EX-10.1






AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT




by and among




BELL MICROPRODUCTS FUNDING CORPORATION,

as Borrower,




BELL MICROPRODUCTS INC.,

as Servicer,




VARIABLE FUNDING CAPITAL COMPANY LLC,

as a Lender,




WACHOVIA BANK, NATIONAL ASSOCIATION,

as a Lender Group Agent,




MARKET STREET FUNDING LLC,

as a Lender,




PNC BANK, NATIONAL ASSOCIATION,

as a Lender Group Agent,




THE CONDUIT LENDERS FROM TIME TO TIME PARTIES HERETO,




THE LIQUIDITY BANKS FROM TIME TO TIME PARTY HERETO,




THE LENDER GROUP AGENTS FROM TIME TO TIME PARTY HERETO




and




WACHOVIA BANK, NATIONAL ASSOCIATION,

as Agent




Dated as of December 28, 2005




1




TABLE OF CONTENTS




Page




	 	 	 	 	 	 	 	 	 
	Article I The Advances
	 	 	 	 	 	 	2	 
	Section 1.1
	 	Credit Facility.
	 	 	2	 
	Section 1.2
	 	Increases.
	 	 	3	 
	Section 1.3
	 	Decreases.
	 	 	3	 
	Section 1.4
	 	Deemed Collections; Borrowing Limit.
	 	 	4	 
	Section 1.5
	 	Payment Requirements.
	 	 	5	 
	Section 1.6
	 	Ratable Loans; Funding Mechanics; Liquidity Fundings.
	 	 	5	 
	Article II Payments and Collections
	 	 	6	 
	Section 2.1
	 	Payments.
	 	 	6	 
	Section 2.2
	 	Collections Prior to Amortization.
	 	 	6	 
	Section 2.3
	 	Collections Following Amortization.
	 	 	7	 
	Section 2.4
	 	Payment Rescission.
	 	 	8	 
	Article III Conduit Funding
	 	 	 	 	 	 	8	 
	Section 3.1
	 	Yield.
	 	 	8	 
	Section 3.2
	 	Calculation of Yield.
	 	 	8	 
	Section 3.3
	 	Yield Payments.
	 	 	8	 
	Section 3.4
	 	Default Rate.
	 	 	8	 
	Article IV Bank Funding
	 	 	 	 	 	 	8	 
	Section 4.1
	 	Bank Funding.
	 	 	8	 
	Section 4.2
	 	Interest Payments.
	 	 	9	 
	Section 4.3
	 	Selection and Continuation of Interest Periods.
	 	 	9	 
	Section 4.4
	 	Liquidity Bank Interest Rates.
	 	 	9	 
	Section 4.5
	 	Suspension of the LIBO Rate.
	 	 	10	 
	Section 4.6
	 	Default Rate.
	 	 	10	 
	Article V Representations and Warranties
	 	 	10	 
	Section 5.1
	 	Representations and Warranties of the Loan Parties.
	 	 	10	 
	Article VI Conditions of Advances
	 	 	14	 
	Section 6.1
	 	Conditions Precedent to Initial Advance.
	 	 	14	 
	Section 6.2
	 	Conditions Precedent to All Advances.
	 	 	14	 
	Article VII Covenants
	 	 	 	 	 	 	15	 
	Section 7.1
	 	Affirmative Covenants of the Loan Parties.
	 	 	15	 
	Section 7.2
	 	Negative Covenants of the Loan Parties.
	 	 	23	 
	Article VIII Administration and Collection
	 	 	24	 
	Section 8.1
	 	Designation of Servicer.
	 	 	24	 
	Section 8.2
	 	Duties of Servicer.
	 	 	25	 
	Section 8.3
	 	Collection Notices.
	 	 	26	 
	Section 8.4
	 	Responsibilities of Borrower.
	 	 	27	 
	Section 8.5
	 	Reports.
	 	 	27	 
	Section 8.6
	 	Servicing Fee.
	 	 	27	 
	Article IX Amortization Events
	 	 	 	 	 	 	27	 
	Section 9.1
	 	Amortization Events.
	 	 	27	 
	Section 9.2
	 	Remedies.
	 	 	30	 
	Article X Indemnification
	 	 	 	 	 	 	30	 
	Section 10.1
	 	Indemnities by the Loan Parties.
	 	 	30	 
	Section 10.2
	 	Increased Cost and Reduced Return.
	 	 	33	 
	Section 10.3
	 	Other Costs and Expenses.
	 	 	33	 
	Section 10.4
	 	Allocations.
	 	 	34	 
	Article XI The Agent
	 	 	 	 	 	 	34	 
	Section 11.1
	 	Authorization and Action.
	 	 	34	 
	Section 11.2
	 	Delegation of Duties.
	 	 	35	 
	Section 11.3
	 	Exculpatory Provisions.
	 	 	35	 
	Section 11.4
	 	Reliance by Agent.
	 	 	36	 
	Section 11.5
	 	Non-Reliance on Agent and Other Lenders.
	 	 	36	 
	Section 11.6
	 	Reimbursement and Indemnification.
	 	 	37	 
	Section 11.7
	 	Agent in its Individual Capacity.
	 	 	37	 
	Section 11.8
	 	Successor Agent.
	 	 	37	 
	Article XII Assignments; Participations
	 	 	38	 
	Section 12.1
	 	Assignments.
	 	 	38	 
	Section 12.2
	 	Participations.
	 	 	39	 
	Article XIII Security Interest
	 	 	 	 	 	 	40	 
	Section 13.1
	 	Grant of Security Interest.
	 	 	40	 
	Section 13.2
	 	Termination after Final Payout Date.
	 	 	40	 
	Article XIV Miscellaneous
	 	 	 	 	 	 	40	 
	Section 14.1
	 	Waivers and Amendments.
	 	 	40	 
	Section 14.2
	 	Notices.
	 	 	41	 
	Section 14.3
	 	Ratable Payments.
	 	 	42	 
	Section 14.4
	 	Protection of Agent’s Security Interest.
	 	 	42	 
	Section 14.5
	 	Confidentiality.
	 	 	42	 
	Section 14.6
	 	Bankruptcy Petition.
	 	 	43	 
	Section 14.7
	 	Limitation of Liability.
	 	 	43	 
	Section 14.8
	 	CHOICE OF LAW.
	 	 	43	 
	Section 14.9
	 	CONSENT TO JURISDICTION.
	 	 	44	 
	Section 14.10
	 	WAIVER OF JURY TRIAL.
	 	 	44	 
	Section 14.11
	 	Integration; Binding Effect; Survival of Terms.
	 	 	44	 
	Section 14.12
	 	Counterparts; Severability; Section References.
	 	 	45	 
	Section 14.13
	 	Wachovia Roles.
	 	 	45	 
	Section 14.14
	 	Relationship of this Amendment to the Loan and Security Agreement.
	 	 	45	 
	Section 14.15
	 	Amendment And Restatement.
	 	 	45	 






2




	 	 	 
	Exhibits

	 	

	 

	 	

	Exhibit I

Exhibit II

Exhibit III

Exhibit IV

Exhibit V

Exhibit VI

Exhibit VII

Exhibit VIII

Exhibit IX

Exhibit X

Exhibit XI

	 	Definitions

Form of Borrowing Notice

Places of Business of the Loan Parties; Locations of

Records; Federal Employer Identification Number(s)

Names of Collection Banks; Collection Accounts

Form of Compliance Certificate

Form of Collection Account Agreement

Form of Assignment Agreement

Credit and Collection Policy

Form of Periodic Report

Form of Contract(s)

Form of Pricing Supplement






Schedules


Schedule A Lender Groups, Lender Group Agents, Conduit Lenders and Liquidity Banks and Commitments
of Liquidity Banks


Schedule B Closing Documents



3




CREDIT AND SECURITY AGREEMENT




THIS AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT, dated as of December 28, 2005 is
entered into by and among:



(a) Bell Microproducts Funding Corporation, a Delaware corporation (“Borrower”),



(b) Bell Microproducts Inc., a California corporation (“Bell Microproducts”), as
initial Servicer (the Servicer together with Borrower, the “Loan Parties” and each, a
“Loan Party”),



(c) Variable Funding Capital Company LLC (“VFCC”),



(d) Wachovia Bank, National Association, as agent for the Lender Group (as defined herein) of
which VFCC is a party (in such capacity, the “VFCC Agent”) and as agent for the Lenders
hereunder or any successor agent hereunder (in such capacity, together with its successors and
assigns hereunder, the “Agent”),



(e) Market Street Funding LLC (“Market Street”),



(f) PNC Bank, National Association, as agent for the Lender Group of which Market Street is a
party (in such capacity, the “Market Street Agent”),



(g) Each of the entities identified on Schedule A to this Agreement as a Conduit
(together with any of their respective successors and assigns hereunder, the “Conduit Lenders”),



(h) Each of the entities identified on Schedule A to this Agreement as a Liquidity
Bank (together with any of their respective successors and assigns hereunder, the “Liquidity
Banks”), and



(i) Each of the entities identified on Schedule A to this Agreement as a Lender Group
Agent (together with any of their respective successors and assigns hereunder, the “Lender
Group Agents”).



Unless defined elsewhere herein, capitalized terms used in this Agreement shall have the
meanings assigned to such terms in Exhibit I.



PRELIMINARY STATEMENTS




The Loan Parties, VFCC (as successor by assignment to Blue Ridge Asset Funding Corporation)
and the Agent are parties to that certain Credit and Security Agreement dated as of September 20,
2004, as amended from time to time (the “Existing Credit and Security Agreement”).



Borrower desires to borrow from the Lenders from time to time.



Each Conduit may, in its absolute and sole discretion, make Advances to the Borrower from time
to time.



In the event that a Non-Committed Conduit declines to make any Advance, the Liquidity Banks
that are members of the related Lender Group shall, at the request of Borrower, make Advances from
time to time.



Wachovia Bank, National Association has been requested and is willing to act as Agent on
behalf of the Lenders in accordance with the terms hereof.



The parties hereto desire to amend and restate the Existing Credit and Security Agreement as
follows:



Article I




The Advances




Section 1.1 Credit Facility.



(a) Upon the terms and subject to the conditions hereof, from time to time prior to the
Facility Termination Date:




(i) Borrower may, at its option, request Advances from the Lenders, ratably (based on
Lender Group Shares), in an aggregate principal amount at any one time outstanding not to
exceed the lesser of the Aggregate Commitment and the Borrowing Base (such lesser amount,
the “Borrowing Limit”);




(ii) subject to the terms and conditions of this Agreement, each Lender Group shall
make available Loans in an amount equal to the lesser of such Lender Group’s Lender Group
Limit and the related Lender Group Share of the requested Advance, as provided for herein;
and




(iii) any Non-Committed Conduit may, at its option, make available its Lender Group
Share of the requested Advance, or if any Non-Committed Conduit shall decline to make
available its Lender Group Share of any Advance, except as otherwise provided in Section
1.2, the Liquidity Banks that are members of the related Lender Group severally agree to
make Loans in an aggregate principal amount equal to the lesser of such Lender Group’s
Lender Group Limit and the related Lender Group Share of the requested Advance.



Each of the Advances, and all other Obligations, shall be secured by the Collateral as
provided in Article XIII. It is the intent of each Conduit to fund its Lender Group Share
of all Advances by the issuance of Commercial Paper.



(b) Borrower may, upon at least ten (10) days’ notice to the Agent and the Lender Group
Agents, terminate in whole or reduce in part, ratably among the Lender Groups, the unused portion
of the Aggregate Commitment of the Liquidity Banks; provided that each partial reduction of
the Aggregate Commitment shall be in an amount equal to $10,000,000 (or a larger integral multiple
of $1,000,000 if in excess thereof) and shall reduce either (i) with respect to any Lender Group
the related Conduit of which is a Non-Committed Conduit, the Commitments of the Liquidity Banks of
each Lender Group ratably among such Liquidity Banks in such Lender Group or (ii) with respect to
any Lender Group the related Conduit of which is a Committed Conduit, the Commitment of such
Conduit.



(c) Agent may, in good faith, from time to time, upon not less than ten (10) days’ prior
notice to Borrower, reduce the Borrowing Limit from the amounts set forth in Section 1.1(a)
to the extent that the Agent determines in its good faith credit judgment that (i) the likelihood
of collection of the Receivables has decreased or there has been a deterioration in the performance
of the Receivables from historical levels or (ii) the quality, stress level, concentration level or
mix of the Receivables has deteriorated from historical levels. In determining whether to reduce
the Borrowing Limit, the Agent may consider events, conditions, contingencies or risks which are
also considered in determining Eligible Receivables or in establishing the Net Pool Balance.



Section 1.2 Increases.



Borrower shall provide the Agent and each Lender Group Agent with at least two (2) Business
Days’ prior notice in a form set forth as Exhibit II hereto of each Advance (each, a
“Borrowing Notice”). Each Borrowing Notice shall be subject to Section 6.2 hereof
and, except as set forth below, shall be irrevocable and shall specify the requested increase in
Aggregate Principal (which shall not be less than $1,000,000 or a larger integral multiple of
$100,000) and the Borrowing Date and, in the case of an Advance to be funded by the Liquidity
Banks, the requested Interest Rate and Interest Period; provided, however, that Borrower shall not
request, and the Lenders shall have no obligation to make, any Advance either (x) more than six (6)
times during any Settlement Period or (y) at any time any Borrowing Notice is outstanding but the
related Borrowing Date has not yet occurred. Following receipt of a Borrowing Notice, each Lender
Group Agent will determine whether the related Conduit will make available such Lender Group’s
Lender Group Share of the requested Advance. If any Conduit or the related Lender Group Agent
determines that such Lender Group will not make available the related Lender Group’s Lender Group
Share of a proposed Advance, then such Lender Group’s Lender Group Share of the proposed Advance
will be made by the related Liquidity Banks and such Loan will accrue CP Costs for the period from
the date such Loan is made to the end of the then current Settlement Period. On the date of each
Advance, upon satisfaction of the applicable conditions precedent set forth in Article VI,
each Conduit or the related Liquidity Banks, as applicable, shall deposit to the Facility Account,
in immediately available funds, no later than 2:00 p.m. (New York City time), an amount equal to
(a) in the case of a Conduit, its Lender Group Share of the principal amount of the requested
Advance or (b) in the case of a Liquidity Bank, such Liquidity Bank’s Pro Rata Share of its Lender
Group Share of the principal amount of the requested Advance.



Section 1.3 Decreases.



Except as provided in Section 1.4, Borrower shall provide the Agent and each Lender
Group Agent with prior written notice in conformity with the Required Notice Period (a
“Reduction Notice”) of any proposed reduction of Aggregate Principal. Such Reduction
Notice shall designate (a) the date (the “Proposed Reduction Date”) upon which any such
reduction of Aggregate Principal shall occur (which date shall give effect to the applicable
Required Notice Period), and (b) the amount of Aggregate Principal to be reduced which shall be
applied ratably (based on Lender Group Shares) among all Lender Groups and, within each Lender
Group, to the Loans specified by the Borrower in the Reduction Notice, or if no Loans are so
specified, ratably to the Loans of the related Conduit and the Liquidity Banks (the “Aggregate
Reduction”). Only one (1) Reduction Notice shall be outstanding at any time.



Section 1.4 Deemed Collections; Borrowing Limit.



(a) If on any day:




(i) the Outstanding Balance of any Receivable is reduced as a result of any defective
or rejected goods or services, any cash discount or any other adjustment by the Originator
or any Affiliate thereof, or as a result of any tariff or other governmental or regulatory
action, or




(ii) the Outstanding Balance of any Receivable is reduced or canceled as a result of a
setoff in respect of any claim by the Obligor thereof (whether such claim arises out of the
same or a related or an unrelated transaction), or




(iii) the Outstanding Balance of any Receivable is reduced on account of the obligation
of the Originator or any Affiliate thereof to pay to the related Obligor any rebate or
refund, or




(iv) the Outstanding Balance of any Receivable is less than the amount included in
calculating the Net Pool Balance for purposes of any Periodic Report (for any reason other
than such Receivable becoming a Defaulted Receivable), or




(v) any of the representations or warranties of the Borrower set forth in Section
5.1(i), (j), (r), (s), (t) or (u) were not true
when made with respect to any Receivable,



then, on such day, the Borrower shall be deemed to have received a Collection of such Receivable
(A) in the case of clauses (i)-(iv) above, in the amount of such reduction or cancellation
or the difference between the actual Outstanding Balance and the amount included in calculating
such Net Pool Balance, as applicable; and (B) in the case of clause (v) above, in the
amount of the Outstanding Balance of such Receivable and, effective as of the date on which the
next succeeding Periodic Report is required to be delivered, the Borrowing Base shall be reduced by
the amount of such Deemed Collection.



(b) Borrower shall ensure that the Aggregate Principal at no time exceeds the Borrowing Limit.
If at any time the Aggregate Principal exceeds the Borrowing Limit, Borrower shall pay to each
Lender Group Agent not later than the next succeeding Settlement Date an amount equal to such
Lender Group Share of the amount necessary to reduce the Aggregate Principal, such that after
giving effect to such payment the Aggregate Principal is less than or equal to the Borrowing Limit.
Upon receipt of such funds, each Lender Group Agent shall apply such funds to the Loans of the
related Conduit and the Liquidity Banks as determined by the related Lender Group Agent, such that
after giving effect to such payment the related Lender Group Principal is less than or equal to the
Lender Group Limit.



Section 1.5 Payment Requirements.



All amounts to be paid or deposited by any Loan Party pursuant to any provision of this
Agreement shall be paid or deposited in accordance with the terms hereof no later than 2:00 p.m.
(New York City time) on the day when due in immediately available funds, and if received after 2:00
p.m. (New York City time) shall be deemed to be received on the next succeeding Business Day. If
such amounts are payable to a Lender Group they shall be paid to the related Lender Group Agent’s
Account, for the account of such Lender Group, until otherwise notified by the applicable Lender
Group Agent. Upon notice to Borrower, the Agent may debit the Facility Account for all amounts due
and payable hereunder. All computations of CP Rate, Interest, per annum fees calculated as part of
any CP Rate, per annum fees hereunder and per annum fees under each Fee Letter shall be made on the
basis of a year of 360 days for the actual number of days elapsed. If any amount hereunder shall
be payable on a day which is not a Business Day, such amount shall be payable on the next
succeeding Business Day.



Section 1.6 Ratable Loans; Funding Mechanics; Liquidity Fundings.



(a) Each Advance hereunder shall consist of one or more Loans made by each Lender Group and,
within each Lender Group, by the related Conduit and/or the related Liquidity Banks.



(b) Each Lender funding any Loan shall wire transfer the principal amount of its Loan to its
Lender Group Agent in immediately available funds not later than 12:00 noon (New York City time) on
the applicable Borrowing Date and each Lender Group Agent, subject to its receipt of such Loan
proceeds, shall wire transfer such funds received by it to the account specified by the Borrower in
its Borrowing Request not later than 2:00 p.m. (New York City time) on such Borrowing Date.



(c) While it is the intent of each Conduit to fund the related Lender Group Share of each
requested Advance through the issuance of its Commercial Paper, the parties acknowledge that if any
Conduit is unable, or such Conduit or the related Lender Group Agent determines that it is
undesirable, to issue Commercial Paper to fund all or any portion of its Lender Group Share of
Loans, or is unable to repay such Commercial Paper upon the maturity thereof, such Conduit may put
all or any portion of its Loans to the Liquidity Banks for the related Lender Group at any time
pursuant to the Liquidity Agreement for such Lender Group to finance or refinance the necessary
portion of its Lender Group Share of Loans through a Liquidity Funding to the extent available.



(d) Nothing herein shall be deemed to commit any Non-Committed Conduit to make Loans. Each
Committed Conduit, by its execution of this Agreement or the related Assignment Agreement shall be
committed to make Loans hereunder in an aggregate outstanding amount not to exceed its Commitment.



Article II




Payments and Collections




Section 2.1 Payments.



Borrower hereby promises to pay the following (collectively, the “Obligations”):



(a) the Aggregate Principal on and after the Facility Termination Date as and when Collections
are received;



(b) the fees set forth in each Fee Letter on the dates specified therein;



(c) all accrued and unpaid Interest on the Alternate Base Rate Loans on each Settlement Date;



(d) all accrued and unpaid Interest on the LIBO Rate Loans on the last day of each Interest
Period applicable thereto;



(e) all accrued and unpaid Yield on the Conduit Loans on each Settlement Date; and



(f) all Broken Funding Costs and Indemnified Amounts upon demand.



Section 2.2 Collections Prior to Amortization.



On each Settlement Date prior to the Amortization Date, the Servicer shall deposit to the each
Lender Group Agent’s Account, for distribution to the Persons specified below, from Collections
received by it during the related Settlement Period equal to the sum of the following amounts for
application to the Obligations in the order specified:




first, ratably among each Lender Group in accordance with the Lender Group
Shares, to the payment of all accrued and unpaid Yield, Interest and Broken Funding Costs
(if any) of each Lender Group that are then due and owing,




second, ratably among each Lender Group in accordance with the Lender Group
Shares, to the payment of all accrued and unpaid fees under each Fee Letter (if any) that
are then due and owing,




third, to the accrued and unpaid Servicing Fee,




fourth, if required under Section 1.3 or 1.4, to the ratable
reduction, among each Lender Group in accordance with the Lender Group Shares, of the
Aggregate Principal,




fifth, for the ratable payment, among each Lender Group in accordance with the
Lender Group Shares, of all other unpaid Obligations, if any, that are then due and owing,
and




sixth, the balance, if any, to Borrower or otherwise in accordance with
Borrower’s instructions.



Collections applied to the payment of Obligations shall be distributed to each Lender Group Agent
in accordance with the aforementioned provisions, and, giving effect to each of the priorities set
forth above in this Section 2.2. Upon receipt of any such funds, each Lender Group Agent
shall distribute such funds to the appropriate members of its Lender Group. If at any time any
Collections are received by the Servicer on and after the Initial Funding Date and prior to the
Facility Termination Date, Borrower hereby requests, and each Lender and the Agent hereby agrees,
that such funds may be reinvested by Borrower by purchasing additional Eligible Receivables (each,
a “Reinvestment”) such that after giving effect to such Reinvestment, the Aggregate
Principal is less than or equal to the Borrowing Limit.



Section 2.3 Collections Following Amortization.



On (a) each day on which any of the conditions precedent set forth in Section 6.2 are
not satisfied, (b) the Amortization Date and (c) each day thereafter, the Servicer shall set aside
and hold in trust, for the Secured Parties, all Collections received on such day. On and after the
Amortization Date, the Servicer shall, on each Settlement Date and on each other Business Day
specified by the Agent (after deduction of any accrued and unpaid Servicing Fee as of such date):
(i) remit to the Agent the amount due pursuant to clause first below and (ii) then, to each
Lender Group Agent’s Account such Lender Group’s Lender Group Share of the remaining amounts set
aside pursuant to the preceding two sentences, and each Lender Group Agent shall apply such amounts
to reduce the Obligations as follows:




first, to the reimbursement of the Agent’s costs of collection and enforcement
of this Agreement,




second, ratably among each Lender Group in accordance with the Lender Group
Shares, to the payment of all accrued and unpaid Yield, Interest and Broken Funding Costs of
such Lender Group,




third, ratably among each Lender Group in accordance with the Lender Group
Shares, to the payment of all accrued and unpaid fees under the Fee Letter for such Lender
Group,




fourth, ratably among each Lender Group in accordance with the Lender Group
Shares, to the reduction of Aggregate Principal,




fifth, ratably among each Lender Group in accordance with the Lender Group
Shares, for the payment of all other unpaid Obligations, and




sixth, after the Obligations have been indefeasibly reduced to zero, to
Borrower.



Collections applied to the payment of Obligations shall be distributed in accordance with the
aforementioned provisions, and, giving effect to each of the priorities set forth above in this
Section 2.3, shall be shared ratably (within each priority) among the members of each
Lender Group in accordance with the amount of such Obligations owing to each of them in respect of
each such priority.



Section 2.4 Payment Rescission.



No payment of any of the Obligations shall be considered paid or applied hereunder to the extent
that, at any time, all or any portion of such payment or application is rescinded by application of
law or judicial authority, or must otherwise be returned or refunded for any reason. Borrower
shall remain obligated for the amount of any payment or application so rescinded, returned or
refunded, and shall promptly pay to the applicable Lender Group Agent (for application to the
Person or Persons within the related Lender Group who suffered such rescission, return or refund)
the full amount thereof, plus Interest on such amount at the Default Rate from the date of any such
rescission, return or refunding.



Article III




Conduit Funding




Section 3.1 Yield.



Each Conduit Loan that is funded with Commercial Paper will accrue Yield at the applicable
Yield Rate each day on the principal amount of such Loan.



Section 3.2 Calculation of Yield.



Not later than the 3rd Business Day immediately preceding each Periodic Reporting
Date (as defined in clause (i) of the definition thereof), each Conduit shall calculate the
aggregate amount of Yield applicable to its Loans for the Calculation Period then most recently
ended and shall notify Borrower of such aggregate amount.



Section 3.3 Yield Payments.



On each Settlement Date, Borrower shall pay to each Lender Group Agent (for the benefit of the
related Conduit) an amount equal to all accrued and unpaid Yield for such Lender Group in respect
of the principal associated with all Conduit Loans of such Conduit for the Calculation Period then
most recently ended in accordance with Article II.



Section 3.4 Default Rate.



From and after the occurrence of an Amortization Event, all Conduit Loans shall accrue
Interest at the Default Rate and shall cease to be CP Rate Loans.



Article IV




Bank Funding




Section 4.1 Bank Funding.



Prior to the occurrence of an Amortization Event, the outstanding principal balance of each
Bank Funding shall accrue interest for each day during its Interest Period at either the LIBO Rate
or the Alternate Base Rate in accordance with the terms and conditions hereof. Until Borrower
gives notice to the Lender Group Agent for each Lender Group of another Interest Rate in accordance
with Section 4.4, the initial Interest Rate for any Loan made by any Conduit that is
transferred to the Liquidity Banks for such Conduit’s Lender Group pursuant to the related
Liquidity Agreement shall be the Alternate Base Rate (unless the Default Rate is then applicable).
If the Liquidity Banks of a Lender Group acquire by assignment from the related Conduit any Loan
pursuant to the Liquidity Agreement for such Lender Group, each such Loan so assigned shall be
deemed to have an Interest Period commencing on the date of any such assignment.



Section 4.2 Interest Payments.



