exv10w2






Confidential Treatment Requested.

Confidential Material in this document has been redacted

and filed separately with the Commission.

















 





Exhibit 10.2




REVOLVING CREDIT




AND




SECURITY AGREEMENT




PNC BANK, NATIONAL ASSOCIATION




(AS LENDER AND AS AGENT)




WITH




DIGITAL RECORDERS, INC.

and

TWINVISION OF NORTH AMERICA, INC.

(BORROWERS)




and




DRI CORPORATION

(GUARANTOR)




June 30, 2008





 









 








TABLE OF CONTENTS




	 	 	 	 	 	 	 	 	 
	I.	 	DEFINITIONS	 	 	1	 
	 
	 	1.1.	 	Accounting Terms	 	 	1	 
	 
	 	1.2.	 	General Terms	 	 	1	 
	 
	 	1.3.	 	Uniform Commercial Code Terms	 	 	21	 
	 
	 	1.4.	 	Certain Matters of Construction	 	 	21	 
	 
	 	 	 	 	 	 	 	 
	II.	 	ADVANCES, PAYMENTS	 	 	22	 
	 
	 	2.1.	 	Revolving Advances	 	 	22	 
	 
	 	2.2.	 	Procedure for Revolving Advances Borrowing	 	 	22	 
	 
	 	2.3.	 	Disbursement of Advance Proceeds	 	 	25	 
	 
	 	2.4.	 	[Reserved]	 	 	25	 
	 
	 	2.5.	 	Maximum Advances	 	 	25	 
	 
	 	2.6.	 	Repayment of Advances	 	 	25	 
	 
	 	2.7.	 	Repayment of Excess Advances	 	 	26	 
	 
	 	2.8.	 	Statement of Account	 	 	26	 
	 
	 	2.9.	 	Letters of Credit	 	 	26	 
	 
	 	2.10.	 	Issuance of Letters of Credit	 	 	26	 
	 
	 	2.11.	 	Requirements For Issuance of Letters of Credit	 	 	27	 
	 
	 	2.12.	 	Disbursements, Reimbursement	 	 	27	 
	 
	 	2.13.	 	Repayment of Participation Advances	 	 	29	 
	 
	 	2.14.	 	Documentation	 	 	29	 
	 
	 	2.15.	 	Determination to Honor Drawing Request	 	 	29	 
	 
	 	2.16.	 	Nature of Participation and Reimbursement Obligations	 	 	30	 
	 
	 	2.17.	 	Indemnity	 	 	31	 
	 
	 	2.18.	 	Liability for Acts and Omissions	 	 	31	 
	 
	 	2.19.	 	Additional Payments	 	 	33	 
	 
	 	2.20.	 	Manner of Borrowing and Payment	 	 	33	 
	 
	 	2.21.	 	Mandatory Prepayments	 	 	34	 
	 
	 	2.22.	 	Use of Proceeds	 	 	34	 
	 
	 	2.23.	 	Defaulting Lender	 	 	35	 
	 
	 	 	 	 	 	 	 	 
	III.	 	INTEREST AND FEES	 	 	36	 
	 
	 	3.1.	 	Interest	 	 	36	 
	 
	 	3.2.	 	Letter of Credit Fees	 	 	36	 
	 
	 	3.3.	 	Closing Fee and Facility Fee	 	 	37	 
	 
	 	3.4.	 	Collateral Evaluation Fee and Collateral Monitoring Fee	 	 	37	 
	 
	 	3.5.	 	Computation of Interest and Fees	 	 	38	 
	 
	 	3.6.	 	Maximum Charges	 	 	38	 
	 
	 	3.7.	 	Increased Costs	 	 	38	 
	 
	 	3.8.	 	Basis For Determining Interest Rate Inadequate or Unfair	 	 	39	 
	 
	 	3.9.	 	Capital Adequacy	 	 	39	 
	 
	 	3.10.	 	Gross Up for Taxes	 	 	40	 
	 
	 	3.11.	 	Withholding Tax Exemption	 	 	40	 
	 
	 	 	 	 	 	 	 	 
	IV.	 	COLLATERAL: GENERAL TERMS	 	 	41	 
	 
	 	4.1.	 	Security Interest in the Collateral	 	 	41	 






i









 






	 	 	 	 	 	 	 	 	 
	 
	 	4.2.	 	Perfection of Security Interest	 	 	41	 
	 
	 	4.3.	 	Disposition of Collateral	 	 	42	 
	 
	 	4.4.	 	Preservation of Collateral	 	 	42	 
	 
	 	4.5.	 	Ownership of Collateral	 	 	42	 
	 
	 	4.6.	 	Defense of Agent’s and Lenders’ Interests	 	 	43	 
	 
	 	4.7.	 	Books and Records	 	 	44	 
	 
	 	4.8.	 	Financial Disclosure	 	 	44	 
	 
	 	4.9.	 	Compliance with Laws	 	 	44	 
	 
	 	4.10.	 	Inspection of Premises	 	 	44	 
	 
	 	4.11.	 	Insurance	 	 	44	 
	 
	 	4.12.	 	Failure to Pay Insurance	 	 	45	 
	 
	 	4.13.	 	Payment of Taxes	 	 	45	 
	 
	 	4.14.	 	Payment of Leasehold Obligations	 	 	46	 
	 
	 	4.15.	 	Receivables	 	 	46	 
	 
	 	4.16.	 	Inventory	 	 	48	 
	 
	 	4.17.	 	Maintenance of Equipment	 	 	48	 
	 
	 	4.18.	 	Exculpation of Liability	 	 	49	 
	 
	 	4.19.	 	Environmental Matters	 	 	49	 
	 
	 	4.20.	 	Financing Statements	 	 	51	 
	 
	 	 	 	 	 	 	 	 
	V.	 	REPRESENTATIONS AND WARRANTIES	 	 	51	 
	 
	 	5.1.	 	Authority	 	 	51	 
	 
	 	5.2.	 	Formation and Qualification	 	 	52	 
	 
	 	5.3.	 	Survival of Representations and Warranties	 	 	52	 
	 
	 	5.4.	 	Tax Returns	 	 	52	 
	 
	 	5.5.	 	Financial Statements	 	 	52	 
	 
	 	5.6.	 	Entity Names	 	 	53	 
	 
	 	5.7.	 	O.S.H.A. and Environmental Compliance	 	 	53	 
	 
	 	5.8.	 	Solvency; No Litigation, Violation, Indebtedness or Default	 	 	54	 
	 
	 	5.9.	 	Patents, Trademarks, Copyrights and Licenses	 	 	55	 
	 
	 	5.10.	 	Licenses and Permits	 	 	55	 
	 
	 	5.11.	 	Default of Indebtedness	 	 	55	 
	 
	 	5.12.	 	No Default	 	 	56	 
	 
	 	5.13.	 	No Burdensome Restrictions	 	 	56	 
	 
	 	5.14.	 	No Labor Disputes	 	 	56	 
	 
	 	5.15.	 	Margin Regulations	 	 	56	 
	 
	 	5.16.	 	Investment Company Act	 	 	56	 
	 
	 	5.17.	 	Disclosure	 	 	56	 
	 
	 	5.18.	 	Delivery of Subordinated Loan Documentation	 	 	56	 
	 
	 	5.19.	 	Swaps	 	 	57	 
	 
	 	5.20.	 	Conflicting Agreements	 	 	57	 
	 
	 	5.21.	 	Application of Certain Laws and Regulations	 	 	57	 
	 
	 	5.22.	 	Business and Property of Loan Parties	 	 	57	 
	 
	 	5.23.	 	Section 20 Subsidiaries	 	 	57	 
	 
	 	5.24.	 	Anti-Terrorism Laws	 	 	57	 
	 
	 	5.25.	 	Trading with the Enemy	 	 	58	 
	 
	 	5.26.	 	Trade Relations	 	 	58	 






ii









 






	 	 	 	 	 	 	 	 	 
	 
	 	5.27.	 	Loans to Shareholders, Directors, Officers or Affiliates	 	 	58	 
	 
	 	 	 	 	 	 	 	 
	VI.	 	AFFIRMATIVE COVENANTS	 	 	58	 
	 
	 	6.1.	 	Payment of Fees	 	 	58	 
	 
	 	6.2.	 	Conduct of Business and Maintenance of Existence and Assets	 	 	59	 
	 
	 	6.3.	 	Violations	 	 	59	 
	 
	 	6.4.	 	Government Receivables	 	 	59	 
	 
	 	6.5.	 	Financial Covenants	 	 	59	 
	 
	 	6.6.	 	Execution of Supplemental Instruments	 	 	60	 
	 
	 	6.7.	 	Payment of Indebtedness	 	 	60	 
	 
	 	6.8.	 	Standards of Financial Statements	 	 	60	 
	 
	 	6.9.	 	Federal Securities Laws	 	 	60	 
	 
	 	 	 	 	 	 	 	 
	VII.	 	NEGATIVE COVENANTS	 	 	60	 
	 
	 	7.1.	 	Merger, Consolidation, Acquisition and Sale of Assets	 	 	60	 
	 
	 	7.2.	 	Creation of Liens	 	 	61	 
	 
	 	7.3.	 	Guarantees	 	 	61	 
	 
	 	7.4.	 	Investments	 	 	61	 
	 
	 	7.5.	 	Loans	 	 	61	 
	 
	 	7.6.	 	Capital Expenditures	 	 	62	 
	 
	 	7.7.	 	Dividends	 	 	62	 
	 
	 	7.8.	 	Indebtedness	 	 	62	 
	 
	 	7.9.	 	Nature of Business	 	 	62	 
	 
	 	7.10.	 	Transactions with Affiliates	 	 	62	 
	 
	 	7.11.	 	Leases	 	 	63	 
	 
	 	7.12.	 	Subsidiaries	 	 	63	 
	 
	 	7.13.	 	Fiscal Year and Accounting Changes	 	 	63	 
	 
	 	7.14.	 	Pledge of Credit	 	 	63	 
	 
	 	7.15.	 	Amendment of Articles of Incorporation, By-Laws	 	 	63	 
	 
	 	7.16.	 	Compliance with ERISA	 	 	63	 
	 
	 	7.17.	 	Payment of Indebtedness	 	 	64	 
	 
	 	7.18.	 	Anti-Terrorism Laws	 	 	64	 
	 
	 	7.19.	 	Membership/Partnership Interests	 	 	64	 
	 
	 	7.20.	 	Trading with the Enemy Act	 	 	64	 
	 
	 	7.21.	 	Other Agreements	 	 	65	 
	 
	 	7.22.	 	Robinson Turney International, Inc	 	 	65	 
	 
	 	 	 	 	 	 	 	 
	VIII.	 	CONDITIONS PRECEDENT	 	 	65	 
	 
	 	8.1.	 	Conditions to Initial Advances	 	 	65	 
	 
	 	8.2.	 	Conditions to Each Advance	 	 	68	 
	 
	 	 	 	 	 	 	 	 
	IX.	 	INFORMATION AS TO BORROWERS	 	 	68	 
	 
	 	9.1.	 	Disclosure of Material Matters	 	 	69	 
	 
	 	9.2.	 	Schedules	 	 	69	 
	 
	 	9.3.	 	Environmental Reports	 	 	69	 
	 
	 	9.4.	 	Litigation	 	 	69	 
	 
	 	9.5.	 	Material Occurrences	 	 	69	 
	 
	 	9.6.	 	Government Receivables/Surety or Performance Bonds	 	 	70	 
	 
	 	9.7.	 	Annual Financial Statements	 	 	70	 






iii









 






	 	 	 	 	 	 	 	 	 
	 
	 	9.8.	 	Quarterly Financial Statements	 	 	70	 
	 
	 	9.9.	 	Monthly Financial Statements	 	 	70	 
	 
	 	9.10.	 	Other Reports	 	 	70	 
	 
	 	9.11.	 	Additional Information	 	 	71	 
	 
	 	9.12.	 	Projected Operating Budget	 	 	71	 
	 
	 	9.13.	 	Variances From Operating Budget	 	 	71	 
	 
	 	9.14.	 	Notice of Suits, Adverse Events	 	 	71	 
	 
	 	9.15.	 	ERISA Notices and Requests	 	 	71	 
	 
	 	9.16.	 	Additional Documents	 	 	72	 
	 
	 	 	 	 	 	 	 	 
	X.	 	EVENTS OF DEFAULT	 	 	72	 
	 
	 	10.1.	 	Nonpayment	 	 	72	 
	 
	 	10.2.	 	Breach of Representation	 	 	72	 
	 
	 	10.3.	 	Financial Information	 	 	73	 
	 
	 	10.4.	 	Judicial Actions	 	 	73	 
	 
	 	10.5.	 	Noncompliance	 	 	73	 
	 
	 	10.6.	 	Judgments	 	 	73	 
	 
	 	10.7.	 	Bankruptcy	 	 	73	 
	 
	 	10.8.	 	Inability to Pay	 	 	73	 
	 
	 	10.9.	 	Affiliate Bankruptcy	 	 	73	 
	 
	 	10.10.	 	Material Adverse Effect	 	 	74	 
	 
	 	10.11.	 	Lien Priority	 	 	74	 
	 
	 	10.12.	 	Subordinated Loan Default	 	 	74	 
	 
	 	10.13.	 	Cross Default	 	 	74	 
	 
	 	10.14.	 	Breach of Guaranty	 	 	74	 
	 
	 	10.15.	 	Change of Control	 	 	74	 
	 
	 	10.16.	 	Invalidity	 	 	74	 
	 
	 	10.17.	 	Licenses	 	 	74	 
	 
	 	10.18.	 	Seizures	 	 	74	 
	 
	 	10.19.	 	Operations	 	 	75	 
	 
	 	10.20.	 	Pension Plans	 	 	75	 
	 
	 	 	 	 	 	 	 	 
	XI.	 	LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT	 	 	75	 
	 
	 	11.1.	 	Rights and Remedies	 	 	75	 
	 
	 	11.2.	 	Agent’s Discretion	 	 	77	 
	 
	 	11.3.	 	Setoff	 	 	77	 
	 
	 	11.4.	 	Rights and Remedies not Exclusive	 	 	77	 
	 
	 	11.5.	 	Allocation of Payments After Event of Default	 	 	77	 
	 
	 	 	 	 	 	 	 	 
	XII.	 	WAIVERS AND JUDICIAL PROCEEDINGS	 	 	78	 
	 
	 	12.1.	 	Waiver of Notice	 	 	78	 
	 
	 	12.2.	 	Delay	 	 	78	 
	 
	 	12.3.	 	Jury Waiver	 	 	78	 
	 
	 	 	 	 	 	 	 	 
	XIII.	 	EFFECTIVE DATE AND TERMINATION	 	 	79	 
	 
	 	13.1.	 	Term	 	 	79	 
	 
	 	13.2.	 	Termination	 	 	79	 
	 
	 	 	 	 	 	 	 	 
	XIV.	 	REGARDING AGENT	 	 	79	 






iv









 






