Document:

exv10w43

	2008 Management Incentive Plan (MIP) Effective January 1, 2008

 

 

	Compensation Philosophy The corporation recognizes that an equitable compensation philosophy helps to attract,
motivate, and retain the most critical resource — employees. Our compensation programs are based
on a commitment to equitable pay for all positions using the factors of market value, internal
comparisons and results achieved. Performance is the most important component in advancement
decisions and is measured by the execution of set goals through accepted behaviors which lead to
the achievement of the corporate Vision. Managers work within set guidelines to determine increases
and incentive awards, carefully considering performance when allocating available funds. The
corporate compensation programs, merit increases and incentive bonuses are determined without
regard to race, color, religion, gender, sexual orientation, national origin, citizenship, age,
disability or status as a disabled veteran, other veteran, recently separated veteran, or
Vietnam-era veteran. Corporate Vision The corporate Vision directs the strategies that are used to
design compensation plans. .. We must earn the right to be an independent bank by increasing
shareholder value . We will achieve this goal by growing profitability and more quickly than our
market competitors .. We will deliver extraordinary value to our clients . We will have a solutions
based sales and sales management process while being committed to internal and external service
excellence .. We will attract, retain and develop the very best people in our markets . We will
hold our people accountable and reward them for both individual and team behaviors and results ..
We will share information and communicate honestly and openly with each other across all areas of
our company . We will be a learning organization with a collaborative, boundaryless environment ..
We will continuously improve our company while operating effectively, cost efficiently and
prudently managing our risks .. We will be the leading bank in the Midwest Incentive Compensation
Committee An incentive compensation design committee — comprised of representatives Executive
Management, HR Corporate Compensation Committee, Human Resources and the Financial Management Group
— developed the incentive plan. They defined component categories, established goals, created
payout formulas and developed reporting and tracking systems. The incentive compensation committee
is accountable for interpretation of the performance plan and resolves any discrepancies or
exceptions.

 

 

	Ethics & Professional Standards Eligibility for payment under this program is conditioned on
demonstrating the highest level of professionalism and ethics, while adhering to the Citizens
Republic Bancorp Code of Conduct and other performance standards. Records It is understood that all
incentives are considered earned income and are subject to all federal, state and local tax laws
and any voluntary payroll deductions such as 401(k) contributions. All appropriate records
necessary for tax purposes will be maintained by the Human Resource Payroll department. Incentives
payable but not received under this program will still be awarded in the event of the death of a
participant. Participants of record with incentive payable but not received, whose beneficiary is
unable to be located within one year of a distribution will forfeit their distribution to the Bank.
General Provisions & Eligibility Requirements Eligible participants include Senior Vice Presidents
and above and certain other officers based upon corporate responsibilities who are not participants
in another established incentive plan with payment amounts determined by performance in relation to
goal. Staff members become eligible to participate in the plan by virtue of promotion or new hire.
        . Awards will be pro-rated based on months served for participants with less than 12 months of
service in a plan year. Some new hire participant awards may be guaranteed based on offer letter.
To be eligible for incentive payment, participants must meet the following requirements: . Be
actively employed at the time of the incentive payment .. A participant who terminates employment
prior to the plan year end is not eligible to receive an award. . Not be on corrective action
(written or termination warning) at the end of the plan year nor at the time of payment .. Results
and payouts will not be prorated . Be performing at a minimum performance level of “Productive” The
discretion of management, CEO and the incentive compensation committee is the final factor in the
determination of eligibility and for final determination of payment award. Special Rules . The Plan
is effective beginning January 1, 2008 and is subject to change at any time prior to the actual
payment, per the Bank’s sole and absolute discretion. . The Plan is not intended to be a contract,
and no participant shall have any contractual right to payment or employment for a particular term
under the Plan. . The Plan will be administered in accordance with Citizens EEO/Affirmative Action
Policy. . The Management Incentive Plan is administered by the Compensation and Human Resources
Committee of the Corporation.

 

 

	.. The Administrator has complete authority to interpret Plan provisions, revise the Plan and
make all of the determinations they deem appropriate for fair administration of the Plan. o The
Administrator reserves the right to terminate this Plan or to revise any aspect of this Plan at any
time, including individual payouts, without prior notification to participants. o Any exceptions to
the Plan must be approved by the Plan Administrator. . While all attempts will be made to follow
the incentive formulas and metrics, subjective adjustments occasionally can and will be made both
upwards and downwards based on management discretion which will require CEO approval. ..
Adjustments will be considered based on value of an individual’s contribution to performance during
the year and not based on comparison to prior year awards, comparison to peer’s incentive levels,
attitude, effort, etc. .. Subjective adjustments will be the exception and not the rule. Management
will however reserve the right to make these subjective adjustments if necessary to be equally fair
to shareholders and plan participants. . The incentive award for the Chairman, President and CEO
will be determined by the Compensation and Human Resources Committee. . A special award fund
(Discretionary) equal to 15% of the aggregate incentive award will be available for individual
awards as determined by the President and CEO. Awards from this fund are made to staff members who
are not participants in the Management Incentive Plan. .. Awards for the Discretionary Fund will be
made only in recognition of exemplary achievements. .. Distribution of all available amounts in
this fund is not mandatory. (see discretionary award guidelines) . This Plan supersedes in their
entirety any previous compensation plan(s), letters, or arrangements with respect to any and all
compensation or incentive pay plans. All other agreements are void and have no further effect. .
This document and is contents are confidential and proprietary to Citizens Bank and shall remain
the property of Citizens Bank. .. Neither this document nor its contents may be discussed,
disclosed, or revealed to anyone outside the Company. The participant is responsible for
maintaining the security of this document. . A participant is responsible for immediately
communicating any incentive underpayments or overpayments to the Human Resources Compensation team.
        .. Failure to communicate any errors on a timely basis may result in corrective action up to and
including termination.

 

 

	Plan Objectives The objectives of the plan are to: . Ensure achievement of strategic goals and
align with the financial goals of the bank: .. Profitable revenue growth, Deposit growth, Efficient
use of capital, NIE management, Credit Quality . Be a “win-win” program for our company,
shareholders and participants. . Strengthen links between pay and performance. . Allow for changes
and/or modifications which support our corporate and line of business strategies. Targeted
Incentive Pool Determination Base Salary x Participation Rate x Service Factor = Targeted Incentive
Pool The participant’s Base Salary at plan year end is used in the calculation. Participation Rates
are determined at start of plan year and approved by the Human Resources Compensation Committee.
Participation Rates are stated as % of base salary and are based on job function and value to the
corporation. The participation rate for individual positions is benchmarked from market data
research provided by various surveys and consultants. The Service Factor is equal to the number of
months the participant is employed with the corporation (or holds an eligible position) during the
plan year divided by 12 and stated as a percentage. Example: 100% is equal to 12 months, 50% is
equal to 6 months. Level Participation Determination

 

 

	Corporate Level Incentive Components The Management Incentive Plan Corporate components consist of
Primary and Secondary Factors: . Primary Factors: Total Revenue, Net Income after Taxes, Total
Deposits, Non Performing Assets, Expense Management. .. All components are independent .. The
results of each Corporate Level component will be placed against the payout tier structure at the
end of the plan year to determine the weighted average payout for Corporate Level performance. (See
payout tier structure at end of document) . Secondary Factors: A Revenue and Net Income Peer
Ranking vs. Peer Group factor may be utilized to determine the FINAL weighted average factor for
the Corporate Component portion of the payout.

 

 

	Line of Business & Individual Level Incentive Goal Setting & Results Each manager is accountable
for establishing goals and providing year end results for their participating staff: . Management
will be provided an automated goal planning and scoring template for each participant. . They will
make the determination, with input from the participant, on the type of goals (quantifiable vs.
qualitative) to be assigned based on the level of participation (line of business results vs.
individual results) of the participant. Each level of participation allows for both goal types. .
Goal setting should provide the measure, the goal/desired outcome and an assigned weighting for
each goal so that the total of all weightings in the assigned participation levels equals 100%. .
At plan year end, managers will be asked to provide results and actual outcomes for all goals, to
score each participant on the core corporate competencies and to provide payout percentages based
on defined payout ranges. Automated goal planning and scoring templates will be provided for each
participant. Quantifiable Goals: . Includes items such as growth, financial measures, service
levels, etc... — Items typically numerical in nature and measurable. . Goals should be set at
levels that are challenging to reach at 100%. . The results for each measurable goal will be placed
against a corporate payout tier structure at the end of the plan year to determine a weighted
average result. Qualitative Goals: . Goals that are not quantifiable, but are measurable on the 1-4
rating scale. . Includes items such as audits, surveys, specific special projects/initiatives,
solutions/strategies, implementations, etc... — Non-numerical. . Goals should be set at levels
that are challenging to reach. . The results for each goal/initiative will be placed against a
corporate payout tier structure on a 1-4 rating scale at the end of the plan year to determine a
weighted average Individual result. Individual Level Performance Modifier: All participants will be
rated on the Core Corporate Competencies to establish a performance multiplier: . Performance for
the full plan year should be considered when rating each participant. . A performance modifier of
0% to 150% will be assigned based on an overall average rating for the participant. . A performance
modifier with results exceeding 100% (average rating of 3.00 or higher) should be reserved for
truly extraordinary performance. See a SAMPLE of the Line of Business & Individual Level Goal
Planning & Scoring Template beginning on page 9.

 

 

	MIP Incentive Calculation (Targeted Incentive Pool x Weighted Avg. Corporate Result) + (Targeted
Incentive Pool x Weighted Avg. Line of Business Result) + (Targeted Incentive Pool x Weighted Avg.
Individual Result) x Performance Factor = Calculated MIP Incentive $        Earned Award Payments All
awards earned under the Management Incentive Plan will be paid as soon as practical following
approvals by the Compensation and Human Resources Committee in February following the plan year
end. Discretionary Award Guidelines . Objectives: To recognize and promote exemplary individual
performance or initiative. . Eligible Participants: All staff members are eligible except staff
members who are in established incentive plans with payment amounts determined by performance in
relation to established goals. . Nomination Process: Managers nominate staff member(s) according to
established guidelines. They must obtain concurrence and approval from their Leadership Team
member. . Monetary Guidelines: Range of $500 to $3000. Larger amounts can be given in exceptional
circumstances. . Guidelines: Discretionary awards can be given in recognition for one or more of
the following performance criteria: Earnings: • Expense reduction • Revenue enhancement Innovation:
· Continuous improvement efforts • Innovative delivery alternatives • Foresight and planning to
prevent crises Achievement: • Unique/specialized skills or knowledge of value to the company, i.e.,
Key Performers • Sustained high performance • Exemplary performance during unusual circumstances or
specific events • Special projects completed in an exceptional manner, with value added •
Extraordinary client service

 

 

	SAMPLE — Line of Business & Individual Level Goal Planning & Scoring Template

 

 

	INDIVIDUAL LEVEL OVERALL

 

 

