EXECUTION COPY

CASH COLLATERAL AGREEMENT

     THIS CASH COLLATERAL AGREEMENT (this “Agreement”) dated as of May 31, 2005
is by and between GLENAYRE ELECTRONICS, INC., a Colorado corporation (the
“Parent”) and WACHOVIA BANK, NATIONAL ASSOCIATION, as Administrative Agent for
the Lenders under the Credit Agreement referred to below (the “Administrative
Agent”).

RECITALS

     WHEREAS, Entertainment Distribution Company, LLC, a Delaware limited
liability company (the “Borrower”), those Domestic Subsidiaries of the Borrower
as may from time to time become a party thereto (the “Guarantors”), the lenders
from time to time party thereto (the “Lenders”), and Wachovia Bank, National
Association, as administrative agent for the Lenders, have entered into that
certain Credit Agreement dated as of May 31, 2005 (as amended, restated,
supplemented or otherwise modified from time to time, the “Credit Agreement”);

     WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make their respective Loans and
to issue and/or acquire participation interests in Letters of Credit under the
Credit Agreement that the Parent (a) shall execute and deliver this Agreement to
the Administrative Agent and (b) shall deposit the Cash Collateral into the Cash
Collateral Account to secure the Secured Obligations, such Cash Collateral to be
pledged to the Administrative Agent for the benefit of the Lenders (the “Secured
Parties”); and

     WHEREAS, the Parent, pursuant to the requirements of the Credit Agreement,
seeks to grant to the Administrative Agent for the benefit of the Secured
Parties a first priority perfected security interest in the Cash Collateral
Account.

     NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

     1. Defined Terms. Capitalized terms used herein but not otherwise defined
herein shall have the meanings assigned to such terms in the Credit Agreement.
As used herein, the following terms shall have the meanings specified below:

     “Cash Collateral Account” shall have the meaning assigned to such term in
Section 2(a)(i).

     “Cash Collateral” shall have the meaning assigned to such term in
Section 2(a).

     “Secured Obligations” means all obligations of the Borrower and the other
Credit Parties in respect of the Term Loan under the Credit Agreement including,
without limitation, principal and accrued interest.

     2. Cash Collateral.

     (a) Grant of Security Interest. To secure the prompt payment and
performance in full when due, whether by lapse of time, acceleration, or
otherwise, of the Secured Obligations, the

 

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Parent hereby grants to the Administrative Agent a continuing security interest
in, and a right to set off against, any and all right, title and interest of the
Parent in and to the following (collectively, the “Cash Collateral”), whether
now owned or existing or owned, acquired, or arising hereafter:

     (i) that certain money market account no. 2000028669780 in the name of the
Parent maintained with Wachovia Bank, National Association, as depository (the
“Bank”), and any and all money and investment property therein, including any
and all certificates or instruments purchased with funds deposited in such
account, and all renewals of such instruments and certificates and replacements
therefor, whether in the form of certificates of deposit or other instruments,
notes, securities or accounts (including, without limitation, cash and Cash
Equivalents) and any other cash and non-cash proceeds of the principal amount of
the foregoing, including interest and dividends thereon and other property
received in respect of, or in substitution or exchange for any of the foregoing
(all of the foregoing is collectively referred to as the “Cash Collateral
Account”); and

     (ii) all proceeds of the Cash Collateral Account, including, without
limitation, interest or dividends on the Cash Collateral Account or such
certificates, instruments, notes, securities or accounts; provided, that all
Liens of the Administrative Agent in amounts disbursed under clause 2(c)(ii) or
2(c)(iii) below or the Credit Agreement shall be automatically released upon
such disbursement, and such disbursements shall be made free and clear of any
Lien of the Administrative Agent or any Lender.

     (b) Amount of Cash Collateral. On the Closing Date, the Parent shall
deposit in the Cash Collateral Account an amount in Dollars equal $16,500,000.

     (c) Access to Amounts in Cash Collateral Account.

     (i) The Cash Collateral Account will be an account maintained with the Bank
in the name of the Parent for the benefit of the Administrative Agent. The
amounts in the Cash Collateral Account will be held for the sole benefit of the
Administrative Agent. Subject to clause 2(c)(ii) and 2(c)(iii) below, the Parent
agrees that the Administrative Agent is the sole party authorized to withdraw
amounts from, to draw upon, or to otherwise exercise any powers with respect to
the Cash Collateral Account, and that the Parent shall have no authority to
withdraw any amounts from, to draw upon, or to otherwise exercise any power as a
depositor, owner or otherwise with respect to the Cash Collateral Account and
the funds deposited therein.

     (ii) So long as no Default or Event of Default shall have occurred and be
continuing, the Parent shall be entitled to receive distributions and dividends
on the Cash Collateral upon request free and clear of any Liens in favor of the
Administrative Agent; provided, however, that (A) the balance of funds in the
Cash Collateral Account shall at all times be greater than or equal to
$16,500,000 less the amount of Cash Collateral released by the Administrative
Agent to the Parent pursuant to Section 5.12(b) of the Credit Agreement and
(B) the Parent may request such distributions and dividends no more frequently
than once per quarter.

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     (iii) The Cash Collateral shall be released to the Parent, free and clear
of any Liens in favor of the Administrative Agent, on the terms and conditions
set forth in Section 5.12(b) of the Credit Agreement.