	 	 	 	 	 	 	 	 	 
	 
	 	14.1.	 	Appointment	 	 	79	 
	 
	 	14.2.	 	Nature of Duties	 	 	80	 
	 
	 	14.3.	 	Lack of Reliance on Agent and Resignation	 	 	80	 
	 
	 	14.4.	 	Certain Rights of Agent	 	 	81	 
	 
	 	14.5.	 	Reliance	 	 	81	 
	 
	 	14.6.	 	Notice of Default	 	 	81	 
	 
	 	14.7.	 	Indemnification	 	 	82	 
	 
	 	14.8.	 	Agent in its Individual Capacity	 	 	82	 
	 
	 	14.9.	 	Delivery of Documents	 	 	82	 
	 
	 	14.10.	 	Loan Parties’ Undertaking to Agent	 	 	82	 
	 
	 	14.11.	 	No Reliance on Agent’s Customer Identification Program	 	 	82	 
	 
	 	14.12.	 	Other Agreements	 	 	83	 
	 
	 	 	 	 	 	 	 	 
	XV.	 	BORROWING AGENCY	 	 	83	 
	 
	 	15.1.	 	Borrowing Agency Provisions	 	 	83	 
	 
	 	15.2.	 	Waiver of Subrogation	 	 	84	 
	 
	 	 	 	 	 	 	 	 
	XVI.	 	MISCELLANEOUS	 	 	84	 
	 
	 	16.1.	 	Governing Law	 	 	84	 
	 
	 	16.2.	 	Entire Understanding	 	 	84	 
	 
	 	16.3.	 	Successors and Assigns; Participations; New Lenders	 	 	87	 
	 
	 	16.4.	 	Application of Payments	 	 	89	 
	 
	 	16.5.	 	Indemnity	 	 	89	 
	 
	 	16.6.	 	Notice	 	 	89	 
	 
	 	16.7.	 	Survival	 	 	91	 
	 
	 	16.8.	 	Severability	 	 	91	 
	 
	 	16.9.	 	Expenses	 	 	91	 
	 
	 	16.10.	 	Injunctive Relief	 	 	92	 
	 
	 	16.11.	 	Consequential Damages	 	 	92	 
	 
	 	16.12.	 	Captions	 	 	92	 
	 
	 	16.13.	 	Counterparts; Facsimile Signatures	 	 	92	 
	 
	 	16.14.	 	Construction	 	 	92	 
	 
	 	16.15.	 	Confidentiality; Sharing Information	 	 	92	 
	 
	 	16.16.	 	Publicity	 	 	93	 
	 
	 	16.17.	 	Certifications From Banks and Participants; US PATRIOT Act	 	 	93	 
	 
	 	 	 	 	 	 	 	 
	XVII.	 	GUARANTY	 	 	93	 
	 
	 	17.1.	 	Guaranty	 	 	93	 
	 
	 	17.2.	 	Waivers	 	 	94	 
	 
	 	17.3.	 	No Defense	 	 	94	 
	 
	 	17.4.	 	Guaranty of Payment	 	 	94	 
	 
	 	17.5.	 	Indemnity	 	 	94	 
	 
	 	17.6.	 	Liabilities Absolute	 	 	95	 
	 
	 	17.7.	 	Waiver of Notice	 	 	96	 
	 
	 	17.8.	 	Agent’s Discretion	 	 	96	 
	 
	 	17.9.	 	Reinstatement	 	 	96	 
	 
	 	17.10.	 	Action Upon Event of Default	 	 	97	 
	 
	 	17.11.	 	Statute of Limitations	 	 	98	 






v









 






	 	 	 	 	 	 	 	 	 
	 
	 	17.12.	 	Interest	 	 	98	 
	 
	 	17.13.	 	Guarantor’s Investigation	 	 	98	 
	 
	 	17.14.	 	Termination	 	 	98	 






vi









 






LIST OF EXHIBITS AND SCHEDULES




Exhibits




	 	 	 
	Exhibit 1.2(a)

	 	Borrowing Base Certificate
	Exhibit 1.2(b)

	 	Compliance Certificate
	Exhibit 2.1(a)

	 	Revolving Credit Note
	Exhibit 5.5(b)

	 	Financial Projections
	Exhibit 8.1(i)

	 	Financial Condition Certificate
	Exhibit 16.3

	 	Commitment Transfer Supplement






Schedules




	 	 	 
	Schedule 1.2(a)

	 	Permitted Encumbrances
	Schedule 4.5

	 	Equipment and Inventory Locations
	Schedule 4.5(c)

	 	Chief Executive Offices
	Schedule 4.15(h)

	 	Deposit and Investment Accounts
	Schedule 4.19

	 	Real Property
	Schedule 5.1

	 	Consents
	Schedule 5.2(a)

	 	States of Qualification and Good Standing
	Schedule 5.2(b)

	 	Subsidiaries
	Schedule 5.4

	 	Federal Tax Identification Number
	Schedule 5.6

	 	Prior Names
	Schedule 5.8(b)

	 	Litigation
	Schedule 5.8(d)

	 	Plans
	Schedule 5.9

	 	Intellectual Property, Source Code Escrow Agreements
	Schedule 5.10

	 	Licenses and Permits
	Schedule 5.14

	 	Labor Disputes
	Schedule 5.27

	 	Loans to Shareholders, Directors, Officers or Affiliates
	Schedule 7.3

	 	Guarantees
	Schedule 7.8

	 	Existing Indebtedness






vii









 





REVOLVING CREDIT

AND

SECURITY AGREEMENT




     Revolving Credit and Security Agreement dated as of June 30, 2008 by and among DIGITAL
RECORDERS, INC., a corporation organized under the laws of the State of North Carolina (“DR”),
TWINVISION OF NORTH AMERICA, INC., a corporation organized under the laws of the State of North
Carolina (“TVna”) (DR and TVna, each a “Borrower”, and collectively “Borrowers”), DRI CORPORATION,
a corporation organized under the laws of the State of North Carolina, as a guarantor (“DRI”), the
financial institutions which are now or which hereafter become a party hereto (collectively, the
“Lenders” and individually a “Lender”) and PNC BANK, NATIONAL ASSOCIATION (“PNC”), as agent for
Lenders (PNC, in such capacity, the “Agent”).



     IN CONSIDERATION of the mutual covenants and undertakings herein contained, Loan Parties,
Lenders and Agent hereby agree as follows:



I. DEFINITIONS.




     1.1. Accounting Terms. As used in this Agreement, the Other Documents or any
certificate, report or other document made or delivered pursuant to this Agreement, accounting
terms not defined in Section 1.2 or elsewhere in this Agreement and accounting terms partly defined
in Section 1.2 to the extent not defined, shall have the respective meanings given to them under
GAAP; provided, however, whenever such accounting terms are used for the purposes
of determining compliance with financial covenants in this Agreement, such accounting terms shall
be defined in accordance with GAAP as applied in preparation of the audited financial statements of
DRI for the fiscal year ended December 31, 2007.



     1.2. General Terms. For purposes of this Agreement the following terms shall have the
following meanings:



     “Accountants” shall have the meaning set forth in Section 9.7 hereof.



     “Advance Rates” shall mean, collectively, the Receivables Advance Rate and the
Inventory Advance Rate.



     “Advances” shall mean and include the Revolving Advances and Letters of Credit.



     “Affiliate” of any Person shall mean (a) any Person which, directly or indirectly, is
in control of, is controlled by, or is under common control with such Person, or (b) any Person who
is a director, managing member, general partner or officer (i) of such Person, (ii) of any
Subsidiary of such Person or (iii) of any Person described in clause (a) above. For purposes of
this definition, control of a Person shall mean the power, direct or indirect, (x) to vote 10% or
more of the Equity Interests having ordinary voting power for the election of directors of such
Person or other Persons performing similar functions for any such Person, or (y) to direct or cause
the direction of the management and policies of such Person whether by ownership of Equity
Interests, contract or otherwise.



 









 





     “Agent” shall have the meaning set forth in the preamble to this Agreement and shall
include its successors and assigns.



     “Agreement” shall mean this Revolving Credit and Security Agreement, as the same may
be amended, restated, supplemented or otherwise modified from time to time.



     “Alternate Base Rate” shall mean, for any day, a rate per annum equal to the higher of
(i) the Base Rate in effect on such day and (ii) the Federal Funds Open Rate in effect on such day
plus 1/2 of 1%.



     “Anti-Terrorism Laws” shall mean any Applicable Laws relating to terrorism or money
laundering, including Executive Order No. 13224, the USA PATRIOT Act, the Applicable Laws
comprising or implementing the Bank Secrecy Act, and the Applicable Laws administered by the United
States Treasury Department’s Office of Foreign Asset Control (as any of the foregoing Applicable
Laws may from time to time be amended, renewed, extended, or replaced).



     “Applicable Law” shall mean all laws, rules and regulations applicable to the Person,
conduct, transaction, covenant, Other Document or contract in question, including all applicable
common law and equitable principles; all provisions of all applicable state, federal and foreign
constitutions, statutes, rules, regulations, treaties, directives and orders of any Governmental
Body, and all orders, judgments and decrees of all courts and arbitrators.



     “Authority” shall have the meaning set forth in Section 4.19(d).



     “Availability” at a particular date shall mean an amount equal to (a) the Formula
Amount, minus (b) the sum of (i) the outstanding amount of Advances plus (ii) all
amounts due and owing to any Loan Party’s trade creditors which are more than sixty (60) days past
due, plus (iii) fees and expenses for which Loan Parties are liable but which have not been
paid or charged to Borrowers’ Account.



     “Base Rate” shall mean the base commercial lending rate of PNC as publicly announced
to be in effect from time to time, such rate to be adjusted automatically, without notice, on the
effective date of any change in such rate. This rate of interest is determined from time to time
by PNC as a means of pricing some loans to its customers and is neither tied to any external rate
of interest or index nor does it necessarily reflect the lowest rate of interest actually charged
by PNC to any particular class or category of customers of PNC.



     “Blocked Accounts” shall have the meaning set forth in Section 4.15(h).



     “Blocked Account Bank” shall have the meaning set forth in Section 4.15(h).



     “Blocked Person” shall have the meaning set forth in Section 5.24(b) hereof.



     “Borrower” or “Borrowers” shall have the meaning set forth in the preamble to
this Agreement and shall extend to all permitted successors and assigns of such Persons.



     “Borrowers’ Account” shall have the meaning set forth in Section 2.8.



2









 





     “Borrowing Agent” shall mean DRI.



     “Borrowing Base Certificate” shall mean a certificate in substantially the form of
Exhibit 1.2(a) duly executed by the President, Chief Financial Officer or Controller of the
Borrowing Agent and delivered to the Agent, appropriately completed, by which such officer shall
certify to Agent the Formula Amount and calculation thereof as of the date of such certificate.



     “Business Day” shall mean any day other than Saturday or Sunday or a legal holiday on
which commercial banks are authorized or required by law to be closed for business in East
Brunswick, New Jersey and, if the applicable Business Day relates to any Eurodollar Rate Loans,
such day must also be a day on which dealings are carried on in the London interbank market.



     “Capital Expenditures” shall mean expenditures made or liabilities incurred for the
acquisition of any fixed assets or improvements, replacements, substitutions or additions thereto
which have a useful life of more than one year, including the total principal portion of
Capitalized Lease Obligations, which, in accordance with GAAP, would be classified as capital
expenditures, provided that “Capital Expenditures” shall not include the cost of
development of software or products, to the extent such costs are required to be capitalized in
accordance with GAAP.



     “Capitalized Lease Obligation” shall mean any Indebtedness of any Loan Party
represented by obligations under a lease that is required to be capitalized for financial reporting
purposes in accordance with GAAP.



     “CERCLA” shall mean the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. §§9601 et seq.



     “Change of Control” shall mean (a) any Person or “group” (within the meaning of Rules
13d-3 and 13d-5 under the Exchange Act), shall have acquired beneficial ownership of 20% or more on
a fully diluted basis of the voting and/or economic interest in DRI’ Equity Interests, (b) the
Board of Directors of DRI shall cease to consist of a majority of Continuing Directors, (c) other
than as permitted by Section 4.3 and 7.1, any merger or consolidation of or with any Loan Party or
sale of all or substantially all of the property or assets of any Loan Party, (d) DRI ceases to own
100% of the Equity Interests of either Borrower, or (e) the occurrence of any “Change of Control”
as defined in the Subordinated Loan Documentation.



     “Charges” shall mean all taxes, charges, fees, imposts, levies or other assessments,
including all net income, gross income, gross receipts, sales, use, ad valorem, value added,
transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment,
social security, unemployment, excise, severance, stamp, occupation and property taxes, custom
duties, fees, assessments, liens, claims and charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts, imposed by any taxing or other
authority, domestic or foreign (including the Pension Benefit Guaranty Corporation or any
environmental agency or superfund), upon the Collateral, any Loan Party or any of its Affiliates.



     “Closing Date” shall mean June 30, 2008 or such other date as may be agreed to by the
parties hereto.



3









 





     “Code” shall mean the Internal Revenue Code of 1986, as the same may be amended or
supplemented from time to time, and any successor statute of similar import, and the rules and
regulations thereunder, as from time to time in effect.



     “Collateral” shall mean and include:



          (a) all Receivables;




          (b) all Equipment;




          (c) all General Intangibles;




          (d) all Inventory;




          (e) all Investment Property;




          (f) the Leasehold Interests;




          (g) all of each Loan Party’s right, title and interest in and to, whether now owned or
hereafter acquired and wherever located, (i) its respective goods and other property including, but
not limited to, all merchandise returned or rejected by Customers, relating to or securing any of
the Receivables; (ii) all of each Loan Party’s rights as a consignor, a consignee, an unpaid
vendor, mechanic, artisan, or other lienor, including stoppage in transit, setoff, detinue,
replevin, reclamation and repurchase; (iii) all additional amounts due to any Loan Party from any
Customer relating to the Receivables; (iv) other property, including warranty claims, relating to
any goods securing the Obligations; (v) all of each Loan Party’s contract rights, rights of payment
which have been earned under a contract right, instruments (including promissory notes), documents,
chattel paper (including electronic chattel paper), warehouse receipts, deposit accounts, letters
of credit and money; (vi) all commercial tort claims (whether now existing or hereafter arising);
(vii) if and when obtained by any Loan Party, all real and personal property of third parties in
which such Loan Party has been granted a lien or security interest as security for the payment or
enforcement of Receivables; (viii) all letter of credit rights (whether or not the respective
letter of credit is evidenced by a writing); (ix) all supporting obligations; and (x) any other
goods, personal property or real property now owned or hereafter acquired in which any Loan Party
has expressly granted a security interest or may in the future grant a security interest to Agent
hereunder, or in any amendment or supplement hereto or thereto, or under any other agreement
between Agent and any Loan Party;




          (h) all of each Loan Party’s ledger sheets, ledger cards, files, correspondence, records,
books of account, business papers, computers, computer software (owned by any Loan Party or in
which it has an interest), computer programs, tapes, disks and documents relating to (a), (b), (c),
(d), (e), (f) or (g) of this paragraph; and




          (i) all proceeds and products of (a), (b), (c), (d), (e), (f), (g) or (h) in whatever form,
including, but not limited to: cash, deposit accounts (whether or not comprised solely of
proceeds), certificates of deposit, insurance proceeds (including hazard, flood and credit
insurance), negotiable instruments and other instruments for the payment of money, chattel




4









 







paper, security agreements, documents, eminent domain proceeds, condemnation proceeds and tort
claim proceeds.