On the Settlement Date for each Bank Funding, Borrower shall pay to the applicable Lender
Group Agent (for the benefit of the related Liquidity Banks) an aggregate amount equal to the
accrued and unpaid Interest for the entire Interest Period of each such Bank Funding of such Lender
Group in accordance with Article II.



Section 4.3 Selection and Continuation of Interest Periods.



(a) With consultation from (and approval by) the Lender Group Agent for the related Lender
Group, Borrower shall from time to time request Interest Periods for the Bank Fundings of a Lender
Group by providing notice to the related Lender Group Agent in accordance with the provisions of
Section 4.4, provided that if at any time any Bank Funding is outstanding for a Lender
Group, Borrower shall always request Interest Periods for such Lender Group such that at least one
Interest Period for such Lender Group shall end on the date specified in clause (i) of the
definition of Settlement Date.



(b) Borrower or a Lender Group Agent, upon notice to and consent by the other received at
least three (3) Business Days prior to the end of an Interest Period (the “Terminating
Tranche”) for any Bank Funding of the related Lender Group, may, effective on the last day of
the Terminating Tranche: (i) divide any such Bank Funding into multiple Bank Fundings, (ii)
combine any such Bank Funding with one or more other Bank Fundings of such Lender Group that have a
Terminating Tranche ending on the same day as such Terminating Tranche or (iii) combine any such
Bank Funding with a new Bank Funding to be made by the Liquidity Banks of such Lender Group on the
day such Terminating Tranche ends.



Section 4.4 Liquidity Bank Interest Rates.



Borrower may select the LIBO Rate or the Alternate Base Rate for each Bank Funding. Borrower
shall by 2:00 p.m. (New York City time): (a) at least two (2) Business Days prior to the
expiration of any Terminating Tranche with respect to which the LIBO Rate is being requested as a
new Interest Rate and (b) at least one (1) Business Day prior to the expiration of any Terminating
Tranche with respect to which the Alternate Base Rate is being requested as a new Interest Rate,
give the applicable Lender Group Agent irrevocable notice of the new Interest Rate for the Bank
Funding associated with such Terminating Tranche. Until Borrower gives notice to the applicable
Lender Group Agent of another Interest Rate, the (i) initial Interest Rate for any Loan transferred
to the Liquidity Banks of a Lender Group pursuant to the Liquidity Agreement for such Lender Group
and (ii) the Interest Rate for any Terminating Tranche shall be the Alternate Base Rate (unless the
Default Rate is then applicable).



Section 4.5 Suspension of the LIBO Rate.



(a) If any Liquidity Bank notifies the applicable Lender Group Agent that it has determined
that funding its Pro Rata Share of the Bank Fundings for such Lender Group at a LIBO Rate would
violate any applicable law, rule, regulation, or directive of any governmental or regulatory
authority, whether or not having the force of law, or that (i) deposits of a type and maturity
appropriate to match fund its Bank Funding at such LIBO Rate by such Liquidity Bank are not
available or (ii) such LIBO Rate does not accurately reflect the cost of acquiring or maintaining a
Bank Funding at such LIBO Rate, then such Lender Group Agent shall suspend the availability of such
LIBO Rate and require Borrower to select the Alternate Base Rate for any Bank Funding of such
Lender Group accruing Interest at such LIBO Rate.



(b) If less than all of the Liquidity Banks of a Lender Group give a notice to the applicable
Lender Group Agent pursuant to Section 4.5(a), then each Liquidity Bank which gave such a
notice shall be obliged, at the request of Borrower, any Conduit or the Agent, to assign all of its
rights and obligations hereunder to (i) another Liquidity Bank that is a member of the related
Lender Group, if such Liquidity Bank accepts such assignment or (ii) another funding entity
nominated by Borrower or the related Lending Group Agent that is an Eligible Assignee willing to
participate in this Agreement through the Liquidity Termination Date in the place of such notifying
Liquidity Bank; provided that (A) the notifying Liquidity Bank receives payment in full,
pursuant to an Assignment Agreement, of all Obligations owing to it (whether due or accrued), (B)
the replacement Liquidity Bank otherwise satisfies the requirements of Section 12.1(b), and
(C) such replacement Liquidity Bank shall be acceptable to the Agent and the related Lender Group
Agent.



Section 4.6 Default Rate.



From and after the occurrence of an Amortization Event, all Bank Fundings shall accrue
Interest at the Default Rate.



Article V




Representations and Warranties




Section 5.1 Representations and Warranties of the Loan Parties.



Each Loan Party hereby represents and warrants to the Agent, each Lender Group Agent and the
Lenders, as to itself, as of the date hereof, as of the date of each Advance and as of each
Settlement Date that:



(a) Existence and Power. Such Loan Party’s jurisdiction of organization is correctly
set forth in the preamble to this Agreement. Such Loan Party is duly organized under the laws of
that jurisdiction and no other state or jurisdiction, and such jurisdiction must maintain a public
record showing the organization to have been organized. Such Loan Party is validly existing and in
good standing under the laws of its state of organization. Such Loan Party is duly qualified to do
business and is in good standing as a foreign entity, and has and holds all organizational power
and all governmental licenses, authorizations, consents and approvals required to carry on its
business in each jurisdiction in which its business is conducted except where the failure to so
qualify or so hold could not reasonably be expected to have a Material Adverse Effect.



(b) Power and Authority; Due Authorization, Execution and Delivery. The execution and
delivery by such Loan Party of this Agreement and each other Transaction Document to which it is a
party, and the performance of its obligations hereunder and thereunder and, in the case of
Borrower, Borrower’s use of the proceeds of Advances made hereunder, are within its corporate
powers and authority and have been duly authorized by all necessary corporate action on its part.
This Agreement and each other Transaction Document to which such Loan Party is a party has been
duly executed and delivered by such Loan Party.



(c) No Conflict. The execution and delivery by such Loan Party of this Agreement and
each other Transaction Document to which it is a party, and the performance of its obligations
hereunder and thereunder do not contravene or violate (i) its certificate or articles of
incorporation or by-laws, (ii) any law, rule or regulation applicable to it, (iii) any restrictions
under any agreement, contract or instrument to which it is a party or by which it or any of its
property is bound, or (iv) any order, writ, judgment, award, injunction or decree binding on or
affecting it or its property, and do not result in the creation or imposition of any Adverse Claim
on assets of such Loan Party or its Subsidiaries (except as created hereunder) except, in any case,
where such contravention or violation could not reasonably be expected to have a Material Adverse
Effect; and no transaction contemplated hereby requires compliance with any bulk sales act or
similar law.



(d) Governmental Authorization. Other than the filing of the financing statements
required hereunder, no authorization or approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body is required for the due execution and delivery
by such Loan Party of this Agreement and each other Transaction Document to which it is a party and
the performance of its obligations hereunder and thereunder.



(e) Actions, Suits. There are no actions, suits or proceedings pending, or to the
best of such Loan Party’s knowledge, threatened, against or affecting such Loan Party, or any of
its properties, in or before any court, arbitrator or other body, that could reasonably be expected
to have a Material Adverse Effect. Such Loan Party is not in default with respect to any order of
any court, arbitrator or governmental body.



(f) Binding Effect. This Agreement and each other Transaction Document to which such
Loan Party is a party constitute the legal, valid and binding obligations of such Loan Party
enforceable against such Loan Party in accordance with their respective terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar
laws relating to or limiting creditors’ rights generally and by general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at law).



(g) Accuracy of Information. All information heretofore furnished by such Loan Party
or any of its Affiliates to the Agent, any Lender Group Agent or the Lenders for purposes of or in
connection with this Agreement, any of the other Transaction Documents or any transaction
contemplated hereby or thereby is, and all such information hereafter furnished by such Loan Party
or any of its Affiliates to the Agent, any Lender Group Agent or the Lenders will be, true and
accurate in every material respect on the date such information is stated or certified and does not
and will not contain any material misstatement of fact or omit to state a material fact or any fact
necessary to make the statements contained therein not misleading.



(h) Use of Proceeds. No proceeds of any Advance hereunder will be used (i) for a
purpose that violates, or would be inconsistent with, (A) Section 7.2(e) of this Agreement
or (B) Regulation T, U or X promulgated by the Board of Governors of the Federal Reserve System
from time to time or (ii) to acquire any security in any transaction which is subject to Section
12, 13 or 14 of the Securities Exchange Act of 1934, as amended.



(i) Good Title. Borrower is the legal and beneficial owner of the Receivables and
Related Security with respect thereto, free and clear of any Adverse Claim, except as created by
the Transaction Documents. There have been duly filed all financing statements or other similar
instruments or documents necessary under the UCC (or any comparable law) of all appropriate
jurisdictions to perfect Borrower’s ownership interest in each Receivable, its Collections and the
Related Security.



(j) Perfection. This Agreement is effective to create a valid security interest in
favor of the Agent for the benefit of the Secured Parties in the Collateral to secure payment of
the Obligations, free and clear of any Adverse Claim except as created by the Transaction
Documents. There have been duly filed all financing statements or other similar instruments or
documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to
perfect the Agent’s (on behalf of the Secured Parties) security interest in the Collateral. Such
Loan Party’s jurisdiction of organization is a jurisdiction whose law generally requires
information concerning the existence of a nonpossessory security interest to be made generally
available in a filing, record or registration system as a condition or result of such a security
interest’s obtaining priority over the rights of a lien creditor which respect to collateral.



(k) Places of Business and Locations of Records. The principal places of business and
chief executive office of such Loan Party and the offices where it keeps all of its Records are
located at the address(es) listed on Exhibit III or such other locations of which the Agent
has been notified in accordance with Section 7.2(a) in jurisdictions where all action
required by Section 14.4(a) has been taken and completed. Borrower’s Federal Employer
Identification Number is correctly set forth on Exhibit III.



(l) Collections. The conditions and requirements set forth in Section 7.1(j)
and Section 8.2 have at all times been satisfied and duly performed. The names, addresses
and jurisdictions of organization of all Collection Banks, together with the account numbers of the
Collection Accounts of Borrower at each Collection Bank and the post office box number of each
Lock-Box, are listed on Exhibit IV. Borrower has not granted any Person, other than the
Agent as contemplated by this Agreement, dominion and control of any Lock-Box or Collection
Account, or the right to take dominion and control of any such Lock-Box or Collection Account at a
future time or upon the occurrence of a future event.



(m) Material Adverse Effect. (i) The initial Servicer represents and warrants that
since September 30, 2005, no event has occurred that would have a material adverse effect on the
financial condition or operations of the initial Servicer and its Subsidiaries or the ability of
the initial Servicer to perform its obligations under this Agreement, and (ii) Borrower represents
and warrants that since the date of this Agreement, no event has occurred that would have a
material adverse effect on (A) the financial condition or operations of Borrower, (B) the ability
of Borrower to perform its obligations under the Transaction Documents, or (C) the collectibility
of the Receivables generally or any material portion of the Receivables.



(n) Names. The name in which Borrower has executed this Agreement is identical to the
name of Borrower as indicated on the public record of its state of organization which shows
Borrower to have been organized. In the past five (5) years, Borrower has not used any corporate
names, trade names or assumed names other than the name in which it has executed this Agreement.



(o) Ownership of Borrower. Bell Microproducts owns, directly or indirectly, 100% of
the issued and outstanding capital stock of the Borrower, free and clear of any Adverse Claim.
Such capital stock is validly issued, fully paid and nonassessable, and there are no options,
warrants or other rights to acquire securities of the Borrower.



(p) Not a Holding Company or an Investment Company. Such Loan Party is not a “holding
company” or a “subsidiary holding company” of a “holding company” within the meaning of the Public
Utility Holding Company Act of 1935, as amended, or any successor statute. Such Loan Party is not
an “investment company” within the meaning of the Investment Company Act of 1940, as amended, or
any successor statute.



(q) Compliance with Law. Such Loan Party has complied in all respects with all
applicable laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to
which it may be subject, except where the failure to so comply could not reasonably be expected to
have a Material Adverse Effect. Each Receivable, together with the Contract related thereto, does
not contravene any laws, rules or regulations applicable thereto (including, without limitation,
laws, rules and regulations relating to truth in lending, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collection practices and privacy, if applicable),
and no part of such Contract is in violation of any such law, rule or regulation, except where such
contravention or violation could not reasonably be expected to have a Material Adverse Effect.



(r) Compliance with Credit and Collection Policy. Such Loan Party has complied in all
material respects with the Credit and Collection Policy with regard to each Receivable and the
related Contract, and has not made any change to such Credit and Collection Policy, except such
material change as to which the Agent and the Lender Group Agents have been notified in accordance
with Section 7.1(a)(ix).



(s) Payments to the Originator. With respect to each Receivable transferred to
Borrower under the Receivables Sale Agreement, Borrower has given reasonably equivalent value to
the Originator in consideration therefor and such transfer was not made for or on account of an
antecedent debt. No transfer by the Originator of any Receivable under the Receivables Sale
Agreement is or may be voidable under any section of the Bankruptcy Reform Act of 1978 (11 U.S.C.
§§ 101 et seq.), as amended.



(t) Enforceability of Contracts. Each Contract with respect to each Receivable is
effective to create, and has created, a legal, valid and binding obligation of the related Obligor
to pay the Outstanding Balance of the Receivable created thereunder and any accrued interest
thereon, enforceable against the Obligor in accordance with its terms, except as such enforcement
may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating
to or limiting creditors’ rights generally and by general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law).



(u) Eligible Receivables. Each Receivable included in the Net Pool Balance as an
Eligible Receivable on the date of any Periodic Report was an Eligible Receivable on such date.



(v) Borrowing Limit. Immediately after giving effect to each Advance and each
settlement on any Settlement Date hereunder, the Aggregate Principal is less than or equal to the
Borrowing Limit.



(w) Accounting. The manner in which such Loan Party accounts for the transactions
contemplated by this Agreement and the Receivables Sale Agreement does not jeopardize the true sale
analysis.



Article VI




Conditions of Advances




Section 6.1 Conditions Precedent to Initial Advance.



The initial Advance under this Agreement is subject to the conditions precedent that (a) the
Agent and each Lender Group Agent shall have received on or before the date of such Advance those
documents listed on Schedule A to the Receivables Sale Agreement and those documents listed
on Schedule B to this Agreement and (b) the Agent and each Lender Group Agent shall have
received all fees and expenses required to be paid to it on such date pursuant to the terms of this
Agreement and the related Fee Letters.



Section 6.2 Conditions Precedent to All Advances.



Each Advance and each rollover or continuation of any Advance shall be subject to the further
conditions precedent that (a) the Servicer shall have delivered to the Agent and each Lender Group
Agent on or prior to the date thereof, in form and substance satisfactory to the Agent and the
Lender Group Agents, all Periodic Reports as and when due under Section 8.5; (b) the
Facility Termination Date shall not have occurred; (c) the Agent and each Lender Group Agent shall
have received such other approvals, opinions or documents as it may reasonably request; and (d) on
the date thereof, the following statements shall be true (and acceptance of the proceeds of such
Advance shall be deemed a representation and warranty by Borrower that such statements are then
true):




(i) the representations and warranties set forth in Section 5.1 are true and
correct on and as of the date of such Advance (or such Settlement Date, as the case may be),
such Reinvestment or rollover or continuation of any Advance as though made on and as of
such date;




(ii) no event has occurred and is continuing, or would result from such Advance (or the
continuation thereof), that will constitute an Amortization Event, and no event has occurred
and is continuing, or would result from such Advance (or the continuation thereof), such
Reinvestment or rollover or continuation of any Advance, that would constitute an Unmatured
Amortization Event; and




(iii) after giving effect to such Advance such Reinvestment or rollover or continuation
of any Advance, the Aggregate Principal will not exceed the Borrowing Limit.



Article VII




Covenants




Section 7.1 Affirmative Covenants of the Loan Parties.



Until the Final Payout Date, each Loan Party hereby covenants, as to itself, as set forth
below:



(a) Financial Reporting. Such Loan Party will (I) maintain, for itself and each of
its Subsidiaries, a system of accounting established and administered in accordance with GAAP,
in which system true and complete entries shall be made of all dealings or transactions of or
in relation to the Receivables and the businesses of such Loan Party and its Subsidiaries and
(II) furnish or cause to be furnished to the Agent and each Lender Group Agent:




(i) Annual Reporting. Within ninety (90) days after the close of each of its
respective fiscal years, audited, unqualified consolidated financial statements (which shall
include balance sheets, statements of income and retained earnings and a statement of cash
flows) for such Loan Party for such fiscal year, together with the unqualified opinion
of independent certified public accountants, which accountants shall be an independent
accounting firm selected by such Loan Party and reasonably acceptable to the Agent and each
Lender Group Agent, that such audited financial statements have been prepared in accordance
with GAAP, and present fairly the results of operations and financial condition of such Loan
Party and its Subsidiaries as of the end of and for the fiscal year then ended.




(ii) Quarterly Reporting. Within forty-five (45) days after the close of the
first three (3) quarterly periods of each of its respective fiscal years, consolidated
balance sheets of each of the Loan Parties as at the close of each such period and
statements of income and retained earnings and a statement of cash flows for each such
Person for the period from the beginning of such fiscal year to the end of such quarter, all
certified by its respective chief financial officer.




(iii) Monthly Reporting. Within thirty-five (35) days after the end of each
fiscal month, the monthly unaudited consolidated and consolidating financial statements of
such Loan Party (including in each case balance sheets, statements of income and loss, and
statements of depreciation and amortization, capital expenditures and debt reduction), all
in reasonable detail, fairly presenting the financial position and the results of the
operations of such Loan Party and its Subsidiaries as of the end of and through such fiscal
month, subject to normal year-end adjustments.




(iv) Compliance Certificate. Together with the financial statements required
hereunder, a compliance certificate in substantially the form of Exhibit V signed by
such Loan Party’s Authorized Officer and dated the date of such annual financial statement
or such quarterly financial statement, as the case may be.




(v) Shareholders Statements and Reports. Promptly upon the furnishing thereof
to the shareholders of such Loan Party copies of all financial statements, reports and proxy
statements so furnished.




(vi) Accountant Letters. Together with the financial statements required
hereunder, any reports or management letters prepared by accountants or auditors on behalf
of such Loan Party.




(vii) S.E.C. Filings. Promptly upon the filing thereof, notify the Agent and
the Lender Group Agents of the filing of all registration statements and annual, quarterly,
monthly or other regular reports which any Loan Party or any of its Affiliates files with
the Securities and Exchange Commission.




(viii) Copies of Notices. Promptly upon its receipt of any notice, request for
consent, financial statements, certification, report or other communication under or in
connection with any Transaction Document from any Person other than the Agent or any Lender,
copies of the same.




(ix) Change in Credit and Collection Policy. At least thirty (30) days prior
to the effectiveness of any material change in or material amendment to the Credit and
Collection Policy, a copy of the Credit and Collection Policy then in effect and a notice
(A) indicating such change or amendment, and (B) if such proposed change or amendment would
be reasonably likely to adversely affect the collectibility of the Receivables or decrease
the credit quality of any newly created Receivables, requesting the Agent’s and each Lender
Group Agent’s prior consent thereto shall be required.




(x) Other Information. Promptly, from time to time, such other information,
documents, records or reports relating to the Receivables or the condition or operations,
financial or otherwise, of such Loan Party as the Agent or a Lender Group Agent may from
time to time reasonably request in order to protect the interests of the Agent and the
Lenders under or as contemplated by this Agreement.



(b) Notices. Such Loan Party will notify the Agent and the Lender Group Agents in
writing of any of the following promptly upon learning of the occurrence thereof, describing the
same and, if applicable, the steps being taken with respect thereto:




(i) Amortization Events or Unmatured Amortization Events. The occurrence of
each Amortization Event and each Unmatured Amortization Event, by a statement of an
Authorized Officer of such Loan Party.




(ii) Judgments and Proceedings. (A) (1) The entry of any judgment or decree
against the Servicer or any of its Subsidiaries if the aggregate amount of all judgments and
decrees then outstanding against the Servicer and its Subsidiaries exceeds $1,000,000 after
deducting (I) the amount with respect to which the Servicer or any such Subsidiary, as the
case may be, is insured and with respect to which the insurer has assumed responsibility in
writing, and (II) the amount for which the Servicer or any such Subsidiary is otherwise
indemnified if the terms of such indemnification are reasonably satisfactory to the Agent
and each Lender Group Agent, and (2) the institution of any litigation, arbitration
proceeding or governmental proceeding against the Servicer which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect; and (B) the entry
of any judgment or decree or the institution of any litigation, arbitration proceeding or
governmental proceeding against Borrower.




(iii) Material Adverse Effect. The occurrence of any event or condition that
has had, or could reasonably be expected to have, a Material Adverse Effect.




(iv) Termination Date. The occurrence of the “Termination Date” under and as
defined in the Receivables Sale Agreement.




(v) Defaults Under Other Agreements. The occurrence of a default or an event
of default under any other financing arrangement pursuant to which such Loan Party is a
debtor or an obligor.




(vi) Notices under Receivables Sale Agreement. Copies of all notices delivered
under the Receivables Sale Agreement.




(vii) Control. The exercise by any lender of dominion or control over cash or
other proceeds of collateral.




(viii) Reporting Modification. The occurrence of a request by any other lender
for reporting to occur on less than a monthly basis and indicating the modified reporting
requirements.



(c) Compliance with Laws and Preservation of Corporate Existence. Such Loan Party
will comply in all respects with all applicable laws, rules, regulations, orders, writs, judgments,
injunctions, decrees or awards to which it may be subject, except where the failure to so comply
could not reasonably be expected to have a Material Adverse Effect. Such Loan Party will preserve
and maintain its corporate existence, rights, franchises and privileges in the jurisdiction of its
incorporation, and qualify and remain qualified in good standing as a foreign corporation in each
jurisdiction where its business is conducted, except where the failure to so preserve and maintain
or qualify could not reasonably be expected to have a Material Adverse Effect.



(d) Field Exams. Such Loan Party will furnish to the Agent and the Lender Group
Agents from time to time such information with respect to it and the Receivables as the Agent or
any Lender Group Agent may reasonably request. Such Loan Party will, from time to time during
regular business hours as requested by the Agent or any Lender Group Agent upon reasonable notice
and at the sole cost of such Loan Party, permit the Agent and each Lender Group Agent, or its
agents or representatives (and shall cause the Originator to permit the Agent and Lender Group
Agents or its agents or representatives): (i) to examine and make copies of and abstracts from all
Records in the possession or under the control of such Person relating to the Collateral,
including, without limitation, the related Contracts, and (ii) to visit the offices and properties
of such Person for the purpose of examining such materials described in clause (i) above,
and to discuss matters relating to such Person’s financial condition or the Collateral or any
Person’s performance under any of the Transaction Documents or any Person’s performance under the
Contracts and, in each case, with any of the officers or employees of Borrower or the Servicer
having knowledge of such matters (each of the foregoing examinations and visits, a
“Review”); provided, however, that, so long as no Amortization Event has
occurred and is continuing, (A) the Loan Parties shall only be responsible for the costs and
expenses of three (3) Reviews in any one calendar year, and (B) the Agent and the Lender Group
Agents will not request more than four (4) Reviews in any one calendar year (each Lender Group
Agent hereby agrees that it will not, without prior consultation and agreement with the Agent,
request any such Review).



(e) Keeping and Marking of Records and Books.




(i) The Servicer will (and will cause the Originator to) maintain and implement
administrative and operating procedures (including, without limitation, an ability to
recreate records evidencing Receivables in the event of the destruction of the originals
thereof), and keep and maintain all documents, books, records and other information
reasonably necessary or advisable for the collection of all Receivables (including, without
limitation, records adequate to permit the immediate identification of each new Receivable
and all Collections of and adjustments to each existing Receivable). The Servicer will (and
will cause the Originator to) give the Agent and each Lender Group Agent notice of any
material change in the administrative and operating procedures referred to in the previous
sentence.




(ii) Such Loan Party will (and will cause the Originator to): (A) on or prior to the
date hereof, mark its master data processing records and other books and records relating to
the Loans with a legend, acceptable to the Agent, describing the Agent’s security interest
in the Collateral and (B) upon the request of the Agent following the occurrence of an
Amortization Event: (1) mark each Contract with a legend describing the Agent’s security
interest and (2) deliver to the Agent all Contracts (including, without limitation, all
multiple originals of any such Contract constituting an instrument, a certificated security
or chattel paper) relating to the Receivables.



(f) Compliance with Contracts and Credit and Collection Policy. Such Loan Party will
(and will cause the Originator to) timely and fully (i) perform and comply with all provisions,
covenants and other promises required to be observed by it under the Contracts related to the
Receivables, and (ii) comply in all respects with the Credit and Collection Policy in regard to
each Receivable and the related Contract.



(g) Performance and Enforcement of Receivables Sale Agreement. Borrower will, and
will require the Originator to, perform each of their respective obligations and undertakings under
and pursuant to the Receivables Sale Agreement, will purchase Receivables thereunder in strict
compliance with the terms thereof and will vigorously enforce the rights and remedies accorded to
Borrower under the Receivables Sale Agreement. Borrower will take all actions to perfect and
enforce its rights and interests (and the rights and interests of the Agent, the Lender Group
Agents and the Lenders as assignees of Borrower) under the Receivables Sale Agreement and as the
Agent or any Lender Group Agent may from time to time reasonably request, including, without
limitation, making claims to which it may be entitled under any indemnity, reimbursement or similar
provision contained in the Receivables Sale Agreement.



(h) Ownership. Borrower will (or will cause the Originator to) take all necessary
action to (i) vest legal and equitable title to the Collateral purchased under the Receivables Sale
Agreement irrevocably in Borrower, free and clear of any Adverse Claims (other than Adverse Claims
in favor of the Agent, for the benefit of the Secured Parties) including, without limitation, the
filing of all financing statements or other similar instruments or documents necessary under the
UCC (or any comparable law) of all appropriate jurisdictions to perfect Borrower’s interest in such
Collateral and such other action to perfect, protect or more fully evidence the interest of
Borrower therein as the Agent or any Lender Group Agent may reasonably request), and (ii) establish
and maintain, in favor of the Agent, for the benefit of the Secured Parties, a valid and perfected
first priority security interest in all Collateral, free and clear of any Adverse Claims,
including, without limitation, the filing of all financing statements or other similar instruments
or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to
perfect the Agent’s (for the benefit of the Secured Parties) security interest in the Collateral
and such other action to perfect, protect or more fully evidence the interest of the Agent for the
benefit of the Secured Parties as the Agent or any Lender Group Agent may reasonably request.



