BELL MICROPRODUCTS INC
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>4
<FILENAME>v08161_10-3.txt
<TEXT>




                          CREDIT AND SECURITY AGREEMENT

                         DATED AS OF SEPTEMBER 20, 2004

                                      AMONG

              BELL MICROPRODUCTS FUNDING CORPORATION, AS BORROWER,

                      BELL MICROPRODUCTS INC., AS SERVICER,

                      BLUE RIDGE ASSET FUNDING CORPORATION,

               THE LIQUIDITY BANKS FROM TIME TO TIME PARTY HERETO

                                       AND

                  WACHOVIA BANK, NATIONAL ASSOCIATION, AS AGENT





<PAGE>


                                TABLE OF CONTENTS
                                                                            Page

Article I  The Advances........................................................1
    Section 1.1  Credit Facility...............................................1
    Section 1.2  Increases.....................................................2
    Section 1.3  Decreases.....................................................3
    Section 1.4  Deemed Collections; Borrowing Limit...........................3
    Section 1.5  Payment Requirements..........................................4
    Section 1.6  Ratable Loans; Funding Mechanics; Liquidity Fundings..........4
Article II  Payments and Collections...........................................5
    Section 2.1  Payments......................................................5
    Section 2.2  Collections Prior to Amortization.............................5
    Section 2.3  Collections Following Amortization............................6
    Section 2.4  Payment Rescission............................................6
    Section 2.5  Special Concentration Limit...................................7
Article III  Blue Ridge Funding................................................7
    Section 3.1  CP Costs......................................................7
    Section 3.2  Calculation of CP Costs.......................................7
    Section 3.3  CP Costs Payments.............................................7
    Section 3.4  Default Rate..................................................7
Article IV  Liquidity Bank Funding.............................................7
    Section 4.1  Liquidity Bank Funding........................................7
    Section 4.2  Interest Payments.............................................8
    Section 4.3  Selection and Continuation of Interest Periods................8
    Section 4.4  Liquidity Bank Interest Rates.................................8
    Section 4.5  Suspension of the LIBO Rate...................................8
    Section 4.6  Default Rate..................................................9
Article V  Representations and Warranties......................................9
    Section 5.1  Representations and Warranties of the Loan Parties............9
Article VI  Conditions of Advances............................................13
    Section 6.1  Conditions Precedent to Initial Advance......................13
    Section 6.2  Conditions Precedent to All Advances.........................13
Article VII  Covenants........................................................14
    Section 7.1  Affirmative Covenants of the Loan Parties....................14
    Section 7.2  Negative Covenants of the Loan Parties.......................21
Article VIII  Administration and Collection...................................23
    Section 8.1  Designation of Servicer......................................23
    Section 8.2  Duties of Servicer...........................................23
    Section 8.3  Collection Notices...........................................25
    Section 8.4  Responsibilities of Borrower.................................25
    Section 8.5  Reports......................................................25
    Section 8.6  Servicing Fee................................................26
Article IX  Amortization Events...............................................26
    Section 9.1  Amortization Events..........................................26
    Section 9.2  Remedies.....................................................28


                                       i

<PAGE>

Article X  Indemnification....................................................29
    Section 10.1  Indemnities by the Loan Parties.............................29
    Section 10.2  Increased Cost and Reduced Return...........................31
    Section 10.3  Other Costs and Expenses....................................32
    Section 10.4  Allocations.................................................32
Article XI  The Agent.........................................................33
    Section 11.1  Authorization and Action....................................33
    Section 11.2  Delegation of Duties........................................33
    Section 11.3  Exculpatory Provisions......................................33
    Section 11.4  Reliance by Agent...........................................34
    Section 11.5  Non-Reliance on Agent and Other Lenders.....................34
    Section 11.6  Reimbursement and Indemnification...........................34
    Section 11.7  Agent in its Individual Capacity............................35
    Section 11.8  Successor Agent.............................................35
Article XII  Assignments; Participations......................................35
    Section 12.1  Assignments.................................................35
    Section 12.2  Participations..............................................36
Article XIII  Security Interest...............................................37
    Section 13.1  Grant of Security Interest..................................37
    Section 13.2  Termination after Final Payout Date.........................37
Article XIV  Miscellaneous....................................................37
    Section 14.1  Waivers and Amendments......................................37
    Section 14.2  Notices.....................................................38
    Section 14.3  Ratable Payments............................................39
    Section 14.4  Protection of Agent's Security Interest.....................39
    Section 14.5  Confidentiality.............................................39
    Section 14.6  Bankruptcy Petition.........................................40
    Section 14.7  Limitation of Liability.....................................40
    Section 14.8  CHOICE OF LAW...............................................40
    Section 14.9  CONSENT TO JURISDICTION.....................................41
    Section 14.10  WAIVER OF JURY TRIAL.......................................41
    Section 14.11  Integration; Binding Effect; Survival of Terms.............41
    Section 14.12  Counterparts; Severability; Section References.............42
    Section 14.13  Wachovia Roles.............................................42
    Section 14.14  Relationship of this Amendment to the Loan and
                   Security Agreement.........................................42


                                       ii

<PAGE>


Exhibits

Exhibit I         Definitions
Exhibit II        Form of Borrowing Notice
Exhibit  III      Places of Business of the Loan Parties;  Locations of Records;
                  Federal Employer Identification Number(s)
Exhibit IV        Names of Collection Banks; Collection Accounts
Exhibit V         Form of Compliance  Certificate
Exhibit VI        Form of Collection Account Agreement
Exhibit  VII      Form  of Assignment Agreement
Exhibit  VIII     Credit  and  Collection  Policy  Exhibit  IX Form of  Periodic
                  Report
Exhibit X         Form of Contract(s)

Schedules
Schedule A        Commitments
Schedule B        Closing Documents



                                      iii

<PAGE>


                          CREDIT AND SECURITY AGREEMENT


           This Credit and Security Agreement, dated as of September 20, 2004 is
entered into by and among:

           (a) Bell Microproducts  Funding  Corporation,  a Delaware corporation
("Borrower"),


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

           (c) The  entities  listed on Schedule A to this  Agreement  (together
with any of their respective  successors and assigns  hereunder,  the "Liquidity
Banks"),

           (d) Blue Ridge  Asset  Funding  Corporation,  a Delaware  corporation
("Blue Ridge"), and

           (e) Wachovia  Bank,  National  Association,  as agent for the Lenders
hereunder or any successor  agent  hereunder  (together  with its successors and
assigns hereunder, the "Agent").

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

                             PRELIMINARY STATEMENTS

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

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

           In the event  that  Blue  Ridge  declines  to make any  Advance,  the
Liquidity  Banks shall,  at the request of Borrower,  make Advances from time to
time.

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

                                   ARTICLE I

                                  THE ADVANCES

           SECTION 1.1 CREDIT FACILITY.

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

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


<PAGE>


                      (ii) Blue Ridge may,  at its  option,  make the  requested
           Advance,  or if Blue Ridge shall decline to make any Advance,  except
           as otherwise  provided in Section 1.2, the Liquidity  Banks severally
           agree to make Loans in an  aggregate  principal  amount  equal to the
           requested Advance.

           Each of the Advances, and all other Obligations,  shall be secured by
the  Collateral  as provided in Article  XIII. It is the intent of Blue Ridge to
fund all Advances by the issuance of Commercial Paper.

           (b) Borrower  may,  upon at least ten (10) days' notice to the Agent,
terminate in whole or reduce in part,  ratably  among the Liquidity  Banks,  the
unused portion of the Aggregate Commitment; provided that each partial reduction
of the Aggregate  Commitment  shall be in an amount equal to  $10,000,000  (or a
larger  integral  multiple of $1,000,000 if in excess  thereof) and shall reduce
the  Commitments  of the  Liquidity  Banks  ratably  in  accordance  with  their
respective Pro Rata Shares.

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

           SECTION 1.2 INCREASES.

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


                                       2
<PAGE>


           SECTION 1.3 DECREASES.

           Except as provided in Section 1.4,  Borrower  shall provide the Agent
with prior  written  notice in  conformity  with the Required  Notice  Period (a
"Reduction  Notice") of any  proposed  reduction of  Aggregate  Principal.  Such
Reduction  Notice shall designate (a) the date (the "Proposed  Reduction  Date")
upon which any such  reduction  of Aggregate  Principal  shall occur (which date
shall give effect to the applicable Required Notice Period),  and (b) the amount
of Aggregate Principal to be reduced which shall be applied ratably to the Loans
of Blue Ridge and the Liquidity Banks in accordance with the amount of principal
(if any) owing to Blue Ridge,  on the one hand,  and the amount of principal (if
any) owing to the Liquidity Banks (ratably,  based on their  respective Pro Rata
Shares), on the other hand (the "Aggregate  Reduction").  Only one (1) Reduction
Notice shall be outstanding at any time.

           SECTION 1.4 DEEMED COLLECTIONS; BORROWING LIMIT.

           (a) If on any day:

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

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

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

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

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

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


                                       3
<PAGE>


           (b)  Borrower  shall ensure that the  Aggregate  Principal at no time
exceeds the Borrowing Limit. If at any time the Aggregate  Principal exceeds the
Borrowing  Limit,  Borrower  shall  pay to the  Agent  not  later  than the next
succeeding  Settlement  Date an amount to be  applied  to reduce  the  Aggregate
Principal  (as  allocated by the Agent),  such that after giving  effect to such
payment the Aggregate Principal is less than or equal to the Borrowing Limit.

           SECTION 1.5 PAYMENT REQUIREMENTS.

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

           SECTION 1.6 RATABLE LOANS; FUNDING MECHANICS; LIQUIDITY FUNDINGS.

           (a) Each Advance hereunder shall consist of one or more Loans made by
Blue Ridge and/or the Liquidity Banks.

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

           (c)  While it is the  intent  of Blue  Ridge to fund  each  requested
Advance through the issuance of its Commercial  Paper,  the parties  acknowledge
that if Blue Ridge is unable,  or determines  that it is  undesirable,  to issue
Commercial  Paper to fund all or any portion of its Loans, or is unable to repay
such Commercial Paper upon the maturity  thereof,  Blue Ridge may put all or any
portion  of its  Loans  to the  Liquidity  Banks  at any  time  pursuant  to the
Liquidity  Agreement to finance or refinance the necessary  portion of its Loans
through a Liquidity Funding to the extent available.  The Liquidity Fundings may
be  Alternate  Base Rate Loans or LIBO Rate  Loans,  or a  combination  thereof,
selected by the Borrower in accordance with Article IV.  Regardless of whether a
Liquidity  Funding  constitutes the direct funding of a Loan, an assignment of a
Loan made by Blue Ridge or the sale of one or more participations in a Loan made
by Blue Ridge,  each Liquidity Bank  participating in a Liquidity  Funding shall
have the rights of a "Lender"  hereunder with the same force and effect as if it
had directly made a Loan to the Borrower in the amount of its Liquidity Funding.

           (d)  Nothing  herein  shall be deemed to  commit  Blue  Ridge to make
Loans.


                                       4
<PAGE>


                                   ARTICLE II

                            PAYMENTS AND COLLECTIONS

           SECTION 2.1 PAYMENTS.

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

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

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

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

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

           (e) all  accrued  and  unpaid  CP Costs on the CP Rate  Loans on each
Settlement Date; and

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

           SECTION 2.2 COLLECTIONS PRIOR TO AMORTIZATION.