	1-4 Rating Guideline (Applied separately against each qualitative goal) Both rating
definitions/guidelines and performance must be taken into consideration when assigning a final
rating: Example: . A (4) “Role Model” rating translates to meeting the performance requirement
stated for a (4) AND performing within the guidelines for a (4) rating. (ie. Actively shares best
practices, Helps team exceed goals, etc...). . If both performance AND rating guidelines are not
met, the rating should be lowered until the results meet the required level of standard. Component
Rating — 1 — Needs Improvement Definition: Did not achieve goals set; does not demonstrate
competency expectations at this level. Performance improvement is priority. • Does not meet minimum
stated goal set • Does not learn from repeated mistakes • Requires significant guidance from
supervisor to complete related task or demonstrate competency • Few if any examples in event file
demonstrating the competency • No appropriate strength competency comment • Many examples in event
file of not demonstrating competency • Requires significant guidance from supervisor to demonstrate
competency Component Rating — 2 — Productive Definition: Meets goals set within minimum to
exceeds standard range; a solid performer with some guidance, demonstrates potential to develop
full competency and willingness to become skilled at all elements of performance. • Meets goals
within minimum to exceeds standard • Demonstrates understanding of process • Learns from mistakes •
Requires some guidance from supervisor to complete related tasks • Some examples in event file
demonstrating the competency • Several specific examples of strengths demonstrating competency •
Requires some guidance from supervisor to demonstrate competency • Assists others to achieve
competency when asked Component Rating — 3 — Accomplished Definition: Exceeds goals while
demonstrating strong values and competencies; demonstrates full knowledge of competency and
independently applies it. Expresses positive attitude and demonstrates willingness to expand role.
· Meets goals at or above exceeds standard • Has very few mistakes and demonstrates ability to
learn from those mistakes • Works without assistance to achieve goal

 

 

	· Demonstrates best practice process to achieve goal • Has shared best practices • Many
examples in event file demonstrating the competency • Many specific examples of strengths
demonstrating competency • Seldom requires guidance from supervisor to demonstrate competency •
Regularly shares best practices and assists others within team to achieve this competency Component
Rating — 4 — Role Model Definition: Exceptional performance in every measurable aspect;
innovative, insightful and perceptive. Inspires others through extraordinary attitude and ability
to leverage expert knowledge to others in the team. Sets example that every staff member should
follow. • Always above exceeds standard • Results are consistently among industry best • Normally
mistake free • Actively shares best practices • Helps team exceed goals • Numerous examples in
event file demonstrating the competency • Numerous specific examples of strengths demonstrating
competency • Rarely requires guidance from supervisor to demonstrate competency • Always shares
best practices and assists others within team to achieve this competency • Responsible for team
increasing performance on this competency

 

 

	Payout Tier Structures

 

 

	LINE OF BUSINESS LEVEL QUANTIFIABLE GOALS LINE OF BUSINESS INDIVIDUAL LEVEL QUALITATIVE GOALS
INDIVIDUAL LEVEL PERFORMANCE MODIFIERexv10w1

Exhibit 10.1

AMENDED AND RESTATED CREDIT AGREEMENT

among

BELL MICROPRODUCTS INC.,

as Borrower,

and

THE TEACHERS’ RETIREMENT SYSTEM OF ALABAMA,

for Itself and as Agent

THE EMPLOYEES’ RETIREMENT SYSTEM OF ALABAMA

JUDICIAL RETIREMENT FUND,

PEIRAF-DEFERRED COMPENSATION PLAN,

and

PUBLIC EMPLOYEES INDIVIDUAL RETIREMENT ACCOUNT FUND

(collectively, the “Lenders”)

Effective as of June 30, 2008

 

TABLE OF CONTENTS

	 	 	 	 	 
	ARTICLE 1. DEFINITIONS AND ACCOUNTING TERMS
	 	 	6	 
	 
	 	 	 	 
	1.1 Defined Terms
	 	 	6	 
	 
	 	 	 	 
	1.2 GAAP
	 	 	14	 
	 
	 	 	 	 
	1.3 Headings
	 	 	15	 
	 
	 	 	 	 
	1.4 Plural Terms
	 	 	15	 
	 
	 	 	 	 
	1.5 Time
	 	 	15	 
	 
	 	 	 	 
	1.6 Governing Law
	 	 	15	 
	 
	 	 	 	 
	1.7 Construction
	 	 	15	 
	 
	 	 	 	 
	1.8 Calculation of Interest and Fees
	 	 	15	 
	 
	 	 	 	 
	1.9 Other Interpretive Provisions
	 	 	15	 
	 
	 	 	 	 
	ARTICLE 2. TERMS OF LENDING
	 	 	15	 
	 
	 	 	 	 
	2.1 Outstanding Borrowings Under the Existing Agreements
	 	 	15	 
	 
	 	 	 	 
	2.2 Amendment and Restatement of Existing Notes
	 	 	15	 
	 
	 	 	 	 
	2.3 The Notes
	 	 	16	 
	 
	 	 	 	 
	2.4 Collateral Security
	 	 	16	 
	 
	 	 	 	 
	2.5 Amendment Fees
	 	 	17	 
	 
	 	 	 	 
	ARTICLE 3. PROVISIONS OF THE NOTE
	 	 	17	 
	 
	 	 	 	 
	3.1 General Provisions As To Payments
	 	 	17	 
	 
	 	 	 	 
	3.2 Interest
	 	 	18	 
	 
	 	 	 	 
	3.3 Principal Repayment
	 	 	18	 
	 
	 	 	 	 
	3.4 Optional Prepayments
	 	 	19	 
	 
	 	 	 	 
	3.5 Late Fees
	 	 	19	 

ii

 

	 	 	 	 	 
	ARTICLE 4. CONDITIONS PRECEDENT
	 	 	19	 
	 
	 	 	 	 
	4.1 Conditions to Lenders’ Obligation to Proceed
	 	 	19	 
	 
	 	 	 	 
	ARTICLE 5. REPRESENTATIONS AND WARRANTIES
	 	 	20	 
	 
	 	 	 	 
	5.1 The Borrower’s Representations and Warranties
	 	 	20	 
	 
	 	 	 	 
	ARTICLE 6. COVENANTS
	 	 	24	 
	 
	 	 	 	 
	6.1 Affirmative Covenants
	 	 	24	 
	 
	 	 	 	 
	6.2 Negative Covenants
	 	 	28	 
	 
	 	 	 	 
	ARTICLE 7. DEFAULT
	 	 	29	 
	 
	 	 	 	 
	7.1 Events of Default
	 	 	29	 
	 
	 	 	 	 
	7.2 Remedies
	 	 	30	 
	 
	 	 	 	 
	ARTICLE 8. [RESERVED]
	 	 	30	 
	 
	 	 	 	 
	ARTICLE 9. SUBORDINATION OF NOTE
	 	 	30	 
	 
	 	 	 	 
	9.1 Notes and Liens Subordinate to Senior Indebtedness
	 	 	30	 
	 
	 	 	 	 
	9.2 Liens Subordinate to Senior Lenders’ Liens
	 	 	31	 
	 
	 	 	 	 
	ARTICLE 10. [RESERVED]
	 	 	31	 
	 
	 	 	 	 
	ARTICLE 11. MISCELLANEOUS
	 	 	31	 
	 
	 	 	 	 
	11.1 Notices
	 	 	31	 
	 
	 	 	 	 
	11.2 Expenses
	 	 	32	 
	 
	 	 	 	 
	11.3 Indemnification
	 	 	32	 
	 
	 	 	 	 
	11.4 Waivers; Amendments
	 	 	32	 
	 
	 	 	 	 
	11.5 Successors and Assigns
	 	 	32	 
	 
	 	 	 	 
	11.6 No Third Party Rights
	 	 	33	 
	 
	 	 	 	 
	11.7 Partial Invalidity
	 	 	33	 
	 
	 	 	 	 
	11.8 Counterparts
	 	 	33	 

iii

 

	 	 	 
	EXHIBITS
	 	 
	 
	Exhibit A

	 	Form of Note
	 
	 	 
	Exhibit B

	 	Principal Amounts and Payees
	 
	 	 
	Exhibit C

	 	Amortization Schedule
	 
	 	 
	Exhibit D

	 	Form of Security Agreement
	 
	 	 
	Exhibit 6.1(a)

	 	Compliance Certificate
	 
	 	 
	Exhibit 6.2(a)

	 	Permitted Indebtedness Test
	 
	 	 
	Exhibit 6.2(h)

	 	Financing Covenant Test
	 
	 	 
	Exhibit 9.1

	 	Company Debt Subordination Agreement
	 
	 	 
	Exhibit 9.2

	 	Subsidiary Lien Subordination Agreement

iv

 

AMENDED AND RESTATED CREDIT AGREEMENT

          This Amended and Restated Credit Agreement (this “Agreement”) is made effective as of
June 30, 2008 (the “Effective Date”), by and among The Teachers’ Retirement System of
Alabama (“Teachers’ Retirement System”), The Employees’ Retirement System of Alabama
(“Employees’ Retirement System”), Judicial Retirement Fund, PEIRAF-Deferred Compensation
Plan, and Public Employees Individual Retirement Account Fund, (each, a “Lender” and
collectively, the “Lenders”), Teacher’s Retirement System, as Agent for the Lenders (the
“Agent”) and Bell Microproducts Inc., a California corporation (the “Borrower”).

R E C I T A L S

          A. Borrower and the Lenders, including the Agent, are parties to that certain Securities
Purchase Agreement, dated as of July 6, 2000 (the “2000 Credit Agreement”), pursuant to
which, among other things, Borrower issued to Lenders certain senior subordinated long term
promissory notes in the aggregate original principal amount of $100,000,000 (collectively, the
“2000 Long Term Notes”). Except as described in Recital C below, Borrower’s obligations
under the 2000 Credit Agreement and the 2000 Long Term Notes are secured by security interests in
all Collateral owned by Borrower and described in that certain Security Agreement by Borrower in
favor of the Agent, as agent for the Lenders, dated as of July 6, 2000 (the “2000 Security
Agreement”).

          B. In addition to the foregoing, Borrower and Teachers’ Retirement System and Employees’
Retirement System (collectively, the “Revolving Lenders”) are parties to that certain
Revolving Credit Agreement, dated as of January 30, 2007 (the “2007 Credit Agreement”),
pursuant to which Borrower issued to the Revolving Lenders certain senior subordinated revolving
notes in the aggregate original principal amount of $30,000,000 (collectively, the “2007
Revolving Notes”). Except as described in Recital C below, Borrower’s obligations under the
2007 Credit Agreement and the 2007 Revolving Notes are secured by (i) security interests in all
Collateral owned by Borrower and described in that certain Security Agreement by Borrower in favor
of the Revolving Lenders, dated as of January 30, 2007, and (ii) security interests in all
Collateral owned by Total Tec Systems, Inc., a New Jersey corporation and wholly-owned subsidiary
of the Borrower (“Total Tec”) and described in that certain Security Agreement by Total Tec
in favor of the Revolving Lenders, dated as of January 30, 2007 (collectively, the “2007
Security Agreements”).

          C. At Borrower’s request, the Lenders released their respective security interests in all
Accounts of the Borrower, in order to permit Borrower to enter into the transactions contemplated
by the Wachovia Bank Group Senior ABS Agreement described below. In order to induce the Lenders
and the Agent to enter into this Agreement, Borrower has agreed to obtain all necessary consents
and approvals that may be required in order to grant to Lenders and the Agent a second priority
lien and security agreement in and to all Accounts of the Borrower by a certain date (and, if
unable to do so, to pay an additional fee), all as more particularly described below.

 

 

          D. As of the Effective Date, the aggregate principal balance outstanding under the 2000 Long
Term Notes is $26,650,000, and the aggregate principal balance outstanding under the 2007 Revolving
Notes is $30,000,000.