     “Commitment Percentage” of any Lender shall mean the percentage set forth below such
Lender’s name on the signature page hereof as same may be adjusted upon any assignment by a Lender
pursuant to Section 16.3(c) or (d) hereof.



     “Commitment Transfer Supplement” shall mean a document in the form of Exhibit 16.3
hereto, properly completed and otherwise in form and substance satisfactory to Agent by which the
Purchasing Lender purchases and assumes a portion of the obligation of Lenders to make Advances
under this Agreement.



     “Compliance Certificate” shall mean a compliance certificate in the form of Exhibit
1.2(b) hereto, to be signed by the Chief Financial Officer or Controller of Borrowing Agent, which
shall state that, based on an examination sufficient to permit such officer to make an informed
statement, no Default or Event of Default exists, or if such is not the case, specifying such
Default or Event of Default, its nature, when it occurred, whether it is continuing and the steps
being taken by Loan Parties with respect to such default and, such certificate shall have appended
thereto calculations which set forth Loan Parties’ compliance with the requirements or restrictions
imposed by Sections 6.5, 7.4, 7.5, 7.6, 7.7, 7.8 and 7.11.



     “Consents” shall mean all filings and all licenses, permits, consents, approvals,
authorizations, qualifications and orders of Governmental Bodies and other third parties, domestic
or foreign, necessary to carry on any Loan Party’s business or necessary (including to avoid a
conflict or breach under any agreement, instrument, other document, license, permit or other
authorization) for the execution, delivery or performance of this Agreement, the Other Documents or
the Subordinated Loan Documentation, including any Consents required under all applicable federal,
state or other Applicable Law.



     “Consigned Inventory” shall mean Inventory of any Borrower that is in the possession
of another Person on a consignment, sale or return, or other basis that does not constitute a final
sale and acceptance of such Inventory.



     “Continuing Directors” shall mean the directors of DRI on the Closing Date and each
other director if such director’s nomination for the election to the Board of Directors of DRI is
recommended by a majority of the then Continuing Directors.



     “Controlled Group” shall mean, at any time, each Loan Party and all members of a
controlled group of corporations and all trades or businesses (whether or not incorporated) under
common control and all other entities which, together with any Loan Party, are treated as a single
employer under Section 414 of the Code.



     “Customer” shall mean and include the account debtor with respect to any Receivable
and/or the prospective purchaser of goods, services or both with respect to any contract or
contract right, and/or any party who enters into or proposes to enter into any contract or other
arrangement with any Loan Party, pursuant to which such Loan Party is to deliver any personal
property or perform any services.



5









 





     “Customs” shall have the meaning set forth in Section 2.11(b) hereof.



     “Default” shall mean an event, circumstance or condition which, with the giving of
notice or passage of time or both, would constitute an Event of Default.



     “Default Rate” shall have the meaning set forth in Section 3.1 hereof.



     “Defaulting Lender” shall have the meaning set forth in Section 2.23(a) hereof.



     “Depository Accounts” shall have the meaning set forth in Section 4.15(h) hereof.



     “Documents” shall have the meaning set forth in Section 8.1(c) hereof.



     “Dollar” and the sign “$” shall mean lawful money of the United States of
America.



     “Domestic Rate Loan” shall mean any Advance that bears interest based upon the
Alternate Base Rate.



     “Drawing Date” shall have the meaning set forth in Section 2.12(b) hereof.



     “DR” shall have the meaning set forth in the preamble to this Agreement.



     “DRI” shall have the meaning set forth in the preamble to this Agreement.



     “DRI on a Consolidated Basis” shall mean the consolidation in accordance with GAAP of
the accounts or other items of DRI and its Subsidiaries.



     “Early Termination Date” shall have the meaning set forth in Section 13.1 hereof.



     “Earnings Before Interest and Taxes” shall mean for any Person (which may include on a
consolidated basis, Subsidiaries of such Person) for any period the sum of (i) net income (or loss)
of such Person for such period (excluding extraordinary gains), provided that that the Loan
Parties shall not be permitted to increase net income by any expenses allocated to Foreign
Subsidiaries during such period unless such Loan Party has been reimbursed in cash during such
period for such allocated expenses, plus (ii) all interest expense of such Person for such period,
plus (iii) all charges against income of such Person for such period for federal, state and local
taxes actually paid.



     “EBITDA” shall mean for any Person (which may include on a consolidated basis,
Subsidiaries of such Person) for any period the sum of (i) Earnings Before Interest and Taxes for
such period plus (ii) depreciation expenses for such period, plus (iii) amortization expenses for
such period.



     “Eligible Inventory” shall mean and include Inventory, excluding work in process, with
respect to each Borrower, valued at the lower of cost or market value, determined on a
first-in-first-out basis, which is not, in Agent’s opinion, obsolete, slow moving or unmerchantable
and which Agent, in its sole discretion, shall not deem ineligible Inventory, based on such
considerations as Agent may from time to time deem appropriate including whether the



6









 







Inventory is subject to a perfected, first priority security interest in favor of Agent and no
other Lien (other than a Permitted Encumbrance). In addition, Inventory shall not be Eligible
Inventory if it (i) does not conform to all standards imposed by any Governmental Body which has
regulatory authority over such goods or the use or sale thereof, (ii) is in transit, (iii) is
located outside the continental United States or at a location that is not otherwise in compliance
with this Agreement, (iv) constitutes Consigned Inventory, (v) is the subject of an Intellectual
Property Claim; (vi) is subject to a License Agreement or other agreement that limits, conditions
or restricts any Borrower’s or Agent’s right to sell or otherwise dispose of such Inventory, unless
Agent is a party to a Licensor/Agent Agreement with the Licensor under such License Agreement; or
(vii) or is situated at a location not owned by a Borrower unless the owner or occupier of such
location has executed in favor of Agent a Lien Waiver Agreement.



     “Eligible Receivables” shall mean and include with respect to each Borrower, each
Receivable of such Borrower arising in the Ordinary Course of Business and which Agent, in its sole
credit judgment, shall deem to be an Eligible Receivable, based on such considerations as Agent may
from time to time deem appropriate. A Receivable shall not be deemed eligible unless such
Receivable is subject to Agent’s first priority perfected security interest and no other Lien
(other than Permitted Encumbrances), and is evidenced by an invoice or other documentary evidence
satisfactory to Agent. In addition, no Receivable shall be an Eligible Receivable if:



          (a) it arises out of a sale made by any Borrower to an Affiliate of any Borrower or to a
Person controlled by an Affiliate of any Borrower;




          (b) it is due or unpaid more than ninety (90) days after the original invoice date or sixty
(60) days after the original due date;




          (c) fifty percent (50%) or more of the Receivables from such Customer are not deemed Eligible
Receivables hereunder pursuant to clause (b) above. Such percentage may, in Agent’s sole
discretion, be increased or decreased from time to time;




          (d) any covenant, representation or warranty contained in this Agreement with respect to such
Receivable has been breached;




          (e) the Customer shall (i) apply for, suffer, or consent to the appointment of, or the taking
of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial
part of its property or call a meeting of its creditors, (ii) admit in writing its inability, or be
generally unable, to pay its debts as they become due or cease operations of its present business,
(iii) make a general assignment for the benefit of creditors, (iv) commence a voluntary case under
any state or federal bankruptcy laws (as now or hereafter in effect), (v) be adjudicated a bankrupt
or insolvent, (vi) file a petition seeking to take advantage of any other law providing for the
relief of debtors, (vii) acquiesce to, or fail to have dismissed, any petition which is filed
against it in any involuntary case under such bankruptcy laws, or (viii) take any action for the
purpose of effecting any of the foregoing;




          (f) the sale is to a Customer outside the continental United States of America or Canada
(excluding the Province of Quebec), unless the sale is on letter of credit, guaranty or acceptance
terms, in each case acceptable to Agent in its sole discretion;




7









 








          (g) the sale to the Customer is on a bill-and-hold, guaranteed sale, sale-and-return, sale on
approval, consignment or any other repurchase or return basis or is evidenced by chattel paper;




          (h) Agent believes, in its sole judgment, that collection of such Receivable is insecure or
that such Receivable may not be paid by reason of the Customer’s financial inability to pay;




          (i) the Customer is the United States of America, any state or any department, agency or
instrumentality of any of them, unless the applicable Borrower assigns its right to payment of such
Receivable to Agent pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C.
Sub-Section 3727 et seq. and 41 U.S.C. Sub-Section 15 et seq.) or has otherwise complied with other
applicable statutes or ordinances;




          (j) the goods giving rise to such Receivable have not been delivered to and accepted by the
Customer or the services giving rise to such Receivable have not been performed by the applicable
Borrower and accepted by the Customer or the Receivable otherwise does not represent a final sale;




          (k) the Receivables of the Customer exceed a credit limit determined by Agent, in its sole
discretion, to the extent such Receivable exceeds such limit;




          (l) the Receivable is subject to any offset, deduction, defense, dispute, or counterclaim, the
Customer is also a creditor or supplier of a Borrower or the Receivable is contingent in any
respect or for any reason;




          (m) the applicable Borrower has made any agreement with any Customer for any deduction
therefrom, except for discounts or allowances made in the Ordinary Course of Business for prompt
payment, all of which discounts or allowances are reflected in the calculation of the face value of
each respective invoice related thereto;




          (n) any return, rejection or repossession of the merchandise has occurred or the rendition of
services has been disputed;




          (o) such Receivable is not payable to a Borrower; or




          (p) such Receivable is not otherwise satisfactory to Agent as determined in good faith by
Agent in the exercise of its discretion in a reasonable manner.




     “Environmental Complaint” shall have the meaning set forth in Section 4.19(d) hereof.



     “Environmental Laws” shall mean all federal, state and local environmental, land use,
zoning, health, chemical use, safety and sanitation laws, statutes, ordinances and codes relating
to the protection of the environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous Substances and the rules,
regulations, policies, guidelines, interpretations, decisions, orders and directives of federal,
state and local governmental agencies and authorities with respect thereto.



8









 





     “Equipment” shall mean and include as to each Loan Party all of such Loan Party’s
goods (other than Inventory) whether now owned or hereafter acquired and wherever located including
all equipment, machinery, apparatus, motor vehicles, fittings, furniture, furnishings, fixtures,
parts, accessories and all replacements and substitutions therefor or accessions thereto.



     “Equity Interests” of any Person shall mean any and all shares, rights to purchase,
options, warrants, general, limited or limited liability partnership interests, member interests,
participation or other equivalents of or interest in (regardless of how designated) equity of such
Person, whether voting or nonvoting, including common stock, preferred stock, convertible
securities or any other “equity security” (as such term is defined in Rule 3a11-1 of the General
Rules and Regulations promulgated by the SEC under the Exchange Act).



     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended
from time to time and the rules and regulations promulgated thereunder.



     “Eurodollar Rate” shall mean for any Eurodollar Rate Loan for the then current
Interest Period relating thereto the interest rate per annum determined by Agent by dividing (i)
the rate which appears on the Bloomberg Page BBAM1 (or on such other substitute Bloomberg page that
displays rates at which US dollar deposits are offered by leading banks in the London interbank
deposit market), or the rate which is quoted by another source selected by Agent which has been
approved by the British Bankers’ Association as an authorized information vendor for the purpose of
displaying rates at which US dollar deposits are offered by leading banks in the London interbank
deposit market (an “Alternative Source”), at approximately 11:00 a.m., London time two (2) Business
Days prior to the first day of such Interest Period (or if there shall at any time, for any reason,
no longer exist a Bloomberg Page BBAM1 (or any substitute page) or any Alternate Source, a
comparable replacement rate determined by the Agent at such time (which determination shall be
conclusive absent manifest error)) for an amount comparable to such Eurodollar Rate Loan and having
a borrowing date and a maturity comparable to such Interest Period by (ii) a number equal to 1.00
minus the Reserve Percentage.



     The Eurodollar Rate shall be adjusted with respect to any Eurodollar Rate Loan that is
outstanding on the effective date of any change in the Reserve Percentage as of such effective
date. The Agent shall give prompt notice to the Borrowing Agent of the Eurodollar Rate as
determined or adjusted in accordance herewith, which determination shall be conclusive absent
manifest error.



     “Eurodollar Rate Loan” shall mean an Advance at any time that bears interest based on
the Eurodollar Rate.



     “Event of Default” shall have the meaning set forth in Article X hereof.



     “Exchange Act” shall have the mean the Securities Exchange Act of 1934, as amended.



     “Executive Order No. 13224” shall mean the Executive Order No. 13224 on Terrorist
Financing, effective September 24, 2001, as the same has been, or shall hereafter be, renewed,
extended, amended or replaced.



9









 





     “Federal Funds Effective Rate” for any day shall mean the rate per annum (based on a
year of 360 days and actual days elapsed and rounded upward to the nearest 1/100 of 1%) announced
by the Federal Reserve Bank of New York (or any successor) on such day as being the weighted
average of the rates on overnight federal funds transactions arranged by federal funds brokers on
the previous trading day, as computed and announced by such Federal Reserve Bank (or any successor)
in substantially the same manner as such Federal Reserve Bank computes and announces the weighted
average it refers to as the “Federal Funds Effective Rate” as of the date of this Agreement;
provided, if such Federal Reserve Bank (or its successor) does not announce such rate on any day,
the “Federal Funds Effective Rate” for such day shall be the Federal Funds Effective Rate for the
last day on which such rate was announced.



     “Federal Funds Open Rate” shall mean the rate per annum determined by the Agent in
accordance with its usual procedures (which determination shall be conclusive absent manifest
error) to be the “open” rate for federal funds transactions as of the opening of business for
federal funds transactions among members of the Federal Reserve System arranged by federal funds
brokers on such day, as quoted by Garvin Guybutler Corporation, any successor entity thereto, or
any other broker selected by the Agent, as set forth on the applicable Telerate display page;
provided, however; that if such day is not a Business Day, the Federal Funds Open Rate for such day
shall be the “open” rate on the immediately preceding Business Day, or if no such rate shall be
quoted by a Federal funds broker at such time, such other rate as determined by the Agent in
accordance with its usual procedures.