           On each Settlement Date prior to the Amortization  Date, the Servicer
shall deposit to the Agent's Account, for distribution to the Lenders, a portion
of the Collections  received by it during the preceding  Settlement Period equal
to the sum of the following  amounts for  application to the  Obligations in the
order specified:

                      first, ratably to the payment of all accrued and unpaid CP
           Costs,  Interest and Broken  Funding Costs (if any) that are then due
           and owing,

                      second,  ratably to the  payment of all accrued and unpaid
           fees under the Fee Letter (if any) that are then due and owing,

                      third, to the accrued and unpaid Servicing Fee,

                      fourth,  if  required  under  Section  1.3 or 1.4,  to the
           ratable reduction of Aggregate Principal,

                      fifth,  for  the  ratable  payment  of  all  other  unpaid
           Obligations, if any, that are then due and owing, and

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


                                       5
<PAGE>


Collections  applied  to the  payment of  Obligations  shall be  distributed  in
accordance with the aforementioned provisions, and, giving effect to each of the
priorities set forth above in this Section 2.2, shall be shared ratably  (within
each priority)  among the Agent and the Lenders in accordance with the amount of
such Obligations  owing to each of them in respect of each such priority.  If at
any time any  Collections  are received by the Servicer on and after the Initial
Funding  Date and  prior  to the  Facility  Termination  Date,  Borrower  hereby
requests,  and each Lender and the Agent hereby  agrees,  that such funds may be
reinvested by Borrower by purchasing  additional  Eligible  Receivables (each, a
"Reinvestment")  such  that  after  giving  effect  to  such  Reinvestment,  the
Aggregate Principal is less than or equal to the Borrowing Limit.


           SECTION 2.3 COLLECTIONS FOLLOWING AMORTIZATION.

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

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

                      second,  ratably to the  payment of all accrued and unpaid
           CP Costs, Interest and Broken Funding Costs,

                      third,  ratably to the  payment of all  accrued and unpaid
           fees under the Fee Letter,

                      fourth, to the ratable reduction of Aggregate Principal,

                      fifth,  for  the  ratable  payment  of  all  other  unpaid
           Obligations, and

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

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

           SECTION 2.4 PAYMENT RESCISSION.

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


                                       6
<PAGE>


           SECTION 2.5 SPECIAL CONCENTRATION LIMIT.

Peakdata  LLC and its  Affiliates  shall be subject  to a Special  Concentration
Limit of 7.0%, which Special  Concentration  Limit may be cancelled by the Agent
at any time upon not less than five (5)  Business  Days'  written  notice to the
Loan Parties.

                                  ARTICLE III

                               BLUE RIDGE FUNDING

           SECTION 3.1 CP COSTS.

           Borrower shall pay CP Costs with respect to the principal  balance of
Blue Ridge's Loans from time to time  outstanding.  Each Loan of Blue Ridge that
is funded  substantially  with Pooled Commercial Paper will accrue CP Costs each
day on a pro rata basis,  based upon the percentage  share that the principal in
respect of such Loan represents in relation to all assets held by Blue Ridge and
funded substantially with related Pooled Commercial Paper.

           SECTION 3.2 CALCULATION OF CP COSTS.

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

           SECTION 3.3 CP COSTS PAYMENTS.

           On each  Settlement  Date,  Borrower  shall pay to the Agent (for the
benefit of Blue Ridge) an  aggregate  amount  equal to all accrued and unpaid CP
Costs in  respect  of the  principal  associated  with all CP Rate Loans for the
Calculation Period then most recently ended in accordance with Article II.

           SECTION 3.4 DEFAULT RATE.

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

                                   ARTICLE IV

                             LIQUIDITY BANK FUNDING


                                       7
<PAGE>

           SECTION 4.1 LIQUIDITY BANK FUNDING.

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

           SECTION 4.2 INTEREST PAYMENTS.

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

           SECTION 4.3 SELECTION AND CONTINUATION OF INTEREST PERIODS.

           (a) With  consultation  from (and  approval  by) the Agent,  Borrower
shall from time to time request  Interest  Periods for the  Liquidity  Fundings,
provided  that if at any time any  Liquidity  Funding is  outstanding,  Borrower
shall always  request  Interest  Periods such that at least one Interest  Period
shall end on the date  specified in clause (i) of the  definition  of Settlement
Date.

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

           SECTION 4.4 LIQUIDITY BANK INTEREST RATES.

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

                                       8
<PAGE>


           SECTION 4.5 SUSPENSION OF THE LIBO RATE.

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

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

           SECTION 4.6 DEFAULT RATE.

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

                                   ARTICLE V

                         REPRESENTATIONS AND WARRANTIES

           SECTION 5.1 REPRESENTATIONS AND WARRANTIES OF THE LOAN PARTIES.

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

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

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


                                       9
<PAGE>


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

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

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

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

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

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


                                       10
<PAGE>


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

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

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

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

           (m) Material Adverse Effect. (i) The initial Servicer  represents and
warrants  that  since June 30,  2004,  no event has  occurred  that would have a
material adverse effect on the financial  condition or operations of the initial
Servicer and its  Subsidiaries or the ability of the initial Servicer to perform
its obligations under this Agreement,  and (ii) Borrower represents and warrants
that since the date of this  Agreement,  no event has occurred that would have a
material  adverse  effect  on (A)  the  financial  condition  or  operations  of
Borrower,  (B) the  ability of Borrower  to perform  its  obligations  under the
Transaction Documents, or (C) the collectibility of the Receivables generally or
any material portion of the Receivables.

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


                                       11
<PAGE>


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

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

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

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

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

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

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


                                       12
<PAGE>


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

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

                                   ARTICLE VI

                             CONDITIONS OF ADVANCES

           SECTION 6.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE.

           The initial Advance under this Agreement is subject to the conditions
precedent  that (a) the Agent shall have  received on or before the date of such
Advance those documents  listed on Schedule A to the Receivables  Sale Agreement
and those  documents  listed on  Schedule  B to this  Agreement,  (b) the Rating
Agency  Condition  shall  have  been  satisfied,  and (c) the Agent  shall  have
received all fees and expenses  required to be paid on such date pursuant to the
terms of this Agreement and the Fee Letter.

           SECTION 6.2 CONDITIONS PRECEDENT TO ALL ADVANCES.

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

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

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

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


                                       13
<PAGE>


                                  ARTICLE VII

                                    COVENANTS

           SECTION 7.1 AFFIRMATIVE COVENANTS OF THE LOAN PARTIES.

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

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

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

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

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

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

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


                                       14
<PAGE>


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

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

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

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

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

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

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

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


                                       15
<PAGE>


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

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

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

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

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

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

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

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


                                       16
<PAGE>


           (e) Keeping and Marking of Records and Books.

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

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

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

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

           (h)  Ownership.  Borrower will (or will cause the Originator to) take
all  necessary  action to (i) vest legal and equitable  title to the  Collateral
purchased under the Receivables Sale Agreement irrevocably in Borrower, free and
clear of any Adverse  Claims  (other than Adverse  Claims in favor of the Agent,
for the benefit of the  Secured  Parties)  including,  without  limitation,  the
filing of all financing  statements or other  similar  instruments  or documents
necessary under the UCC (or any comparable law) of all appropriate jurisdictions


                                       17
<PAGE>


to perfect  Borrower's  interest  in such  Collateral  and such other  action to
perfect,  protect or more fully evidence the interest of Borrower therein as the
Agent may reasonably request),  and (ii) establish and maintain, in favor of the
Agent,  for the  benefit of the Secured  Parties,  a valid and  perfected  first
priority  security  interest  in all  Collateral,  free and clear of any Adverse
Claims, including, without limitation, the filing of all financing statements or
other  similar  instruments  or  documents  necessary  under  the  UCC  (or  any
comparable law) of all appropriate jurisdictions to perfect the Agent's (for the
benefit of the Secured  Parties)  security  interest in the  Collateral and such
other  action to perfect,  protect or more fully  evidence  the  interest of the
Agent for the  benefit  of the  Secured  Parties  as the  Agent  may  reasonably
request.

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

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

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

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

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

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


                                       18
<PAGE>


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

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

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

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

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

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

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


                                       19
<PAGE>


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

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

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

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

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

           (j) Collections.

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


                                       20
<PAGE>


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

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

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

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

           SECTION 7.2 NEGATIVE COVENANTS OF THE LOAN PARTIES.

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

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

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


                                       21
<PAGE>


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

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

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

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

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

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


                                       22
<PAGE>


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

                                  ARTICLE VIII

                          ADMINISTRATION AND COLLECTION

           SECTION 8.1 DESIGNATION OF SERVICER.

           (a) The servicing,  administration  and collection of the Receivables
shall be conducted by such Person (the  "Servicer")  so designated  from time to
time  in  accordance  with  this  Section  8.1.  Bell  Microproducts  is  hereby
designated as, and hereby agrees to perform the duties and  obligations  of, the
Servicer  pursuant  to the  terms of this  Agreement.  The Agent may at any time
designate as Servicer any Person to succeed Bell  Microproducts or any successor
Servicer provided that the Rating Agency Condition is satisfied.

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

           SECTION 8.2 DUTIES OF SERVICER.

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

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


                                       23
<PAGE>


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

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

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

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


                                       24
<PAGE>


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

           SECTION 8.3 COLLECTION NOTICES.

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

           SECTION 8.4 RESPONSIBILITIES OF BORROWER.

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

           SECTION 8.5 REPORTS.

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

           (b)  Receivables  Reports.  The  Servicer  agrees to provide to Agent
notice of: (i) any material delay in Originator's  or Servicer's  performance of
any of its  obligations to any Obligor or the assertion of any material  claims,
offsets, defenses or counterclaims by any Obligor, or any material disputes with
Obligors, or any material settlement, adjustment or compromise thereof, (ii) all
material  adverse  information  known to the Servicer  relating to the financial
condition  of any  Obligor  and (iii) any event or  circumstance  which,  to the


                                       25
<PAGE>


Servicer's knowledge,  would be reasonably likely to cause Agent to consider any
then existing  Receivable as no longer constituting an Eligible  Receivable.  No
credit,  discount,  allowance or  extension,  or  agreement  with respect to any
credit,  discount,  allowance or extension,  shall be granted by the Servicer to
any Obligor  without the Agent's  consent,  except in the ordinary course of the
Servicer's business consistent with the practices of the Servicer as of the date
hereof and as to any such  agreement  so long as the Agent  shall have  received
notice thereof to the extent required hereunder.

           SECTION 8.6 SERVICING FEE.

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

                                   ARTICLE IX

                               AMORTIZATION EVENTS

           SECTION 9.1 AMORTIZATION EVENTS.

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

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

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

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

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

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

           (f)  Failure of the  Servicer or any of its  Subsidiaries  other than
Borrower to pay  Indebtedness  in excess of  $1,000,000  in aggregate  principal
amount  (hereinafter,   "Material  Indebtedness")  when  due  and  such  failure
continues  beyond any  applicable  grace or cure period  (other than any default


                                       26
<PAGE>


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

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

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

                      (i) the  three-month  rolling  average  Delinquency  Ratio
           shall exceed 5.25%,

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

                      (iii) the three-month rolling average Dilution Ratio shall
           exceed 5.00%.

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

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

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

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

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


                                       27
<PAGE>


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

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

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

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

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

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

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

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

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

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

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

           SECTION 9.2 REMEDIES.