(i) Lenders’ Reliance. Borrower acknowledges that the Lenders are entering into the
transactions contemplated by this Agreement in reliance upon Borrower’s identity as a legal entity
that is separate from the Originator. Therefore, from and after the date of execution and delivery
of this Agreement, Borrower shall take all reasonable steps, including, without limitation, all
steps that the Agent, any Lender Group Agent or any Lender may from time to time reasonably
request, to maintain Borrower’s identity as a separate legal entity and to make it manifest to
third parties that Borrower is an entity with assets and liabilities distinct from those of the
Originator and any Affiliates thereof (other than Borrower) and not just a division of the
Originator or any such Affiliate. Without limiting the generality of the foregoing and in addition
to the other covenants set forth herein, Borrower will:




(i) conduct its own business in its own name and require that all full-time employees
of Borrower, if any, identify themselves as such and not as employees of the Originator
(including, without limitation, by means of providing appropriate employees with business or
identification cards identifying such employees as Borrower’s employees);




(ii) compensate all employees, consultants and agents directly, from Borrower’s own
funds, for services provided to Borrower by such employees, consultants and agents and, to
the extent any employee, consultant or agent of Borrower is also an employee, consultant or
agent of the Originator or any Affiliate thereof, allocate the compensation of such
employee, consultant or agent between Borrower and the Originator or such Affiliate, as
applicable, on a basis that reflects the services rendered to Borrower and the Originator or
such Affiliate, as applicable;




(iii) clearly identify its offices (by signage or otherwise) as its offices and, if
such office is located in the offices of the Originator, Borrower shall lease such office at
a fair market rent;




(iv) have a separate telephone number, which will be answered only in its name and
separate stationery and checks in its own name;




(v) conduct all transactions with the Originator and the Servicer (including, without
limitation, any delegation of its obligations hereunder as Servicer) strictly on an
arm’s-length basis, allocate all overhead expenses (including, without limitation, telephone
and other utility charges) for items shared between Borrower and the Originator on the basis
of actual use to the extent practicable and, to the extent such allocation is not
practicable, on a basis reasonably related to actual use;




(vi) at all times have a Board of Directors consisting of at least three members, at
least one member of which is an Independent Director;




(vii) observe all corporate formalities as a distinct entity, and ensure that all
corporate actions relating to (A) the selection, maintenance or replacement of the
Independent Director, (B) the dissolution or liquidation of Borrower or (C) the initiation
of, participation in, acquiescence in or consent to any bankruptcy, insolvency,
reorganization or similar proceeding involving Borrower, are duly authorized by unanimous
vote of its Board of Directors (including the Independent Director);




(viii) maintain Borrower’s books and records separate from those of the Originator and
any Affiliate thereof and otherwise readily identifiable as its own assets rather than
assets of the Originator or any Affiliate thereof;




(ix) prepare its financial statements separately from those of the Originator and
insure that any consolidated financial statements of the Originator or any Affiliate thereof
that include Borrower and that are filed with the Securities and Exchange Commission or any
other governmental agency have notes clearly stating that Borrower is a separate corporate
entity and that its assets will be available first and foremost to satisfy the claims of the
creditors of Borrower;




(x) except as herein specifically otherwise provided, maintain the funds or other
assets of Borrower separate from, and not commingled with, those of the Originator or any
Affiliate thereof and only maintain bank accounts or other depository accounts to which
Borrower alone is the account party, into which Borrower alone makes deposits and from which
Borrower alone (or the Agent hereunder) has the power to make withdrawals;




(xi) pay all of Borrower’s operating expenses from Borrower’s own assets (except for
certain payments by the Originator or other Persons pursuant to allocation arrangements that
comply with the requirements of this Section 7.1(i));




(xii) operate its business and activities such that: it does not engage in any
business or activity of any kind, or enter into any transaction or indenture, mortgage,
instrument, agreement, contract, lease or other undertaking, other than the transactions
contemplated and authorized by this Agreement and the Receivables Sale Agreement; and does
not create, incur, guarantee, assume or suffer to exist any indebtedness or other
liabilities, whether direct or contingent, other than (A) as a result of the endorsement of
negotiable instruments for deposit or collection or similar transactions in the ordinary
course of business, (B) the incurrence of obligations under this Agreement, (C) the
incurrence of obligations, as expressly contemplated in the Receivables Sale Agreement, to
make payment to the Originator thereunder for the purchase of Receivables from the
Originator under the Receivables Sale Agreement, and (D) the incurrence of operating
expenses in the ordinary course of business of the type otherwise contemplated by this
Agreement;




(xiii) maintain its corporate charter in conformity with this Agreement, such that it
does not amend, restate, supplement or otherwise modify its Certificate of Incorporation or
By-Laws in any respect that would impair its ability to comply with the terms or provisions
of any of the Transaction Documents, including, without limitation, Section 7.1(i)
of this Agreement;




(xiv) maintain the effectiveness of, and continue to perform under the Receivables Sale
Agreement such that it does not amend, restate, supplement, cancel, terminate or otherwise
modify the Receivables Sale Agreement, or give any consent, waiver, directive or approval
thereunder or waive any default, action, omission or breach under the Receivables Sale
Agreement or otherwise grant any indulgence thereunder, without (in each case) the prior
written consent of the Agent and the Lender Group Agents;




(xv) maintain its corporate separateness such that it does not merge or consolidate
with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction
or in a series of transactions, and except as otherwise contemplated herein) all or
substantially all of its assets (whether now owned or hereafter acquired) to, or acquire all
or substantially all of the assets of, any Person, nor at any time create, have, acquire,
maintain or hold any interest in any Subsidiary;




(xvi) maintain at all times the Required Capital Amount and refrain from making any
dividend, distribution, redemption of capital stock or payment of any subordinated
indebtedness which would cause the Required Capital Amount to cease to be so maintained; and




(xvii) take such other actions as are necessary on its part to ensure that the facts
and assumptions set forth in the opinion issued by Fredrikson & Byron, P.A. as counsel for
Borrower, in connection with the closing or initial Advance under this Agreement and
relating to substantive consolidation issues, and in the certificates accompanying such
opinion, remain true and correct in all material respects at all times.



(j) Collections.




(i) Such Loan Party will cause (A) all proceeds from all Lock-Boxes to be directly
deposited by a Collection Bank into a Collection Account and (B) each Lock-Box and
Collection Account (and the Borrower shall cause the Facility Account) to be subject at all
times to a Collection Account Agreement that is in full force and effect. In the event any
payments relating to the Collateral are remitted directly to Borrower or any Affiliate of
Borrower, Borrower will remit (or will cause all such payments to be remitted) directly to a
Collection Bank and deposited into a Collection Account within two (2) Business Days
following receipt thereof, and, at all times prior to such remittance, Borrower will itself
hold or, if applicable, will cause such payments to be held in trust for the exclusive
benefit of the Agent and the Lenders. Borrower will maintain exclusive ownership, dominion
and control (subject to the terms of this Agreement) of each Lock-Box and Collection Account
and shall not grant the right to take dominion and control of any Lock-Box or Collection
Account at a future time or upon the occurrence of a future event to any Person, except to
the Agent as contemplated by this Agreement;




(ii) Borrower, or Servicer on behalf of Borrower, shall cause evidence to be delivered
to Agent and the Lender Group Agents showing that each Lock-Box and each Collection Account
is maintained in the name of Borrower; and




(iii) Borrower and Servicer shall maintain all Collections in a Collection Account or
the Facility Account and shall not (A) withdraw funds from any such account except for the
purposes set forth in, and to the extent permitted by, the Transaction Documents or (B)
permit or cause the Facility Account to be terminated except with the prior consent of, and
on terms and conditions acceptable to, the Agent.



(k) Taxes. Such Loan Party will file all tax returns and reports required by law to
be filed by it and will promptly pay all taxes and governmental charges at any time owing, except
any such taxes which are not yet delinquent or are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set
aside on its books. Borrower will pay when due any taxes payable in connection with the
Receivables, exclusive of taxes on or measured by income or gross receipts of the Agent, any Lender
Group Agent or any Lender.



(l) Payment to the Originator. With respect to any Receivable purchased by Borrower
from the Originator, such sale shall be effected under, and in strict compliance with the terms of,
the Receivables Sale Agreement, including, without limitation, the terms relating to the amount and
timing of payments to be made to the Originator in respect of the purchase price for such
Receivable.



Section 7.2 Negative Covenants of the Loan Parties.



Until the Final Payout Date, each Loan Party hereby covenants, as to itself, that:



(a) Name Change, Offices and Records. Such Loan Party will not change its name,
identity or structure (within the meaning of any applicable enactment of the UCC), relocate its
chief executive office at any time while the location of its chief executive office is relevant to
perfection of the Agent’s security interest, for the benefit of the Secured Parties, in the
Receivables, Related Security and Collections, or change any office where Records are kept unless
it shall have: (i) given the Agent and each Lender Group Agent at least forty-five (45) days’
prior written notice thereof and (ii) delivered to the Agent all financing statements, instruments
and other documents requested by the Agent or any Lender Group Agent in connection with such change
or relocation.



(b) Change in Payment Instructions to Obligors. Except as may be required by the
Agent pursuant to Section 8.2(b), such Loan Party will not add or terminate any bank as a
Collection Bank, or make any change in the instructions to Obligors regarding payments to be made
to any Lock-Box or Collection Account, unless the Agent and the Lender Group Agents shall have
received, at least ten (10) days before the proposed effective date therefor, (i) written notice of
such addition, termination or change and (ii) with respect to the addition of a Collection Bank or
a Collection Account or Lock-Box, an executed Collection Account Agreement with respect to the new
Collection Account or Lock-Box; provided, however, that the Servicer may make
changes in instructions to Obligors regarding payments if such new instructions require such
Obligor to make payments to another existing Collection Account.



(c) Modifications to Contracts and Credit and Collection Policy. Such Loan Party will
not, and will not permit the Originator to, make any change to the Credit and Collection Policy
that could adversely affect the collectibility of the Receivables or decrease the credit quality of
any newly created Receivables. Except as provided in Section 8.2(d), the Servicer will
not, and will not permit the Originator to, extend, amend or otherwise modify the terms of any
Receivable or any Contract related thereto other than in accordance with the Credit and Collection
Policy.



(d) Sales, Liens. Borrower will not sell, assign (by operation of law or otherwise)
or otherwise dispose of, or grant any option with respect to, or create or suffer to exist any
Adverse Claim upon (including, without limitation, the filing of any financing statement) or with
respect to, any of the Collateral, or assign any right to receive income with respect thereto
(other than, in each case, the creation of a security interest therein in favor of the Agent as
provided for herein), and Borrower will defend the right, title and interest of the Secured Parties
in, to and under any of the foregoing property, against all claims of third parties claiming
through or under Borrower or the Originator. Borrower will not create or suffer to exist any
mortgage, pledge, security interest, encumbrance, lien, charge or other similar arrangement on any
of its inventory.



(e) Use of Proceeds. Borrower will not use the proceeds of the Advances for any
purpose other than (i) paying for Receivables and Related Security under and in accordance with the
Receivables Sale Agreement, including without limitation, making payments on the Subordinated Notes
to the extent permitted thereunder and under the Receivables Sale Agreement, (ii) paying its
ordinary and necessary operating expenses when and as due, and (iii) making Restricted Junior
Payments to the extent permitted under this Agreement.



(f) Termination Date Determination. Borrower will not designate the Termination Date,
or send any written notice to the Originator in respect thereof, without the prior written consent
of the Agent and the Lender Group Agents, except with respect to the occurrence of such Termination
Date arising pursuant to Section 5.1(e) of the Receivables Sale Agreement.



(g) Restricted Junior Payments. Borrower will not make any Restricted Junior Payment
if after giving effect thereto, Borrower’s Net Worth would be less than the Required Capital
Amount.



(h) Borrower Indebtedness. Borrower will not incur or permit to exist any
Indebtedness or liability on account of deposits except: (i) the Obligations, (ii) the
Subordinated Loans, and (iii) other current accounts payable to Servicer, as servicer, and to Bell
Microproducts under the Administrative Support Agreement arising in the ordinary course of business
and not overdue.



(i) Prohibition on Additional Negative Pledges. No Loan Party will enter into or
assume any agreement (other than this Agreement and the other Transaction Documents) prohibiting
the creation or assumption of any Adverse Claim upon the Collateral except as contemplated by the
Transaction Documents, or otherwise prohibiting or restricting any transaction contemplated hereby
or by the other Transaction Documents, and no Loan Party will enter into or assume any agreement
creating any Adverse Claim upon the Subordinated Notes.



Article VIII




Administration and Collection




Section 8.1 Designation of Servicer.



(a) The servicing, administration and collection of the Receivables shall be conducted by such
Person (the “Servicer”) so designated from time to time in accordance with this Section
8.1. Bell Microproducts is hereby designated as, and hereby agrees to perform the duties and
obligations of, the Servicer pursuant to the terms of this Agreement. The Agent may, with the
consent or at the direction of the Required Lenders, at any time designate as Servicer any Person
to succeed Bell Microproducts or any successor Servicer.



(b) So long as Bell Microproducts shall be and remain the Servicer, then Bell Microproducts
shall be primarily liable to the Agent and the Lenders for the full and prompt performance of all
duties and responsibilities of the Servicer hereunder, (ii) the Agent and the Lenders shall be
entitled to deal exclusively with Bell Microproducts in matters relating to the discharge by the
Servicer of its duties and responsibilities hereunder and (iii) the Agent and the Lenders shall not
be required to give notice, demand or other communication to any Person other than Bell
Microproducts in order for communication to the Servicer and its sub-servicer or other delegate
with respect thereto to be accomplished. Bell Microproducts, at all times that it is the Servicer,
shall be responsible for providing any sub-servicer or other delegate of the Servicer with any
notice given to the Servicer under this Agreement.



Section 8.2 Duties of Servicer.



(a) The Servicer shall take or cause to be taken all such actions as may be necessary or
advisable to collect each Receivable from time to time, all in accordance with applicable laws,
rules and regulations, with reasonable care and diligence, and in accordance with the Credit and
Collection Policy.



(b) The Servicer will instruct all Obligors to pay all Collections directly to a Lock-Box or
Collection Account. The Servicer shall effect a Collection Account Agreement substantially in the
form of Exhibit VI with each bank party to a Collection Account at any time. In the case
of any remittances received in any Lock-Box or Collection Account that shall have been identified,
to the satisfaction of the Servicer, to not constitute Collections or other proceeds of the
Receivables or the Related Security, the Servicer shall promptly remit such items to the Person
identified to it as being the owner of such remittances. From and after the date the Agent
delivers to any Collection Bank a Collection Notice pursuant to Section 8.3, the Agent may
request that the Servicer, and the Servicer thereupon promptly shall instruct all Obligors with
respect to the Receivables, to remit all payments thereon to a new depositary account specified by
the Agent and, at all times thereafter, Borrower and the Servicer shall not deposit or otherwise
credit, and shall not permit any other Person to deposit or otherwise credit to such new depositary
account any cash or payment item other than Collections.



(c) The Servicer shall administer the Collections in accordance with the procedures described
herein and in Article II. All such Collections shall be retained in the Facility Account
pending disbursement in accordance with the provisions of Article II and payment of the
Purchase Price (as defined in the Receivables Sale Agreement) of Receivables upon receipt by the
Agent and the Lender Group Agents of a Daily Purchase Report (as defined in the Receivables Sale
Agreement) from the Originator in accordance with the provisions of the Receivables Sale Agreement,
whereupon the Servicer may, prior to the Amortization Date and provided that such date is a date on
which all of the conditions set forth in Section 6.2 have been satisfied, and provided,
further, that the Agent has not required the segregation of Collections pursuant to the following
sentence, withdraw amounts from the Facility Account to pay the cash portion of the Purchase Price
for Receivables as shown on such Daily Purchase Report. The Servicer shall set aside and hold in
trust for the account of Borrower and the Lenders their respective shares of the Collections in
accordance with Article II. The Servicer shall, upon the request of the Agent, segregate,
in a manner acceptable to the Agent, all cash, checks and other instruments received by it from
time to time constituting Collections from the general funds of the Servicer or Borrower prior to
the remittance thereof in accordance with Article II. If the Servicer shall be required to
segregate Collections pursuant to the preceding sentence, the Servicer shall segregate and deposit
with a bank designated by the Agent such allocable share of Collections of Receivables set aside
for the Lenders on the first Business Day following receipt by the Servicer of such Collections,
duly endorsed or with duly executed instruments of transfer.



(d) The Servicer may, in accordance with the Credit and Collection Policy, extend the maturity
of any Receivable or adjust the Outstanding Balance of any Receivable as the Servicer determines to
be appropriate to maximize Collections thereof; provided, however, that such
extension or adjustment shall not alter the status of such Receivable as a Delinquent Receivable or
Defaulted Receivable or limit the rights of the Agent or the Lenders under this Agreement.
Notwithstanding anything to the contrary contained herein, the Agent shall have the absolute and
unlimited right to direct the Servicer to commence or settle any legal action with respect to any
Receivable or to foreclose upon or repossess any Related Security.



(e) The Servicer shall hold in trust for Borrower and the Lenders all Records that (i)
evidence or relate to the Receivables, the related Contracts and Related Security or (ii) are
otherwise necessary or desirable to collect the Receivables and shall, as soon as practicable upon
demand of the Agent, deliver or make available to the Agent all such Records, at a place selected
by the Agent. The Servicer shall, as soon as practicable following receipt thereof turn over to
Borrower any cash collections or other cash proceeds in accordance with Article II. The
Servicer shall, from time to time at the request of any Lender Group Agent, furnish to such Lender
Group Agent (promptly after any such request) a calculation of the amounts set aside for the
Lenders pursuant to Article II.



(f) Any payment by an Obligor in respect of any indebtedness owed by it to Originator or
Borrower shall, except as otherwise specified by such Obligor or otherwise required by contract or
law and unless otherwise instructed by the Agent, be applied as a Collection of any Receivable of
such Obligor (starting with the oldest such Receivable) to the extent of any amounts then due and
payable thereunder before being applied to any other receivable or other obligation of such
Obligor.



(g) The Servicer will at all times (i) maintain systems and procedures whereby all Returned
Goods are at all times identified on their face as Returned Goods and do not constitute inventory
of the Originator or any of its Affiliates (other than the Borrower), (ii) maintain an area for the
storage of all Returned Goods that is physically separated from the area in which the inventory of
the Originator or any of its Affiliates (other than the Borrower) is located, in which separated
area only Returned Goods are stored or located and no other inventory shall at any time be stored
or located and (iii) physically segregate all Returned Goods from all other of the inventory of the
Originator and all of its Affiliates (other than the Borrower).



Section 8.3 Collection Notices.



The Agent is authorized at any time to date and to deliver to the Collection Banks the
Collection Notices. Borrower hereby transfers to the Agent for the benefit of the Lenders,
effective when the Agent delivers such notice, the exclusive ownership and control of each Lock-Box
and the Collection Accounts. In case any authorized signatory of Borrower whose signature appears
on a Collection Account Agreement shall cease to have such authority before the delivery of such
notice, such Collection Notice shall nevertheless be valid as if such authority had remained in
force. Borrower hereby authorizes the Agent, and agrees that the Agent shall be entitled (a) at
any time after delivery of the Collection Notices, to endorse Borrower’s name on checks and other
instruments representing Collections, (b) at any time after the occurrence of an Amortization
Event, to enforce the Receivables, the related Contracts and the Related Security, and (c) at any
time after the occurrence of an Amortization Event, to take such action as shall be necessary or
desirable to cause all cash, checks and other instruments constituting Collections of Receivables
to come into the possession of the Agent rather than Borrower.



Section 8.4 Responsibilities of Borrower.



Anything herein to the contrary notwithstanding, the exercise by the Agent and the Lenders of
their rights hereunder shall not release the Servicer, the Originator or Borrower from any of their
duties or obligations with respect to any Receivables or under the related Contracts. The Lenders
shall have no obligation or liability with respect to any Receivables or related Contracts, nor
shall any of them be obligated to perform the obligations of Borrower.



Section 8.5 Reports.



(a) Periodic Reports. The Servicer shall prepare and forward to the Agent and each
Lender Group Agent (a) on each Periodic Reporting Date, a Periodic Report and an electronic file of
the data contained therein and (b) at such times as the Agent or a Lender Group Agent shall
request, a listing by Obligor of all Receivables together with an aging of such Receivables.



(b) Receivables Reports. The Servicer agrees to provide to Agent and Lender Group
Agents notice of: (i) any material delay in the Originator’s or Servicer’s performance of any of
its obligations to any Obligor or the assertion of any material claims, offsets, defenses or
counterclaims by any Obligor, or any material disputes with Obligors, or any material settlement,
adjustment or compromise thereof, (ii) all material adverse information known to the Servicer
relating to the financial condition of any Obligor and (iii) any event or circumstance which, to
the Servicer’s knowledge, would be reasonably likely to cause Agent to consider any then existing
Receivable as no longer constituting an Eligible Receivable. No credit, discount, allowance or
extension, or agreement with respect to any credit, discount, allowance or extension, shall be
granted by the Servicer to any Obligor without the Agent’s consent, except in the ordinary course
of the Servicer’s business consistent with the practices of the Servicer as of the date hereof and
as to any such agreement so long as the Agent and the Lender Group Agents shall have received
notice thereof to the extent required hereunder.



Section 8.6 Servicing Fee.



As compensation for the Servicer’s servicing activities on their behalf, the Lenders hereby
agree to pay the Servicer the Servicing Fee, which fee shall be paid in arrears on each Settlement
Date.



Article IX




Amortization Events




Section 9.1 Amortization Events.



The occurrence of any one or more of the following events shall constitute an Amortization
Event:



(a) Any Loan Party shall fail to make any payment or deposit required to be made by it under
the Transaction Documents when due and, for any such payment or deposit which is not in respect of
principal, such failure continues for two (2) consecutive Business Days.



(b) Any representation, warranty, certification or statement made by any Loan Party in any
Transaction Document to which it is a party or in any other document delivered pursuant thereto
shall prove to have been incorrect when made or deemed made.



(c) Any Loan Party shall fail to perform or observe any covenant contained in Section
7.2 or 8.5 when due.



(d) Any Loan Party shall fail to perform or observe any other covenant or agreement under any
Transaction Documents and such failure shall continue for ten (10) consecutive days.



(e) Failure of Borrower to pay any Indebtedness (other than the Obligations) when due or the
default by Borrower in the performance of any term, provision or condition contained in any
agreement under which any such Indebtedness was created or is governed, the effect of which is to
cause, or to permit the holder or holders of such Indebtedness to cause, such Indebtedness to
become due prior to its stated maturity; or any such Indebtedness of Borrower shall be declared to
be due and payable or required to be prepaid (other than by a regularly scheduled payment) prior to
the date of maturity thereof.



(f) Failure of the Servicer or any of its Subsidiaries other than Borrower to pay Indebtedness
in excess of $1,000,000 in aggregate principal amount (hereinafter, “Material
Indebtedness”) when due and such failure continues beyond any applicable grace or cure period
(other than any default that is the subject of a Notice of Default as described in Section
9.1(s)); or the default by the Servicer or any of its Subsidiaries other than Borrower in the
performance of any term, provision or condition contained in any agreement under which any Material
Indebtedness was created or is governed beyond any applicable grace or cure period (other than any
default that is the subject of a Notice of Default as described in Section 9.1(s)), the
effect of which is to cause, or to permit the holder or holders of such Material Indebtedness to
cause, such Material Indebtedness to become due prior to its stated maturity; or any Material
Indebtedness of the Servicer or any of its Subsidiaries other than Borrower shall be declared to be
due and payable or required to be prepaid (other than by a regularly scheduled payment) prior to
the date of maturity thereof.



(g) An Event of Bankruptcy shall occur with respect to any Loan Party or any of their
respective Subsidiaries.



(h) As at the end of any Calculation Period:




(i) the three-month rolling average Delinquency Ratio shall exceed 6.25%,




(ii) the three-month rolling average Default Ratio shall exceed 4.25%, or




(iii) the three-month rolling average Dilution Ratio shall exceed 6.75%.



(i) A Change of Control shall occur with respect to any Loan Party.



(j) (i) One or more final judgments for the payment of money in an aggregate amount of $10,000
or more shall be entered against Borrower, (ii) one or more final judgments for the payment of
money in an amount in excess of $1,000,000 in any one case or in excess of $3,000,000 in the
aggregate, shall be entered against the Servicer or any of its Subsidiaries (other than Borrower)
on claims not covered by insurance or as to which the insurance carrier has denied its
responsibility, and such judgment shall continue unsatisfied and in effect for thirty (30)
consecutive days without a stay of execution or (iii) any judgment other than for the payment of
money, or injunction, attachment, garnishment, or execution is rendered against any Loan Party or
any of the Collateral having a value in excess of $1,000,000.



(k) The “Termination Date” under and as defined in the Receivables Sale Agreement shall occur
under the Receivables Sale Agreement or the Originator shall for any reason cease to transfer, or
cease to have the legal capacity to transfer, or otherwise be incapable of transferring,
Receivables to Borrower under the Receivables Sale Agreement.



(l) This Agreement shall terminate in whole or in part (except in accordance with its terms),
or shall cease to be effective or to be the legally valid, binding and enforceable obligation of
Borrower, or any Person shall directly or indirectly contest in any manner such effectiveness,
validity, binding nature or enforceability, or the Agent for the benefit of the Lenders shall cease
to have a valid and perfected first priority security interest in the Collateral.



(m) On any Settlement Date, after giving effect to the turnover of Collections by the Servicer
on such date and the application thereof to the Obligations in accordance with this Agreement, the
Aggregate Principal shall exceed the Borrowing Limit.



(n) The Internal Revenue Service shall file notice of a lien pursuant to Section 6323 of the
Tax Code with regard to any of the Collateral and such lien shall not have been released within
seven (7) days, or the PBGC shall, or shall indicate its intention to, file notice of a lien
pursuant to Section 4068 of ERISA with regard to any of the Collateral.



(o) Any Plan of the Servicer or any of its ERISA Affiliates:




(i) shall fail to be funded in accordance with the minimum funding standard required by
applicable law, the terms of such Plan, Section 412 of the Tax Code or Section 302 of ERISA
for any plan year or a waiver of such standard is sought or granted with respect to such
Plan under applicable law, the terms of such Plan or Section 412 of the Tax Code or Section
303 of ERISA; or




(ii) is being, or has been, terminated or the subject of termination proceedings under
applicable law or the terms of such Plan; or




(iii) shall require the Servicer or any of its ERISA Affiliates to provide security
under applicable law, the terms of such Plan, Section 401 or 412 of the Tax Code or Section
306 or 307 of ERISA; or




(iv) results in a liability to the Servicer or any of its ERISA Affiliates under
applicable law, the terms of such Plan, or Title IV ERISA,



and there shall result from any such failure, waiver, termination or other event a liability to the
PBGC or a Plan that would have a Material Adverse Effect.



