..................
  Common stock.....................         301          500 (8)          801
  Additional paid-in capital.......     142,300      136,478 (9)      278,778
  Retained earnings (accumulated
   deficit)........................    (117,988)      (9,126)(10)    (127,114)
  Cumulative translation adjust-
   ment............................      (6,248)                       (6,248)
                                      ---------    ---------        ---------
    Total stockholders' equity.....      18,365      127,852          146,217
                                      ---------    ---------        ---------
    TOTAL LIABILITIES AND
     STOCKHOLDERS' EQUITY..........   $ 687,077    $ (21,148)       $ 665,929
                                      =========    =========        =========
</TABLE>
 
   See notes to the Unaudited Pro Forma Condensed Consolidated Balance Sheet.
 
                                       45
<PAGE>
 
                   UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
                            STATEMENT OF OPERATIONS
 
                      FOR THE YEAR ENDED DECEMBER 31, 1996
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                          HISTORICAL                                                          PRO FORMA
                          YEAR ENDED                                                          YEAR ENDED
                         DECEMBER 31,   FORMER     PRO FORMA      ADJUSTED    PRO FORMA      DECEMBER 31,
                             1996     OPERATIONS  ADJUSTMENTS     SUBTOTAL   ADJUSTMENTS         1996
                         ------------ ----------  -----------    ----------  -----------     ------------
<S>                      <C>          <C>         <C>            <C>         <C>             <C>
Net sales...............  $5,522,824  $2,081,481                 $3,441,343                   $3,441,343
Cost of sales...........   5,233,570   1,971,465                  3,262,105                    3,262,105
                          ----------  ----------    -------      ----------   --------        ----------
Gross profit............     289,254     110,016                    179,238                      179,238
Selling, general, and
 administrative
 expenses...............     295,021     104,986    $(3,486)(11)    193,521                      193,521
Impairment losses.......      42,033      42,033                        --                           --
                          ----------  ----------    -------      ----------   --------        ----------
Operating loss..........     (47,800)    (37,003)     3,486         (14,283)                     (14,283)
Loss on sale of
 European, Mexican, and
 Latin American
 operations.............      33,455      33,455                        --                           --
Interest expense........      37,431       7,530      2,238 (12)     27,663   $(14,196)(13)       13,800
                                                                                   333 (14)
Other expense...........      20,150       2,183                     17,967                       17,967
                          ----------  ----------    -------      ----------   --------        ----------
Loss before income
 taxes..................    (138,836)    (80,171)     1,248         (59,913)    13,863           (46,050)
Income tax
 provision(15)..........       1,539         717                        822                          822
                          ----------  ----------    -------      ----------   --------        ----------
Net loss................  $ (140,375) $  (80,888)   $ 1,248      $  (60,735)  $ 13,863        $  (46,872)
                          ==========  ==========    =======      ==========   ========        ==========
Net loss per share(16)..  $    (4.68)                            $    (2.02)                  $     (.59)
                          ==========                             ==========                   ==========
Average outstanding and
 equivalent common
 shares(16).............      30,001                                 30,001     50,000            80,001
                          ==========  ==========    =======      ==========   ========        ==========
</TABLE>
 
                                       46
<PAGE>
 
                   UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
                            STATEMENT OF OPERATIONS
 
                       FOR SIX MONTHS ENDED JUNE 30, 1997
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                          HISTORICAL                                                      PRO FORMA
                          SIX MONTHS                                                     SIX MONTHS
                             ENDED       FORMER    PRO FORMA   ADJUSTED   PRO FORMA         ENDED
                         JUNE 30, 1997 OPERATIONS ADJUSTMENTS  SUBTOTAL  ADJUSTMENTS    JUNE 30, 1997
                         ------------- ---------- ----------- ---------- -----------    -------------
<S>                      <C>           <C>        <C>         <C>        <C>            <C>
Net sales...............  $2,008,855    $202,177              $1,806,678                 $1,806,678
Cost of sales...........   1,888,224     194,500               1,693,724                  1,693,724
                          ----------    --------      ---     ----------   -------       ----------
Gross profit............     120,631       7,677                 112,954                    112,954
Selling, general, and
 administrative
 expenses...............      94,820       6,199                  88,621                     88,621
                          ----------    --------      ---     ----------   -------       ----------
Operating income........      25,811       1,478                  24,333                     24,333
Interest expense........      16,383         297                  16,086    (8,263)(13)       7,990
                                                                               167 (14)
Other expense...........       5,919        (988)                  6,907                      6,907
                          ----------    --------      ---     ----------   -------       ----------
Income before income
 taxes..................       3,509       2,169                   1,340                      9,436
Income tax provision
 (15)...................         333          15                     318                        318
                          ----------    --------      ---     ----------   -------       ----------
Net Income..............  $    3,176    $  2,154      $--     $    1,022   $ 8,096       $    9,118
                          ==========    ========      ===     ==========   =======       ==========
Net income per share
 (16)...................  $     0.11                          $     0.03                 $     0.11
                          ==========                          ==========                 ==========
Average outstanding and
 equivalent common
 shares (16)............      30,078                              30,078    50,000           80,078
                          ==========                          ==========   =======       ==========
</TABLE>
 
 
     See notes to Unaudited Pro Forma Condensed Consolidated Statements of
                                  Operations.
 
                                       47
<PAGE>
 
                                 MERISEL, INC.
 
   NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
GENERAL
 
 Adjustment for the Sale of Assets
 
  The pro forma adjustments related to the sale of assets (specifically, the
sale of EML, which took effect on September 27, 1996 and the sale of FAB,
which took effect on March 28, 1997) are made to the statement of operations
for the year ended December 31, 1996, and for the three months ended March 28,
1997 in order to illustrate the effect that would have been given if these
assets had been sold as of January 1, 1996. The assumptions underlying the pro
formas also take into account the effect of certain amendments to existing
debt agreements that were entered into as a direct consequence of the sale of
these businesses and related assets. These adjustments are summarized in the
following tables and more fully described in the notes thereto.
 
 Adjustments for the Stonington Restructuring
 
  The pro forma adjustments related to the Stonington Conversion and related
transactions are summarized in the following tables and are more fully
described in the notes thereto. The following pro forma adjustments assume
that the Stonington Restructuring will be accomplished as outlined in
"BACKGROUND OF THE STONINGTON RESTRUCTURING".
 
BALANCE SHEET
 
  Column numbers refer to footnotes from the Unaudited Pro Forma Condensed
Consolidated Balance Sheet.
 
<TABLE>
<CAPTION>
     FOOTNOTE
      NUMBER          (1)       (2)        (3)        (4)         (5)         (6)         (7)       (8)      (9)       (10)
     --------      ---------  -------  ----------- ---------  ------------ ---------  ------------ ------ ---------- --------
                                                   LONG-TERM  SUBORDINATED                                ADDITIONAL
                              PREPAID    ACCRUED    DEBT--       DEBT--    LONG-TERM  SUBORDINATED COMMON  PAID-IN   RETAINED
                     CASH     ASSETS   LIABILITIES  CURRENT     CURRENT      DEBT         DEBT     STOCK   CAPITAL   EARNINGS
                   ---------  -------  ----------- ---------  ------------ ---------  ------------ ------ ---------- --------
                                                              ($ IN THOUSANDS)
 <S>               <C>        <C>      <C>         <C>        <C>          <C>        <C>          <C>    <C>        <C>
 (a).............  $ 152,000                       $ 128,300               $   8,800                $ 49   $ 14,851
 (b).............     (1,069) $(2,561)                                                                               $(3,630)
 (c).............   (149,000)            $(1,077)     (9,000)   $(4,400)    (125,723)   $(8,800)
 (d).............       (950)  (2,546)                                                                                (3,496)
 (e).............    (11,272)                       (128,300)                 (8,800)                451    125,377
 (f).............     (2,000)                                                                                         (2,000)
 (g).............     (4,750)   1,000                                                                        (3,750)
                   ---------  -------    -------   ---------    -------    ---------    -------     ----   --------  -------
 Total...........  $ (17,041) $(4,107)   $(1,077)  $  (9,000)   $(4,400)   $(125,723)   $(8,800)    $500   $136,478  $(9,126)
                   =========  =======    =======   =========    =======    =========    =======     ====   ========  =======
</TABLE>
- -------
(a) To record receipt of $152 million of cash from Stonington in the form of
    $137.1 of convertible debt and the purchase of 4.9 million shares of
    common stock for $14.9 million.
(b) To write off $3.6 million of professional and other fees related to the
    Noteholder Restructuring which was not consummated.
(c) To record repayment of 11.5% Notes, Revolving Credit Agreement, and the
    Subordinated Notes and related accrued interest.
(d) To write off the unamortized deferred financing costs of $2.5 million
    related to the Revolving Credit Agreement, 11.5% Notes, and the
    Subordinated Notes and record a prepayment penalty of $1.0 million on the
    Subordinated Notes. The $3.5 million will be reflected as an extraordinary
    item with no related tax benefit due to the net operating loss
    carryforwards.
(e) To reflect the conversion of $137.1 million of convertible debt and the
    issuance of 45.1 million shares of Common Stock to Stonington, net of
    estimated professional and other fees associated with the Stonington
    Conversion of $11.3 million.
(f) To expense one-time payments of $2.0 million to certain executive officers
    of the Company made upon consummation of the Stonington Conversion.
(g) To record payment of estimated fees and other costs associated with
    obtaining the new revolving credit agreement and a remarketing facility
    related to the 12.5% Notes.
 
                                      48
<PAGE>
 
                                 MERISEL, INC.
 
                    NOTES TO UNAUDITED PRO FORMA CONDENSED
                CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
                           STATEMENTS OF OPERATIONS
 
(11) Represents costs allocated by the Company to former operations that would
     not have been eliminated due to the sale of such operations.
 
(12) Interest expense is adjusted to reflect the effect of the amendments to
     the 11.5% notes and the Revolving Credit Agreement that were entered into
     by the Company as a result of the sale of EML. Specifically, the
     adjustment represents the savings from the aggregate reduction in
     principal of $72.5 million net of the effect of an average increase in
     interest rate on the instruments of approximately 2.25%. The adjustment
     is for the period from January 1, 1996 through the end of September when
     the sale of EML effectively took place, and is set forth below:
 
<TABLE>
      <S>                                                              <C>
      Interest saved from $72,500,000 combined pay down of debt on
       Revolving Credit Agreement and 11.5% Notes..................... $ 5,914
      Additional interest expense from increased rate of interest on
       Revolving Credit Agreement and 11.5% Notes as amended..........  (3,676)
                                                                       -------
      Net pro forma savings in interest expense for 1996.............. $ 2,238
                                                                       =======
</TABLE>
 
(13) To eliminate interest expense on the 11.5% Notes, Revolving Credit
     Agreement and Subordinated Notes that were repaid.
 
(14) To record amortization of deferred fees associated with revolving credit
     agreement.
 
(15) Due to the Company's net operating losses, on a pro forma basis, the
     Company would not owe additional taxes nor receive additional tax
     benefits as a result of the decreases in interest expense and net loss or
     increases in net income.
 
(16) Net income (loss) per share and weighted average number of shares
     outstanding have been adjusted to reflect the issuance of Common Stock.
 
                                      49
<PAGE>
 
               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS
 
GENERAL
 
  The Company is a leading distributor of computer hardware, networking
equipment and software products. Through its operating subsidiary Merisel
Americas and its subsidiaries (collectively, the "Operating Company"), the
Company markets products and services throughout North America and is a valued
partner to a broad range of computer resellers, including value-added
resellers (VARs), commercial resellers/dealers, and retailers. The Company
also has established the Merisel Open Computing Alliance (MOCA(TM)), a
division which primarily supports Sun Microsystems' UNIX-based product sales
and installations.
 
  During 1996, the Company pursued a business plan that was developed to
address capital structure issues by curtailing non-essential capital
expenditures and disposing of assets. Effective January 1, 1996, the Company
sold its Australian operations. As of September 27, 1996, the Company
completed the sale of its European, Mexican and Latin American businesses
(referred to herein as "EML"). In addition, as of March 28, 1997, the Company
completed the sale of substantially all of the assets of Merisel FAB to a
wholly owned subsidiary of SYNNEX Information Technologies, Inc. ("Synnex").
 
  As a result of these asset dispositions, the Company's operations are now
focused exclusively in North America. In the year ended December 31, 1996, the
North American Business (as defined below) produced $3.4 billion in revenues,
and the Former Operations (as defined below) produced $2.1 billion in revenue.
As the North American Business represents the ongoing business of the Company,
the following discussion and analysis will compare the components of operating
income for the three months and six months ended June 30, 1997 for the North
American Business only. As used in this discussion and analysis, the term
"North American Business" refers to the Company's United States and Canadian
distribution businesses, and the term "Former Operations" refers to those
operations disposed of by Merisel during 1996 and the first quarter of 1997,
namely the Australian Business, EML, and Merisel FAB's franchise and
aggregation businesses ("FAB").
 
COMPARISON OF FISCAL YEARS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1995
 
  The Company's net sales for the North American Business (as defined below)
increased 0.4% from $3,427,821,000 in 1995 to $3,441,343,000 for the year
ended December 31, 1996. This increase resulted from increased sales of 12.4%
in Canada offset by a 2.0% decrease in sales in the United States in the third
quarter of 1995, the North American Business sold approximately $124,000,000
of Microsoft Windows '95 following its launch in August 1995. Excluding the
effect of this additional revenue, net sales would have increased 2.0% in the
United States and 14.5% in Canada. The Canadian sales increase is in line with
the growth in the industry for the markets in which that subsidiary competes.
In the United States, the Company did not keep pace with industry growth
rates, due to liquidity constraints, cost controls which the Company
implemented to conserve cash outflow and competitive pressures.
 
  In the North American Business, hardware and accessories accounted for 75%
of net sales, and software accounted for 25% of net sales for the year ended
December 31, 1996 as compared to 69% and 31% for the same categories
respectively, for the year ended December 31, 1995. Software sales were a
larger percentage of total sales in the prior year due to the sales generated
from the Microsoft Windows '95 launch in August 1995.
 
  Gross profit for the North American Business decreased 3.1% from
$184,918,000 in 1995 to $179,238,000 in 1996. Gross profit as a percentage of
sales, or gross margin, decreased from 5.4% in 1995 to 5.2% in 1996. Both
years were affected by large margin adjustments. In 1995, the Company recorded
a $25,800,000 charge to margin in the United States related to accounts
payable reconcilement issues. In 1996, $17,750,000 was charged related to
customer disputes, vendor reconciliations and other issues in the United
States, and $9,588,000 was charged for similar issues in Canada. Excluding the
effect of these margin adjustments, gross profit would have been $174,079,000
or 6.1% of net sales and $36,639,000 or 6.4% of net sales in the United States
and Canada, respectively, for the year ended December 31, 1995, as compared to
$168,531,000 or 6.0% of net sales and
 
                                      50
<PAGE>
 
$38,045,000 or 5.9% of net sales in the United States and Canada,
respectively, for the year ended December 31, 1996. The decrease in adjusted
gross profit is primarily attributable to the impact of liquidity constraints
on the Company's ability to purchase on favorable terms and competitive
pricing pressures, each of which is expected to continue in 1997.
 
  Selling, general and administrative expenses for the North American Business
increased by 6.9% from $181,042,000 for the year ended December 31, 1995 to
$193,521,000 for the year ended December 31, 1996. Selling, general
administrative expenses in 1995 include a fourth quarter charge of $8,200,000
to adjust the value of certain assets and liabilities. Excluding this fourth
quarter 1995 charge, selling, general and administrative expense levels have
increased approximately $20,679,000 from the prior year. Of this increase,
$10,500,000 related to professional fees incurred as part of the development
of the 1996 Business Plan, process improvements and lender negotiations and
severance charges related to management changes. Selling General and
Administrative charges in 1996 excluding these charges were $183,021,000. The
remaining increase in expenses is related to higher operating costs associated
with the installation of new computer systems. Selling, general and
administrative costs include depreciation and amortization expense totaling
$11,756,000 in 1995 and $12,360,000 in 1996.
 
  In the fourth quarter of 1995, the North American business recorded an asset
impairment charge for $19,500,000 in order to adjust capitalized system
development costs related to the installation of new computer systems. Also in
1995, $5,228,000 in restructuring charges were recorded in the North American
Business as a result of the planned closure of a warehouse and other
restructuring activities. As of December 31, 1996 the company has used
$4,747,000 of this charge and the remaining amount of $481,000 is included in
accrued liabilities. No such charge was deemed necessary in 1996.
 
  As a result of the above items, the operating loss for the North American
Business of $20,852,000 for the year ended December 31, 1995 decreased to an
operating loss of $14,283,000 for the year ended December 31, 1996. Excluding
the margin adjustments taken in both years, the professional fees and
severance costs incurred in 1996, the fourth quarter charges taken to
operating expense in 1995, the impairment charge in 1995, and the
restructuring charge in 1995, all of which are quantified above, the Company
would have had operating income of $37,876,000 in 1995 as compared to
operating income of $23,555,000 in 1996.
 
 Interest Expense; Other Expense; Income Tax Provision
 
  Interest expense for the Company, including Former Operations, decreased
0.4% from $37,583,000 for the year ended December 31, 1995 to $37,431,000 for
the year ended December 31, 1996. The decrease resulted from lower average
borrowings in the fourth quarter of 1996, offset by higher average interest
rates and higher average borrowings in the first three quarters of the year.
 
  Other expense for the Company, including Former Operations, increased from
$13,885,000 for the year ended December 31, 1995 to $20,150,000 for the year
ended December 31, 1996. The increase was primarily attributable to fees
incurred in connection with an increase in the Company's trade receivable
securitizations in 1996. The increase in securitization fees is primarily
attributable to an increase in the amount of net receivables sold.
 
  The income tax provision increased from a benefit of $21,779,000 for the
year ended December 31, 1995 to an expense of $1,539,000 for the same period
in 1996. The Company has not recognized a tax provision benefit with respect
to its current losses, having fully utilized its ability to carryback those
losses and obtain refunds of taxes paid in prior years. Further, the Company
has recognized tax provision expense that primarily represents the
establishment of a valuation allowance against a previously recognized state
deferred tax asset.
 
 
                                      51
<PAGE>
 
 Consolidated Loss
 
  The Company, including Former Operations, reported an increase in its net
loss from $83,911,000 in 1995 to $140,375,000 in 1996. The net loss per share
increased from $2.82 in 1995 to $4.68 in 1996.
 
COMPARISON OF FISCAL YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994
 
  The Company's net sales for the North American Business increased 19.2% from
$2,876,074,000 in 1994 to $3,427,821,000 for the year ended December 31, 1995.
The gain was due to increased sales of 21.0% in the United States and 10.8% in
Canada. These increases were primarily due to growth in existing distribution
operations resulting from the growth of the overall market for hardware and
software products, as well as an increase in the number of products certain
vendors are selling through distribution.
 
  In the North American Business, hardware and accessories accounted for 69%
of net sales, and software accounted for 31% of net sales for the year ended
December 31, 1995, as compared to 68% and 32% for the same categories,
respectively, for the year ended December 31, 1994.
 
  Gross profit for the North American Business decreased 12.4% from
$211,015,000 in 1994 to $184,918,000 in 1995. Gross profit as a percentage of
sales or gross margin, decreased from 7.3% in 1994 to 5.4% in 1995. The
decrease in gross margin was principally attributable to competitive pricing
pressures. In addition, a portion of the fourth quarter 1995 adjustments was
charged to cost of sales, which further contributed to the decrease in gross
profit.
 
  Selling, general and administrative expenses for the North American Business
increased 10.9% from $163,378,000 for the year ended December 31, 1994 to
$181,042,000 for the year ended December 31, 1995. The increase was primarily
due to costs associated with the Company's 19.2% increase in net sales, and
fourth quarter charges taken in 1995, including adjustments to the values of
certain assets and liabilities for $8,200,000.
 
  In the fourth quarter of 1995, the North American business recorded an asset
impairment charge of $19,500,000 in order to adjust capitalized system
development costs related to the installation of new computer systems.
 
  During 1995, $5,228,000 in restructuring charges were recorded in the North
American Business related to the planned closure of a warehouse and other
restructuring activities.
 
  As a result of the above items, operating income for the North American
Business of $47,737,000 for the year ended December 31, 1994 decreased to an
operating loss of $20,852,000 for the year ended December 31, 1995.
 
 Interest Expense; Other Expense; Income Tax Provision
 
  Interest for the Company, including Former Operations, increased 29.5% from
$29,024,000 for the year ended December 31, 1994 to $37,583,000 for the year
ended December 31, 1995. The increase is primarily attributable to the
Company's higher debt levels and, to a lesser extent, an increase in interest
rates.
 
  Other expense for the Company, including Former Operations, increased from
$11,752,000 for the year ended December 31, 1994 to $13,885,000 for the year
ended December 31, 1995. The increase in other expense in 1995 primarily
related to an increase of $3,000,000 in fees incurred in connection with
accounts receivable securitizations.
 
  The income tax provision increased from an expense of $8,341,000 for the
year ended December 31, 1994 to a benefit of $21,779,000 for the year ended
December 31, 1995, reflecting the Company's loss position in 1995 and the
utilization of loss carryback provisions. The decrease in the effective tax
rate was principally the result of an increase in the valuation allowance
related to United States deferred tax assets.
 
                                      52
<PAGE>
 
 Consolidated Loss
 
  On a consolidated basis for the Company, including Former Operations, net
income decreased from $11,610,000 for the year ended December 31, 1994 to a
net loss of $83,911,000 for the year ended December 31, 1995. Net income per
share decreased from $.38 in 1994 to a net loss per share of $2.82 in 1995.
 
SIX MONTHS ENDED JUNE 30, 1997 AS COMPARED TO THE SIX MONTHS ENDED JUNE 30,
1996
 
  The following table sets forth the unaudited results of operations for the
North American Business and Former Operations for the six months ended June
30, 1997 and June 30, 1996.
 
<TABLE>
<CAPTION>
                                     SIX MONTHS ENDED                             SIX MONTHS ENDED
                         JUNE 30, 1997 (IN THOUSANDS) (UNAUDITED)     JUNE 30, 1996 (IN THOUSANDS) (UNAUDITED)
                         -------------------------------------------- --------------------------------------------
                            NORTH                                        NORTH
                           AMERICAN        FORMER      CONSOLIDATED     AMERICAN        FORMER      CONSOLIDATED
                           BUSINESS      OPERATIONS       TOTAL         BUSINESS      OPERATIONS       TOTAL
                         -------------- ------------- --------------- -------------  ------------- ---------------
<S>                      <C>            <C>           <C>             <C>            <C>           <C>
Net Sales............... $    1,806,677  $    202,178  $    2,008,855 $   1,710,519  $   1,268,738  $   2,979,257
Cost of Sales...........      1,693,724       194,500       1,888,224     1,614,966      1,197,481      2,812,447
                         --------------  ------------  -------------- -------------  -------------  -------------
Gross Profit............        112,953         7,678         120,631        95,553         71,257        166,810
SG&A Expenses...........         88,620         6,200          94,820        98,332         63,226        161,558
                         --------------  ------------  -------------- -------------  -------------  -------------
Operating Income........ $       24,333  $      1,478  $       25,811 $      (2,779) $       8,031  $       5,252
                         ==============  ============  ============== =============  =============  =============
</TABLE>
 
  Net sales for the North American Business increased 5.6% from $1,710,519,000
for the six months ended June 30, 1996 to $1,806,677,000 for the six months
ended June 30, 1997. The increase resulted from a 2.0% increase in net sales
for the U.S. division and a 21.9% increase in Canada. The U.S. division
experienced growth over the prior period, with particularly strong growth in
its MOCA(TM) and VAR segments, but overall growth was partially offset by a
decrease in retail sales. The decline in retail sales reflects the Company's
decision to substantially reduce its sales in the retail segment industry in
early 1996, in part to address cash management objectives and constraints. The
Company has recommitted significant resources to rebuilding its retail
customer base in 1997.
 
  In the North American Business, hardware and accessories accounted for 77%
of net sales and software accounted for 23% of net sales in the first six
months of 1997, as compared to 75% and 25% for the same categories,
respectively, in the first six months of 1996.
 
  Gross profit for the North American Business increased 18.2% or $17,400,000
from $95,553,000 in 1996 to $112,953,000 in 1997. Gross profit as a percentage
of sales, or gross margin, increased from 5.6% in 1996 to 6.3% in 1997. Gross
profit in the prior year period includes a charge totaling $4,400,000 related
to vendor reconciliation issues. Of the remaining $13,000,000 improvement in
gross profit, $5,614,000 is due to the growth in sales volume, and $3,290,000
is due to favorable resolutions of vendor reconciliation issues realized in
the second quarter, as a result of improved processes. The resolution of
future vendor reconciliation issues may or may not favorably affect margins in
subsequent periods. The remaining increase is attributable to the same factors
summarized in the discussion of gross profit for the three months ended June
30, 1997 and 1996. Gross margins in the U.S. and Canada were 6.3% and 6.1%,
respectively, for the first half of 1997, compared to 5.5% and 6.0%,
respectively, for the first half of 1996. Excluding the effect of both the
$4,400,000 of charges in 1996 and the $3,290,000 benefit in 1997 related to
accounts payable and vendor reconciliation issues as noted above, the margin
in the U.S. would have been 6.1% for the first half of 1997 compared to 5.8%
for the same period of 1996. Despite the improved margin performance
experienced in the first half of 1997, the Company expects that it will
continue to face intense competitive pricing pressures.
 
  Selling, general and administrative expenses for the North American Business
decreased by 9.9% from $98,332,000 in the six months ended June 30, 1996 to
$88,621,000 in the six months ended June 30, 1997. The higher level of
expenses in the 1996 period was primarily attributable to expenses associated
with carrying out
 
                                      53
<PAGE>
 
the Company's 1996 Business Plan and strategies, such as severance costs,
professional fees and other costs incurred to develop business plans and
strategies and to improve certain business processes as well as increased
expenses associated with its new computer operating system in 1996.
 
  As a result of the above items, operating income for the North American
Business improved by $27,111,000 from a loss of $2,779,000 for the first six
months of 1996 to income of $24,332,000 for the first six months of 1997.
 
 Interest Expense; Other Expense; and Income Tax Provision
 
  For the six months ended June 30, 1996, interest expense for the Company,
including Former Operations, decreased 15.9% from $19,472,000 in the 1996
period to $16,383,000 in the 1997 period. The decrease in interest expense is
attributable to the amortization and paydown of the Company's debt by
approximately $104,225,000 from the end of June of 1996 through the end of
June, 1997, and was partially offset by an increase in interest rates under
the Operating Companies' Loan Agreement. Approximately $72,500,000 of the
paydown occurred in October of 1996 using proceeds from the sale of EML.
 