           Upon the occurrence and during the  continuation  of an  Amortization
Event,  the Agent may, or upon the  direction  of the Required  Liquidity  Banks
shall, take any of the following actions:  (a) replace the Person then acting as
Servicer if the Agent has not already done so, (b) declare the Amortization Date
to have occurred, whereupon the Aggregate Commitment shall immediately terminate


                                       28
<PAGE>


and the Amortization Date shall forthwith occur, all without demand,  protest or
further  notice of any kind,  all of which are hereby  expressly  waived by each
Loan  Party;  provided,  however,  that  upon  the  occurrence  of an  Event  of
Bankruptcy with respect to any Loan Party,  the receipt by the Agent of a notice
pursuant  to Section  9.1(r) or the  receipt by the Agent of a Notice of Default
pursuant  to  the   Intercreditor   Agreement,   the  Amortization   Date  shall
automatically occur,  without demand,  protest or any notice of any kind, all of
which are hereby expressly waived by each Loan Party, (c) deliver the Collection
Notices to the  Collection  Banks,  (d)  exercise  all rights and  remedies of a
secured  party upon default  under the UCC and other  applicable  laws,  and (e)
notify  Obligors of the Agent's  security  interest in the Receivables and other
Collateral.  The aforementioned rights and remedies shall be without limitation,
and shall be in addition to all other  rights and  remedies of the Agent and the
Lenders  otherwise  available under any other  provision of this  Agreement,  by
operation  of law,  at equity or  otherwise,  all of which are hereby  expressly
preserved, including, without limitation, all rights and remedies provided under
the UCC, all of which rights shall be cumulative.

                                   ARTICLE X

                                 INDEMNIFICATION

           SECTION 10.1 INDEMNITIES BY THE LOAN PARTIES.

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

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

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

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


                                       29
<PAGE>


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

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

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

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

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

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

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

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


                                       30
<PAGE>


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

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

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

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

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

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

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

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

           SECTION 10.2 INCREASED COST AND REDUCED RETURN.

           If after the date  hereof,  any Funding  Source  shall be charged any
fee, expense or increased cost on account of the adoption of any applicable law,
rule or regulation  (including any applicable law, rule or regulation  regarding
capital adequacy) or any change therein,  or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration  thereof, or compliance
with any  request or  directive  (whether or not having the force of law) of any
such authority,  central bank or comparable agency (a "Regulatory Change"):  (a)
that subjects any Funding Source to any charge or withholding on or with respect
to any  Funding  Agreement  or a Funding  Source's  obligations  under a Funding
Agreement,  or on or with  respect to the  Receivables,  or changes the basis of
taxation  of payments to any  Funding  Source of any amounts  payable  under any
Funding  Agreement  (except  for  changes in the rate of tax on the  overall net


                                       31
<PAGE>


income  of a Funding  Source  or taxes  excluded  by  Section  10.1) or (b) that
imposes, modifies or deems applicable any reserve, assessment, insurance charge,
special deposit or similar  requirement  against assets of, deposits with or for
the account of a Funding Source, or credit extended by a Funding Source pursuant
to a Funding  Agreement  or (c) that imposes any other  condition  the result of
which is to increase the cost to a Funding Source of performing its  obligations
under a Funding Agreement, or to reduce the rate of return on a Funding Source's
capital as a consequence of its  obligations  under a Funding  Agreement,  or to
reduce the amount of any sum received or receivable by a Funding  Source under a
Funding  Agreement  or to require any payment  calculated  by  reference  to the
amount of interests or loans held or interest  received by it, then, upon demand
by the Agent,  Borrower shall pay to the Agent,  for the benefit of the relevant
Funding  Source,  such amounts charged to such Funding Source or such amounts to
otherwise  compensate  such  Funding  Source  for  such  increased  cost or such
reduction  (which  demand shall include a description  and  calculation  of such
increased cost or such reduction).

           SECTION 10.3 OTHER COSTS AND EXPENSES.

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

           SECTION 10.4 ALLOCATIONS.

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


                                       32
<PAGE>


                                   ARTICLE XI

                                    THE AGENT

           SECTION 11.1 AUTHORIZATION AND ACTION.

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

           SECTION 11.2 DELEGATION OF DUTIES.

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

           SECTION 11.3 EXCULPATORY PROVISIONS.

           Neither  the  Agent  nor any of its  directors,  officers,  agents or
employees  shall be (a) liable for any  action  lawfully  taken or omitted to be
taken by it or them under or in connection  with the Liquidity  Agreement or any
Transaction  Document  (except  for  its,  their  or  such  Person's  own  gross
negligence or willful  misconduct),  or (b)  responsible in any manner to any of
the Lenders for any recitals, statements,  representations or warranties made by
any Loan Party contained in the Liquidity Agreement, any Transaction Document or
any certificate, report, statement or other document referred to or provided for
in, or received under or in connection with, any Transaction Document or for the
value, validity,  effectiveness,  genuineness,  enforceability or sufficiency of
the  Liquidity  Agreement  or any  Transaction  Document  or any other  document
furnished  in  connection  therewith,  or for any  failure  of any Loan Party to
perform its obligations under any Transaction  Document, or for the satisfaction
of any  condition  specified  in Article  VI, or for the  perfection,  priority,
condition,  value  or  sufficiency  of  any  collateral  pledged  in  connection


                                       33
<PAGE>


herewith. The Agent shall not be under any obligation to any Lender to ascertain
or to inquire as to the  observance or  performance  of any of the agreements or
covenants  contained  in, or  conditions  of, any  Transaction  Document,  or to
inspect the  properties,  books or records of the Loan Parties.  The Agent shall
not  be  deemed  to  have  knowledge  of any  Amortization  Event  or  Unmatured
Amortization  Event unless the Agent has received  notice from a Loan Party or a
Lender.

           SECTION 11.4 RELIANCE BY AGENT.

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

           SECTION 11.5 NON-RELIANCE ON AGENT AND OTHER LENDERS.

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

           SECTION 11.6 REIMBURSEMENT AND INDEMNIFICATION.

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


                                       34
<PAGE>


           SECTION 11.7 AGENT IN ITS INDIVIDUAL CAPACITY.

           The Agent and its Affiliates may make loans to, accept  deposits from
and  generally  engage in any kind of business with Borrower or any Affiliate of
Borrower as though the Agent were not the Agent  hereunder.  With respect to the
making of Loans pursuant to this Agreement, the Agent shall have the same rights
and powers under the Liquidity  Agreement and this  Agreement in its  individual
capacity  as any  Lender  and may  exercise  the same as  though it were not the
Agent, and the terms "Liquidity Bank," "Lender," "Liquidity Banks" and "Lenders"
shall include the Agent in its individual capacity.

           SECTION 11.8 SUCCESSOR AGENT.

           The Agent,  upon five (5) days'  notice to the Loan  Parties  and the
Lenders,  may voluntarily resign and may be removed at any time, with or without
cause, by the Required Liquidity Lenders; provided, however, that Wachovia shall
not voluntarily resign as the Agent so long as any of the Liquidity  Commitments
remain in effect or Blue Ridge has any  outstanding  Loans.  If the Agent (other
than  Wachovia)  shall  voluntarily  resign or be  removed  as Agent  under this
Agreement, then the Required Liquidity Lenders during such five-day period shall
appoint, from among the remaining Liquidity Banks, a successor Agent,  whereupon
such successor Agent shall succeed to the rights, powers and duties of the Agent
and the term  "Agent"  shall  mean  such  successor  agent,  effective  upon its
appointment,  and the former Agent's rights, powers and duties as Agent shall be
terminated,  without any other or further act or deed on the part of such former
Agent or any of the parties to this Agreement.  Upon  resignation or replacement
of any Agent in  accordance  with this Section  11.8,  the retiring  Agent shall
execute such UCC-3 assignments and amendments, and assignments and amendments of
the Liquidity  Agreement and the Transaction  Documents,  as may be necessary to
give effect to its replacement by a successor Agent.  After any retiring Agent's
resignation  hereunder as Agent, the provisions of this Article XI and Article X
shall inure to its benefit as to any actions  taken or omitted to be taken by it
while it was Agent under this Agreement.

                                  ARTICLE XII

                           ASSIGNMENTS; PARTICIPATIONS

           SECTION 12.1 ASSIGNMENTS.

           (a) Each of the  Agent,  the Loan  Parties  and the  Liquidity  Banks
hereby  agrees and consents to the complete or partial  assignment by Blue Ridge
of all or any portion of its rights under, interest in, title to and obligations
under this Agreement to the Liquidity Banks pursuant to the Liquidity Agreement.

           (b) Any  Liquidity  Bank may at any time and from time to time assign
to one or more Eligible  Assignees (each, a "Purchasing  Liquidity Bank") all or
any part of its  rights and  obligations  under this  Agreement  pursuant  to an
assignment  agreement  substantially in the form set forth in Exhibit VII hereto
(an "Assignment  Agreement") executed by such Purchasing Liquidity Bank and such
selling Liquidity Bank;  provided,  however,  that any assignment of a Liquidity
Bank's rights and  obligations  hereunder shall include a pro rata assignment of
its rights and obligations  under the Liquidity  Agreement.  The consent of Blue


                                       35
<PAGE>


Ridge shall be required prior to the effectiveness of any such assignment.  Each
assignee of a Liquidity Bank must (i) be an Eligible  Assignee and (ii) agree to
deliver to the Agent,  promptly  following any request  therefor by the Agent or
Blue Ridge, an enforceability  opinion in form and substance satisfactory to the
Agent and Blue Ridge. Upon delivery of an executed  Assignment  Agreement to the
Agent,  such  selling  Liquidity  Bank shall be  released  from its  obligations
hereunder  and under the Liquidity  Agreement to the extent of such  assignment.
Thereafter the  Purchasing  Liquidity Bank shall for all purposes be a Liquidity
Bank party to this Agreement and the Liquidity  Agreement and shall have all the
rights and  obligations of a Liquidity Bank hereunder and thereunder to the same
extent as if it were an original party hereto and thereto and no further consent
or action by Borrower, the Lenders or the Agent shall be required.

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

           (d) No Loan Party may assign any of its rights or  obligations  under
this  Agreement  without the prior written  consent of the Agent and each of the
Lenders and without satisfying the Rating Agency Condition.

           SECTION 12.2 PARTICIPATIONS.

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


                                       36
<PAGE>


                                  ARTICLE XIII

                                SECURITY INTEREST

           SECTION 13.1 GRANT OF SECURITY INTEREST.

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

           SECTION 13.2 TERMINATION AFTER FINAL PAYOUT DATE.

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

                                  ARTICLE XIV

                                  MISCELLANEOUS

           SECTION 14.1 WAIVERS AND AMENDMENTS.