(p) Any event shall occur which (i) materially and adversely impairs the ability of the
Originator to originate Receivables of a credit quality that is at least equal to the credit
quality of the Receivables sold or contributed to Borrower on the date of this Agreement or (ii)
has, or could be reasonably expected to have, a Material Adverse Effect.



(q) After any Settlement Date, the Net Pool Balance is less than the sum of (i) the Aggregate
Principal plus (ii) the Required Reserve.



(r) Congress Financial Corporation (Western), any of its Affiliates or assignees shall deliver
to the Agent written notice stating that the Originator has sold inventory outside the ordinary
course of business in violation of Section 9.7 of the Loan and Security Agreement.



(s) The Agent shall receive a Notice of Default pursuant to the terms of the Intercreditor
Agreement.



Section 9.2 Remedies.



Upon the occurrence and during the continuation of an Amortization Event, the Agent may, or
upon the direction of the Required Lenders shall, take any of the following actions: (a) replace
the Person then acting as Servicer if the Agent has not already done so, (b) declare the
Amortization Date to have occurred, whereupon the Aggregate Commitment shall immediately terminate
and the Amortization Date shall forthwith occur, all without demand, protest or further notice of
any kind, all of which are hereby expressly waived by each Loan Party; provided,
however, that upon the occurrence of an Event of Bankruptcy with respect to any Loan Party,
the receipt by the Agent of a notice pursuant to Section 9.1(r) or the receipt by the Agent
of a Notice of Default pursuant to the Intercreditor Agreement, the Amortization Date shall
automatically occur, without demand, protest or any notice of any kind, all of which are hereby
expressly waived by each Loan Party, (c) deliver the Collection Notices to the Collection Banks,
(d) exercise all rights and remedies of a secured party upon default under the UCC and other
applicable laws, and (e) notify Obligors of the Agent’s security interest in the Receivables and
other Collateral. The aforementioned rights and remedies shall be without limitation, and shall be
in addition to all other rights and remedies of the Agent and the Lenders otherwise available under
any other provision of this Agreement, by operation of law, at equity or otherwise, all of which
are hereby expressly preserved, including, without limitation, all rights and remedies provided
under the UCC, all of which rights shall be cumulative.



Article X




Indemnification




Section 10.1 Indemnities by the Loan Parties.



Without limiting any other rights that the Agent or any Lender may have hereunder or under
applicable law, (a) Borrower hereby agrees to indemnify (and pay upon demand to) the Agent, each
Conduit, each Lender Group Agent, each of the Liquidity Banks and each of the respective assigns,
officers, directors, agents and employees of the foregoing (each, an “Indemnified Party”)
from and against any and all damages, losses, claims, taxes, liabilities, costs, expenses and for
all other amounts payable, including reasonable attorneys’ fees (which attorneys may be employees
of the Agent or such Lender) and disbursements (all of the foregoing being collectively referred to
as “Indemnified Amounts”) awarded against or incurred by any of them arising out of or as a
result of this Agreement or the acquisition, either directly or indirectly, by a Lender of an
interest in the Receivables, and (b) the Servicer hereby agrees to indemnify (and pay upon demand
to) each Indemnified Party for Indemnified Amounts awarded against or incurred by any of them
arising out of the Servicer’s activities as Servicer hereunder excluding, however, in all of the
foregoing instances under the preceding clauses (a) and (b):




(i) Indemnified Amounts to the extent a final judgment of a court of competent
jurisdiction holds that such Indemnified Amounts resulted from gross negligence or willful
misconduct on the part of the Indemnified Party seeking indemnification;




(ii) Indemnified Amounts to the extent the same includes losses in respect of
Receivables that are uncollectible on account of the insolvency, bankruptcy or lack of
creditworthiness of the related Obligor; or




(iii) taxes imposed by the jurisdiction in which such Indemnified Party’s principal
executive office is located, on or measured by the overall net income of such Indemnified
Party to the extent that the computation of such taxes is consistent with the
characterization for income tax purposes of the acquisition by the Lenders of Loans as a
loan or loans by the Lenders to Borrower secured by the Receivables, the Related Security,
the Collection Accounts and the Collections;



provided, however, that nothing contained in this sentence shall limit the
liability of any Loan Party or limit the recourse of the Lenders to any Loan Party for amounts
otherwise specifically provided to be paid by such Loan Party under the terms of this Agreement.
Without limiting the generality of the foregoing indemnification, Borrower shall indemnify the
Indemnified Parties for Indemnified Amounts (including, without limitation, losses in respect of
uncollectible receivables, regardless of whether reimbursement therefor would constitute recourse
to Borrower or if such reimbursement were provided by the Servicer or the Originator, would
constitute recourse to the Originator or the Servicer) relating to or resulting from:




(i) any representation or warranty made by any Loan Party or the Originator (or any
officers of any such Person) under or in connection with this Agreement, any other
Transaction Document or any other information or report delivered by any such Person
pursuant hereto or thereto, which shall have been false or incorrect when made or deemed
made;




(ii) the failure by Borrower, the Servicer or the Originator to comply with any
applicable law, rule or regulation with respect to any Receivable or Contract related
thereto, or the nonconformity of any Receivable or Contract included therein with any such
applicable law, rule or regulation or any failure of the Originator to keep or perform any
of its obligations, express or implied, with respect to any Contract;




(iii) any failure of Borrower, the Servicer or the Originator to perform its duties,
covenants or other obligations in accordance with the provisions of this Agreement or any
other Transaction Document;




(iv) any products liability, personal injury or damage suit, or other similar claim
arising out of or in connection with merchandise, insurance or services that are the subject
of any Contract or any Receivable;




(v) any dispute, claim, offset or defense (other than discharge in bankruptcy of the
Obligor) of the Obligor to the payment of any Receivable (including, without limitation, a
defense based on such Receivable or the related Contract not being a legal, valid and
binding obligation of such Obligor enforceable against it in accordance with its terms), or
any other claim resulting from the sale of the merchandise or service related to such
Receivable or the furnishing or failure to furnish such merchandise or services;




(vi) the commingling of Collections of Receivables at any time with other funds;




(vii) any investigation, litigation or proceeding related to or arising from this
Agreement or any other Transaction Document, the transactions contemplated hereby, the use
of the proceeds of any Advance, the Collateral or any other investigation, litigation or
proceeding relating to Borrower, the Servicer or the Originator in which any Indemnified
Party becomes involved as a result of any of the transactions contemplated hereby;




(viii) any inability to litigate any claim against any Obligor in respect of any
Receivable as a result of such Obligor being immune from civil and commercial law and suit
on the grounds of sovereignty or otherwise from any legal action, suit or proceeding;




(ix) any Amortization Event described in Section 9.1(g);




(x) any failure of Borrower to acquire and maintain legal and equitable title to, and
ownership of any of the Collateral from the Originator, free and clear of any Adverse Claim
(other than as created hereunder); or any failure of Borrower to give reasonably equivalent
value to the Originator under the Receivables Sale Agreement in consideration of the
transfer by the Originator of any Receivable, or any attempt by any Person to void such
transfer under statutory provisions or common law or equitable action;




(xi) any failure to vest and maintain vested in the Agent for the benefit of the
Lenders, or to transfer to the Agent for the benefit of the Secured Parties, a valid first
priority perfected security interests in the Collateral, free and clear of any Adverse Claim
(except as created by the Transaction Documents);




(xii) the failure to have filed, or any delay in filing, financing statements or other
similar instruments or documents under the UCC of any applicable jurisdiction or other
applicable laws with respect to any Collateral, and the proceeds thereof, whether at the
time of any Advance or at any subsequent time;




(xiii) any action or omission by any Loan Party which reduces or impairs the rights of
the Agent or the Lenders with respect to any Collateral or the value of any Collateral;




(xiv) any attempt by any Person to void any Advance or the Agent’s security interest in
the Collateral under statutory provisions or common law or equitable action; and




(xv) the failure of any Receivable included in the calculation of the Net Pool Balance
as an Eligible Receivable to be an Eligible Receivable at the time so included.



Section 10.2 Increased Cost and Reduced Return.



If after the date hereof, any Funding Source shall be charged any fee, expense or increased
cost on account of the adoption of any applicable law, rule or regulation (including any applicable
law, rule or regulation regarding capital adequacy) or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance with any request or
directive (whether or not having the force of law) of any such authority, central bank or
comparable agency (a “Regulatory Change”): (a) that subjects any Funding Source to any
charge or withholding on or with respect to any Funding Agreement or a Funding Source’s obligations
under a Funding Agreement, or on or with respect to the Receivables, or changes the basis of
taxation of payments to any Funding Source of any amounts payable under any Funding Agreement
(except for changes in the rate of tax on the overall net income of a Funding Source or taxes
excluded by Section 10.1) or (b) that imposes, modifies or deems applicable any reserve,
assessment, insurance charge, special deposit or similar requirement against assets of, deposits
with or for the account of a Funding Source, or credit extended by a Funding Source pursuant to a
Funding Agreement or (c) that imposes any other condition the result of which is to increase the
cost to a Funding Source of performing its obligations under a Funding Agreement, or to reduce the
rate of return on a Funding Source’s capital as a consequence of its obligations under a Funding
Agreement, or to reduce the amount of any sum received or receivable by a Funding Source under a
Funding Agreement or to require any payment calculated by reference to the amount of interests or
loans held or interest received by it, then, upon demand by the related Lender Group Agent,
Borrower shall pay to such Lender Group Agent, for the benefit of the relevant Funding Source, such
amounts charged to such Funding Source or such amounts to otherwise compensate such Funding Source
for such increased cost or such reduction (which demand shall include a description and calculation
of such increased cost or such reduction).



Section 10.3 Other Costs and Expenses.



Borrower shall pay to the Agent and each Lender Group Agent on demand all costs and
out-of-pocket expenses in connection with the preparation, execution, delivery and administration
of this Agreement, the transactions contemplated hereby and the other documents to be delivered
hereunder, including without limitation, the cost of any auditors auditing the books, records and
procedures of Borrower, reasonable fees and out-of-pocket expenses of legal counsel for the Agent
and for each Lender Group Agent (which such counsel may be employees of the related Conduit or such
Lender Group Agent) with respect thereto and with respect to advising the Agent and each Lender
Group Agent as to their respective rights and remedies under this Agreement. Borrower shall pay to
the Agent and each Lender Group Agent on demand any and all costs and expenses of the Agent, such
Lender Group Agent and the Lenders, if any, including reasonable counsel fees and expenses in
connection with the enforcement of this Agreement and the other documents delivered hereunder and
in connection with any restructuring or workout of this Agreement or such documents, or the
administration of this Agreement following an Amortization Event. Borrower shall reimburse each
Conduit on demand for all other costs and expenses incurred by such Conduit (“Other
Costs”), including, without limitation, the cost of auditing such Conduit’s books by certified
public accountants, the cost of rating the Commercial Paper by independent financial rating
agencies, and the reasonable fees and out-of-pocket expenses of counsel for such Conduit or any
counsel for any shareholder of such Conduit with respect to advising such Conduit or such
shareholder as to matters relating to such Conduit’s operations.



Section 10.4 Allocations.



Each Conduit shall allocate the liability for Other Costs among Borrower and other Persons
with whom such Conduit has entered into agreements to purchase interests in or finance receivables
and other financial assets (“Other Customers”). If any Other Costs are attributable to
Borrower and not attributable to any Other Customer, Borrower shall be solely liable for such Other
Costs. However, if Other Costs are attributable to Other Customers and not attributable to
Borrower, such Other Customer shall be solely liable for such Other Costs. All allocations to be
made pursuant to the foregoing provisions of this Article X shall be made by the applicable
Conduit in its sole discretion (but in good faith) and shall be binding on Borrower.



Article XI




The Agent




Section 11.1 Authorization and Action.



(a) Each Lender and each Lender Group Agent hereby designates and appoints Wachovia to act as
its agent under the Transaction Documents and under the Liquidity Agreement, and authorizes the
Agent to take such actions as agent on its behalf and to exercise such powers as are delegated to
the Agent by the terms of the Liquidity Agreement or the Transaction Documents, together with such
powers as are reasonably incidental thereto. The Agent shall not have any duties or
responsibilities, except those expressly set forth in the Liquidity Agreement or in any Transaction
Document, or any fiduciary relationship with any Lender or any Lender Group Agent, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities on the part of the Agent
shall be read into the Liquidity Agreement or any Transaction Document or otherwise exist for the
Agent. In performing its functions and duties under the Liquidity Agreement and the Transaction
Documents, the Agent shall act solely as agent for the Lenders and the Lender Group Agents and does
not assume nor shall be deemed to have assumed any obligation or relationship of trust or agency
with or for any Loan Party or any of such Loan Party’s successors or assigns. The Agent shall not
be required to take any action that exposes the Agent to personal liability or that is contrary to
the Liquidity Agreement or any Transaction Document or applicable law. The appointment and
authority of the Agent hereunder shall terminate upon the indefeasible payment in full of all
Obligations. Each Lender and each Lender Group Agent hereby authorizes the Agent to execute each
of the UCC financing statements, each Collection Account Agreement on behalf of such Lender and
such Lender Group Agent (the terms of which shall be binding on such Lender and such Lender Group
Agent).



(b) Each Person in each Lender Group, on behalf of itself and its assigns, hereby designates
and appoints the Person identified as the Lender Group Agent for such Lender Group in such Lender
Group’s Assignment Agreement to act as its agent hereunder and under each other Transaction
Document, and authorizes such Lender Group Agent to take such actions as agent on its behalf and to
exercise such powers as are delegated to such Lender Group Agent by the terms of the this Agreement
and the other Transaction Documents together with such powers as are reasonably incidental thereto.



Section 11.2 Delegation of Duties.



(a) The Agent may execute any of its duties under the Liquidity Agreement and each Transaction
Document by or through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.



(b) Each Lender Group Agent may execute any of its duties hereunder and each Transaction
Document by or through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. No Lender Group Agent shall be responsible for
the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable
care.



Section 11.3 Exculpatory Provisions.



Neither the Agent, any Lender Group Agent nor any of their respective directors, officers,
agents or employees shall be (a) liable for any action lawfully taken or omitted to be taken by it
or them under or in connection with the Liquidity Agreement or any Transaction Document (except for
its, their or such Person’s own gross negligence or willful misconduct), or (b) responsible in any
manner to any of the Lenders for any recitals, statements, representations or warranties made by
any Loan Party contained in the Liquidity Agreement, any Transaction Document or any certificate,
report, statement or other document referred to or provided for in, or received under or in
connection with, any Transaction Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of the Liquidity Agreement or any Transaction Document or any other
document furnished in connection therewith, or for any failure of any Loan Party to perform its
obligations under any Transaction Document, or for the satisfaction of any condition specified in
Article VI, or for the perfection, priority, condition, value or sufficiency of any
collateral pledged in connection herewith. Neither the Agent nor any Lender Group Agent shall be
under any obligation to any Lender to ascertain or to inquire as to the observance or performance
of any of the agreements or covenants contained in, or conditions of, any Transaction Document, or
to inspect the properties, books or records of the Loan Parties. Neither the Agent nor any Lender
Group Agent shall be deemed to have knowledge of any Amortization Event or Unmatured Amortization
Event unless it has received notice from a Loan Party or a Lender.



Section 11.4 Reliance by Agent.



The Agent and each Lender Group Agent shall in all cases be entitled to rely, and shall be
fully protected in relying, upon any document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to Borrower), independent
accountants and other experts selected by it. The Agent and each Lender Group Agent shall in all
cases be fully justified in failing or refusing to take any action under the Liquidity Agreement or
any Transaction Document unless it shall first receive such advice or concurrence of the Required
Lenders, a majority in interest of the Liquidity Banks that are members of its Lender Group (in the
case of the Agent, in such instances as are provided for herein) or all of the Lenders, as
applicable, as it deems appropriate and it shall first be indemnified to its satisfaction by the
Lenders (in the case of the Agent) or the Lenders that are members of its Lender Group (in the case
of a Lender Group Agent), provided that unless and until the Agent or a Lender Group Agent shall
have received such advice, the Agent or such Lender Group Agent, as the case may be, may take or
refrain from taking any action, as it shall deem advisable and in the best interests of the Lenders
(in the case of the Agent) or the Lenders that are members of its Lender Group (in the case of the
Lender Group Agent). The Agent and each Lender Group Agent shall in all cases be fully protected
in acting, or in refraining from acting, in accordance with a request of the Required Lenders or
all of the Lenders, as applicable (in the case of the Agent), or the Lenders that are members of
its Lender Group (in the case of the Lender Group Agent), and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders (in the case of the Agent) or
the Lenders that are members of its Lender Group (in the case of the Lender Group Agent).



Section 11.5 Non-Reliance on Agent and Other Lenders.



Each Lender expressly acknowledges that neither the Agent, any Lender Group Agent nor any of
their respective officers, directors, employees, agents, attorneys-in-fact or affiliates has made
any representations or warranties to it and that no act by the Agent or any Lender Group Agent
hereafter taken, including, without limitation, any review of the affairs of any Loan Party, shall
be deemed to constitute any representation or warranty by the Agent or any Lender Group Agent.
Each Lender represents and warrants to the Agent and each Lender Group Agent that it has and will,
independently and without reliance upon the Agent, any Lender Group Agent or any other Lender and
based on such documents and information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, prospects, financial and other conditions
and creditworthiness of Borrower and made its own decision to enter into the Liquidity Agreement,
the Transaction Documents and all other documents related thereto.



Section 11.6 Reimbursement and Indemnification.



(a) The Lender Group Agents agree to reimburse and indemnify the Agent and its officers,
directors, employees, representatives and agents ratably according to their Lender Group Shares, to
the extent not paid or reimbursed by the Loan Parties (i) for any amounts for which the Agent,
acting in its capacity as Agent, is entitled to reimbursement by the Loan Parties hereunder and
(ii) for any other expenses incurred by the Agent, in its capacity as Agent and acting on behalf of
the Lenders, in connection with the administration and enforcement of the Liquidity Agreement and
the Transaction Documents.



(a) The Liquidity Banks that are members of each Lender Group agree to reimburse and indemnify
the related Lender Group Agent and its officers, directors, employees, representatives and agents
ratably according to their Pro Rata Shares, to the extent not paid or reimbursed by the Loan
Parties (i) for any amounts for which such Lender Group Agent, acting in its capacity as Lender
Group Agent, is entitled to reimbursement by the Loan Parties hereunder and (ii) for any other
expenses incurred by such Lender Group Agent, in its capacity as Lender Group Agent and acting on
behalf of the Lenders in such Lender Group, in connection with the administration and enforcement
of this Agreement and the Transaction Documents.



Section 11.7 Agent in its Individual Capacity.



The Agent, each Lender Group Agent and their respective Affiliates may make loans to, accept
deposits from and generally engage in any kind of business with Borrower or any Affiliate of
Borrower as though the Agent or such Lender Group Agent were not the Agent or a Lender group Agent
hereunder. With respect to the making of Loans pursuant to this Agreement, the Agent and each
Lender Group Agent shall have the same rights and powers under the Liquidity Agreement for its
Lender Group and this Agreement in its individual capacity as any Lender and may exercise the same
as though it were not the Agent or Lender Group Agent, as the case may be, and the terms “Liquidity
Bank,” “Lender,” “Liquidity Banks” and “Lenders” shall include the Agent and each Lender Group
Agent, as applicable, in its individual capacity.



Section 11.8 Successor Agent.



The Agent and each Lender Group Agent, upon five (5) days’ notice to the Loan Parties and the
Lenders, may voluntarily resign and may be removed at any time, with or without cause, by the
Required Liquidity Lenders (in the case of the Agent) and by a Majority-In-Interest of the
Liquidity Banks of the related Lender Group (in the case of the Lender Group Agent);
provided, however, that Wachovia shall not voluntarily resign as the Agent so long
as any of the Liquidity Commitments remain in effect or VFCC has any outstanding Loans. If the
Agent (other than Wachovia) shall voluntarily resign or be removed as Agent under this Agreement,
then the Required Liquidity Lenders during such five-day period shall appoint, from among the
remaining Liquidity Banks, a successor Agent, whereupon such successor Agent shall succeed to the
rights, powers and duties of the Agent and the term “Agent” shall mean such successor agent,
effective upon its appointment, and the former Agent’s rights, powers and duties as Agent shall be
terminated, without any other or further act or deed on the part of such former Agent or any of the
parties to this Agreement. If a Lender Group Agent shall voluntarily resign or be removed as
Lender Group Agent under this Agreement, then a majority in interest of the Liquidity Banks that
are members of the related Lender Group, during such five-day period, shall appoint, from among the
remaining Liquidity Banks that are members of such Lender Group, a successor Lender Group Agent
reasonably acceptable to Borrower (provided that Borrower’s consent shall not be required if any
Amortization Event shall have occurred), whereupon such successor Lender Group Agent shall succeed
to the rights, powers and duties of the Lender Group Agent for such Lender Group and the term
“Lender Group Agent” shall mean such successor agent, effective upon its appointment, and the
former Lender Group Agent’s rights, powers and duties as Lender Group Agent shall be terminated,
without any other or further act or deed on the part of such former Lender Group Agent or any of
the parties to this Agreement. Upon resignation or replacement of any Agent in accordance with
this Section 11.8, the retiring Agent shall execute such UCC-3 assignments and amendments,
and assignments and amendments of the Liquidity Agreement and the Transaction Documents, as may be
necessary to give effect to its replacement by a successor Agent. After any retiring Agent’s
resignation hereunder as Agent, the provisions of this Article XI and Article X
shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement.



Article XII




Assignments; Participations




Section 12.1 Assignments.



(a) Each of the Agent, the Loan Parties, each of the Lender Group Agents and the Liquidity
Banks hereby agrees and consents to the complete or partial assignment by a Conduit of all or any
portion of its rights under, interest in, title to and obligations under this Agreement to the
Liquidity Banks that are members of such Conduit’s Lender Group pursuant to the related Liquidity
Agreement.



(b) Any Liquidity Bank may at any time and from time to time assign to one or more Eligible
Assignees (each, a “Purchasing Liquidity Bank”) all or any part of its rights and
obligations under this Agreement pursuant to an assignment agreement substantially in the form set
forth in Exhibit VII hereto (an “Assignment Agreement”) executed by such Purchasing
Liquidity Bank and such selling Liquidity Bank; provided, however, that any
assignment of a Liquidity Bank’s rights and obligations hereunder shall include a pro rata
assignment of its rights and obligations under the Liquidity Agreement. The consent of the related
Conduit shall be required prior to the effectiveness of any such assignment. Each assignee of a
Liquidity Bank must (i) be an Eligible Assignee and (ii) agree to deliver to the Agent and each
Lender Group Agent, promptly following any request therefor by the Agent or such Lender Group
Agent, an enforceability opinion in form and substance satisfactory to the Agent and such Lender
Group Agent. Upon delivery of an executed Assignment Agreement to the Agent and the related Lender
Group Agent, such selling Liquidity Bank shall be released from its obligations hereunder and under
the Liquidity Agreement to the extent of such assignment. Thereafter the Purchasing Liquidity Bank
shall for all purposes be a Liquidity Bank party to this Agreement and the Liquidity Agreement and
shall have all the rights and obligations of a Liquidity Bank hereunder and thereunder to the same
extent as if it were an original party hereto and thereto and no further consent or action by
Borrower, the Lenders, the Lender Group Agents or the Agent shall be required.



(c) Each of the Liquidity Banks agrees that in the event that it shall suffer a Downgrading
Event, such Downgraded Liquidity Bank shall be obliged, at the request of the related Lender Group
Agent, to (i) collateralize its Commitment and its Liquidity Commitment in a manner acceptable to
the Agent and such Lender Group Agent, or (ii) assign all of its rights and obligations hereunder
and under the Liquidity Agreement to an Eligible Assignee nominated by the related Lender Group
Agent or a Loan Party and acceptable to the related Lender Group Agent and willing to participate
in this Agreement and the Liquidity Agreement through the Liquidity Termination Date in the place
of such Downgraded Liquidity Bank; provided that the Downgraded Liquidity Bank receives
payment in full, pursuant to an Assignment Agreement, of an amount equal to such Liquidity Bank’s
Pro Rata Share of the Obligations owing to the Liquidity Banks that are members of its Lender
Group.



(d) Each Lender Group Agent shall, on behalf of the Borrower, maintain a copy of each
Assignment Agreement delivered to and a register (each “Register”) for the recordation of
the names and addresses of, and the principal amount of the Loans owing to, the Lenders that are
members of such Lender Group Agent’s Lender Group and the Commitments of each Liquidity Bank that
is a member of such Lender Group from time to time. The entries in each Register shall be
conclusive, in the absence of manifest error, and the Borrower, each Lender, each Lender Group
Agent and the Agent shall treat the person whose name is recorded in a Register as the owner of the
Loans described therein for all purposes of this Agreement. Notwithstanding anything to the
contrary, any assignment of any Loan by a Lender shall be effective only upon appropriate entries
with respect thereto being made in a Register.



Section 12.2 Participations.



Any Liquidity Bank may, in the ordinary course of its business at any time sell to one or more
Persons (each, a “Participant”) participating interests in its Pro Rata Share of the
Aggregate Commitment, its Loans, its Liquidity Commitment or any other interest of such Liquidity
Bank hereunder or under the Liquidity Agreement. Notwithstanding any such sale by a Liquidity Bank
of a participating interest to a Participant, such Liquidity Bank’s rights and obligations under
this Agreement and the Liquidity Agreement shall remain unchanged, such Liquidity Bank shall remain
solely responsible for the performance of its obligations hereunder and under the Liquidity
Agreement, and the Loan Parties, the related Lender Group Agent and the Agent shall continue to
deal solely and directly with such Liquidity Bank in connection with such Liquidity Bank’s rights
and obligations under this Agreement and the Liquidity Agreement. Each Liquidity Bank agrees that
any agreement between such Liquidity Bank and any such Participant in respect of such participating
interest shall not restrict such Liquidity Bank’s right to agree to any amendment, supplement,
waiver or modification to this Agreement, except for any amendment, supplement, waiver or
modification described in Section 14.1(b)(i).



Article XIII




Security Interest




Section 13.1 Grant of Security Interest.