          E. Borrower has requested that the indebtedness outstanding under the 2000 Long Term Notes and
the 2007 Revolving Notes (sometimes collectively referred to as the “Existing Notes”) be
consolidated and restructured to, among other things, modify the maturity date with respect to
certain of the indebtedness evidenced thereby, and to modify the interest rate and certain of the
payment terms with respect thereto.

          F. Lenders are willing to modify the payment terms with respect to the Existing Notes in the
manner requested by Borrower, subject, however, to the terms, conditions and
limitations set forth herein.

          G. In order to provide for the matters set forth in paragraph F. above, Lenders, Agent and
Borrower have agreed to consolidate the terms and conditions set forth in the 2000 Credit Agreement
and the 2007 Credit Agreement (sometimes collectively referred to as the “Existing
Agreements”) and to amend and restate the Existing Agreements in their entirety on the terms,
conditions and limitations set forth in this Agreement, which is intended by the parties to
completely amend, restate and supersede each of the Existing Agreements and, from and after the
Effective Date, to govern the relationship of the parties with regard to the matters set forth
herein.

          H. The parties have had the opportunity to consult with, and obtain the representation and
advice of, their respective legal counsel with regard to the terms and conditions of this
Agreement, and each party has had the opportunity to participate fully in the drafting of this
Agreement.

          ACCORDINGLY, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

ARTICLE 1. DEFINITIONS AND ACCOUNTING TERMS

     1.1 Defined Terms. In addition to the terms defined elsewhere in this Agreement, the
following terms shall have the meanings set out respectively after each:

     “2000 Credit Agreement” shall have the meaning set forth in the Recitals to this
Agreement.

     “2000 Long Term Notes” shall have the meaning set forth in the Recitals to this
Agreement.

     “2000 Security Agreement” shall have the meaning set forth in the Recitals to this
Agreement.

     “2007 Credit Agreement” shall have the meaning set forth in the Recitals to this
Agreement.

 

 

     “2007 Revolving Notes” shall have the meaning set forth in the Recitals to this
Agreement.

     “2007 Security Agreements” shall have the meaning set forth in the Recitals to this
Agreement.

     “Accounts” shall mean all “accounts”, as defined in Article 9 of the Uniform
Commercial Code, as in effect in the State of Alabama from time to time (the “Alabama
UCC”), together with all proceeds and products thereof, wherever located and whether now owned
or acquired at any time hereafter.

     “Affiliate” shall mean, with respect to any Person, (a) each Person that, directly or
indirectly, owns or controls, whether beneficially or as a trustee, guardian or other fiduciary,
five percent (5%) or more of any class of capital stock of such Person, (b) each Person that
controls, is controlled by or is under common control with such Person or any Affiliate of such
Person or (c) each of such Person’s employees, officers, directors, joint venturers and partners;
provided, however, that in no case shall the Agent or any Lender be deemed to be an
Affiliate of the Borrower for purposes of this Agreement. For the purpose of this definition,
“control” of a Person shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of its management or policies, whether through the ownership of voting
securities, by contract or otherwise.

     “Alternative Financial Statements” shall have the meaning set forth in Section 4.1(g)
of this Agreement.

     “Anti-Terrorism Laws” shall mean any Governmental Rule of the United States or any
State within the U.S. relating to terrorism or money laundering, applicable to any Lender, the
Borrower or any Subject Subsidiary, including, Executive Order No. 13224 and the USA Patriot Act.

     “Business Day” shall mean any day (a) which is not a Saturday or Sunday, and (b) on
which commercial banks are not authorized or required to close in San Francisco, California or
Montgomery, Alabama.

     “Capital Asset” shall mean, with respect to any Person, tangible property owned or
leased (in the case of a Capital Lease) by such Person, or any expense incurred by any Person that
is required by GAAP to be reported as an asset on such Person’s balance sheet.

     “Capital Leases” shall mean any and all lease obligations that, in accordance with
GAAP, are required to be capitalized on the books of a lessee.

     “Closing Date” shall mean the date on which this Agreement has been executed and
delivered by all parties and all conditions set forth in Article 4 shall have been satisfied or
effectively waived by the Lenders and the Agent.

     “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

 

 

     “Collateral” shall mean all property in which the Lenders have a Lien to secure the
Obligations, pursuant to the Security Agreements.

     “Contractual Obligation” of any Person shall mean, any material indenture, note,
security, deed of trust, mortgage, security agreement, lease, guaranty, instrument, contract,
agreement or other form of obligation to which such Person is a party or by which such Person or
any of its property is bound.

     “Default” shall mean any event or circumstance not yet constituting an Event of
Default which with the giving of any notice or the lapse of any period of time or both, would
become an Event of Default.

     “Default Rate” shall mean the per annum rate of interest that is 3.0% in excess of the
Interest Rate.

     “Dollars” and “$” shall mean the lawful currency of the United States of
America and, in relation to any payment under this Agreement, same day or immediately available
funds.

     “Environmental Laws” means all Requirements of Law relating to the protection of human
health or the environment, including, without limitation, (a) all Requirements of Law pertaining to
reporting, licensing, permitting, investigation, and remediation of emissions, discharges,
releases, or threatened releases of hazardous materials, chemical substances, pollutants,
contaminants, or hazardous or toxic substances, materials or wastes whether solid, liquid, or
gaseous in nature, into the air, surface water, groundwater, or land, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of
chemical substances, pollutants, contaminants, or hazardous or toxic substances, materials, or
wastes, whether solid, liquid, or gaseous in nature; and (b) all Requirements of Law pertaining to
the protection of the health and safety of employees or the public.

     “Event of Default” shall have the meaning given to that term in Section 7.1.

     “Existing Agreements” shall mean the 2000 Credit Agreement and the 2007 Credit
Agreement.

     “Existing Indebtedness” shall have the meaning set forth in Section 2.1 hereof.

     “Existing Notes” shall mean the 2000 Long Term Notes and the 2007 Revolving Notes.

     “Federal Reserve Board” shall mean the Board of Governors of the Federal Reserve
System.

     “Final Maturity Date” shall mean December 1, 2013.

     “Financial Statements” shall mean, with respect to any accounting period for any
Person, statements of income and of changes in cash flow of such Person for such period, and
balance sheets of such Person as of the end of such period, setting forth in each case in
comparative form figures for the corresponding period in the preceding fiscal year if such period
is less than a full

 

 

fiscal year or, if such period is a full fiscal year, corresponding figures from the preceding
annual audit, all prepared in reasonable detail and in accordance with GAAP.

     “GAAP” shall mean generally accepted accounting principles and practices as in effect
in the United States of America from time to time, consistently applied.

     “Governmental Authority” shall mean any domestic or foreign national, state or local
government, any political subdivision thereof, any department, agency, authority or bureau of any
of the foregoing, or any other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.

     “Governmental Charges” shall mean all taxes, levies, assessments, fees, claims or
other charges imposed by any Governmental Authority upon or relating to (i) the Borrower, (ii)
employees, payroll, income or gross receipts of the Borrower, (iii) the ownership or use of any of
its assets by the Borrower or (iv) any other aspect of the business of the Borrower.

     “Governmental Rule” shall mean any material law, rule, regulation, ordinance, order,
code interpretation, judgment, decree, directive, guidelines, policy or similar form of decision of
any Governmental Authority.

     “Indebtedness” of any Person shall mean and include (a) all items of indebtedness and
liabilities which, in accordance with GAAP, would be included in determining liabilities that are
shown on the liability side of the balance sheet of such Person, (b) all indebtedness and
liabilities of other Persons assumed or guaranteed by such Person or in respect of which such
Person is secondarily or contingently liable whether by any agreement to acquire indebtedness and
liabilities or to supply or advance funds or otherwise, and (c) all indebtedness and liabilities of
other Persons secured by any Lien in any property of such Person (including without limitation
Capital Leases).

     “Indemnitees” shall have the meaning given to that term in Section 11.3.

     “Interest Rate” shall mean the fixed rate of interest equal to 9% per annum.

     “Lender” or “Lenders” shall mean the Lender or Lenders identified on the first
page of this Agreement, and their respective successors and assigns.

     “Lien” shall mean, with respect to any property, any security interest, mortgage,
pledge, lien, claim, charge or other encumbrance in, of, or on such property or the income
therefrom, including, without limitation, the interest of a vendor or lessor under a conditional
sale agreement, Capital Lease or other title retention agreement, or any agreement to provide any
of the foregoing, and the filing of any financing statement or similar instrument under the Uniform
Commercial Code or comparable law of any jurisdiction.

     “Margin Stock” shall have the meaning given to that term in Regulation U issued by the
Federal Reserve Board, as amended from time to time, and any successor regulation thereto.

 

 

     “Material Adverse Effect” shall mean a material adverse effect on (a) the business,
assets, operations, prospects or financial or other condition of the Borrower; (b) the ability of
the Borrower to pay or perform the Obligations in accordance with the terms of this Agreement and
the other Transaction Documents; or (c) the rights and remedies of the Lenders under this
Agreement, the other Transaction Documents or any related document, instrument or agreement.

     “Net Worth” shall mean, 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.

     “Notes” shall mean collectively the Amended and Restated Senior Subordinated Term
Notes issued by the Borrower to the Lenders dated the date hereof in the aggregate original
principal amount of $56,650,000.

     “Obligations” shall mean and include any and all debts, obligations and liabilities of
Borrower to the Lenders or any one or more of them (whether now existing or hereafter arising,
voluntary or involuntary, whether or not jointly owed with others, direct or indirect, absolute or
contingent, liquidated or unliquidated, and whether or not from time to time decreased or
extinguished and later increased, created or incurred), under or arising out of, or in connection
with or under this Agreement or any other Transaction Document, including without limitation, all
principal, interest (including any interest accruing after the filing of any petition in bankruptcy
or the commencement of any insolvency, reorganization or like proceeding relating to Borrower,
whether or not a claim for post-filing or post-petition interest is allowed in such proceeding),
all reimbursement obligations, fees, expenses, indemnification and reimbursement payments, costs
and expenses (including all fees and expenses of counsel to, and accountants engaged by, Lenders
incurred in connection with the transactions contemplated by this Agreement or any other
Transaction Document, and including all costs of enforcement of the Obligations hereunder or under
any Transaction Document), together with all renewals, extensions, modifications or refinancings
thereof.

     “Permitted Dividend” shall mean and include:

     (a) Dividends payable solely in the common stock of the Borrower (and cash paid in lieu
of fractional shares in connection therewith); and

     (b) Repurchases of employee stock pursuant to repurchase agreements.

     “Permitted Indebtedness” shall mean and include:

     (a) Senior Indebtedness, that may be outstanding from time to time;

     (b) the Obligations;

     (c) other amounts owed by the Borrower to the Lenders or the Lenders’ affiliates;

     (d) Indebtedness to subcontractors and trade creditors incurred in the ordinary course
of business;

 

 

     (e) Indebtedness under operating leases;

     (f) Indebtedness of any Subsidiary of the Borrower to the Borrower arising from the
extension by the Borrower to such Subsidiary of working capital financing;

     (g) Indebtedness arising from the endorsement of instruments in the ordinary course of
business;

     (h) Indebtedness of the Borrower under Rate Contracts, provided, that (A) all such
arrangements are entered into in connection with bona fide hedging operations and not for
speculation and (B) the aggregate net amount owed by the Borrower under, on account of or
otherwise in connection with such Rate Contracts does not exceed $50,000,000 (marked to
market) at any time; and

     (i) Other Indebtedness whether secured or unsecured, and including Indebtedness under
Capital Leases, purchase money Indebtedness and any other Indebtedness of any kind,
incurred in the ordinary course of Borrower’s business, but only to the extent that the
aggregate outstanding amount of all Indebtedness of the Borrower and its Subsidiaries,
determined on a consolidated basis, described in clauses (a), (b), (c), (h) and (i) of this
definition, does not exceed the maximum amount thereof set forth in Sections 6.2(a) and
6.2(b) of this Agreement.