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

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

                      (i)  without  the  consent of each  affected  Lender,  (A)
           extend the Liquidity  Termination  Date or the date of any payment or
           deposit of  Collections  by Borrower or the Servicer,  (B) reduce the
           rate or extend the time of payment  of  Interest  or any CP Costs (or
           any component of Interest or CP Costs), reduce any fee payable to the
           Agent for the benefit of the Lenders,  (C) except pursuant to Article


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<PAGE>


           XII hereof,  change the amount of the  principal  of any Lender,  any
           Liquidity Bank's Pro Rata Share or any Liquidity  Bank's  Commitment,
           (D)  amend,  modify  or waive  any  provision  of the  definition  of
           Required  Liquidity Banks or this Section 14.1(b),  (E) consent to or
           permit the  assignment  or  transfer by Borrower of any of its rights
           and obligations  under this  Agreement,  (F) change the definition of
           "Eligible  Receivable," "Loss Reserve," "Dilution Reserve," "Interest
           Reserve,"   "Servicing  Reserve,"  "Servicing  Fee  Rate,"  "Required
           Reserve" or "Required  Reserve  Factor  Floor" or (G) amend or modify
           any defined term (or any defined term used  directly or indirectly in
           such defined  term) used in clauses (A) through (F) above in a manner
           that would  circumvent the intention of the restrictions set forth in
           such clauses; or

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

and any material amendment, waiver or other modification of this Agreement shall
require  satisfaction  of  the  Rating  Agency  Condition.  Notwithstanding  the
foregoing,  (A) without the consent of the Liquidity Banks, but with the consent
of Borrower, the Agent may amend this Agreement solely to add additional Persons
as Liquidity Banks hereunder and (B) the Agent, the Required Liquidity Banks and
Blue Ridge may enter into amendments to modify any of the terms or provisions of
Article XI,  Article XII, or Section 14.13 without the consent of Borrower.  Any
modification  or waiver made in accordance with this Section 14.1 shall apply to
each of the Lenders equally and shall be binding upon Borrower,  the Lenders and
the Agent.

           SECTION 14.2 NOTICES.

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


                                       38
<PAGE>


           SECTION 14.3 RATABLE PAYMENTS.

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

           SECTION 14.4 PROTECTION OF AGENT'S SECURITY INTEREST.

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

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

           SECTION 14.5 CONFIDENTIALITY.

           (a) Each Loan Party and each Lender  shall  maintain  and shall cause
each of its  employees  and  officers to maintain  the  confidentiality  of this
Agreement and the other confidential or proprietary  information with respect to
the Agent and Blue Ridge and their respective  businesses obtained by it or them


                                       39
<PAGE>


in  connection   with  the   structuring,   negotiating  and  execution  of  the
transactions  contemplated  herein,  except that such Loan Party and such Lender
and its  officers  and  employees  may disclose  such  information  to such Loan
Party's and such Lender's external  accountants and attorneys and as required by
any applicable law or order of any judicial or administrative proceeding.

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

           SECTION 14.6 BANKRUPTCY PETITION.

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

           SECTION 14.7 LIMITATION OF LIABILITY.

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

           SECTION 14.8 CHOICE OF LAW.

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


                                       40
<PAGE>


           SECTION 14.9 CONSENT TO JURISDICTION.

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

           SECTION 14.10 WAIVER OF JURY TRIAL.

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

           SECTION 14.11 INTEGRATION; BINDING EFFECT; SURVIVAL OF TERMS.


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

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


                                       41
<PAGE>


           SECTION 14.12 COUNTERPARTS; SEVERABILITY; SECTION REFERENCES.

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

           SECTION 14.13 WACHOVIA ROLES.

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

           SECTION 14.14 RELATIONSHIP OF THIS AMENDMENT TO THE LOAN AND SECURITY
           AGREEMENT.

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


                            [signature pages follow]


                                       42
<PAGE>


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

                                 BELL MICROPRODUCTS FUNDING CORPORATION


                                 By:____________________________________________
                                 Name:__________________________________________
                                 Title:_________________________________________

                                 Address: Bell Microproducts Funding Corporation
                                          1941 Ringwood Avenue
                                          Suite A
                                          San Jose, California 95131
                                          Attention: Chief Financial Officer
                                          Telephone: (408)467-2735
                                          Fax:       (408)467-2735


                                 BELL MICROPRODUCTS INC.

                                 By:____________________________________________
                                 Name:__________________________________________
                                 Title:_________________________________________

                                 Address: Bell Microproducts Inc.
                                          1941 Ringwood Avenue
                                          San Jose, California 95131
                                          Attention: Chief Financial Officer
                                          Telephone: (408)451-9400
                                          Fax:       (408)451-1632





                        [additional signatures to follow]


<PAGE>



                                BLUE RIDGE ASSET FUNDING CORPORATION

                                By:  Wachovia Capital Markets, LLC,
                                     as Attorney-In-Fact


                                By:____________________________________________
                                Name:__________________________________________
                                Title:_________________________________________

                                Address: Blue Ridge Asset Funding Corporation
                                         c/o Wachovia Bank, National Association
                                         301 South College Street, TW-10
                                         Charlotte, North Carolina  28288
                                         Attention: Doug Wilson
                                         Telephone: 704-374-2520
                                         Fax:       704-383-9579


                                WACHOVIA BANK, NATIONAL ASSOCIATION,
                                as a Liquidity Bank and as Agent


                                By:____________________________________________
                                Name:__________________________________________
                                Title:_________________________________________

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




                               [end of signatures]


<PAGE>


                                    EXHIBIT I

                                   DEFINITIONS

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

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

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

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

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

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

Agent:  As defined in the preamble to this Agreement.

Agent's Account:  Account  #8735-098787 at Wachovia Bank, National  Association,
ABA #053100494.

Aggregate Commitment: On any date of determination,  the aggregate amount of the
Liquidity Banks' Commitments to make Loans hereunder. As of the date hereof, the
Aggregate Commitment is $75,000,000.

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

Aggregate Reduction:  As defined in Section 1.3.

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

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


                                  Exhibit I-1
<PAGE>


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

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

Amortization Event:  As defined in Article IX.

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

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

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

Blue Ridge:  As defined in the preamble to this Agreement.

Borrower:  As defined in the preamble to this Agreement.

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

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

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

Borrowing Notice:  As defined in Section 1.2.

Broken Funding Costs:  For any CP Rate Loan or LIBO Rate Loan which:  (i) in the
case of a CP Rate Loan, has its principal reduced without compliance by Borrower
with the notice requirements hereunder,  (ii) in the case of a CP Rate Loan or a
LIBO Rate Loan, does not become subject to an Aggregate  Reduction following the
delivery  of any  Reduction  Notice,  (iii)  in the case of a CP Rate  Loan,  is
assigned under the Liquidity Agreement, or (iv) in the case of a LIBO Rate Loan,
is terminated or reduced prior to the last day of its Interest Period, an amount
equal to the excess,  if any, of (A) the CP Costs or  Interest  (as  applicable)
that would have accrued  during the  remainder  of the  Interest  Periods or the
tranche periods for Commercial  Paper  determined by the Agent to relate to such
Loan (as  applicable)  subsequent to the date of such  reduction,  assignment or
termination  (or in  respect  of clause  (ii)  above,  the date  such  Aggregate
Reduction  was  designated  to occur  pursuant to the  Reduction  Notice) of the
principal of such Loan if such  reduction,  assignment  or  termination  had not
occurred or such Reduction  Notice had not been  delivered,  over (B) the sum of
(1) to the extent all or a portion of such  principal  is  allocated  to another


                                  Exhibit I-2
<PAGE>


Loan, the amount of CP Costs or Interest  actually  accrued during the remainder
of such period on such  principal  for the new Loan,  and (2) to the extent such
principal  is not  allocated  to another  Loan,  the  income,  if any,  actually
received  during the  remainder  of such  period by the holder of such Loan from
investing the portion of such principal not so allocated.  In the event that the
amount  referred to in clause (B) exceeds the amount  referred to in clause (A),
the  relevant  Lender or  Lenders  agree to pay to  Borrower  the amount of such
excess. All Broken Funding Costs shall be due and payable hereunder upon demand.

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

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

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

Collateral:  As defined in Section 13.1.

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

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

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

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

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

Commercial  Paper:  Promissory  notes of Blue Ridge  issued by Blue Ridge in the
commercial paper market.

Commitment:  For each  Liquidity  Bank, the commitment of such Liquidity Bank to
make Loans to Borrower  hereunder in the event the Blue Ridge elects not to fund
any Advance in an aggregate  principal amount at any one time outstanding not to
exceed the amount set forth opposite such Liquidity Bank's name on Schedule A to
this Agreement.


                                  Exhibit I-3
<PAGE>


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

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

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

CP Costs:  For each day, the sum of (i)  discount or interest  accrued on Pooled
Commercial  Paper on such day,  plus  (ii) any and all  accrued  commissions  in
respect of placement agents and Commercial Paper dealers, and issuing and paying
agent fees incurred,  in respect of such Pooled  Commercial  Paper for such day,
plus (iii) other costs  associated  with funding  small or odd-lot  amounts with
respect  to all  receivable  purchase  facilities  which  are  funded  by Pooled
Commercial  Paper for such day, minus (iv) any accrual of income net of expenses
received  on  such  day  from  investment  of  collections  received  under  all
receivable  purchase or financing  facilities funded  substantially  with Pooled
Commercial Paper,  minus (v) any payment received on such day net of expenses in
respect of Broken  Funding Costs (or similar costs) related to the prepayment of
any investment of Blue Ridge pursuant to the terms of any receivable purchase or
financing  facilities  funded  substantially  with Pooled  Commercial  Paper. In
addition to the foregoing  costs,  if Borrower  shall request any Advance during
any period of time  determined by the Agent in its sole  discretion to result in
incrementally  higher  CP  Costs  applicable  to  such  Advance,  the  principal
associated  with any such Advance  shall,  during such  period,  be deemed to be
funded by Blue Ridge in a special  pool  (which may include  capital  associated
with  other  receivable  purchase  or  financing  facilities)  for  purposes  of
determining  such  additional CP Costs  applicable only to such special pool and
charged each day during such period against such principal.

CP Rate Loan:  For each Loan of Blue Ridge made to Borrower  under the Agreement
prior to the time, if any, when (i) it is  refinanced  with a Liquidity  Funding
pursuant to the Liquidity  Agreement,  or (ii) the occurrence of an Amortization
Event and the  commencement  of the accrual of  Interest  thereon at the Default
Rate.

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

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

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


                                  Exhibit I-4
<PAGE>


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

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

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

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

Defaulted  Receivable:  A  Receivable:  (i) as to which the Obligor  thereof has
suffered  an Event of  Bankruptcy;  (ii) which,  consistent  with the Credit and
Collection  Policy,  would be written off Borrower's books as uncollectible;  or
(iii) as to which any payment,  or part thereof,  remains  unpaid for 61 days or
more from the original due date for such payment.

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

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

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

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

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


                                  Exhibit I-5
<PAGE>


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

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

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

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

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

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

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

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

Eligible Receivable:  At any time, a Receivable:

                     (i) the  Obligor  of which  (A) if a natural  person,  is a
           resident of the United  States or of Canada or, if a  corporation  or
           other  business  organization,  is  organized  under  the laws of the
           United States or Canada or any political subdivision of the foregoing
           and has its chief  executive  office in the United  States or Canada;
           (B) is not an  Affiliate of any of the parties  hereto;  (C) is not a
           government or a governmental  subdivision or agency; and (D) is not a
           Designated Obligor,

                     (ii)  the  Obligor  of  which  is not  the  Obligor  of any
           Defaulted Receivable,


                                  Exhibit I-6
<PAGE>


                     (iii)  which is not owing  from an Obligor as to which more
           than 25% of the  aggregate  Outstanding  Balance  of all  Receivables
           owing from such Obligor are Defaulted Receivables,

                     (iv) which is not a Delinquent Receivable,

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

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

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

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

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

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

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

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

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


                                  Exhibit I-7
<PAGE>


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

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

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

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

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

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

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

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

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


                                  Exhibit I-8
<PAGE>


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

                     (xxiv) that has not been  selected  in a manner  materially
           adverse to any Lender;

                     (xxv) that is not payable in installments;

                     (xxvi) that is not evidenced by a promissory note; and

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

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

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

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


                                  Exhibit I-9
<PAGE>


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

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

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

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

Fee Letter:  That  certain  letter  agreement  dated as of the date hereof among
Borrower,  Bell  Microproducts  Inc.  and the  Agent,  as it may be  amended  or
modified and in effect from time to time.