  Other expenses for the Company, including Former Operations, decreased from
$10,766,000 for the six months ended June 30, 1996, to $5,919,000 for the six
months ended June 30, 1997. The decrease was primarily due to the recording of
a gain on the sale of property held in North Carolina for $1,530,000. In
addition to increased expenses in the first quarter of 1996 related to one
time financing charges of approximately $3,125,000 paid to negotiate
amendments of the Company's financing agreements.
 
  The income tax provision increased from a benefit of $74,000 for the six
months ended June 30, 1996 to an expense of $333,000 for the same period of
1997. In 1996 the Company was able to realize some benefit related to
available net operating loss carryback provisions. In the current year, the
income tax rate reflects only the minimal statutory tax requirements in the
various states and provinces in which the Company conducts business, as the
Company has sufficient net operating loss provisions from prior year losses to
offset federal income taxes related to 1997 income.
 
 Consolidated Income (Loss)
 
  On a consolidated basis, net income for the Company, including Former
Operations, increased from a loss of $24,912,000 for the six months ended June
30, 1996, to income of $3,176,000 for the six months ended June 30, 1997, due
to the factors described above. Net income per share increased from a loss of
$.83 per share for the six months ended June 30, 1996 to income of $.11 per
share for the same period of 1997.
 
SYSTEMS AND PROCESSES
 
  Merisel has made significant investments in new, advanced computer and
warehouse management systems for its North American operations to support
sales growth and improve service levels. All of Merisel's nine North American
warehouses now utilize Merisel's Information and Logistical Efficiency System
("MILES"), a computerized warehouse management system, which uses infrared bar
coding and advanced computer hardware and software to maintain high picking,
receiving and shipping accuracy rates.
 
  Merisel is in the process of converting its North American operations to the
SAP client/server operating system. SAP is an enterprise-wide system which
integrates all functional areas of the business including order entry,
inventory management and finance in a real-time environment. The Company began
designing the new system in 1993 and converted its Canadian operations from a
mainframe to the client/server operating system in August 1995. The new system
is designed to provide greater transaction accuracy, flexibility, and custom
pricing applications.
 
  The Company plans to convert its U.S. operations to the SAP system no later
than the first part of 1999. The design and implementation of these new
systems are complex projects and involve certain risks. As a result,
 
                                      54
<PAGE>
 
the U.S. system implementation will be delayed beyond 1997. Until such
implementation, the Company will continue to modify its existing U.S. systems
and may experience difficulty in processing transactions, which could
adversely affect operating income and cash flows.
 
VARIABILITY OF QUARTERLY RESULTS AND SEASONALITY
 
  Historically, the Company has experienced variability in its net sales and
operating margins on a quarterly basis and expects these patterns to continue
in the future. Management believes that the factors influencing quarterly
variability include: (i) the overall growth in the computer industry; (ii)
shifts in short-term demand for the Company's products resulting, in part,
from the introduction of new products or updates of existing products; and
(iii) the fact that virtually all sales in a given quarter result from orders
booked in that quarter. Due to the factors noted above, as well as the dynamic
characteristics of the computer product distribution industry, the Company's
revenues and earnings may be subject to material volatility, particularly on a
quarterly basis.
 
  Additionally, in the U.S. and Canada, the Company's net sales in the fourth
quarter have been historically higher than in its other three quarters.
Management believes that the pattern of higher fourth quarter sales is
partially explained by customer buying patterns relating to calendar year-end
business and holiday purchases. As a result of this pattern the Company's
working capital requirements in the fourth quarter have typically been greater
than other quarters. Net sales in the Canadian operations are also
historically strong in the first quarter of the fiscal year. This is primarily
due to buying patterns of Canadian Government Agencies. See "--Liquidity and
Capital Resources" below.
 
LIQUIDITY AND CAPITAL RESOURCES
 
  The Company has financed its growth and cash needs primarily through
borrowings, securitizations of its trade receivables and the public and
private sales of its securities.
 
  Net cash provided by operating activities during the six months ended June
30, 1997 was $12,635,000. The primary uses of cash were a decrease in accounts
payable of $13,381,000, an increase in accounts receivable of $24,715,000, and
an increase in prepaid and other assets of $9,050,000. Sources of cash
included a decrease in inventory of $45,826,000 and net profit of $3,176,000
which included depreciation expense of $5,971,000. The decreased inventory and
accounts payable from the fourth quarter of 1996 is primarily the result of
the effect of seasonal fluctuations on inventory needs. The increase in
accounts receivable relates to a very strong final week of sales in the
quarter, particularly from its MOCA(TM) segment, which also was a factor in
driving inventory down beyond the decrease in accounts payable. The increase
in prepaid and other assets includes professional fees paid related to the
debt restructuring of approximately $5,100,000.
 
  Net cash provided by investing activities was $2,189,000 consisting of
proceeds from the sale of land held in North Carolina totaling $5,020,000,
offset by capital expenditures of $2,831,000. The expenditures were primarily
for the maintenance and improvements of existing facilities. The Company
presently anticipates that its capital expenditures for 1997 will be between
$15,000,000 and $18,000,000, primarily consisting of costs of upgrading and
modifying existing computer systems, warehouse systems and other Company
facilities, and capital expenditures related to building the sales
infrastructure. Net cash used in financing activities was $11,195,000 and was
comprised primarily of scheduled payments under the Company's various debt
facilities.
 
  Funds are also generated through the sale of receivables by Merisel Capital
Funding, Inc., a wholly owned subsidiary of the Company's Merisel Americas,
Inc. operating subsidiary. Merisel Capital Funding's sole business is the
ongoing purchase of trade receivables from Merisel Americas. Merisel Capital
Funding sells these receivables, in turn, under an agreement with a
securitization company, whose purchases yield proceeds of up to $300,000,000
at any point in time. Merisel Capital Funding is a separate corporate entity
with separate creditors who, upon its liquidation, are entitled to be
satisfied out of Merisel Capital Funding's assets prior to any value in the
subsidiary becoming available to the subsidiary's equity holder. As a result
of losses the Company incurred
 
                                      55
<PAGE>
 
in fiscal year 1996, Merisel Americas and Merisel Capital Funding were obliged
to and did obtain amendments and waivers with respect to certain covenants
under this facility, which expires in October 2000.
 
  Effective December 15, 1995, Merisel Canada, Inc. ("Merisel Canada") entered
into a receivables purchase agreement with a securitization company to provide
funding for its operations. In accordance with this agreement, Merisel Canada
sells receivables to the securitization company, which yields proceeds of up
to $150,000,000 Canadian dollars. The facility expires December 12, 2000, but
is extendible by notice from the securitization company, subject to the
Company's approval.
 
  Under these securitization facilities, the receivables are sold at face
value with payment of a portion of the purchase price being deferred. As of
June 30, 1997, the total amount outstanding under these facilities was
$247,445,000. Fees incurred in connection with the sale of accounts receivable
for the six months ended June 30, 1997, were $7,350,000, respectively,
compared to $8,526,000 incurred for the six months ended June 30, 1996 and are
recorded as other expense.
 
  At June 30, 1997, two of the Company's subsidiaries, Merisel Americas and
Merisel Europe, Inc. ("Merisel Europe"), had unsecured senior borrowings
consisting of $54,398,000 principal amount of 11.5% notes issued by Merisel
Americas and an $81,597,000 principal amount incurred under the Revolving
Credit Agreement by Merisel Americas and Merisel Europe. Advances under the
Revolving Credit Agreement bore interest at specific rates based upon market
reference rates plus a specified percentage. The average interest rate for the
Revolving Credit Agreement at June 30, 1997 was approximately 11.0%. On
October 4, 1996, the Company amended the 11.5% Notes and the Revolving Credit
Agreement in connection with the sale of EML and permanently reduced the
outstanding borrowings on the 11.5% Notes and the Revolving Credit Agreement
by $29,000,000 and $43,500,000, respectively. As a result of the sale of EML,
Merisel Europe no longer is an operating entity.
 
  At June 30, 1997, Merisel Americas had outstanding an aggregate of
$13,200,000 of Subordinated Notes. The Subordinated Notes, as amended during
1996, provided for an interest rate increase of .50% to 11.78% per annum
effective April 15, 1996, and were repayable in three remaining equal annual
installments of $4,400,000 due in March of 1998, 1999 and 2000.
 
  On September 19, 1997, the Company entered into the Stock and Note Purchase
Agreement and used the proceeds therefrom to pay in full all outstanding
indebtedness under the Operating Companies Loan Agreements. The Convertible
Note contains various covenants, including those which prohibit the payment of
cash dividends, require that a minimum amount of tangible net worth, and place
limitations on the acquisition of assets. These agreements also require the
Company and Merisel Americas to maintain certain specified financial ratios.
Such financial ratios include: minimum interest coverage; minimum consolidated
adjusted tangible net worth; minimum EBITSDA; minimum inventory turnover; and
minimum accounts payable to inventory. See "CERTAIN CONSIDERATIONS RELATING TO
THE STONINGTON RESTRUCTURING" and "DESCRIPTION OF CONVERTIBLE NOTE AND STOCK
AND NOTE PURCHASE AGREEMENT--Convertible Note."
 
ASSET MANAGEMENT
 
  Merisel attempts to manage its inventory position to maintain levels
sufficient to achieve high product availability and same-day order fill rates.
Inventory levels may vary from period to period, due to factors including
increases or decreases in sales levels, Merisel's practice of making large-
volume purchases when it deems such purchases to be attractive and the
addition of new manufacturers and products. The Company has negotiated
agreements with many of its manufacturers which contain stock balancing and
price protection provisions intended to reduce, in part, Merisel's risk of
loss due to slow-moving or obsolete inventory or manufacturer price
reductions. The Company is not assured that these agreements will succeed in
reducing this risk. In the event of a manufacturer price reduction, the
Company generally receives a credit for products in inventory. In addition,
the Company has the right to return a certain percentage of purchases, subject
to certain
 
                                      56
<PAGE>
 
limitations. Historically, price protection and stock return privileges, as
well as the Company's inventory management procedures, have helped to reduce
the risk of loss of carrying inventory.
 
  The Company has purchased foreign exchange contracts whenever available to
minimize foreign exchange transaction gains and losses. Such contracts were
temporarily not available to the Company beginning in the latter part of 1996.
The Company experienced net transaction losses of approximately $350,000 in
the first quarter of 1997, prior to the renewed availability of foreign
exchange contracts. The Company plans to continue to use foreign exchange
contracts in the future, to the extent they are available and necessary.
 
  The Company offers credit terms to qualifying customers and also sells on a
prepay, credit card and cash-on-delivery basis. The Company also offers
financing for its sales to certain of its customers through various floor plan
financing companies. With respect to credit sales, the Company attempts to
control its bad debt exposure by monitoring customers' creditworthiness and,
where practicable, through participation in credit associations that provide
customer credit rating information for certain accounts. In addition, the
Company purchases credit insurance as it deems appropriate.
 
COMPETITION
 
  Traditionally, competition in the computer products distribution industry is
intense. Competitive factors include price, brand selection, breadth and
availability of product offering, financing options, shipping and packaging
accuracy, speed of delivery, level of training and technical support,
marketing services and programs and ability to influence a buyer's decision.
 
  Certain of the Company's competitors have substantially greater financial
resources than the Company. The Company's principal competitors include large
United States-based distributors and aggregators such as Gates/Arrow, Inacom,
Ingram Micro, MicroAge and Tech Data Corporation, as well as regional
distributors and franchisors.
 
  The Company also competes with manufacturers that sell directly to computer
resellers, sometimes at prices below those charged by the Company for similar
products. The Company believes its broad product offering, product
availability, prompt delivery and support services may offset a manufacturer's
price advantage. In addition, many manufacturers concentrate their direct
sales on large computer resellers because of the relatively high costs
associated with dealing with small-volume computer reseller customers.
 
                                      57
<PAGE>
 
                                  MANAGEMENT
 
  The following table sets forth certain information regarding the directors
and executive officers and officers of the Company.
 
<TABLE>
<CAPTION>
NAME                      AGE(1)                       POSITION
- ----                      ------                       --------
<S>                       <C>    <C>
Dwight A. Steffensen....    54   Chairman of the Board of Directors and Chief
                                 Executive Officer
Robert J. McInerney (2).    52   President, Chief Operating Officer and Director
                                 designee
James E. Illson (3).....    44   Chief Financial Officer, Senior Vice President,
                                 Assistant Secretary and Director designee
Thomas P. Reeves........    36   President, Merisel Canada, Inc.
Timothy N. Jenson.......    38   Vice President-Finance, Treasurer and Assistant
                                 Secretary
Karen A. Tallman........    40   Vice President, General Counsel and Secretary
Joseph Abrams...........    61   Director
David L. House..........    54   Director
Dr. Arnold Miller.......    69   Director
Lawrence J. Schoenberg..    65   Director
Albert J. Fitzgibbons...    52   Director designee
Bradley J. Hoecker......    35   Director designee
Stephen M. McLean.......    39   Director designee
</TABLE>
- --------
(1) As of October 3, 1997
(2) Mr. McInerney was appointed to his position as President and Chief
    Operating Officer as of February 3, 1997, pursuant to an employment
    agreement with the Company which has an initial term of three years.
(3) Mr. Illson was appointed to his position as Chief Financial Officer,
    Senior Vice President and Assistant Secretary as of August 12, 1996,
    pursuant to an employment agreement with the Company which has an initial
    term of three years.
 
DIRECTORS
 
  The Board presently consists of five members divided into three classes
serving staggered terms, with one class of directors elected annually. Class I
consists of one director, and Class II and Class III each consist of two
directors. The term of the director constituting Class I will expire this
year. The term of the directors in Class II extends through 1998, and the term
of the directors in Class III extends through 1999. The table below indicates
the names of the directors in each class and the expiration of the terms of
the directors in each class.
 
<TABLE>
<CAPTION>
        CLASS I                   CLASS II                   CLASS III
        -------                   --------                   ---------
<S>                        <C>                        <C>
(TERMS EXPIRING IN 1997)   (TERMS EXPIRING IN 1998)   (TERMS EXPIRING IN 1999)
 Lawrence J. Schoenberg         Joseph Abrams             David L. House
                              Dr. Arnold Miller        Dwight A. Steffensen
</TABLE>
 
  No arrangement or understanding exists between any director or officer and
any other person or persons pursuant to which any such person was or is to be
selected as a director or officer other than as disclosed in "--Post-
Stonington Conversion Board Configuration." None of the directors or officers
has any family relationship between them.
 
  The business experience, principal occupations and employment during the
past five years of each of the directors, together with their periods of
service as directors and executive officers of the Company, as applicable, are
set forth below.
 
  Dwight A. Steffensen was elected as Chief Executive Officer and Chairman of
the Board in February 1996. Mr. Steffensen has been a member of the Board
since August 1990. From January 1985 to March 1992, Mr. Steffensen served as a
director and Executive Vice President of Bergen Brunswig Corporation
("Bergen"), a pharmaceuticals distributor. From April 1992 to October 1995,
Mr. Steffensen served as President and Chief Operating Officer for Bergen. In
January 1996, he resigned from Bergen's Board of Directors. See "--Post-
Stonington Restructuring Board Configuration."
 
  Joseph Abrams was elected a director of the Company following the
acquisition of Microamerica, Inc. ("Microamerica") by the Company in April
1990. Mr. Abrams had previously served as a director of
 
                                      58
<PAGE>
 
Microamerica from 1983 to April 1990 and also served as President, Chief
Operating Officer and Secretary of AGS Computers, Inc. ("AGS"), a software
development company, which was a subsidiary of NYNEX Corp., a
telecommunications company, from 1988 until his retirement in 1991. He is also
a director of Spectrum Signal Processing, a hardware and software electronics
company and Phonetel Technologies, a provider of pay telephone services.
 
  David L. House was appointed to the Board of Directors in March 1994 to fill
a vacancy. In October 1996, Mr. House was named Chairman of the Board,
President and Chief Executive Officer of Bay Networks, Inc., a marketer of
internet working products. From 1974 to 1996, he was employed by Intel
Corporation, a manufacturer of microprocessing systems, most recently as
Senior Vice President and General Manager of the Enterprise Server group.
 
  Dr. Arnold Miller was elected to the Board of Directors in August 1989 and
was appointed the Governance Director in May 1995. Since its formation in
1987, he has been President of Technology Strategy Group, a consulting firm
organized to assist businesses and government in the fields of corporate
strategy development, international technology transfer and joint ventures, as
well as business operations support. Prior to joining Technology Strategy
Group, Dr. Miller was employed at Xerox Corporation, a consumer products and
information services company, for 14 years, where his most recent position was
Corporate Vice President with responsibility for worldwide electronics
operations.
 
  Lawrence J. Schoenberg was elected a director of the Company following the
acquisition of Microamerica in April 1990. Mr. Schoenberg had previously
served as a director of Microamerica from 1983 to April 1990. From 1967
through 1990, Mr. Schoenberg served as Chairman of the Board and Chief
Executive Officer of AGS. From January to December 1991, Mr. Schoenberg served
as Chairman and as a member of the executive committee of the Board of
Directors of AGS. Mr. Schoenberg retired from AGS in 1992. He is also a
director of Sungard Data Services, Inc., a computer services company,
Government Technology Services, Inc., a microcomputer reseller and Cellular
Technology Services, a provider of systems to cellular telephone service
providers.
 
BOARD OF DIRECTORS, MEETINGS AND COMMITTEES
 
  The Board held 20 meetings during the year ended December 31, 1996. During
1996, no director attended fewer than 75% of the total number of meetings of
the Board and any committees of the Board upon which he served.
 
  The Board maintains an Audit Committee that was formed to, among other
things, consult and meet with the Company's auditors and its Chief Financial
Officer and other finance and accounting personnel, review potential conflict
of interest situations, where appropriate, and report and make recommendations
to the full Board of Directors regarding such matters, which met six times in
1996 and is comprised of Dr. Miller and Mr. Schoenberg; an Organization and
Compensation Committee, which met six times in 1996, comprised of
Messrs. Abrams, House and Schoenberg; an Option Committee that administers the
Company's stock option plans, which met three times in 1996, comprised of
Messrs. Abrams, House and Schoenberg; and a Nominating Committee to recommend
persons for membership on the Board and to establish criteria and procedures
for the selection of new directors, which did not meet in 1996, comprised of
Dr. Miller, Mr. Schoenberg and Mr. Steffensen. There is no established
procedure for Stockholders to recommend nominations to the Nominating
Committee.
 
POST-STONINGTON CONVERSION BOARD CONFIGURATION
 
  Pursuant to Board action following the Stonington Conversion, the Company
intends that the Board will be expanded from five to between nine and eleven
members. The Company further intends that the expanded Board will be
reconstituted such that three current Board members (Mr. Schoenberg, Dr.
Miller, and Mr. Steffensen) will remain on the Board in each of Classes I, II
and III, respectively; three Stonington designees (Messrs. Fitzgibbons,
Hoecker and McLean) will be elected to the Board in each of the three Classes;
two management nominees (Messrs. Illson and McInerney) will be elected to
Classes I and II; and one to three new independent directors will be appointed
to Class III and, if designated, to one or both of Classes I and II. See "--
Directors" and "--Executive Officers" and "CERTAIN CONSIDERATIONS RELATING TO
THE STONINGTON RESTRUCTURING--Change of Control."
 
 
                                      59
<PAGE>
 
  Set forth below is a brief description of the business experience for the
previous five years of Stonington's designees to the post-Stonington
Restructuring Board.
 
  Albert J. Fitzgibbons III. Mr. Fitzgibbons is a Partner and a Director of
Stonington, a position that he has held since 1993 and a Partner and a
Director of Stonington Partners, Inc. II. He has also been a Director of
Merrill Lynch Capital Partners, Inc. ("MLCP"), a private investment firm
associated with Merrill Lynch & Co. ("ML&C"), since 1988 and a Consultant to
MLCP since 1994. He was a Partner of MLCP from 1993 to 1994 and Executive Vice
President of MLCP from 1988 to 1993. Mr. Fitzgibbons was also a Managing
Director of the Investment Banking Division of ML&C from 1978 to July 1994.
Mr. Fitzgibbons is also a director of Borg-Warner Automotive, Inc., Borg-
Warner Security Corporation, Dictaphone Corporation, Rykoff Sexton, Inc. and
United Artists Theatre Circuit, Inc.
 
  Bradley J. Hoecker. Mr. Hoecker is a Principal of Stonington, a position
that he has held since 1993. He has been a Consultant to MLCP since 1994. He
was a Principal of MLCP from 1993 to July, 1994 and an Associate of MLCP from
1989 to 1993. Mr. Hoecker was also an Associate of the Investment Banking
Division of ML&C from 1989 to 1994. From 1984 to 1987, Mr. Hoecker was
employed by Bankers Trust Company. Mr. Hoecker is a director of Packard
BioScience Company, and several privately held corporations.
 
  Stephen M. McLean. Mr. McLean is a Partner and a Director of Stonington, a
position that he has held since 1993 and is a Partner and a Director of
Stonington Partners, Inc. II. He has also been a member of the Board of
Directors of MLCP since 1987 and a Consultant to MLCP since 1994. He was a
Partner of MLCP from 1993 to July 1994 and a Senior Vice President of MLCP
from 1987 to 1993. Mr. McLean was also a Managing Director of the Investment
Banking Division of Merrill Lynch, Pierce, Fenner & Smith Incorporated from
1987 to 1994. Mr. McLean is a Director of CMI Industries, Inc., Dictaphone
Corporation, Packard BioScience Company, Pathmark Stores, Inc. and
Supermarkets General Holdings Corporation and several privately held
companies.
 
EXECUTIVE OFFICERS
 
  Executive officers of the Company are elected by and serve at the discretion
of the Board. Set forth below is a brief description of the business
experience for the previous five years of all executive officers except those
who are also directors. For information concerning the business experience of
Mr. Steffensen, see "Directors" above.
 
  Robert J. McInerney. Mr. McInerney joined the Company in February of 1997 in
the capacity of President and Chief Operating Officer. From 1994 to 1996 Mr.
McInerney served as Executive Vice President at United Capital Corporation, a
Long Island based multinational holding company. He was responsible for the
P&L, structure and strategy of the corporation's three manufacturing groups.
Mr. McInerney is credited with achieving record operating results and
increasing profitability for all three groups. From 1981 to 1994 Mr. McInerney
was employed by Arrow Electronics, Inc., a distributor of electronic
components and systems. He served as president of Arrow's Commercial Systems
Group (CSG) from 1987 to 1994 and was responsible for sales, marketing,
finance and operations, marketing communications and advertising. See "--Post-
Stonington Restructuring Board Configuration."
 
  Mr. James E. Illson. Prior to joining Merisel in August 1996, Mr. Illson
served as Senior Vice President and Chief Financial Officer for the Southern
California-based grocery chain, Bristol Farms. Mr. Illson was responsible for
managing all financial operations. This included implementing business plans,
reporting and control systems, and developing short-term and long-term capital
strategies. He joined Bristol Farms in 1995. From 1992 to 1995, Mr. Illson was
a partner with Kidd, Kamm & Co., a private equity investment firm where he was
responsible for activities relating to the acquisition and expansion of
portfolio companies. Prior to that, Mr. Illson spent more than 13 years with
Deloitte & Touche, most recently as a partner in Deloitte & Touche's
reorganization advisory services group. See "--Post-Stonington Restructuring
Board Configuration."
 
                                      60
<PAGE>
 
  Thomas P. Reeves. Mr. Reeves joined the Company in 1987 as director of
International Strategic Planning. From March 1990 to February 1992, Mr. Reeves
served as Managing Director of the Company's United Kingdom subsidiary. From
February 1992 until August 1994, Mr. Reeves served as the Company's Managing
Director of operations in Europe. Mr. Reeves was named Senior Vice President-
European Operations in May 1992. In August 1994, he became Senior Vice
President-Canadian Operations as well as President of the Company's Canadian
subsidiary.
 
  Timothy N. Jenson. Mr. Jenson joined the Company in 1993 as Vice President
and Treasurer. In 1996, he was promoted to Vice President-Finance, Treasurer
and Assistant Secretary. From 1989 to 1993, Mr. Jenson served as Vice
President at Citicorp North America, Inc. where he provided financial
services, banking products and advisory services to large multinational
corporations. He previously served at Bank of America as Vice President of
corporate banking, where he was responsible for the financing and banking
activities of a portfolio of Corporate Clients.
 
  Karen A. Tallman. Ms. Tallman joined the Company in 1997 as Vice President,
General Counsel and Secretary. From 1992 to 1997, Ms. Tallman was employed by
CB Commercial Real Estate Group, Inc., most recently in the positions of Vice
President, Secretary and Senior Counsel. Previously Ms. Tallman was a
corporate attorney for nine years at the law firm of Skadden, Arps, Slate,
Meagher, Flom LLP.
 
SECTION 16 MATTERS
 
  Section 16(a) of the Exchange Act requires the Company's executive officers
and directors to file reports of ownership and changes in ownership with the
Securities and Exchange Commission and the Nasdaq National Market, and to
furnish the Company with copies of all Section 16(a) forms they file.
 
  Based on its review of the copies of such forms received by it and on
written representations from such persons that no Forms 5 were required for
those persons, the Company believes that, during the fiscal year ended
December 31, 1996, all filing requirements applicable to its directors and
executive officers were complied with.
 
                                      61
<PAGE>
 
                            MANAGEMENT COMPENSATION
 
SUMMARY COMPENSATION TABLE
 
  The following table sets forth the cash and non-cash compensation for each
of the last three fiscal years awarded to or earned by the Company's Chief
Executive Officer, the four other most highly compensated executive officers
of the Company in 1996, and two former highly paid executives for whom
disclosure would have been provided had they been executive officers of the
Company as of December 31, 1996.
 