     “Fixed Charge Coverage Ratio” shall mean and include, with respect to any fiscal
period, the ratio of (a) EBITDA of the Loan Parties on a Consolidated Basis minus
Unfinanced Capital Expenditures made by the Loan Parties during such period minus cash
taxes paid by the Loan Parties during such period minus all dividends and distributions
paid by the Loan Parties during such period to (b) all Senior Debt Payments plus all
Subordinated Debt Payments made during such period.



     “Foreign Subsidiary” of any Person, shall mean any Subsidiary of such Person that is
not organized or incorporated in the United States or any State or territory thereof.



     “Formula Amount” shall have the meaning set forth in Section 2.1(a).



     “Funded Debt” shall mean, with respect to any Person, without duplication, all
Indebtedness for borrowed money evidenced by notes, bonds, debentures, or similar evidences of
Indebtedness that by its terms matures more than one year from, or is directly or indirectly
renewable or extendible at such Person’s option under a revolving credit or similar agreement
obligating the lender or lenders to extend credit over a period of more than one year from the date
of creation thereof, and specifically including Capitalized Lease Obligations, current maturities
of long-term debt, revolving credit and short-term debt extendible beyond one year at the option of
the debtor, and also including, in the case of each Loan Party, the Obligations and, without
duplication, Indebtedness consisting of guaranties of Funded Debt of other Persons.



     “GAAP” shall mean generally accepted accounting principles in the United States of
America in effect from time to time.



10









 





     “General Intangibles” shall mean and include as to each Loan Party, all of such Loan
Party’s general intangibles, whether now owned or hereafter acquired, including all payment
intangibles, all choses in action, causes of action, corporate or other business records,
inventions, designs, patents, patent applications, equipment formulations, manufacturing
procedures, quality control procedures, trademarks, tradenames, trademark applications, service
marks, trade secrets, goodwill, copyrights, design rights, software, computer information, source
codes, codes, records and updates, registrations, licenses, franchises, customer lists, tax
refunds, tax refund claims, computer programs, all claims under guaranties, security interests or
other security held by or granted to such Loan Party to secure payment of any of the Receivables by
a Customer (other than to the extent covered by Receivables) all rights of indemnification and all
other intangible property of every kind and nature (other than Receivables).



     “Governmental Acts” shall have the meaning set forth in Section 2.17.



     “Governmental Body” shall mean any nation or government, any state or other political
subdivision thereof or any entity, authority, agency, division or department exercising the
legislative, judicial, regulatory or administrative functions of or pertaining to a government.



     “Guarantor” shall mean DRI and any other Person who may hereafter guarantee payment or
performance of the whole or any part of the Obligations and “Guarantors” means collectively all
such Persons.



     “Guarantor Security Agreement” shall mean any Security Agreement executed by any
Guarantor in favor of Agent securing the Guaranty of such Guarantor, in form and substance
satisfactory to the Agent.



     “Guaranty” shall mean the guaranty set forth in Article XVII of this Agreement and any
other guaranty of the obligations of Borrowers executed by a Guarantor in favor of Agent for its
benefit and for the ratable benefit of Lenders, in form and substance satisfactory to the Agent.



     “Hazardous Discharge” shall have the meaning set forth in Section 4.19(d) hereof.



     “Hazardous Substance” shall mean, without limitation, any flammable explosives, radon,
radioactive materials, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls,
petroleum and petroleum products, methane, hazardous materials, Hazardous Wastes, hazardous or
Toxic Substances or related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA, or any other applicable Environmental
Law and in the regulations adopted pursuant thereto.



     “Hazardous Wastes” shall mean all waste materials subject to regulation under CERCLA,
RCRA or applicable state law, and any other applicable Federal and state laws now in force or
hereafter enacted relating to hazardous waste disposal.



     “Hedge Liabilities” shall have the meaning provided in the definition of
“Lender-Provided Interest Rate Hedge”.



     “Indebtedness” of a Person at a particular date shall mean all obligations of such
Person which in accordance with GAAP would be classified upon a balance sheet as liabilities
(except



11









 







capital stock and surplus earned or otherwise) and in any event, without limitation by reason
of enumeration, shall include all indebtedness, debt and other similar monetary obligations of such
Person whether direct or guaranteed, and all premiums, if any, due at the required prepayment dates
of such indebtedness, and all indebtedness secured by a Lien on assets owned by such Person,
whether or not such indebtedness actually shall have been created, assumed or incurred by such
Person. Any indebtedness of such Person resulting from the acquisition by such Person of any
assets subject to any Lien shall be deemed, for the purposes hereof, to be the equivalent of the
creation, assumption and incurring of the indebtedness secured thereby, whether or not actually so
created, assumed or incurred.



     “Ineligible Security” shall mean any security which may not be underwritten or dealt
in by member banks of the Federal Reserve System under Section 16 of the Banking Act of 1933 (12
U.S.C. Section 24, Seventh), as amended.



     “Intellectual Property” shall mean property constituting under any Applicable Law a
patent, patent application, copyright, trademark, service mark, trade name, mask work, trade secret
or license or other right to use any of the foregoing.



     “Intellectual Property Claim” shall mean the assertion by any Person of a claim
(whether asserted in writing, by action, suit or proceeding or otherwise) that any Loan Party’s
ownership, use, marketing, sale or distribution of any Inventory, Equipment, Intellectual Property
or other property or asset is violative of any ownership of or right to use any Intellectual
Property of such Person.



     “Intercreditor Agreement” shall mean the Intercreditor Agreement dated as of the
Closing Date by and among Agent, Loan Parties and Subordinated Lender.



     “Interest Period” shall mean the period provided for any Eurodollar Rate Loan pursuant
to Section 2.2(b).



     “Interest Rate Hedge” shall mean an interest rate exchange, collar, cap, swap,
adjustable strike cap, adjustable strike corridor or similar agreements entered into by any Loan
Party or its Subsidiaries in order to provide protection to, or minimize the impact upon, such Loan
Party and/or its Subsidiaries of increasing floating rates of interest applicable to Indebtedness.



     “Inventory” shall mean and include as to each Loan Party all of such Loan Party’s now
owned or hereafter acquired goods, merchandise and other personal property, wherever located, to be
furnished under any consignment arrangement, contract of service or held for sale or lease, all raw
materials, work in process, finished goods and materials and supplies of any kind, nature or
description which are or might be used or consumed in such Loan Party’s business or used in selling
or furnishing such goods, merchandise and other personal property, and all documents of title or
other documents representing them.



     “Inventory Advance Rate” shall have the meaning set forth in Section 2.1(a)(y)(ii)
hereof.



     “Investment Property” shall mean and include as to each Loan Party, all of such Loan
Party’s now owned or hereafter acquired securities (whether certificated or uncertificated),
securities entitlements, securities accounts, commodities contracts and commodities accounts.



12









 





     “Issuer” shall mean any Person who issues a Letter of Credit and/or accepts a draft
pursuant to the terms hereof.



     “Leasehold Interests” shall mean all of each Loan Party’s right, title and interest in
and to the premises listed on Schedule 4.19.



     “Lender” and “Lenders” shall have the meaning ascribed to such term in the
preamble to this Agreement and shall include each Person which becomes a transferee, successor or
assign of any Lender.



     “Lender-Provided Interest Rate Hedge” shall mean an Interest Rate Hedge which is
provided by any Lender and with respect to which the Agent confirms meets the following
requirements: such Interest Rate Hedge (i) is documented in a standard International Swap Dealer
Association Agreement, (ii) provides for the method of calculating the reimbursable amount of the
provider’s credit exposure in a reasonable and customary manner, and (iii) is entered into for
hedging (rather than speculative) purposes. The liabilities of any Loan Party to the provider of
any Lender-Provided Interest Rate Hedge (the “Hedge Liabilities”) shall be “Obligations” hereunder,
guaranteed obligations under any Guaranty and secured obligations under any Guarantor Security
Agreement and otherwise treated as Obligations for purposes of each of the Other Documents. The
Liens securing the Hedge Liabilities shall be pari passu with the Liens securing all other
Obligations under this Agreement and the Other Documents.



     “Letter of Credit Fees” shall have the meaning set forth in Section 3.2.



     “Letter of Credit Borrowing” shall have the meaning set forth in Section 2.12(d).



     “Letter of Credit Sublimit” shall mean $0.



     “Letters of Credit” shall have the meaning set forth in Section 2.9.



     “License Agreement” shall mean any agreement between any Borrower and a Licensor
pursuant to which such Borrower is authorized to use any Intellectual Property in connection with
the manufacturing, marketing, sale or other distribution of any Inventory of such Borrower or
otherwise in connection with such Borrower’s business operations.



     “Licensor” shall mean any Person from whom any Borrower obtains the right to use
(whether on an exclusive or non-exclusive basis) any Intellectual Property in connection with such
Borrower’s manufacture, marketing, sale or other distribution of any Inventory or otherwise in
connection with such Borrower’s business operations.



     “Licensor/Agent Agreement” shall mean an agreement between Agent and a Licensor, in
form and content satisfactory to Agent, by which Agent is given the unqualified right, vis-a-vis
such Licensor, to enforce Agent’s Liens with respect to and to dispose of any Borrower’s Inventory
with the benefit of any Intellectual Property applicable thereto, irrespective of such Borrower’s
default under any License Agreement with such Licensor.



     “Lien” shall mean any mortgage, deed of trust, pledge, hypothecation, assignment,
security interest, lien (whether statutory or otherwise), Charge, claim or encumbrance, or



13









 







preference, priority or other security agreement or preferential arrangement held or asserted
in respect of any asset of any kind or nature whatsoever including any conditional sale or other
title retention agreement, any lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction.



     “Lien Waiver Agreement” shall mean an agreement which is executed in favor of Agent by
a Person who owns or occupies premises at which any Collateral may be located from time to time and
by which such Person shall waive any Lien that such Person may ever have with respect to any of the
Collateral and shall authorize Agent from time to time to enter upon the premises to inspect or
remove the Collateral from such premises or to use such premises to store or dispose of such
Inventory.



     “Loan Party” shall mean, individually, each Borrower and each Guarantor, and “Loan
Parties” shall mean, collectively, Borrowers and Guarantors.



     “Loan Parties on a Consolidated Basis” shall mean the consolidation in accordance with
GAAP of the accounts or other items of DRI and the Borrowers (and excluding, for the avoidance of
doubt, any Foreign Subsidiaries of DRI).



     “Material Adverse Effect” shall mean a material adverse effect on or material adverse
developments with respect to (a) the condition (financial or otherwise), results of operations,
assets, business, properties or prospects of any Loan Party, (b) any Loan Party’s ability to duly
and punctually pay or perform the Obligations in accordance with the terms thereof, (c) the value
of the Collateral, or Agent’s Liens on the Collateral or the priority of any such Lien, (d) the
practical realization of the benefits of Agent’s and each Lender’s rights and remedies under this
Agreement and the Other Documents or (e) the validity or enforceability against a Loan Party of any
Other Document to which it is a party.



     “Maximum Face Amount” shall mean, with respect to any outstanding Letter of Credit,
the face amount of such Letter of Credit including all automatic increases provided for in such
Letter of Credit, whether or not any such automatic increase has become effective.



     “Maximum Revolving Advance Amount” shall mean $8,000,000.



     “Maximum Undrawn Amount” shall mean with respect to any outstanding Letter of Credit,
the amount of such Letter of Credit that is or may become available to be drawn, including all
automatic increases provided for in such Letter of Credit, whether or not any such automatic
increase has become effective.



     “Minimum Loan Amount” shall mean $3,500,000.



     “Modified Commitment Transfer Supplement” shall have the meaning set forth in Section
16.3(d).



     “Multiemployer Plan” shall mean a “multiemployer plan” as defined in Sections 3(37)
and 4001(a)(3) of ERISA.



14









 





     “Multiple Employer Plan” shall mean a Plan which has two or more contributing sponsors
(including any Loan Party or any member of the Controlled Group) at least two of whom are not under
common control, as such a plan is described in Section 4064 of ERISA.



     “Note” shall mean collectively, the Revolving Credit Note.



     “Obligations” shall mean and include any and all loans, advances, debts, liabilities,
obligations, covenants and duties owing by any Loan Party to Lenders or Agent or to any other
direct or indirect subsidiary or affiliate of Agent or any Lender of any kind or nature, present or
future (including any interest or other amounts accruing thereon after maturity, or after the
filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding relating to any Loan Party, whether or not a claim for post-filing or post-petition
interest or other amounts is allowed in such proceeding), whether or not evidenced by any note,
guaranty or other instrument, whether arising under any agreement, instrument or document,
(including this Agreement and the Other Documents) whether or not for the payment of money, whether
arising by reason of an extension of credit, opening of a letter of credit, loan, equipment lease
or guarantee, under any interest or currency swap, future, option or other similar agreement, or in
any other manner, whether arising out of overdrafts or deposit or other accounts or electronic
funds transfers (whether through automated clearing houses or otherwise) or out of the Agent’s or
any Lenders non-receipt of or inability to collect funds or otherwise not being made whole in
connection with depository transfer check or other similar arrangements, whether direct or indirect
(including those acquired by assignment or participation), absolute or contingent, joint or
several, due or to become due, now existing or hereafter arising, contractual or tortious,
liquidated or unliquidated, regardless of how such indebtedness or liabilities arise or by what
agreement or instrument they may be evidenced or whether evidenced by any agreement or instrument,
including, but not limited to, any and all of any Loan Party’s Indebtedness and/or liabilities
under this Agreement, the Other Documents or under any other agreement between Agent or Lenders and
any Loan Party and any amendments, extensions, renewals or increases and all costs and expenses of
Agent and any Lender incurred in the documentation, negotiation, modification, enforcement,
collection or otherwise in connection with any of the foregoing, including but not limited to
reasonable attorneys’ fees and expenses and all obligations of any Loan Party to Agent or Lenders
to perform acts or refrain from taking any action.



     “Ordinary Course of Business” shall mean with respect to any Loan Party, the ordinary
course of such Loan Party’s business as conducted on the Closing Date.



     “Other Documents” shall mean the Note, the Questionnaire, any Guaranty, any Guarantor
Security Agreement, any Lender-Provided Interest Rate Hedge, the Intercreditor Agreement and any
and all other agreements, instruments and documents, including guaranties, pledges, powers of
attorney, consents, interest or currency swap agreements or other similar agreements and all other
writings heretofore, now or hereafter executed by any Loan Party and/or delivered to Agent or any
Lender in respect of the transactions contemplated by this Agreement.



     “Out-of-Formula Loans” shall have the meaning set forth in Section 16.2(b).



     “Parent” of any Person shall mean a corporation or other entity owning, directly or
indirectly at least 50% of the shares of stock or other ownership interests having ordinary voting



15









 







power to elect a majority of the directors of the Person, or other Persons performing similar
functions for any such Person.



     “Participant” shall mean each Person who shall be granted the right by any Lender to
participate in any of the Advances and who shall have entered into a participation agreement in
form and substance satisfactory to such Lender.



     “Participation Advance” shall have the meaning set forth in Section 2.12(d).



     “Participation Commitment” shall mean each Lender’s obligation to buy a participation
of the Letters of Credit issued hereunder.