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

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

Funding Agreement:  (i) this Agreement,  (ii) the Liquidity  Agreement and (iii)
any other agreement or instrument executed by any Funding Source with or for the
benefit of Blue Ridge.

Funding Source:  (i) any Liquidity Bank or (ii) any insurance  company,  bank or
other funding entity providing liquidity, credit enhancement or back-up purchase
support or facilities to Blue Ridge.

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

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


                                  Exhibit I-10
<PAGE>


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

Intercreditor  Agreement:  That  certain  Intercreditor  Agreement,  dated as of
September  20,  2004,  between  the Agent  and  Congress  Financial  Corporation
(Western),  as administrative  agent for the lenders under the Loan and Security
Agreement.

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

Interest Period:  With respect to any Loan held by a Liquidity Bank:

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

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

                     If any  Interest  Period  would end on a day which is not a
           Business Day, such Interest  Period shall end on the next  succeeding
           Business Day, provided, however, that in the case of Interest Periods
           corresponding to the LIBO Rate, if such next succeeding  Business Day
           falls  in a  new  month,  such  Interest  Period  shall  end  on  the
           immediately  preceding  Business  Day.  In the  case of any  Interest


                                  Exhibit I-11
<PAGE>


           Period for any Loan which commences before the Amortization  Date and
           would otherwise end on a date occurring after the Amortization  Date,
           such Interest Period shall end on the Amortization Date. The duration
           of each Interest Period which commences after the  Amortization  Date
           shall be of such duration as selected by the Agent.

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

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

Lender:  Blue Ridge and each Liquidity Bank.

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

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

Liquidity Agreement: That certain Liquidity Asset Purchase Agreement dated as of
September 20, 2004, by and among Blue Ridge,  the Agent and the Liquidity  Banks
from time to time party  thereto,  as the same may be amended,  restated  and/or
otherwise modified from time to time in accordance with the terms thereof.

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

Liquidity  Commitment:  As to each  Liquidity  Bank,  its  commitment  under the
Liquidity Agreement (which shall equal 102% of its Commitment hereunder).


                                  Exhibit I-12
<PAGE>


Liquidity  Funding:  Any (i) purchase made by any Liquidity Bank pursuant to its
Liquidity  Commitment of all or any portion of, or any undivided  interest in, a
Blue  Ridge  Loan or (ii) Loan made by a  Liquidity  Bank in lieu of Blue  Ridge
pursuant to Section 1.1.

Liquidity Termination Date:  The earlier to occur of the following:

                     (i) the  date  on  which  the  Liquidity  Banks'  Liquidity
           Commitments expire,  cease to be available to Blue Ridge or otherwise
           cease to be in full force and effect; or

                     (ii) the date on which a Downgrading  Event with respect to
           a Liquidity Bank shall have occurred and been continuing for not less
           than 30 days, and either (A) the Downgraded  Liquidity Bank shall not
           have been replaced by an Eligible  Assignee pursuant to the Liquidity
           Agreement,  or  (B)  the  Liquidity  Commitment  of  such  Downgraded
           Liquidity Bank shall not have been funded or collateralized in such a
           manner that will avoid a  reduction  in or  withdrawal  of the credit
           rating  applied  to the  Commercial  Paper  to which  such  Liquidity
           Agreement  applies by any of the rating  agencies  then  rating  such
           Commercial Paper.

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

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

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

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

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

Material  Adverse Effect:  With respect to any Loan Party and its Affiliates,  a
material adverse effect on (a) the financial condition,  business,  performance,
operations or properties of any Loan Party or of the group taken as a whole; (b)
the legality,  validity or enforceability as to any Loan Party of this Agreement
or any other Transaction Document; (c) the legality,  validity,  enforceability,
perfection  or priority of the security  interests and liens of the Agent or any
Lender  upon the  Collateral  or any other  property of any Loan Party or of the
group taken as a whole that is security for the Obligations, or the value of the
Collateral or such other  property;  (d) the ability of any Loan Party or of the


                                  Exhibit I-13
<PAGE>


group taken as a whole to repay the Obligations  attributable to such Loan Party
or group or of any such Loan  Party or of the group  taken as a whole to perform
its  respective  obligations  under this  Agreement;  (e) the  Agent's  security
interest,  for the benefit of the Secured Parties, in the Receivables  generally
or in any significant  portion of the  Receivables,  the Related Security or the
Collections with respect thereto;  or (f) the ability of the Agent or any Lender
to enforce the  Obligations  or realize upon the  Collateral  or otherwise  with
respect  to the  rights  and  remedies  of the Agent or any  Lender  under  this
Agreement or any of the other Funding Agreements.

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

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

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

Net Worth:  As defined in the Receivables Sale Agreement.

Notice of Default:  As defined in the Intercreditor Agreement.

Obligations:  As defined in Section 2.1.

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

Obligor Concentration Limit:  At any time,

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

<TABLE>
<CAPTION>

                                                                                          Allowable % of Eligible
                       S&P Rating                          Moody's Rating                       Receivables
         ---------------------------------------- ---------------------------------- -----------------------------------
         <S>                                      <C>                                <C>
                          A-1+                                   P-1                                10%
         ---------------------------------------- ---------------------------------- -----------------------------------
                          A-1                                    P-1                                 8%
         ---------------------------------------- ---------------------------------- -----------------------------------
                          A-2                                    P-2                                 6%
         ---------------------------------------- ---------------------------------- -----------------------------------
                          A-3                                    P-3                                 3%
         ---------------------------------------- ---------------------------------- -----------------------------------
          Below A-3 or Not Rated by either S&P    Below P-3 or Not Rated by either
                       or Moody's                          S&P or Moody's                            3%
         ---------------------------------------- ---------------------------------- -----------------------------------
</TABLE>


                                  Exhibit I-14
<PAGE>


           provided,  however,  that (i) if any Obligor has a split rating,  the
           applicable  rating will be the lower of the two,  (ii) if any Obligor
           is not  rated  by  either  S&P or  Moody's,  the  applicable  Obligor
           Concentration  Limit  shall be the one set  forth in the last line of
           the table  above,  and (iii)  subject to  satisfaction  of the Rating
           Agency  Condition  and/or an increase in the  percentage set forth in
           clause  (i)(A) of the  definition  of  "Required  Reserve,"  upon the
           Borrower's request from time to time, the Agent may agree to a higher
           percentage of Eligible  Receivables for a particular  Obligor and its
           Affiliates  (each such higher  percentage,  a "Special  Concentration
           Limit"), it being understood that any Special Concentration Limit may
           be cancelled by the Agent upon not less than five (5) Business  Days'
           written notice to the Loan Parties; and

                     (b) in relation  to the  aggregate  Outstanding  Balance of
           Receivables  owed by all Obligors and their  Affiliates (if any) that
           are (i) natural  persons  resident in Canada or (ii)  corporations or
           other business  organizations,  organized under the laws of Canada or
           any political subdivision thereof, the applicable concentration limit
           in any such case shall be 5%.

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

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

Participant:  As defined in Section 12.2.

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

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

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

Periodic  Reporting Date: (i) the 10th Business Day of each month after the date
of this Agreement (or if any such day is not a Business Day, the next succeeding
Business Day thereafter) or (ii) such other day as may be requested by the Agent
in its discretion.

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

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


                                  Exhibit I-15
<PAGE>


Pooled  Commercial  Paper:  Commercial  Paper notes of Blue Ridge subject to any
particular  pooling  arrangement by Blue Ridge,  but excluding  Commercial Paper
issued by Blue Ridge for a tenor and in an amount specifically  requested by any
Person in connection with any agreement effected by Blue Ridge.

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

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

Proposed Reduction Date:  As defined in Section 1.3.

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

Rating Agency  Condition:  That Blue Ridge has received  written notice from S&P
and  Moody's  that an  amendment,  a change  or a waiver  will not  result  in a
withdrawal or downgrade of the then current  ratings on Blue Ridge's  Commercial
Paper.

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

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

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

Reduction Notice:  As defined in Section 1.3.

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


                                  Exhibit I-16
<PAGE>


Reinvestment:  As defined in Section 2.2.

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

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

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

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

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

                     (v) all Records related to such Receivable,

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

                     (vii) all proceeds of any of the foregoing.

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

Required  Liquidity  Banks:  At any time,  Liquidity  Banks with  Commitments in
excess of 66-2/3% of the Aggregate Commitment.

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

        Aggregate Reduction                              Required Notice Period
        < 50% of the Aggregate Commitment                2 Business Days
        50% or more of the Aggregate Commitment          5 Business Days

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


                                  Exhibit I-17
<PAGE>


Required Reserve Factor Floor: For any Calculation Period, the sum (expressed as
a percentage)  of (i) 16% plus (ii) the product of the Adjusted  Dilution  Ratio
and the Dilution  Horizon Ratio, in each case, as of the  immediately  preceding
Cut-Off Date.

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

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

Secured Parties:  The Indemnified Parties.

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

Servicing Fee:  For each day in a Calculation Period:

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

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

Servicing Fee Rate:  1.0% per annum.

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


                                  Exhibit I-18
<PAGE>


Settlement Date: The (i) 2nd Business Day after each Periodic Reporting Date and
(ii) last day of the  relevant  Interest  Period in  respect of each Loan of the
Liquidity Banks.

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

Subordinated Loan:  As defined in the Receivables Sale Agreement.

Subordinated Note: As defined in the Receivables Sale Agreement.

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

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

Termination Date:  As defined in the Receivables Sale Agreement.

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

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

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

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

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

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


                                  Exhibit I-19
<PAGE>


                                   EXHIBIT II

                            FORM OF BORROWING NOTICE

                                       ---

                        [BELL MICROPRODUCTS FUNDING CORP]

                                BORROWING NOTICE
                           dated ______________, 20__
                     for Borrowing on ________________, 20__


Wachovia Bank, National Association, as Agent
191 Peachtree Street, N.E.
22nd Floor, Mail Code GA8088
Atlanta, Georgia 30303
Attention:  Sherry McInturf, Fax No. (404)332-5152

Ladies and Gentlemen:

           Reference  is made to the Credit and Security  Agreement  dated as of
September 20, 2004 (as amended,  supplemented or otherwise modified from time to
time, the "Credit Agreement") among Bell Microproducts  Funding Corporation (the
"Borrower"),  Bell  Microproducts  Inc., as initial  Servicer,  Blue Ridge Asset
Funding Corporation, and Wachovia Bank National Association, individually and as
Agent.  Capitalized  terms defined in the Credit  Agreement are used herein with
the same meanings.