<TABLE>
<CAPTION>
                                                                                 LONG-TERM
                                     ANNUAL COMPENSATION                        COMPENSATION
                                  -------------------------      ALL OTHER       AWARDS(3)
NAME AND PRINCIPAL POSITION  YEAR SALARY($)(2) BONUS ($)(1) COMPENSATION ($)(2)  OPTIONS(#)
- ---------------------------  ---- ------------ ------------ ------------------- ------------
<S>                          <C>  <C>          <C>          <C>                 <C>
Dwight A. Steffensen....     1996   435,070      313,620            4,980         500,000
 Chairman of the Board
 of Directors,
 Chief Executive
 Officer(4)
Timothy N. Jenson.......     1996   173,870       82,810              390          12,000
 Vice President--            1995   143,070        4,870            1,210          12,000
 Finance,
 Treasurer and Assistant     1994   126,060        8,660            2,890             -0-
 Secretary
Kristin Rogers..........     1996   173,380       68,750              390          50,000
 Former Senior Vice          1995   158,380        6,000            7,430          27,500
 President,
 Product Management          1994   135,290       16,560            3,190             -0-
Karen Fuller............     1996   150,000       35,620              330          12,000
 Former Vice President,      1995   146,230        2,500              970          10,000
 Marketing(5)
                             1994   134,820       26,670            3,160             -0-
Thomas Reeves...........     1996   136,280       42,260              310             -0-
 Senior Vice President--     1995   113,510       51,140              650          80,000
 Canadian
 Operations                  1994   114,990          -0-            2,460             -0-
Susan J. Miller-Smith...     1996   252,940      154,340          307,720             -0-
 Former Senior Vice          1995   241,660          -0-           84,100         100,000
 President--
 Managing Director--         1994   160,850       91,480          177,300             -0-
 Europe(6)
Ron Rittenmeyer.........     1996   244,870      400,000          355,860             -0-
 Former Chief Operating      1995   121,290          -0-              420         200,000
 Officer(6)
                             1994       -0-          -0-              -0-             -0-
</TABLE>
- --------
(1) Portions of the salary and/or bonus earned by named executive officers may
    be deferred pursuant to the Company's executive deferred compensation plan
    (the "Deferred Compensation Plan"), which was adopted by the Board of
    Directors in 1990. Under the Deferred Compensation Plan, executive
    officers may elect on an annual basis to defer any portion of their pre-
    tax compensation until retirement or termination of employment. The
    Company will pay participants in the Deferred Compensation Plan, upon
    retirement or termination of employment, an amount equal to the amount of
    deferred compensation plus a guaranteed return at a specified rate that is
    no less than a base interest rate. In addition, upon the death of a
    participant the Company will pay a death benefit to a named beneficiary.
(2) For Mr. Steffensen, the amount listed for 1996 includes $4,980 of premiums
    paid with respect to the Company's Group Life insurance Policy (the "Term
    Life Policy"). For Mr. Jenson, Ms. Fuller, Ms. Rogers, and Mr. Reeves,
    other compensation listed in 1996 is also comprised entirely of premiums
    paid with respect to the Term Life Policy. For Ms. Miller-Smith, 1996
    other compensation includes $304,500 of severance pay related to an
    employment contract between the Company and Ms. Miller-Smith, and $3,220
    of premiums paid to the Term Life Policy. For Mr. Rittenmeyer 1996 other
    compensation includes $355,000 of severance pay related to an employment
    contract between the Company and Mr. Rittenmeyer, and $860 of premiums
    paid to the Term Life Policy.
(3) At December 31, 1996, the only long-term compensatory arrangement the
    Company had for its executive officers was its stock option plan, grants
    under which are listed in the Summary Compensation Table for completeness
    of presentation. For Mr. Steffensen, the amount represents stock
    appreciation rights.
(4) Mr. Steffensen joined the Company on February 12, 1996.
(5) Ms. Rogers and Ms. Fuller both resigned March 28, 1997, and all salaries
    and bonuses paid to each of Ms. Fuller and Ms. Rogers were paid pursuant
    to employment agreements between them and the Company.
(6) Ms. Miller-Smith and Mr. Rittenmeyer resigned on December 15, 1996 and
    September 17, 1996, respectively, and all amounts reported as salary and
    bonuses were paid pursuant to employment agreements between them and the
    Company.
 
                                      62
<PAGE>
 
OPTIONS IN 1996 FISCAL YEAR
 
  The following tables summarize option grants and exercises during the 1996
fiscal year to or by the executive officers named in the Summary Compensation
Table above and the value of the options held by such persons at the end of
the 1996 fiscal year.
 
                     OPTION/SAR GRANTS IN 1996 FISCAL YEAR
 
<TABLE>
<CAPTION>
                                       INDIVIDUAL GRANTS
                         -----------------------------------------------
                                                                          POTENTIAL REALIZABLE
                                        PERCENT OF                          VALUE AT ASSUMED
                          NUMBER OF       TOTAL                           ANNUAL RATES OF STOCK
                          SECURITIES   OPTIONS/SARS                      PRICE APPRECIATION FOR
                          UNDERLYING    GRANTED TO  PER SHARE              OPTION TERM ($)(1)
                         OPTIONS/SARS   EMPLOYEES   EXERCISE  EXPIRATION -----------------------
          NAME           GRANTED (#)   IN 1996 (%)  PRICE ($)    DATE      5%($)       10%($)
          ----           ------------  ------------ --------- ---------- ---------- ------------
<S>                      <C>           <C>          <C>       <C>        <C>        <C>
Dwight Steffensen.......   500,000(2)     58.50%     $2.818         n/a     855,955    2,245,185
Timothy Jenson..........    12,000(3)      1.40%     $1.938    12/11/06      14,622       37,055
Kristin Rogers..........    50,000(3)      5.85%     $2.500    06/28/97      78,612      199,218
Karen Fuller............    12,000(3)      1.40%     $2.625    06/28/97      19,810       50,202
Thomas Reeves...........       -0-         0.00%     $0.000           0         0.0          0.0
Susan Miller-Smith......       -0-         0.00%     $0.000           0         0.0          0.0
Ronald A. Rittenmeyer...       -0-         0.00%     $0.000           0         0.0          0.0
</TABLE>
- --------
(1) Potential realizable value is determined by taking the initial market
    value per share and applying the stated annual appreciation rate
    compounded annually for the remaining term of the option, subtracting the
    exercise price at the end of that period and multiplying that number by
    the number of options granted. Actual gains, if any, recognized by a named
    executive officer are dependent on the future performance of the Common
    Stock and on overall market conditions. There can be no assurance that the
    potential realizable values reflected in this table will be achieved.
(2) Represents SARs granted to Mr. Steffensen.
(3) Represents options granted to each of Mr. Jenson, Ms. Rogers, and Ms.
    Fuller.
 
                AGGREGATED OPTION EXERCISES IN 1996 FISCAL YEAR
                 AND VALUE OF OPTIONS AT FISCAL 1996 YEAR END
 
<TABLE>
<CAPTION>
                                                 NUMBER OF SECURITIES
                                                UNDERLYING UNEXERCISED     VALUE OF UNEXPIRED IN-
                            SHARES                 OPTIONS AT FISCAL        THE-MONEY OPTIONS AT
                           ACQUIRED    VALUE         YEAR END (#)          FISCAL YEAR END ($)(1)
                              ON      REALIZED ------------------------- --------------------------
          NAME           EXERCISE (#)   ($)    EXERCISABLE UNEXERCISABLE EXERCISABLE NONEXERCISABLE
          ----           ------------ -------- ----------- ------------- ----------- --------------
<S>                      <C>          <C>      <C>         <C>           <C>         <C>
Dwight Steffensen.......     -0-        -0-        4,000         -0-         -0-          -0-
Timothy Jenson..........     -0-        -0-       20,750      18,750         -0-          -0-
Kristin Rogers..........     -0-        -0-       41,366      22,450         -0-          -0-
Karen Fuller............     -0-        -0-       32,625      23,875         -0-          -0-
Thomas Reeves...........     -0-        -0-      155,571      40,000         -0-          -0-
</TABLE>
- --------
(1) Value is determined by subtracting the exercise price of each option held
    by the named executive officer from $1.6875, the fair market value of the
    Common Stock as of December 31, 1996, and multiplying the resulting number
    by the number of underlying shares of Common Stock.
 
COMPENSATION OF DIRECTORS
 
  During fiscal 1996, each nonemployee director was entitled to receive an
annual retainer of $8,000, $1,000 per Board of Directors meeting attended,
$5,000 annually for acting as the chairman of a committee of the Board, $2,000
annually for committee membership, $250 per committee meeting attended and
reimbursement for travel
 
                                      63
<PAGE>
 
expenses to and from Board of Directors and committee meetings. Technology
Strategy Group, a consulting firm associated with Dr. Miller, also received
$98,000 for consulting fees in 1996.
 
  Pursuant to the Company's 1992 Stock Option Plan for Nonemployee Directors
(the "Nonemployee Director Plan"), immediately following the Company's 1996
Annual Meeting, Messrs. Abrams, House, Miller, and Schoenberg were each
awarded options to purchase 1,000 shares of Common Stock at an exercise price
of $1.875 per share. The Nonemployee Director Plan provides for the granting
of nonqualified stock options to each member of the Company's Board of
Directors who is not otherwise an employee or officer of the Company or any
subsidiary of the Company (an "Eligible Director"). Currently, four members of
the Board of Directors are Eligible Directors. The Nonemployee Director Plan
provides for the issuance of options to purchase up to 50,000 shares of Common
Stock at an exercise price per share of not less than the fair market value of
the Common Stock on the date of grant.
 
  The Nonemployee Director Plan provides for initial grants with respect to
options to purchase 1,000 shares of Common Stock to each Eligible Director
immediately following the annual meeting at which such director is first
elected or appointed, whichever is applicable. Each Eligible Director who has
received an initial option grant will also receive annual automatic option
grants of 1,000 shares immediately following each of the Company's annual
meetings. Each option becomes exercisable when, and only if, the optionee
continues to serve as a director for twelve months following the date on which
the option was granted. Options expire ten years and one day from the date of
grant, subject to earlier termination in accordance with the Nonemployee
Director Plan. Any vested and exercisable options may be exercised in whole or
in part by payment in cash of the full exercise price.
 
EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
 
  Pursuant to Mr. Steffensen's employment agreement with the Company, Mr.
Steffensen is entitled to receive certain fees upon a change of control of the
Company. See "INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON--
Interest of Certain Executive Officers."
 
  In October 1995, the Company entered into a retention agreement with Mr.
Reeves. The retention agreement provides that if, within one year after a
Change of Control of the Company (as defined in the agreement) and prior to
August 15, 1998, Mr. Reeves' employment is terminated other than as a result
of (i) a "Termination for Cause" (as defined in the agreement), (ii) his death
or permanent disability or (iii) his resignation without "Good Reason" (as
defined in the agreement), the Company will continue to pay Mr. Reeves' Base
Salary for the 180 day-period following such termination and will make a lump-
sum payment to Mr. Reeves equal to one-half of the average annual performance
bonus received by Mr. Reeves over the three years preceding his termination
date.
 
  The Company intends to enter into an amended and restated retention
agreement with Mr. Reeves that will (1) extend its expiration date to July 31,
1999, (2) provide that in the event of a Covered Termination (as defined in
the agreement) within one year following a Change of Control he is entitled to
receive biweekly payments equal to 18 months' salary plus a lump sum payment
in an amount equal to 150% of the average annual performance bonus paid to him
over the previous three years, (3) provide that if an Other Termination occurs
(as defined in the agreement), Mr. Reeves shall receive biweekly payments
equal to twelve months salary, plus a lump sum payment in an amount equal to
100% of the average annual performance bonus paid to him over the previous
three years, (4) provide for Mr. Reeves to be reimbursed for medical and
dental insurance payments during the period for which he is entitled to
payments under (2) or (3) above, and (5) provides that in the event that a
Covered Termination occurs within one year of a Change of Control or an Other
Termination, Mr. Reeves shall be entitled to reimbursement for relocation
expenses up to a maximum of $[      ] should he decide to relocate.
 
  The Company has entered into a Retention Agreement with Mr. Jenson which
provides that if, within one year of a Change of Control of the Company (as
defined in the agreement), Mr. Jenson's employment is terminated other than as
a result of (i) a "Termination for Cause" (as defined in the agreement), (ii)
his death or
 
                                      64
<PAGE>
 
permanent disability or (iii) his resignation without "Good Reason" (as
defined in the agreement), the Company will make a lump-sum payment to Mr.
Jenson equal to one year's salary plus an amount equal to his annual
performance bonus for the prior year less any amounts payable to Mr. Jenson
pursuant to his employment agreement with the Company.
 
                ORGANIZATION AND COMPENSATION COMMITTEE REPORT
                        ON 1996 EXECUTIVE COMPENSATION
 
  The Organization and Compensation Committee (the "Committee") of the Board
is currently comprised of Messrs. Abrams, House and Schoenberg. Dr. Miller
also served on the Committee in 1996. The Committee establishes policies
relating to the compensation of Company executive officers and other key
employees. The administration of the Company's employee stock option plans is
the responsibility of the Company's Option Committee, which is currently
comprised of Messrs. Abrams, House and Schoenberg. All decisions of the
Committee relating to compensation of the Company's executive officers are
ratified by the entire Board of Directors. Decisions relating to the grant of
stock options to executive officers are made solely by the Option Committee so
that grants of such options satisfy Rule 16b-3 of the Securities Exchange Act
of 1934. In the 1996 fiscal year, the Company's Board of Directors ratified
all of the Committee's recommendations regarding executive compensation, as
submitted. Additionally, each member of the Board of Directors who is also an
executive officer does not participate when the Board of Directors reviews his
compensation.
 
  As required by rules designed to enhance the disclosure of the Company's
executive compensation policies and practices, the following is the
Committee's report submitted to the Board of Directors addressing the
compensation of the Company's executive officers for the 1996 fiscal year.
 
COMPENSATION POLICY
 
  The Company's executive compensation policy is designed to establish an
appropriate relationship between executive pay and the Company's annual
performance, its long-term objectives and its ability to attract and retain
qualified executive officers. The Committee attempts to achieve these goals by
integrating competitive annual base salaries with (a) bonuses based on
corporate performance and on the achievement of internal strategic objectives
and (b) executive stock options through the Company's stock option plans. The
Committee believes that cash compensation in the form of salary and bonus
provides Company executives with short-term rewards for success in operations,
and that long-term compensation through the award of stock options encourages
growth in management stock ownership, which in turn leads to the expansion of
management's stake in the long-term performance and success of the Company.
 
  Base Salary and Bonuses. Due to the Company's financial performance in
fiscal 1996, the base salary level of executive officers in fiscal 1996 was
generally not increased. In addition, in August 1996, the Company hired James
E. Illson as its Chief Financial Officer. Mr. Illson's starting salary was
determined by the Committee based upon Mr. Illson's previous experience,
industry standards for compensation paid to employees with comparable
responsibilities and the Committee's belief that Mr. Illson would be valuable
to the Company in its operational and financial restructuring. The Committee
believes that Mr. Illson's compensation package is consistent with current
industry standards for executives in similar positions.
 
  In May of 1996, the Committee approved the Merisel Executive Incentive
Program for 1996 (the "Incentive Program"). The Incentive Program provides for
quarterly payments to the executive officers based on actual net income/loss
as a percentage of operating plan net income. No incentive compensation was to
be paid unless the Company had achieved at least 90% of its operating plan net
income. If 90% to 99% of operating plan net income was realized, 25% of the
executive compensation was to be paid. The remaining 75% of executive
compensation was to be paid out of net income in excess of the operating plan
net income, after deducting the 25% already paid.
 
 
                                      65
<PAGE>
 
  Stock Options. The Company has adopted a long-term incentive compensation
strategy to provide incentives and reward management's contribution to the
achievement of long-term Company performance goals, as measured by the market
value of the Common Stock. Under this long-term strategy, the Option Committee
awarded stock options in 1996 under the Company's existing employee stock
option plan to executive officers who were deemed to be likely to have a
measurable impact on the Company's earnings per share over an extended period.
The options granted to executive officers in 1996 vest over a four-year
period. Currently, grants are made on an annual basis as opposed to the
Company's previous policy of granting options every three years.
 
  Retention Program. Due to the Company's restructuring, in March of 1996, the
Committee authorized the Company to implement a retention program in order to
retain key executives and associates. The program provided certain retention
benefits to consist of a combination of (i) retention bonuses (subject to an
aggregate maximum of $1,000,000), (ii) guaranteed bonuses budgeted under the
Company's 1996 Operating Plan and (iii) up to 6 months of severance benefits.
The Committee believes that such programs enable the Company to retain those
executive officers and associates who are critical to the success of the
Company.
 
COMPENSATION OF CHIEF EXECUTIVE OFFICER
 
  Dwight A. Steffensen joined the Company in February 1996 as its Chief
Executive Officer. The annual salary earned by Mr. Steffensen for 1996 was
$435,077, which is comparable to the compensation package of Mr. Pickett, the
Company's former Chief Executive Officer. Mr. Steffensen's base salary was
based upon Mr. Steffensen's 12 years of experience at Bergen Brunswig
Corporation and the Committee's belief that Mr. Steffensen's experience would
be instrumental in effecting the restructuring of the Company's operational
and capital structure and in helping to bring the Company back to
profitability. In light of these goals, he received a bonus in each quarter of
1996, based on the Company's financial performance and certain extraordinary
transactions. The Committee believes that Mr. Steffensen's compensation
package is consistent with current industry standards of executives in similar
positions.
 
CORPORATE TAX DEDUCTION ON COMPENSATION
 
  To the extent readily determinable and as one of the factors in its
consideration of compensation matters, the Committee considers the anticipated
tax treatment to the Company and to the executives of various compensation.
Some types of compensation and their deductibility depend upon the timing of
an executive's vesting or exercise of previously granted rights. Further,
interpretations of and changes in the tax laws also affect the deductibility
of compensation. To the extent reasonably practicable and to the extent it is
within the Committee's control, the Committee intends to limit executive
compensation in ordinary circumstances to that deductible under Section 162(m)
of the Internal Revenue Code of 1986. In doing so, the Committee may utilize
alternatives (such as deferring compensation) for qualifying executive
compensation for deductibility and may rely on grandfathering provisions with
respect to existing contractual commitments.
 
  The Committee believes that a direct relationship between executive
compensation and the Company's performance, as measured by growth in income
and earnings, ultimately results in increased value to the Company's
stockholders. The Committee believes that management compensation levels
during the Company's 1996 fiscal year appropriately reflect the application of
the Committee's compensation policy.
 
                    ORGANIZATION AND COMPENSATION COMMITTEE
 
                                 Joseph Abrams
                                  David House
                              Lawrence Schoenberg
 
                                      66
<PAGE>
 
PERFORMANCE GRAPH
 
  The following graph compares the total cumulative stockholder return on the
Common Stock from December 31, 1991 to December 31, 1996 to that of the
Standard & Poor's MidCap Index, an index that includes 400 companies with a
total capitalization of $638 billion as of December 31, 1996, and (b) a
combination, assuming investment on a weighted average basis, of the Standard
& Poor's Computer Systems Index and the Standard & Poor's Computer Software &
Services Index over the same period. The graph assumes that the value of an
investment in Common Stock and in each such index was $100 on December 31,
1991, and that all dividends have been reinvested.
 
 
 
 
 
                     COMPARISON OF CUMULATIVE TOTAL RETURN
                    OF COMPANY, PEER GROUP AND BROAD MARKET
 
                        PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period                                         BROAD
(Fiscal Year Covered)        MERISEL INC    PEER GROUP     MARKET
- -------------------          ----------     ----------     ------
<S>                          <C>            <C>          <C>
Measurement Pt-  1991        $100           $100         $100
FYE   1992                   $110.96        $ 92.83      $111.93
FYE   1993                   $201.37        $100.51      $127.15
FYE   1994                   $ 87.67        $134.09      $122.59
FYE   1995                   $ 47.95        $187.27      $157.72
FYE   1996                   $ 18.15        $276.10      $188.00
</TABLE>
 
                                      67
<PAGE>
 
                           OWNERSHIP OF COMMON STOCK
 
  The following table sets forth as of October 2, 1997 certain information
regarding beneficial ownership of Common Stock by each Stockholder known by
the Company to be the beneficial owner of more than 5% of Common Stock as of
such date, each director, certain executive officers of the Company and all
directors and executive officers, as a group. Unless otherwise indicated, the
Stockholders have sole voting and investment power with respect to shares
beneficially owned by them, subject to community property laws, where
applicable.
 
<TABLE>
<CAPTION>
                                                               PERCENTAGE AFTER
                                    COMMON STOCK                  STONINGTON
NAME AND ADDRESS (1)             BENEFICIALLY OWNED    PERCENT  CONVERSION (8)
- --------------------             ------------------    ------- ----------------
<S>                              <C>                   <C>     <C>
Dwight A. Steffensen............       358,167(2)        1.02%          *
James E. Illson.................        18,750(3)           *           *
Timothy N. Jenson...............        25,850(4)           *           *
Thomas Reeves...................       156,271(5)           *           *
Lawrence Schoenberg.............       365,584(6)        1.05%          *
Arnold Miller...................         7,000(3)           *           *
David House.....................         3,000(3)           *           *
Joseph Abrams...................       600,460(6)        1.72%          *
Phoenix Acquisition Company II,
 L.L.C. ........................     4,901,316(7)(8)    14.01%       62.4%
  767 5th Avenue
  48th Floor
  New York, New York 10153
Albert Fitzgibbons III..........             0(9)
Stephen M. McLean...............             0(9)
Dimensional Fund Advisors.......     1,793,560(8)(10)    5.13%       2.24%
  1299 Ocean Avenue, 11th Floor
  Santa Monica, California 90401
All Directors and Executive Of-
 ficers as a Group (8 Persons)..     1,538,082(11)       4.41%       1.92%
</TABLE>
- --------
  * Less than 1%.
 (1) Unless otherwise indicated, the address of each person listed is Merisel,
     Inc. 200 Continental Blvd., El Segundo, CA 90245-0984.
 (2) Consists of (1) options to purchase 4,000 shares issuable with respect to
     stock options exercisable within 60 days after October 2, 1997 and (2)
     stock appreciation rights that are vested or vest within 60 days after
     October 2, 1997 and which, at Mr. Steffensen's election and upon 60 days'
     notice, may be converted in stock options to purchase an equal number of
     shares of Common Stock. Upon consummation of the Stonington Conversion,
     the remaining 145,833 of Mr. Steffensen's stock appreciation rights will
     vest.
 (3) All shares held by the beneficial owner are shares issuable with respect
     to stock options exercisable within 60 days after October 2, 1997.
 (4) Includes 23,750 shares issuable with respect to stock options exercisable
     within 60 days after October 2, 1997.
 (5) Includes 155,571 shares issuable with respect to stock options
     exercisable within 60 days of October 2, 1997.
 (6) Includes 5,000 shares issuable with respect to stock options exercisable
     within 60 days after October 2, 1997.
 (7) The Fund is the sole member of the Stockholder and the Fund is managed by
     Stonington, which disclaims beneficial ownership of these shares.
 (8) All information regarding share ownership is taken from and furnished in
     reliance upon the Schedule 13D, filed by the Stockholder pursuant to
     Section 13(d) of the Exchange Act.
 (9) The Stockholder is a director or partner of certain affiliates of Phoenix
     and, therefore, may be deemed to beneficially own the 4,901,316 shares of
     Common Stock beneficially owned by Phoenix. Such shares represent 14.01%
     of the outstanding Common Stock as of October 2, 1997 and, together with
     the 45,098,684 shares of Common Stock to be issued to Phoenix upon
     consummation of the Stonington Conversion, would represent 62.4% of the
     outstanding Common Stock. The Stockholder disclaims such beneficial
     ownership.
(10) Dimensional Fund Advisors, Inc. in its capacity as investment advisor may
     be deemed beneficial owner of such shares, which are owned by certain of
     its investment counseling clients.
(11) Includes 213,071 shares issuable with respect to stock options
     exercisable within 60 days after October 2, 1997 and 354,167 shares
     issuable with respect to vested stock appreciation rights.
 
                                      68
<PAGE>
 
                        CERTAIN AFFILIATE TRANSACTIONS
 
  The Company has entered into Indemnity Agreements with each of its directors
and certain of its officers, which agreements require the Company, among other
things, to indemnify them against certain liabilities that may arise by reason
of their status or service as directors, officers, employees or agents of the
Company (other than liabilities arising from conduct in bad faith or which is
knowingly fraudulent or deliberately dishonest), and, under certain
circumstances, to advance their expenses incurred as a result of proceedings
brought against them.
 