To secure the due and punctual payment of the Obligations, whether now or hereafter existing,
due or to become due, direct or indirect, or absolute or contingent, including, without limitation,
all Indemnified Amounts, in each case pro rata according to the respective amounts thereof,
Borrower hereby grants to the Agent, for the benefit of the Secured Parties, a security interest
in, all assets of Borrower, including, without limitation, all of Borrower’s right, title and
interest, whether now owned and existing or hereafter arising in and to all of the Receivables, the
Related Security, the Collections, each Lock-Box and Collection Account and all proceeds of the
foregoing (collectively, the “Collateral”).



Section 13.2 Termination after Final Payout Date.



Each of the Secured Parties hereby authorizes the Agent, and the Agent hereby agrees, promptly
after the Final Payout Date to execute and deliver to the Borrower (or otherwise authorize the
Borrower to file) such UCC termination statements as may be necessary to terminate the Agent’s
security interest in and Lien upon the Collateral, all at the Borrower’s expense. Upon the Final
Payout Date, all right, title and interest of the Agent and the other Secured Parties in and to the
Collateral shall terminate.



Article XIV




Miscellaneous




Section 14.1 Waivers and Amendments.



(a) No failure or delay on the part of the Agent, any Lender Group Agent or any Lender in
exercising any power, right or remedy under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or remedy preclude any other further
exercise thereof or the exercise of any other power, right or remedy. The rights and remedies
herein provided shall be cumulative and nonexclusive of any rights or remedies provided by law.
Any waiver of this Agreement shall be effective only in the specific instance and for the specific
purpose for which given.



(b) No provision of this Agreement may be amended, supplemented, modified or waived except in
writing in accordance with the provisions of this Section 14.1(b). The Lenders, Borrower,
the Lender Group Agents and the Agent, at the direction of the Required Lenders, may enter into
written modifications or waivers of any provisions of this Agreement, provided,
however, that no such modification or waiver shall:




(i) without the consent of each affected Lender, (A) extend the Liquidity Termination
Date or the date of any payment or deposit of Collections by Borrower or the Servicer, (B)
reduce the rate or extend the time of payment of Interest or any Yield (or any component of
Interest or Yield), reduce any fee payable to the Agent for the benefit of the Lenders, (C)
except pursuant to Article XII hereof, change the amount of the principal of any
Lender, any Liquidity Bank’s Pro Rata Share or any Liquidity Bank’s Commitment, (D) amend,
modify or waive any provision of the definition of Required Lenders or this Section
14.1(b), (E) consent to or permit the assignment or transfer by Borrower of any of its
rights and obligations under this Agreement, (F) change the definition of “Eligible
Receivable,” “Loss Reserve,” “Dilution Reserve,” “Interest Reserve,” “Servicing Reserve,”
“Servicing Fee Rate,” “Required Reserve” or “Required Reserve Factor Floor” or (G) amend or
modify any defined term (or any defined term used directly or indirectly in such defined
term) used in clauses (A) through (F) above in a manner that would
circumvent the intention of the restrictions set forth in such clauses;




(ii) without the written consent of any then Lender Group Agent, amend, modify or waive
any provision of this Agreement if the effect thereof is to affect the rights or duties of
such Lender Group Agent or




(iii) without the written consent of the then Agent, amend, modify or waive any
provision of this Agreement if the effect thereof is to affect the rights or duties of such
Agent.



Notwithstanding the foregoing, (A) without the consent of the unaffected Lender Group Agents and
the members of such unaffected Lender Group, but with the consent of Borrower, the Agent and a
Lender Group Agent may amend this Agreement solely to add additional Persons as Liquidity Banks
hereunder for such Lender Group Agent’s Lender group and (B) the Agent, the Required Lenders, the
Lender Group Agents and the Lenders may enter into amendments to modify any of the terms or
provisions of Article XI, Article XII, or Section 14.13 without the consent
of Borrower. Any modification or waiver made in accordance with this Section 14.1 shall
apply to each of the Lenders equally and shall be binding upon Borrower, the Lenders, the Lender
Group Agents and the Agent.



Section 14.2 Notices.



Except as provided in this Section 14.2, all communications and notices provided for
hereunder shall be in writing (including bank wire, telecopy or electronic facsimile transmission
or similar writing) and shall be given to the other parties hereto at their respective addresses or
telecopy numbers set forth on the signature pages hereof or at such other address or telecopy
number as such Person may hereafter specify for the purpose of notice to each of the other parties
hereto. Each such notice or other communication shall be effective (a) if given by telecopy, upon
the receipt thereof, (b) if given by mail, three (3) Business Days after the time such
communication is deposited in the mail with first class postage prepaid or (c) if given by any
other means, when received at the address specified in this Section 14.2. Borrower hereby
authorizes each Lender Group Agent to effect Advances and Interest Period and Interest Rate
selections based on telephonic notices made by any Person whom such Lender Group Agent in good
faith believes to be acting on behalf of Borrower. Borrower agrees to deliver promptly to such
Lender Group Agent a written confirmation of each telephonic notice signed by an authorized officer
of Borrower; provided, however, the absence of such confirmation shall not affect
the validity of such notice. If the written confirmation differs from the action taken by such
Lender Group Agent, the records of the Agent shall govern absent manifest error.



Section 14.3 Ratable Payments.



If any Lender, whether by setoff or otherwise, has payment made to it with respect to any
portion of the Obligations owing to such Lender (other than payments received pursuant to
Section 10.2 or 10.3) in a greater proportion than that received by any other
Lender entitled to receive a ratable share of such Obligations, such Lender agrees, promptly upon
demand, to purchase for cash without recourse or warranty a portion of such Obligations held by the
other Lenders so that after such purchase each Lender will hold its ratable proportion of such
Obligations; provided that if all or any portion of such excess amount is thereafter
recovered from such Lender, such purchase shall be rescinded and the purchase price restored to the
extent of such recovery, but without interest.



Section 14.4 Protection of Agent’s Security Interest.



(a) Borrower agrees that from time to time, at its expense, it will promptly execute and
deliver all instruments and documents, and take all actions, that may be necessary or desirable, or
that the Agent may request, to perfect, protect or more fully evidence the Agent’s security
interest in the Collateral, or to enable the Agent or the Lenders to exercise and enforce their
rights and remedies hereunder. At any time, the Agent may, or the Agent may direct Borrower or the
Servicer to, notify the Obligors of Receivables, at Borrower’s expense, of the ownership or
security interests of the Lenders under this Agreement and may also direct that payments of all
amounts due or that become due under any or all Receivables be made directly to the Agent or its
designee. Borrower or the Servicer (as applicable) shall, at any Lender’s request, withhold the
identity of such Lender in any such notification.



(b) If any Loan Party fails to perform any of its obligations hereunder, the Agent, any Lender
Group Agent or any Lender may (but shall not be required to) perform, or cause performance of, such
obligations, and the Agent’s, such Lender Group Agent’s or such Lender’s costs and expenses
incurred in connection therewith shall be payable by Borrower as provided in Section 10.3.
Each of the Loan Parties (i) hereby authorizes the Agent to file financing statements and other
filing or recording documents with respect to the Receivables and Related Security (including any
amendments thereto, or continuation or termination statements thereof), without the signature or
other authorization of such Loan Party, in such form and in such offices as the Agent reasonably
determines appropriate to perfect or maintain the perfection of the security interest of the Agent
hereunder, (ii) acknowledges and agrees that it is not authorized to, and will not, file financing
statements or other filing or recording documents with respect to the Receivables or Related
Security (including any amendments thereto, or continuation or termination statements thereof),
without the express prior written approval by the Agent, consenting to the form and substance of
such filing or recording document, and (iii) approves, authorizes and ratifies any filings or
recordings made by or on behalf of the Agent in connection with the perfection of the security
interests in favor of Borrower or the Agent.



Section 14.5 Confidentiality.



(a) Each Loan Party, each Lender Group Agent and each Lender shall maintain and shall cause
each of its employees and officers to maintain the confidentiality of this Agreement and the other
confidential or proprietary information with respect to the Agent, each Lender Group Agent, each
Loan Party and each Lender and their respective businesses obtained by it or them in connection
with the structuring, negotiating and execution of the transactions contemplated herein, except
that such Loan Party, each Lender Group Agent and each Lender and their respective officers and
employees may disclose such information to such Person’s external accountants and attorneys and as
required by any applicable law or order of any judicial or administrative proceeding.



(b) Anything herein to the contrary notwithstanding, each Loan Party hereby consents to the
disclosure of any nonpublic information with respect to it (i) to the Agent, each Lender Group
Agent, the Liquidity Banks or the Lenders by each other, (ii) by the Agent, any Lender Group Agent
or the Lenders to any prospective or actual assignee or participant of any of them and (iii) by the
Agent or any Lender Group Agent to any rating agency, Commercial Paper dealer or provider of a
surety, guaranty or credit or liquidity enhancement to any Conduit or any entity organized for the
purpose of purchasing, or making loans secured by, financial assets for which any Lender Group
Agent acts as the administrative agent and to any officers, directors, employees, outside
accountants and attorneys of any of the foregoing, provided that each such Person is informed of
the confidential nature of such information. In addition, each Lender, each Lender Group Agent and
the Agent may disclose any such nonpublic information pursuant to any law, rule, regulation,
direction, request or order of any judicial, administrative or regulatory authority or proceedings
(whether or not having the force or effect of law).



Section 14.6 Bankruptcy Petition.



Borrower, the Servicer, the Agent, each Lender Group Agent and each Liquidity Bank hereby
covenants and agrees that, prior to the date that is one year and one day after the payment in full
of all outstanding senior indebtedness of any Conduit, it will not institute against, or join any
other Person in instituting against, such Conduit any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other similar proceeding under the laws of the United
States or any state of the United States.



Section 14.7 Limitation of Liability.



No claim may be made by any Loan Party or any other Person against any Conduit, the Agent, any
Lender Group Agent or any Liquidity Bank or their respective Affiliates, directors, officers,
employees, attorneys or agents for any special, indirect, consequential or punitive damages in
respect of any claim for breach of contract or any other theory of liability arising out of or
related to the transactions contemplated by this Agreement, or any act, omission or event occurring
in connection therewith; and each Loan Party hereby waives, releases, and agrees not to sue upon
any claim for any such damages, whether or not accrued and whether or not known or suspected to
exist in its favor.



Section 14.8 CHOICE OF LAW.



THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF OTHER THAN SECTION 5-1401 OF
THE GENERAL OBLIGATIONS LAW.



Section 14.9 CONSENT TO JURISDICTION.



EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF
ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK, NEW YORK, IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY SUCH PERSON
PURSUANT TO THIS AGREEMENT, AND EACH SUCH PARTY HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY
WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN
SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST ANY LOAN PARTY IN THE
COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY LOAN PARTY AGAINST THE AGENT OR
ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY DOCUMENT
EXECUTED BY SUCH LOAN PARTY PURSUANT TO THIS AGREEMENT SHALL BE BROUGHT ONLY IN A COURT IN NEW
YORK, NEW YORK.



Section 14.10 WAIVER OF JURY TRIAL.



EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT
OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, ANY DOCUMENT EXECUTED BY ANY LOAN PARTY PURSUANT
TO THIS AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.



Section 14.11 Integration; Binding Effect; Survival of Terms.



(a) This Agreement and each other Transaction Document contain the final and complete
integration of all prior expressions by the parties hereto with respect to the subject matter
hereof and shall constitute the entire agreement among the parties hereto with respect to the
subject matter hereof superseding all prior oral or written understandings.



(b) This Agreement shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns (including any trustee in bankruptcy). This
Agreement shall create and constitute the continuing obligations of the parties hereto in
accordance with its terms and shall remain in full force and effect until terminated in accordance
with its terms; provided, however, that the rights and remedies with respect to (i)
any breach of any representation and warranty made by any Loan Party pursuant to Article V,
(ii) the indemnification and payment provisions of Article X, and (iii) the provisions of
Sections 14.5 and 14.6 shall be continuing and shall survive any termination of
this Agreement.



Section 14.12 Counterparts; Severability; Section References.



This Agreement may be executed in any number of counterparts and by different parties hereto
in separate counterparts, each of which when so executed shall be deemed to be an original and all
of which when taken together shall constitute one and the same Agreement. Any provisions of this
Agreement which are prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction. Unless otherwise
expressly indicated, all references herein to “Article,” “Section,” “Schedule” or “Exhibit” shall
mean articles and sections of, and schedules and exhibits to, this Agreement.



Section 14.13 Wachovia Roles.



Each of the Lender and each Lender Group Agent acknowledges that Wachovia acts, or may in the
future act: (a) as administrative agent for VFCC or any Liquidity Bank, (b) as an issuing and
paying agent for the Commercial Paper of VFCC or any other Lender, (c) to provide credit or
liquidity enhancement for the timely payment for the Commercial Paper of VFCC or any other Lender,
and/or (d) to provide other services from time to time for VFCC or any Liquidity Bank
(collectively, the “Wachovia Roles”). Without limiting the generality of this Section
14.13, each Lender and each Lender Group Agent hereby acknowledges and consents to any and all
Wachovia Roles and agrees that in connection with any Wachovia Role, Wachovia may take, or refrain
from taking, any action that it, in its discretion, deems appropriate, including, without
limitation, in its role as administrative agent for VFCC, and the giving of notice of a mandatory
purchase pursuant to the related Liquidity Agreement.



Section 14.14 Relationship of this Amendment to the Loan and Security Agreement.



To the extent that any covenant, representation, warranty, default provision or amendment or
waiver fee arrangement in respect of any of the Loan Parties at any time contained in the Loan and
Security Agreement, any amendment, modification, restatement, supplement or replacement thereof or
thereto or in any document, agreement, facility or securities entered into or issued by any Loan
Party or any of its Affiliates is more favorable to the creditors of any of the Loan Parties or any
of their Affiliates than any corresponding provision hereunder is to the Lenders and the Lender
Group Agents or any financial covenant is thereunder made applicable to any Loan Party or any of
its Affiliates, then this Amendment shall be automatically (and without any action necessary on the
part of any party hereto) deemed to be amended to incorporate such more favorable covenant,
representation, warranty, default provision or amendment or waiver fee arrangement or financial
covenant for the benefit of the Lenders and the Lender Group Agents.



Section 14.15 Amendment And Restatement.



The terms and provisions of the Existing Credit and Security Agreement shall be amended and
restated in their entirety by the terms and provisions of this Agreement. This Agreement is not
intended to, and shall not, effect a novation of any of the obligations of the parties to the
Existing Credit and Security Agreement, but merely an amendment and restatement of the terms
governing such obligations. Further, from and after the date hereof, this Agreement (as it may be
amended from time to time) shall be the “Credit Agreement” referred to in the Borrower’s
Certificate of Incorporation.



[signature pages follow]




4




IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and
delivered by their duly authorized officers as of the date hereof.




BELL MICROPRODUCTS FUNDING CORPORATION


as Borrower




By:

Name:

Title:





Address: Bell Microproducts Funding Corporation




1941 Ringwood Avenue




Suite A




San Jose, California 95131




Attention: Chief Financial Officer




Telephone: 408-467-2735




Fax: 408-467-2735




BELL MICROPRODUCTS INC.


as Servicer




By:

Name:

Title:




	 	 	 
	Address:

	 	Bell Microproducts Inc.

1941 Ringwood Avenue

San Jose, California 95131

Attention: Chief Financial Officer

Telephone: 408-451-9400

Fax: 408-451-1632






[additional signatures to follow]





5







VARIABLE FUNDING CAPITAL COMPANY LLC


as a Lender



	 	 	 
	By:

	 	Wachovia Capital Markets, LLC,

as Attorney-In-Fact
	 
	 	 
	By:

	 	

	 

	 	 
	Name:

	 	

	
 
	 	 
	Title:

	 	

	 

	 	 







Address: Variable Funding Capital Company LLC




c/o Wachovia Bank, National Association




One Wachovia Center




301 South College Street, TW-10




Charlotte, North Carolina 28288




Attention: Doug Wilson




Telephone: 704-374-2520


Fax: 704-383-9579




WACHOVIA BANK,


NATIONAL ASSOCIATION


as a Liquidity Bank, as Lender Group Agent for the
Lender Group of which VFCC is a member and as Agent




By:

Name:

Title:




	 
	Address:Wachovia Bank, National Association
191 Peachtree Street, N.E.
22nd Floor, Mail Code GA8088
Atlanta, Georgia 30303
Attention: Eero Maki
Telephone: 404-332-5275
Fax: 404-332-5152







[additional signatures to follow]





MARKET STREET FUNDING LLC


as a Lender




By:

Name:

Title:





Address:



	 	 	 	 	 
	Market Street Funding LLC
c/o AMACAR Group, L.L.C.
	 	 	 	 
	6525 Morrison Blvd., Suite 318

	Charlotte, North Carolina 28211

	Attention:
	 	Douglas K. Johnson

	Telephone No.:
	 	 	(704) 365-0569	 
	Facsimile No.:
	 	 	(704) 365-1362	 






	 	 	 	 	 
	With a copy to:
	 	 	 	 
	PNC Bank, National Association

	One PNC Plaza
249 Fifth Avenue
	 	 	 	 
	Pittsburgh, Pennsylvania 15222-2707

	Attention:
	 	John T. Smathers

	Telephone No.:
	 	 	(412) 762-6440	 
	Facsimile No.:
	 	 	(412) 762-9184	 






[additional signatures to follow]







6







PNC BANK, NATIONAL ASSOCIATION,


as Lender Group Agent for the Market Street Group




By:

Name:

Title:




Address:



	 	 	 	 	 
	PNC Bank, National Association

	One PNC Plaza
249 Fifth Avenue
	 	 	 	 
	Pittsburgh, Pennsylvania 15222-2707

	Attention:
	 	John T. Smathers

	Telephone No.:
	 	 	(412) 762-6440	 
	Facsimile No.:
	 	 	(412) 762-9184	 






[end of signatures]




7



EXHIBIT I




DEFINITIONS




As used in this Agreement, the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the terms defined):



Adjusted Dilution Ratio: At any time, the rolling average of the Dilution Ratio for the
twelve (12) Calculation Periods then most recently ended.



Administrative Support Agreement: That certain Administrative Support Agreement, dated as
of September 20, 2004, between Bell Microproducts and Borrower, as the same may be amended,
restated or otherwise modified from time to time.



Advance: A borrowing hereunder consisting of the aggregate amount of the several Loans
made on the same Borrowing Date.



Adverse Claim: A lien, security interest, charge or encumbrance, or other right or claim
in, of or on any Person’s assets or properties in favor of any other Person.



Affiliate: With respect to any Person, any other Person directly or indirectly
controlling, controlled by, or under direct or indirect common control with, such Person or any
Subsidiary of such Person. A Person shall be deemed to control another Person if the controlling
Person owns 10% or more of any class of voting securities of the controlled Person or possesses,
directly or indirectly, the power to direct or cause the direction of the management or policies of
the controlled Person, whether through ownership of stock, by contract or otherwise.



Agent: As defined in the preamble to this Agreement.



Aggregate Commitment: On any date of determination, the aggregate amount of the
Commitments to make Loans hereunder. As of the date hereof, the Aggregate Commitment is
$120,000,000.



Aggregate Principal: On any date of determination, the aggregate outstanding principal
amount of all Advances outstanding on such date.



Aggregate Reduction: As defined in Section 1.3.



Agreement: This Credit and Security Agreement, as it may be amended or modified and in
effect from time to time in accordance with the terms hereof.



Alternate Base Rate: For any day, a rate per annum equal to the higher as of such day of:
(i) the Prime Rate or (ii) one-half of one percent (0.50%) above the Federal Funds Effective Rate.
For purposes of determining the Alternate Base Rate for any day, changes in the Prime Rate or the
Federal Funds Effective Rate shall be effective on the date of each such change.



Alternate Base Rate Loan: A Loan which bears interest at the Alternate Base Rate or the
Default Rate.



Amortization Date: The earliest to occur of (i) the day on which any of the conditions
precedent set forth in Section 6.2 are not satisfied, (ii) the Business Day immediately
prior to the occurrence of an Event of Bankruptcy with respect to any Loan Party, (iii) the
Business Day specified in a written notice from the Agent following the occurrence of any other
Amortization Event, and (iv) the date which is thirty (30) days after the Agent’s and the Lender
Group Agents’ receipt of written notice from Borrower that it wishes to terminate the facility
evidenced by this Agreement.



Amortization Event: As defined in Article IX.



Assignment Agreement: As defined in Section 12.1(b).



Auction Notice: Any written notice sent to the Agent pursuant to the terms of the
Intercreditor Agreement to the effect that there has been a sale of inventory outside the ordinary
course of business in violation of the Loan and Security Agreement will give rise to a Receivable.



Authorized Officer: With respect to any Person, its president, corporate controller,
treasurer or chief financial officer.



Bank Funding: Any Loan made by a Liquidity Bank in lieu of Conduit Loan pursuant to
Section 1.1.



Borrower: As defined in the preamble to this Agreement.



Borrowing Base: On any date of determination, the Net Pool Balance minus the Required
Reserves, each calculated as of the last day of the period covered by the most recent Periodic
Report.



Borrowing Date: A Business Day on which an Advance is made hereunder.



Borrowing Limit: As defined in Section 1.1(a)(i).



Borrowing Notice: As defined in Section 1.2.



Broken Funding Costs: For any Lender Group on any day, as defined in the related Pricing
Supplement.



Business Day: Any day on which banks are not authorized or required to close in New York,
New York or Atlanta, Georgia, and The Depository Trust Company of New York is open for business,
and, if the applicable Business Day relates to any computation or payment to be made with respect
to the LIBO Rate, any day on which dealings in dollar deposits are carried on in the London
interbank market.



Calculation Period: If the Periodic Reporting Date occurs (i) only once each month, the
calendar month immediately preceding the month in which such Periodic Reporting Date occurs or (ii)
more frequently than once each month, the period of time selected by the Agent in its discretion.



Change of Control: The acquisition by any Person, or two or more Persons acting in
concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934) of 20% or more of the outstanding shares of
voting stock of any Loan Party.



Collateral: As defined in Section 13.1.



Collection Account: Each concentration account, depositary account, lock-box account or
similar account in which any Collections are collected or deposited.



Collection Account Agreement: An agreement substantially in the form of Exhibit VI
among an Originator, Bell Microproducts Inc., Borrower, the Agent and a Collection Bank.



Collection Bank: At any time, any of the banks holding one or more Collection Accounts.



Collection Notice: A notice, in substantially the form of Annex A to Exhibit
VI, from the Agent to a Collection Bank.



Collections: With respect to any Receivable, all cash collections and other cash proceeds
in respect of such Receivable, including, without limitation, all Finance Charges or other related
amounts accruing in respect thereof and all cash proceeds of Related Security with respect to such
Receivable.



Commercial Paper: Promissory notes issued in the commercial paper market by any Conduit or
issued by any Person to provide funding to any Conduit.



Committed Conduit: Any Conduit identified on the related Pricing Supplement as a Committed
Conduit.



Commitment: For each Liquidity Bank that is part of any Lender Group and each Committed
Conduit, the commitment of (i) such Liquidity Bank to make Loans to Borrower hereunder in the event
the related Conduit elects not to fund such Lender Group’s Lender Group Share of any Advance in an
aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite
such Liquidity Bank’s name on Schedule A to this Agreement (in the case of the initial
Liquidity Banks) or the amount set forth opposite such Liquidity Bank’s name on Schedule A
to the related Assignment Agreement (in the case of the other Liquidity Banks) or (ii) such
Committed Conduit to make Loans to Borrower hereunder in an aggregate principal amount at any one
time outstanding not to exceed the amount set forth opposite such Committed Conduit’s name on
Schedule A to this Agreement or the amount set forth opposite such Committed Conduit’s name
on Schedule A to the related Assignment Agreement.



Conduit: Any asset backed commercial paper conduit that relies primarily upon the issuance
of Commercial Paper to fund its investments hereunder.



Conduit Loan: Any Loan made by a Conduit, whether such Loan is a CP Rate Loan or is funded
by a Liquidity Funding under the related Liquidity Agreement.



Concentration Factor: For any Calculation Period, a percentage not less than 18.25% and
not greater than 25.25%, and not less than the sum of the Eligible Receivables of the four largest
Obligors (each as a percentage of all Eligible Receivables up to the Concentration Limit or Special
Concentration Limit as applicable) as selected by the Agent (in consultation with the Lender Group
Agents) in its sole discretion, which the Agent shall establish by notice to the Borrower and the
Servicer from time to time (with a copy to each Lender Group Agent).



Contingent Obligation: Of a Person means any agreement, undertaking or arrangement by
which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds
for the payment of, or otherwise becomes or is contingently liable upon, the obligation or
liability of any other Person, or agrees to maintain the net worth or working capital or other
financial condition of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter, operating agreement, take-or-pay
contract or application for a letter of credit.



Consolidated Net Worth: With respect to any Person at any time, the remainder at such
time, determined on a consolidated basis, in accordance with GAAP, of (a) the total assets of such
Person and its Subsidiaries, minus (b) the total liabilities of such Person and its
Subsidiaries.



Contract: With respect to any Receivable, any and all instruments, agreements, invoices or
other writings pursuant to which such Receivable arises or which evidences such Receivable.



CP Rate: For any Lender Group on any day for each day, as defined in the related Pricing
Supplement.



CP Rate Loan: Each Loan made by a Conduit prior to the time, if any, when (i) it is
refinanced with a Liquidity Funding pursuant to the related Liquidity Agreement, or (ii) the
occurrence of an Amortization Event and the commencement of the accrual of Interest thereon at the
applicable Default Rate.



Credit and Collection Policy: Borrower’s credit and collection policies and practices
relating to Contracts and Receivables existing on the date hereof and summarized in Exhibit
VIII hereto, as modified from time to time in accordance with this Agreement.



Cut-Off Date: The last day of a Calculation Period.



Days Sales Outstanding: As of any day, an amount equal to the product of (i) 91,
multiplied by (ii) the amount obtained by dividing (A) the aggregate outstanding balance of
Receivables as of the most recent Cut-Off Date, by (B) the aggregate amount of Receivables created
during the three (3) Calculation Periods including and immediately preceding such Cut-Off Date.



Deemed Collections: Collections deemed received by the Borrower under Section
1.4(a).



Default Horizon Ratio: As of any Cut-Off Date, (a) the ratio (expressed as a decimal)
computed by dividing (i) the aggregate sales generated by the Originator during the three
Calculation Periods ending on such Cut-Off Date, by (ii) the Net Pool Balance as of such Cut-off
Date or (b) such other formula as the Agent may from time to time provide to the Borrower and the
Servicer in writing based upon results of any Review, any additional report and/or any further
analysis conducted at any time by or on behalf of the Agent or the Lender Group Agents in their
sole discretion.