           1. The  [SERVICER,  ON  BEHALF  OF THE]  Borrower  hereby  certifies,
represents  and  warrants  to the  Agent and the  Lenders  that on and as of the
Borrowing Date (as hereinafter defined):

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

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

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

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

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


                                  Exhibit II-1

<PAGE>


           2. The  [SERVICER,  ON BEHALF OF THE] Borrower  hereby  requests that
Blue Ridge (or their respective Liquidity Banks) make an Advance on ___________,
20__ (the "Borrowing Date") as follows:

           (a)       Aggregate Amount of Advance:  $_____________.

           (b) If the Advance is not funded by Blue Ridge,  [SERVICER  ON BEHALF
OF THE] Borrower  requests that the Liquidity  Banks make an Alternate Base Rate
Loan that converts  into LIBO Rate Loan with an Interest  Period of _____ months
on the third Business Day after the Borrowing Date).

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

           [APPLY  $________  TO PAYMENT OF  PRINCIPAL  AND INTEREST OF EXISTING
LOANS DUE ON THE BORROWING  DATE].  [APPLY $______ TO PAYMENT OF FEES DUE ON THE
BORROWING DATE]. [WIRE TRANSFER $________ TO ACCOUNT NO. ________ AT ___________
BANK, IN [CITY, STATE], ABA NO. __________, REFERENCE: ________].

           IN WITNESS  WHEREOF,  the  [SERVICER,  ON BEHALF OF THE] Borrower has
caused this  Borrowing  Request to be executed and delivered as of this ____ day
of ___________, _____.

                                      [_______________________, AS SERVICER,
                                      ON BEHALF OF:] ____________., as Borrower


                                      By:_______________________________________
                                      Name:_____________________________________
                                      Title:____________________________________


                                  Exhibit II-2

<PAGE>


                                   EXHIBIT III

          PLACES OF BUSINESS OF THE LOAN PARTIES; LOCATIONS OF RECORDS;
                    FEDERAL EMPLOYER IDENTIFICATION NUMBER(S)


<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------------------------
                  Loan Party                   Places of Business and Location of Records              FEIN
--------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>                                                 <C>
           Bell Microproducts Inc.                        1941 Ringwood Avenue                      94-3057566
                                                       San Jose, California 95131
--------------------------------------------------------------------------------------------------------------------------------
    Bell Microproducts Funding Corporation                1941 Ringwood Avenue                      27-0101561
                                                                  Suite A
                                                       San Jose, California 95131
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                 Exhibit III - 1


<PAGE>


                                   EXHIBIT IV

           NAMES OF COLLECTION BANKS; LOCK-BOXES & COLLECTION ACCOUNTS

<TABLE>
<CAPTION>
---------------------------------------------------- -------------------------------------------------------------------
                     Lock-Box                                            Related Collection Account
---------------------------------------------------- -------------------------------------------------------------------
<S>                                                  <C>
File 57266                                           NAME OF CURRENT ACCOUNT HOLDER:
Los Angeles, CA  90074-7266                          Bell Microproducts Funding Corporation
                                                     ACCOUNT NUMBER: 14594-03034
                                                                     Bank of America, N.A.
                                                     ABA NUMBER:  121000358
                                                     CONTACT PERSON: Sarah Singh
                                                     CONTACT'S TEL: (714)850-6536
                                                     CONTACT'S FAX: (714)850-6586
---------------------------------------------------- -------------------------------------------------------------------
12778 Collections Center Drive                       NAME OF CURRENT ACCOUNT HOLDER:
Chicago, IL 60693                                    Bell Microproducts Funding Corporation
                                                     ACCOUNT NUMBER: 14594-03034
                                                                     Bank of America, N.A.
                                                     ABA NUMBER:  121000358
                                                     CONTACT PERSON: Sarah Singh
                                                     CONTACT'S TEL: (714)850-6536
                                                     CONTACT'S FAX: (714)850-6586
---------------------------------------------------- -------------------------------------------------------------------
</TABLE>


                                 Exhibit IV - 1

<PAGE>


                                    EXHIBIT V

                         FORM OF COMPLIANCE CERTIFICATE



To:        Wachovia Bank, National Association, as Agent

           This  Compliance  Certificate  is furnished  pursuant to that certain
Credit  and  Security  Agreement  dated as of  September  20,  2004  among  Bell
Microproducts Funding Corporation (the "Borrower"), Bell Microproducts Inc. (the
"Servicer"),  the Lenders party thereto and Wachovia Bank, National Association,
as agent for such Lenders (the "Agreement").

           THE UNDERSIGNED HEREBY CERTIFIES THAT:

           1. I am the duly elected [CHIEF FINANCIAL OFFICER] of Borrower.

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

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

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

           [5.  DESCRIBED  BELOW ARE THE  EXCEPTIONS,  IF ANY, TO PARAGRAPH 3 BY
LISTING,  IN DETAIL,  THE NATURE OF THE  CONDITION OR EVENT,  THE PERIOD  DURING
WHICH IT HAS EXISTED AND THE ACTION  WHICH  BORROWER  HAS TAKEN,  IS TAKING,  OR
PROPOSES   TO  TAKE   WITH   RESPECT   TO  EACH   SUCH   CONDITION   OR   EVENT:
____________________]


                                  Exhibit V-1
<PAGE>



           The  foregoing  certifications,  together with the  computations  set
forth in  Schedule I hereto and the  financial  statements  delivered  with this
Certificate  in support  hereof,  are made and  delivered as of  ______________,
20__.


                                          By:___________________________________
                                          Name:_________________________________
                                          Title:________________________________



                                  Exhibit V-2
<PAGE>


                      SCHEDULE I TO COMPLIANCE CERTIFICATE


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

           This schedule relates to the month ended: _______________.






                                  Exhibit V-3
<PAGE>


                                   EXHIBIT VI

                        DEPOSIT ACCOUNT CONTROL AGREEMENT
                           (LOCKBOX - WITH ACTIVATION)
================================================================================

           This  Agreement is entered into as of September 20, 2004,  among Bell
Microproducts   Funding   Corporation   ("Company"),   Bell  Microproducts  Inc.
("Servicer"), Wachovia Bank, National Association ("Wachovia"), as agent for the
Lenders under the Credit and Security Agreement, dated as of September 20, 2004,
among the Company, Servicer,  Wachovia, Blue Ridge Asset Funding Corporation and
the Liquidity  Banks from time to time parties thereto  ("Lender"),  and Bank of
America, N.A. ("Bank") with respect to the following:

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

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

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

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

Accordingly, Company, Lender and Bank agree as follows:

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

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

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


                                  Exhibit VI-1
<PAGE>


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

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

4. Bank is permitted to charge the Account:

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

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

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

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

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

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


                                  Exhibit VI-2
<PAGE>


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

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

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

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

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

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

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

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


                                  Exhibit VI-3
<PAGE>


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

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

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

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

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

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

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

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

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


                                  Exhibit VI-4
<PAGE>


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

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

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



                                  Exhibit VI-5
<PAGE>


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



BELL MICROPRODUCTS FUNDING CORPORATION
("COMPANY")

By:___________________________________      Address for notices:
Name:_________________________________      1941 Ringwood Ave.
Title:________________________________      Suite A
                                            San Jose, California  95131
                                            Attention: Chief Financial Officer
                                            Telephone: (408) 467-2735
                                            Fax:       (408) 467-2735

BELL MICROPRODUCTS INC.
("SERVICER")

By:___________________________________      Address for notices:
Name:_________________________________      1941 Ringwood Ave.
Title:________________________________      San Jose, California  95131
                                            Attention: Chief Financial Officer
                                            Telephone: (408) 451-9400
                                            Fax:       (408) 451-1632

WACHOVIA BANK, NATIONAL ASSOCIATION
("LENDER")

By:___________________________________      Address for notices:
Name:_________________________________      Wachovia Securities, Inc.
Title:________________________________      191 Peachtree Street, NE
                                            Atlanta, GA  30303
                                            Attention: Eero Maki
                                            Telephone: (404)332-5275
                                            Fax:       (404)332-5152



                                  Exhibit VI-6
<PAGE>


BANK OF AMERICA, N.A.
("BANK")

By:___________________________________      Address for notices:
Name:_________________________________      South Coast Financial Center BC
Title:________________________________      2nd Floor CA6-137-02-02
                                            675 Anton Boulevard
                                            Costa Mesa, California 92626-1919
                                            Attention: Sarah Singh
                                            Telephone: (714)850-6536
                                            Fax:       (714)850-6586

                                            with a copy to:

                                            Bank of America
                                            14th Floor, CA5-704-14-01
                                            315 Montgomery Street
                                            San Francisco, California 94104-1866
                                            Attention: Shirin Chee
                                            Telephone: (415) 953-7085
                                            Fax:       (415)953-1502


                                  Exhibit VI-7
<PAGE>



                                                                       EXHIBIT A
                                            TO DEPOSIT ACCOUNT CONTROL AGREEMENT

                          STANDARD TERMS AND CONDITIONS

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

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

PROCESSING

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

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

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

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

RETURNED CHECK

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


                                  Exhibit VI-8
<PAGE>


ACCEPTABLE PAYEES

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

CHANGES TO PROCESSING INSTRUCTIONS

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


                                  Exhibit VI-9
<PAGE>



                                                                       EXHIBIT B
                                               DEPOSIT ACCOUNT CONTROL AGREEMENT


                            [Letterhead of Wachovia]



To:        Bank of America, N.A.
           South Coast Financial Center BC
           2nd Floor CA6-137-02-02
           675 Anton Boulevard
           Costa Mesa, California 92626-1919
           Attention:  Sarah Singh

           Bank of America
           14th Floor, CA5-704-14-01
           315 Montgomery Street
           San Francisco, California 94104-1866
           Attention:  Shirin Chee

                     Re:       Bell Microproducts Funding Corporation
                               Account No.  14594-03034

Ladies and Gentlemen:

           Reference is made to the Deposit  Account  Control  Agreement,  dated
September  20,  2004  (the  "Agreement"),   among  Bell  Microproducts   Funding
Corporation,  us and you regarding the above-described  account (the "Account").
In accordance with Section 2 of the Agreement,  we hereby give you notice of our
exercise of control of the Account and we hereby  instruct you to transfer funds
to our account as follows:

Bank Name:       ___________________________
ABA No.:         ___________________________
Account Name:    ___________________________
Account No.:     ___________________________

                                            Very truly yours,

                                            WACHOVIA BANK, NATIONAL ASSOCIATION,
                                            as Lender

                                            By:_________________________________
                                            Name:_______________________________
                                            Title:______________________________


                                 Exhibit VI-10
<PAGE>


                                   EXHIBIT VII

                          FORM OF ASSIGNMENT AGREEMENT


           THIS ASSIGNMENT  AGREEMENT (this  "Assignment  Agreement") is entered
into   as  of   the   ___   day  of   ____________,   ____,   by   and   between
_____________________ ("Assignor") and __________________ ("Assignee").

                             PRELIMINARY STATEMENTS

           A. This  Assignment  Agreement  is being  executed  and  delivered in
accordance  with Section  12.1(b) of that certain Credit and Security  Agreement
dated  as of  September  20,  2004  by  and  among  Bell  Microproducts  Funding
Corporation, as Borrower, Bell Microproducts Inc., as Servicer, Blue Ridge Asset
Funding  Corporation,  Wachovia Bank,  National  Association,  as Agent, and the
Liquidity  Banks party  thereto (as amended,  modified or restated  from time to
time,  the "Credit and Security  Agreement")  and that certain  Liquidity  Asset
Purchase  Agreement dated as of September 20, 2004 by and among Blue Ridge,  the
Liquidity  Banks from time to time party  thereto and  Wachovia  Bank,  National
Association,  as Agent (as amended,  modified or restated from time to time, the
"Liquidity Agreement").  Capitalized terms used and not otherwise defined herein
are used with the meanings set forth or  incorporated by reference in the Credit
and Security Agreement.