                                      69
<PAGE>
 
                         PART 1. FINANCIAL INFORMATION
 
                         INDEPENDENT AUDITORS' REPORT
 
Merisel, Inc.:
 
  We have audited the accompanying consolidated balance sheets of Merisel,
Inc. and subsidiaries as of December 31, 1995 and 1996, and the related
consolidated statements of operations, changes in stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
 
  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
  In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Merisel, Inc. and
subsidiaries at December 31, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
 
Deloitte & Touche LLP
 
Los Angeles, California
April 14, 1997
 
                                      F-1
<PAGE>
 
                         MERISEL, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                             DECEMBER 31,
                                                          --------------------
                                                             1995       1996
                                                          ----------  --------
                         ASSETS
                         ------
<S>                                                       <C>         <C>
CURRENT ASSETS:
  Cash and cash equivalents.............................. $    1,378  $ 44,678
  Accounts receivable (net of allowances of $24,786 and
   $23,684 at December 31, 1995 and 1996, respectively)..    413,057   168,295
  Inventories............................................    561,230   392,557
  Prepaid expenses and other current assets..............     17,919    16,925
  Income taxes receivable................................     35,116     2,183
  Deferred income tax benefit............................      6,657       482
                                                          ----------  --------
    Total current assets.................................  1,035,357   625,120
PROPERTY AND EQUIPMENT, NET..............................     90,381    61,430
COST IN EXCESS OF NET ASSETS ACQUIRED, NET...............     93,287    41,724
OTHER ASSETS.............................................     11,309     2,765
                                                          ----------  --------
    TOTAL ASSETS......................................... $1,230,334  $731,039
                                                          ==========  ========
<CAPTION>
          LIABILITIES AND STOCKHOLDERS' EQUITY
          ------------------------------------
<S>                                                       <C>         <C>
CURRENT LIABILITIES:
  Accounts payable....................................... $  621,990  $383,548
  Accrued liabilities....................................     71,483    37,544
  Short-term debt........................................     21,620
  Long-term debt--current................................     35,000     9,084
  Subordinated debt--current.............................      4,400     4,400
                                                          ----------  --------
    Total current liabilities............................    754,493   434,576
LONG-TERM DEBT...........................................    299,271   268,079
SUBORDINATED DEBT........................................     17,600    13,200
CAPITALIZED LEASE OBLIGATIONS............................      4,504       187
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
  Preferred stock, $.01 par value; authorized 1,000,000
   shares; none issued or outstanding....................
  Common stock, $.01 par value; authorized 50,000,000
   shares; outstanding 29,863,500 and $30,078,500 at
   December 31, 1995 and 1996, respectively..............        299       301
  Additional paid-in capital.............................    141,938   142,300
  Retained earnings (accumulated deficit)................     19,211  (121,164)
  Cumulative translation adjustment......................     (6,982)   (6,440)
                                                          ----------  --------
    Total stockholders' equity...........................    154,466    14,997
                                                          ----------  --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............... $1,230,334  $731,039
                                                          ==========  ========
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                      F-2
<PAGE>
 
                         MERISEL, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
 
<TABLE>
<CAPTION>
                                             FOR THE YEARS ENDED DECEMBER 31,
                                             ---------------------------------
                                                1994       1995        1996
                                             ---------- ----------  ----------
<S>                                          <C>        <C>         <C>
NET SALES................................... $5,018,687 $5,956,967  $5,522,824
COST OF SALES...............................  4,676,164  5,633,278   5,233,570
                                             ---------- ----------  ----------
GROSS PROFIT................................    342,523    323,689     289,254
SELLING, GENERAL AND ADMINISTRATIVE
 EXPENSES...................................    281,796    317,195     295,021
IMPAIRMENT LOSSES...........................                51,383      42,033
RESTRUCTURING CHARGE........................                 9,333
                                             ---------- ----------  ----------
OPERATING INCOME (LOSS).....................     60,727    (54,222)    (47,800)
INTEREST EXPENSE............................     29,024     37,583      37,431
LOSS ON SALE OF EUROPEAN, MEXICAN AND LATIN
 AMERICAN OPERATIONS........................                            33,455
OTHER EXPENSE...............................     11,752     13,885      20,150
                                             ---------- ----------  ----------
INCOME (LOSS) BEFORE INCOME TAXES...........     19,951   (105,690)   (138,836)
PROVISION (BENEFIT) FOR INCOME TAXES........      8,341    (21,779)      1,539
                                             ---------- ----------  ----------
NET INCOME (LOSS)........................... $   11,610 $  (83,911) $ (140,375)
                                             ========== ==========  ==========
NET INCOME (LOSS) PER SHARE................. $     0.38 $    (2.82) $    (4.68)
                                             ========== ==========  ==========
WEIGHTED AVERAGE NUMBER OF SHARES...........     30,389     29,806      30,001
                                             ========== ==========  ==========
</TABLE>
 
 
          See accompanying notes to consolidated financial statements.
 
                                      F-3
<PAGE>
 
                         MERISEL, INC. AND SUBSIDIARIES
 
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                        RETAINED
                           COMMON STOCK    ADDITIONAL   EARNINGS   CUMULATIVE
                         -----------------  PAID-IN   (ACCUMULATED TRANSLATION
                           SHARES   AMOUNT  CAPITAL     DEFICIT)   ADJUSTMENT    TOTAL
                         ---------- ------ ---------- ------------ ----------- ---------
<S>                      <C>        <C>    <C>        <C>          <C>         <C>
BALANCE AT DECEMBER 31,
 1993................... 29,604,300  $296   $140,775   $  91,512     $(8,726)  $ 223,857
  Exercise of stock
   options and other....    112,300     1        474                                 475
  Cumulative translation
   adjustment...........                                                 222         222
  Net income............                                  11,610                  11,610
                         ----------  ----   --------   ---------     -------   ---------
BALANCE AT DECEMBER 31,
 1994................... 29,716,600   297    141,249     103,122      (8,504)    236,164
  Exercise of stock
   options and other....    146,900     2        689                                 691
  Cumulative translation
   adjustment...........                                               1,522       1,522
  Net loss..............                                 (83,911)                (83,911)
                         ----------  ----   --------   ---------     -------   ---------
BALANCE AT DECEMBER 31,
 1995................... 29,863,500   299    141,938      19,211      (6,982)    154,466
  Exercise of stock
   options and other....    215,000     2        362                                 364
  Cumulative translation
   adjustment...........                                                 542         542
  Net loss..............        --    --         --     (140,375)               (140,375)
                         ----------  ----   --------   ---------     -------   ---------
BALANCE AT DECEMBER 31,
 1996................... 30,078,500  $301   $142,300   $(121,164)    $(6,440)  $  14,997
                         ==========  ====   ========   =========     =======   =========
</TABLE>
 
 
          See accompanying notes to consolidated financial statements.
 
                                      F-4
<PAGE>
 
                         MERISEL, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                           FOR THE YEARS ENDED DECEMBER 31,
                                           -----------------------------------
                                              1994        1995        1996
                                           -----------  ---------  -----------
<S>                                        <C>          <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income (loss)........................ $    11,610  $ (83,911)  $ (140,375)
 Adjustments to reconcile net income to
  net cash provided by (used for)
  operating activities:
  Depreciation and amortization...........      16,101     20,509       18,789
  Provision for doubtful accounts.........      18,851     16,335       17,421
  Impairment losses.......................                 51,383       42,033
  Loss on Sale of European, Mexican and
   Latin American businesses..............                              33,455
  Deferred income taxes...................      (4,973)     5,471        6,175
  Changes in assets and liabilities, net
   of the effects from acquisitions:
   Accounts receivable....................    (152,912)  (103,553)     132,480
   Inventories............................     (75,314)   (43,524)      91,059
   Prepaid expenses and other current
    assets................................      (6,604)    (8,186)     (14,612)
   Income taxes receivable................                (35,116)      33,470
   Accounts payable.......................      94,385     98,756     (179,304)
   Accrued liabilities....................      19,690     23,872      (11,342)
   Income taxes payable...................      (3,275)    (4,422)
                                           -----------  ---------  -----------
    Net cash (used for) provided by
     operating activities.................     (82,441)   (62,386)      29,249
                                           -----------  ---------  -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchase of property and equipment.......     (40,163)   (49,082)      (9,652)
 Proceeds from sale of property and
  equipment...............................                               5,975
 Payment of earn out obligation from
  ComputerLand acquisition................                             (13,409)
 Cash proceeds from sale of Australian
  business................................                               8,515
 Cash proceeds from sale of European,
  Mexican and Latin American businesses...                             110,379
 Acquisitions, net of cash acquired.......     (86,343)
 Other investing activities...............                                (767)
                                           -----------  ---------  -----------
    Net cash (used for) provided by
     investing activities.................    (126,506)   (49,082)     101,041
                                           -----------  ---------  -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Borrowings under revolving line of
  credit..................................   1,766,300    937,275    1,448,358
 Repayments under revolving line of
  credit..................................  (1,742,114)  (944,960)  (1,466,150)
 Net borrowings (repayments) under foreign
  bank facilities.........................     (13,058)    (9,980)     (17,742)
 Borrowings (repayments) under senior
  notes...................................     125,000                 (43,195)
 Repayment under subordinated debt
  agreement...............................                              (4,400)
 Proceeds from sale of accounts
  receivable..............................      75,000    125,320
 Proceeds from issuance of common stock...         475        691          364
                                           -----------  ---------  -----------
    Net cash provided by financing
     activities...........................     211,603    108,346      (82,765)
                                           -----------  ---------  -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH...         863        967       (4,225)
                                           -----------  ---------  -----------
NET INCREASE (DECREASE) IN CASH AND CASH
 EQUIVALENTS..............................       3,519     (2,155)      43,300
CASH AND CASH EQUIVALENTS, BEGINNING OF
 PERIOD...................................          14      3,533        1,378
                                           -----------  ---------  -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD.. $     3,533  $   1,378  $    44,678
                                           ===========  =========  ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
 INFORMATION:
 Cash paid (received) during the year for:
  Interest (net of interest capitalized of
   $1,053 and $3,281 for 1994 and 1995,
   respectively. No interest was
   capitalized in 1996)................... $    21,237  $  27,118  $    30,456
  Income taxes............................      11,185     10,747      (36,068)
 Noncash activities:
  Capital lease obligations entered into..                  5,708          187
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                      F-5
<PAGE>
 
                        MERISEL, INC. AND SUBSIDIARIES
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
                       DECEMBER 31, 1994, 1995 AND 1996
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  General. Merisel, Inc., a Delaware corporation and a holding company
(together with its subsidiaries, "Merisel" or the "Company"), is a leading
distributor of computer hardware, networking equipment and software products.
Through its main operating subsidiary, Merisel Americas, Inc. ("Merisel
Americas") and its subsidiaries (the "Operating Company"), the Company markets
products and services throughout North America, and has achieved operational
efficiencies that have made it a valued partner to a broad range of computer
resellers, including value-added resellers (VARs), retailers, and
commercial/dealers. The Company also has established the Merisel Open
Computing Alliance (MOCA(TM)), which primarily supports Sun Microsystems'
product sales and installations.
 
  Liquidity. In 1996, the Company incurred a net loss of $140,375,000 which
includes impairment losses of $42,033,000 and a loss on the sale of the
Company's European, Mexican and Latin American Business (such businesses are
referred to herein as "EML") of $33,455,000. The impairment losses were
associated with the intangible assets of the Company's wholly owned subsidiary
Merisel FAB, Inc. ("Merisel FAB") which operated the Company's Franchise and
Aggregation Business ("FAB"). As of March 28, 1997 the Company sold
substantially all of the assets of Merisel FAB to Synnex Information
Technologies, Inc. ("Synnex") (See Note 12--"Subsequent Events"). EML was sold
as of September 27, 1996 to CHS Electronics, Inc. ("CHS") (See Note 5--
"Dispositions"). Management believes that a substantial portion of operating
losses incurred in 1996 relate to the implementation of its 1996 Business Plan
which focused upon the conservation of cash, the sale of assets, and the
improvement of business processes, particularly in the area of accounts
payable.
 
  The Company has developed and is implementing a business strategy for 1997
(the "1997 Business Strategy") that focuses on profitable North American
revenue growth instead of managing for cash. Under the 1997 Business Strategy,
Merisel intends to concentrate on strengthening and building its sales
infrastructure, improving gross margins, and controlling operating expenses.
Other priorities include continuing efforts to achieve operational excellence,
addressing financial controls and policies by emphasizing margin improvements
and tight expense control, and implementing a strategy focused on the United
States and Canada.
 
  In order to meet its debt obligations in mid-1997 (See Note 9--"Debt").
Merisel is actively pursuing a restructuring plan with the debtholders under
its various financing agreements. Effective April 14, 1997, the Company
entered into an agreement (the "Agreement") with holders of more than 75% of
the outstanding principal amount of its 12.5% Senior Notes ("12.5% Notes")
Pursuant to the terms of the Agreement, upon the fulfillment of certain
conditions, holders of the 12.5% Notes would exchange (the "Exchange") their
12.5% Notes for common stock, par value $.01 per share, of the Company (the
"Common Stock"), which would equal 80% of the outstanding shares of Common
Stock immediately after the Exchange. Contemporaneously with the Exchange, the
holders of Common Stock would receive warrants (the "Warrants") to purchase
Common Stock constituting 17.5% of the Common Stock outstanding immediately
after giving effect to the Exchange.
 
  The Exchange is subject to certain conditions including (i) stockholder
approval of an amendment to the Certificate of Incorporation of the Company to
authorize the additional shares of Common Stock, and (ii) consents to
amendments of the $85,208,000 Revolving Credit Agreement ("Revolving Credit
Agreement") and the agreement governing the $56,805,000 principal amount of
the 11.5% Senior Note Purchase Agreement ("11.5% Notes") by 100% of the
lenders under such agreements to extend the maturity of such indebtedness to
January 31, 1999 (the "Extension"), or a refinancing of such indebtedness
prior to October 31, 1997. The Company intends to effectuate the Exchange by
commencing a registered exchange offer which would be conditioned on 100% of
the holders of the 12.5% Notes tendering such notes for Common Stock. If less
than 100% of the holders of the 12.5% Notes tender in the exchange offer,
Merisel, Inc., the parent company, intends to file a "prepackaged" plan of
reorganization under Chapter 11 of the U.S. Bankruptcy Code. Merisel Americas
 
                                      F-6
<PAGE>
 
                        MERISEL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
and Merisel Canada (the subsidiaries through which the Company's distribution
business is conducted) would not be a party to any prepackaged plan which may
be required. Any such prepackaged plan, if filed, would affect Merisel, Inc.
only, and as such would not affect the continuing and timely payment in full
of such subsidiaries' obligations to suppliers, employees and other creditors.
In addition, such a prepackaged plan would be subject only to the approval of
the holders of the 12.5% Notes, as no other creditors of the Company or its
operating subsidiaries would be impaired by the plan as contemplated. The
holders of the required percentage of the outstanding principal amount of
12.5% Notes have agreed to vote in favor of the prepackaged plan subject to
fulfillment of the other conditions to the Exchange.
 
  In connection with the Extension, the Company has entered into an agreement
in principle with the holders of in excess of 60% of the outstanding principal
amount of the Revolving Credit Agreement and 66 2/3% of the 11.5% Notes,
pursuant to which such holders have agreed, subject to execution of definitive
documentation, to extend the respective maturities to January 31, 1999. In
consideration of such Extension, the Company has agreed to pay certain fees
related to the Extension and, commencing in 1998, additional fees payable
quarterly together with an increase in the interest rate of 0.5% per quarter
for each quarter that the debt remains outstanding. The Company would have the
right to prepay such debt at anytime without penalty. There can be no
assurance that the remaining creditors under the Revolving Credit Agreement
and the 11.5% Notes (all of whom must approve the Extension for it to be
effective) will approve the Extension. In the event that the Extension does
not become effective, the Company believes that, assuming it achieves its 1997
Business Strategy, it will have reasonable prospects for a refinancing of such
indebtedness in the latter half of 1997, particularly if the Exchange is
consummated concurrently with such refinancing.
 
  Effective immediately, and throughout the period the Company is implementing
the Exchange and Extension, in excess of 75% of the holders of the 12.5% Notes
have agreed to waive any default arising from the nonpayment of interest due
in 1997 on the 12.5% Notes, and the required percentage of holders of the
Revolving Credit Agreement, the 11.5% Notes, and the Subordinated Notes of
Merisel Americas have agreed to waive any cross-default resulting from such
non-payment. In consideration for such waivers, Merisel Americas has agreed to
pay certain fees to the holders of the Revolving Credit Agreement and the
11.5% Notes, and, subject to the Extension becoming effective, to increase the
interest rate by 0.5% per quarter during 1998 on the Subordinated Notes while
such debt remains outstanding. Accordingly, the Company believes that it will
be able to satisfy all of its material debt obligations under such instruments
in 1997 pending the consummation of the Exchange and the Extension. Interest
will continue to be due and payable on the outstanding 12.5% Notes that have
not consented to the waiver at the time such payments are due; however, such
holders will not be able to accelerate the payment of the principal of the
12.5% Notes under the terms of the Indenture governing the 12.5% Notes.
 
  At December 31, 1996, the Company had cash and cash equivalents of
approximately $44,700,000. In the opinion of management, as a result of the
Agreement reached with the holders of the 12.5% Notes and the waivers received
from the holders of the Revolving Credit Agreement, the 11.5% Notes and the
Subordinated Notes, cash on hand, together with anticipated cash flow in 1997
will be sufficient to meet the Company's liquidity requirements for the next
12 months.
 
  Risks and Uncertainties. The Company believes that the diversity and breadth
of the Company's product and service offerings, customers, and the general
stability of the economies in the markets in which it operates significantly
mitigate the risk that a severe impact will occur in the near term as a result
of changes in its customer base, competition, or composition of its markets.
Although Merisel regularly stocks products and accessories supplied by more
that 500 manufacturers, 60% of the Company's net sales in 1996 (as compared to
63% in 1995, and 56% in 1994) were derived from products supplied by Merisel's
ten largest manufacturers.
 
                                      F-7
<PAGE>
 
                        MERISEL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
  The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Significant estimates include collectibility of accounts receivable,
inventory, deferred income taxes, accounts payable, sales returns and
recoverability of long-term assets.
 
  New Accounting Pronouncement. The Company has chosen to continue to account
for stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations. Accordingly, compensation cost for
stock options is measured as the excess, if any, of the quoted price of the
Company's stock at the date of grant over the amount an employee must pay to
acquire the stock. Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation." (SFAS 123) encourages, but does not
require companies to record compensation cost for stock-based employee
compensation plans at fair value. Although adoption of SFAS 123 is optional,
pro forma disclosures illustrating the effect on net income and earnings per
share as if the provisions of SFAS 123 had been adopted, are required and are
presented in Note 11 "Employee Stock Options and Benefit Plans".
 
  Revenue Recognition, Returns and Sales Incentives. The Company recognizes
revenue from hardware and software sales as products are shipped. The Company,
subject to certain limitations, permits its customers to exchange products or
receive credits against future purchases. The Company offers its customers
several sales incentive programs which, among others, include funds available
for cooperative promotion of product sales. Customers earn credit under such
programs based upon the volume of purchases. The cost of these programs is
partially subsidized by marketing allowances provided by the Company's
manufacturers. The allowances for sales returns and costs of customer
incentive programs are accrued concurrently with the recognition of revenue.
The Company does not have any arrangements with customers whereby it
recognizes revenue from the shipment of any product that is subject to sell-
through arrangements with resellers.
 
  In connection with FAB, the Company collected initial franchise fees, "cost
plus" markups and royalties. Initial franchise fees, were recognized as income
when substantially all services and conditions relating to the sale of the
franchise had been performed or satisfied. "Cost plus" markups, which range
from 1.95% to 3.10%, were charged to franchisees for products purchased from
ComputerLand. These markups, as well as royalties, which range from 0.5% to
5.0% of franchise sales were recognized as such sales occur. Royalty revenues
were $5,812,000 and $10,500,000 in 1996 and 1995 respectively. Franchise
agreements range from one to ten years in length. As of March 28th, 1997 the
Company completed the sale of substantially all of the assets of Merisel FAB.
(See Note 12--"Subsequent Events")
 
  Cash and Cash Equivalents. The Company considers all highly liquid
investments purchased with initial maturities of three months or less to be
cash equivalents.
 
  Inventories. Inventories are valued at the lower of cost or market; cost is
determined on the average cost method.
 
  Property and Depreciation. Property and equipment are stated at cost less
accumulated depreciation. Depreciation is provided on the straight-line method
over the estimated useful lives of the assets, generally three to seven years.
Leasehold improvements are amortized over the shorter of the life of the lease
or the improvement.
 
  The Company capitalizes all direct costs incurred in the construction of
facilities and the development and installation of new computer and warehouse
management systems. Such amounts include the costs of materials and other
direct construction costs, purchased computer hardware and software, outside
programming and consulting fees, direct employee salaries and interest.
 
                                      F-8
<PAGE>
 
                        MERISEL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
  Cost in Excess of Net Assets Acquired. Cost in excess of net assets acquired
resulted from the acquisition in January 1994 of FAB and the acquisition in
1990 of Microamerica, Inc. The cost in excess of net assets acquired from
Microamerica, Inc. is being amortized over a period of 40 years using the
straight line method. The cost in excess of net assets acquired from FAB was
being amortized over an aggregate period of 25 years (see Note 3--
"Acquisitions"). As of March 28, 1997, the Company completed the sale of
substantially all of the assets of Merisel FAB. In connection with such sale,
the cost in excess of net assets acquired related to Merisel FAB will be
written off (see Note 12--"Subsequent Events"). Accumulated amortization was
$12,186,000 and $14,429,000 at December 31, 1995 and 1996 respectively.
 
  The Company reviews the recoverability of intangible assets to determine if
there has been any permanent impairment. This assessment is performed based on
the estimated undiscounted future cash flows from operating activities
compared with the carrying value of intangible assets. If the undiscounted
future cash flows are less than the carrying value, an impairment loss is
recognized, measured by the difference between the carrying value and fair
value of the assets (see Note 4--"Impairment Losses").
 
  Income Taxes. Deferred income taxes represent the amounts which will be paid
or received in future periods based on the tax rates that are expected to be
in effect when the temporary differences are scheduled to reverse.
 
  At December 31, 1995, the cumulative amount of undistributed earnings on
which the Company has not recognized United States income taxes was
approximately $7,000,000, representing primarily earnings in the Company's
Canadian subsidiary. No undistributed foreign earnings remained in the Company
as of December 31, 1996.
 
  Concentration of Credit Risks. Financial instruments which subject the
Company to credit risk consist primarily of cash equivalents, trade accounts
receivable, and forward foreign currency exchange contracts. Concentration of
credit risk with respect to trade accounts receivable are generally
diversified due to the large number of entities comprising the Company's
customer base and their geographic dispersion. The Company performs ongoing
credit evaluations of its customers and maintains an allowance for potential
credit losses, and in certain locations maintains credit insurance as the
Company deems appropriate. The Company diversifies its credit risk with
respect to forward foreign exchange contracts due to the number of
institutions with which it enters into contracts. The Company actively
evaluates the creditworthiness of the financial institutions with which it
conducts business.
 
  Fair Values of Financial Instruments. The fair values of financial
instruments, other than long-term debt, closely approximate their carrying
value. The estimated fair value of long-term debt including current
maturities, based on reference to quoted market prices, was less than the
carrying value by approximately $32,300,000 and $60,776,000 as of December 31,
1995 and 1996, respectively.
 
  Foreign Currency Translation. Assets and liabilities of foreign subsidiaries
are translated into United States dollars at the exchange rate in effect at
the close of the period. Revenues and expenses of these subsidiaries are
translated at the average exchange rate during the period. The aggregate
effect of translating the financial statements of foreign subsidiaries at the
above rates is included in a separate component of stockholders' equity
entitled Cumulative Translation Adjustment. In addition, the Company advances
funds in the normal course of business to certain of its foreign subsidiaries
which are not expected to be repaid in the foreseeable future. Translation
adjustments resulting from these advances are also included in Cumulative
Translation Adjustment.
 
  Foreign Exchange Instruments. The Company's use of derivatives is limited to
the purchase of foreign exchange contracts in order to minimize foreign
exchange transaction gains and losses. The Company purchases forward dollar
contracts to hedge short-term advances to its foreign subsidiary and to hedge
commitments to
 
                                      F-9
<PAGE>
 
                        MERISEL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
acquire inventory for sale and does not use the contracts for trading
purposes. The Company's foreign exchange rate contracts minimize the Company's
exposure to exchange rate movement risk, as any gains or losses on these
contracts are offset by gains and losses on the transactions being hedged. At
December 31, 1995, the Company had approximately $131,000,000 of foreign
exchange contracts outstanding, the carrying value of which does not differ
significantly from their fair value. There were no outstanding foreign
exchange contracts as of December 31, 1996. In 1994 and 1995 there was a net
foreign currency loss of $1,422,000, and $806,000 respectively. These losses
were primarily due to the devaluation of the Mexican Peso. In 1996 the Company
recorded a net foreign currency gain of $161,000 which was also primarily
related to the performance of the Mexican Peso against the United States
dollar. These amounts are recorded as other expense.
 
  Net Income (Loss) Per Share. Net income (loss) per share is computed by
dividing net income (loss) by the weighted average number of shares of common
stock and common stock equivalents (common stock options) outstanding during
the related period, unless such inclusion is antidilutive. The weighted
average number of shares includes shares issuable upon the assumed exercise of
stock options less the number of shares assumed purchased with the proceeds
available from such exercise.
 
  Fiscal Periods. The Company's fiscal year is the 52- or 53-week period
ending on the Saturday nearest to December 31 and its fiscal quarters are the
13- or 14-week periods ending on the Saturday nearest to March 31, June 30,
September 30 and December 31. For clarity of presentation, the Company has
described year-ends presented as if the years ended on December 31 and
quarter-ends presented as if the quarters ended on March 31, June 30,
September 30 and December 31. The 1994, 1995 and 1996 fiscal years were 52
weeks in duration. All quarters presented for 1995 and 1996 were 13 weeks in
duration.
 
2. RESTRUCTURING CHARGE
 
  During the first six months of 1995, the Company recorded charges of
$9,333,000 associated with resizing and restructuring several of the Company's
operations. The charge consisted of $4,578,000 of severance charges for the
involuntary termination of approximately 240 employees, $2,830,000 for
anticipated warehouse closures in North America and $1,925,000 for the
anticipated consolidation of certain warehouses in Europe. As of December 31,
1995, $4,543,000 of these charges remained in accrued liabilities.
 
  As a result of the Company's sale of EML, the Company's plans regarding the
consolidation of certain warehouses in Europe were no longer necessary. (see
Note 5--"Dispositions") As a result, approximately $1,925,000 of the unused
restructuring charge provided in 1995 was offset against the loss on the sale
of EML. The remaining unused restructuring charge of approximately $2,200,000
was used to offset severance costs associated with corporate downsizing as a
result of the sale of EML. As of December 31, 1996, $481,000 of restructuring
charges remained in accrued liabilities.
 
3. ACQUISITIONS
 
  On January 31, 1994, the Company, through its wholly-owned subsidiary,
Merisel FAB, acquired certain assets of the United States Franchise and
Distribution Division (the "F&D Division") of Vanstar Corporation (formerly
ComputerLand Corporation) (the "ComputerLand Acquisition"). The Company paid
$80,200,000 in cash at closing for the acquired assets and $2,100,000 of
direct acquisition costs. In addition, the Company paid Vanstar a negotiated
settlement of $13,400,000 in earn out obligations under the original purchase
agreement, net of rebates. The acquisition was accounted for as a purchase.
Based on an independent valuation prepared for the company, $96,300,000 of the
purchase price was allocated to intangible assets with an estimated aggregate
life of 25 years. The intangible assets were subsequently written down by
$30,000,000 in the fourth quarter of 1995, $40,000,000 in the third quarter of
1996, and $2,033,000 in the fourth quarter of 1996 (See Note 4--"Impairment
Losses").
 
                                     F-10
<PAGE>
 
                        MERISEL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
  In connection with the ComputerLand Acquisition, Merisel FAB and Vanstar
entered into the Distribution and Services Agreement (the "Service Agreement")
which as extended and amended provided significant distribution and other
support services to Merisel FAB for a contractually agreed upon fee. Also
under the terms of the Services Agreement, Vanstar agreed to provide extended
credit to Merisel FAB (the "Vanstar Payable") which was to be reduced by
scheduled payment amounts. At December 31, 1995 and 1996, $23,500,000 and
$20,000,000, respectively, was outstanding on the Vanstar Payable and is
included in accounts payable. The Vanstar Payable was assumed by, and the
Service Agreement was assigned to, Synnex pursuant to the sale of
substantially all of the assets of Merisel FAB as of March 28, 1997. (See Note
12--"Subsequent Events.")
 