     “Payee” shall have the meaning set forth in Section 3.10.



     “Payment Office” shall mean initially Two Tower Center Boulevard, East Brunswick, New
Jersey 08816; thereafter, such other office of Agent, if any, which it may designate by notice to
Borrowing Agent and to each Lender to be the Payment Office.



     “PBGC” shall mean the Pension Benefit Guaranty Corporation established pursuant to
Subtitle A of Title IV of ERISA or any successor.



     “Pension Benefit Plan” shall mean at any time any employee pension benefit plan
(including a Multiple Employer Plan, but not a Multiemployer Plan) which is covered by Title IV of
ERISA or is subject to the minimum funding standards under Section 412 of the Code and either (i)
is maintained by any member of the Controlled Group for employees of any member of the Controlled
Group; or (ii) has at any time within the preceding five years been maintained by any entity which
was at such time a member of the Controlled Group for employees of any entity which was at such
time a member of the Controlled Group.



     “Permitted Encumbrances” shall mean (a) Liens in favor of Agent for its benefit and
the benefit of the Lenders and the other holders of the Obligations; (b) Liens for taxes,
assessments or other governmental charges not delinquent or being Properly Contested; (c) Liens
disclosed in the financial statements referred to in Section 5.5, the existence of which Agent has
consented to in writing, provided that such Liens shall secure only those obligations which
they secure on the Closing Date (and extensions, renewals and refinancings of such obligations
permitted by Section 7.8) and shall not subsequently apply to any other property or assets of any
Loan Party; (d) deposits or pledges to secure obligations under worker’s compensation, social
security or similar laws, or under unemployment insurance; (e) deposits or pledges to secure bids,
tenders, contracts (other than contracts for the payment of money), leases, statutory obligations,
surety and appeal bonds and other obligations of like nature arising in the Ordinary Course of
Business; (f) Liens arising by virtue of the rendition, entry or issuance against any Loan Party or
any Subsidiary, or any property of any Loan Party or any Subsidiary, of any judgment, writ, order,
or decree for so long as each such Lien (x) is in existence for less than 20 consecutive days after
it first arises or is being Properly Contested and (y) is at all times junior in priority to any
Liens in favor of Agent; (g) mechanics’, workers’, materialmen’s or other like Liens arising in the
Ordinary Course of Business with respect to obligations which are not due or which are being
contested in good faith by the applicable Loan Party; (h) Liens placed upon fixed assets hereafter
acquired to secure a portion of the purchase price thereof, provided that (x) any such lien shall



16









 







not encumber any other property of any Loan Party and (y) the aggregate amount of Indebtedness
secured by such Liens incurred as a result of such purchases during any fiscal year shall not
exceed the amount provided for in Section 7.6; (i) Liens in favor of the Subordinated Lender, so
long as such Liens are subject to the Intercreditor Agreement, and (j) Liens disclosed on
Schedule 1.2, provided that such Liens shall secure only those obligations which they
secure on the Closing Date (and extensions, renewals and refinancings of such obligations permitted
by Section 7.8) and shall not subsequently apply to any other property or assets of any Loan Party.



     “Person” shall mean any individual, sole proprietorship, partnership, corporation,
business trust, joint stock company, trust, unincorporated organization, association, limited
liability company, limited liability partnership, institution, public benefit corporation, joint
venture, entity or Governmental Body (whether federal, state, county, city, municipal or otherwise,
including any instrumentality, division, agency, body or department thereof).



     “Plan” shall mean any employee benefit plan within the meaning of Section 3(3) of
ERISA (including a Pension Benefit Plan), maintained for employees of any Loan Party or any member
of the Controlled Group or any such Plan to which any Loan Party or any member of the Controlled
Group is required to contribute on behalf of any of its employees.



     “PNC” shall have the meaning set forth in the preamble to this Agreement and shall
extend to all of its successors and assigns.



     “Pro Forma Balance Sheet” shall have the meaning set forth in Section 5.5(a) hereof.



     “Pro Forma Financial Statements” shall have the meaning set forth in Section 5.5(b)
hereof.



     “Properly Contested” shall mean, in the case of any Indebtedness or Lien, as
applicable, of any Person (including any taxes) that is not paid as and when due or payable by
reason of such Person’s bona fide dispute concerning its liability to pay same or concerning the
amount thereof, (i) such Indebtedness or Lien, as applicable, is being properly contested in good
faith by appropriate proceedings promptly instituted and diligently conducted; (ii) such Person has
established appropriate reserves as shall be required in conformity with GAAP; (iii) the
non-payment of such Indebtedness will not have a Material Adverse Effect and will not result in the
forfeiture of any assets of such Person; (iv) no Lien is imposed upon any of such Person’s assets
with respect to such Indebtedness unless such Lien is at all times junior and subordinate in
priority to the Liens in favor of the Agent (except only with respect to property taxes that have
priority as a matter of applicable state law) and enforcement of such Lien is stayed during the
period prior to the final resolution or disposition of such dispute; (v) if such Indebtedness or
Lien, as applicable, results from, or is determined by the entry, rendition or issuance against a
Person or any of its assets of a judgment, writ, order or decree, enforcement of such judgment,
writ, order or decree is stayed pending a timely appeal or other judicial review; and (vi) if such
contest is abandoned, settled or determined adversely (in whole or in part) to such Person, such
Person forthwith pays such Indebtedness and all penalties, interest and other amounts due in
connection therewith.



     “Projections” shall have the meaning set forth in Section 5.5(b) hereof.



17









 





     “Purchasing CLO” shall have the meaning set forth in Section 16.3(d) hereof.



     “Purchasing Lender” shall have the meaning set forth in Section 16.3(c) hereof.



     “Questionnaire” shall mean the Documentation Information Questionnaire and the
responses thereto provided by Borrowing Agent and delivered to Agent.



     “RCRA” shall mean the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et
seq., as same may be amended from time to time.



     “Real Property” shall mean all of each Loan Party’s right, title and interest in and
to the owned and leased premises identified on Schedule 4.19 hereto or which is hereafter owned or
leased by any Loan Party.



     “Receivables” shall mean and include, as to each Loan Party, all of such Loan Party’s
accounts, contract rights, instruments (including those evidencing indebtedness owed to such Loan
Party by its Affiliates), documents, chattel paper (including electronic chattel paper), general
intangibles relating to accounts, drafts and acceptances, credit card receivables and all other
forms of obligations owing to such Loan Party arising out of or in connection with the sale or
lease of Inventory or the rendition of services, all supporting obligations, guarantees and other
security therefor, whether secured or unsecured, now existing or hereafter created, and whether or
not specifically sold or assigned to Agent hereunder.



     “Receivables Advance Rate” shall have the meaning set forth in Section 2.1(a)(y)(i)
hereof.



     “Register” shall have the meaning set forth in Section 16.3(e).



     “Reimbursement Obligation” shall have the meaning set forth in Section 2.12(b)hereof.



     “Release” shall have the meaning set forth in Section 5.7(c)(i) hereof.



     “Reportable Event” shall mean a reportable event described in Section 4043(c) of ERISA
or the regulations promulgated thereunder.



     “Required Lenders” shall mean Lenders holding greater than fifty percent (50%) of the
Advances and, if no Advances are outstanding, shall mean Lenders holding greater fifty percent
(50%) of the Commitment Percentages; provided, however, if there are fewer than three (3) Lenders,
Required Lenders shall mean all Lenders.



     “Reserve Percentage” shall mean as of any day the maximum percentage in effect on such
day as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for
determining the reserve requirements (including supplemental, marginal and emergency reserve
requirements) with respect to eurocurrency funding (currently referred to as “Eurocurrency
Liabilities”.



     “Revolving Advances” shall mean Advances made other than Letters of Credit.



18









 





     “Revolving Credit Note” shall mean, collectively, the promissory notes referred to in
Section 2.1(a) hereof.



     “Revolving Interest Rate” shall mean an interest rate per annum equal to (a) the sum
of the Alternate Base Rate plus one and three-quarters of one percent (1.75%) with respect to
Domestic Rate Loans and (b) the sum of the Eurodollar Rate plus three and one-quarter of one
percent (3.25%) with respect to Eurodollar Rate Loans.



     “RTI” shall have the meaning set forth in Section 7.22 hereof.



     “SEC” shall mean the Securities and Exchange Commission or any successor thereto.



     “Section 20 Subsidiary” shall mean the Subsidiary of the bank holding company
controlling PNC, which Subsidiary has been granted authority by the Federal Reserve Board to
underwrite and deal in certain Ineligible Securities.



     “Securities Act” shall mean the Securities Act of 1933, as amended.



     “Senior Debt Payments” shall mean and include all cash actually expended by any Loan
Party to make (a) interest payments on any Advances hereunder, plus (b) payments for all
fees, commissions and charges set forth herein and with respect to any Advances, plus (c)
capitalized lease payments, plus (d) payments with respect to any other Indebtedness for
borrowed money.



     “Settlement Date” shall mean the Closing Date and thereafter Wednesday or Thursday of
each week or more frequently if Agent deems appropriate unless such day is not a Business Day in
which case it shall be the next succeeding Business Day.



     “Subordinated Debt Payments” shall mean and include all cash actually expended by any
Loan Party to make payments of interest and principal in respect of the Subordinated Note.



     “Subordinated Lender” shall mean BHC Interim Funding, III, L.P.



     “Subordinated Loan” shall mean the loan evidenced by the Subordinated Note.



     “Subordinated Loan Documentation” shall mean the Loan and Security Agreement dated as
of the Closing Date by and among Borrowers and Subordinated Lender, the Loan Documents (as defined
in the Loan and Security Agreement) and each of the documents, agreements, filings and other
writings related to the foregoing.



     “Subordinated Notes” shall mean the subordinated promissory notes issued by Borrowers
in favor of Subordinated Lender dated as of the Closing Date in the aggregate principal sum of
$5,000,000.



     “Subsidiary” of any Person shall mean a corporation or other entity of whose Equity
Interests having ordinary voting power (other than Equity Interests having such power only by
reason of the happening of a contingency) to elect a majority of the directors of such corporation,
or other Persons performing similar functions for such entity, are owned, directly or indirectly,
by such Person.



19









 





     “Term” shall have the meaning set forth in Section 13.1 hereof.



     “Termination Event” shall mean (i) a Reportable Event with respect to any Plan or
Multiemployer Plan; (ii) the withdrawal of any Loan Party or any member of the Controlled Group
from a Plan or Multiemployer Plan during a plan year in which such entity was a “substantial
employer” as defined in Section 4001(a)(2) of ERISA; (iii) the providing of notice of intent to
terminate a Plan in a distress termination described in Section 4041(c) of ERISA; (iv) the
institution by the PBGC of proceedings to terminate a Plan or Multiemployer Plan; (v) any event or
condition (a) which might constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Plan or Multiemployer Plan, or (b) that may result
in termination of a Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi) the partial or
complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of any Loan Party or any
member of the Controlled Group from a Multiemployer Plan.



     “Toxic Substance” shall mean and include any material present on the Real Property or
the Leasehold Interests which has been shown to have significant adverse effect on human health or
which is subject to regulation under the Toxic Substances Control Act (TSCA), 15 U.S.C. §§ 2601 et
seq., applicable state law, or any other applicable Federal or state laws now in force or hereafter
enacted relating to toxic substances. “Toxic Substance” includes but is not limited to asbestos,
polychlorinated biphenyls (PCBs) and lead-based paints.



     “Trading with the Enemy Act” shall mean the foreign assets control regulations of the
United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any enabling
legislation or executive order relating thereto.



     “Transactions” shall have the meaning set forth in Section 5.5 hereof.



     “Transferee” shall have the meaning set forth in Section 16.3(d) hereof.



     “TVna” shall have the meaning set forth in the preamble to this Agreement.



     “Undrawn Availability” at a particular date shall mean an amount equal to (a) the
lesser of (i) the Formula Amount or (ii) the Maximum Revolving Advance Amount, minus (b) the sum of
(i) the outstanding amount of Advances plus (ii) all amounts due and owing to any Loan Party’s
trade creditors which are more than sixty (60) days past due, plus (iii) fees and expenses for
which Loan Parties are liable but which have not been paid or charged to Borrowers’ Account.



     “Unfinanced Capital Expenditures” shall mean all Capital Expenditures of any Loan
Party other than those made utilizing financing provided by the applicable seller or third party
lenders. For the avoidance of doubt, Capital Expenditures made by a Loan Party utilizing Revolving
Advances shall be deemed Unfinanced Capital Expenditures.



     “Uniform Commercial Code” shall have the meaning set forth in Section 1.3 hereof.



     “USA PATRIOT Act” shall mean the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56, as
the same has been, or shall hereafter be, renewed, extended, amended or replaced.



20









 





     “Week” shall mean the time period commencing with the opening of business on a
Wednesday and ending on the end of business the following Tuesday.



     1.3. Uniform Commercial Code Terms. All terms used herein and defined in the Uniform
Commercial Code as adopted in the State of New York from time to time (the “Uniform Commercial
Code”) shall have the meaning given therein unless otherwise defined herein. Without limiting the
foregoing, the terms “accounts”, “chattel paper”, “instruments”, “general intangibles”, “goods”,
“payment intangibles”, “proceeds”, “supporting obligations”, “securities”, “investment property”,
“documents”, “deposit accounts”, “software”, “letter of credit rights”, “inventory”, “equipment”
and “fixtures”, as and when used in the description of Collateral shall have the meanings given to
such terms in Articles 8 or 9 of the Uniform Commercial Code. To the extent the definition of any
category or type of collateral is expanded by any amendment, modification or revision to the
Uniform Commercial Code, such expanded definition will apply automatically as of the date of such
amendment, modification or revision.