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

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

                                    AGREEMENT

           The parties hereto hereby agree as follows:

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


                                 Exhibit VII-1
<PAGE>


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

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

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

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

           (6) By executing and delivering this Assignment  Agreement,  Assignor
and Assignee  confirm to and agree with each other,  the Agent and the Liquidity
Banks as follows: (a) other than the representation and warranty that it has not
created  any  Adverse  Claim  upon any  interest  being  transferred  hereunder,
Assignor makes no representation or warranty and assumes no responsibility  with
respect  to any  statements,  warranties  or  representations  made by any other
Person  in or in  connection  with  any  of  the  Transaction  Documents  or the
Liquidity  Agreement  or  the  execution,  legality,  validity,  enforceability,
genuineness,   sufficiency  or  value  of  Assignee,  the  Credit  and  Security
Agreement, the Liquidity Agreement or any other instrument or document furnished
pursuant thereto or the perfection, priority, condition, value or sufficiency of
any Collateral;  (b) Assignor makes no representation or warranty and assumes no
responsibility  with respect to the  financial  condition of the  Borrower,  any
Obligor,  any Affiliate of the Borrower or the  performance or observance by the


                                 Exhibit VII-2
<PAGE>


Borrower,  any Obligor, any Affiliate of the Borrower of any of their respective
obligations under the Transaction  Documents or any other instrument or document
furnished  pursuant thereto or in connection  therewith;  (c) Assignee  confirms
that  it has  received  a copy  of each  of the  Transaction  Documents  and the
Liquidity Agreement, and other documents and information as it has requested and
deemed  appropriate  to make its own credit  analysis and decision to enter into
this Assignment Agreement; (d) Assignee will, independently and without reliance
upon the Agent,  Blue Ridge,  the Borrower or any other Liquidity Bank or Lender
and based on such documents and information as it shall deem  appropriate at the
time,  continue to make its own credit  decisions in taking or not taking action
under the  Transaction  Documents  and the  Liquidity  Agreement;  (e)  Assignee
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise  such  powers  under the  Transaction  Documents  and the  Liquidity
Agreement as are delegated to the Agent by the terms thereof, together with such
powers as are reasonably  incidental  thereto;  and (f) Assignee  agrees that it
will perform in accordance with their terms all of the obligations which, by the
terms of the  Liquidity  Agreement,  the Credit and Security  Agreement  and the
other Transaction  Documents,  are required to be performed by it as a Liquidity
Bank or, when applicable, as a Lender.

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

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

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

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



                                 Exhibit VII-3
<PAGE>


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

                                            [ASSIGNOR]


                                            By:_________________________________
                                            Name:_______________________________
                                            Title:______________________________


                                            [ASSIGNEE]


                                            By:_________________________________
                                            Name:_______________________________
                                            Title:______________________________



                                 Exhibit VII-4
<PAGE>



                                   SCHEDULE I

                             TO ASSIGNMENT AGREEMENT

                       LIST OF LENDING OFFICES, ADDRESSES
                       FOR NOTICES AND COMMITMENT AMOUNTS

Date:  _____________, ______

Transferred Percentage:        ____________%

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
                   A-1               A-2                B-1               B-2                C-1                C-2
----------------------------------------------------------------------------------------------------------------------------
<S>         <C>               <C>                 <C>               <C>               <C>                <C>
Assignor    Commitment (prior Commitment (after     Outstanding     Ratable Share of      Liquidity          Liquidity
             to giving effect  giving effect to  principal (if any)   Outstanding     Commitment (prior  Commitment (after
            to the Assignment   the Assignment                         principal      to giving effect    giving effect to
                Agreement)        Agreement)                                          to the Assignment    the Assignment
                                                                                          Agreement)          Agreement)
----------------------------------------------------------------------------------------------------------------------------
                   A-1               A-2                B-1               B-2                C-1                C-2
----------------------------------------------------------------------------------------------------------------------------
Assignee    Commitment (prior Commitment (after     Outstanding     Ratable Share of      Liquidity          Liquidity
             to giving effect  giving effect to  principal (if any)   Outstanding     Commitment (prior  Commitment (after
            to the Assignment   the Assignment                         principal      to giving effect    giving effect to
                Agreement)        Agreement)                                          to the Assignment    the Assignment
                                                                                          Agreement)          Agreement)
----------------------------------------------------------------------------------------------------------------------------
</TABLE>


Address for Notices

Attention:
Phone:
Fax:


                                 Exhibit VII-5
<PAGE>


                                   SCHEDULE II
                             TO ASSIGNMENT AGREEMENT


                                EFFECTIVE NOTICE


TO:        ________________________, Assignor
           ________________________
           ________________________
           ________________________

TO:        ________________________, Assignee
           ________________________
           ________________________
           ________________________

           The  undersigned,  as Agent under the Credit and  Security  Agreement
dated as of ______,  ____ by and among  ___________,  a  _________  corporation,
_________,  as Servicer,  Blue Ridge Asset Funding  Corporation,  Wachovia Bank,
National  Association,  as Agent, and the Liquidity Banks party thereto,  hereby
acknowledges  receipt  of  executed   counterparts  of  a  completed  Assignment
Agreement  dated  as  of  ____________,  2004  between  __________________,   as
Assignor, and __________________,  as Assignee. Terms defined in such Assignment
Agreement are used herein as therein defined.

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

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

           [3. PURSUANT TO SUCH ASSIGNMENT  AGREEMENT,  THE ASSIGNEE IS REQUIRED
TO PAY  $____________  TO  ASSIGNOR  AT OR  BEFORE  12:00  NOON  (LOCAL  TIME OF
ASSIGNOR) ON THE EFFECTIVE DATE IN IMMEDIATELY AVAILABLE FUNDS.]

                                            Very truly yours,

                                            WACHOVIA BANK, NATIONAL ASSOCIATION,
                                            as Agent


                                            By:_________________________________
                                            Name:_______________________________
                                            Title:______________________________



                                 Exhibit VII-6
<PAGE>


                                        BLUE RIDGE ASSET FUNDING CORPORATION

                                        By: Wachovia Bank, National Association,
                                            as attorney-in-fact


                                        By:_____________________________________
                                        Name:___________________________________
                                        Title:__________________________________


****[THE BORROWER HEREBY CONSENTS TO THE FOREGOING ASSIGNMENT:

BELL MICROPRODUCTS FUNDING CORPORATION


BY:___________________________________
NAME:_________________________________
TITLE:________________________________]****



                                 Exhibit VII-7
<PAGE>


                                  EXHIBIT VIII

                          CREDIT AND COLLECTION POLICY


                   See Exhibit V to Receivables Sale Agreement




                                 Exhibit VIII-1
<PAGE>


                                   EXHIBIT IX

                             FORM OF PERIODIC REPORT

        Bell Microproducts Funding Corporation Periodic Servicer Report
                              For the Month Ended
                                   7/31/2004
                                    (Page 1)
                                      ($)


Borrowing Base                        ______________

A/R ROLLFORWARD

  Beginning of Month Balance (Total A/R Outstanding)                ____________
  Add: Gross Sales (Domestic                                        ____________
  Less: Total Collections                                           ____________


         Discounts & Allowances       ______________
         NC RMA Credits               ______________
         NN Net Credit Retail Credits ______________
         Volume Purchase Rebates      ______________
         Vendor Pass Thru Credits     ______________ Total Dilution:____________

Less: Contra Offset                                                 ____________
Less: Bad Debt Write-Offs                                           ____________
Less: Misc. Contra Offsets                                          ____________
Add: Recoveries                                                     ____________
Unidentified Misc. Adjustments                                      ____________
Ending A/R Balance                                                  ____________

AGING SCHEDULE
                                           & OF TOTAL AGING
                   -----------------------------------------------------------
                   CURRENT     CURRENT MONTH    1 MONTH PRIOR   2 MONTHS PRIOR
                   -------     -------------    -------------   --------------
Current            _______     _____________    _____________   ______________
1-30 DPD           _______     _____________    _____________   ______________
31-60 DPD          _______     _____________    _____________   ______________
61-90 DPD          _______     _____________    _____________   ______________
91+ DPD            _______     _____________    _____________   ______________

Credit Balance
         > 61 DPD  _______     _____________    _____________   ______________
       Total Aging _______     _____________    _____________   ______________

A/R RECONCILIATIONS

Calculated Ending A/R                                               ____________
Reported Ending A/R                                                 ____________
Difference                                                          ____________

Calculated Ending A/R                                               ____________
Total Aging                                                         ____________
Difference                                                          ____________


INELIGIBLES

Defaulted Receivables (Gross)                                       ____________
Excess (>10% of EAR) Invoices w/terms 60-90 days                    ____________
Invoices w/terms over 91 days                                       ____________
Foreign Excluding Canada <60 days past due                          ____________
Excess (>5% of EAR) A/R from customers in Canada (60days past due   ____________
Crossage at 25% <60 days past due                                   ____________
Contras <60 days PD (see misc.)                                     ____________
Bankrupt & Positive collection balance <60 days past due            ____________
Customer Deductions/Chargebacks <60 days PD                         ____________
Credit Balances over 60 days PD                                     ____________
Intercompany/Employee A/R                                           ____________
Misc.                                                               ____________

Total Ineligibles                                                   ____________

ELIGIBLE RECEIVABLES                                                ____________



                                  Exhibit IX-1
<PAGE>


        Bell Microproducts Funding Corporation Periodic Servicer Report
                              For the Month Ended
                                   7/31/2004
                                    (Page 2)
                                      ($)



                               CURRENT MONTH    1 MONTH PRIOR   2 MONTHS PRIOR
                               -------------    -------------   --------------
EXCESS CARVEOUTS
  Concentrations               _____________    _____________   ______________

BORROWING BASE
  Total A/R                    _____________    _____________   ______________
  Less: Total Ineligibles      _____________    _____________   ______________
  Eligible Recievables         _____________    _____________   ______________
  Less: Total Excess Carveouts _____________    _____________   ______________
  NET POOL BALANCE             _____________    _____________   ______________

RESERVES
  Loss Reserve                 _____________    _____________   ______________
  Dilution Reserve             _____________    _____________   ______________
  Yield Reserve                _____________    _____________   ______________
  Servicing Reserve            _____________    _____________   ______________
  Total Dynamic Reserve        _____________    _____________   ______________
  Reserve Floor                _____________    _____________   ______________
  Required Reserve %           _____________    _____________   ______________
  Required Reserve $ (RR)      _____________    _____________   ______________

FUNDING AVAILABILITY
  Net Proof Balance (NPB)      _____________    _____________   ______________
  Less: Required Reserve       _____________    _____________   ______________
  BORROWING BASE               _____________    _____________   ______________

  Current CP Outstanding (CP)  _____________    _____________   ______________
  Purchase Availability or
   Required Paydown            _____________    _____________   ______________
  Purchase or Paydown at
    Settlement          (INPUT)_____________    _____________   ______________