4. IMPAIRMENT LOSSES
 
  In the quarter ended September 30, 1996, the Company determined that a
portion of the carrying value for certain of its identifiable intangible
assets would not be recovered from their use in future operations.
Accordingly, these assets were written down to their fair values as of
September 30, 1996. An impairment was recognized on the intangible assets of
the Franchise and Aggregation Business (FAB), due to declining sales growth,
margins and earnings, and the resulting negative trend in projected cash
flows. The intangible assets of FAB were acquired in January 1994 (see Note 3)
and had a net book value of $57,600,000 at September 30, 1996, prior to the
write down. Fair value of the intangible assets was measured by discounting
future expected cash flows, which resulted in a required write down of
$40,000,000. In December 1996, the Company recorded an additional $2,033,000
charge to adjust FAB assets to their fair value based on the provisions of a
definitive agreement to sell such assets in the first quarter of 1997. (See
Note 12--"Subsequent Events.") An impairment loss of $30,000,000 associated
with these assets was previously recorded in the fourth quarter of 1995.
 
  The Company undertook the process of converting its North American
operations to new computer operating systems from 1993 through 1995. Such
undertaking was completed in the Canadian subsidiary, for a substantially
higher cost than anticipated. In addition, the Company has decided to delay
the installation of these systems in the United States beyond 1997. As a
result of the cost overruns, the Company's experience in Canada and the
decision to delay installation in the United States, it was determined that
the value of these assets had been impaired, which resulted in a write down at
the end of the fourth quarter of 1995 of $19,500,000 in capitalized costs. The
book value of these capitalized costs was $44,600,000 at December 31, 1995
prior to the write down, and $25,100,000 subsequent to the write down. The
write down was determined by identifying certain cost categories that would be
duplicated with future development efforts and which would not provide value
to the Company.
 
  In March 1996, as of January 1, 1996 the Company sold its interest in its
wholly owned Australian subsidiary, Merisel Pty Ltd. ("Australia"), to Tech
Pacific Holdings Ltd. Under the terms of the agreement, the Company received
consideration of $9,900,000 in the form of repayment of certain intercompany
debt obligations. The Company recognized a $1,900,000 charge as an impairment
loss for the write down of the Australian net assets to their net realizable
value in the fourth quarter of 1995. These net assets, after write down,
totaled $9,900,000 and were classified in the December 31, 1995 consolidated
balance sheet as other current assets. Prior to the $1,900,000 charge, the
Australian subsidiary reported a loss of $6,100,000 for 1995.
 
5. DISPOSITIONS
 
  On October 4, 1996, Merisel completed the sale of EML to CHS. The sale was
effective as of September 27, 1996. A loss of $33,455,000, which includes
approximately $7,400,000 of direct costs related to the sale, was recorded on
such sale. The sale price, computed based on the combined closing balance
sheet of EML, was $147,631,000, consisting of (i) $110,379,000 in cash, (ii)
the assumption of Merisel's European asset
 
                                     F-11
<PAGE>
 
                        MERISEL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
securitization agreement against which $26,252,000 was outstanding at closing
and (iii) a receivable for $11,000,000, payable in three installments of
$3,000,000, $4,000,000, and $4,000,000, due at various date through 1997.
 
  In addition, effective January 1, 1996 the Company completed the sale of its
Australian Subsidiary ("see Note 4"). Following is summarized pro forma
operating results assuming that the Company had sold EML and its Austrailian
subsidiary as of January 1, 1995.
 
<TABLE>
<CAPTION>
                                                         TWELVE MONTHS ENDED
                                                            DECEMBER 31,
                                                        ----------------------
                                                           1995        1996
                                                        ----------  ----------
                                                        (IN THOUSANDS EXCEPT
                                                           PER SHARE DATA)
      <S>                                               <C>         <C>
      Net Sales........................................ $4,568,915  $4,462,653
      Gross Profit.....................................    228,293     216,032
      Net loss.........................................    (67,737)   (100,052)
                                                        ==========  ==========
      Net loss per share............................... $    (2.27) $    (3.33)
                                                        ==========  ==========
      Weighted Average Shares Outstanding..............     29,806      30,001
                                                        ==========  ==========
</TABLE>
 
  EML is not an incorporated entity for which historical financial statements
were prepared. The historical balances used in preparing the above pro forma
balances represent combined balances obtained from the separate unaudited
financial statements for the individual entities comprising EML. The pro forma
results include adjustments for general and administrative expenses that would
not have been eliminated due to the sale of EML. The pro forma adjustments
also include adjustments for amortization of intangible assets and for
interest expense on debt repaid with a portion of the proceeds from the sale,
net of the effect of an interest rate increase resulting from the
renegotiation of certain debt agreements as a result of the sale. Historical
balances obtained from Australia's unaudited financial statements were also
used in preparing the pro forma balances above.
 
  Effective March 28, 1997, Merisel completed the sale of substantially all of
the assets of Merisel FAB to a wholly owned subsidiary of Synnex. The purchase
price was approximately $31,992,000. (See Note 12-- "Subsequent Events".)
 
6. SALE OF ACCOUNTS RECEIVABLE
 
  The Company's wholly owned subsidiary, Merisel Americas, sells trade
receivables on an ongoing basis to its wholly owned subsidiary, Merisel
Capital Funding, Inc. ("Merisel Capital Funding"). Pursuant to an agreement
with a securitization Company (the "Receivables Purchase and Servicing
Agreement"), Merisel Capital Funding, in turn, sells such receivables to the
securitization Company on an ongoing basis, which yields proceeds of up to
$300,000,000 at any point in time. Merisel Capital Funding's sole business is
the purchase of trade receivables from Merisel Americas. Merisel Capital
Funding is a separate corporate entity with its own separate creditors, which
upon its liquidation will be entitled to be satisfied out of Merisel Capital
Funding's assets prior to any value in Merisel Capital Funding becoming
available to Merisel Capital Funding's equity holders. This facility expires
in October 2000. In connection with the sale of EML and as a result of the
substantial losses incurred by the Company, Merisel Americas and Merisel
Capital Funding were required to, and did obtain, amendments and waivers with
respect to certain covenants under this facility.
 
  Effective December 15, 1995, Merisel Canada, Inc. ("Merisel Canada") entered
into a receivables purchase agreement with a securitization Company to provide
funding for Merisel's Canadian subsidiary. In accordance with this agreement,
Merisel Canada sells receivables to the securitization Company, which yields
proceeds of up to $150,000,000 Canadian dollars. The facility expires December
12, 2000, but is extendible by notice from the securitization Company, subject
to the Company's approval.
 
                                     F-12
<PAGE>
 
                        MERISEL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
  Effective October 16, 1995, Merisel U.K. Ltd. ("Merisel U.K.") entered into
a receivables purchase agreement with a securitization Company to provide
funding for Merisel's U.K. subsidiary. This facility, including $26,252,000
outstanding thereunder, was assumed by CHS in connection with the purchase of
EML.
 
  Under these securitization facilities, the receivables are sold at face
value with payment of a portion of the purchase price being deferred. As of
December 31, 1996 the total amount outstanding under these facilities was
$248,820,000. Fees incurred in connection with the sale of accounts receivable
for the years ended December 31, 1994, 1995 and 1996 were $7,151,000,
$10,291,000 and $16,029,000, respectively, and are recorded as other expense.
 
7. PROPERTY AND EQUIPMENT
 
  Property and equipment consisted of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                  ESTIMATED    DECEMBER 31,
                                                 USEFUL LIFE ------------------
                                                 (IN YEARS)    1995      1996
                                                 ----------- --------  --------
      <S>                                        <C>         <C>       <C>
      Land.....................................              $  9,678  $  5,818
      Building.................................         20      3,880     3,880
      Equipment................................     3 to 7     76,918    65,628
      Furniture and fixtures...................     3 to 5     13,777     8,575
      Leasehold improvements...................    3 to 20     15,963     9,025
      Construction in progress.................                21,365    21,850
                                                             --------  --------
        Total..................................               141,581   114,776
      Less accumulated depreciation and amorti-
       zation..................................               (51,200)  (53,346)
                                                             --------  --------
      Property and equipment, net..............              $ 90,381  $ 61,430
                                                             ========  ========
</TABLE>
 
8. INCOME TAXES
 
  The components of income (loss) before income taxes consisted of the
following (in thousands):
 
<TABLE>
<CAPTION>
                                                         DECEMBER 31,
                                                  -----------------------------
                                                   1994      1995       1996
                                                  -------  ---------  ---------
      <S>                                         <C>      <C>        <C>
      Domestic................................... $23,430  $ (71,884) $(100,139)
      Foreign....................................  (3,479)   (33,806)   (38,697)
                                                  -------  ---------  ---------
      Total...................................... $19,951  $(105,690) $(138,836)
                                                  =======  =========  =========
</TABLE>
 
  The provision (benefit) for income taxes consisted of the following (in
thousands):
 
<TABLE>
<CAPTION>
                                                           DECEMBER 31,
                                                     --------------------------
                                                      1994      1995     1996
                                                     -------  --------  -------
      <S>                                            <C>      <C>       <C>
      Current:
        Federal..................................... $10,675  $(24,627) $(1,706)
        State.......................................   2,429       130      360
        Foreign.....................................     210    (2,753)  (3,290)
                                                     -------  --------  -------
        Total Current...............................  13,314   (27,250)  (4,636)
                                                     -------  --------  -------
      Deferred:
        Domestic....................................  (4,325)    7,120    4,659
        Foreign.....................................    (648)   (1,649)   1,516
                                                     -------  --------  -------
        Total deferred..............................  (4,973)    5,471    6,175
                                                     -------  --------  -------
        Total provision (benefit)................... $ 8,341  $(21,779) $ 1,539
                                                     =======  ========  =======
</TABLE>
 
                                     F-13
<PAGE>
 
                        MERISEL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
  Deferred tax liabilities and assets were comprised of the following (in
thousands):
 
<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                             ------------------
                                                               1995      1996
                                                             --------  --------
      <S>                                                    <C>       <C>
      Deferred tax assets
        Net operating loss.................................. $  2,350  $ 26,328
        Expense accruals....................................    9,886    11,919
        State taxes.........................................    1,056      (372)
        Property and goodwill...............................    3,648    10,697
        Other, net..........................................    1,999     2,033
                                                             --------  --------
                                                               18,939    50,605
        Valuation allowances................................  (12,282)  (50,123)
                                                             --------  --------
          Total............................................. $  6,657  $    482
                                                             ========  ========
      Net deferred tax asset................................ $  6,657  $    482
                                                             ========  ========
</TABLE>
 
  The major elements contributing to the difference between the federal
statutory tax rate and the effective tax rate are as follows:
 
<TABLE>
<CAPTION>
                                                            FOR THE YEARS
                                                            ENDED DECEMBER
                                                                 31,
                                                           -------------------
                                                           1994  1995    1996
                                                           ----  -----   -----
      <S>                                                  <C>   <C>     <C>
      Statutory rate.....................................  35.0% (35.0)% (35.0)%
      Increase in U.S. valuation allowance...............          9.3    27.3
      State income taxes, less effect of federal
       deduction.........................................   4.0    0.1      .2
      Foreign income subject to tax at other than
       statutory rate....................................   2.5    3.2
      Goodwill amortization..............................   1.3    0.4      .2
      Foreign losses with benefits at less than statutory
       rate..............................................   6.7    0.1     7.2
      Utilization of net operating losses of foreign
       subsidiary........................................  (5.3)          (1.0)
      Other..............................................  (2.4)   1.3     2.2
                                                           ----  -----   -----
      Effective tax rate.................................  41.8% (20.6)%   1.1 %
                                                           ====  =====   =====
</TABLE>
 
  At December 31, 1995 and December 31, 1996, the Company had available net
operating loss carryforwards of $6,671,000 and $77,643,000, respectively which
expire at various dates through December 31, 2011.
 
9. DEBT
 
  At December 31, 1996, the Company's subsidiaries, Merisel Americas and
Merisel Europe, Inc. ("Merisel Europe") had unsecured senior borrowings, which
as amended, consisted of $56,805,000 of 11.5% notes by Merisel Americas, and a
$85,208,000 Revolving Credit Agreement by Merisel Americas and Merisel Europe,
all of which were outstanding. Advances under the Revolving Credit Agreement
bear interest at specific rates based upon market reference rates plus a
specified percentage. The average interest rate for the Revolving Credit
Agreement at December 31, 1996 was approximately 10.85%. In the year ended
December 31, 1996, the Company paid a total of $35,000,000 in aggregate
scheduled amortization payments under the 11.5% Notes and Revolving Credit
Agreement. Additionally, on October 4, 1996, the Company amended the 11.5%
Notes and the Revolving Credit Agreement in connection with the sale of EML
and permanently reduced the outstanding borrowings on the 11.5% Notes and the
Revolving Credit Agreement by $29,000,000 and $43,500,000, respectively. As a
result of the sale of EML, Merisel Europe no longer is an operating entity.
 
                                     F-14
<PAGE>
 
                        MERISEL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
  As amended, these agreements require that the Company make an aggregate of
five consecutive principal payments of $1,500,000 each on the last calendar
day of each month from February through June 1997 plus an additional principal
repayment of $7,500,000 on January 2, 1998. As amended, the 11.5% Notes and
the Revolving Credit Agreement provide that if the Company makes the June 30,
1997 interest payment on its $125,000,000 principal amount 12.5% Notes at any
time before January 31, 1998, then the Company shall make an aggregate
principal repayment of an additional $40,000,000 on the 11.5% Notes and the
Revolving Credit Agreement. Further, if the Company makes the December 31,
1997 interest payment on its 12.5% Notes at anytime before January 31, 1998,
the Company must make an additional aggregate principal payment of $30,000,000
on the 11.5% Notes and the Revolving Credit Agreement. The 11.5% Notes and the
Revolving Credit Agreement are due in full on January 31, 1998. The amendments
also provide that certain tax refunds and asset sale proceeds when received by
the Company shall be used to permanently prepay the 11.5% Notes and Revolving
Credit Agreement. The principal repayments will be shared ratably by the
lenders under the Revolving Credit Agreement and the holders of the 11.5%
Notes.
 
  The 11.5% Notes and the Revolving Credit Agreement contain various covenants
including those which prohibit the payment of cash dividends, require a
minimum amount of tangible net worth, and place limitations on the acquisition
of assets. These agreements also require the Company or certain of its
subsidiaries to maintain certain specified financial ratios. Such financial
ratios include: interest coverage; adjusted tangible net worth; earnings
before interest, taxes, depreciation, amortization and securitization expense;
total debt equivalents to adjusted tangible net worth; inventory turnover;
accounts payable; and minimum accounts payable to inventory. In connection
with the sale of EML, and as a result of the substantial losses incurred by
the Company, the Company was required to obtain, and did obtain waivers of
various covenants, including financial ratio covenants, contained in the 11.5%
Notes and the Revolving Credit Agreement and amendments of such covenants for
future periods.
 
  At December 31, 1996, Merisel Americas had outstanding an aggregate of
$17,600,000 of privately placed subordinated notes (the "Subordinated Notes").
The Subordinated Notes, as amended during 1996, provide for an interest rate
increase of .50% to 11.78% per annum effective April 15, 1996, and are
repayable in four remaining equal annual installments of $4,400,000 which was
due and paid in January 1997, and $4,400,000 due in March 1998, March 1999 and
in March 2000. Accrued interest on the Subordinated Notes is required to be
paid quarterly. The Subordinated Notes contain certain restrictive covenants,
including those that limit the Company's ability to incur debt, acquire the
stock of or merge with other corporations, sell certain assets and prohibit
the payment of dividends. The Subordinated Notes also incorporate the
financial covenants contained in the Senior Notes and the Revolving Credit
Agreement. In connection with the amendment of the Revolving Credit Agreement
and the Senior Notes described above, the Company was required to obtain and
did obtain an amendment of the Subordinated Note Purchase Agreement.
 
  On April 14, 1997 the Company obtained the Limited Waiver and Agreement to
Amend from the required number of holders of the 11.5% Notes, the Revolving
Credit Agreement and the Subordinated Notes. Under the Limited Waiver and
Agreement to Amend, the Company obtained certain waivers and consents
necessary to facilitate its debt restructuring. Among other items, the lenders
agreed to waive any default that may arise from the non-payment of interest on
the 12.5% Notes, the commencement of a "prepackaged" plan of reorganization
under Chapter 11 of the U.S. Bankruptcy Code and certain other events of
default and financial covenants. In addition, the lenders have agreed subject
to execution of definitive documentation and certain other conditions, to
extend the maturities of the Revolving Credit Agreement and the 11.5% Notes to
January 31, 1999. (See Note 1--"Liquidity")
 
  At December 31, 1996, Merisel, Inc. had outstanding $125,000,000 principal
amount of the 12.5% Notes. The 12.5% Notes provide for an interest rate of
12.5% payable semiannually. By virtue of being an obligation of Merisel, Inc.,
the 12.5% Notes are effectively subordinated to all liabilities of the
Company's subsidiaries,
 
                                     F-15
<PAGE>
 
                        MERISEL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
including trade payables and are not guaranteed by any of the Company's
operating entities. The Indenture relating to the 12.5% Notes contains certain
covenants that, among other things, limit the type and amount of additional
indebtedness that may be incurred by the Company or any of its subsidiaries
and impose limitations on investments, loans, advances, sales or transfers of
assets, the making of dividends and other payments, the creation of liens,
sale-leaseback transactions with affiliates and certain mergers. Without a
restructuring or refinancing of the Company's debt, the Company may be unable
to make its June 30, 1997 and December 31, 1997 interest payments on the 12.5%
Notes and the additional $40,000,000 and $30,000,000 repayments which would be
due on June 30, 1997 and December 31, 1997, respectively, on the 11.5% Notes
and the Revolving Credit Agreement required before such interest payments can
be made. In addition, the restriction on dividend payments contained in the
11.5% Notes and the Revolving Credit Agreement could limit the ability of the
Company to repay principal and interest on the 12.5% Notes if, and to the
extent that, such limitations prevent cash or other dividends from being paid
to the Company. Further, in the event of a default under the 11.5% Notes and
the Revolving Credit Agreement, payments of principal and interest on the
12.5% Notes are prohibited.
 
  On April 14, 1997, the Company obtained a Limited Waiver and Voting
Agreement from the required number of holders of the 12.5% Notes. Under the
Limited Waiver and Voting Agreement, the holders have agreed to exchange the
12.5% Notes into approximately 80% of the Company's Common Stock. The Company
intends to effect the exchange through an exchange offer requiring the tender
of 100% of the 12.5% Notes. If less than 100% of the note holders tender such
notes, the Company intends to file a "prepacked" plan of reorganization under
Chapter 11 of the U.S. Bankruptcy Code. The holders of the required percentage
of the outstanding principal amount of 12.5% Notes have agreed to vote in
favor of the prepackaged plan subject to fulfillment of the other conditions
to the Exchange. In addition, the holders have agreed to waive any defaults
arising from the non-payment of interest due in 1997. (See Note 1--
"Liquidity").
 
  At December 31, 1996, the Company had promissory notes outstanding with an
aggregate balance of $10,150,000. Such notes provide for interest at the rate
of approximately 7.7% per annum and are repayable in 48 and 60 monthly
installments commencing February 1, 1996, with balloon payments due at
maturity. The notes are collateralized by certain of the Company's real
property and equipment.
 
  At December 31, 1995, the Company leased certain warehouse and computer
equipment under long-term leases and has the option to purchase the equipment
for a nominal cost at the termination of the lease. All such leases were
related to EML and were assumed by CHS. At December 31, 1996, the Company's
only capital lease obligations were $187,000 related to FAB's operations.
These obligations were assumed by Synnex as part of the sale of Merisel FAB in
the first quarter of 1997. (See Note 12--"Subsequent Events.")
 
10. COMMITMENTS AND CONTINGENCIES
 
  The Company leases its facilities and certain equipment under noncancellable
operating leases. Future minimum rental payments, under leases that have
initial or remaining noncancellable lease terms in excess of one year are
$8,148,000 in 1997, $6,920,000 in 1998, $6,367,000 in 1999, $4,218,000 in
2000, $3,279,000 in 2001 and $4,717,000 thereafter. Certain of the leases
contain inflation escalation clauses and requirements for the payment of
property taxes, insurance, and maintenance expenses. Rent expense for 1994,
1995 and 1996 was $13,447,000, $14,840,000 and $16,284,000, respectively.
 
  In June 1994, the Company and certain of its officers and/or directors were
named in putative securities class actions filed in the United States District
Court for the Central District of California, consolidated as In re Merisel,
Inc. Securities Litigation. Plaintiffs, who are seeking damages in an
unspecified amount, purport to represent a class of all persons who purchased
Merisel common stock between November 8, 1993 and June 7, 1994 (the "Class
Period"). The complaint, as amended and consolidated, alleges that the
defendants inflated the
 
                                     F-16
<PAGE>
 
                        MERISEL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
market price of Merisel's common stock with material misrepresentations and
omissions during the Class Period. Plaintiffs contend that such alleged
misrepresentations are actionable under Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.
Following the granting of defendant's first motion to dismiss on December 5,
1994, plaintiffs filed a second consolidated and amended complaint on December
22, 1994. On April 3, 1995, Federal District Judge Real dismissed the
complaint with prejudice. The plaintiffs have appealed the dismissal. The
parties' appellate briefing to the Ninth Circuit was completed on November 6,
1995. The Ninth Circuit heard oral arguments on June 4, 1996. As of the date
of this report there has been no decision from the Ninth Circuit.
 
  In January 1997, the Company received notice that Tech Pacific had brought a
claim in the Supreme Court of New South Wales, Sydney Registry Commercial
Division, against the Company, its subsidiary Merisel Asia, Inc. ("Merisel
Asia"); Patrick T. Woods, former managing director of Merisel Australia and
Michael D. Pickett, former CEO and Chairman of Merisel, in a proceeding
captioned Tech Pacific Holdings Limited, v. Merisel, Inc., et. al. In March
1996, Tech Pacific purchased Merisel Australia, Merisel's Australian
subsidiary for a purchase price of $9.9 million, pursuant to the Share
Purchase Agreement dated as of March 7, 1996 between Merisel Asia and Tech
Pacific. The claim asserts various breaches of representations and warranties
as well as misleading and deceptive conduct under relevant provisions of
Australian law with respect to the financial position of Merisel Australia.
The plaintiffs seek to recover specific damages exceeding $8 million as well
as unspecific damages plus interest and costs and expenses associated with the
claim. The Company intends to defend itself vigorously against this claim;
however, the Company is unable at this preliminary point in the proceedings to
reasonably estimate the probable loss, if any, that would be incurred.
 
  The Company is involved in certain other legal proceedings arising in the
ordinary course of business, none of which management expects to have a
material impact on the Company's financial statements.
 
11. EMPLOYEE STOCK OPTIONS AND BENEFIT PLANS
 
  The Company's stock option plans, incentive stock options and nonqualified
stock options may be granted to employees, directors, and consultants. The
plans authorize the issuance of an aggregate of 4,616,200 shares upon exercise
of options granted thereunder. The optionees, option prices, vesting
provisions, dates of grant and number of shares granted under the plans are
determined primarily by the Board of Directors or the option committee under
the stock option plans, though incentive stock options must be granted at
prices which are no less than the fair market value of the Company's Common
Stock at the date of grant. The following summarizes activity in the plans for
the three years ended December 31, 1996:
 
<TABLE>
<CAPTION>
                                   1994                     1995                    1996
                          ------------------------ ----------------------- ------------------------
                                       WGTD. AVG.              WGTD. AVG.               WGTD. AVG.
                            SHARES    EXER. PRICE    SHARES    EXER. PRICE   SHARES     EXER. PRICE
                          ----------  ------------ ----------  ----------- -----------  -----------
<S>                       <C>         <C>          <C>         <C>         <C>          <C>
Outstanding at beginning
 of year................   1,856,140  $       7.61  1,902,625  $      9.03   3,191,289  $      7.30
Granted.................     243,500         18.45  1,680,241         5.91     354,500         2.45
Exercised...............    (112,300)         4.23   (112,422)        2.99    (215,000)         .67
Canceled................     (84,715)        11.25   (279,155)       12.43  (1,812,444)        7.04
                          ----------               ----------              -----------
Outstanding at end of
 year...................   1,902,625          9.03  3,191,289         7.30   1,518,345         7.48
                          ----------               ----------              -----------
Option price range for
 Exercised shares.......              $2.00-$11.88             $2.20-$6.25              $0.01-$2.20
                                      ------------             -----------              -----------
Weighted average fair
 value of options
 granted during the
 year...................                           $     3.80              $      1.61
                                                   ----------              -----------
</TABLE>
 
                                     F-17
<PAGE>
 
                        MERISEL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
  The following table summarizes information about stock options outstanding
at December 31, 1996:
 
<TABLE>
<CAPTION>
                                   OPTIONS OUTSTANDING       OPTIONS EXERCISABLE
                              ------------------------------ --------------------
                                          WEIGHTED
                                           AVERAGE  WEIGHTED             WEIGHTED
                                NUMBER    REMAINING AVERAGE    NUMBER    AVERAGE
                              OUTSTANDING  LIFE IN  EXERCISE EXERCISABLE EXERCISE
   RANGE OF EXERCISE PRICES   AT 12/31/96   YEARS    PRICE   AT 12/31/96  PRICE
   ------------------------   ----------- --------- -------- ----------- --------
   <S>                        <C>         <C>       <C>      <C>         <C>
   $ 7.7800 to $ 8.4100....       11,970       4    $ 8.3958    11,970   $ 8.3958
     3.0000 to $ 3.0000....      173,500       5      3.0000   173,500     3.0000
    11.3750 to $11.3750....      182,250       6     11.3750   163,900    11.3750
    11.7500 to $11.8750....      126,500       7     11.8711    95,875    11.8698
    15.0000 to $19.8750....       91,250       8     19.6078    60,250    19.4704
     4.5790 to $ 6.3125....      587,875       9      5.7827   217,750     5.7049
     1.8750 to $ 3.7500....      345,000      10      2.4586         0     0.0000
                               ---------     ---    --------   -------   --------
   $ 1.8750 to $19.8750....    1,518,345                       723,245
                               =========                       =======
</TABLE>
 
  The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." Accordingly, no compensation cost has been recognized for the
stock option plans. Had compensation cost for the Company's stock option plans
been determined based on their fair value at the grant date for options
granted in 1995 and 1996 consistent with the provisions of SFAS No. 123, the
Corporation's net loss and loss per share would have been reduced to the pro
forma amounts indicated below:
 
<TABLE>
<CAPTION>
                                                              1995      1996
                                                            --------  ---------
                                                              (IN THOUSANDS,
                                                             EXCEPT PER SHARE
                                                                 AMOUNTS)
      <S>                                                   <C>       <C>
      Net Loss--As Reported................................ $(83,911) $(140,375)
      Net Loss--Pro Forma..................................  (84,480)  (140,994)
      Loss Per Share--As Reported..........................    (2.82)     (4.68)
      Loss Per Share--Pro Forma............................    (2.83)     (4.70)
</TABLE>
 
  The fair value of each option granted during 1995 and 1996 is estimated on
the date of grant using the Black-Scholes option pricing model with the
following weighted average assumptions:
 
<TABLE>
<CAPTION>
                                                                   1995   1996
                                                                   -----  -----
      <S>                                                          <C>    <C>
      Expected life...............................................   5.0    5.0
      Expected volatility......................................... 72.41% 72.69%
      Risk-free interest rate.....................................  6.27%  6.32%
      Dividend Yield..............................................  0.00%  0.00%
</TABLE>
 
  The Company offers a 401(k) savings plan under which all employees who are
21 years of age with at least one year of service are eligible to participate.
The plan permits eligible employees to make contributions up to certain
limitations, with the Company matching certain of those contributions. The
Company's contributions vest 25% per year. The Company contributed $579,000
and $125,000 to the plan during the years ended December 31, 1994 and 1995,
respectively. The Company did not make any matching contributions on behalf of
its employees in 1996.
 