     “Permitted Liens” shall mean and include:

     (a) Liens for taxes or other Governmental Charges not at the time delinquent or
thereafter payable without penalty or being contested in good faith, provided provision is
made to the reasonable satisfaction of the Agent for the eventual payment thereof if
subsequently found payable;

     (b) Liens of carriers, warehousemen, mechanics, materialmen, vendors, and landlords
incurred in the ordinary course of business for sums not overdue or being contested in good
faith;

     (c) Deposits under workers’ compensation, unemployment insurance and social security
laws or to secure the performance of bids, tenders, contracts (other than for the repayment
of borrowed money) or leases, or to secure statutory obligations of surety or appeal bonds
or to secure indemnity, performance or other similar bonds in the ordinary course of
business;

     (d) Liens arising out of a judgment or award not exceeding $500,000 (exclusive of any
amounts covered by insurance issued by a Person not an Affiliate of the Borrower) with
respect to which an appeal is being prosecuted, a stay of execution pending appeal having
been secured;

     (e) Liens securing purchase money Indebtedness if such Indebtedness is Permitted
Indebtedness and such Liens do not extend to any property other than the property directly
financed with such Indebtedness;

 

 

     (f) Liens securing obligations under a Capital Lease if such lease is Permitted
Indebtedness and such Liens do not extend to any property other than the property leased
under such Capital Lease;

     (g) Liens securing Senior Indebtedness;

     (h) Leases, subleases, licenses and sublicenses granted to the Borrower the granting of
which is not prohibited pursuant to the definition of Permitted Indebtedness;

     (i) Liens in favor of customs and revenue authorities which secure payment of duties in
connection with the importation of goods which are not yet due and payable;

     (j) Liens existing on property acquired by the Borrower or any of its Subsidiaries at
the time of such acquisition (including Liens on the assets of any Person at the time such
Person becomes a Subsidiary of the Borrower), but only to the extent that the Indebtedness
evidenced or secured by such Liens constitutes Permitted Indebtedness at the time of such
acquisition;

     (k) Liens on insurance policies and the proceeds thereof incurred solely to secure the
financing of premiums owing with respect thereto, but only to the extent that the
Indebtedness being financed constitutes Permitted Indebtedness;

     (l) Liens in favor of the Borrower;

     (m) Liens in favor of the Agent or any Lender and/or the Lenders’ affiliates; and

     (n) In the case of real property, such minor defects, irregularities, encumbrances,
easements, rights of way, and clouds on title as normally exist on similar properties which
do not, individually or in the aggregate, materially impair the property affected thereby or
the use thereof.

     “Person” shall mean and include an individual, a partnership, a corporation (including
a business trust), a joint stock company, an unincorporated association, a limited liability
company, a joint venture, a trust or other entity.

     “Rate Contracts” shall mean swap agreements (as that term is defined in Section 101 of
the Federal Bankruptcy Reform Act of 1978, as amended) and any other agreements or arrangements
designed to provide protection against fluctuations in interest or currency exchange rates.

     “Requirement of Law” applicable to any Person shall mean (a) the Articles or
Certificate of Incorporation and Bylaws, Partnership Agreement or other organizational or governing
documents of such Person, (b) any Governmental Rule applicable to such Person, (c) any material
license, permit, approval or other authorization granted by any Governmental Authority to or for
the benefit of such Person and (d) any material judgment, decision or determination of any
Governmental Authority or arbitrator, in each case applicable to or binding upon such Person or any
of its property or to which such Person or any of its property is subject.

 

 

     “Revolving Lenders” shall have the meaning set forth in the Recitals to this
Agreement.

     “Security Agreements” shall mean the (i) the 2000 Security Agreement, (ii) the 2007
Security Agreements, and (iii) the Security Agreements described in Section 2.4 hereof, between the
Borrower and the Subject Subsidiaries and the Agent and/or the Lenders, as the same may be amended,
supplemented or otherwise modified from time to time.

     “Security Documents” means the Security Agreements and any financing statements
(including amendments thereto and continuation statements thereof), together with any other
documents or agreements, now or hereafter in effect, which secure the payment and performance of
the Obligations of the Borrower hereunder and under the Notes.

     “Senior Indebtedness” means (a) all indebtedness, liabilities and obligations of the
Borrower outstanding as of the Effective Date and incurred under and pursuant to the Second Amended
and Restated Credit and Security Agreement, dated as of May 14, 2007, among the Borrower, Bell
Microproducts Funding Corporation, a Delaware corporation, Variable Funding Capital Company, LLC,
Wachovia Bank, National Association, as agent, and the Conduit Lenders, GECC Agent, the Liquidity
Banks, the Lender Group Agents and the Lender Group (as such terms are defined therein) (the
“Wachovia Bank Group Senior ABS Agreement”), as the same may have been amended through the
Effective Date, (b) all Indebtedness, liabilities and obligations outstanding as of the Effective
Date and incurred under and pursuant to the Loan and Security Agreement by and among the Borrower,
certain of its Subsidiaries as borrowers and guarantors, Wachovia Capital Finance Corporation
(Western), formerly known as Congress Financial Corporation (Western), as administrative,
collateral and syndication agent for the financial institutions from time to time party thereto as
lenders, as the same may have been amended through the Effective Date (the “Wachovia Bank Group
Senior ABL Agreement”), (c) all Indebtedness, liabilities and obligations that may hereafter
be incurred under any other credit or financing agreement that may be entered into by the Borrower
after the Effective Date with the prior written consent of the Agent and the Lenders and that is
secured by Collateral of the Borrower, the security interest in which the Agent and the Lenders
agree in writing shall be senior to the security interest of the Agent and the Lenders under the
Security Agreements and the other Security Documents, and (d) any extension, renewal, refunding or
refinancing of any of the Indebtedness described in clauses (a), (b) or (c) above;
provided, that any increase in the principal amounts of any such Indebtedness incurred in
connection with any extension, renewal, refunding or refinancing of any of the above-described
Indebtedness shall not constitute Senior Indebtedness unless, at the time of such extension,
renewal, refunding or refinancing, no Event of Default or Default then exists and, on a pro forma
basis (assuming the full funding of such increased principal Indebtedness), the financial covenants
contained in Sections 6.2(a), 6.2(g) and 6.2(h) are satisfied.

     “Senior Indebtedness Documents” means each of the agreements, instruments or other
documents evidencing or governing Senior Indebtedness, as the same may exist from time to time.

     “Senior Lenders” shall mean any lenders (whether one or more) who are providing Senior
Indebtedness.

 

 

     “Subject Subsidiary/ies” means all Subsidiaries of the Borrower organized under the
laws of any state in the United States, any province of Canada or any political jurisdiction of any
country in South America, except for (i) Bell Microproducts Europe, Inc., a California corporation,
and (ii) Bell Microproducts Funding Corporation, a Delaware corporation.

     “Subordination Agreements” means any and all subordination agreements heretofore
executed by any one or more of the Lenders in favor of the holders of Senior Indebtedness with
respect to the Existing Indebtedness, together with the new subordination agreements to be executed
and delivered by the Lenders contemporaneously with the execution and delivery of this Agreement.

     “Subsidiary” of any Person shall mean (a) any corporation of which more than 50% of
the issued and outstanding capital stock having ordinary voting power to elect a majority of the
Board of Directors of such corporation (irrespective of whether at the time capital stock of any
other class or classes of such corporation shall or might have voting power upon the occurrence of
any contingency) is at the time directly or indirectly owned or controlled by such Person, by such
Person and one or more of its other Subsidiaries or by one or more of such Person’s other
Subsidiaries, (b) any partnership, joint venture, limited liability company or other association of
which more than 50% of the equity interest having the power to vote, direct or control the
management of such partnership, joint venture or other association is at the time owned and
controlled by such Person, by such Person and one or more of the other Subsidiaries or by one or
more of such Person’s other Subsidiaries and (c) any other Person included in the Financial
Statements of such Person on a consolidated basis.

     “Total Tec” shall have the meaning set forth in the Recitals to this Agreement.

     “Transaction Documents” shall mean this Agreement, the Notes and the Security
Agreements.

     “USA Patriot Act” shall mean the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub.L. No. 107-56, 115
Stat. 272 (2001), as the same has been, or shall hereafter be, renewed, extended amended or
replaced.

     “Wachovia Bank Group Senior ABL Agreement” has the meaning set forth in the definition
of “Senior Indebtedness.”

     “Wachovia Bank Group Senior ABS Agreement” has the meaning set forth in the definition
of “Senior Indebtedness.”

     1.2 GAAP. Unless otherwise indicated in this Agreement, all accounting terms used in
this Agreement shall be construed, and all accounting and financial computations hereunder shall be
computed, in accordance with GAAP. If GAAP changes during the term of this Agreement such that any
covenants contained herein would then be calculated in a different manner or with different
components, the Borrower, the Agent and the Lenders agree to negotiate in good faith to amend this
Agreement in such respects as is necessary to conform those covenants as criteria for evaluating
the Borrower’s financial condition to substantially the same criteria as were effective prior to
such change in GAAP; provided, however, that, until the

 

 

Borrower, the Agent and the Lenders so amend this Agreement, all such covenants shall be
calculated in accordance with GAAP as in effect immediately prior to such change.

     1.3 Headings. Headings in this Agreement are for convenience of reference only and are
not part of the substance hereof.

     1.4 Plural Terms. All terms defined in this Agreement in the singular form shall have
comparable meanings when used in the plural form and vice versa.

     1.5 Time. All references in this Agreement to a time of day shall mean Montgomery,
Alabama time, unless otherwise indicated.

     1.6 Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Alabama without reference to conflicts of law rules.

     1.7 Construction. This Agreement is the result of negotiations among, and has been
reviewed by, the Borrower, the Agent and the Lenders and their respective counsel. Accordingly,
this Agreement shall be deemed to be the product of all parties hereto, and no ambiguity shall be
construed in favor of or against the Borrower, the Agent or the Lenders.

     1.8 Calculation of Interest and Fees. All calculations of interest and fees under this
Agreement for any period (a) shall include the first day of such period and exclude the last day of
such period and (b) shall be calculated on the basis of actual days elapsed in a 360 day year.

     1.9 Other Interpretive Provisions. References in this Agreement to “Recitals,”
“Articles,” “Sections,” “Paragraphs,” Subparagraphs,” “Exhibits” and “Schedules” are to recitals,
articles, sections, paragraphs, subparagraphs, exhibits and schedules herein and hereto unless
otherwise indicated. References in this Agreement to any document, instrument or agreement (a)
shall include all exhibits, schedules and other attachments thereto, (b) shall include all
documents, instruments or agreements issued or executed in replacement thereof, and (c) shall mean
such document, instrument or agreement, or replacement or predecessor thereto, as amended, modified
and supplemented from time to time and in effect at any given time. The words “hereof,” “herein”
and “hereunder” and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. The words “include” and
“including” and words of similar import when used in this Agreement shall not be construed to be
limiting or exclusive.