Default Rate: For any day, a rate per annum equal to the sum of (i) the Alternate Base
Rate plus (ii) 2.00%, changing when and as the Alternate Base Rate changes.



Default Ratio: As of any Cut-Off Date, the ratio (expressed as a percentage) computed by
dividing (i) the total amount of Receivables which became Defaulted Receivables during the
Calculation Period that includes such Cut-Off Date, by (ii) the aggregate sales generated by the
Originator during the Calculation Period occurring four months prior to the Calculation Period
ending on such Cut-Off Date.



Defaulted Receivable: A Receivable: (i) as to which the Obligor thereof has suffered an
Event of Bankruptcy; (ii) which, consistent with the Credit and Collection Policy, would be written
off Borrower’s books as uncollectible; or (iii) as to which any payment, or part thereof, remains
unpaid for 91 days or more from the original due date for such payment.



Delinquency Ratio: At any time, a percentage equal to (i) the aggregate Outstanding
Balance of all Receivables that were Delinquent Receivables at such time divided by (ii) the
aggregate Outstanding Balance of all Receivables at such time.



Delinquent Receivable: A Receivable as to which any payment, or part thereof, remains
unpaid for 31-60 days from the original due date for such payment.



Designated Obligor: An Obligor indicated by the Agent to Borrower in writing.



Dilution: The amount of any reduction or cancellation of the Outstanding Balance of a
Receivable as described in Section 1.4(a).



Dilution Horizon Ratio: As of any Cut-off Date, a ratio (expressed as a decimal), computed
by dividing (i) the sum of (A) the aggregate sales generated by the Originator during the
Calculation Period ending on such Cut-Off Date and (B) 0.63 times the aggregate sales generated by
the Originator during the second Calculation Period immediately preceding the Calculation Period
ending on such Cut-Off Date, by (ii) the Net Pool Balance as of such Cut-Off Date or such other
formula the Agent may from time to time provide to the Borrower and the Servicer in writing based
upon results of any Review, any additional report and/or any further analysis conducted at any time
by or on behalf of Agent or the Lender Group Agents in their sole discretion.



Dilution Ratio: As of any Cut-Off Date, (a) a ratio (expressed as a percentage), computed
by dividing (i) the total amount of decreases in Outstanding Balances due to Dilutions during the
Calculation Period ending on such Cut-Off Date, by (ii) the aggregate sales generated by the
Originator during the second Calculation Period prior to the Calculation Period ending on
such Cut-Off Date or (b) such other formula as the Agent may from time to time provide to the
Borrower and the Servicer in writing based upon results of Reviews conducted by or on behalf of the
Agent or the Lender Group Agents.



Dilution Reserve: For any Calculation Period, the product (expressed as a percentage) of:




(i) the sum of (A) two (2) times the Adjusted Dilution Ratio as of the immediately
preceding Cut-Off Date, plus (B) the Dilution Volatility Component as of the immediately
preceding Cut-Off Date, times




(ii) the Dilution Horizon Ratio as of the immediately preceding Cut-Off Date.



Dilution Volatility Component: The product (expressed as a percentage) of (i) the
difference between (A) the highest three (3)-month rolling average Dilution Ratio over the past 12
Calculation Periods and (B) the Adjusted Dilution Ratio, and (ii) a fraction, the numerator of
which is equal to the amount calculated in (i)(A) of this definition and the denominator of
which is equal to the amount calculated in (i)(B) of this definition.



Downgraded Liquidity Bank: A Liquidity Bank which has been the subject of a Downgrading
Event.



Downgrading Event: For any Person on any day, means the lowering of the rating with regard
to the short-term securities of such Person to below (i) A-1 by S&P, or (ii) P-1 by Moody’s.



Eligible Assignee: A commercial bank having a combined capital and surplus of at least
$250,000,000 with a rating of its (or its holding company’s) short-term securities equal to or
higher than (i) A-1 by S&P and (ii) P-1 by Moody’s, assignment to which has been consented to by
the Borrower, such consent not to be unreasonably withheld or delayed; provided, that no such
consent of the Borrower is required following the occurrence and during the continuation of an
Amortization Event or Unmatured Amortization Event.



Eligible Receivable: At any time, a Receivable:




(i) the Obligor of which (A) if a natural person, is a resident of Hong Kong,
Singapore, Taiwan or a country that is a member of the OECD or any political subdivision of
the foregoing and has its chief executive office in Hong Kong, Singapore, Taiwan or a
country that is a member of the OECD; (B) is not an Affiliate of any of the parties hereto;
(C) is not a government or a governmental subdivision or agency; and (D) is not a Designated
Obligor,




(ii) [reserved],




(iii) which is not owing from an Obligor as to which more than 50% of the aggregate
Outstanding Balance of all Receivables owing from such Obligor are Defaulted Receivables,




(iv) which is not a Receivable as to which any payment remains unpaid for more than 60
days from the original due date,




(v) which by its terms is due and payable within 90 days of the original billing date
therefor and has not had its payment terms extended more than once; provided,
however, that, no more than 10% of the Receivables may have payment terms between 61
and 90 days,




(vi) which is an “account” or “chattel paper” within the meaning of Section 9-102(a)(2)
and Section 9-102(a)(11), respectively, of the UCC of all applicable jurisdictions,




(vii) which is denominated and payable only in United States dollars in the United
States,




(viii) which arises under a Contract in substantially the form of one of the form
contracts set forth on Exhibit X hereto or otherwise approved by the Lender Group
Agents in writing, which, together with such Receivable, is in full force and effect and
constitutes the legal, valid and binding obligation of the related Obligor enforceable
against such Obligor in accordance with its terms subject to no offset, counterclaim or
other defense,




(ix) which arises under a Contract which (A) does not require the Obligor under such
Contract to consent to the transfer, sale, pledge or assignment of the rights and duties of
the Originator or any of its assignees under such Contract and (B) does not contain a
confidentiality provision that purports to restrict the ability of any Lender to exercise
its rights under this Agreement, including, without limitation, its right to review the
Contract,




(x) which arises under a Contract that contains an obligation to pay a specified sum of
money, contingent only upon the sale of goods or the provision of services by the
Originator,




(xi) which, together with the Contract related thereto, complies with all applicable
laws and other legal requirements, whether Federal, state or local, including, without
limitation, to the extent applicable, usury laws, the Federal Consumer Credit Protection
Act, the Fair Credit Billing Act, the Federal Truth in Lending Act, and Regulation Z of the
Board of Governors of the Federal Reserve System and with respect to which no part of the
Contract related thereto is in violation of any such law, rule or regulation,




(xii) which satisfies all applicable requirements of the Credit and Collection Policy,




(xiii) which was generated in the ordinary course of the Originator’s business,




(xiv) which arises solely from the sale of goods or the provision of services to the
related Obligor by the Originator, and not by any other Person (in whole or in part),




(xv) as to which the Agent has not notified Borrower that the Lender Group Agents have
determined that such Receivable or class of Receivables is not acceptable as an Eligible
Receivable, including, without limitation, because such Receivable arises under a Contract
that is not acceptable to the Lender Group Agents,




(xvi) which is not subject to any dispute, counterclaim, right of rescission, set-off,
counterclaim or any other defense (including defenses arising out of violations of usury
laws) of the applicable Obligor against the Originator or any other Adverse Claim, and the
Obligor thereon holds no right as against the Originator to cause the Originator to
repurchase the goods or merchandise the sale of which shall have given rise to such
Receivable (except with respect to sale discounts effected pursuant to the Contract, or
defective goods returned in accordance with the terms of the Contract); provided,
however, that if such dispute, offset, counterclaim or defense affects only a
portion of the Outstanding Balance of such Receivable, then such Receivable may be deemed an
Eligible Receivable to the extent of the portion of such Outstanding Balance which is not so
affected, and provided, further, that Receivables of any Obligor which has
any accounts payable by the Originator or by a wholly-owned Subsidiary of the Originator
(thus giving rise to a potential offset against such Receivables) may be treated as Eligible
Receivables to the extent that the Obligor of such Receivables has agreed pursuant to a
written agreement in form and substance satisfactory to the Lender Group Agents, that such
Receivables shall not be subject to such offset,




(xvii) as to which the Originator has satisfied and fully performed all obligations on
its part with respect to such Receivable required to be fulfilled by it, and no further
action is required to be performed by any Person with respect thereto other than payment
thereon by the applicable Obligor,




(xviii) as to which each of the representations and warranties contained in
Sections 5.1(i), (j), (r), (s), (t) and (u)
is true and correct,




(xix) all right, title and interest to and in which has been validly transferred by the
Originator directly to Borrower under and in accordance with the Receivables Sale Agreement,
and Borrower has good and marketable title thereto free and clear of any Adverse Claim,




(xx) [reserved],




(xxi) that directs payment thereof to be sent to a Lock-Box,




(xxii) the Obligor of which (i) is not the subject of a current bankruptcy, insolvency
or similar proceeding and (ii) has not been the subject of a bankruptcy, insolvency or
similar proceeding during the prior 24 months unless otherwise agreed to in writing by the
Lender Group Agents,




(xxiii) that does not provide the Obligor with the right to obtain any cash advance
thereunder,



	 	 	 
	(xxiv)

(xxv)

(xxvi)

	 	that has not been selected in a manner materially adverse to any Lender,

that is not payable in installments,

that is not evidenced by a promissory note, and







(xxvii) that has terms which have not been modified, impaired, waived, altered,
extended or renegotiated since the initial sale or provision of service to an obligor in any
way not provided for in the Agreement.



ERISA: The Employee Retirement Income Security Act of 1974, as amended from time to time,
and any rule or regulation issued thereunder.



ERISA Affiliate: Any trade or business (whether or not incorporated) under common control
with Bell Mircroproducts within the meaning of Section 414(b) or (c) of the Tax Code (and Sections
414(m) and (o) of the Tax Code for purposes of provisions relating to Section 412 of the Tax Code).



Event of Bankruptcy: Shall occur, with respect to any specified Person, on the date that
(A) a petition, case or proceeding under the bankruptcy laws of the United States of America or
Canada or similar law of any foreign jurisdiction now or hereafter in effect or under any
insolvency, arrangement, reorganization, receivership, moratorium, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether
at law or in equity) is filed or commenced against such Person or all or any part of its properties
and such petition or application is not dismissed within forty-five (45) days after the date of its
filing or such Person shall file any answer admitting or not contesting such petition or
application or indicates its consent to, acquiescence in or approval of, any such action or
proceeding or the relief requested is granted sooner or (B) a petition, case or proceeding under
the bankruptcy laws of the United States of America or Canada now or hereafter in effect or under
any insolvency, arrangement, reorganization, receivership, moratorium, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether
at a law or equity) is filed by such Person or for all or any part of its property including,
without limitation, if such Person shall: (i) apply for or consent to the appointment of a
receiver, trustee or liquidator of it or of all or a substantial part of its property and assets;
(ii) be unable, or admit in writing its inability, to pay its debts as they mature, or commit any
other act of bankruptcy; (iii) make a general assignment for the benefit of creditors; (iv) file a
voluntary petition or assignment in bankruptcy or a proposal seeking a reorganization, compromise,
moratorium or arrangement with its creditors; (v) take advantage of any insolvency or other similar
law pertaining to arrangements, moratoriums, compromises or reorganizations, or admit the material
allegations of a petition or application filed in respect of it in any bankruptcy, reorganization
or insolvency proceeding; or (vi) take any corporate action for the purpose of effecting any of the
foregoing.



Facility Account: Borrower’s account no. 14594-03034 at Bank of America.



Facility Termination Date: The earlier of (i) the Liquidity Termination Date (ii) the
business day prior to an Event of Bankruptcy with respect to any Loan Party, (iii) the date
specified by the Borrower upon not less than thirty (30)business days’ notice to the Agent and the
Lender Group Agents, (iv) the date declared by the Agent following the occurrence of an
Amortization Event, (v) the date that is 3 years from the date of the execution of the Receivables
Sale Agreement and the Credit and Security Agreement and (vi) the date the Agent receives any
Auction Notice.



Federal Bankruptcy Code: Title 11 of the United States Code entitled “Bankruptcy,” as
amended and any successor statute thereto.



Federal Funds Effective Rate: For any day for any period, a fluctuating interest rate per
annum for each day during such period equal to (i) the weighted average of the rates on overnight
federal funds transactions with members of the Federal Reserve System arranged by federal funds
brokers, as published for such day (or, if such day is not a Business Day, for the preceding
Business Day) by the Federal Reserve Bank of New York in the Composite Closing Quotations for U.S.
Government Securities; or (ii) if such rate is not so published for any day which is a Business
Day, the average of the quotations at approximately 11:30 a.m. (New York City time) for such day on
such transactions received by the Agent from three federal funds brokers of recognized standing
selected by it.



Fee Letter: The letter agreements among Borrower, Bell Microproducts Inc. and the
respective Lender Group Agent, as such letter agreements may be amended or modified and in effect
from time to time.



Final Payout Date: The date on which all Obligations have been paid in full and the
Aggregate Commitment has been terminated.



Finance Charges: With respect to a Contract, any finance, interest, late payment charges
or similar charges owing by an Obligor pursuant to such Contract.



Funding Agreement: For any Lender Group, (i) this Agreement, (ii) the related Liquidity
Agreement and (iii) any other agreement or instrument executed by any Funding Source with or for
the benefit of the related Conduit.



Funding Source: (i) any Lender Group, (i) all of the Liquidity Banks that are members of
such Lender group or (ii) any insurance company, bank or other funding entity providing liquidity,
credit enhancement or back-up purchase support or facilities to the related Conduit.



GAAP: At any time, generally accepted accounting principles in effect in the United States
of America at such time.



Indebtedness: Of a Person means such Person’s (i) obligations for borrowed money, (ii)
obligations representing the deferred purchase price of property or services (other than accounts
payable arising in the ordinary course of such Person’s business payable on terms customary in the
trade), (iii) obligations, whether or not assumed, secured by liens or payable out of the proceeds
or production from property now or hereafter owned or acquired by such Person, (iv) obligations
which are evidenced by notes, acceptances, or other instruments, (v) capitalized lease obligations,
(iv) net liabilities under interest rate swap, exchange or cap agreements, (vii) Contingent
Obligations and (v) liabilities in respect of unfunded vested benefits under plans covered by Title
IV of ERISA.



Independent Director: A member of the Board of Directors of Borrower who (A) at the time
of appointment, is not at such time, and has not been at any time during the preceding five (5)
years: (i) a creditor, supplier, director, officer, employee, family member, manager or contractor
of Bell Microproducts or any of its Subsidiaries or Affiliates (other than Borrower), (ii) a direct
or indirect or beneficial owner, excluding de minimus ownership interests, (at the time of such
individual’s appointment as an Independent Director or at any time thereafter while serving as an
Independent Director) of any of the outstanding common shares of Borrower, Bell Microproducts or
any of their respective Subsidiaries or Affiliates, having general voting rights, or (iii) a person
who controls (whether directly, indirectly or otherwise) Bell Microproducts or any of its
Subsidiaries or Affiliates (other than Borrower) or any creditor, supplier, employee, officer,
director, manager or contractor of Bell Microproducts or any of its Subsidiaries or Affiliates
(other than Borrower), and (B) shall have no less than five (5) years experience in serving as a
director for special purposes vehicles engaged in securitization activities and/or structured
finance transactions (e.g., AMACAR Group, L.L.C., Lord Securities Corporation, Global Securities,
and Organization Services, Inc., a subsidiary of Wilmington Trust).



Intercreditor Agreement: That certain Amended and Restated Intercreditor Agreement, dated
as of December 28, 2005, between the Agent and Congress Financial Corporation (Western), as
administrative agent for the lenders under the Loan and Security Agreement.



Interest: For any Lender Group and each respective Interest Period relating to Loans made
by the Liquidity Banks of such Lender Group, an amount equal to the product of the applicable
Interest Rate for each Loan multiplied by the principal of such Loan for each day elapsed during
such Interest Period, annualized on a 360 day basis.



Interest Period: For any Lender Group:




(i) if Interest for such Loan is calculated on the basis of the LIBO Rate, a period of
one, two, three or six months, commencing on a Business Day selected by Borrower or the
related Lender Group Agent pursuant to this Agreement. Such Interest Period shall end on
the day in the applicable succeeding calendar month which corresponds numerically to the
beginning day of such Interest Period, provided, however, that if there is
no such numerically corresponding day in such succeeding month, such Interest Period shall
end on the last Business Day of such succeeding month; or




(ii) if Interest for such Loan is calculated on the basis of the Alternate Base Rate, a
period commencing on a Business Day selected by Borrower and agreed to by the related Lender
Group Agent, provided that no such period shall exceed one month.



If any Interest Period would end on a day which is not a Business Day, such Interest Period
shall end on the next succeeding Business Day, provided, however, that in the case of Interest
Periods corresponding to the LIBO Rate, if such next succeeding Business Day falls in a new month,
such Interest Period shall end on the immediately preceding Business Day. In the case of any
Interest Period for any Loan which commences before the Amortization Date and would otherwise end
on a date occurring after the Amortization Date, such Interest Period shall end on the Amortization
Date. The duration of each Interest Period which commences after the Amortization Date shall be of
such duration as selected by the applicable Lender Group Agent.



Interest Rate: With respect to each Loan of the Liquidity Banks, the applicable LIBO Rate,
the applicable Alternate Base Rate or the Default Rate, as applicable.



Interest Reserve: For any Calculation Period, the product (expressed as a percentage) of
(i) 1.5 times (ii) the Alternate Base Rate as of the immediately preceding Cut-Off Date
times (iii) a fraction the numerator of which is the highest Days Sales Outstanding for the
most recent 12 Calculation Periods and the denominator of which is 360.



Lender: Each Conduit and each Liquidity Bank.



Lender Group: One or more Conduits, together with the related Lender Group Agent and
related Liquidity Banks.



Lender Group Agent: For any Lender Group, the Person designated as the Lender Group Agent
from time to time for such Lender Group pursuant to this Agreement or the related Assignment
Agreement.



Lender Group Agent’s Account: For any Lender Group, the account maintained by the Lender
Group Agent for such Lender Group, as set forth in the related Pricing Supplement and as changed
from time to time by such Lender Group Agent in a written notice to Borrower and the Servicer.



Lender Group Limit: For any Lender Group, the aggregate commitment of the Liquidity Banks
or the Committed Conduit(s), as applicable, that are members of such Lender Group, as shown on
Schedule A hereto or in the related Assignment Agreement, as such commitments may increase
or decrease from time to time in accordance with the terms of this Agreement.



Lender Group Principal: For any Lender Group on any day, the aggregate amount of
outstanding Loans made by such Lender Group.



Lender Group Share: For any Lender Group the percentage equivalent of a fraction the
numerator of which is such Lender Group’s Lender Group Limit and the denominator of which is the
Aggregate Commitment.



LIBO Rate: For any Interest Period, the rate per annum determined on the basis of the
offered rate for deposits in U.S. dollars of amounts equal or comparable to the principal amount of
the related Loan offered for a term comparable to such Interest Period, which rates appear on a
Bloomberg L.P. terminal, displayed under the address “US0001M <Index> Q <Go>“ effective
as of 11:00 A.M., London time, two Business Days prior to the first day of such Interest Period,
provided that if no such offered rates appear on such page, the LIBO Rate for such Interest Period
will be the arithmetic average (rounded upwards, if necessary, to the next higher 1/100th of 1%) of
rates quoted by not less than two major banks in New York, New York, selected by the Agent, at
approximately 10:00 a.m.(New York City time), two (2) Business Days prior to the first day of such
Interest Period, for deposits in U.S. dollars offered by leading European banks for a period
comparable to such Interest Period in an amount comparable to the principal amount of such Loan,
divided by (i) one minus the maximum aggregate reserve requirement (including all basic,
supplemental, marginal or other reserves) which is imposed against the Agent in respect of
Eurocurrency liabilities, as defined in Regulation D of the Board of Governors of the Federal
Reserve System as in effect from time to time (expressed as a decimal), applicable to such Interest
Period plus (ii) 1.50 % per annum. The LIBO Rate shall be rounded, if necessary, to the next
higher 1/16 of 1%.



LIBO Rate Disruption Event: The occurrence of any event described in Section 4.5.



LIBO Rate Loan: A Loan which bears interest at the LIBO Rate.



Liquidity Agreement: For any Lender Group, the Liquidity Agreement described in the
related Pricing Supplement.



Liquidity Banks: As defined in the preamble in this Agreement.



Liquidity Commitment: As to each Liquidity Bank, its commitment under the related
Liquidity Agreement (which for VFCC shall equal 102% of its Commitment hereunder and for Liquidity
Banks related to any other Lender Group shall equal the percentage of such Liquidity Bank’s
Commitment as set forth in the related Pricing Supplement or Assignment Agreement).



Liquidity Funding: Any purchase or funding made by any Liquidity Bank pursuant to its
Liquidity Agreement relating to any Loan made hereunder by the related Conduit.



Liquidity Termination Date: For any Lender Group on any day, as defined in the related
Pricing Supplement or in the related Assignment Agreement, as applicable.



Loan: Any loan made by a Lender to the Borrower pursuant to this Agreement (including,
without limitation, any Liquidity Funding). Each Loan shall either be a CP Rate Loan, an Alternate
Base Rate Loan or a Eurodollar Rate Loan, selected in accordance with the terms of this Agreement.



Loan and Security Agreement: That certain Loan and Security Agreement, dated as of May 14,
2001, as amended, by and among Bell Microproducts Inc., Bell Microproducts — Future Tech, Inc.,
Rorke Data, Inc., Bell Microproducts Canada — Tenex Data ULC, Total Tec Systems, Inc., Bell
Microproducts Canada Inc., Bell Microproducts Mexico, S.A. de C.V., Bell Microproducts Mexico
Shareholder, LLC, and Congress Financial Corporation (Western), as administrative, collateral and
syndication agent, and other parties as lenders.



Loan Parties: As defined in the preamble to this Agreement.



Lock-Box: Each locked postal box with respect to which a bank who has executed a
Collection Account Agreement has been granted exclusive access for the purpose of retrieving and
processing payments made on the Receivables and which is listed on Exhibit IV.



Loss Reserve: For any Calculation Period, the product (expressed as a percentage) of (i)
2.0, times (ii) the highest three-month rolling average Default Ratio during the 12 Calculation
Periods ending on the immediately preceding Cut-Off Date, times (iii) the Default Horizon Ratio as
of the immediately preceding Cut-Off Date.



Majority-In-Interest: At any time, with respect to a Lender Group and the Liquidity Banks
or Committed Conduit(s) members thereof, Liquidity Banks or Committed Conduit(s) whose Commitments
exceed 50% of the related Lender Group’s Lender Group Limit at such time.



Market Street: As defined in the Preamble to this Agreement.



Market Street Agent: As defined in the Preamble to this Agreement.



Market Street Group: As defined in the Preamble to this Agreement.



Market Street Liquidity Agreement: That certain Liquidity Asset Purchase Agreement, dated
the date hereof, by and among PNC, each of the Purchasers from time to time parties thereto and
Market Street Funding Corporation.



Market Street Liquidity Banks: The financial institutions from time to time members of the
Market Street Group as Liquidity Banks thereof and PNC (in its capacity as initial Liquidity Bank
for the Market Street Group).



Material Adverse Effect: With respect to any Loan Party and its Affiliates, a material
adverse effect on (a) the financial condition, business, performance, operations or properties of
any Loan Party or of the group taken as a whole; (b) the legality, validity or enforceability as to
any Loan Party of this Agreement or any other Transaction Document; (c) the legality, validity,
enforceability, perfection or priority of the security interests and liens of the Agent or any
Lender upon the Collateral or any other property of any Loan Party or of the group taken as a whole
that is security for the Obligations, or the value of the Collateral or such other property; (d)
the ability of any Loan Party or of the group taken as a whole to repay the Obligations
attributable to such Loan Party or group or of any such Loan Party or of the group taken as a whole
to perform its respective obligations under this Agreement; (e) the Agent’s security interest, for
the benefit of the Secured Parties, in the Receivables generally or in any significant portion of
the Receivables, the Related Security or the Collections with respect thereto; or (f) the ability
of the Agent or any Lender to enforce the Obligations or realize upon the Collateral or otherwise
with respect to the rights and remedies of the Agent or any Lender under this Agreement or any of
the other Funding Agreements.



Material Indebtedness: As defined in Section 9.1(f).



Moody’s: Moody’s Investors Service, Inc.



Net Pool Balance: At any time, the aggregate Outstanding Balance of all Eligible
Receivables at such time reduced by the aggregate amount by which the Outstanding Balance of all
Eligible Receivables of each Obligor and its Affiliates exceeds the Obligor Concentration Limit for
such Obligor.



Net Worth: As defined in the Receivables Sale Agreement.



Non-Committed Conduit: Any Conduit identified on the related Pricing Supplement as a
Non-Committed Conduit.



Notice of Default: As defined in the Intercreditor Agreement.



Obligations: As defined in Section 2.1.



Obligor: A Person obligated to make payments pursuant to a Contract.



Obligor Concentration Limit: At any time,




(a) in relation to the aggregate Outstanding Balance of Receivables owed by any single
Obligor and its Affiliates (if any), the applicable concentration limit shall be determined
as follows for Obligors who have short term unsecured debt ratings currently assigned to
them by S&P and Moody’s (or in the absence thereof, the equivalent long term unsecured
senior debt ratings), the applicable concentration limit shall be determined according to
the following table:



	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	Allowable % of

	 
	 	 	 	 	 	Eligible

	S&P Rating
	 	Moody’s Rating
	 	Receivables

	 
	 	 	 	 	 	 	 	 
	A-1+
	 	P	-1	 	 	 	10	%
	 
	 	 	 	 	 	 	 	 
	A-1
	 	P	-1	 	 	 	8	%
	 
	 	 	 	 	 	 	 	 
	A-2
	 	P	-2	 	 	 	6	%
	 
	 	 	 	 	 	 	 	 
	A-3
	 	P	-3	 	 	 	3.25	%
	 
	 	 	 	 	 	 	 	 
	Below A-3 or Not
	 	Below P-3 or Not
	 	 	 	 
	Rated by either S&P
	 	Rated by either S&P
	 	 	 	 
	or Moody’s
	 	or Moody’s
	 	 	3.25	%
	 
	 	 	 	 	 	 	 	 







provided, however, that (i) if any Obligor has a split rating, the
applicable rating will be the lower of the two, (ii) if any Obligor is not rated by either
S&P or Moody’s, the applicable Obligor Concentration Limit shall be the one set forth in the
last line of the table above, and (iii) subject to an increase in the percentage set forth
in clause (i)(A) of the definition of “Required Reserve,” the Lender Group Agents
may agree to a higher percentage of Eligible Receivables for a particular Obligor and its
Affiliates (each such higher percentage, a “Special Concentration Limit”), it being
understood that any Special Concentration Limit may be reduced or cancelled by the Agent
(individually or acting at the direction of the Required Lenders) upon not less than five
(5) Business Days’ written notice to the Loan Parties, and provided further, that the
Borrower shall deliver to the Agent and the Lender Group Agents a monthly report listing
each Obligor with respect to which a Special Obligation Limit is being requested; and




(b) in relation to the aggregate Outstanding Balance of Receivables owed by all
Obligors and their Affiliates (if any) that are (i) natural persons resident in Hong Kong,
Singapore, Taiwan or a country that is a member of the OECD (other than the United States of
America) or (ii) corporations or other business organizations, organized under the laws of
Hong Kong, Singapore, Taiwan or a country that is a member of the OECD (other than the
United States of America) or any political subdivision thereof, the applicable concentration
limit in any such case shall be 5%.