     (d) Further Assurances. The Parent shall execute and deliver to the
Administrative Agent such documents and agreements (including, without
limitation, any account control agreements), and shall take or cause to be taken
such actions, as the Administrative Agent may, from time to time, request to
carry out the terms and conditions of this Agreement and the other Credit
Documents, including, without limitation, any and all other filings and
recordings reasonably deemed necessary by the Administrative Agent to ensure
that the Administrative Agent has a first priority perfected security interest
in the Cash Collateral Account. The Parent agrees that it is obligated to pay
all customary and reasonable bank charges resulting from the Cash Collateral
Account.

3. Representations and Warranties. The Parent hereby represents and warrants
that:

     (a) it has the corporate right, power and authority to execute, deliver and
perform this Agreement and has taken all necessary corporate action to authorize
the execution, delivery and performance of this Agreement;

     (b) this Agreement constitutes the legal, valid and binding obligation of
the Parent enforceable against it in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors’ rights
generally and by the availability of equitable remedies;

     (c) the execution, delivery and performance of this Agreement will not
violate any provision of any applicable law or material contractual obligation
of the Parent;

     (d) no consent or authorization of, filing with, or other act by or in
respect of, any arbitrator or governmental authority and no consent of any other
person or entity (including, without limitation, any stockholder or creditor of
such person or entity), is required in connection with the execution, delivery,
performance, validity or enforceability of this Agreement; provided, it is
understood and agreed that the Parent’s corporate owner, Glenayre Technologies,
Inc., is required to file this Agreement with the US Securities and Exchange
Commission; and

     (e) it is the legal and beneficial owner of the Cash Collateral, free and
clear of any adverse claims.

4. Miscellaneous.

     (a) Notices. All notices and other communications to the Administrative
Agent hereunder shall be in writing and shall be given in accordance with
Section 9.2 of the Credit Agreement. All notices and other communications to the
Parent hereunder shall be in writing and shall be given in accordance with
Section 17 of the Parent Pledge Agreement.

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     (b) Survival of Agreement. All covenants, agreements, representations and
warranties made by the Parent herein and in the certificates or other
instruments prepared or delivered in connection with or pursuant to this
Agreement shall be considered to have been relied upon by the Administrative
Agent regardless of any investigation made by the Administrative Agent or on its
behalf, and shall continue in full force and effect as long as any Cash
Collateral remains in the Cash Collateral Account.

     (c) Binding Effect; Termination.

     (i) This Agreement shall be binding upon and inure to the benefit of the
Parent and the Administrative Agent and their respective successors and assigns;
provided that the Parent may not assign or transfer any of its rights or
obligations hereunder or any of its interests in the Cash Collateral Account
without prior written consent of the Administrative Agent.

     (ii) The term of this Agreement shall be until the earlier to occur of
(a) the indefeasible payment in full of the Secured Obligations or (b) the
release of all of the Cash Collateral as provided by Section 2(c)(iii) above.

     (d) No Waiver; Remedies Cumulative. No failure or delay on the part of the
Administrative Agent in exercising any right, power or privilege hereunder and
no course of dealing between the Parent and the Administrative Agent shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder. The
rights and remedies provided herein are cumulative and not exclusive of any
rights or remedies which the Administrative Agent would otherwise have. No
notice to or demand on the Parent in any case shall entitle the Parent to any
other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of the Administrative Agent to any other or
further action in any circumstances without notice or demand.

     (e) Amendments, Waivers and Consents. Neither this Agreement nor any of the
terms hereof may be amended, changed, waived, discharged or terminated unless
such amendment, change, waiver, discharge or termination is in writing signed by
each of the parties hereto.

     (f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall constitute one and the same instrument. It shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart. Delivery of executed counterparts of this Agreement by
telecopy shall be effective as an original and shall constitute a representation
that an original shall be delivered.

     (g) Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement.

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     (h) Governing Law; Submission to Jurisdiction; Waiver of Jury Trial; Venue.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK (INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL
OBLIGATIONS LAW, BUT EXCLUDING ALL OTHER CHOICE OF LAW AND CONFLICTS OF LAW
RULES). The terms of Sections 9.14 and 9.17 of the Credit Agreement are
incorporated herein by reference, mutatis mutandis, and the parties hereto agree
to such terms.

     (i) Severability. If any provision of this Agreement is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.

     (j) Entirety. This Agreement represents the entire agreement of the parties
hereto regarding the subject matter hereof, and supersedes all prior agreements
and understandings, oral or written, if any.

[Signature Page Follows]

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     IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Agreement to be duly executed and delivered as of the date first above
written.

              PARENT:   GLENAYRE ELECTRONICS, INC.,         a Colorado
corporation    
 
           

  By   /s/ DEBRA ZIOLA    

           

  Name:   Debra Ziola    

  Title:   Chief Financial Officer    

Entertainment Distribution Company, LLC
Cash Collateral Agreement

 

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              ADMINISTRATIVE AGENT:   WACHOVIA BANK, NATIONAL ASSOCIATION, as  
      Administrative Agent under the Credit Agreement    
 
           

  By   /s/ JOHN C. COFFIN    

           

  Name:   John C. Coffin    

  Title:   Senior Vice President    

Entertainment Distribution Company, LLC
Cash Collateral Agreement