ARTICLE 2. TERMS OF LENDING

     2.1 Outstanding Borrowings Under the Existing Agreements. Borrower, the Agent and the
Lenders hereby acknowledge and agree that, as of the Effective Date, the aggregate outstanding
principal balance under the Existing Notes is $56,650,000.00 (the “Existing Indebtedness”),
and that all accrued interest, fees and other charges under the Existing Notes and the Existing
Agreements, in each case accrued through and including June 29, 2008, have been paid to the
Lenders.

     2.2 Amendment and Restatement of Existing Notes. As of the Effective Date, the
Obligations of the Borrower under the Existing Notes shall be modified as set forth in this

 

 

Agreement and in the Notes described in Section 2.3 of this Agreement. From and after the
Effective Date, the Existing Notes shall be deemed to have been amended and restated in their
entirety as set forth in the Notes, which shall not, and shall not be deemed to, constitute a
novation of the Existing Indebtedness.

     2.3 The Notes. From and after the Effective Date, Borrower’s obligation to pay the
principal of and interest on the Existing Indebtedness shall be evidenced by the promissory notes
(the “Notes”), substantially in the form of Exhibit A attached hereto, with blanks
appropriately completed in conformity therewith and payable to the order of the Lenders. The Notes
will be in the principal amounts, and payable to the order of the Lenders, as set forth in the
chart attached hereto as Exhibit B, and shall be executed and delivered by Borrower to the
relevant Lenders contemporaneously with the execution and delivery of this Agreement.

     2.4 Collateral Security.

     (a) As security for the Existing Indebtedness, the Borrower, for itself and on behalf
of the Subject Subsidiaries, and Total Tec have granted a second priority security interest,
subordinate only to the Senior Indebtedness to the extent set forth in the Subordination
Agreements, in the Collateral owned by each of them and described in the 2000 Security
Agreement and the 2007 Security Agreements; provided, that the parties acknowledge that, at
Borrower’s request, the Lenders have released their security interest in the Accounts.
Borrower hereby agrees, with and for the benefit of each of the Lenders and the Agent, that
all Collateral described in the 2000 Security Agreement and the 2007 Security Agreement
(other than the released Accounts) shall constitute collateral security for the Obligations
hereunder and under the Notes. In furtherance, and not in limitation, of the foregoing,
Borrower hereby ratifies and confirms all the terms and conditions contained in the 2000
Security Agreement and the 2007 Security Agreement to which it is a party, and agrees to
cause Total Tec to ratify and confirm the 2007 Security Agreement to which it is a party,
and to agree that all Collateral described therein (other than the Accounts) shall
constitute collateral security for the Obligations hereunder and under the Notes.

     (b) In addition to the foregoing, for purposes of ratifying and confirming the grant of
security interests in favor of the Agent and the Lenders by the Subject Subsidiaries, the
Borrower hereby agrees to cause each of the following Subject Subsidiaries to execute and
deliver a Security Agreement in favor of the Agent and the Lenders, in substantially the
form set forth as Exhibit D attached hereto, in each case, to be delivered
contemporaneously with the execution and delivery of this Agreement:

     (i) Rorke Data, Inc., a Minnesota corporation;

     (ii) Bell Microproducts Canada Inc., a California corporation;

     (iii) Bell Microproducts-Future Tech, Inc., a California corporation; and

     (iv) New ProSys Corp., a Georgia corporation.

     (c) In addition to the foregoing, Borrower hereby agrees, if and to the extent no
longer prohibited by the Wachovia Bank Group Senior ABS Agreement, on or prior to

 

 

December 31, 2008, to grant to Lenders, for their ratable benefit, and to the Agent on
their behalf, a second priority lien and security interest in and to all Accounts owned by
Borrower together with all proceeds and products of the foregoing, wherever located and
whether now existing or arising in the future, pursuant to a Security Agreement containing
terms and conditions substantially similar in all respects to the 2000 and 2007 Security
Agreements, with appropriate adjustments to reference the Notes and this Agreement. The
parties acknowledge that the Wachovia Bank Group Senior ABS Agreement currently prohibits
the grant of a subordinate security interest in Accounts to the Lenders as contemplated
herein, and that Borrower is currently seeking to refinance the Indebtedness evidenced
thereby. Accordingly, in connection with such potential refinancing, Borrower hereby agrees
to seek the consent of the lenders with whom it is negotiating to the grant of the security
interest referred to herein, and to take all actions reasonably necessary, and to use its
best efforts, acting in good faith, to obtain their consent. If, for any reason (including,
without limitation, the inability to refinance the Indebtedness incurred under the Wachovia
Bank Group Senior ABS Agreement), the Borrower has not granted the security interest
described herein to the Agent and the Lenders, as additional Collateral securing the
Obligations, by December 31, 2008, the Borrower shall pay to the Agent, for the ratable
benefit of the Lenders, an additional fee (the “December 2008 Fee”) in the amount of
$141,625.00. The December 2008 Fee shall be due and payable on December 31, 2008, in cash
or other immediately available funds.

     2.5 Amendment Fees. On the Closing Date, the Borrower shall pay to the Agent, for the
ratable benefit of the Lenders a non-refundable fee in the amount of $566,500.00, in cash or other
immediately available funds.

ARTICLE 3. PROVISIONS OF THE NOTE

     3.1 General Provisions As To Payments.

     (a) The Borrower shall make each payment in respect of the principal of and accrued
interest on the Notes or any other amount due to the Lenders, under this Agreement or any
other Transaction Document, not later than 3:00 p.m., on the day when due, to the Lenders as
provided in the Notes, or in such manner as instructed from time to time in writing by the
Agent. All payments hereunder shall be made in United States Dollars by wire transfer of
immediately available funds.

     (b) Whenever any payment (including principal of or interest on the Notes or other
amount) hereunder or under any other Transaction Document shall become due, or otherwise
would occur, on a day that is not a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be included in the
computation of such interest, or other amount, if applicable.

     (c) Lenders and the Agent are hereby authorized by Borrower to endorse on the schedule
attached to each Notes (or on a continuation of such schedule attached to each such Note and
made a part thereof), or otherwise to record in the internal records of the Lenders and/or
the Agent, an appropriate notation evidencing the date and amount of each payment and
prepayment of principal under such Note, each payment of interest on

 

 

such Note, and other information with respect thereto, and any such recordation, absent
manifest error, shall constitute prima facie evidence of the accuracy of the information so
recorded; provided, that the failure of the Agent or any Lender to make such a
notation or any error therein shall not affect the Obligations of Borrower, including the
obligation of Borrower to repay all principal, interest and other charges in accordance with
the terms of this Agreement and the Notes.

     3.2 Interest.

     (a) Interest shall accrue on the principal amount of the Notes outstanding from time to
time at the Interest Rate, which shall be calculated as specified in Section 1.8 and shall
be payable on the dates set forth in the Notes and in Section 3.3(b) hereof.

     (b) Interest on the Notes shall accrue from the date of this agreement, and continue
until all amounts outstanding under the Notes shall have been paid in full, and shall be
payable on the dates specified in the Notes and on maturity of the Notes, whether by
acceleration or otherwise. Overdue principal and interest in respect of each installment
payment under the Notes and all other overdue amounts owing hereunder (not including any
late fee charged under Section 3.5 hereof) shall bear interest for each day that
such amounts are overdue at a rate per annum equal to the Interest Rate; provided,
however, if any such amounts are overdue for a period in excess of two (2) Business
Days, any Lender, at its option may elect, without notice to Borrower, to have all such
overdue amounts (including any applicable late fee) bear interest for each day that
such amounts are overdue (after as well as before judgment) at a rate per annum equal to the
Default Rate.

     (c) In no event whatsoever shall the aggregate of all amounts deemed interest under the
Notes and charged or collected pursuant to the terms of this Agreement or pursuant to the
Notes exceed the highest rate permissible under any law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto. If any provisions of
this Agreement or the Notes are in contravention of any such law, such provisions shall be
deemed amended to conform thereto.

     3.3 Principal Repayment.

     (a) In the event that the Borrower completes a new common stock offering after the date
hereof, then the Borrower will use a minimum of 33% of the proceeds of such offering to
repay the outstanding balance under the Notes, which prepayment shall be a applied ratably
among all the Notes, first to accrued and unpaid interest, fees and charges under the Notes
and then the principal installments thereunder, in inverse chronological order.

     (b) The Borrower shall repay the principal outstanding under the Notes in semi-annual
installments, commencing on December 15, 2008, and then on each June 1 and December 1
thereafter, through and including the Final Maturity Date in accordance

 

 

with the amortization schedule attached hereto as Exhibit C. Interest accrued
under the Notes shall be due and payable with each installment of principal thereof.

     (c) Any and all principal of the Notes remaining unpaid, together with all interest,
fees and other charges hereunder and under the Notes which are accrued but unpaid,
automatically and unconditionally shall be due and payable in full on the Final Maturity
Date.

     3.4 Optional Prepayments. The Borrower may, at any time, at its option, prepay the
Notes in whole and from time to time in part, without premium or penalty, upon not less than 2
Business Day’s prior written notice to the Agent (which shall be by both facsimile transmission to
334-240-3268 and by e-mail transmission to HunterH@rsa.state.al.us and JulieB@rsa.state.al.us);
provided, however, that each partial prepayment shall be in an aggregate principal amount not less
than $1,000,000 or integral multiples of $100,000 in excess thereof. Each notice of prepayment
pursuant to this Section 3.4 shall specify the proposed date of such prepayment and the
principal amount of the Note to be prepaid. Each prepayment of principal effected pursuant to this
Section 3.4 shall be (a) applied ratably among all of the Notes and to installments of principal
thereunder in inverse chronological order, and (b) accompanied by all accrued but unpaid interest
on the Notes (and all then-outstanding fees and other charges thereunder) through and including the
date of such prepayment.

     3.5 Late Fees. Borrower will pay to the Agent, for the ratable benefit of the Lenders,
a late charge equal to five percent (5%) of the amount of any payment, including principal and
interest (including interest accruing during the period from the payment due date until the date
actually paid), which has not been paid on the due date thereof, but in no case less than $.50 or
more than the maximum amount allowed by applicable law. Collection or acceptance by Lenders of such
late charge shall not constitute a waiver of any rights or remedies of Lenders provided herein or
in any other Transaction Document.

ARTICLE 4. CONDITIONS PRECEDENT

     4.1 Conditions to Lenders’ Obligation to Proceed. The obligation of the Lenders and
Agent to enter into the transactions contemplated hereby are subject to the satisfaction of the
following conditions:

     (a) Agreement. Each of the Lenders and the Agent shall have received, fully
executed copies of this Agreement and the other Transaction Documents, each in form and
substance satisfactory to it and its counsel.

     (b) No Litigation. No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to obtain
damages in respect of, or which is related to or arises out of this Agreement or the
consummation of the transactions contemplated hereby.

     (c) Payment of Amendment Fee, and Fees and Expenses. The Borrower shall have
paid to the Agent (i) the amendment fee in the amount of $566,500.00, for the

 

 

ratable benefit of the Lenders, and (ii) the reasonable legal fees and expenses of the
Lenders’ and Agent’s legal counsel.

     (d) Consent of Holders of Senior Indebtedness. If and to the extent required
under the terms of the Wachovia Bank Group Senior ABS Agreement and/or the Wachovia Bank
Group Senior ABL Agreement, the Borrower shall have obtained the consent of the holders of
the Senior Indebtedness outstanding on the date hereof to the transactions contemplated by
this Agreement.