     1.4. Certain Matters of Construction. The terms “herein”, “hereof” and “hereunder”
and other words of similar import refer to this Agreement as a whole and not to any particular
section, paragraph or subdivision. All references herein to Articles, Sections, Exhibits and
Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement. Any pronoun used shall be deemed to cover all genders. Wherever appropriate in
the context, terms used herein in the singular also include the plural and vice versa. All
references to statutes and related regulations shall include any amendments of same and any
successor statutes and regulations. Unless otherwise provided, all references to any instruments
or agreements to which Agent is a party, including references to any of the Other Documents, shall
include any and all modifications or amendments thereto and any and all extensions or renewals
thereof. All references herein to the time of day shall mean the time in New York, New York.
Unless otherwise provided, all financial calculations shall be performed with Inventory valued on a
first-in, first-out basis. Whenever the words “including” or “include” shall be used, such words
shall be understood to mean “including, without limitation” or “include, without limitation”. A
Default or Event of Default shall be deemed to exist at all times during the period commencing on
the date that such Default or Event of Default occurs to the date on which such Default or Event of
Default is waived in writing pursuant to this Agreement or, in the case of a Default, is cured
within any period of cure expressly provided for in this Agreement; and an Event of Default shall
“continue” or be “continuing” until such Event of Default has been waived in writing by the
Required Lenders. Any Lien referred to in this Agreement or any of the Other Documents as having
been created in favor of Agent, any agreement entered into by Agent pursuant to this Agreement or
any of the Other Documents, any payment made by or to or funds received by Agent pursuant to or as
contemplated by this Agreement or any of the Other Documents, or any act taken or omitted to be
taken by Agent, shall, unless otherwise expressly provided, be created, entered into, made or
received, or taken or omitted, for the benefit or account of Agent and Lenders. Wherever the phrase
“to the best of Borrowers’ knowledge”, “to the best of any Loan Party’s knowledge” or words of
similar import relating to the knowledge or the awareness of any Borrower or Loan Party are used in
this Agreement or Other Documents, such phrase shall mean and refer to (i) the actual knowledge of
a senior officer of any Borrower or Loan Party, as applicable, or (ii) the knowledge that a senior
officer would have obtained if he had engaged in good faith and diligent performance of his duties,
including the making of such reasonably specific inquiries as may be necessary of the employees or
agents of such Borrower



21









 







or Loan Party, as applicable, and a good faith attempt to ascertain the existence or accuracy
of the matter to which such phrase relates. All covenants hereunder shall be given independent
effect so that if a particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or otherwise within the limitations of, another
covenant shall not avoid the occurrence of a default if such action is taken or condition exists.
In addition, all representations and warranties hereunder shall be given independent effect so that
if a particular representation or warranty proves to be incorrect or is breached, the fact that
another representation or warranty concerning the same or similar subject matter is correct or is
not breached will not affect the incorrectness of a breach of a representation or warranty
hereunder.



II. ADVANCES, PAYMENTS.




     2.1. Revolving Advances.



          (a) Amount of Revolving Advances. Subject to the terms and conditions set forth in
this Agreement, including Section 2.1(b), each Lender, severally and not jointly, will make
Revolving Advances to Borrowers in aggregate amounts outstanding at any time equal to such Lender’s
Commitment Percentage of the lesser of (x) the Maximum Revolving Advance Amount less the
aggregate Maximum Undrawn Amount of all outstanding Letters of Credit, or (y) an amount equal to
the sum of:




               (i) up to 85%, subject to the provisions of Section 2.1(b) hereof (“Receivables Advance
Rate”), of Eligible Receivables, plus



               (ii) up to the lesser of (A) 85% of the appraised net orderly liquidation value of Eligible
Inventory (as evidenced by an Inventory appraisal satisfactory to Agent in its sole discretion
exercised in good faith) or (B) $750,000 in the aggregate at any one time, minus



               (iii) the aggregate Maximum Undrawn Amount of all outstanding Letters of Credit, minus



               (iv) such reserves as Agent may reasonably deem proper and necessary from time to time.



     The amount derived from the sum of (x) Sections 2.1(a)(y)(i) and (ii) minus (y) Section 2.1
(a)(y)(iv) at any time and from time to time shall be referred to as the “Formula Amount”. The
Revolving Advances shall be evidenced by one or more secured promissory notes (collectively, the
“Revolving Credit Note”) substantially in the form attached hereto as Exhibit 2.1(a).



          (b) Discretionary Rights. The Advance Rates may be increased or decreased by Agent at
any time and from time to time in the exercise of its reasonable discretion. Each Borrower
consents to any such increases or decreases and acknowledges that decreasing the Advance Rates or
increasing or imposing reserves may limit or restrict Advances requested by Borrowing Agent. The
rights of Agent under this subsection are subject to the provisions of Section 16.2(b).




     2.2. Procedure for Revolving Advances Borrowing.



22









 





          (a) Borrowing Agent on behalf of any Borrower may notify Agent prior to 10:00 a.m. on a
Business Day of a Borrower’s request to incur, on that day, a Revolving Advance hereunder. Should
any amount required to be paid as interest hereunder, or as fees or other charges under this
Agreement or any other agreement with Agent or Lenders, or with respect to any other Obligation,
become due, same shall be deemed a request for a Revolving Advance as of the date such payment is
due, in the amount required to pay in full such interest, fee, charge or Obligation under this
Agreement or any other agreement with Agent or Lenders, and such request shall be irrevocable.




          (b) Notwithstanding the provisions of subsection (a) above, in the event any Borrower desires
to obtain a Eurodollar Rate Loan, Borrowing Agent shall give Agent written notice by no later than
10:00 a.m. on the day which is three (3) Business Days prior to the date such Eurodollar Rate Loan
is to be borrowed, specifying (i) the date of the proposed borrowing (which shall be a Business
Day), (ii) the type of borrowing and the amount on the date of such Advance to be borrowed, which
amount shall be a minimum of $100,000 and integral multiples of $100,000 in excess thereof, and
(iii) the duration of the first Interest Period therefor. Interest Periods for Eurodollar Rate
Loans shall be for one, two or three months; provided, if an Interest Period would end on a day
that is not a Business Day, it shall end on the next succeeding Business Day unless such day falls
in the next succeeding calendar month in which case the Interest Period shall end on the next
preceding Business Day. No Eurodollar Rate Loan shall be made available to any Borrower during the
continuance of a Default or an Event of Default. After giving effect to each requested Eurodollar
Rate Loan, including those which are converted from a Domestic Rate Loan under Section 2.2(d),
there shall not be outstanding more than three (3) Eurodollar Rate Loans, in the aggregate.




          (c) Each Interest Period of a Eurodollar Rate Loan shall commence on the date such Eurodollar
Rate Loan is made and shall end on such date as Borrowing Agent may elect as set forth in
subsection (b)(iii) above provided that the exact length of each Interest Period shall be
determined in accordance with the practice of the interbank market for offshore Dollar deposits and
no Interest Period shall end after the last day of the Term.




          Borrowing Agent shall elect the initial Interest Period applicable to a Eurodollar Rate Loan
by its notice of borrowing given to Agent pursuant to Section 2.2(b) or by its notice of conversion
given to Agent pursuant to Section 2.2(d), as the case may be. Borrowing Agent shall elect the
duration of each succeeding Interest Period by giving irrevocable written notice to Agent of such
duration not later than 10:00 a.m. on the day which is three (3) Business Days prior to the last
day of the then current Interest Period applicable to such Eurodollar Rate Loan. If Agent does not
receive timely notice of the Interest Period elected by Borrowing Agent, Borrowing Agent shall be
deemed to have elected to convert to a Domestic Rate Loan subject to Section 2.2(d) hereinbelow.




          (d) Provided that no Event of Default shall have occurred and be continuing, Borrowing Agent
may, on the last Business Day of the then current Interest Period applicable to any outstanding
Eurodollar Rate Loan, or on any Business Day with respect to Domestic Rate Loans, convert any such
loan into a loan of another type in the same aggregate principal amount provided that any
conversion of a Eurodollar Rate Loan shall be made only on the last Business Day of the then
current Interest Period applicable to such Eurodollar Rate Loan. If Borrowing





23









 







Agent desires to convert a loan, Borrowing Agent shall give Agent written notice by no later
than 10:00 a.m. (i) on the day which is three (3) Business Days’ prior to the date on which such
conversion is to occur with respect to a conversion from a Domestic Rate Loan to a Eurodollar Rate
Loan, or (ii) on the day which is one (1) Business Day prior to the date on which such conversion
is to occur with respect to a conversion from a Eurodollar Rate Loan to a Domestic Rate Loan,
specifying, in each case, the date of such conversion, the loans to be converted and if the
conversion is from a Domestic Rate Loan to any other type of loan, the duration of the first
Interest Period therefor.




          (e) At its option and upon written notice given prior to 10:00 a.m. (New York time) at least
three (3) Business Days’ prior to the date of such prepayment, any Borrower may prepay the
Eurodollar Rate Loans in whole at any time or in part from time to time with accrued interest on
the principal being prepaid to the date of such repayment. Such Borrower shall specify the date of
prepayment of Advances which are Eurodollar Rate Loans and the amount of such prepayment. In the
event that any prepayment of a Eurodollar Rate Loan is required or permitted on a date other than
the last Business Day of the then current Interest Period with respect thereto, such Borrower shall
indemnify Agent and Lenders therefor in accordance with Section 2.2(f) hereof.




          (f) Each Borrower shall indemnify Agent and Lenders and hold Agent and Lenders harmless from
and against any and all losses or expenses that Agent and Lenders may sustain or incur as a
consequence of any prepayment, conversion of or any default by any Borrower in the payment of the
principal of or interest on any Eurodollar Rate Loan or failure by any Borrower to complete a
borrowing of, a prepayment of or conversion of or to a Eurodollar Rate Loan after notice thereof
has been given, including, but not limited to, any interest payable by Agent or Lenders to lenders
of funds obtained by it in order to make or maintain its Eurodollar Rate Loans hereunder. A
certificate as to any additional amounts payable pursuant to the foregoing sentence submitted by
Agent or any Lender to Borrowing Agent shall be conclusive absent manifest error.




          (g) Notwithstanding any other provision hereof, if any Applicable Law, or any change therein
or in the interpretation or application thereof, shall make it unlawful for any Lender (for
purposes of this subsection (g), the term “Lender” shall include any Lender and the office or
branch where any Lender or any corporation or bank controlling such Lender makes or maintains any
Eurodollar Rate Loans) to make or maintain its Eurodollar Rate Loans, the obligation of Lenders to
make Eurodollar Rate Loans hereunder shall forthwith be cancelled and Borrowers shall, if any
affected Eurodollar Rate Loans are then outstanding, promptly upon request from Agent, either pay
all such affected Eurodollar Rate Loans or convert such affected Eurodollar Rate Loans into loans
of another type. If any such payment or conversion of any Eurodollar Rate Loan is made on a day
that is not the last day of the Interest Period applicable to such Eurodollar Rate Loan, Borrowers
shall pay Agent, upon Agent’s request, such amount or amounts as may be necessary to compensate
Lenders for any loss or expense sustained or incurred by Lenders in respect of such Eurodollar Rate
Loan as a result of such payment or conversion, including (but not limited to) any interest or
other amounts payable by Lenders to lenders of funds obtained by Lenders in order to make or
maintain such Eurodollar Rate Loan. A certificate as to any additional amounts payable pursuant to
the foregoing sentence submitted by Lenders to Borrowing Agent shall be conclusive absent manifest
error.




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     2.3. Disbursement of Advance Proceeds. All Advances shall be disbursed from whichever
office or other place Agent may designate from time to time and, together with any and all other
Obligations of Borrowers to Agent or Lenders, shall be charged to Borrowers’ Account on Agent’s
books. During the Term, Borrowers may use the Revolving Advances by borrowing, prepaying and
reborrowing, all in accordance with the terms and conditions hereof. The proceeds of each
Revolving Advance requested by Borrowing Agent on behalf of any Borrower or deemed to have been
requested by any Borrower under Section 2.2(a) hereof shall, with respect to requested Revolving
Advances to the extent Lenders make such Revolving Advances, be made available to the applicable
Borrower on the day so requested by way of credit to such Borrower’s operating account at PNC, or
such other bank as Borrowing Agent may designate following notification to Agent, in immediately
available federal funds or other immediately available funds or, with respect to Revolving Advances
deemed to have been requested by any Borrower, be disbursed to Agent to be applied to the
outstanding Obligations giving rise to such deemed request.



     2.4. [Reserved].



     2.5. Maximum Advances. The aggregate balance of Revolving Advances outstanding at any
time shall not exceed the lesser of (a) the Maximum Revolving Advance Amount or (b) the Formula
Amount less, in each case, the aggregate Maximum Undrawn Amount of all issued and outstanding
Letters of Credit.



     2.6. Repayment of Advances.



          (a) The Revolving Advances shall be due and payable in full on the last day of the Term
subject to earlier prepayment as herein provided.




          (b) Each Borrower recognizes that the amounts evidenced by checks, notes, drafts or any other
items of payment relating to and/or proceeds of Collateral may not be collectible by Agent on the
date received. In consideration of Agent’s agreement to conditionally credit Borrowers’ Account as
of the Business Day on which Agent receives those items of payment, each Borrower agrees that, in
computing the charges under this Agreement, all items of payment shall be deemed applied by Agent
on account of the Obligations one (1) Business Day after (i) the Business Day Agent receives such
payments via wire transfer or electronic depository check or (ii) in the case of payments received
by Agent in any other form, the Business Day such payment constitutes good funds in Agent’s
account. Agent is not, however, required to credit Borrowers’ Account for the amount of any item
of payment which is unsatisfactory to Agent and Agent may charge Borrowers’ Account for the amount
of any item of payment which is returned to Agent unpaid.




          (c) All payments of principal, interest and other amounts payable hereunder, or under any of
the Other Documents shall be made to Agent at the Payment Office not later than 1:00 P.M. (New York
time) on the due date therefor in lawful money of the United States of America in federal funds or
other funds immediately available to Agent. Agent shall have the right to effectuate payment on
any and all Obligations due and owing hereunder by charging Borrowers’ Account or by making
Advances as provided in Section 2.2 hereof.




25









 








          (d) Borrowers shall pay principal, interest, and all other amounts payable hereunder, or under
any related agreement, without any deduction whatsoever, including, but not limited to, any
deduction for any setoff or counterclaim.




     2.7. Repayment of Excess Advances. The aggregate balance of Advances outstanding at
any time in excess of the maximum amount of Advances permitted hereunder shall be immediately due
and payable without the necessity of any demand, at the Payment Office, whether or not a Default or
Event of Default has occurred.



     2.8. Statement of Account. Agent shall maintain, in accordance with its customary
procedures, a loan account (“Borrowers’ Account”) in the name of Borrowers in which shall be
recorded the date and amount of each Advance made by Agent and the date and amount of each payment
in respect thereof; provided, however, the failure by Agent to record the date and amount of any
Advance shall not adversely affect Agent or any Lender. Each month, Agent shall send to Borrowing
Agent a statement showing the accounting for the Advances made, payments made or credited in
respect thereof, and other transactions between Agent and Borrowers during such month. The monthly
statements shall be deemed correct and binding upon Borrowers in the absence of manifest error and
shall constitute an account stated between Lenders and Borrowers unless Agent receives a written
statement of Borrowers’ specific exceptions thereto within thirty (30) days after such statement is
received by Borrowing Agent. The records of Agent with respect to the loan account shall be
conclusive evidence absent manifest error of the amounts of Advances and other charges thereto and
of payments applicable thereto.



     2.9. Letters of Credit. Subject to the terms and conditions hereof, Agent shall (a)
issue or cause the issuance of standby and/or trade Letters of Credit (“Letters of Credit”) for the
account of any Borrower; provided, however, that Agent will not be required to issue or cause to be
issued any Letters of Credit to the extent that the issuance thereof would then cause the sum of
(i) the outstanding Revolving Advances plus (ii) the Maximum Undrawn Amount of all outstanding
Letters of Credit to exceed the lesser of (x) the Maximum Revolving Advance Amount or (y) the
Formula Amount. The Maximum Undrawn Amount of outstanding Letters of Credit shall not exceed in
the aggregate at any time the Letter of Credit Sublimit. All disbursements or payments related to
Letters of Credit shall be deemed to be Domestic Rate Loans consisting of Revolving Advances and
shall bear interest at the Revolving Interest Rate for Domestic Rate Loans; Letters of Credit that
have not been drawn upon shall not bear interest.