                                     F-18
<PAGE>
 
                        MERISEL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
12. SUBSEQUENT EVENTS
 
  As of March 28, 1997, the Company completed the sale of substantially all of
the assets of Merisel FAB to a wholly owned subsidiary of Synnex. The sale
price, computed based upon the February 21, 1997 balance sheet of Merisel FAB
was $31,992,000 consisting of the buyer assuming $11,992,000 of trade payables
and accrued liabilities and a $20,000,000 extended payable due to Vanstar
Corporation. As part of the sale, the Company agreed to extend rebates to
Synnex on future purchases at a defined rate per dollar of purchases, not to
exceed $2,000,000. The purchase price is subject to adjustments based upon
Merisel FAB's March 28, 1997 balance sheet. In the quarter ended December 31,
1996, the Company recorded an impairment charge of $2,033,000 to adjust
Merisel FAB's assets to their fair market value.
 
13. SEGMENT INFORMATION
 
  The Company's operations primarily involve a single industry segment--the
wholesale distribution of computer hardware and software products. The
geographic areas in which the Company operates on an ongoing basis are the
United States, and Canada, after taking into account the sale of the Company's
other foreign businesses during 1996. Net sales, operating income (before
interest, other non-operating expenses and income taxes) and identifiable
assets by geographical area were as follows (in thousands):
 
<TABLE>
<CAPTION>
                           UNITED                  OTHER
                           STATES     CANADA   INTERNATIONAL ELIMINATIONS CONSOLIDATED
                         ----------  --------  ------------- ------------ ------------
<S>                      <C>         <C>       <C>           <C>          <C>
1994:
  Net sales............. $3,413,614  $516,616   $1,088,457                 $5,018,687
                         ==========  ========   ==========                 ==========
  Operating income
   (loss)............... $   52,150  $  9,871     $ (1,294)                $   60,727
                         ==========  ========   ==========                 ==========
  Identifiable assets... $  715,082  $147,483   $  337,083     $ (7,778)   $1,191,870
                         ==========  ========   ==========     ========    ==========
1995:
Net sales:
  Net sales............. $3,996,346  $572,569   $1,388,052                 $5,956,967
                         ==========  ========   ==========                 ==========
  Operating loss........  $ (37,825) $ (3,637)   $ (12,760)                 $ (54,222)
                         ==========  ========   ==========                 ==========
  Identifiable assets... $  738,220  $135,482   $  375,878     $(19,246)   $1,230,334
                         ==========  ========   ==========     ========    ==========
1996:
Net sales:
  Net sales............. $3,818,923  $643,730   $1,060,171                 $5,522,824
                         ==========  ========   ==========                 ==========
  Operating income
   (loss)...............  $ (44,295) $ (5,406)  $    1,901                  $ (47,800)
                         ==========  ========   ==========                 ==========
  Identifiable assets... $  623,707  $126,691   $        0     $(19,359)   $  731,039
                         ==========  ========   ==========     ========    ==========
</TABLE>
 
                                     F-19
<PAGE>
 
                        MERISEL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
 
  Selected financial information for the quarterly periods for the fiscal
years ended 1995 and 1996 is presented below (in thousands, except per share
amounts):
 
<TABLE>
<CAPTION>
                                                    1995
                               ------------------------------------------------
                                MARCH 31    JUNE 30    SEPTEMBER 30 DECEMBER 31
                               ----------  ----------  ------------ -----------
<S>                            <C>         <C>         <C>          <C>
Net sales..................... $1,454,894  $1,379,864   $1,544,018  $1,578,191
Gross profit..................     93,223      85,475       89,253      55,738
Net loss......................     (1,789)     (4,613)        (253)    (77,256)
Net loss per share............      (0.06)      (0.16)       (0.01)      (2.59)
<CAPTION>
                                                    1996
                               ------------------------------------------------
                                MARCH 31    JUNE 30    SEPTEMBER 30 DECEMBER 31
                               ----------  ----------  ------------ -----------
<S>                            <C>         <C>         <C>          <C>
Net sales..................... $1,536,589  $1,442,668   $1,393,532  $1,150,035
Gross profit..................     87,223      79,587       57,193      65,251
Net (loss) income.............    (13,508)    (11,404)    (117,138)      1,675
Net (loss) income per share...      (0.45)      (0.38)       (3.90)        .06
</TABLE>
 
  In the fourth quarter of 1995, the Company recorded certain items which
reduced operating income by approximately $89,400,000. These items included
impairment losses on long-lived assets totaling $51,400,000. The remaining
$38,000,000 represents adjustments to account balances, primarily in accounts
payable. Additional adjustments related to vendor account reconciliations and
customer disputes were taken, which amounted to $2,200,000 in each of the
first two quarters of 1996, and $23,000,000 in the third quarter of 1996.
Additionally, third quarter charges were also recognized for further
impairment of certain long lived assets for $40,000,000 and for the loss on
the sale of certain assets totaling $33,455,000. In the fourth quarter of
1996, net income includes a $2,033,000 charge to adjust Merisel FAB's assets
to their fair value based on the provisions of a definitive agreement to sell
such assets in the first quarter of 1997.
 
15. SUBSEQUENT EVENTS (UNAUDITED)
 
  On September 19, 1997, the Limited Waiver Agreement (see Note 1--Liquidity
and Note 9--"Debt") terminated in accordance with its terms as holders of over
75% of the outstanding principal amount of the 12.5% Notes (the "Consenting
Noteholders") declined to grant the Company's request for an extension of such
termination date. Prior to the termination of the Limited Waiver Agreement,
certain disagreements arose between the Company and the Noteholders over the
interpretation of the Company's obligations under the Limited Waiver
Agreement, including that the Limited Waiver Agreement did not require either
the Board of Directors of the Company (the "Board") or the Company to
recommend proposals relating to the Exchange Restructuring to Stockholders and
that the Company was not obligated to seek confirmation of a "prepackaged
plan" of reorganization (the "Prepackaged Plan") by means of the "cramdown"
provisions of the Bankruptcy Code. On September 4, 1997, the Company filed
suit in Delaware Chancery Court (the "Delaware Action") seeking a declaratory
judgment with respect to these issues. The Company believes its claims are
meritorious and intends to vigorously prosecute its claims in the Delaware
Action. There can be no assurance, however, that the Company will ultimately
be successful with respect to its claims.
 
                                     F-20
<PAGE>
 
                        MERISEL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
  On September 11, 1997, certain Consenting Noteholders filed an answer to the
Company's complaint in the Delaware Action as well as a counterclaim against
the Company asserting claims for breach of the Limited Waiver Agreement,
unjust enrichment and a declaratory judgment. The counterclaim also asserts a
claim for unjust enrichment against Dwight A. Steffensen, the Company's Chief
Executive Officer (the "Noteholder Suit"). The Noteholder Suit seeks damages
in excess of $100 million from the Company. The Company's alleged breaches
include, among other things, that the Board changed its recommendation to
Stockholders with respect to proposals relating to the Limited Waiver
Agreement. The Board changed its recommendation with respect to these
proposals in light of the Company's receipt of a proposal as described below,
which, in the Board's determination, was economically superior for
Stockholders to the Exchange Restructuring. The Company and Mr. Steffensen
believe that they have strong defenses to each of the claims asserted and
intend to defend themselves vigorously.
 
  In addition, on September 19, 1997, the Company received notice from
representatives of the lenders under the Operating Companies' Loan Agreements
that, in connection with the Company's repayment of the indebtedness under the
Operating Companies' Loan Agreement, such lenders believe that they are owed
approximately $2.7 million in fees. The Company does not believe any such fee
is owed and, has so notified the lenders.
 
  On September 19, 1997, the Company and Merisel Americas entered into a Stock
and Note Purchase Agreement with Phoenix Acquisition Company II, L.L.C.
("Phoenix"), a Delaware limited liability company whose sole member is
Stonington Capital Appreciation 1994 Fund L.P. Pursuant to the Stock and Note
Purchase Agreement, Phoenix acquired a Convertible Note for $137.1 million and
4,901,316 shares of Common Stock (the "Initial Shares") for $14.9 million. The
Convertible Note is an unsecured obligation of the Company and Merisel
Americas with an initial principal payment of $123,900,000, due January 31,
1998 and additional principal payments of $4,400,000 due on each of March 10,
1998, 1999 and 2000 if such interest payments are not forgiven due to the
Convertible Note converting into Common Stock prior to that time. The
Convertible Note provides that, upon a favorable Stockholder vote and
satisfaction of certain other conditions, the Convertible Note will
automatically convert into approximately 45.1 million shares of Common Stock
(subject to certain adjustments). The Conversion Shares and the Initial Shares
would together represent 50,000,000 shares of Common Stock, or approximately
62.4% of the Common Stock outstanding immediately following consummation of
the Conversion.
 
  On September 19, 1997, as required by the 12.5% Note Indenture,
approximately $8 million was deposited with the 12.5% Note Indenture trustee
for payment of interest that had previously been waived, and all outstanding
indebtedness under the Operating Companies' Loan Agreements was paid in full
with the proceeds from the sale of the Common Stock and issuance of the
Convertible Note to Phoenix pursuant to the Stock and Note Purchase Agreement.
The Company believes that, given such deposit for payment, it is in full
compliance with all of its obligations under the 12.5% Indenture.
 
                                     F-21
<PAGE>
 
                         MERISEL, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
 
                                 (IN THOUSANDS)
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                        JUNE 30,   DECEMBER 31,
                                                          1997         1996
                                                        ---------  ------------
                        ASSETS
                        ------
<S>                                                     <C>        <C>
CURRENT ASSETS:
Cash and cash equivalents.............................. $  48,563   $  44,678
Accounts receivable (net of allowances of $23,105 and
 $23,684 for 1997 and 1996, respectively)..............   181,809     168,295
Inventories............................................   346,730     392,557
Prepaid expenses and other current assets..............    20,912      16,925
Income taxes receivable................................                 2,183
Deferred income tax benefit............................       478         482
                                                        ---------   ---------
  Total current assets.................................   598,492     625,120
PROPERTY AND EQUIPMENT, NET............................    54,866      61,430
COST IN EXCESS OF NET ASSETS ACQUIRED, NET.............    25,914      41,724
OTHER ASSETS...........................................     7,805       2,765
                                                        ---------   ---------
TOTAL ASSETS........................................... $ 687,077   $ 731,039
                                                        =========   =========
<CAPTION>
         LIABILITIES AND STOCKHOLDERS' EQUITY
         ------------------------------------
<S>                                                     <C>        <C>
CURRENT LIABILITIES:
Accounts payable....................................... $ 347,627   $ 383,548
Accrued liabilities....................................    37,517      37,544
Long-term debt-current.................................    10,645       9,084
Subordinated debt-current..............................     4,400       4,400
                                                        ---------   ---------
  Total current liabilities............................   400,189     434,576
Long-term debt.........................................   259,723     268,079
Subordinated debt......................................     8,800      13,200
Capitalized lease obligations..........................                   187
                                                        ---------   ---------
TOTAL LIABILITIES......................................   668,712     716,042
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, authorized 1,000,000
 shares; none issued or outstanding Common stock, $.01
 par value, authorized 50,000,000 shares; 30,078,500
 shares outstanding for 1997 and 1996, respectively....       301         301
Additional paid-in capital.............................   142,300     142,300
Accumulated deficit....................................  (117,988)   (121,164)
Cumulative translation adjustment......................    (6,248)     (6,440)
                                                        ---------   ---------
  Total stockholders' equity...........................    18,365      14,997
                                                        ---------   ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............. $ 687,077   $ 731,039
                                                        =========   =========
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                      F-22
<PAGE>
 
                         MERISEL, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                    THREE MONTHS ENDED     SIX MONTHS ENDED
                                         JUNE 30,              JUNE 30,
                                    -------------------  ----------------------
                                      1997      1996        1997        1996
                                    -------- ----------  ----------  ----------
<S>                                 <C>      <C>         <C>         <C>
NET SALES.........................  $895,754 $1,442,668  $2,008,855  $2,979,257
COST OF SALES.....................   840,101  1,363,081   1,888,224   2,812,447
                                    -------- ----------  ----------  ----------
GROSS PROFIT......................    55,653     79,587     120,631     166,810
SELLING, GENERAL & ADMINISTRATIVE
 EXPENSES.........................    43,299     78,422      94,820     161,558
                                    -------- ----------  ----------  ----------
OPERATING INCOME..................    12,354      1,165      25,811       5,252
INTEREST EXPENSE..................     7,760      9,595      16,383      19,472
OTHER EXPENSE.....................     2,389      3,528       5,919      10,766
                                    -------- ----------  ----------  ----------
INCOME (LOSS) BEFORE INCOME TAXES.     2,205    (11,958)      3,509     (24,986)
INCOME TAX PROVISION(BENEFIT).....       159       (554)        333         (74)
                                    -------- ----------  ----------  ----------
NET INCOME (LOSS).................  $  2,046 $  (11,404) $    3,176  $  (24,912)
                                    ======== ==========  ==========  ==========
NET INCOME (LOSS) PER SHARE.......  $   0.07 $    (0.38) $     0.11  $    (0.83)
                                    ======== ==========  ==========  ==========
WEIGHTED AVERAGE NUMBER OF SHARES
 OUTSTANDING......................    30,078     29,878      30,078      29,871
                                    ======== ==========  ==========  ==========
</TABLE>
 
 
          See accompanying notes to consolidated financial statements.
 
                                      F-23
<PAGE>
 
                         MERISEL, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                                 (IN THOUSANDS)
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                         SIX MONTHS ENDED
                                                             JUNE 30,
                                                        ---------------------
                                                          1997        1996
                                                        ---------   ---------
<S>                                                     <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).....................................  $   3,176   $ (24,912)
Adjustments to reconcile net loss to net cash provided
 by operating activities:
  Depreciation and amortization.......................      5,971      11,171
  Provision for doubtful accounts.....................      4,692       8,006
  Deferred income taxes...............................                    396
Gain/Loss Sale of Property and Equipment..............     (1,530)
Changes in assets and liabilities:
  Accounts receivable.................................    (24,715)     66,641
  Inventories.........................................     45,826     161,757
  Prepaid expenses and other assets...................     (9,050)     (6,968)
  Income taxes receivable/payable.....................      3,767      28,804
  Accounts payable....................................    (13,381)   (183,659)
  Accrued liabilities.................................     (2,121)       (510)
                                                        ---------   ---------
Net cash provided by operating activities.............     12,635      60,726
                                                        ---------   ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment....................     (2,831)     (4,817)
Proceeds from sale of property........................      5,020
Earn out obligation--ComputerLand acquisition.........                (13,409)
Cash proceeds from sale of Australian business........                  8,515
Other investing activities............................                  1,721
                                                        ---------   ---------
Net cash provided by (used for) investing activities .      2,189      (7,990)
                                                        ---------   ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving line of credit.............    484,708     785,850
Repayments under revolving line of credit.............   (488,319)   (750,850)
Net repayments under other bank facilities ...........       (777)    (21,487)
Proceeds from issuance of promissory notes............                  8,790
Repayment of senior notes.............................     (2,407)     (8,000)
Proceeds from sale of accounts receivable.............                (24,540)
Repayment under subordinated debt agreement ..........     (4,400)     (4,400)
Proceeds from issuance of Common Stock................                    217
                                                        ---------   ---------
Net cash used in financing activities.................    (11,195)    (14,420)
EFFECT OF EXCHANGE RATE CHANGES ON CASH...............        256      (3,735)
                                                        ---------   ---------
NET INCREASE IN CASH AND..............................      3,885      34,581
CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING
 OF PERIOD ...........................................     44,678       1,378
                                                        ---------   ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD..............  $  48,563   $  35,959
                                                        =========   =========
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                      F-24
<PAGE>
 
                        MERISEL, INC. AND SUBSIDIARIES
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
                                  (UNAUDITED)
 
1. GENERAL
 
  Merisel, Inc., a Delaware corporation and a holding company (together with
its subsidiaries, "Merisel" or the "Company"), is a leading distributor of
computer hardware, networking equipment and software products. Through its
operating subsidiary Merisel Americas, Inc. ("Merisel Americas") and its
subsidiaries (collectively, the "Operating Company"), the Company markets
products and services throughout North America and is a valued partner to a
broad range of computer resellers, including value-added resellers (VARs),
retailers, and commercial/dealers. The Company also has established the
Merisel Open Computing Alliance (MOCA(TM)), which primarily supports Sun
Microsystems' UNIX-based product sales and installations.
 
  The information for the three and six months ended June 30, 1997 and 1996
has not been audited by independent accountants, but includes all adjustments
(consisting of normal recurring accruals) which are, in the opinion of
management, necessary for a fair presentation of the results for such periods.
 
  Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the requirements
of the Securities and Exchange Commission, although the Company believes that
the disclosures included in these financial statements are adequate to make
the information not misleading. The consolidated financial statements as
presented herein should be read in conjunction with the consolidated financial
statements and notes thereto included in Merisel's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996.
 
  Liquidity--In 1996, the Company incurred a net loss of $140,375,000 which
includes impairment losses of $42,033,000 and a loss on the sale of the
Company's European, Mexican and Latin American Business (such businesses are
referred to herein as "EML") of $33,455,000. The impairment losses were
associated with the intangible assets of the Company's wholly owned subsidiary
Merisel FAB, Inc. ("Merisel FAB") which operated the Company's Franchise and
Aggregation Business ("FAB"). As of March 28, 1997, the Company sold
substantially all of the assets of Merisel FAB to SYNNEX Information
Technologies, Inc. ("Synnex"). EML was sold as of September 27, 1996 to CHS
Electronics, Inc. ("CHS") (See Note 4--"Dispositions"). In addition to the
losses associated with the sale of EML and impairment losses, 1996 operations
were impacted by significant charges related to customer disputes, vendor
reconcilement and other issues, costs associated with the improvement of
certain business processes, and the impact of liquidity constraints on the
Company's ability to purchase inventory on favorable terms.
 
  The Company has developed and is implementing a business strategy for 1997
(the "1997 Business Strategy") that focuses on profitable North American
revenue growth. Under the 1997 Business Strategy, Merisel intends to
concentrate on strengthening and building its sales infrastructure for the
purpose of increasing revenues, improving gross margins, and controlling
operating expenses. Other priorities include continuing efforts to achieve
operational excellence and implementing a strategy focused on the United
States and Canada.
 
  In order to meet its debt obligations, Merisel is actively pursuing a
restructuring plan with the debtholders under its various financing
agreements. Effective April 14, 1997, the Company entered into a Limited
Waiver and Voting Agreement (the "Limited Waiver Agreement") with holders of
more than 75% of the outstanding principal amount of its 12.5% Senior Notes
("12.5% Notes"). Pursuant to the terms of the Limited Waiver Agreement, upon
the fulfillment of certain conditions, holders of the 12.5% Notes would
exchange (the "Exchange") their 12.5% Notes for Common Stock of the Company
(the "Common Stock"), which would equal approximately 80% of the outstanding
shares of Common Stock immediately after the Exchange. Contemporaneously with
the Exchange, the holders of Common Stock immediately prior to the Exchange
would receive warrants (the "Warrants") to purchase Common Stock constituting
17.5% of the Common Stock outstanding immediately after giving effect to the
Exchange.
 
                                     F-25
<PAGE>
 
                        MERISEL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
                                  (UNAUDITED)
 
 
  Consummation of the Exchange is subject to certain conditions including (i)
stockholder approval of an amendment to the Certificate of Incorporation of
the Company to effect a one-for-five reverse split of the Common Stock and
(ii) 100% of the outstanding 12.5% Notes being validly tendered in exchange
for Common Stock. On August 1, 1997, the Company commenced the solicitation of
stockholder proxies and the noteholder exchange offer with respect to the
proposed debt restructuring plan. If less than 100% of the holders tender
their 12.5% Notes pursuant to the exchange offer but acceptances of a
"prepackaged" plan (as described below) are received from at least two-thirds
in principal amount and a majority in number of holders of the 12.5% Notes,
and the holders of at least two-thirds of the Common Stock voting, Merisel,
Inc., the parent company, intends to file a "prepackaged" plan of
reorganization under Chapter 11 of the U.S. Bankruptcy Code to effect the
proposed debt restructuring on the same terms as proposed under the Exchange
(the "Prepackaged Plan"). The Operating Company would not be a party to any
Prepackaged Plan which may be required. Any such Prepackaged Plan, if filed,
would affect Merisel, Inc. only and as such would not affect the continuing
and timely payment in full of the Operating Company's obligations to
suppliers, employees and other creditors. In addition, such a Prepackaged Plan
would be subject only to the approval of the holders of the 12.5% Notes and
the Company's stockholders, as no other creditors or security holders of the
Company or the Operating Company would be impaired by the plan as
contemplated. The holders of the required percentage of the outstanding
principal amount of 12.5% Notes have agreed to vote in favor of the
Prepackaged Plan subject to fulfillment of certain other conditions to the
Exchange.
 
  Also effective April 14, 1997, the Company entered into an agreement (the
"Extension") in principle with 100% of the holders of the loans made and notes
issued under financing agreements to which the Company's operating
subsidiaries are parties. Pursuant to such agreement, holders of the
$84,297,000 principal amount outstanding under a revolving credit agreement
(the "Revolving Credit Agreement") and the $56,198,000 principal amount of
11.5% Senior Notes outstanding under a senior note purchase agreement (the
"11.5% Notes") have agreed, subject to execution of definitive documentation,
to execute amendments to extend the respective maturities of such debt to
January 31, 1999, provided that none of the amendments will become effective
unless the Exchange is closed on or prior to August 31, 1997 or the
Prepackaged Plan or a similar plan has been substantially consummated on or
prior to October 31, 1997. The Company would have the right to prepay such
debt at any time without penalty. On August 31, 1997, the Extension terminated
in accordance with its terms. The Company has requested a further extension
until October 15, 1997, but such extension has not yet been granted. The
Company believes that, assuming it achieves its 1997 Business Strategy, it
will have reasonable prospects for a refinancing of the operating company
indebtedness (as described above) in the latter half of 1997, particularly if
the Exchange or a comparable restructuring is consummated prior to or
concurrently with such refinancing.
 
  Pursuant to the Limited Waiver Agreement, throughout the period the Company
is implementing the proposed restructuring, in excess of 75% of the holders of
the 12.5% Notes have agreed to waive any default arising from the nonpayment
of interest that was due on June 30, 1997 on the 12.5% Notes. In consideration
of the Extension, Merisel Americas has agreed to pay certain fees to the
holders of the Revolving Credit Agreement and the 11.5% Notes, and, subject to
the Extension becoming effective, to increase the interest rate by 0.5% per
quarter during 1998 on such debt and, in the case of the Revolving Credit
Agreement and the 11.5% Notes only, to pay additional fees each quarter, in
each case while such debt remains outstanding. The Company may incur certain
additional incremental costs if it receives a further extension of the
Operating Companies Loan Agreements. Interest will continue to be due and
payable on the outstanding 12.5% Notes that have not consented to the waiver
at the time such payments are due; however, such holders will not be able to
accelerate the payment of the principal of the 12.5% Notes under the terms of
the Indenture governing the 12.5% Notes.
 
 
                                     F-26
<PAGE>
 
                        MERISEL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
                                  (UNAUDITED)
 
 
  On July 15, 1997, Merisel announced that it had received a proposal from
Stonington Partners, Inc., a New York-based investment firm, to invest
$152,000,000 in order to acquire 70% of the Company's Common Stock. Current
stockholders would retain their shares which would represent 30% of the then
outstanding Common Stock after the equity investment. Under the proposal, the
12.5% Senior Notes would remain outstanding in lieu of the exchange of such
indebtedness for equity as proposed under the existing debt restructuring
plan, and the cash investment would be used to eliminate substantially all of
the approximately $150,000,000 in outstanding debt of the operating
subsidiaries. The Stonington offer was subject to certain conditions,
including termination or modification of the Limited Waiver Agreement.
 
  On July 16, 1997, representatives of the Ad Hoc Noteholders' Committee for
its 12.5% Senior Notes advised the Company that they would not agree with the
Company to terminate or modify the Limited Waiver Agreement. Accordingly, on
the morning of July 16, 1997, the Company issued a press release reiterating
its intention to submit the existing Restructuring plan to a stockholder vote
in accordance with its agreement with the Noteholders. Additionally, on July
24, 1997, Stonington advised the Company that it had received a summons and
complaint from counsel to the Ad Hoc Noteholders' Committee alleging tortious
interference by Stonington with the Limited Waiver Agreement and seeking
damages. Stonington has indicated that it intends to defend the suit
vigorously.
 