     (e) No Default. No Default or Event of Default under this Agreement shall
exist and, except for any Default or Event of Default which shall have been waived in
writing by the relevant Lenders, no Default or Event of Default under either of the Existing
Agreements or the Existing Notes shall exist.

     (f) Representations and Warranties; Performance of Covenants. The
representations and warranties of the Borrower contained herein shall be correct in all
material respects on the Closing Date. As of the Closing Date, the Borrower shall have
satisfied each of the conditions precedent, and shall have performed each of the covenants
on its part to be performed hereunder on or prior to the Closing Date, all as set forth
herein.

     (g) Compliance Certificate. The Borrower shall have executed and delivered to
the Agent Compliance Certificates, setting forth the information and calculations called for
in Sections 6.2(a) and 6.2(h) of this Agreement, as of June 30, 2008.

     (h) Additional Reports. The Borrower shall have provided to Agent copies of
the quarterly and year-to-date financial statements reflecting the financial condition and
operating results of the Borrower and its Subsidiaries as required by the provisions of
Section 7.1(a)(xi) of the Wachovia Bank Group Senior ABS Agreement (as in effect on the
Effective Date) to be delivered to the lenders and agents thereunder for the quarters ending
September 30, 2007, December 31, 2007, and March 31, 2008, but not including any reports
that may be required under the Wachovia Bank Group Senior ABS Agreement which contain
quarterly comparisons of actual operating results to projected or planned results
(collectively, the “Alternative Financial Statements”).

ARTICLE 5. REPRESENTATIONS AND WARRANTIES

     5.1 The Borrower’s Representations and Warranties. In order to induce the Agent and
the Lenders to enter into this Agreement, the Borrower hereby represents and warrants to the Agent
and the Lenders as follows:

     (a) Due Incorporation, Qualification, Etc. The Borrower (i) is a corporation
duly organized, validly existing and in good standing under the laws of California; (ii) has
the power and authority to own, lease and operate its properties and carry on its business
as now conducted; and (iii) is duly qualified, licensed to do business and in good standing
as a foreign corporation in each jurisdiction where the failure to be so qualified or
licensed might have a Material Adverse Effect, including, without limitation, the State of
Alabama.

 

 

     (b) Authority. The execution, delivery and performance by the Borrower of each
Transaction Document, and the consummation of the transactions contemplated thereby (i) are
within the Borrower’s power and (ii) have been duly authorized by all necessary action on
the part of the Borrower.

     (c) Enforceability. Each Transaction Document executed by the Borrower has been
duly executed and delivered by the Borrower and constitutes a legal, valid and binding
obligation of the Borrower, enforceable against the Borrower in accordance with its terms,
except as limited by bankruptcy, insolvency or other laws of general application relating to
or affecting the enforcement of creditors’ rights generally and general principles of
equity.

     (d) Non-Contravention. The execution and delivery by the Borrower of the
Transaction Documents and the performance and consummation of the transactions contemplated
thereby do not (i) violate any Requirement of Law applicable to the Borrower; (ii) violate
any provision of, or result in the material breach or the acceleration of, or entitle any
other Person to accelerate (whether after the giving of notice or lapse of time or both),
any Contractual Obligation of the Borrower; or (iii) result in the creation or imposition of
any Lien upon any material property, asset or revenue of the Borrower (except such Liens as
may be created in favor of the Lenders under any Transaction Document).

     (e) Approvals. Other than as obtained as of the date hereof; no material
consent, approval, order or authorization of, or registration, declaration or filing with,
any Governmental Authority or other Person (including, without limitation, the shareholders
of any Person), is required in connection with the execution and delivery of the Transaction
Documents executed by the Borrower and the performance and consummation of the transactions
contemplated thereby.

     (f) No Violation or Default. The Borrower is not in violation of or in default
with respect to (i) any Requirement of Law or (ii) any Contractual Obligation where such
violation or default could have a Material Adverse Effect. Without limiting the generality
of the foregoing, the Borrower (A) has not violated any Environmental Laws, (B) does not
have any liability under any Environmental Laws or (C) has not received notice or other
communication of an investigation, and the Borrower is not under investigation by any
Governmental Authority having authority to enforce Environmental Laws, where such violation,
liability or investigation could have a Material Adverse Effect. No Event of Default or
Default has occurred and is continuing.

     (g) Litigation. Except as set forth (with the dollar amounts claimed) in
Schedule 5.1(g), no actions (including, without limitation, derivative actions),
suits, proceedings or investigations are pending or, to the knowledge of the Borrower,
threatened against the Borrower at law or in equity in any court or before any other
Governmental Authority which (i) could (alone or in the aggregate) have a Material Adverse
Effect or (ii) seeks to enjoin, either directly or indirectly, the execution, delivery or
performance by the Borrower of the Transaction Documents or the transactions contemplated
thereby.

 

 

     (h) Title. The Borrower owns and has good and marketable title to, or a valid
leasehold interest in, all its respective real properties and good title to its other
respective assets and properties as reflected in the Alternative Financial Statements
delivered to the Agent pursuant to Section 4.1(h) hereof, (except those assets and
properties disposed of in the ordinary course of business or otherwise in compliance with
this Agreement since the date of such Alternative Financial Statements) and all assets and
properties acquired by the Borrower since such date (except those disposed of in the
ordinary course of business or otherwise in compliance with this Agreement). Such assets and
properties are subject to no Lien, except for Permitted Liens.

     (i) Financial Statements. Except as disclosed on Schedule 5.1(i), the
Alternative Financial Statements of the Borrower which have been delivered to the Agent
pursuant to Section 4.1(h) hereof, (i) are in accordance with the books and records
of the Borrower, which have been maintained in accordance with good business practice; and
(ii) fairly present the financial condition and results of the Borrower and its Subsidiaries
at such date. The Borrower has no contingent obligations, liability for taxes or other
outstanding obligations which are material in the aggregate, except as disclosed in such
Alternative Financial Statements.

     (j) Other Regulations. The Borrower is not subject to regulation under the
Investment Company Act of 1940, the Public Utility Holding Company Act of 1935, the Federal
Power Act, any state public utilities code or any federal or state statute or regulatory
scheme which would limit its ability to execute, deliver and perform any of the Transaction
Documents executed or to be executed by it.

     (k) Patent and Other Rights. The Borrower owns, and has the full right to
license without the consent of any other Person, all patents, licenses, trademarks, trade
names, trade secrets, service marks, copyrights and all rights with respect thereto, which
are required to conduct its business as now conducted.

     (l) Governmental Charges. The Borrower has filed or caused to be filed all tax
returns which are required to be filed by it. The Borrower has paid, or made provision for
the payment of, all taxes and other Governmental Charges which have or may have become due
pursuant to such returns or otherwise, except such Governmental Charges, if any, which are
being contested in good faith and as to which adequate reserves (determined in accordance
with GAAP) have been provided or which could not have a Material Adverse Effect if unpaid.

     (m) Margin Stock. The Borrower owns no Margin Stock which, in the aggregate,
would constitute a substantial part of the assets of the Borrower, and no proceeds of the
Notes have been or will be used to purchase or carry, directly or indirectly, any Margin
Stock or to extend credit, directly or indirectly, to any Person for the purpose of
purchasing or carrying any Margin Stock.

     (n) Total Tec. Total Tec is incorporated in New Jersey, and the Borrower owns
100% of the issued and outstanding capital stock of New ProSys Corp., a Georgia corporation,
which owns 100% of the issued and outstanding capital stock of Total Tec.

 

 

     (o) Catastrophic Events. Neither the Borrower or any Subsidiary nor any of its
or their properties is or has been affected by any fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or
other casualty that would reasonably be expected to have a Material Adverse Effect. There
are no disputes presently subject to grievance procedure, arbitration or litigation under
any of the collective bargaining agreements, employment contracts or employee welfare or
incentive plans to which the Borrower is a party, and there are no strikes, lockouts, work
stoppages or slowdowns, or, to the best knowledge of the Borrower, jurisdictional disputes
or organizing activity occurring or threatened which could have a Material Adverse Effect.

     (p) Burdensome Contractual Obligations, Etc. Neither the Borrower or any
Subsidiary, nor any of its or their properties is subject to any Contractual Obligation or
Requirement of Law which would reasonably be expected to have a Material Adverse Effect.

     (q) No Material Adverse Effect. Except as disclosed on Schedule 5.1(q),
no event has occurred and no condition exists which would reasonably be expected to have a
Material Adverse Effect.

     (r) Accuracy of Information Furnished. None of the Transaction Documents and
none of the other certificates, statements or information furnished to the Lenders or the
Agent by or on behalf of the Borrower in connection with the Transaction Documents or the
transactions contemplated thereby contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made, not
misleading.

     (s) Anti-Terrorism Laws.

     (i) General. Neither Borrower nor any of the Subject Subsidiaries is
in violation of any Anti-Terrorism Law or engages in or conspires to engage in any
transaction that evades or avoids, or has the purpose of evading or avoiding, or
attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.

     (ii) Executive Order No. 13224.

     (A) Neither Borrower nor any of the Subject Subsidiaries, nor, to the
knowledge of Borrower, any of their respective agents acting in any capacity
in connection with the transactions hereunder, is any of the following (each
a “Blocked Person”):

     (1) a Person that is listed in the annex to, or is otherwise subject to
the provisions of, Executive Order No. 13224;

     (2) a Person owned or controlled by, or acting for or on behalf of, any
Person that is listed in the annex to, or is otherwise subject to the
provisions of, Executive Order No. 13224;

 

 

     (3) a Person or entity with which any bank or other financial
institution is prohibited from dealing or otherwise engaging in any
transaction by any Anti-Terrorism Law;

     (4) a Person or entity that commits, threatens or conspires to commit
or supports “terrorism” as defined in Executive Order No. 13224;

     (5) a Person or entity that is named as a “specially designated
national” or “blocked” person or entity on the most current list published
by the U.S. Treasury Department Office of Foreign Asset Control at its
official website or any replacement website or other replacement official
publication of such list;

     (6) a Person that is named on any other list of known or suspected
terrorists or money launderers or money-laundering organizations issued by a
Federal government agency pursuant to Anti-Terrorism Laws; or

     (7) a Person or entity who is affiliated with a Person or entity listed
above.

     (B) Neither Borrower nor any of the Subject Subsidiaries, nor, to the
knowledge of Borrower, any of their respective agents acting in any capacity
in connection with the transactions hereunder (1) conducts any business or
engages in making or receiving any contribution of funds, goods or services
to or for the benefit of any Blocked Person or (2) deals in, or otherwise
engages in any transaction relating to, any property or interests in
property blocked pursuant to Executive Order No. 13224.