     2.10. Issuance of Letters of Credit.



          (a) Borrowing Agent, on behalf of Borrowers, may request Agent to issue or cause the issuance
of a Letter of Credit by delivering to Agent at the Payment Office, prior to 10:00 a.m. (New York
time), at least five (5) Business Days’ prior to the proposed date of issuance, Agent’s form of
Letter of Credit Application (the “Letter of Credit Application”) completed to the satisfaction of
Agent; and, such other certificates, documents and other papers and information as Agent may
reasonably request. Borrowing Agent, on behalf of Borrowers, also has the right to give
instructions and make agreements with respect to any application, any applicable letter of credit
and security agreement, any applicable letter of credit reimbursement agreement and/or any other
applicable agreement, any letter of credit and the disposition of




26









 







documents, disposition of any unutilized funds, and to agree with Agent upon any amendment,
extension or renewal of any Letter of Credit.




          (b) Each Letter of Credit shall, among other things, (i) provide for the payment of sight
drafts, other written demands for payment, or acceptances of usance drafts when presented for honor
thereunder in accordance with the terms thereof and when accompanied by the documents described
therein and (ii) have an expiry date not later than twenty-four (24) months after such Letter of
Credit’s date of issuance and in no event later than the last day of the Term. Each standby Letter
of Credit shall be subject either to the Uniform Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce Publication No. 600, and any amendments or revision
thereof adhered to by the Issuer (“UCP 600”) or the International Standby Practices
(ISP98-International Chamber of Commerce Publication Number 600) (the “ISP98 Rules”), as determined
by Agent, and each trade Letter of Credit shall be subject to UCP 600.




          (c) Agent shall use its reasonable efforts to notify Lenders of the request by Borrowing Agent
for a Letter of Credit hereunder.




     2.11. Requirements For Issuance of Letters of Credit.



          (a) Borrowing Agent shall authorize and direct any Issuer to name the applicable Borrower as
the “Applicant” or “Account Party” of each Letter of Credit. If Agent is not the Issuer of any
Letter of Credit, Borrowing Agent shall authorize and direct the Issuer to deliver to Agent all
instruments, documents, and other writings and property received by the Issuer pursuant to the
Letter of Credit and to accept and rely upon Agent’s instructions and agreements with respect to
all matters arising in connection with the Letter of Credit or the application therefor.




          (b) In connection with all Letters of Credit issued or caused to be issued by Agent under this
Agreement, each Borrower hereby appoints Agent, or its designee, as its attorney, with full power
and authority if an Event of Default shall have occurred and be continuing, (i) to sign and/or
endorse such Borrower’s name upon any warehouse or other receipts, letter of credit applications
and acceptances, (ii) to sign such Borrower’s name on bills of lading; (iii) to clear Inventory
through the United States of America Customs Department (“Customs”) in the name of such Borrower or
Agent or Agent’s designee, and to sign and deliver to Customs officials powers of attorney in the
name of such Borrower for such purpose; and (iv) to complete in such Borrower’s name or Agent’s, or
in the name of Agent’s designee, any order, sale or transaction, obtain the necessary documents in
connection therewith, and collect the proceeds thereof. Neither Agent nor its attorneys will be
liable for any acts or omissions nor for any error of judgment or mistakes of fact or law, except
for Agent’s or its attorney’s willful misconduct. This power, being coupled with an interest, is
irrevocable as long as any Letters of Credit remain outstanding.




     2.12. Disbursements, Reimbursement.



          (a) Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to,
and hereby irrevocably and unconditionally agrees to, purchase from Agent a





27









 







participation in such Letter of Credit and each drawing thereunder in an amount equal to such
Lender’s Commitment Percentage of the Maximum Face Amount of such Letter of Credit and the amount
of such drawing, respectively.




          (b) In the event of any request for a drawing under a Letter of Credit by the beneficiary or
transferee thereof, Agent will promptly notify Borrowing Agent. Provided that Borrowing Agent
shall have received such notice, the Borrowers shall reimburse (such obligation to reimburse Agent
shall sometimes be referred to as a “Reimbursement Obligation”) Agent prior to 12:00 Noon, New York
time on each date that an amount is paid by Agent under any Letter of Credit (each such date, a
“Drawing Date”) in an amount equal to the amount so paid by Agent. In the event Borrowers fail to
reimburse Agent for the full amount of any drawing under any Letter of Credit by 12:00 Noon, New
York time, on the Drawing Date, Agent will promptly notify each Lender thereof, and Borrowers shall
be deemed to have requested that a Domestic Rate Loan be made by the Lenders to be disbursed on the
Drawing Date under such Letter of Credit, subject to the amount of the unutilized portion of the
lesser of Maximum Revolving Advance Amount or the Formula Amount and subject to Section 8.2 hereof.
Any notice given by Agent pursuant to this Section 2.12(b) may be oral if immediately confirmed in
writing; provided that the lack of such an immediate confirmation shall not affect the
conclusiveness or binding effect of such notice.




          (c) Each Lender shall upon any notice pursuant to Section 2.12(b) make available to Agent an
amount in immediately available funds equal to its Commitment Percentage of the amount of the
drawing, whereupon the participating Lenders shall (subject to Section 2.12(d)) each be deemed to
have made a Domestic Rate Loan to Borrowers in that amount. If any Lender so notified fails to
make available to Agent the amount of such Lender’s Commitment Percentage of such amount by no
later than 2:00 p.m., New York time on the Drawing Date, then interest shall accrue on such
Lender’s obligation to make such payment, from the Drawing Date to the date on which such Lender
makes such payment (i) at a rate per annum equal to the Federal Funds Effective Rate during the
first three days following the Drawing Date and (ii) at a rate per annum equal to the rate
applicable to Revolving Advances maintained as Domestic Rate Loans on and after the fourth day
following the Drawing Date. Agent will promptly give notice of the occurrence of the Drawing Date,
but failure of Agent to give any such notice on the Drawing Date or in sufficient time to enable
any Lender to effect such payment on such date shall not relieve such Lender from its obligation
under this Section 2.12(c), provided that such Lender shall not be obligated to pay interest as
provided in Section 2.12(c) (i) and (ii) until and commencing from the date of receipt of notice
from Agent of a drawing.




          (d) With respect to any unreimbursed drawing that is not converted into a Revolving Advance
maintained as a Domestic Rate Loan to Borrowers in whole or in part as contemplated by Section
2.12(b), because of Borrowers’ failure to satisfy the conditions set forth in Section 8.2 (other
than any notice requirements) or for any other reason, Borrowers shall be deemed to have incurred
from Agent a borrowing (each a “Letter of Credit Borrowing”) in the amount of such drawing. Such
Letter of Credit Borrowing shall be due and payable on demand (together with interest) and shall
bear interest at the rate per annum applicable to a Revolving Advance maintained as a Domestic Rate
Loan. Each Lender’s payment to Agent pursuant to Section 2.12(c) shall be deemed to be a payment
in respect of its participation in such Letter of




28









 







Credit Borrowing and shall constitute a “Participation Advance” from such Lender in
satisfaction of its Participation Commitment under this Section 2.12.




          (e) Each Lender’s Participation Commitment shall continue until the last to occur of any of
the following events: (x) Agent ceases to be obligated to issue or cause to be issued Letters of
Credit hereunder; (y) no Letter of Credit issued or created hereunder remains outstanding and
uncancelled and (z) all Persons (other than the Borrowers) have been fully reimbursed for all
payments made under or relating to Letters of Credit.




     2.13. Repayment of Participation Advances.



          (a) Upon (and only upon) receipt by Agent for its account of immediately available funds from
Borrowers (i) in reimbursement of any payment made by the Agent under the Letter of Credit with
respect to which any Lender has made a Participation Advance to Agent, or (ii) in payment of
interest on such a payment made by Agent under such a Letter of Credit, Agent will pay to each
Lender, in the same funds as those received by Agent, the amount of such Lender’s Commitment
Percentage of such funds, except Agent shall retain the amount of the Commitment Percentage of such
funds of any Lender that did not make a Participation Advance in respect of such payment by Agent.




          (b) If Agent is required at any time to return to any Borrower, or to a trustee, receiver,
liquidator, custodian, or any official in any insolvency proceeding, any portion of the payments
made by Borrowers to Agent pursuant to Section 2.13(a) in reimbursement of a payment made under the
Letter of Credit or interest or fee thereon, each Lender shall, on demand of Agent, forthwith
return to Agent the amount of its Commitment Percentage of any amounts so returned by Agent plus
interest at the Federal Funds Effective Rate.




     2.14. Documentation. Each Borrower agrees to be bound by the terms of the Letter of
Credit Application and by Agent’s interpretations of any Letter of Credit issued on behalf of such
Borrower and by Agent’s written regulations and customary practices relating to letters of credit,
though Agent’s interpretations may be different from such Borrower’s own. In the event of a
conflict between the Letter of Credit Application and this Agreement, this Agreement shall govern.
It is understood and agreed that, except in the case of gross negligence or willful misconduct (as
determined by a court of competent jurisdiction in a final non-appealable judgment), Agent shall
not be liable for any error, negligence and/or mistakes, whether of omission or commission, in
following the Borrowing Agent’s or any Borrower’s instructions or those contained in the Letters of
Credit or any modifications, amendments or supplements thereto.



     2.15. Determination to Honor Drawing Request. In determining whether to honor any
request for drawing under any Letter of Credit by the beneficiary thereof, Agent shall be
responsible only to determine that the documents and certificates required to be delivered under
such Letter of Credit have been delivered and that they comply on their face with the requirements
of such Letter of Credit and that any other drawing condition appearing on the face of such Letter
of Credit has been satisfied in the manner so set forth.



29









 





     2.16. Nature of Participation and Reimbursement Obligations. Each Lender’s obligation
in accordance with this Agreement to make the Revolving Advances or Participation Advances as a
result of a drawing under a Letter of Credit, and the obligations of Borrowers to reimburse Agent
upon a draw under a Letter of Credit, shall be absolute, unconditional and irrevocable, and shall
be performed strictly in accordance with the terms of this Section 2.16 under all circumstances,
including the following circumstances:



               (i) any set-off, counterclaim, recoupment, defense or other right which such Lender may have
against Agent, any Borrower or any other Person for any reason whatsoever;



               (ii) the failure of any Borrower or any other Person to comply, in connection with a Letter of
Credit Borrowing, with the conditions set forth in this Agreement for the making of a Revolving
Advance, it being acknowledged that such conditions are not required for the making of a Letter of
Credit Borrowing and the obligation of the Lenders to make Participation Advances under Section
2.12;



               (iii) any lack of validity or enforceability of any Letter of Credit;



               (iv) any claim of breach of warranty that might be made by Borrower or any Lender against the
beneficiary of a Letter of Credit, or the existence of any claim, set-off, recoupment,
counterclaim, crossclaim, defense or other right which any Borrower or any Lender may have at any
time against a beneficiary, any successor beneficiary or any transferee of any Letter of Credit or
the proceeds thereof (or any Persons for whom any such transferee may be acting), Agent or any
Lender or any other Person, whether in connection with this Agreement, the transactions
contemplated herein or any unrelated transaction (including any underlying transaction between any
Borrower or any Subsidiaries of such Borrower and the beneficiary for which any Letter of Credit
was procured);



               (v) the lack of power or authority of any signer of (or any defect in or forgery of any
signature or endorsement on) or the form of or lack of validity, sufficiency, accuracy,
enforceability or genuineness of any draft, demand, instrument, certificate or other document
presented under or in connection with any Letter of Credit, or any fraud or alleged fraud in
connection with any Letter of Credit, or the transport of any property or provisions of services
relating to a Letter of Credit, in each case even if Agent or any of Agent’s Affiliates has been
notified thereof;



               (vi) payment by Agent under any Letter of Credit against presentation of a demand, draft or
certificate or other document which does not comply with the terms of such Letter of Credit;



               (vii) the solvency of, or any acts or omissions by, any beneficiary of any Letter of Credit,
or any other Person having a role in any transaction or obligation relating to a Letter of Credit,
or the existence, nature, quality, quantity, condition, value or other characteristic of any
property or services relating to a Letter of Credit;



               (viii) any failure by the Agent or any of Agent’s Affiliates to issue any Letter of Credit in
the form requested by Borrowing Agent, unless the Agent has received written



30









 







notice from Borrowing Agent of such failure within three (3) Business Days after the Agent
shall have furnished Borrowing Agent a copy of such Letter of Credit and such error is material and
no drawing has been made thereon prior to receipt of such notice;



               (ix) any Material Adverse Effect on any Borrower or any Guarantor;



               (x) any breach of this Agreement or any Other Document by any party thereto;



               (xi) the occurrence or continuance of an insolvency proceeding with respect to any Borrower or
any Guarantor;



               (xii) the fact that a Default or Event of Default shall have occurred and be continuing;



               (xiii) the fact that the Term shall have expired or this Agreement or the Obligations
hereunder shall have been terminated; and



               (xiv) any other circumstance or happening whatsoever, whether or not similar to any of the
foregoing.



     2.17. Indemnity. In addition to amounts payable as provided in Section 16.5, each
Borrower hereby agrees to protect, indemnify, pay and save harmless Agent and any of Agent’s
Affiliates that have issued a Letter of Credit from and against any and all claims, demands,
liabilities, damages, taxes, penalties, interest, judgments, losses, costs, charges and expenses
(including reasonable fees, expenses and disbursements of counsel and allocated costs of internal
counsel) which the Agent or any of Agent’s Affiliates may incur or be subject to as a consequence,
direct or indirect, of the issuance of any Letter of Credit, other than as a result of (A) the
gross negligence or willful misconduct of the Agent as determined by a final and non-appealable
judgment of a court of competent jurisdiction or (b) the wrongful dishonor by the Agent or any of
Agent’s Affiliates of a proper demand for payment made under any Letter of Credit, except if such
dishonor resulted from any act or omission, whether rightful or wrongful, of any present or future
de jure or de facto Governmental Body (all such acts or omissions herein called “Governmental
Acts”).