  At June 30, 1997, the Company had cash and cash equivalents of approximately
$48,563,000. In the opinion of management, as a result of the agreement
reached with the holders of the 12.5% Notes and the waivers received from the
holders of indebtedness outstanding under the Revolving Credit Agreement, the
11.5% Notes and the Subordinated Notes, cash on hand, additional permitted
sales of accounts receivable under the securitization facilities, together
with anticipated cash flow in 1997 will be sufficient to meet the Company's
liquidity requirements for the next 12 months. Should the Limited Waiver
Agreement terminate without the consummation of the proposed debt
restructuring, the Company believes it has sufficient cash resources to make
both the outstanding interest payment on the 12.5% Notes, and the $40,000,000
aggregate principal payment that would then be due on the 11.5% Notes and
under the Revolving Credit Agreement, however, should the Company be unable to
refinance some portion of its remaining debt during the fourth quarter, the
Company's ability to maintain adequate trade credit and inventory levels would
be adversely affected, which would in turn have an adverse impact on the
Company's operations.
 
  Recent Developments--See "Recent Developments" in the Exchange Restructuring
Prospectus and Supplement thereto.
 
2. NEW ACCOUNTING PRONOUNCEMENTS
 
  In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 128, "Earnings per Share" (SFAS 128)
which is effective for financial statements issued for periods ending after
December 15, 1997. SFAS 128 simplifies the previous standards for computing
earnings per share and requires the disclosure of basic and diluted earnings
per share. For the year ended December 31, 1996 and for the subsequent interim
period reported, the amount reported as net income per common and common
equivalent share is not materially different than that which would have been
reported for basic and diluted earnings per share in accordance with SFAS 128.
 
  In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting for Comprehensive Income"
and No. 131, "Disclosures about Segments of an Enterprise and Related
Information." These statements are effective for financial statements issued
for periods beginning after December 15, 1997. The Company has not yet
analyzed the impact of adopting these statements.
 
                                     F-27
<PAGE>
 
                        MERISEL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
                                  (UNAUDITED)
 
 
3. FISCAL YEAR
 
  The Company's fiscal year is the 52- or 53-week period ending on the
Saturday nearest to December 31. The Company's second quarter is the 13-week
period ending on the Saturday nearest to June 30. For simplicity of
presentation, the Company has described the interim periods and year-end
period as of June 30, and December 31, respectively.
 
4. DISPOSITIONS
 
  In March 1996, effective as of January 1, 1996, the Company sold its
interest in its wholly owned Australian subsidiary, Merisel Pty Ltd.
("Australia"), to Tech Pacific Holdings Ltd. Under the terms of the agreement,
the Company received consideration of $9,900,000 in the form of repayment of
certain intercompany debt obligations. The Company recognized a $1,900,000
charge as an impairment loss for the write down of the Australian net assets
to their net realizable value in the fourth quarter of 1995.
 
  On October 4, 1996, Merisel completed the sale of EML to CHS. The sale was
effective as of September 27, 1996. A loss of $33,455,000, which includes
approximately $7,400,000 of direct costs related to the sale, was recorded on
such sale. The sale price, computed based on the combined closing balance
sheet of EML, was $147,631,000, consisting of (i) $110,379,000 in cash, (ii)
the assumption of Merisel's European asset securitization agreement against
which $26,252,000 was outstanding at closing and (iii) a receivable for
$11,000,000, which has been paid in full.
 
  As of March 28, 1997, the Company completed the sale of substantially all of
the assets of Merisel FAB to a wholly owned subsidiary of Synnex. The sale
price, computed based upon the February 21, 1997 balance sheet of Merisel FAB,
was $31,992,000 consisting of the assumption by the buyer of $11,992,000 of
trade payables and accrued liabilities and a $20,000,000 extended payable due
to Vanstar Corporation. As part of the sale, the Company agreed to extend
rebates to Synnex on future purchases at a defined rate per dollar of
purchases, not to exceed $2,000,000 in aggregate rebates. In the quarter ended
December 31, 1996, the Company recorded an impairment charge of $2,033,000 to
adjust Merisel FAB's assets to their estimated fair market value.
 
  Following is summarized pro forma operating results assuming that the
Company had sold the assets of Merisel FAB and EML as of January 1, 1996.
 
<TABLE>
<CAPTION>
                                                         SIX MONTHS  SIX MONTHS
                                                           ENDED       ENDED
                                                          JUNE 30,    JUNE 30,
                                                            1996        1997
                                                         ----------  ----------
                                                         (IN THOUSANDS EXCEPT
                                                            PER SHARE DATA)
      <S>                                                <C>         <C>
      Net Sales......................................... $1,710,519  $1,806,677
      Gross Profit......................................     95,553     112,952
      Net Income (loss).................................    (25,448)      1,022
                                                         ----------  ----------
      Net Income (loss) per share....................... $    (0.85) $     0.03
                                                         ==========  ==========
      Weighted Average Shares Outstanding...............     29,871      30,078
                                                         ==========  ==========
</TABLE>
 
  EML is not an incorporated entity for which historical financial statements
were prepared. The historical balances used in preparing the above pro forma
balances represent combined balances obtained from the separate unaudited
financial statements for the individual entities comprising EML. The pro forma
results include adjustments for general and administrative expenses that would
not have been eliminated due to the sale of EML.
 
                                     F-28
<PAGE>
 
                        MERISEL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
                                  (UNAUDITED)
 
The pro forma adjustments also include adjustments for amortization of
intangible assets and for interest expense on debt repaid with a portion of
the proceeds from the sale, net of the effect of an interest rate increase
resulting from the renegotiation of certain debt agreements as a result of the
sale. Historical balances obtained from FAB's unaudited financial statements
were also used in preparing the pro forma balances above.
 
5. DEBT
 
  At June 30, 1997, two of the Company's subsidiaries, Merisel Americas and
Merisel Europe, Inc. ("Merisel Europe"), had outstanding unsecured senior
borrowings consisting of $54,398,000 principal amount of 11.5% Notes issued by
Merisel Americas and $81,597,000 principal amount incurred under a Revolving
Credit Agreement by Merisel Americas and Merisel Europe. Advances under the
Revolving Credit Agreement bear interest at specific rates based upon market
reference incurred rates plus a specified percentage. The average interest
rate for borrowings under the Revolving Credit Agreement at June 30, 1997 was
approximately 11.0%. At June 30, 1997, Merisel Americas also had outstanding
$13,200,000 principal amount of 11.8% subordinated notes. Additionally, at
June 30, 1997, Merisel, Inc. had outstanding $125,000,000 principal amount of
the 12.5% Notes. As a result of the sale of EML, Merisel Europe is no longer
an operating entity.
 
  At June 30, 1997, the Company had promissory notes outstanding with an
aggregate balance of $9,373,000. Such notes provide for interest at the rate
of approximately 7.7% per annum and are repayable in 48 and 60 monthly
installments commencing February 1, 1996, with balloon payments due at
maturity. The notes are collateralized by certain of the Company's real
property and equipment.
 
  See Note 1--"Liquidity" for a discussion of the Company's proposed debt
restructuring.
 
6. NET INCOME (LOSS) PER SHARE
 
  Net income (loss) per share is computed by dividing net income(loss) by the
weighted average number of shares of Common Stock outstanding during the
related period, including Common Stock options when dilutive.
 
7. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
 
  Cash paid (received) in the six month periods ended June 30 for interest and
income taxes was as follows:
 
<TABLE>
<CAPTION>
                                                               1997      1996
                                                              -------  --------
                                                               (IN THOUSANDS)
      <S>                                                     <C>      <C>
      Interest............................................... $14,245  $ 21,452
      Income taxes........................................... $(3,401) $(28,066)
</TABLE>
 
  Effective March 28, 1997, the Company sold substantially all of the assets
of Merisel FAB. The recorded sale price was $31,992,000, consisting of the
assumption of $11,992,000 of trade payables and accrued liabilities and a
$20,000,000 extended payable due to a third party, in full consideration for
the assets (See Note 4--"Dispositions").
 
                                     F-29
<PAGE>
 
                                                                        ANNEX I
 
                           CERTIFICATE OF AMENDMENT
                                    TO THE
                         CERTIFICATE OF INCORPORATION
                                      OF
                                 MERISEL, INC.
 
                               ----------------
 
                    PURSUANT TO SECTION 242 OF THE GENERAL
                   CORPORATION LAW OF THE STATE OF DELAWARE
 
                               ----------------
 
  Merisel, Inc., a Delaware corporation (hereinafter called the
"Corporation"), does hereby certify as follows:
 
  FIRST: The first paragraph of Article IV of the Corporation's Certificate of
Incorporation is hereby amended to read in its entirety as set forth below:
 
    "The corporation is authorized to issue a total of 101,000,000 shares of
  stock which shall be divided into two classes of shares designated "Common
  Stock" and "Preferred Stock," respectively. The number of shares of Common
  Stock authorized to be issued is 100,000,000 shares with a par value of
  $.01 per share, and the number of shares of Preferred Stock authorized to
  be issued is 1,000,000 shares with a par value of $.01 per share."
 
  SECOND: The foregoing amendment was duly adopted in accordance with
Section 242 of the General Corporation Law of the State of Delaware.
 
  IN WITNESS WHEREOF, Merisel, Inc. has caused this Certificate of Amendment
to be duly executed in its corporate name this [  ] day of [      ], 1997.
 
                                          MERISEL, INC.
 
                                          By: _________________________________
                                             Name: Dwight A. Steffensen
                                             Title: Chief Executive Officer
 
                                      I-1
<PAGE>
 
                                                                        ANNEX II
 
 
 
 
 
 
                                 MERISEL, INC.
 
                      1997 STOCK AWARD AND INCENTIVE PLAN
 
                                      II-i
<PAGE>
 
                                 MERISEL, INC.
 
                      1997 STOCK AWARD AND INCENTIVE PLAN
 
<TABLE>
<CAPTION>
     SECTION                                                                PAGE
     -------                                                                ----
     <C> <S>                                                                <C>
      1. Purpose; Types of Awards; Construction...........................    1
      2. Definitions......................................................    1
      3. Administration...................................................    4
      4. Eligibility......................................................    5
      5. Stock Subject to the Plan........................................    5
      6. Specific Terms of Awards.........................................    5
      7. Change in Control Provisions.....................................    8
      8. Loan Provisions..................................................    9
      9. General Provisions...............................................    9
</TABLE>
 
1. PURPOSE; TYPES OF AWARDS; CONSTRUCTION.
 
  The purposes of the 1997 Stock Award and Incentive Plan of Merisel, Inc.
(the "Plan") is to afford an incentive to reinforce the long-term commitment
to the Company's success of those directors, officers and other employees of
the Company and its Subsidiaries who are or will be responsible for such
success; to facilitate the ownership of the Company's stock by such
individuals, thereby aligning their interests with those of the Company's
stockholders; and to assist the Company in attracting and retaining directors,
officers and other employees with experience and ability. Pursuant to Section
6 of the Plan, there may be granted Stock Options (including "incentive stock
options" and "nonqualified stock options"), stock appreciation rights and
limited stock appreciation rights (either in connection with options granted
under the Plan or independently of options), restricted stock, restricted
stock units, performance shares and other stock-or cash-based awards. The Plan
also provides the authority to make loans to purchase shares of common stock
of the Company. The Plan is designed to comply with the requirements of
Regulation G (12 C.F.R. (S)207) regarding the purchase of shares on margin,
the requirements for "performance-based compensation" under Section 162(m) of
the Code and the conditions for exemption from short-swing profit recovery
rules under Rule 16b-3 of the Exchange Act, and shall be interpreted in a
manner consistent with the requirements thereof.
 
2. DEFINITIONS.
 
  For purposes of the Plan, the following terms shall be defined as set forth
below:
 
  (a) "Award" means any Option, SAR (including a Limited SAR), Restricted
Stock, Restricted Stock Unit, Performance Share or Other Stock-Based Award or
Other Cash-Based Award granted under the Plan.
 
  (b) "Award Agreement" means any written agreement, contract, or other
instrument or document evidencing an Award.
 
  (c) "Beneficiary" means the person, persons, trust or trusts which have been
designated by a Grantee in his or her most recent written beneficiary
designation filed with the Company to receive the benefits specified under the
Plan upon his or her death, or, if there is no designated Beneficiary or
surviving designated Beneficiary, then the person, persons, trust or trusts
entitled by will or the laws of descent and distribution to receive such
benefits.
 
  (d) "Board" means the Board of Directors of the Company.
 
                                     II-1
<PAGE>
 
  (e) "Change in Control" means a change in control of the Company which will
be deemed to have occurred if:
 
    (i) any "person," as such term is used in Section 3(a)(9) of the Exchange
  Act, as modified and used in Sections 13(d) and 14(d) thereof except that
  such term shall not include (A) the Company or any of its subsidiaries, (B)
  any trustee or other fiduciary holding securities under an employee benefit
  plan of the Company or any of its affiliates, (C) an underwriter
  temporarily holding securities pursuant to an offering of such securities,
  (D) any corporation owned, directly or indirectly, by the stock holders of
  the Company in substantially the same proportions as their ownership of
  Stock, or (E) any person or group as used in Rule 13d-1(b) under the
  Exchange Act, is or becomes the Beneficial Owner, as such term is defined
  in Rule 13d-3 under the Exchange Act, directly or indirectly, of securities
  of the Company (not including in the securities beneficially owned by such
  Person any securities acquired directly from the Company or its affiliates
  other than in connection with the acquisition by the Company or its
  affiliates of a business) representing 50% or more of the combined voting
  power of the Company's then outstanding securities;
 
    (ii) during any period of two consecutive years, individuals who at the
  beginning of such period constitute the Board, and any new director (other
  than (A) a director designated by a person who has entered into an
  agreement with the Company to effect a transaction described in clause (i),
  (iii), or (iv) of this Section 2(f) or (B) other than a director whose
  initial assumption of office is in connection with an actual or threatened
  election contest, including but not limited to a consent solicitation,
  relating to the election of directors of the Company) whose election by the
  Board or nomination for election by the Company's stockholders was approved
  by a vote of at least two-thirds ( 2/3) of the directors then still in
  office who either were directors at the beginning of the period or whose
  election or nomination for election was previously so approved, cease for
  any reason to constitute at least a majority thereof;
 
    (iii) there is consummated a merger or consolidation of the Company or
  any or any direct or indirect subsidiary of the Company with any other
  corporation, other than (A) a merger or consolidation which would result in
  the voting securities of the Company outstanding immediately prior thereto
  continuing to represent (either by remaining outstanding or by being
  converted into voting securities of the surviving entity or any parent
  thereof) in combination with the ownership of any trustee or other
  fiduciary holding securities under an employee benefit plan of the Company
  or any subsidiary of the Company, at least 75% of the combined voting power
  of the securities of the Company or such surviving entity or any parent
  thereof outstanding immediately after such merger or consolidation, or (B)
  a merger or consolidation effected to implement a recapitalization of the
  Company (or similar transaction) in which no person (as defined above) is
  or becomes the beneficial owner, directly or indirectly, of securities of
  the Company (not including in the securities beneficially owned by such
  person any securities acquired directly from the Company or its affiliates
  other than in connection with the acquisition by the Company or its
  affiliates of a business) representing 25% or more of the combined voting
  power of the Company's then outstanding securities; or
 
    (iv) the stockholders of the Company approve a plan of complete
  liquidation or dissolution of the Company or there is consummated an
  agreement for the sale or disposition by the Company of all or
  substantially all of the Company's assets (or any transaction having a
  similar effect) other than a sale or disposition by the Company of all or
  substantially all of the Company's assets to an entity, at least 75% of the
  combined voting power of the voting securities of which are owned by
  stockholders of the Company in substantially the same proportions as their
  ownership of the Company immediately prior to such sale.
 
  (f) "Change in Control Price" means the higher of (i) the highest price per
share paid in any transaction constituting a Change in Control or (ii) the
highest Fair Market Value per share at any time during the 60-day period
preceding or following a Change in Control.
 
  (g) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
 
  (h) "Committee" means the Board or the committee established by the Board to
administer the Plan, the composition of which shall at all times satisfy the
provisions of Rule 16b-3.
 
                                     II-2
<PAGE>
 
  (i) "Company" means Merisel, Inc., a corporation organized under the laws of
the State of Delaware, or any successor corporation.
 
  (j) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and as now or hereafter construed, interpreted and applied
by regulations, rulings and cases.
 
  (k) "Fair Market Value" means, with respect to Stock or other property, the
fair market value of such Stock or other property determined by such methods
or procedures as shall be established from time to time by the Committee.
Unless otherwise determined by the Committee in good faith, the per share Fair
Market Value of Stock as of a particular date shall mean (i) the closing sales
price per share of Stock on the national securities exchange on which the
Stock is principally traded, for the last preceding date on which there was a
sale of such Stock on such exchange, or (ii) if the shares of Stock are then
traded in an over-the-counter market, the average of the closing bid and asked
prices for the shares of Stock in such over-the-counter market for the last
preceding date on which there was a sale of such Stock in such market, or
(iii) if the shares of Stock are not then listed on a national securities
exchange or traded in an over-the-counter market, such value as the Committee,
in its sole discretion, shall determine.
 
  (l) "Grantee" means a person who, as an employee or independent contractor
of the Company, a Subsidiary or an Affiliate, has been granted an Award or
Loan under the Plan.
 
  (m) "ISO" means any Option intended to be and designated as an incentive
stock option within the meaning of Section 422 of the Code.
 
  (n) "Limited SAR" means a right granted pursuant to Section 6(c) which
shall, in general, be automatically exercised for cash upon a Change in
Control.
 
  (o) "Loan" means the proceeds from the Company borrowed by a Plan
participant under Section 8 of the Plan.
 
  (p) "NQSO" means any Option that is designated as a nonqualified stock
option.
 
  (q) "Option" means a right, granted to a Grantee under Section 6(b), to
purchase shares of Stock. An Option may be either an ISO or an NQSO; provided
that, ISO's may be granted only to employees of the Company or a Subsidiary.
 
  (r) "Other Cash-Based Award" means cash awarded under Section 6(h),
including cash awarded as a bonus or upon the attainment of specified
performance criteria or otherwise as permitted under the Plan.
 
  (s) "Other Stock-Based Award" means a right or other interest granted to a
Grantee under Section 6(h) that may be denominated or payable in, valued in
whole or in part by reference to, or otherwise based on, or related to, Stock,
including, but not limited to (1) unrestricted Stock awarded as a bonus or
upon the attainment of specified performance criteria or otherwise as
permitted under the Plan, and (2) a right granted to a Grantee to acquire
Stock from the Company for cash and/or a promissory note containing terms and
conditions prescribed by the Committee.
 
  (t) "Performance Share" means an Award of shares of Stock to a Grantee under
Section 6(h) that is subject to restrictions based upon the attainment of
specified performance criteria.
 
  (u) "Plan" means this Merisel, Inc. 1997 Stock Award and Incentive Plan, as
amended from time to time.
 
                                     II-3
<PAGE>
 
  (v) "Restricted Stock" means an Award of shares of Stock to a Grantee under
Section 6(d) that may be subject to certain restrictions and to a risk of
forfeiture.
 
  (w) "Restricted Stock Unit" means a right granted to a Grantee under Section
6(e) to receive Stock or cash at the end of a specified deferral period, which
right may be conditioned on the satisfaction of specified performance or other
criteria.
 
  (x) "Rule 16b-3" means Rule 16b-3, as from time to time in effect
promulgated by the Securities and Exchange Commission under Section 16 of the
Exchange Act, including any successor to such Rule.
 
  (y) "Stock" means shares of the common stock, par value $.01 per share, of
the Company.
 
  (z) "SAR" or "Stock Appreciation Right" means the right, granted to a
Grantee under Section 6(c), to be paid an amount measured by the appreciation
in the Fair Market Value of Stock from the date of grant to the date of
exercise of the right, with payment to be made in cash, Stock, or property as
specified in the Award or determined by the Committee.
 
  (aa) "Securities Act" means the Securities Act of 1933, as amended from time
to time, and as now or hereafter construed, interpreted and applied by
regulations, rulings and cases.
 
  (ab) "Subsidiary" means any corporation in an unbroken chain of corporations
beginning with the Company if, at the time of granting of an Award, each of
the corporations (other than the last corporation in the unbroken chain) owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in the chain.
 
3. ADMINISTRATION.
 
  The Plan shall be administered by the Committee. The Committee shall have
the authority in its discretion, subject to and not inconsistent with the
express provisions of the Plan, to administer the Plan and to exercise all the
powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan, including, without
limitation, the authority to grant Awards and make Loans; to determine the
persons to whom and the time or times at which Awards shall be granted and
Loans shall be made; to determine the type and number of Awards to be granted
and the amount of any Loan, the number of shares of Stock to which an Award
may relate and the terms, conditions, restrictions and performance criteria
relating to any Award or Loan; and to determine whether, to what extent, and
under what circumstances an Award may be settled, cancelled, forfeited,
exchanged, or surrendered; to make adjustments in the terms and conditions of,
and the criteria and performance objectives (if any) included in, Awards and
Loans in recognition of unusual or non-recurring events affecting the Company
or any Subsidiary or Affiliate or the financial statements of the Company or
any Subsidiary or Affiliate, or in response to changes in applicable laws,
regulations, or accounting principles; to construe and interpret the Plan and
any Award or Loan; to prescribe, amend and rescind rules and regulations
relating to the Plan; to determine the terms and provisions of the Award
Agreements and any promissory note or agreement related to any Loan (which
need not be identical for each Grantee); and to make all other determinations
deemed necessary or advisable for the administration of the Plan.
 
  The Committee may appoint a chairperson and a secretary and may make such
rules and regulations for the conduct of its business as it shall deem
advisable, and shall keep minutes of its meetings. All determinations of the
Commit tee shall be made by a majority of its members either present in person
or participating by conference telephone at a meeting or by written consent.
The Committee may delegate to one or more of its members or to one or more
agents such administrative duties as it may deem advisable, and the Committee
or any person to whom it has delegated duties as aforesaid may employ one or
more persons to render advice with respect to any responsibility the Committee
or such person may have under the Plan. All decisions, determinations and
interpretations of the Committee shall be final and binding on all persons,
including the Company, and any Subsidiary or Grantee (or any person claiming
any rights under the Plan from or through any Grantee) and any stockholder.
 
                                     II-4
<PAGE>
 
  No member of the Board or Committee shall be liable for any action taken or
determination made in good faith with respect to the Plan or any Award granted
or Loan made hereunder.
 
4. ELIGIBILITY.
 
  Subject to the conditions set forth below, Awards and Loans may be granted
to directors and selected employees of the Company and its present or future
Subsidiaries, in the discretion of the Committee. In determining the persons
to whom Awards and Loans shall be granted and the type of any Award or the
amount of any Loan (including the number of shares to be covered by such
Award), the Committee shall take into account such factors as the Committee
shall deem relevant in connection with accomplishing the purposes of the Plan.
 
5. STOCK SUBJECT TO THE PLAN.
 
  The maximum number of shares of Stock reserved for the grant of Awards under
the Plan shall be 8,000,000 shares of Stock, (subject to adjustment as
provided herein); provided that, if the Stonington Conversion (as defined in
the Proxy Statement of the Company dated       , 1997) does not become
effective for any reason, then the maximum number of shares reserved for the
grant of awards under the Plan shall be 3,000,000 shares of Stock (subject to
adjustment as provided herein); and provided further that, such number of
shares shall be decreased to the extent that shares of Stock remain subject to
outstanding options or other stock-based awards under any other incentive or
bonus plan of the Company. No more than 100% of the total shares available for
grant may be awarded to a single individual in a single year. Such shares may,
in whole or in part, be authorized but unissued shares or shares that shall
have been or may be reacquired by the Company in the open market, in private
transactions or otherwise. If any shares subject to an Award are forfeited,
cancelled, exchanged or surrendered or if an Award otherwise terminates or
expires without a distribution of shares to the Grantee, the shares of stock
with respect to such Award shall, to the extent of any such forfeiture,
cancellation, exchange, surrender, termination or expiration, again be
available for Awards under the Plan; provided that, in the case of forfeiture,
cancellation, exchange or surrender of shares of Restricted Stock or
Restricted Stock Units with respect to which dividends have been paid or
accrued, the number of shares with respect to such Awards shall not be
available for Awards hereunder unless, in the case of shares with respect to
which dividends were accrued but unpaid, such dividends are also forfeited,
cancelled, exchanged or surrendered. Upon the exercise of any Award granted in
tandem with any other Awards or awards, such related Awards or awards shall be
cancelled to the extent of the number of shares of Stock as to which the Award
is exercised and, notwithstanding the foregoing, such number of shares shall
no longer be available for Awards under the Plan.
 
  In the event that the Committee shall determine that any dividend or other
distribution (whether in the form of cash, Stock, or other property),
recapitalization, stock split, reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of Grantees under the Plan, then the Committee shall make such
equitable changes or adjustments as it deems necessary or appropriate to any
or all of (i) the number and kind of shares of Stock which may thereafter be
issued in connection with Awards, (ii) the number and kind of shares of Stock
issued or issuable in respect of outstanding Awards, and (iii) the exercise
price, grant price, or purchase price relating to any Award; provided that,
with respect to ISOs, such adjustment shall be made in accordance with Section
424(h) of the Code.
 
6. SPECIFIC TERMS OF AWARDS.
 
  (a) General. The term of each Award shall be for such period as may be
determined by the Committee. Subject to the terms of the Plan and any
applicable Award Agreement, payments to be made by the Company or a Subsidiary
or Affiliate upon the grant, maturation, or exercise of an Award may be made
in such forms as the Committee shall determine at the date of grant or
thereafter, including, without limitation, cash, Stock, or other property, and
may be made in a single payment or transfer, in installments, or on a deferred
basis. The Committee
 
                                     II-5
<PAGE>
 
may make rules relating to installment or deferred payments with respect to
Awards, including the rate of interest to be credited with respect to such
payments. In addition to the foregoing, the Committee may impose on any Award
or the exercise thereof, at the date of grant or thereafter, such addition al
terms and conditions, not inconsistent with the provisions of the Plan, as the
Committee shall determine.
 
  (b) Options. The Committee is authorized to grant Options to Grantees on the
following terms and conditions:
 
    (i) Type of Award. The Award Agreement evidencing the grant of an Option
  under the Plan shall designate the Option as an ISO or an NQSO.
 
    (ii) Exercise Price. The exercise price per share of Stock purchasable
  under an Option shall be determined by the Committee; provided that, in the
  case of an ISO, such exercise price shall be not less than the Fair Market
  Value of a share on the date of grant of such Option, and in no event shall
  the exercise price for the purchase of shares be less than par value. The
  exercise price for Stock subject to an Option may be paid in cash or by an
  exchange of Stock previously owned by the Grantee, or a combination of
  both, in an amount having a combined value equal to such exercise price. A
  Grantee may also elect to pay all or a portion of the aggregate exercise
  price by having shares of Stock with a Fair Market Value on the date of
  exercise equal to the aggregate exercise price withheld by the Company or
  sold by a broker-dealer under circumstances meeting the requirements of
  12 C.F.R. (S) 220 or any successor thereof.
 