OECD: Any country that is a member of the Organisation for Economic Cooperation and
Development.



Originator: Bell Microproducts Inc., in its capacity as a seller under the Receivables
Sale Agreement.



Outstanding Balance: Of any Receivable at any time means the then outstanding principal
balance thereof.



Participant: As defined in Section 12.2.



PBGC: The Pension Benefit Guaranty Corporation, or any successor thereto.



Pension Plan: A pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of
ERISA which the Servicer sponsors or maintains, or to which it makes, is making, or is obligated to
make contributions, or in the case of a multiple employer plan (as described in Section 4064(a) of
ERISA) has made contributions at any time during the immediately preceding five plan years.



Periodic Report: A report, in substantially the form of Exhibit IX hereto
(appropriately completed), furnished by the Servicer to the Agent and the Lender Group Agents
pursuant to Section 8.5.



Periodic Reporting Date: The 10th Business Day of each month after the date of
this Agreement (or if such day is not a Business Day, the next succeeding Business Day thereafter).



Person: An individual, partnership, corporation (including a business trust), limited
liability company, joint stock company, trust, unincorporated association, joint venture or other
entity, or a government or any political subdivision or agency thereof.



Plan: An employee benefit plan (as defined in Section 3(3) of ERISA) which the Servicer or
any of its ERISA Affiliates sponsors or maintains or to which the Servicer or any of its ERISA
Affiliates makes, is making, or is obligated to make contributions and includes any Pension Plan,
other than a Plan maintained outside the United States primarily for the benefit of Persons who are
not U.S. residents.



PNC: PNC Bank, National Association.



Pricing Supplement: For any Lender Group, the related supplement substantially in the form
of Exhibit XI hereto, as such supplement may be amended or modified from time to time.



Prime Rate: For any day, a rate per annum equal to the prime rate of interest announced
from time to time by Wachovia (which is not necessarily the lowest rate charged to any customer),
changing when and as said prime rate changes.



Pro Rata Share: For each Liquidity Bank, a percentage equal to the Commitment of such
Liquidity Bank, divided by the related Lender Group Limit.



Proposed Reduction Date: As defined in Section 1.3.



Purchasing Liquidity Bank: As defined in Section 12.1(b).



Receivable: All indebtedness and other obligations owed to Borrower or the Originator (at
the time it arises, and before giving effect to any transfer or conveyance under the Receivables
Sale Agreement) or in which Borrower or an Originator has a security interest or other interest, in
each case arising in connection with the sale of goods or the rendering of services by an
Originator, including, without limitation, any such indebtedness, obligation or interest
constituting an account, chattel paper, instrument or general intangible, and further includes,
without limitation, the obligation to pay any Finance Charges with respect thereto. Indebtedness
and other rights and obligations arising from any one transaction, including, without limitation,
indebtedness and other rights and obligations represented by an individual invoice, shall
constitute a Receivable separate from a Receivable consisting of the indebtedness and other rights
and obligations arising from any other transaction; provided further, that any
indebtedness, rights or obligations referred to in the immediately preceding sentence shall be a
Receivable regardless of whether the account debtor or Borrower treats such indebtedness, rights or
obligations as a separate payment obligation.



Receivables Sale Agreement: That certain Receivables Sale Agreement, dated as of September
20, 2004, between the Originator and Borrower, as the same may be amended, restated or otherwise
modified from time to time.



Records: With respect to any Receivable, all Contracts and other documents, books, records
and other information (including, without limitation, computer programs, tapes, disks, punch cards,
data processing software and related property and rights) relating to such Receivable, any Related
Security therefor and the related Obligor.



Reduction Notice: As defined in Section 1.3.



Register: As defined in Section 12.1(e).



Regulatory Change: As defined in Section 10.2(a).



Reinvestment: As defined in Section 2.2.



Related Security: All of Borrower’s right, title and interest in, to and under the
Receivables Sale Agreement and with respect to any Receivable:




(i) all of Borrower’s interest in the inventory and goods (including returned or
repossessed inventory or goods), if any, the sale of which by the Originator gave rise to
such Receivable, and all insurance contracts with respect thereto,




(ii) all other security interests or liens and property subject thereto from time to
time, if any, purporting to secure payment of such Receivable, whether pursuant to the
Contract related to such Receivable or otherwise, together with all financing statements and
security agreements describing any collateral securing such Receivable,




(iii) all guaranties, letters of credit, insurance and other agreements or arrangements
of whatever character from time to time supporting or securing payment of such Receivable
whether pursuant to the Contract related to such Receivable or otherwise,




(iv) all service contracts and other contracts and agreements associated with such
Receivable,




(v) all Records related to such Receivable,




(vi) all of Borrower’s right, title and interest in, to and under the Receivables Sale
Agreement in respect of such Receivable, and




(vii) all proceeds of any of the foregoing.



Required Capital Amount: As defined in the Receivables Sale Agreement.



Required Lenders: At any time, Liquidity Banks and Committed Conduits with Commitments in
excess of 66-2/3% of the Aggregate Commitment: provided that at any time when a single
Lender Group’s Commitment exceeds 66-2/3%, then “Required Lenders” shall mean a minimum of two (2)
Lender Groups.



Required Notice Period: The number of days required notice set forth below applicable to
the Aggregate Reduction indicated below:



	 	 	 
	Aggregate Reduction	 	Required Notice Period
	< 50% of the Aggregate

Commitment

	 	

2 Business Days
	 
	 	 
	50% or more of the Aggregate

Commitment

	 	

5 Business Days






Required Reserve: On any day during a Calculation Period, the product of (i) the greater
of (A) the Required Reserve Factor Floor and (B) the sum of the Loss Reserve, the Interest Reserve,
the Dilution Reserve and the Servicing Reserve, times (ii) the Net Pool Balance as of the Cut-Off
Date immediately preceding such Calculation Period.



Required Reserve Factor Floor: For any Calculation Period, the sum (expressed as a
percentage) of (i) the Concentration Factor plus (ii) the product of the Adjusted Dilution Ratio
and the Dilution Horizon Ratio, in each case, as of the immediately preceding Cut-Off Date.



Restricted Junior Payment: (i) any dividend or other distribution, direct or indirect, on
account of any shares of any class of capital stock of Borrower now or hereafter outstanding,
except a dividend payable solely in shares of that class of stock or in any junior class of stock
of Borrower, (ii) any redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of capital stock of Borrower
now or hereafter outstanding, (iii) any payment or prepayment of principal of, premium, if any, or
interest, fees or other charges on or with respect to, and any redemption, purchase, retirement,
defeasance, sinking fund or similar payment and any claim for rescission with respect to the
Subordinated Loans, (iv) any payment made to redeem, purchase, repurchase or retire, or to obtain
the surrender of, any outstanding warrants, options or other rights to acquire shares of any class
of capital stock of Borrower now or hereafter outstanding, and (v) any payment of management fees
by Borrower (except for reasonable management fees to the Originator or its Affiliates in
reimbursement of actual management services performed).



S&P: Standard and Poor’s Ratings Services, a division of The McGraw Hill Companies, Inc.



Secured Parties: The Agent, each Lender Group Agent, each Conduit and each Liquidity Bank
and their respective successors and assigns.



Servicer: At any time the Person (which may be the Agent) then authorized pursuant to
Article VIII to service, administer and collect Receivables.



Servicing Fee: For each day in a Calculation Period:




(i) an amount equal to (A) the Servicing Fee Rate (or, at any time while Bell
Microproducts or one of its Affiliates is the Servicer, such lesser percentage as may be
agreed between the Borrower and the Servicer on an arms’ length basis based on then
prevailing market terms for similar services), times (B) the aggregate Outstanding Balance
of all Receivables at the close of business on the Cut-Off Date immediately preceding such
Calculation Period, times (C) 1/360; or




(ii) on and after the Servicer’s reasonable request made at any time when Bell
Microproducts or one of its Affiliates is no longer acting as Servicer hereunder, an
alternative amount specified by the successor Servicer not exceeding (A) 110% of such
Servicer’s reasonable costs and expenses of performing its obligations under this Agreement
during the preceding Calculation Period, divided by (B) the number of days in the current
Calculation Period.



Servicing Fee Rate: 1.0% per annum.



Servicing Reserve: For any Calculation Period, the product (expressed as a percentage) of
(i) the Servicing Fee Rate, times (ii) a fraction, the numerator of which is the highest Days Sales
Outstanding for the most recent 12 Calculation Periods and the denominator of which is 360.



Settlement Date: (i) the 12th Business Day of each month after the date of this
Agreement (or if any such day is not a Business Day, the next succeeding Business Day thereafter),
(ii) the last day of the relevant Interest Period in respect of each Loan of the Liquidity Banks
and (iii) such other day as may be requested by the Agent in its discretion.



Settlement Period: If the Periodic Reporting Date occurs (i) only once each month, (A) in
respect of each Loan of each Conduit, the immediately preceding Calculation Period and (B) in
respect of each Loan of the Liquidity Banks, the entire Interest Period of such Loan or (ii) more
frequently than once each month, the period of time selected by the Agent in its discretion.



Subordinated Loan: As defined in the Receivables Sale Agreement.



Subordinated Note: As defined in the Receivables Sale Agreement.



Subsidiary: Of a Person means (i) any corporation more than 50% of the outstanding
securities having ordinary voting power of which shall at the time be owned or controlled, directly
or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or
more of its Subsidiaries, or (ii) any partnership, association, limited liability company, joint
venture or similar business organization more than 50% of the ownership interests having ordinary
voting power of which shall at the time be so owned or controlled.



Tax Code: The Internal Revenue Code of 1986, as the same may be amended from time to time.



Termination Date: As defined in the Receivables Sale Agreement.



Terminating Tranche: As defined in Section 4.3(b).



Transaction Documents: Collectively, this Agreement, each Borrowing Notice, the
Receivables Sale Agreement, each Collection Account Agreement, each Fee Letter, the Subordinated
Notes and all other instruments, documents and agreements executed and delivered in connection
herewith.



UCC: The Uniform Commercial Code as from time to time in effect in the specified
jurisdiction.



Unmatured Amortization Event: An event which, with the passage of time or the giving of
notice, or both, would constitute an Amortization Event.



VFCC: As defined in the Preamble to this Agreement.



VFCC Agent: As defined in the Preamble to this Agreement.



VFCC Group: As defined in the Preamble to this Agreement.



Wachovia: Wachovia Bank, National Association in its individual capacity.



Yield: For each Conduit Loan for any Calculation Period, the sum of the products (for each
day during such Calculation Period) of:



YR x P x 1



360



where:



	 	 	 	 	 
	P

	 	=
	 	the principal amount of such Conduit Loan on such day; and
	 
	 	 	 	 
	YR

	 	=
	 	the Yield Rate applicable on such day;






provided, however, that no provision of this Agreement shall require the
payment or permit the collection of Yield in excess of the maximum permitted by applicable law and
Yield shall not be considered paid by any distribution if at any time such distribution is
rescinded or must otherwise be returned for any reason.



Yield Rate: For any day during any Calculation Period:




(i) to the extent the applicable Conduit funded the applicable Loan through the
issuance of commercial paper, a rate equal to the applicable CP Rate, or




(ii) to the extent the applicable Conduit funded the applicable Loan through a
Liquidity Funding, a rate equal to the LIBO Rate;



provided, however, the Yield Rate shall be the Alternate Base Rate for any
Calculation Period for any Loan (x) as to which the related Conduit has funded such Loan by a sale
of an interest therein to any related Liquidity Bank under the related Liquidity Agreement on any
day other than the first day of such Calculation Period and without giving such Liquidity Bank(s)
at least two Business Days’ prior notice of such assignment and (y) with respect to which a LIBO
Rate Disruption Event has occurred.



All accounting terms not specifically defined herein shall be construed in accordance with GAAP.
All terms used in Article 9 of the UCC in the State of New York, and not specifically defined
herein, are used herein as defined in such Article 9.



8




EXHIBIT II




FORM OF BORROWING NOTICE














[BELL MICROPRODUCTS FUNDING CORP]




BORROWING NOTICE

dated ______________, 20__

for Borrowing on ________________, 20__




Wachovia Bank, National Association, as Agent


191 Peachtree Street, N.E.


22nd Floor, Mail Code GA8088


Atlanta, Georgia 30303


Attention: Michael Landry


Facsimile No.: (404) 214-5481



PNC Bank, National Association


One PNC Plaza


249 Fifth Avenue


Pittsburgh, Pennsylvania 15222-2707


Attention: William Falcon


Facsimile No.: (412) 762-9184



Ladies and Gentlemen:



Reference is made to the Amended and Restated Credit and Security Agreement dated as of
December 28, 2005 (as amended, supplemented or otherwise modified from time to time, the
“Credit Agreement”) among Bell Microproducts Funding Corporation (the “Borrower”),
Bell Microproducts Inc., as initial Servicer, Variable Funding Capital Company LLC, Wachovia Bank
National Association, individually and as Agent, the Lenders from time to time parties thereto, the
Lender Group Agents from time to time party thereto and the Liquidity Banks from time to time
parties thereto. Capitalized terms defined in the Credit Agreement are used herein with the same
meanings.



1. The [Servicer, on behalf of the] Borrower hereby certifies, represents and warrants to the
Agent and the Lenders that on and as of the Borrowing Date (as hereinafter defined):



(a) all applicable conditions precedent set forth in Article VI of the Credit
Agreement have been satisfied;



(b) each of its representations and warranties contained in Section 5.1 of the Credit
Agreement will be true and correct, in all material respects, as if made on and as of the Borrowing
Date;



(c) no event will have occurred and is continuing, or would result from the requested
Purchase, that constitutes an Amortization Event or Unmatured Amortization Event;



(d) the Facility Termination Date has not occurred; and



(e) after giving effect to the Loans comprising the Advance requested below, the Aggregate
Principal will not exceed the Borrowing Limit.



2. The [Servicer, on behalf of the] Borrower hereby requests that the Lenders (or their
respective Liquidity Banks) make an Advance on      , 20     (the “Borrowing Date”) as
follows:



(a) Aggregate Amount of Advance: $     .



(b) Lender Group Shares:



VFCC Group: $     




Market Street Group: $     If the Advance is not funded by the Conduit
of your Lender Group, [Servicer on behalf of the] Borrower requests that the
Liquidity Banks make an Alternate Base Rate Loan that converts into LIBO Rate Loan
with an Interest Period of      months on the third Business Day after the
Borrowing Date).



3. Please disburse the proceeds of the Loans as follows:



[Apply $     to payment of principal and interest of existing Loans due on the Borrowing
Date]. [Apply $     to payment of fees due on the Borrowing Date]. [Wire transfer $     to
account no.      at      Bank, in [city, state], ABA No.      , Reference:
     ].



IN WITNESS WHEREOF, the [Servicer, on behalf of the] Borrower has caused this Borrowing
Request to be executed and delivered as of this      day of      ,      .




[     , as Servicer,


on behalf of:]      ., as Borrower




By:

Name:

Title:




9




EXHIBIT III




PLACES OF BUSINESS OF THE LOAN PARTIES; LOCATIONS OF RECORDS;

FEDERAL EMPLOYER IDENTIFICATION NUMBER(S)




	 	 	 	 	 
	Loan Party

	 	Places of Business and

Location of Records
	 	

FEIN
	 

	 	 
	 	 
	 
	 	 	 	 
	Bell Microproducts Inc.

	 	1941 Ringwood Avenue

San Jose, California 95131
	 	

94-3057566
	 

	 	 
	 	 
	 
	 	 	 	 
	Bell Microproducts

Funding Corporation

	 	1941 Ringwood Avenue

Suite A

San Jose, California 95131
	 	



27-0101561
	 

	 	 
	 	 






10




EXHIBIT IV




NAMES OF COLLECTION BANKS; LOCK-BOXES & COLLECTION ACCOUNTS




	 	 	 	 	 
	Lock-Box
	 	Related Collection Account

	 
	 	 	 	 
	 
	 	Name of Current Account Holder:
	 
	 	Bell Microproducts Funding Corporation

	 
	 	Account Number: 14594-03034
	 
	 	Bank of America, N.A.

	 
	 	ABA Number:  121000358

	 
	 	Contact Person:  Sarah Singh
	File 57266
	 	Contact’s Tel:  (714)850-6536
	Los Angeles, CA 90074-7266
	 	Contact’s Fax:  (714)850-6586
	 
	 	 	 	 
	 
	 	Name of Current Account Holder:
	 
	 	Bell Microproducts Funding Corporation

	 
	 	Account Number: 14594-03034
	 
	 	Bank of America, N.A.

	 
	 	ABA Number:  121000358

	 
	 	Contact Person:  Sarah Singh
	12778 Collections Center Drive
	 	Contact’s Tel:  (714)850-6536
	Chicago, IL 60693
	 	Contact’s Fax:  (714)850-6586
	 
	 	 	 	 






11




EXHIBIT V




FORM OF COMPLIANCE CERTIFICATE




	 	 	 
	To:

	 	Wachovia Bank, National Association, as Agent

PNC Bank, National Association, as Lender Group Agent






This Compliance Certificate is furnished pursuant to that certain Amended and Restated Credit
and Security Agreement dated as of December 28, 2005 among Bell Microproducts Funding Corporation
(the “Borrower”), Bell Microproducts Inc. (the “Servicer”), the Lenders from time
to time parties thereto, the Lender Group Agents from time to time parties thereto and the
Liquidity Banks from time to time parties thereto and Wachovia Bank, National Association, as agent
for such Lenders (the “Agreement”).



THE UNDERSIGNED HEREBY CERTIFIES THAT:



1. I am the duly elected [Chief Financial Officer] of Borrower.



2. I have reviewed the terms of the Agreement and I have made, or have caused to be made under
my supervision, a detailed review of the transactions and conditions of Borrower and its
Subsidiaries during the accounting period covered by the attached financial statements.



3. The examinations described in paragraph 2 did not disclose, and I have no knowledge
of, the existence of any condition or event which constitutes an Amortization Event or Unmatured
Amortization Event, as each such term is defined under the Agreement, during or at the end of the
accounting period covered by the attached financial statements or as of the date of this
Certificate[, except as set forth in paragraph 5 below].



4. Schedule I attached hereto sets forth financial data and computations evidencing
the compliance with certain covenants of the Agreement, all of which data and computations are
true, complete and correct.



[5. Described below are the exceptions, if any, to paragraph 3 by listing, in detail,
the nature of the condition or event, the period during which it has existed and the action which
Borrower has taken, is taking, or proposes to take with respect to each such condition or event:
     ]



12



The foregoing certifications, together with the computations set forth in Schedule I
hereto and the financial statements delivered with this Certificate in support hereof, are made and
delivered as of December 28, 2005.




By:

Name:

Title:




13



SCHEDULE I TO COMPLIANCE CERTIFICATE




A. Schedule of Compliance as of      ,      with Section      of the Agreement. Unless
otherwise defined herein, the terms used in this Compliance Certificate have the meanings ascribed
thereto in the Agreement.



This schedule relates to the month ended:      .



14




EXHIBIT VI




DEPOSIT ACCOUNT CONTROL AGREEMENT

(Lockbox — With Activation)




This Agreement (the “Control Agreement”) is entered into as of December 28, 2005, among
Bell Microproducts Funding Corporation (“Company”), Bell Microproducts Inc. (“Servicer”), Bank of
America, N.A. (“Bank”) and Wachovia Bank, National Association (“Agent”), as agent for the Lenders
under the Amended and Restated Credit and Security Agreement, dated as of December 28, 2005, among
the Company, Servicer, Wachovia, Variable Funding Capital Company LLC, the Conduit Lenders from
time to time parties thereto (the “Lender”), the Lender Group Agents from time to time parties
thereto and the Liquidity Banks from time to time parties thereto, and with respect to the
following:



A. Bank has agreed to establish and maintain for Company the following post office numbers (i)
P.O. Box 57266, Los Angeles, California 90074 and (ii) P.O. Box 12778, Collections Centre Drive,
Chicago, Illinois (each, a “Lockbox Address”) and deposit account number 14594-03034 (the
“Account”). Bank performs the services described in Exhibit A, which includes receiving mail at
each Lockbox Address, processing it and depositing checks and other payment instructions (“Checks”)
into the Account (the “Lockbox Service”).



B. Company has assigned to Lender a security interest in the Account and in Checks mailed to
each Lockbox Address.



C. Servicer will provide servicing, administration and collection with respect to the
Company’s receivables, and in that capacity will have access to the Account.



D. Company, Lender and Bank are entering into this Agreement to evidence Lender’s security
interest in the Account and such Checks and to provide for the disposition of net proceeds of
Checks deposited in the Account.



Accordingly, Company, Lender and Bank agree as follows:



1. (a) This Agreement evidences Lender’s control over the Account. Notwithstanding anything to the
contrary in the agreement between Bank and Company governing the Account, Bank will comply with
instructions originated by Lender as set forth herein directing the disposition of funds in the
Account without further consent of the Company.



(b) Company represents and warrants to Lender and Bank that it has not assigned or granted a
security interest in the Account or any Check deposited in the Account, except to Lender.



(c) Company will not permit the Account to become subject to any other pledge, assignment,
lien, charge or encumbrance of any kind, other than Lender’s security interest referred to herein.



2. During the Activation Period (as defined below), Bank shall prevent Company and Servicer from
making any withdrawals from the Account. Prior to the Activation Period, Company may operate and
transact business through the Account in its normal fashion, including making withdrawals from the
Account, but covenants to Lender it will not close the Account. Bank shall have no liability in
the event Company breaches this covenant to Lender. A reasonable period of time following the
commencement of the Activation Period, and continuing on each Business Day thereafter, Bank shall
transfer all collected and available balances in the Account to Lender at its account specified in
the Notice (as defined below). The “Activation Period” means the period which commences within a
reasonable period of time not to exceed two Business Days after Bank’s receipt of a written notice
from Lender in the form of Exhibit B (the “Notice”), to restrict the Account so no withdrawals may
be made by Company or Servicer and approximately four Business Days after Bank’s receipt of a
written notice from Lender in the form of Exhibit B (the “Notice”), Bank shall commence the
transfers of all collected and available balances in the Account to the Lender’s account. A
“Business Day” is each day except Saturdays, Sundays and Bank holidays. Funds are not available
if, in the reasonable determination of Bank, they are subject to a hold, dispute or legal process
preventing their withdrawal.



3. Bank agrees it shall not offset, charge, deduct or otherwise withdraw funds from the Account,
except as permitted by Section 4, until it has been advised in writing by Lender that all of
Company’s obligations that are secured by the Checks and the Account are paid in full. Lender
shall notify Bank promptly in writing upon payment in full of Company’s obligations.



4. Bank is permitted to charge the Account:



(a) for its fees and charges relating to the Account or associated with the Lockbox Service
and this Agreement; and



(b) in the event any Check deposited into the Account is returned unpaid for any reason or for
any breach of warranty claim.



5. (a) If the balances in the Account are not sufficient to compensate Bank for any fees or charges
due Bank in connection with the Account, the Lockbox Service or this Agreement, Company agrees to
pay Bank on demand the amount due Bank. Company will have breached this Agreement if it has not
paid Bank, within five days after such demand, the amount due Bank.



(b) If the balances in the Account are not sufficient to compensate Bank for any returned
Check, Company agrees to pay Bank on demand the amount due Bank. If Company fails to so pay Bank
immediately upon demand, Lender agrees to pay Bank within five days after Bank’s demand to Lender
to pay any amount received by Lender with respect to such returned Check. The failure to so pay
Bank shall constitute a breach of this Agreement.



(c) Company hereby authorizes Bank, without prior notice, from time to time to debit any other
account Company may have with Bank for the amount or amounts due Bank under subsection 5(a) or
5(b).



6. (a) Each Business Day, Bank will send any Checks not processed in accordance with the Lockbox
Service set-up documents as well as any other materials, such as invoices, received at any Lockbox
Address plus information regarding the deposit for the day to the address specified below for
Company or as otherwise specified in writing by Company to Bank, and will send a copy of the
deposit advice to the address specified below for Lender.



(b) In addition to the original Bank statement provided to Company, Bank will provide Lender
with a duplicate of such statement.



7. (a) Bank will not be liable to Company or Lender for any expense, claim, loss, damage or cost
(“Damages”) arising out of or relating to its performance under this Agreement other than those
Damages which result directly from its acts or omissions constituting negligence or intentional
misconduct.



(b) In no event will Bank be liable for any special, indirect, exemplary or consequential
damages, including but not limited to lost profits.



(c) Bank will be excused from failing to act or delay in acting, and no such failure or delay
shall constitute a breach of this Agreement or otherwise give rise to any liability of Bank, if (i)
such failure or delay is caused by circumstances beyond Bank’s reasonable control, including but
not limited to legal constraint, emergency conditions, action or inaction of governmental, civil or
military authority, fire, strike, lockout or other labor dispute, war, riot, theft, flood,
earthquake or other natural disaster, breakdown of public or private or common carrier
communications or transmission facilities, equipment failure, or negligence or default of Company
or Lender or (ii) such failure or delay resulted from Bank’s reasonable belief that the action
would have violated any guideline, rule or regulation of any governmental authority.



(d) Bank shall have no duty to inquire or determine whether Company’s obligations to Lender
are in default or whether Lender is entitled to provide the Notice to Bank. Bank may rely on
notices and communications it believes in good faith to be genuine and given by the appropriate
party.