COMPLIANCE (TRIGGERS AND CAPITALIZATION)

                               COMPLIANCE TEST     COMPLIANCE LEVEL
Acid Interest                  _____________    _____________   ______________
3M Delinquency Trigger         _____________    _____________   ______________
3M Default Ratio               _____________    _____________   ______________
3M Dilution Ratio              _____________    _____________   ______________
Required Capital        (INPUT)_____________    _____________   ______________
Subordinated Note       (INPUT)_____________    _____________   ______________

EXCESS CONCENTRATIONS

<TABLE>
<CAPTION>

<S>                  <C>                 <C>            <C>                  <C>          <C>
     Obligor Name    Short Term Rating    Allowable%    Total Receivables    %of Total    Excess Receivables
1.   ____________    _________________    __________    _________________    _________    ___________________
2.   ____________    _________________    __________    _________________    _________    ___________________
3.   ____________    _________________    __________    _________________    _________    ___________________
4.   ____________    _________________    __________    _________________    _________    ___________________
5.   ____________    _________________    __________    _________________    _________    ___________________
6.   ____________    _________________    __________    _________________    _________    ___________________
7.   ____________    _________________    __________    _________________    _________    ___________________
8.   ____________    _________________    __________    _________________    _________    ___________________
9.   ____________    _________________    __________    _________________    _________    ___________________
10.  ____________    _________________    __________    _________________    _________    ___________________
                                                                             TOTAL                         $0
                                                                                          -------------------
</TABLE>


The undersigned  hereby represents and warrants that the foregoing is a true and
accurate accounting with respect to outstanding  receivables as of July 31, 2004
is in accordance  with the Credit and Security  Agreement  dated August 31, 2004
and that  all  representations  and  warrants  related  to such  Agreements  are
restated and reaffirmed.


Signed:_______________________________              Date:______________


                                  Exhibit IX-2
<PAGE>


        Bell Microproducts Funding Corporation Periodic Servicer Report
                              For the Month Ended
                                   7/31/2004
                                    (Page 2)
                                      ($)



                               CURRENT MONTH    1 MONTH PRIOR   2 MONTHS PRIOR
                               -------------    -------------   --------------
EXCESS CARVEOUTS
  Concentrations               _____________    _____________   ______________

BORROWING BASE
  Total A/R                    _____________    _____________   ______________
  Less: Total Ineligibles      _____________    _____________   ______________
  Eligible Recievables         _____________    _____________   ______________
  Less: Total Excess Carveouts _____________    _____________   ______________
  NET POOL BALANCE             _____________    _____________   ______________

RESERVES
  Loss Reserve                 _____________    _____________   ______________
  Dilution Reserve             _____________    _____________   ______________
  Yield Reserve                _____________    _____________   ______________
  Servicing Reserve            _____________    _____________   ______________
  Total Dynamic Reserve        _____________    _____________   ______________
  Reserve Floor                _____________    _____________   ______________
  Required Reserve %           _____________    _____________   ______________
  Required Reserve $ (RR)      _____________    _____________   ______________

FUNDING AVAILABILITY
  Net Proof Balance (NPB)      _____________    _____________   ______________
  Less: Required Reserve       _____________    _____________   ______________
  BORROWING BASE               _____________    _____________   ______________

  Current CP Outstanding (CP)  _____________    _____________   ______________
  Purchase Availability or
   Required Paydown            _____________    _____________   ______________
  Purchase or Paydown at
    Settlement          (INPUT)_____________    _____________   ______________

COMPLIANCE (TRIGGERS AND CAPITALIZATION)

                               COMPLIANCE TEST     COMPLIANCE LEVEL
Acid Interest                  _____________    _____________   ______________
3M Delinquency Trigger         _____________    _____________   ______________
3M Default Ratio               _____________    _____________   ______________
3M Dilution Ratio              _____________    _____________   ______________
Required Capital        (INPUT)_____________    _____________   ______________
Subordinated Note       (INPUT)_____________    _____________   ______________

EXCESS CONCENTRATIONS

<TABLE>
<CAPTION>

<S>                  <C>                 <C>            <C>                  <C>          <C>
     Obligor Name    Short Term Rating    Allowable%    Total Receivables    %of Total    Excess Receivables
1.   ____________    _________________    __________    _________________    _________    ___________________
2.   ____________    _________________    __________    _________________    _________    ___________________
3.   ____________    _________________    __________    _________________    _________    ___________________
4.   ____________    _________________    __________    _________________    _________    ___________________
5.   ____________    _________________    __________    _________________    _________    ___________________
6.   ____________    _________________    __________    _________________    _________    ___________________
7.   ____________    _________________    __________    _________________    _________    ___________________
8.   ____________    _________________    __________    _________________    _________    ___________________
9.   ____________    _________________    __________    _________________    _________    ___________________
10.  ____________    _________________    __________    _________________    _________    ___________________
                                                                             TOTAL                         $0
                                                                                          -------------------
</TABLE>


The undersigned  hereby represents and warrants that the foregoing is a true and
accurate accounting with respect to outstanding  receivables as of July 31, 2004
is in accordance  with the Credit and Security  Agreement  dated August 31, 2004
and that  all  representations  and  warrants  related  to such  Agreements  are
restated and reaffirmed.


Signed:_______________________________              Date:______________



                                  Exhibit IX-3
<PAGE>



                                    EXHIBIT X

                               FORM OF CONTRACT(S)


                                 [See Attached]





                                   Exhibit X-1



<PAGE>



                                   SCHEDULE A

                         COMMITMENTS OF LIQUIDITY BANKS

--------------------------------------------------------------------------
               LIQUIDITY BANK                              COMMITMENT
--------------------------------------------------------------------------
     Wachovia Bank, National Association                  $75,000,000
--------------------------------------------------------------------------



                                  Exhibit X-2

<PAGE>



                                   SCHEDULE B

                     DOCUMENTS TO BE DELIVERED TO THE AGENT
                       ON OR PRIOR TO THE INITIAL PURCHASE
           1.  Executed  copies  of the  Credit  and  Security  Agreement,  duly
executed by the parties thereto.

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

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

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

              a.        Borrower:  Delaware

              b.        Servicer:  Alabama
                                   Arizona
                                   California
                                   Colorado
                                   Delaware
                                   Florida
                                   Georgia
                                   Illinois
                                   Maryland
                                   Massachusetts
                                   Minnesota
                                   New Jersey
                                   New York
                                   Oregon
                                   Pennsylvania
                                   Texas
                                   Utah

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

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

              a.        Borrower:  Delaware


                                  Exhibit X-3
<PAGE>


              b.        Servicer:  California
                                   Alabama
                                   Texas
                                   Ohio
                                   Colorado
                                   Minnesota
                                   Illinois
                                   Florida
                                   Pennsylvania
                                   Delaware
                                   Georgia
                                   New York
                                   Maryland
                                   Virginia

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

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

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

           10. A  favorable  opinion  of  legal  counsel  for the  Loan  Parties
reasonably  acceptable to the Agent which  addresses  the following  matters and
such other matters as the Agent may reasonably request:

                     (a) The Borrower is a corporation  duly organized,  validly
           existing,  and in  good  standing  under  the  laws of the  state  of
           Delaware and the Servicer is a corporation  duly  organized,  validly
           existing,  and in  good  standing  under  the  laws of the  state  of
           California.

                     (b) Each of the Loan Parties has all requisite authority to
           conduct its  business  in each  jurisdiction  where  failure to be so
           qualified  would  have a  material  adverse  effect on such  entity's
           business.

                     (c) The  execution and delivery by each of the Loan Parties
           of  the  Transaction  Document  to  which  it  is  a  party  and  its
           performance of its  obligations  thereunder have been duly authorized
           by all necessary organizational action and proceedings on the part of
           such entity and will not:


                                  Exhibit X-4
<PAGE>


                     (i) require any action by or in respect of, or filing with,
           any governmental  body,  agency or official (other than the filing of
           UCC financing statements);

                     (ii)  contravene,   or  constitute  a  default  under,  any
           provision  of  applicable  law or  regulation  or of its  articles or
           certificate of incorporation or bylaws or of any agreement, judgment,
           injunction,  order,  decree  or other  instrument  binding  upon such
           entity; or

                     (iii) result in the creation or  imposition  of any Adverse
           Claim on assets of such entity or any of its Subsidiaries  (except as
           contemplated by the Transaction Documents).

                     (d) Each of the Transaction  Documents to which each of the
           Loan  Parties  and  Performance  Guarantor  is a party  has been duly
           executed  and  delivered by such entity and  constitutes  the legally
           valid,  and  binding   obligation  of  such  entity   enforceable  in
           accordance  with its  terms,  except to the  extent  the  enforcement
           thereof  may be limited by  bankruptcy,  insolvency  or similar  laws
           affecting the enforcement of creditors'  rights generally and subject
           also to the availability of equitable  remedies if equitable remedies
           are sought.

                     (e) The provisions of the Credit and Security Agreement are
           effective to create valid  security  interests in favor of the Agent,
           for the benefit of the Secured Parties,  in all of Borrower's  right,
           title and  interest in and to the  Receivables  and Related  Security
           described  therein which  constitute  "accounts,"  "chattel paper" or
           "general intangibles" (each as defined in the UCC) (collectively, the
           "Opinion   Collateral"),   as   security   for  the  payment  of  the
           Obligations.

                     (f) Each of the UCC-1 Financing  Statements naming Borrower
           as debtor,  and Agent, as secured party, to be filed in the office of
           the Secretary of State of Delaware, is in appropriate form for filing
           therein.  Upon  filing of such  UCC-1  Financing  Statements  in such
           filing offices and payment of the required  filing fees, the security
           interest  in favor  of the  Agent,  for the  benefit  of the  Secured
           Parties, in the Opinion Collateral will be perfected.

                     (g) Based solely on our review of the  [describe UCC Search
           Reports], and assuming (i) the filing of the Financing Statements and
           payment of the required  filing fees in accordance with paragraph (f)
           and (ii) the absence of any intervening  filings between the date and
           time of the Search Reports and the date and time of the filing of the
           Financing  Statements,  the  security  interest  of the  Agent in the
           Opinion  Collateral is prior to any security  interest granted in the
           Opinion  Collateral by Borrower,  the priority of which is determined
           solely by the filing of a  financing  statement  in the office of the
           Secretary of State of Delaware.

                     (h) Neither of the Loan Parties is a "holding company" or a
           "subsidiary  holding  company"  of a  "holding  company"  within  the
           meaning  of the  Public  Utility  Holding  Company  Act of  1935,  as
           amended,  or an  "investment  company"  within  the  meaning  of  the
           Investment Company Act of 1940, as amended.

           11. A Compliance Certificate.


                                  Exhibit X-5
<PAGE>


           12. The Fee Letter.

           13. A Periodic Report as at _____________, 2004.

           14. A pro forma balance sheet of Borrower as at _____________, 2004.

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

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

           17. The  Liquidity  Agreement,  duly  executed by each of the parties
thereto.

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

           19.  Executed  copies of the Partial  Release by  Winthrop  Resources
Corporation.

           20. Executed  copies of the Partial Release by Mitsubishi  Electric &
Electronics USA, Inc.

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

           22. The side  letter  with  respect to sharing of  information,  duly
executed by each of eth parties thereto.


                                  Exhibit X-6



</TEXT>
</DOCUMENT>