    (iii) Term and Exercisability of Options. Unless otherwise provided in an
  Award Agreement, the date on which the Committee adopts a resolution
  expressly granting an Option shall be considered the day on which such
  Option is granted. Options shall be exercisable over the exercise period
  (which shall not exceed ten years from the date of grant), at such times
  and upon such conditions as the Committee may determine, as reflected in
  the Award Agreement; provided that, the Committee shall have the authority
  to accelerate the exercisability of any outstanding Option at such time and
  under such circumstances as it, in its sole discretion, deems appropriate.
  An Option may be exercised to the extent of any or all full shares of Stock
  as to which the Option has become exercisable, by giving written notice of
  such exercise to the Committee or its designated agent.
 
    (iv) Termination of Employment, etc. An Option may not be exercised
  unless the Grantee is then in the employ of, or then maintains an
  independent contractor relationship with, the Company or a Subsidiary or an
  Affiliate (or a company or a parent or subsidiary company of such company
  issuing or assuming the Option in a transaction to which Section 424(a) of
  the Code applies), and unless the Grantee has remained continuously so
  employed, or continuously maintained such relationship, since the date of
  grant of the Option; provided that, the Award Agreement may contain
  provisions extending the exercisability of Options, in the event of
  specified terminations, to a date not later than the expiration date of
  such Option.
 
    (v) Other Provisions. Options may be subject to such other conditions
  including, but not limited to, restrictions on transferability of the
  shares acquired upon exercise of such Options, as the Committee may
  prescribe in its discretion or as may be required by applicable law.
 
  (c) SARs and Limited SARs. The Committee is authorized to grant SARs and
Limited SARs to Grantees on the following terms and conditions:
 
    (i) In General. Unless the Committee determines otherwise, an SAR or a
  Limited SAR (1) granted in tandem with an NQSO may be granted at the time
  of grant of the related NQSO or at any time thereafter or (2) granted in
  tandem with an ISO may only be granted at the time of grant of the related
  ISO. An SAR or Limited SAR granted in tandem with an Option shall be
  exercisable only to the extent the underlying Option is exercisable.
 
    (ii) SARs. An SAR shall confer on the Grantee a right to receive an
  amount with respect to each share subject thereto, upon exercise thereof,
  equal to the excess of (1) the Fair Market Value of one share of Stock on
  the date of exercise over (2) the grant price of the SAR (which in the case
  of an SAR granted in tandem with an Option shall be equal to the exercise
  price of the underlying Option, and which in the case of any other SAR
  shall be such price as the Committee may determine).
 
                                     II-6
<PAGE>
 
    (iii) Limited SARs. A Limited SAR shall confer on the Grantee a right to
  receive with respect to each share subject thereto, automatically upon the
  occurrence of a Change in Control, an amount equal in value to the excess
  of (1) the Change in Control Price (in the case of a LSAR granted in tandem
  with an ISO, the Fair Market Value), of one share of Stock on the date of
  such Change in Control over (2) the grant price of the Limited SAR (which
  in the case of a Limited SAR granted in tandem with an Option shall be
  equal to the exercise price of the underlying Option, and which in the case
  of any other Limited SAR shall be such price as the Committee determines);
  provided that, in the case of a Limited SAR granted to a Grantee who is
  subject to the reporting requirements of Section 16(a) of the Exchange Act
  (a "Section 16 Individual"), such Section 16 Individual shall only be
  entitled to receive such amount if such Limited SAR has been outstanding
  for at least six (6) months as of the date of the Change in Control.
 
  (d) Restricted Stock. The Committee is authorized to grant Restricted Stock
to Grantees on the following terms and conditions:
 
    (i) Issuance and Restrictions. Restricted Stock shall be subject to such
  restrictions on transferability and other restrictions, if any, as the
  Committee may impose at the date of grant or thereafter, which restrictions
  may lapse separately or in combination at such times, under such
  circumstances, in such installments, or otherwise, as the Committee may
  determine. Such restrictions may include factors relating to the increase
  in the value of the Stock or to individual or Company performance such as
  the attainment of certain specified individual, divisional or Company-wide
  performance goals, sales volume increases or increases in earnings per
  share. Except to the extent restricted under the Award Agreement relating
  to the Restricted Stock, a Grantee granted Restricted Stock shall have all
  of the rights of a stockholder including, without limitation, the right to
  vote Restricted Stock and the right to receive dividends thereon.
 
    (ii) Forfeiture. Upon termination of employment with or service to the
  Company, or upon termination of the independent contractor relationship, as
  the case may be, during the applicable restriction period, Restricted Stock
  and any accrued but unpaid dividends that are at that time subject to
  restrictions shall be forfeited; provided that, the Committee may provide,
  by rule or regulation or in any Award Agreement, or may determine in any
  individual case, that restrictions or forfeiture conditions relating to
  Restricted Stock will be waived in whole or in part in the event of
  terminations resulting from specified causes, and the Committee may in
  other cases waive in whole or in part the forfeiture of Restricted Stock.
 
    (iii) Certificates for Stock. Restricted Stock granted under the Plan may
  be evidenced in such manner as the Committee shall determine. If
  certificates representing Restricted Stock are registered in the name of
  the Grantee, such certificates shall bear an appropriate legend refer ring
  to the terms, conditions, and restrictions applicable to such Restricted
  Stock, and the Company shall retain physical possession of the certificate.
 
    (iv) Dividends. Dividends paid on Restricted Stock shall be either paid
  at the dividend payment date, or deferred for payment to such date as
  determined by the Committee, in cash or in shares of unrestricted Stock
  having a Fair Market Value equal to the amount of such dividends. Stock
  distributed in connection with a stock split or stock dividend, and other
  property distributed as a dividend, shall be subject to restrictions and a
  risk of forfeiture to the same extent as the Restricted Stock with respect
  to which such Stock or other property has been distributed.
 
  (e) Restricted Stock Units. The Committee is authorized to grant Restricted
Stock Units to Grantees, subject to the following terms and conditions:
 
    (i) Award and Restrictions. Delivery of Stock or cash, as determined by
  the Committee, will occur upon expiration of the deferral period specified
  for Restricted Stock Units by the Committee. In addition, Restricted Stock
  Units shall be subject to such restrictions as the Committee may impose, at
  the date of grant or thereafter, which restrictions may lapse at the
  expiration of the deferral period or at earlier or later specified times,
  separately or in combination, in installments or otherwise, as the
  Committee may determine. Such restrictions may include factors relating to
  the increase in the value of the Stock or to individual or Company
  performance such as the attainment of certain specified individual,
  divisional or Company-wide performance goals, sales volume increases or
  increases in earnings per share.
 
                                     II-7
<PAGE>
 
    (ii) Forfeiture. Upon termination of employment or termination of the
  independent contractor relationship during the applicable deferral period
  or portion thereof to which forfeiture conditions apply, or upon failure to
  satisfy any other conditions precedent to the delivery of Stock or cash to
  which such Restricted Stock Units relate, all Restricted Stock Units that
  are then subject to deferral or restriction shall be forfeited; provided
  that, the Committee may provide, by rule or regulation or in any Award
  Agreement, or may determine in any individual case, that restrictions or
  forfeiture conditions relating to Restricted Stock Units will be waived in
  whole or in part in the event of termination resulting from specified
  causes, and the Committee may in other cases waive in whole or in part the
  forfeiture of Restricted Stock Units.
 
  (f) Stock Awards in Lieu of Cash Awards. The Committee is authorized to
grant Stock as a bonus, or to grant other Awards, in lieu of Company
commitments to pay cash under other plans or compensatory arrangements. Stock
or Awards granted hereunder shall have such other terms as shall be determined
by the Committee.
 
  (g) Performance Shares and Other Stock- or Cash-Based Awards. The Committee
is authorized to grant to Grantees Performance Shares and/or Other Stock-Based
Awards or Other Cash-Based Awards as an element of or supplement to any other
Award under the Plan, as deemed by the Committee to be consistent with the
purposes of the Plan. Such Awards may be granted with value and payment
contingent upon performance of the Company or any other factors designated by
the Committee, or valued by reference to the performance of specified
Subsidiaries. The Committee shall determine the terms and conditions of such
Awards at the date of grant or, to the extent permitted by Section 162(m) of
the Code, thereafter; provided, that performance objectives for each year
shall be established by the Committee not later than the latest date
permissible under Section 162(m) of the Code. Such performance objectives may
be expressed in terms of one or more financial or other objective goals.
Financial goals may be expressed, for example, in terms of sales, earnings per
share, stock price, return on equity, net earnings growth, net earnings,
related return ratios, cash flow, earnings before interest, taxes,
depreciation and amortization (EBITDA), return on assets or total stockholder
return. Other objective goals may include the attainment of various
productivity and long-term growth objectives, including, without limitation
reductions in the Corporation's overhead ratio and expense to sales ratios.
Any criteria may be measured in absolute terms or as compared to another
corporation or corporations. To the extent applicable, any such performance
objective shall be determined (i) in accordance with the Corporation's audited
financial statements and generally accepted accounting principles and reported
upon by the Corporation's independent accountants or (ii) so that a third
party having knowledge of the relevant facts could determine whether such
performance objective is met. Performance objectives shall include a threshold
level of performance below which no Award payment shall be made, levels of
performance above which specified percentages of target Awards shall be paid,
and a maximum level of performance above which no addition al Award shall be
paid. Performance objectives established by the Committee may be (but need not
be) different from year-to-year and different performance objectives may be
applicable to different Grantees.
 
7. CHANGE IN CONTROL PROVISIONS.
 
  The Committee or the Board may provide, either at the time of the grant of
an Award or at any time prior to the occurrence of a Change of Control, for
any or all of the following provisions to apply to an Award:
 
  (a) any Award carrying a right to exercise that was not previously
exercisable and vested shall become fully exercisable and vested; and
 
  (b) the restrictions, deferral limitations, payment conditions, and
forfeiture conditions applicable to any other Award granted under the Plan
shall lapse and such Awards shall be deemed fully vested, and any performance
conditions imposed with respect to Awards shall be deemed to be fully
achieved.
 
                                     II-8
<PAGE>
 
  (c) any indebtedness incurred pursuant to Section 8 of this Plan shall be
forgiven and the collateral pledged in connection with any such Loan shall be
released; and
 
  (d) the value of all outstanding Awards shall, to the extent determined by
the Committee at or after grant, be cashed out on the basis of the Change of
Control Price as of the date the Change of Control occurs or such other date
as the Committee may determine prior to the Change of Control.
 
8. LOAN PROVISIONS.
 
  Subject to the provisions of the Plan and all applicable federal and state
laws, rules and regulations (including the requirements of Regulation G (12
C.F.R. (S)207)), the Committee shall have the authority to make Loans to
Grantees (on such terms and conditions as the Committee shall determine), to
enable such Grantees to purchase shares in connection with the realization of
Awards under the Plan. Loans shall be evidenced by a promissory note or other
agreement, signed by the borrower, which shall contain provisions for
repayment and such other terms and conditions as the Committee shall
determine.
 
9. GENERAL PROVISIONS.
 
  (a) Approval of Shareholders. The Plan shall take effect upon its adoption
by the Board but the Plan (and any grants of Awards made prior to the
shareholder approval mentioned herein) shall be subject to ratification by the
holder(s) of a majority of the issued and outstanding shares of voting
securities of the Company entitled to vote, which ratification must occur
within twelve (12) months of the date that the Plan is adopted by the Board.
In the event that the shareholders of the Company do not ratify the Plan at a
meeting of the shareholders at which such issue is considered and voted upon,
then upon such event the Plan and all rights hereunder shall immediately
terminate and no Grantee (or any permitted transferee thereof) shall have any
remaining rights under the Plan or any Award Agreement entered into in
connection herewith.
 
  (b) Nontransferability. Awards shall not be transfer able by a Grantee
except by will or the laws of descent and distribution or, if then permitted
under Rule 16b-3, pursuant to a qualified domestic relations order as defined
under the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder, and shall be exercisable during the
lifetime of a Grantee only by such Grantee or his guardian or legal
representative.
 
  (c) No Right to Continued Employment, etc. Nothing in the Plan or in any
Award or Loan granted or any Award Agreement, promissory note or other
agreement entered into pursuant hereto shall confer upon any Grantee the right
to continue in the employ of or to continue as an independent contractor of
the Company, any subsidiary or any Affiliate or to be entitled to any
remuneration or benefits not set forth in the Plan or such Award Agreement,
promissory note or other agreement or to interfere with or limit in any way
the right of the Company or any such Subsidiary or Affiliate to terminate such
Grantee's employment or independent contractor relationship.
 
  (d) Taxes. The Company or any Subsidiary or Affiliate is authorized to
withhold from any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Stock, or any other payment to a
Grantee, amounts of withholding and other taxes due in connection with any
transaction involving an Award, and to take such other action as the Committee
may deem advisable to enable the Company and Grantees to satisfy obligations
for the payment of withholding taxes and other tax obligations relating to any
Award. This authority shall include authority to withhold or receive Stock or
other property and to make cash payments in respect thereof in satisfaction of
a Grantee's tax obligations.
 
  (e) Amendment and Termination of the Plan. The Board may at any time and
from time-to-time alter, amend, suspend, or terminate the Plan in whole or in
part; provided that, no amendment which requires stockholder approval in order
for the Plan to continue to comply with Rule 16b-3, shall be effective unless
the same shall be approved by the requisite vote of the stockholders of the
Company entitled to vote thereon.
 
                                     II-9
<PAGE>
 
Notwithstanding the foregoing, no amendment shall affect adversely any of the
rights of any Grantee, without such Grantee's consent, under any Award or Loan
theretofore granted under the Plan.
 
  (f) No Rights to Awards or Loans; No Stockholder Rights. No Grantee shall
have any claim to be granted any Award or Loan under the Plan, and there is no
obligation for uniformity of treatment of Grantees. Except as provided
specifically herein, a Grantee or a transferee of an Award shall have no
rights as a stockholder with respect to any shares covered by the Award until
the date of the issuance of a stock certificate to him for such shares.
 
  (g) Unfunded Status of Awards. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Grantee pursuant to an Award, nothing contained in
the Plan or any Award shall give any such Grantee any rights that are greater
than those of a general creditor of the Company.
 
  (h) No Fractional Shares. No fractional shares of Stock shall be issued or
delivered pursuant to the Plan or any Award. The Committee shall determine
whether cash, other Awards, or other property shall be issued or paid in lieu
of such fractional shares or whether such fractional shares or any rights
thereto shall be forfeited or other wise eliminated.
 
  (i) Regulations and Other Approvals.
 
    (I) The obligation of the Company to sell or deliver Common Stock with
  respect to any Award granted under the Plan shall be subject to all
  applicable laws, rules and regulations, including all applicable federal
  and state securities laws, and the obtaining of all such approvals by
  governmental agencies as may be deemed necessary or appropriate by the
  Committee.
 
    (II) Each Award is subject to the requirement that, if at any time the
  Committee determines, in its absolute discretion, that the listing,
  registration or qualification of Common Stock issuable pursuant to the Plan
  is required by any securities exchange or under any state or federal law,
  or the consent or approval of any governmental regulatory body is necessary
  or desirable as a condition of, or in connection with, the grant of an
  Award or the issuance of Common Stock, no such Award shall be granted or
  payment made or Common Stock issued, in whole or in part, unless listing,
  registration, qualification, consent or approval has been effected or
  obtained free of any conditions not acceptable to the Committee.
 
    (III) In the event that the disposition of Common Stock acquired pursuant
  to the Plan is not covered by a then current registration statement under
  the Securities Act and is not otherwise exempt from such registration, such
  Common Stock shall be restricted against transfer to the extent required by
  the Securities Act or regulations thereunder, and the Committee may require
  a Grantee receiving Common Stock pursuant to the Plan, as a condition
  precedent to receipt of such Common Stock, to represent to the Company in
  writing that the Common Stock acquired by such Grantee is acquired for
  investment only and not with a view to distribution.
 
  (j) Governing Law. The Plan and all determinations made and actions taken
pursuant hereto shall be governed by the laws of the State of Delaware without
giving effect to the conflict of laws principles thereof.
 
  (k) Effective Date; Plan Termination. The Plan shall take effect upon its
adoption by the Board (the "Effective Date"), but the Plan (and any grants of
Awards made prior to the stockholder approval mentioned herein), shall be
subject to the approval of the holder(s) of a majority of the issued and
outstanding shares of voting securities of the Company entitled to vote, which
approval must occur within twelve months of the date the Plan is adopted by
the Board. In the absence of such approval, such Awards shall be null and
void.
 
                                     II-10
<PAGE>
 
                   [DONALDSON, LUFKIN & JENRETTE LETTERHEAD]
 
                                                                      ANNEX III
 
                              September 18, 1997
 
Board of Directors
Merisel, Inc.
200 Continental Boulevard
El Segundo, CA 90245
 
Ladies and Gentlemen:
 
  You have requested our opinion as to the fairness from a financial point of
view of the consideration to be received by Merisel, Inc. (the "Company") for
issuing 4,901,316 shares (the "Purchased Shares") of common stock, par value
$.01 per share (the "Common Stock"), and $137.1 million principal amount of
convertible promissory notes (the "Notes") to Phoenix Acquisition Company II,
L.L.C. (the "Lender"), an affiliate of Stonington Partners, Inc.
("Stonington"), pursuant to the terms of a Stock and Note Purchase Agreement
(the "Agreement"), to be dated September 19, 1997, by and among the Lender,
the Company and Merisel Americas, Inc., a wholly owned subsidiary of the
Company ("Merisel Americas"). The issuance of the Purchased Shares and Notes
is herein referred to as the "Transaction."
 
  Pursuant to the Agreement, the Lender will purchase the Purchased Shares and
the Notes for aggregate consideration in the amount of $152 million (the
"Consideration"). In addition, the Agreement requires that the Company pay to
the Lender a transaction fee of $3 million at closing. The Agreement also
requires the Lender to use its best efforts to obtain, on behalf of the
Company, an executed commitment letter for a revolving credit facility to
provide working capital for the Company's subsidiaries and, if it is unable to
do so, to provide a revolving credit facility of at least $50 million for such
purpose.
 
  Upon the receipt of the approval of the stockholders of the Company and the
satisfaction or waiver of certain other conditions contained in the Agreement,
including the condition that there shall be no finding that the Company has
breached or is in breach of any material obligation under either the Limited
Waiver and Agreement to Amend dated as of April 14, 1997 (the "Limited Waiver
and Agreement to Amend") or the Limited Waiver and Voting Agreement dated as
of April 11, 1997 (the "Limited Waiver and Voting Agreement"), together
providing for an alternative restructuring (the "Restructuring"), the full
unpaid principal amount of the Notes and the right to receive all accrued and
unpaid interest (including deferred interest and interest on deferred
interest, if any) (the "Related Accrued Interest Rights") will be converted
into Common Stock, which conversion will occur automatically upon the
satisfaction or waiver of such conditions, without any further action on the
part of the holders. In addition, any holder of the Notes may at any time,
upon the satisfaction or waiver of certain conditions, convert a portion of
the Notes and the Related Accrued Interest Rights into a maximum of 19.9% of
the Common Stock issued and outstanding immediately prior to the proposed
conversion, reduced by the number of shares of Common Stock previously
purchased by any of the holders of Notes pursuant to the Agreement. The
initial conversion rate is 328.9473684211 shares of Common Stock for each
$1,000 principal amount of Notes, together with any and all Related Accrued
Interest Rights. The Company has advised us that as of September 18, 1997,
30,078,495 shares of Common Stock were issued and outstanding. Assuming
conversion of all of the Notes as of September 18, 1997, 50,000,000 shares of
Common Stock (including the Purchased Shares) would have been issued to the
Lender at a price of $3.04 per share, which shares would have represented
approximately 62.4% of the outstanding shares of Common Stock following such
conversion.
 
  The principal amount of the Notes matures on dates from January 31, 1998 to
March 10, 2000 and bear interest at a rate per annum at all times equal to
11.5% per annum, increasing by an additional 1% at the end of each month
commencing at the end of the second month after the date of the Notes for as
long as any portion of the Notes remains outstanding; provided, however, that
the maximum interest rate payable under the Notes will be 18.0% per annum. The
Company and Merisel Americas may, at their option, elect to defer payment of
any
 
                                     III-1
<PAGE>
 
interest on the Notes due on any interest payment date. If such election is
made, interest will accrue on the amount of such deferred interest.
 
  In arriving at our opinion, we have reviewed the Agreement, the Limited
Waiver and Agreement to Amend, the Limited Waiver and Voting Agreement, the
Company's Registration Statement on Form S-4 (Registration No. 333-27369) and
financial and other information that was publicly available or furnished to us
by the Company including information provided during discussions with its
management. Included in the information provided during discussions with the
Company's management were certain internal financial projections of the
Company for the period beginning January 1, 1997 ending December 31, 2001
prepared by management of the Company. In addition, we have compared certain
financial aspects of the Transaction and the Restructuring, compared certain
financial and securities data of the Company with various other companies
whose securities are traded in public markets, reviewed the historical stock
prices and trading volumes of the Common Stock of the Company, reviewed prices
and premiums paid in certain other business combinations and conducted such
other financial studies, analyses and investigations as we deemed appropriate
for purposes of this opinion.
 
  In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available
to us from public sources, that was provided to us by the Company or its
representatives, or that was otherwise reviewed by us. With respect to the
financial projections supplied to us, we have assumed that they have been
reasonably prepared on the basis reflecting the best currently available
estimates and judgments of the management of the Company as to the future
operating and financial performance of the Company. We have not assumed any
responsibility for making an independent evaluation of any assets or
liabilities or for making any independent verification of any of the
information reviewed by us. We have relied as to certain legal matters on the
advice of counsel to the Company, including with respect to the termination of
the Limited Waiver Agreement and the potential outcome of any litigation
relating thereto.
 
  We have assumed that the Limited Waiver Agreement will terminate in
accordance with its terms prior to consummation of the Transaction and that
the Company will use the proceeds from the issuance of the Purchased Shares
and the Notes to repay the outstanding indebtedness under certain agreements
with the Company's subsidiaries and the transaction fee to the Lender, as
provided in the Agreement. The Company has advised us that it also intends to
pay unpaid interest of approximately $8 million on its 12 1/2% Senior Notes
due 2004 and that, upon such payments, the Company will be in full compliance
with all of its outstanding debt obligations. We understand that such
indebtedness may be accelerated if such payments are not made following
termination of the Limited Waiver Agreement.
 
  We have also assumed that the market price of the Common Stock is higher
than it otherwise would be in the absence of the proposals made by Stonington,
including the proposal for the Transaction. On July 14, 1997, the day prior to
the announcement of the initial proposal made by Stonington, the market price
of the Common Stock was $2.03125. On September 17, 1997, the market price of
the Common Stock was $4.1875, We are expressing no opinion as to the price at
which the Common Stock will actually trade at any time.
 
  Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information available to us as of, the
date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. Our opinion does not address the Board's
decision to proceed with the Transaction. Our opinion does not constitute a
recommendation as to any stockholder as to how such stockholder should vote on
the proposed Transaction.
 
  Donaldson, Lufkin & Jenrette Securities Corporation, as part of its
investment banking services, is regularly engaged in the valuation of
businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes.
 
                                     III-2
<PAGE>
 
  Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the Consideration to be received by the Company pursuant
to the Agreement is fair to the Company from a financial point of view.
 
                                          Very truly yours,
 
                                          Donaldson, Lufkin & Jenrette
                                          Securities Corporation
 
                                             /s/ J. Halisey Kennedy
                                          By: _________________________________
                                             J. Halisey Kennedy
                                             Senior Vice President
 
                                     III-3
<PAGE>
 
                                                                        ANNEX IV
 
 
PROXY
                                 MERISEL, INC.
 
IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSALS REFERRED
                             TO IN (1), (2) AND (3)
 
  The undersigned hereby appoints Dwight A. Steffensen and James E. Illson and
each of them the undersigned's true and lawful attorneys and proxies (with full
power of substitution in each) to vote all Common Stock of Merisel, Inc. (the
"Company"), standing in the undersigned's name, at the Special Meeting of
Stockholders of the Company to be held at 200 Continental Boulevard, El
Segundo, California, on [       ], 1997 at 10:00 a.m., Los Angeles time
(including any adjournments or postponements thereof, the "Stockholders'
Meeting"), upon those matters as described in the Proxy Statement for the
meeting and such other matters as may properly come before such meeting. The
Stockholder votes with respect to the Stonington Conversion will not be
effective unless and until the Charter Amendment is approved at the
Stockholders' Meeting and filed with the Secretary of State of Delaware. The
Board of Directors has reserved the right, pursuant to Delaware law, to abandon
the Charter Amendment even if the Company's Stockholders authorize the Charter
Amendment.
 
  A vote FOR the following proposals described in the Proxy Statement for the
Stockholders' Meeting is recommended:
 
  1. Approve the Charter Amendment

                         [_] FOR[_] AGAINST[_] ABSTAIN
 
  2. Approve the Stonington Conversion

                         [_] FOR[_] AGAINST[_] ABSTAIN
 
  3. Approve the Stock Award and Incentive Plan

                         [_] FOR[_] AGAINST[_] ABSTAIN
 
 
  If any other business is transacted at the Stockholders' Meeting, the Proxy
shall be voted in accordance with the best judgment of the above-named
attorneys and proxies.
                           Continued on Reverse Side
 
 

 
                                 MERISEL, INC.
                             PROXY FOR COMMON STOCK
 
 PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR SPECIAL MEETING OF STOCKHOLDERS
                                [       ], 1997
 
                                                  Dated: ________________, 1997
 
                                                  -----------------------------
                                                   (Signature of Stockholder)

                                                  -----------------------------
                                                   (Signature of Stockholder)
 
                                                  Please sign your name
                                                  exactly as it appears
                                                  hereon. If acting as
                                                  attorney, executor, trustee,
                                                  or in other representative
                                                  capacity, please sign name
                                                  and title. If stock is held
                                                  jointly, each joint owner
                                                  should sign.
 
                                                  PLEASE SIGN, DATE AND RETURN
                                                  PROMPTLY IN THE ENCLOSED
                                                  ENVELOPE
 


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