(e) Notwithstanding any of the other provisions in this Agreement, in the event of the
commencement of a case pursuant to Title 11, United States Code, filed by or against Company, or in
the event of the commencement of any similar case under then applicable federal or state law
providing for the relief of debtors or the protection of creditors by or against Company, Bank may
act as Bank deems necessary to comply with all applicable provisions of governing statutes and
shall not be in violation of this Agreement as a result.



(f) Bank shall be permitted to comply with any writ, levy order or other similar judicial or
regulatory order or process concerning any Lockbox Address, the Account or any Check and shall not
be in violation of this Agreement for so doing.



8. Company and Servicer shall jointly and severally indemnify Bank against, and hold it harmless
from, any and all liabilities, claims, costs, expenses and damages of any nature (including but not
limited to allocated costs of staff counsel, other reasonable attorney’s fees and any fees and
expenses) in any way arising out of or relating to disputes or legal actions concerning Bank’s
provision of the services described in this Agreement. This section does not apply to any cost or
damage attributable to the gross negligence or intentional misconduct of Bank. Company’s and
Servicer’s obligations under this section shall survive termination of this Agreement.



9. Company and Servicer shall jointly and severally pay to Bank, upon receipt of Bank’s invoice,
all costs, expenses and attorneys’ fees (including allocated costs for in-house legal services)
incurred by Bank in connection with the enforcement of this Agreement and any instrument or
agreement required hereunder, including but not limited to any such costs, expenses and fees
arising out of the resolution of any conflict, dispute, motion regarding entitlement to rights or
rights of action, or other action to enforce Bank’s rights in a case arising under Title 11, United
States Code. Company agrees to pay Bank, upon receipt of Bank’s invoice, all costs, expenses and
attorneys’ fees (including allocated costs for in-house legal services) incurred by Bank in the
preparation and administration of this Agreement (including any amendments hereto or instruments or
agreements required hereunder).



10. Termination and Assignment of this Agreement shall be as follows:



(a) Lender may terminate this Agreement by providing notice to Company, Servicer and Bank that
all of Company’s obligations which are secured by Checks and the Account are paid in full. Lender
may also terminate or it may assign this Agreement upon 30 day’s prior written notice to Company,
Servicer and Bank. Bank may terminate this Agreement upon 30 days’ prior written notice to
Company, Servicer and Lender. Neither Company nor Servicer may terminate this Agreement or the
Lockbox Service except with the written consent of Lender and upon prior written notice to Bank.



(b) Notwithstanding subsection 10(a), Bank may terminate this Agreement at any time by written
notice to Company, Servicer and Lender if either Company or Lender breaches any of the terms of
this Agreement, or any other agreement with Bank.



11. (a) Each party represents and warrants to the other parties that (i) this Agreement constitutes
its duly authorized, legal, valid, binding and enforceable obligation; (ii) the performance of its
obligations under this Agreement and the consummation of the transactions contemplated hereunder
will not (A) constitute or result in a breach of its certificate or articles of incorporation,
by-laws or partnership agreement, as applicable, or the provisions of any material contract to
which it is a party or by which it is bound or (B) result in the violation of any law, regulation,
judgment, decree or governmental order applicable to it; and (iii) all approvals and authorizations
required to permit the execution, delivery, performance and consummation of this Agreement and the
transactions contemplated hereunder have been obtained.



(b) The parties each agree that it shall be deemed to make and renew each representation and
warranty in subsection 11(a) on and as of each day on which Company uses the services set forth in
this Agreement.



12. (a) This Agreement may be amended only by a writing signed by Company, Servicer, Lender and
Bank; except that Bank’s charges are subject to change by Bank upon 30 days’ prior written notice
to Company.



(b) This Agreement may be executed in counterparts; all such counterparts shall constitute but
one and the same agreement.



(c) This Agreement controls in the event of any conflict between this Agreement and any other
document or written or oral statement. This Agreement supersedes all prior understandings,
writings, proposals, representations and communications, oral or written, of any party relating to
the subject matter hereof.



(d) This Agreement shall be interpreted in accordance with North Carolina law without
reference to that state’s principles of conflicts of law.



13. Any written notice or other written communication to be given under this Agreement shall be
addressed to each party at its address set forth on the signature page of this Agreement or to such
other address as a party may specify in writing. Except as otherwise expressly provided herein,
any such notice shall be effective upon receipt.



14. Nothing contained in the Agreement shall create any agency, fiduciary, joint venture or
partnership relationship between Bank and Company, Servicer or Lender.



15




In Witness Whereof, the parties hereto have executed this Agreement by their duly
authorized officers as of the day and year first above written.



	 	 	 	 	 
	BELL MICROPRODUCTS FUNDING	 	 	 	 
	CORPORATION	 	 	 	 
	(“Company”)	 	 	 	 
	 
	 	Address for notices:

	 
	 	1941 Ringwood Ave.
	By:
	 	Suite A

	—
	 	San Jose, California  95131

	Name:
	 	Attention:  Chief Financial Officer

	—
	 	Telephone:  (408) 467-2735

	Title:
	 	Fax:  (408) 467-2735

	 
	 	 	 	 
	BELL MICROPRODUCTS INC.
(“Servicer”)
	 	 	 	 
	 
	 	Address for notices:

	By:
	 	1941 Ringwood Ave.
	—
	 	San Jose, California  95131

	Name:
	 	Attention:  Chief Financial Officer

	—
	 	Telephone:  (408) 451-9400

	Title:
	 	Fax:  (408) 451-1632

	 
	 	 	 	 
	WACHOVIA BANK, NATIONAL
ASSOCIATION
(“Agent”)
	 	 	 	 
	 
	 	Address for notices:

	 
	 	Wachovia Securities, Inc.

	By:
	 	191 Peachtree Street, NE
	—
	 	Atlanta, GA  30303

	Name:
	 	Attention:  Eero Maki

	—
	 	Telephone:   (404)332-5275

	Title:
	 	Fax:    (404)332-5152

	 
	 	 	 	 






16




	 	 	 	 	 
	Bank of America, N.A.	 	 	 	 
	(“Bank”)	 	 	 	 
	 
	 	Address for notices:

	 
	 	South Coast Financial Center BC

	 
	 	2nd Floor CA6-137-02-02
	 
	 	675 Anton Boulevard
	 
	 	Costa Mesa, California 92626-1919

	 
	 	Attention:  Sarah Singh

	 
	 	Telephone:  (714)850-6536

	 
	 	Fax:  (714)850-6586

	 
	 	with a copy to:

	 
	 	Bank of America

	 
	 	14th Floor, CA5-704-14-01
	By:
	 	315 Montgomery Street
	—
	 	San Francisco, California 94104-1866

	Name:
	 	Attention:  Shirin Chee

	—
	 	Telephone:  (415) 953-7085

	Title:
	 	Fax:  (415)953-1502

	 
	 	 	 	 






	 	 	 
	 
	 	 
	
 
	 	EXHIBIT A
	
 
	 	 
	
 
	 	TO DEPOSIT ACCOUNT CONTROL AGREEMENT
	
 
	 	 






STANDARD TERMS AND CONDITIONS




The Lockbox Service involves processing Checks that are received at a Lockbox Address. With this
Service, Company instructs its customers to mail checks it wants to have processed under the
Service to a Lockbox Address. Bank picks up mail at each Lockbox Address according to its mail
pick-up schedule. Bank will have unrestricted and exclusive access to the mail directed to a
Lockbox Address. Bank will provide Company with the Lockbox Service for a Lockbox Address when
Company has completed and Bank has received Bank’s then current set-up documents for such Lockbox
Address.



If Bank receives any mail containing Company’s lockbox number at Bank’s lockbox operations location
(instead of a Lockbox Address), Bank may handle the mail as if it had been received at a Lockbox
Address.



PROCESSING



Bank will handle Checks received at each Lockbox Address according to the applicable deposit
account agreement, as if the Checks were delivered by Company to Bank for deposit to the Account,
except as modified by these Terms and Conditions.



Bank will open the envelopes picked up from each Lockbox Address and remove the contents. For each
Lockbox Address, Checks and other documents contained in the envelopes will be inspected and
handled in the manner specified in the Company’s set-up documents. Bank captures and reports
information related to the lockbox processing, where available, if Company has specified this
option in the set-up documents. Bank will endorse all Checks Bank processes on Company’s behalf.



If Bank processes an unsigned check as instructed in the set-up documents, and the check is paid,
but the account owner does not authorize payment, Company agrees to indemnify Bank, the drawee bank
(which may include Bank) and any intervening collecting bank for any liability or expense incurred
by such indemnitee due to the payment and collection of the check.



If Company instructs Bank not to process a check bearing a handwritten or typed notation “Payment
in Full” or words of similar import on the face of the check, Company understands that Bank has
adopted procedures designed to detect Checks bearing such notations; however, Bank will not be
liable to Company or any other party for losses suffered if Bank fails to detect Checks bearing
such notations.



RETURNED CHECK



Unless Company and Bank agree to another processing procedure, Bank will reclear a Check once which
has been returned and marked “Refer to Maker,” “Not Sufficient Funds” or “Uncollected Funds.” If
the Check is returned for any other reason or if the Check is returned a second time, Bank will
debit the Account and return the Check to Company. Company agrees that Bank will not send a
returned item notice to Company for a returned Check unless Company and Bank have agreed otherwise.



ACCEPTABLE PAYEES



For each Lockbox Address, Company will provide to Bank the names of Acceptable Payees (“Acceptable
Payee” means Company’s name and any other payee name provided to Bank by Company as an acceptable
payee for Checks to be processed under the Lockbox Service). Bank will process a check only if it
is made payable to an Acceptable Payee and if the check is otherwise processable. Company warrants
that each Acceptable Payee is either (i) a variation of Company’s name or (ii) is an affiliate of
Company which has authorized Checks payable to it to be credited to the Account. Bank may treat as
an Acceptable Payee any variation of any Acceptable Payee’s name that Bank deems to be reasonable.



CHANGES TO PROCESSING INSTRUCTIONS



Company may request Bank orally or in writing to make changes to the processing instructions
(including changes to Acceptable Payees) for any Lockbox Address by contacting its Bank
representative, so long as such changes do not conflict with the terms of the Deposit Account
Control Agreement. Bank will not be obligated to implement any requested changes until Bank has
actually received the requests and had a reasonable opportunity to act upon them. In making
changes, Bank is entitled to rely on instructions purporting to be from Company.





17



EXHIBIT B



DEPOSIT ACCOUNT CONTROL AGREEMENT



[Letterhead of Wachovia]




	 	 	 
	To:

	 	Bank of America, N.A.

South Coast Financial Center BC

2nd Floor CA6-137-02-02

675 Anton Boulevard

Costa Mesa, California 92626-1919

Attention: Sarah Singh
	 
	 	 
	
 
	 	Bank of America

14th Floor, CA5-704-14-01

315 Montgomery Street

San Francisco, California 94104-1866

Attention: Shirin Chee






	 	 	 
	Re:

	 	Bell Microproducts Funding Corporation

Account No. [     ]






Ladies and Gentlemen:



Reference is made to the Deposit Account Control Agreement, dated December 28, 2005 (the
“Agreement”), among Bell Microproducts Funding Corporation, us and you regarding the
above-described account (the “Account”). In accordance with Section 2 of the Agreement, we hereby
give you notice of our exercise of control of the Account and we hereby instruct you to transfer
funds to our account as follows:



Bank Name:


ABA No.:


Account Name:


Account No.:




Very truly yours,




WACHOVIA BANK, NATIONAL ASSOCIATION, as Agent




By:


Name:



18




Title:EXHIBIT VII




FORM OF ASSIGNMENT AGREEMENT




THIS ASSIGNMENT AGREEMENT (this “Assignment Agreement”) is entered into as of the      
day of      ,      , by and between      (“Assignor”) and
     (“Assignee”).



PRELIMINARY STATEMENTS




A. This Assignment Agreement is being executed and delivered in accordance with Section
12.1(b) of that certain Amended and Restated Credit and Security Agreement dated as of December
28, 2005 by and among Bell Microproducts Funding Corporation, as Borrower, Bell Microproducts Inc.,
as Servicer, Wachovia Bank, National Association, as Agent, Variable Funding Capital Company LLC,
the Conduit Lenders from time to time parties thereto (the “Lenders”), the Lender Group Agents from
time to time parties thereto and the Liquidity Banks from time to time parties thereto(as amended,
modified or restated from time to time, the “Credit and Security Agreement”) and that
certain Amended and Restated Liquidity Purchase Agreement dated as of [     ] by and among
[Conduit], the Liquidity Banks from time to time party thereto and [     ], as Agent (as
amended, modified or restated from time to time, the “Liquidity Agreement”). Capitalized
terms used and not otherwise defined herein are used with the meanings set forth or incorporated by
reference in the Credit and Security Agreement.



B. Assignor is a Liquidity Bank party to the Credit and Security Agreement and the Liquidity
Agreement, and Assignee wishes to become a Liquidity Bank thereunder; and



C. Assignor is selling and assigning to Assignee an undivided      % (the
“Transferred Percentage”) interest in all of Assignor’s rights and obligations under the
Transaction Documents and the Liquidity Agreement, including, without limitation, Assignor’s
Commitment, Assignor’s Liquidity Commitment and (if applicable) Assignor’s Loans as set forth
herein.



AGREEMENT




The parties hereto hereby agree as follows:



(1) The sale, transfer and assignment effected by this Assignment Agreement shall become
effective (the “Effective Date”) two (2) Business Days (or such other date selected by the
Agent in its sole discretion) following the date on which a notice substantially in the form of
Schedule II to this Assignment Agreement (“Effective Notice”) is delivered by the
Agent to the Lenders, Assignor and Assignee. From and after the Effective Date, Assignee shall be
a Liquidity Bank party to the Credit and Security Agreement for all purposes thereof as if Assignee
were an original party thereto and Assignee agrees to be bound by all of the terms and provisions
contained therein.



(2) If Assignor has no outstanding principal under the Credit and Security Agreement or the
Liquidity Agreement, on the Effective Date, Assignor shall be deemed to have hereby transferred and
assigned to Assignee, without recourse, representation or warranty (except as provided in
paragraph 6 below), and the Assignee shall be deemed to have hereby irrevocably taken,
received and assumed from Assignor, the Transferred Percentage of Assignor’s Commitment and
Liquidity Commitment and all rights and obligations associated therewith under the terms of the
Credit and Security Agreement and the Liquidity Agreement, including, without limitation, the
Transferred Percentage of Assignor’s future funding obligations under the Credit and Security
Agreement and the Liquidity Agreement.



(3) If Assignor has any outstanding principal under the Credit and Security Agreement and
Liquidity Agreement, at or before 12:00 noon, local time of Assignor, on the Effective Date
Assignee shall pay to Assignor, in immediately available funds, an amount equal to the sum of (i)
the Transferred Percentage of the outstanding principal of Assignor’s Loans and, without
duplication, Assignor’s Percentage Interests (as defined in the Liquidity Agreement) (such amount,
being hereinafter referred to as the “Assignee’s Principal”); (ii) all accrued but unpaid
(whether or not then due) Interest attributable to Assignee’s Principal; and (iii) accruing but
unpaid fees and other costs and expenses payable in respect of Assignee’s Principal for the period
commencing upon each date such unpaid amounts commence accruing, to and including the Effective
Date (the “Assignee’s Acquisition Cost”); whereupon, Assignor shall be deemed to have sold,
transferred and assigned to Assignee, without recourse, representation or warranty (except as
provided in paragraph 6 below), and Assignee shall be deemed to have hereby irrevocably
taken, received and assumed from Assignor, the Transferred Percentage of Assignor’s Commitment,
Liquidity Commitment, Loans (if applicable) and Percentage Interests (if applicable) and all
related rights and obligations under the Transaction Documents and the Liquidity Agreement,
including, without limitation, the Transferred Percentage of Assignor’s future funding obligations
under the Credit and Security Agreement and the Liquidity Agreement.



(4) Concurrently with the execution and delivery hereof, Assignor will provide to Assignee
copies of all documents requested by Assignee which were delivered to Assignor pursuant to the
Credit and Security Agreement or the Liquidity Agreement.



(5) Each of the parties to this Assignment Agreement agrees that at any time and from time to
time upon the written request of any other party, it will execute and deliver such further
documents and do such further acts and things as such other party may reasonably request in order
to effect the purposes of this Assignment Agreement.



(6) By executing and delivering this Assignment Agreement, Assignor and Assignee confirm to
and agree with each other, the Agent and the Liquidity Banks as follows: (a) other than the
representation and warranty that it has not created any Adverse Claim upon any interest being
transferred hereunder, Assignor makes no representation or warranty and assumes no responsibility
with respect to any statements, warranties or representations made by any other Person in or in
connection with any of the Transaction Documents or the Liquidity Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of Assignee, the Credit and
Security Agreement, the Liquidity Agreement or any other instrument or document furnished pursuant
thereto or the perfection, priority, condition, value or sufficiency of any Collateral; (b)
Assignor makes no representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower, any Obligor, any Affiliate of the Borrower or the performance
or observance by the Borrower, any Obligor, any Affiliate of the Borrower of any of their
respective obligations under the Transaction Documents or any other instrument or document
furnished pursuant thereto or in connection therewith; (c) Assignee confirms that it has received a
copy of each of the Transaction Documents and the Liquidity Agreement, and other documents and
information as it has requested and deemed appropriate to make its own credit analysis and decision
to enter into this Assignment Agreement; (d) Assignee will, independently and without reliance upon
the Agent, the Borrower or any other Liquidity Bank or Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Transaction Documents and the Liquidity Agreement; (e)
Assignee appoints and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers under the Transaction Documents and the Liquidity Agreement as are delegated
to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto;
and (f) Assignee agrees that it will perform in accordance with their terms all of the obligations
which, by the terms of the Liquidity Agreement, the Credit and Security Agreement and the other
Transaction Documents, are required to be performed by it as a Liquidity Bank or, when applicable,
as a Lender.



(7) Each party hereto represents and warrants to and agrees with the Agent that it is aware of
and will comply with the provisions of the Credit and Security Agreement, including, without
limitation, Sections 14.5 and 14.6 thereof.



(8) Schedule I hereto sets forth the revised Commitment and Liquidity Commitment of
Assignor and the Commitment and Liquidity Commitment of Assignee, as well as administrative
information with respect to Assignee.



(9) THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK.



(10) Assignee hereby covenants and agrees that, prior to the date which is one year and one
day after the payment in full of all senior indebtedness for borrowed money of Assignor, it will
not institute against, or join any other Person in instituting against, Assignor any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding
under the laws of the United States or any state of the United States.



19



IN WITNESS WHEREOF, the parties hereto have caused this Assignment Agreement to be executed by
their respective duly authorized officers of the date hereof.




[ASSIGNOR]




By:

Name:

Title:





[ASSIGNEE]




By:

Name:

Title:




20



SCHEDULE I




TO ASSIGNMENT AGREEMENT




LIST OF LENDING OFFICES, ADDRESSES

FOR NOTICES AND COMMITMENT AMOUNTS




Date:      ,      



Transferred Percentage:      %



	 	 	 	 	 	 	 	 	 	 	 	 	 
	
 
	 	A-1
	 	A-2
	 	B-1
	 	B-2
	 	C-1
	 	C-2
	
 
	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Assignor

	 	Commitment (prior

to giving effect to

the Assignment

Agreement)
	 	Commitment (after

giving effect to

the Assignment

Agreement)
	 	Outstanding

principal (if any)
	 	Ratable Share of

Outstanding

principal
	 	Liquidity

Commitment (prior

to giving effect to

the Assignment

Agreement)
	 	Liquidity

Commitment (after

giving effect to

the Assignment

Agreement)
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	
 
	 	A-1
	 	A-2
	 	B-1
	 	B-2
	 	C-1
	 	C-2
	
 
	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Assignee

	 	Commitment (prior

to giving effect to

the Assignment

Agreement)
	 	Commitment (after

giving effect to

the Assignment

Agreement)
	 	Outstanding

principal (if any)
	 	Ratable Share of

Outstanding

principal
	 	Liquidity

Commitment (prior

to giving effect to

the Assignment

Agreement)
	 	Liquidity

Commitment (after

giving effect to

the Assignment

Agreement)
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 






Address for Notices



Attention:


Phone:


Fax:



21



SCHEDULE II

TO ASSIGNMENT AGREEMENT




EFFECTIVE NOTICE




TO:      , Assignor




     


     


     



TO:      , Assignee




     


     


     



The undersigned, as Agent under the Amended and Restated Credit and Security Agreement dated
as of December 28, 2005 by and among Bell Microproducts Funding Corporation, as Borrower, Bell
Microproducts Inc., as Servicer, Wachovia Bank, National Association, as Agent, Variable Funding
Capital Company LLC, the Conduit Lenders from time to time parties thereto (the “Lenders”), the
Lender Group Agents from time to time parties thereto and the Liquidity Banks from time to time
parties thereto, hereby acknowledges receipt of executed counterparts of a completed Assignment
Agreement dated as of      , 200     between      , as Assignor, and
     , as Assignee. Terms defined in such Assignment Agreement are used herein as
therein defined.



1. Pursuant to such Assignment Agreement, you are advised that the Effective Date will be
     ,      .



2. Each of the undersigned hereby consents to the Assignment Agreement as required by
Section 12.1(b) of the Credit and Security Agreement.



[3. Pursuant to such Assignment Agreement, the Assignee is required to pay $     to
Assignor at or before 12:00 noon (local time of Assignor) on the Effective Date in immediately
available funds.]



22




Very truly yours,




WACHOVIA BANK,


NATIONAL ASSOCIATION,


as Agent




By:

Name:

Title:





[     ]




By:

Name:

Title:




****[The Borrower hereby consents to the foregoing assignment:



BELL MICROPRODUCTS FUNDING CORPORATION



	 	 	 
	By:

	 	

	 

	 	

	Name:

	 	

	Title:

	 	]****
	 

	 	







23




EXHIBIT VIII




CREDIT AND COLLECTION POLICY




24




See Exhibit V to Receivables Sale Agreement

EXHIBIT IX




FORM OF PERIODIC REPORT







25






26




EXHIBIT X




FORM OF CONTRACT(S)




27




[See Attached]

EXHIBIT XI




FORM OF PRICING SUPPLEMENT




[see attached]




28




SCHEDULE A




LENDER GROUPS, LENDER GROUP AGENTS, CONDUIT LENDERS, LIQUIDITY BANKS AND COMMITMENTS




I. VFCC Group



	 	 	 	 	 	 	 	 	 
	 
	 	Conduit Lender:
	 	VFCC

	 
	 	Lender Group Agent:
	 	Wachovia

	 
	 	Liquidity Banks:
	 	Wachovia

	 
	 	Commitment:
	 	$	70,000,000	 
	II.
	 	Market Street Group
	 	 	 	 
	 
	 	Conduit Lender:
	 	Market Street

	 
	 	Lender Group Agent:
	 	PNC Bank, National Association

	 
	 	Committed Conduit:
	 	Market Street

	 
	 	Commitment:
	 	$	50,000,000	 






29




SCHEDULE B




DOCUMENTS TO BE DELIVERED TO THE AGENT

ON OR PRIOR TO THE INITIAL PURCHASE




1. Executed copies of the Amended and Restated Credit and Security Agreement, duly executed by
the parties thereto.



2. Copy of the Resolutions of the Board of Directors of each Loan Party and Performance
Guarantor certified by its Secretary authorizing such Person’s execution, delivery and performance
of this Agreement and the other documents to be delivered by it hereunder.



3. Articles or Certificate of Incorporation of each Loan Party and Performance Guarantor
certified by the Secretary of State of its jurisdiction of incorporation on or within thirty (30)
days prior to the initial Advance.



4. Good Standing Certificate for each Loan Party and Performance Guarantor issued by the
Secretaries of State of its state of incorporation and each jurisdiction where it has material
operations, each of which is listed below:




a. Borrower: Delaware




b. Servicer: Alabama




Arizona




California




Colorado




Delaware




Florida




Georgia




Illinois




Maryland




Massachusetts




Minnesota




New Jersey




New York




Oregon




Pennsylvania




Texas




Utah




Virginia




Washington



5. A certificate of the Secretary of each Loan Party certifying (i) the names and signatures
of the officers authorized on its behalf to execute this Agreement and any other documents to be
delivered by it hereunder and (ii) a copy of such Person’s By-Laws.



6. Pre-filing state and federal tax lien, judgment lien and UCC lien searches against each
Loan Party from the following jurisdictions:



	 	 	 	 	 
	a.

	 	Borrower:
	 	Delaware
	 
	 	 	 	 
	b.

	 	Servicer:
	 	California

Alabama

Texas

Ohio

Colorado

Minnesota

Illinois

Florida

Pennsylvania

Delaware

Georgia

New York

Maryland

Virginia






7. Time stamped receipt copies of proper financing statements, duly filed under the UCC on or
before the date of the initial Advance in all jurisdictions as may be necessary or, in the opinion
of the Agent, desirable, under the UCC of all appropriate jurisdictions or any comparable law in
order to perfect the ownership interests contemplated by this Agreement.



8. Time stamped receipt copies of proper UCC amendment statements necessary to effect the
release all security interests and other rights of any Person in the Receivables, Contracts or
Related Security previously granted by Borrower, including, without limitation, UCC amendment
statements relating to the partial releases by The Retirement Systems of Alabama.



9. Executed copies of Collection Account Agreements for each Lock-Box and Collection Account.



10. Reliance Letters from legal counsel for the Loan Parties reasonably acceptable to the
Agent with respect to legal opinions delivered in connection with the Existing Credit and Security
Agreement.



11. The Fee Letters duly executed by the parties thereto.



12. A Periodic Report as at December 10, 2005.



13. Executed copies of (i) all consents from and authorizations by any Persons, including
without limitation, the consents from The Retirement Systems of Alabama and Congress Financial
Corporation and (ii) all waivers and amendments to existing credit facilities, that are necessary
in connection with this Agreement.



14. If applicable, a direction letter executed by each of the Loan Parties authorizing the
Agent, and directing warehousemen to allow the Agent to inspect and make copies from such Loan
Party’s books and records maintained at off-site data processing or storage facilities.



15. The Liquidity Agreements, duly executed by each of the parties thereto.



16. If applicable, for each Lender that is not incorporated under the laws of the United
States of America, or a state thereof, two duly completed copies of United States Internal Revenue
Service Form W-8BEN or W-8ECI, as applicable, certifying in either case that such Lender is
entitled to receive payments under the Agreement without deduction or withholding of any United
States federal income taxes.



17. Executed copies of the Partial Release by The Retirement Systems of Alabama.




30