ARTICLE 6. COVENANTS

     6.1 Affirmative Covenants. So long as any of the Obligations hereunder or under any
of the Transaction Documents remain unpaid, outstanding or unsatisfied, the Borrower will comply
with the following affirmative covenants, unless the Lenders and the Agent shall otherwise consent
in writing:

(a) Financial Statements, Reports, etc. Except as expressly set forth in
Section 6.1(b) below, the Borrower shall furnish to the Agent the following,
each in such form and such detail as the Lenders shall reasonably request:

(i) Within fifty (50) days after the last day of each fiscal quarter of the
Borrower, (A) a copy of the Financial Statements of the Borrower for such
quarter and for the fiscal year to date (including consolidated Financial
Statements for the Borrower and its Subsidiaries), certified by the
president or chief financial officer of the Borrower to present fairly the
financial condition, results of operations and other information reflected
therein and to have been prepared in accordance with GAAP (subject to

 

 

year-end audit adjustments), and (B) the Form 10-Q Report filed by the
Borrower with the Securities and Exchange Commission for such quarter;

(ii) Within ninety-five (95) days after the close of each fiscal year of the
Borrower, (A) copies of the audited Financial Statements of the Borrower for
such year (including consolidated Financial Statements for the Borrower and
its Subsidiaries), prepared by independent certified public accountants
acceptable to the Lenders, (B) copies of the unqualified opinions (or
qualified opinions reasonably acceptable to the Lenders) and management
letters delivered by such accountants in connection with all such Financial
Statements, (C) certificates of all such accountants to the Lenders stating
that in making the examination necessary for their opinion they have
obtained no knowledge of any Event of Default or Default which has occurred
and is continuing, or if, in the opinion of such accountants, an Event of
Default or Default has occurred and is continuing, a statement as to the
nature thereof (or other certificates of such accountants reasonably
acceptable to the Lenders), and (D) the Form 10-K Report filed by the
Borrower with the Securities and Exchange Commission for such year;

(iii) Contemporaneously with the quarterly and year-end financial statements
required by the foregoing clauses (i) and (ii), a certificate of the
president or chief financial officer of the Borrower in substantially the
form of Exhibit 6.1(a) hereto, in such detail as the Agent may
reasonably request which sets forth the calculations conducted to verify
that the Borrower is in compliance with (A) the net worth covenant set forth
in Section 6.2(g) and (B) the limitations on Indebtedness set forth
in Sections 6.2 (a) and 6.2(h), stating that no Event of Default and
no Default has occurred and is continuing, or, if any such Event of Default
or Default has occurred and is continuing, a statement as to the nature
thereof and what action the Borrower proposes to take with respect thereto;

(iv) As soon as possible and in no event later than five (5) Business Days
after any registration statement, annual quarterly or other report, proxy or
financial statement is sent, made available or filed, with the Securities
and Exchange Commission notification to the Agent that such items are
available on EDGAR, and copies of and all reports and financial statements
sent or made available by the Borrower to the holders of Senior
Indebtedness;

(v) Such other instruments, agreements, certificates, opinions, statements,
documents and information relating to the operations or condition (financial
or otherwise) of the Borrower, and compliance by the Borrower with the terms
of this Agreement and the other Transaction Documents as the Agent may from
time to time reasonably request; and

 

 

(vi) Notwithstanding any provision to the contrary contained in this
Agreement, Borrower shall deliver to the Agent, for distribution to the
Lenders, true, correct and complete copies of the items described in
Section 6.1(a)(ii) hereof, (1) for the fiscal year ended December
31, 2006, on or prior to December 31, 2008, (2) for the fiscal year ended
December 31, 2007, on or prior to March 31, 2009, and (3) for the fiscal
year ended December 31, 2008, on or prior to June 30, 2009.

(b) Alternative Financial Statements. At all times during which Borrower is
not making current filings of quarterly or annual reports (including related
financial statements) with the Securities and Exchange Commission:

(i) Borrower shall provide the Agent, within the time periods specified in
Section 6.1(a) above, financial statements of the Borrower and its
Subsidiaries for the immediately preceding fiscal quarter or other period
described above which shall be based upon internal management information
and, subject to adjustments, which may be material, arising out of
Borrower’s restatement process, shall fairly present the financial condition
and operating results of Borrower and its Subsidiaries, on a consolidated
basis, subject only to normal adjustments in the then current period; and

(ii) Borrower shall continue to provide all items described in Section
6.1(a)(iii), (iv) and (v) to the Agent, within the time periods
specified therein.

     (c) Books and Records. The Borrower shall at all times keep proper books of
record and account in which full, true and correct entries will be made of its transactions
in accordance with GAAP.

     (d) Inspections. The Borrower shall permit any Person designated by the
Lenders, upon reasonable notice and during normal business hours, to visit and inspect any
of the properties and offices of the Borrower, to examine the books of account of the
Borrower and to discuss the affairs, finances and accounts of the Borrower with, and to be
advised as to the same by, their officers, all at such times and intervals as the Agent or
any Lender may reasonably request.

     (e) Insurance. The Borrower shall carry and maintain insurance of the types and
in the amounts customarily carried from time to time during the term of this Agreement by
others engaged in substantially the same business as the Borrower and operating in the same
geographic area as the Borrower, including fire, public liability, property damage and
worker’s compensation, such insurance to be carried with companies and in amounts reasonably
satisfactory to the Agent. The Borrower shall name the Agent, for the ratable benefit of the
Lenders, as additional insured or loss payee, as appropriate and to the extent of its
interest, on all such insurance.

 

 

     (f) Governmental Charges. The Borrower shall promptly pay and discharge before
delinquent all taxes and other Governmental Charges prior to the date upon which penalties
accrue thereon, except such Governmental Charges as may in good faith be contested or
disputed by appropriate proceedings, provided that in each such case appropriate reserves
are maintained in accordance with GAAP.

     (g) Use of Proceeds. The Borrower shall not use any part of the proceeds of
the Notes, directly or indirectly, for the purpose of purchasing or carrying any Margin
Stock or for the purpose of purchasing or carrying or trading in any securities under such
circumstances as to involve the Borrower, the Agent or any Lender in a violation of
Regulations T, U or X issued by the Federal Reserve Board.

     (h) General Business Operations. The Borrower shall (i) preserve and maintain
its corporate existence and all of its rights, privileges and authority reasonably necessary
to the conduct of its business, (ii) conduct its business activities in compliance with all
Requirements of Law and Contractual Obligations, the violation of which could have a
Material Adverse Effect, and (iii) keep all property useful and necessary in its business in
good working order and condition, ordinary wear and tear excepted.

     (i) Information. Without in any way limiting the generality of Sections
6.1(a), (b), (c) and (d), the Borrower shall meet with representatives of the Lenders on
a semi-annual basis and will provide the Agent with quarterly written reports regarding the
Borrower’s business operations and financial condition.

     (j) Additional Collateral. Promptly upon the Borrower’s acquisition of any new
Subject Subsidiary, the Borrower shall grant to Lenders a second lien in the stock in such
Subject Subsidiary, and shall cause such Subject Subsidiary to grant to the Lenders a second
lien in such Subject Subsidiary’s assets, to secure the Obligations. The parties recognize
that Section 941 et seq. of the Code may limit the ability of the Borrower to grant a lien
in all of the stock of its non-U.S. Subsidiaries, and in the ability of its non-U.S.
Subsidiaries to grant a lien in its assets, to secure the Obligations, and accordingly, the
Borrower and such non-U.S. Subsidiaries shall grant such liens (or negative pledges) to the
maximum extent possible so as not to cause the Borrower to recognize income under Section
951(a)(1)(B) of the Code. The documentation evidencing such liens shall be substantially
similar to existing documents between the Borrower and Subject Subsidiaries, on the one
hand, and the Lenders, on the other hand.

     (k) December 2008 Fee. If and to the extent payable under Section 2.4
hereof, the Borrower shall pay the December 2008 Fee to the Agent, for the ratable benefit
of the Lenders, within two (2) Business Days after December 31, 2008, in cash or other
immediately available funds.

 

 

     6.2 Negative Covenants. So long as any of the Obligations hereunder or under any of
the Transaction Documents remain unpaid, outstanding or unsatisfied, the Borrower will comply with
the following negative covenants, unless the Lenders shall otherwise consent in writing:

     (a) Indebtedness. The Borrower shall not create, incur, assume or permit to
exist any Indebtedness except for Permitted Indebtedness. In addition and without
limitation, at no time shall Borrower permit (i) the aggregate amount of Net Collateralized
Accounts Receivable and Inventory (as defined below) of the Borrower and the Subject
Subsidiaries, minus the aggregate amount of all Senior Indebtedness divided by (ii) the
aggregate amount of all Indebtedness owed to the Lenders and their Affiliates (including,
without limitation, the Obligations), to be less than or equal to 1.25. For purposes of the
calculation called for in this Section 6.2(a), “Net Collateralized Accounts
Receivable and Inventory” shall mean the aggregate of all Accounts and inventory of the
Borrower and the Subject Subsidiaries (valued in accordance with GAAP, consistently applied)
which are, as of the date of calculation, the subject of a valid lien and security interest
in favor of the Lenders, as security for the Obligations, which lien and security interest
is subordinate only to the Senior Indebtedness outstanding as of the date of calculation.
For purposes of illustration only, Exhibit 6.2(a) attached hereto sets forth a
sample calculation of the ratio required to be maintained by this Section 6.2(a).
Borrower shall submit to Agent quarterly certification of compliance with the covenant set
forth in this Section 6.2(a).

     (b) Liens. The Borrower shall not create, incur, assume or permit to exist any
Lien on or with respect to any of its assets or property of any character, whether now owned
or hereafter acquired, except for Permitted Liens.

     (c) Asset Dispositions. The Borrower shall not sell, lease, transfer or
otherwise dispose of any of its assets or property, whether now owned or hereafter acquired,
except in the ordinary course of its business. Upon any such sale in the ordinary course of
business, the Lenders will, at the Borrower’s request, release their Lien, if any, in any
assets so sold.

     (d) Dividends, Redemptions, Etc. The Borrower shall not (i) pay any dividends
or make any distributions on its capital stock; (ii) purchase, redeem, retire, defease or
otherwise acquire for value any of its capital stock; (iii) return any capital to any holder
of its capital stock as such; (iv) make any distribution of assets, capital stock,
obligations or securities to any holder of its capital stock as such; or (v) set apart any
sum for any such purpose; except that the Borrower may pay Permitted Dividends.

     (e) Transactions With Affiliates. The Borrower shall not enter into any
Contractual Obligation with any Affiliate or engage in any other transaction with any
Affiliate except that the Borrower may (i) buy and sell assets to and from its Subsidiaries
for fair value and (ii) engage in other transactions with its Subsidiaries or with
Affiliates upon terms at least as favorable to the Borrower as arms-length transactions with
unaffiliated Persons.

 

 

     (f) Accounting Changes. The Borrower shall not change (i) its fiscal year
(currently January 1 through December 31) or (ii) its accounting practices except as
contemplated in its current restatement process and as required by GAAP.

     (g) Net Worth Covenant. The Borrower shall not permit its Net Worth, for any
fiscal quarter, to be less than $87,500,000.

     (h) Financing Covenant. Borrower shall not permit the calculation required by
Exhibit 6.2(h) attached hereto at any time to result in a ratio of less than 1.50.
The Borrower shall submit to Agent quarterly certification of compliance with the covenant
set forth in this Section 6.2(h).

     (i) No Conflicting Agreements. The Borrower shall not enter into or become a
party to any agreement if such agreement would cause the Borrower to be in violation of any
of its agreements herein.

ARTICLE 7. DEFAULT

     7.1 Events of Default. The occurrence or existence of any one or more of the following
shall constitute an “Event of Default” hereunder:

     (a) The Borrower shall fail to pay when due any principal, interest or other payment
required under the terms of this Agreement or any of the other Transaction Documents ,
unless, in the case of regularly scheduled payments of principal and interest under the
Notes, Borrower pays all such amounts within two (2) Business Days of the due date thereof,
together with the late fee with respect to such installment as described in Section
3.5 hereof; or

     (b) The Borrower shall (i) violate for otherwise fail to satisfy the covenants
contained in Sections 6.1(a) or (b), 6.1(k) or 6.2(a), (b),
(d) or (g) hereof, or (ii) fail to observe or perform any other covenant,
obligation, condition or agreement contained in this Agreement or the other Transaction
Documents and such failure shall continue for 15 Business Days after receipt of written
notice of such failure from the Agent or any Lender; or

     (c) Any material representation, warranty, certificate, or other statement (financial
or otherwise) made or furnished by or on behalf of the Borrower to the Lenders in or in
connection with this Agreement or any of the other Transaction Documents, or as an
inducement to the Agent and the Lenders to enter into this Agreement, shall be false,
incorrect, incomplete or misleading in any material respect when made or furnished; or

     (d) The Borrower shall (i) apply for or consent to the appointment of a receiver,
trustee, liquidator or custodian of itself or of all or a substantial part of its property,
(ii) be unable, or admit in writing its inability, to pay its debts generally as they
mature, (iii) make a general assignment for the benefit of its or any of its creditors, (iv)
be dissolved or liquidated, (v) become insolvent (as such term may be defined or interpreted
under any applicable statute), (vi) commence a voluntary case or other proceeding

 

 

seeking liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent
to any such relief or to the appointment of or taking possession of its property by any
official in an involuntary case or other proceeding commenced against it, or (vii) take any
action for the purpose of affecting any of the foregoing; or

     (e) Proceedings for the appointment of a receiver, trustee, liquidator or custodian of
the Borrower or of all or a substantial part of the property thereof, or an involuntary case
or other proceeding seeking liquidation, reorganization or other relief with respect to the
Borrower or the debts thereof under any bankruptcy, insolvency or other similar law now or
hereafter in effect shall be commenced and an order for relief entered or such proceeding
shall not be dismissed or discharged within 60 days of commencement; or

     (f) Any Transaction Document or any material term thereof shall be asserted by the
Borrower not to be, a legal, valid and binding obligation of the Borrower enforceable in
accordance with its terms; or

     (g) An “Event of Default” or “Amortization Event”, as defined under any Senior
Indebtedness Document shall exist, and any applicable grace or cure period with respect
thereto shall have expired.

     7.2 Remedies. Upon the occurrence or existence of any Event of Default (other than an
Event of Default referred to in Section 7.1 (d) or (e)) and at any time thereafter during
the continuance of such Event of Default, the Agent or any Lender may by written notice to the
Borrower declare all outstanding Obligations payable by the Borrower hereunder to be immediately
due and payable without presentment, demand, protest or any other notice of any kind, all of which
are hereby expressly waived, anything contained herein or in the Notes to the contrary
notwithstanding. Upon the occurrence or existence of any Event of Default referred to in
Section  7.1(d) or (e), immediately and without notice all outstanding Obligations payable
by the Borrower hereunder and under the Notes, shall automatically become immediately due and
payable, without presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived, anything contained herein or in the Notes to the contrary notwithstanding.
In addition to the foregoing remedies, upon the occurrence and during the existence of any Event of
Default, the Agent or any Lender may exercise any right, power or remedy permitted to it by law,
either by suit in equity or by action at law, or both.

ARTICLE 8. [RESERVED]

ARTICLE 9. SUBORDINATION OF NOTE

     9.1 Notes and Liens Subordinate to Senior Indebtedness. The Borrower, and each Lender
by its acceptance of the Notes issued to such Lender, covenant and agree that the Obligations are
hereby expressly made subordinate and subject in right of payment to the prior payment of all
Senior Indebtedness, and the Lenders’ Liens in any Collateral securing the

 

 

Obligations are hereby expressly made subordinated and subject in right to any Liens in favor
of Senior Lenders. The Agent and the Lenders hereby ratify and confirm their respective covenants
under any previously executed subordination agreements and agree to execute and deliver to any
holder of any Senior Indebtedness a subordination agreement in the form of Exhibit 9.1
attached hereto.

     9.2 Liens Subordinate to Senior Lenders’ Liens. Each Lender, by its acceptance of any
Liens in any Subject Subsidiary’s assets pursuant to any Transaction Document (including, without
limitation, any Collateral added pursuant to Section 6.1(j) hereof), covenants and agrees
that such Lender’s Liens in any such Collateral pursuant to any Transaction Document are hereby
expressly made subordinated and subject in right to any Liens in favor of Senior Lenders. The
Lenders and the Agent agree to execute and deliver to any Senior Lender having a Lien in any such
Collateral, a subordination agreement in the form of Exhibit 9.2 attached hereto.

ARTICLE 10. [RESERVED]

ARTICLE 11. MISCELLANEOUS

     11.1 Notices. Except as otherwise provided herein, all notices, requests, demands,
consents, instructions or other communications to or upon the Borrower, the Agent or the Lenders
under this Agreement or the other Transaction Documents shall be in writing and faxed, mailed or
delivered, if to the Borrower or the Lenders, at its respective facsimile number or address set
forth below. All such notices and communications shall be effective (a) when sent by Federal
Express or other overnight service of recognized standing, on the Business Day following the
deposit with such service; (b) when mailed via certified mail return receipt requested postage
prepaid and addressed as aforesaid through the United States Postal Service, upon receipt; (c) when
delivered by hand, upon delivery; and (d) when sent by facsimile, upon confirmation of receipt.

	 	 	 	 	 
	 

	 	The Borrower:
	 	Bell Microproducts Inc.
	 

	 	 	 	1941 Ringwood Avenue
	 

	 	 	 	San Jose, California 95131
	 

	 	 	 	Attention: President, Chief Financial Officer
	 

	 	 	 	Facsimile: (408) 451-1694
	 
	 	 	 	 
	 

	 	With a Copy to:
	 	Bell Microproducts Inc.
	 

	 	 	 	1941 Ringwood Avenue
	 

	 	 	 	San Jose, California 95131
	 

	 	 	 	Attention: General Counsel
	 

	 	 	 	Facsimile: (408) 451-1632

 

 

	 	 	 	 	 
	 

	 	The Agent	 	 
	 

	 	and Lenders:
	 	The Teachers’ Retirement System of Alabama, as Agent
	 

	 	 	 	P.O. Box 302150
	 

	 	 	 	135 South Union Street, Ste. 570
	 

	 	 	 	Montgomery, AL 36130
	 

	 	 	 	Attention: Dr. David G. Bronner, CEO
	 

	 	 	 	Facsimile: (334) 240-3268

     11.2 Expenses. The Borrower shall pay within thirty (30) Business Days of a written
demand therefor all reasonable fees and expenses, including reasonable attorneys’ fees and
expenses, incurred by the Agent or the Lenders in the enforcement or attempted enforcement of any
of the Obligations, including, without limitation, all such fees and expenses incurred in
connection with any “workout” or restructuring affecting the Transaction Documents or the
Obligations or any bankruptcy or similar proceeding involving the Borrower.

     11.3 Indemnification. To the fullest extent permitted by law, the Borrower agrees to
protect, indemnify, defend and hold harmless the Agent, the Lenders and their respective officers,
employees, agents and any affiliates thereof (“Indemnitees”) from and against any
liabilities, losses, damages or expenses of any kind or nature and from any suits, claims or
demands (including in respect of or for reasonable attorney’s fees and other expenses) arising on
account of or in connection with any matter or thing or action or failure to act by Indemnitees, or
any of them, arising out of or relating to the Transaction Documents, including without limitation
any use by the Borrower of any proceeds of the Notes, except to the extent such liability arises
from the willful misconduct or gross negligence of such Indemnitees. Upon receiving knowledge of
any suit, claim or demand asserted by a third party that any Lender or the Agent believes is
covered by this indemnity, such Lender shall give the Borrower notice of the matter and an
opportunity to defend it, at the Borrower’s sole cost and expense. Any failure or delay of any
Lender or the Agent to notify the Borrower of any such suit, claim or demand shall not relieve the
Borrower of its obligations under this Section 11.3 but shall reduce such obligations to
the extent of any increase in those obligations caused solely by any such unreasonable failure or
delay. The obligations of the Borrower under this Section 11.3 shall survive the payment
and performance of the Obligations.

     11.4 Waivers; Amendments. Any term, covenant, agreement or condition of this Agreement
or any other Transaction Document may be amended or waived if such amendment or waiver is in
writing and is signed by the Borrower and the Lenders. No failure or delay by the Agent or any
Lender in exercising any right hereunder shall operate as a waiver thereof or of any other right
nor shall any single or partial exercise of any such right preclude any other further exercise
thereof or of any other right. Unless otherwise specified in such waiver or consent, a waiver or
consent given hereunder shall be effective only in the specific instance and for the specific
purpose for which given.

     11.5 Successors and Assigns. This Agreement and the other Transaction Documents shall
be binding upon and inure to the benefit of the Borrower, the Agent, the Lenders, and future holder
of the Notes and their respective successors and permitted assigns, except that the Borrower may
not assign or transfer any of its rights or obligations under any Transaction Document (other than
the Subordination Agreements) without the prior written consent of the

 

 

Lenders and the Agent. All references in this Agreement to any Person shall be deemed to
include all successors and assigns of such Person.

     11.6 No Third Party Rights. Nothing expressed in or to be implied from this Agreement
is intended to give, or shall be construed to give, any Person, other than the parties hereto and
their permitted successors and assigns hereunder, any benefit or legal or equitable right, remedy
or claim under or by virtue of this Agreement or under or by virtue of any provision herein.

     11.7 Partial Invalidity. If at any time any provision of this Agreement is or becomes
illegal, invalid or unenforceable in any respect under the law or any jurisdiction, neither the
legality, validity or enforceability of the remaining provisions of this Agreement nor the
legality, validity or enforceability of such provision under the law of any other jurisdiction
shall in any way be affected or impaired thereby.

     11.8 Counterparts. This Agreement may be executed in any number of identical
counterparts, any set of which signed by all the parties hereto shall be deemed to constitute a
complete, executed original for all purposes.

(The signature page follows)

 

 

     IN WITNESS WHEREOF, the Borrower, the Agent and the Lenders have caused this Amended and
Restated Credit Agreement to be executed as of the day and year first above written.

	 	 	 	 	 	 	 
	THE BORROWER:	 	BELL MICROPRODUCTS INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ William E. Meyer	 	 
	 

	 	Name:
	 	 

William E. Meyer
	 	 
	 

	 	 	 	Title: Executive Vice President and Chief

Financial Officer	 	 
	 
	 	 	 	 	 	 
	THE LENDERS:	 	THE TEACHERS’ RETIREMENT SYSTEM

OF ALABAMA	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ David G. Bronner	 	 
	 

	 	Name:
	 	 

David G. Bronner
	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	THE EMPLOYEES’ RETIREMENT SYSTEM

OF ALABAMA	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ David G. Bronner	 	 
	 

	 	Name:
	 	 

David G. Bronner
	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	STATE EMPLOYEES’ HEALTH

INSURANCE FUND	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ David G. Bronner	 	 
	 

	 	Name:
	 	 

David G. Bronner
	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	JUDICIAL RETIREMENT FUND	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ David G. Bronner	 	 
	 

	 	Name:
	 	 

David G. Bronner
	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	PEIRAF-DEFERRED COMPENSATION

PLAN	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ David G. Bronner
 

David G. Bronner
	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	PUBLIC EMPLOYEES INDIVIDUAL

RETIREMENT ACCOUNT FUND	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ David G. Bronner
 

David G. Bronner
	 	 
	 

	 	Title:
	 	Chief Executive Officer

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