     2.18. Liability for Acts and Omissions. As between Borrowers and Agent and Lenders,
each Borrower assumes all risks of the acts and omissions of, or misuse of the Letters of Credit
by, the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation
of the respective foregoing, Agent shall not be responsible for: (i) the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in
connection with the application for an issuance of any such Letter of Credit, even if it should in
fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged
(even if Agent shall have been notified thereof); (ii) the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit
or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) the failure of the beneficiary of any such Letter
of Credit, or any other party to which such Letter of Credit may be transferred, to comply fully
with any conditions required in order to draw upon such Letter of Credit or any other claim of any
Borrower against any



31









 







beneficiary of such Letter of Credit, or any such transferee, or any dispute between or among
any Borrower and any beneficiary of any Letter of Credit or any such transferee; (iv) errors,
omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable,
telegraph, telex or otherwise, whether or not they be in cipher; (v) errors in interpretation of
technical terms; (vi) any loss or delay in the transmission or otherwise of any document required
in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) the
misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under
such Letter of Credit; or (viii) any consequences arising from causes beyond the control of Agent,
including any governmental acts, and none of the above shall affect or impair, or prevent the
vesting of, any of Agent’s rights or powers hereunder. Nothing in the preceding sentence shall
relieve Agent from liability for Agent’s gross negligence or willful misconduct (as determined by a
court of competent jurisdiction in a final non-appealable judgment) in connection with actions or
omissions described in such clauses (i) through (viii) of such sentence. In no event shall Agent
or Agent’s Affiliates be liable to any Borrower for any indirect, consequential, incidental,
punitive, exemplary or special damages or expenses (including without limitation attorneys’ fees),
or for any damages resulting from any change in the value of any property relating to a Letter of
Credit.



          Without limiting the generality of the foregoing, Agent and each of its Affiliates (i) may
rely on any oral or other communication believed in good faith by Agent or such Affiliate to have
been authorized or given by or on behalf of the applicant for a Letter of Credit, (ii) may honor
any presentation if the documents presented appear on their face substantially to comply with the
terms and conditions of the relevant Letter of Credit; (iii) may honor a previously dishonored
presentation under a Letter of Credit, whether such dishonor was pursuant to a court order, to
settle or compromise any claim of wrongful dishonor, or otherwise, and shall be entitled to
reimbursement to the same extent as if such presentation had initially been honored, together with
any interest paid by Agent or its Affiliates; (iv) may honor any drawing that is payable upon
presentation of a statement advising negotiation or payment, upon receipt of such statement (even
if such statement indicates that a draft or other document is being delivered separately), and
shall not be liable for any failure of any such draft or other document to arrive, or to conform in
any way with the relevant Letter of Credit; (v) may pay any paying or negotiating bank claiming
that it rightfully honored under the laws or practices of the place where such bank is located; and
(vi) may settle or adjust any claim or demand made on Agent or its Affiliate in any way related to
any order issued at the applicant’s request to an air carrier, a letter of guarantee or of
indemnity issued to a carrier or any similar document (each an “Order”) and honor any drawing in
connection with any Letter of Credit that is the subject of such Order, notwithstanding that any
drafts or other documents presented in connection with such Letter of Credit fail to conform in any
way with such Letter of Credit.




          In furtherance and extension and not in limitation of the specific provisions set forth above,
any action taken or omitted by Agent under or in connection with the Letters of Credit issued by it
or any documents and certificates delivered thereunder, if taken or omitted in good faith and
without gross negligence or willful misconduct (as determined by a court of competent jurisdiction
in a final non-appealable judgment), shall not put Agent under any resulting liability to any
Borrower or any Lender.




32









 







     2.19. Additional Payments. Any sums expended by Agent or any Lender due to any Loan
Party’s failure to perform or comply with its obligations under this Agreement or any Other
Document including any Loan Party’s obligations under Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1
hereof, may be charged to Borrowers’ Account as a Revolving Advance and added to the Obligations.



     2.20. Manner of Borrowing and Payment.



          (a) Each borrowing of Revolving Advances shall be advanced according to the applicable
Commitment Percentages of Lenders.




          (b) Each payment (including each prepayment) by any Borrower on account of the principal of
and interest on the Revolving Advances, shall be applied to the Revolving Advances pro rata
according to the applicable Commitment Percentages of Lenders. Except as expressly provided
herein, all payments (including prepayments) to be made by any Borrower on account of principal,
interest and fees shall be made without set off or counterclaim and shall be made to Agent on
behalf of the Lenders to the Payment Office, in each case on or prior to 1:00 P.M., New York time,
in Dollars and in immediately available funds.




          (c) (i) Notwithstanding anything to the contrary contained in Sections 2.20(a) and (b) hereof,
commencing with the first Business Day following the Closing Date, each borrowing of Revolving
Advances shall be advanced by Agent and each payment by any Borrower on account of Revolving
Advances shall be applied first to those Revolving Advances advanced by Agent. On or before 1:00
P.M., New York time, on each Settlement Date commencing with the first Settlement Date following
the Closing Date, Agent and Lenders shall make certain payments as follows: (I) if the aggregate
amount of new Revolving Advances made by Agent during the preceding Week (if any) exceeds the
aggregate amount of repayments applied to outstanding Revolving Advances during such preceding
Week, then each Lender shall provide Agent with funds in an amount equal to its applicable
Commitment Percentage of the difference between (w) such Revolving Advances and (x) such repayments
and (II) if the aggregate amount of repayments applied to outstanding Revolving Advances during
such Week exceeds the aggregate amount of new Revolving Advances made during such Week, then Agent
shall provide each Lender with funds in an amount equal to its applicable Commitment Percentage of
the difference between (y) such repayments and (z) such Revolving Advances.




               (ii) Each Lender shall be entitled to earn interest at the applicable Revolving Interest Rate
on outstanding Advances which it has funded.



               (iii) Promptly following each Settlement Date, Agent shall submit to each Lender a certificate
with respect to payments received and Advances made during the Week immediately preceding such
Settlement Date. Such certificate of Agent shall be conclusive in the absence of manifest error.



          (d) If any Lender or Participant (a “benefited Lender”) shall at any time receive any payment
of all or part of its Advances, or interest thereon, or receive any Collateral in respect thereof
(whether voluntarily or involuntarily or by set-off) in a greater proportion than any such payment
to and Collateral received by any other Lender, if any, in respect of such other




33









 







Lender’s Advances, or interest thereon, and such greater proportionate payment or receipt of
Collateral is not expressly permitted hereunder, such benefited Lender shall purchase for cash from
the other Lenders a participation in such portion of each such other Lender’s Advances, or shall
provide such other Lender with the benefits of any such Collateral, or the proceeds thereof, as
shall be necessary to cause such benefited Lender to share the excess payment or benefits of such
Collateral or proceeds ratably with each of the other Lenders; provided, however, that if all or
any portion of such excess payment or benefits is thereafter recovered from such benefited Lender,
such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of
such recovery, but without interest. Each Lender so purchasing a portion of another Lender’s
Advances may exercise all rights of payment (including rights of set-off) with respect to such
portion as fully as if such Lender were the direct holder of such portion.




          (e) Unless Agent shall have been notified by telephone, confirmed in writing, by any Lender
that such Lender will not make the amount which would constitute its applicable Commitment
Percentage of the Advances available to Agent, Agent may (but shall not be obligated to) assume
that such Lender shall make such amount available to Agent on the next Settlement Date and, in
reliance upon such assumption, make available to Borrowers a corresponding amount. Agent will
promptly notify Borrowing Agent of its receipt of any such notice from a Lender. If such amount is
made available to Agent on a date after such next Settlement Date, such Lender shall pay to Agent
on demand an amount equal to the product of (i) the daily average Federal Funds Rate (computed on
the basis of a year of 360 days) during such period as quoted by Agent, times (ii) such amount,
times (iii) the number of days from and including such Settlement Date to the date on which such
amount becomes immediately available to Agent. A certificate of Agent submitted to any Lender with
respect to any amounts owing under this paragraph (e) shall be conclusive, in the absence of
manifest error. If such amount is not in fact made available to Agent by such Lender within three
(3) Business Days after such Settlement Date, Agent shall be entitled to recover such an amount,
with interest thereon at the rate per annum then applicable to such Revolving Advances hereunder,
on demand from Borrowers; provided, however, that Agent’s right to such recovery shall not
prejudice or otherwise adversely affect Borrowers’ rights (if any) against such Lender.




     2.21. Mandatory Prepayments.



          Subject to Section 4.3 hereof, when any Loan Party sells or otherwise disposes of any
Collateral other than Inventory in the Ordinary Course of Business, Borrowers shall repay the
Advances in an amount equal to the net proceeds of such sale (i.e., gross proceeds less the
reasonable costs of such sales or other dispositions), such repayments to be made promptly but in
no event more than one (1) Business Day following receipt of such net proceeds, and until the date
of payment, such proceeds shall be held in trust for Agent. The foregoing shall not be deemed to
be implied consent to any such sale otherwise prohibited by the terms and conditions hereof. Such
repayments shall be applied to the Advances in such order as Agent may determine, subject to
Borrowers’ ability to reborrow Revolving Advances in accordance with the terms hereof.




     2.22. Use of Proceeds.



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          (a) Borrowers shall apply the proceeds of Advances to (i) repay existing Indebtedness owed to
Laurus Master Fund, Ltd.,(ii) pay fees and expenses relating to this transaction and (iii) provide
for its working capital needs and reimburse drawings under Letters of Credit.




          (b) Without limiting the generality of Section 2.22(a) above, neither any Loan Party nor any
other Person which may in the future become party to this Agreement or the Other Documents as a
Loan Party intends to use nor shall they use any portion of the proceeds of the Advances, directly
or indirectly, for any purpose in violation of the Trading with the Enemy Act.




     2.23. Defaulting Lender.



          (a) Notwithstanding anything to the contrary contained herein, in the event any Lender (x) has
refused (which refusal constitutes a breach by such Lender of its obligations under this Agreement)
to make available its portion of any Advance or (y) notifies either Agent or Borrowing Agent that
it does not intend to make available its portion of any Advance (if the actual refusal would
constitute a breach by such Lender of its obligations under this Agreement) (each, a “Lender
Default”), all rights and obligations hereunder of such Lender (a “Defaulting Lender”) as to which
a Lender Default is in effect and of the other parties hereto shall be modified to the extent of
the express provisions of this Section 2.23 while such Lender Default remains in effect.




          (b) Advances shall be incurred pro rata from Lenders (the “Non-Defaulting Lenders”) which are
not Defaulting Lenders based on their respective Commitment Percentages, and no Commitment
Percentage of any Lender or any pro rata share of any Advances required to be advanced by any
Lender shall be increased as a result of such Lender Default. Amounts received in respect of
principal of any type of Advances shall be applied to reduce the applicable Advances of each Lender
(other than any Defaulting Lender) pro rata based on the aggregate of the outstanding Advances of
that type of all Lenders at the time of such application; provided, that, Agent shall not
be obligated to transfer to a Defaulting Lender any payments received by Agent for the Defaulting
Lender’s benefit, nor shall a Defaulting Lender be entitled to the sharing of any payments
hereunder (including any principal, interest or fees). Amounts payable to a Defaulting Lender
shall instead be paid to or retained by Agent. Agent may hold and, in its discretion, re-lend to a
Borrower the amount of such payments received or retained by it for the account of such Defaulting
Lender.




          (c) A Defaulting Lender shall not be entitled to give instructions to Agent or to approve,
disapprove, consent to or vote on any matters relating to this Agreement and the Other Documents.
All amendments, waivers and other modifications of this Agreement and the Other Documents may be
made without regard to a Defaulting Lender and, for purposes of the definition of “Required
Lenders”, a Defaulting Lender shall be deemed not to be a Lender and not to have Advances
outstanding.




          (d) Other than as expressly set forth in this Section 2.23, the rights and obligations of a
Defaulting Lender (including the obligation to indemnify Agent) and the other parties hereto shall
remain unchanged. Nothing in this Section 2.23 shall be deemed to release any Defaulting Lender
from its obligations under this Agreement and the Other Documents, shall




35









 







alter such obligations, shall operate as a waiver of any default by such Defaulting Lender
hereunder, or shall prejudice any rights which any Borrower, Agent or any Lender may have against
any Defaulting Lender as a result of any default by such Defaulting Lender hereunder.




          (e) In the event a Defaulting Lender retroactively cures to the satisfaction of Agent the
breach which caused a Lender to become a Defaulting Lender, such Defaulting Lender shall no longer
be a Defaulting Lender and shall be treated as a Lender under this Agreement.




III. INTEREST AND FEES.




     3.1. Interest. Interest on Advances shall be payable in arrears on the first day of
each month with respect to Domestic Rate Loans and, with respect to Eurodollar Rate Loans, at the
end of each Interest Period and upon conversion to a Domestic Rate Loan (if such conversion occurs
other than on the last day of an applicable Interest Period). Interest charges shall be computed
on the greater of (x) the Minimum Loan Amount or (y) the actual principal amount of Revolving
Advances outstanding during the month at a rate per annum equal to the applicable Revolving
Interest Rate. Whenever, subsequent to the date of this Agreement, the Alternate Base Rate is
increased or decreased, the applicable Revolving Interest Rate shall be similarly changed without
notice or demand of any kind by an amount equal to the amount of such change in the Alternate Base
Rate during the time such change or changes remain in effect. The Eurodollar Rate shall be
adjusted with respect to Eurodollar Rate Loans without notice or demand of any kind on the
effective date of any change in the Reserve Percentage as of such effective date. Upon and after
the occurrence of an Event of Default, and during the continuation thereof, at the option of Agent
or at the direction of Required Lenders, the Obligations shall bear interest at the applicable
Revolving Interest Rate plus two (2%) percent per annum (the “Default Rate”).



     3.2. Letter of Credit Fees.



          (a) Borrowers shall pay (x) to Agent, for the ratable benefit of Lenders, fees for each Letter
of Credit for the period from and excluding the date of issuance of same to and including the date
of expiration or termination, equal to the average daily face amount of each outstanding Letter of
Credit multiplied by three and one-quarter of one percent (3.25%) per annum, such fees to be
calculated on the basis of a 360-day year for the actual number of days elapsed and to be payable
quarterly in arrears on the first day of each quarter and on the last day of the Term, and (y) to
the Issuer, a fronting fee of one quarter of one percent (0.25%) per annum, together with any and
all administrative, issuance, amendment, payment and negotiation charges with respect to Letters of
Credit and all fees and expenses as agreed upon by the Issuer and the Borrowing Agent in connection
with any Letter of Credit, including in connection with the opening, amendment or renewal of any
such Letter of Credit and any acceptances created thereunder and shall reimburse Agent for any and
all fees and expenses, if any, paid by Agent to the Issuer (all of the foregoing fees, the “Letter
of Credit Fees”). All such charges shall be deemed earned in full on the date when the same are
due and payable hereunder and shall not be subject to rebate or pro-ration upon the termination of
this Agreement for any reason. Any such charge in effect at the time of a particular transaction
shall be the charge for that transaction, notwithstanding any subsequent change in the Issuer’s
prevailing charges for that type of transaction. All Letter of Credit Fees payable hereunder shall
be deemed earned in full on the





36









 







date when the same are due and payable hereunder and shall not be subject to rebate or
pro-ration upon the termination of this Agreement for any reason.




          On demand after the occurrence and during the continuance of an Event of Default, Borrowers
will cause cash to be deposited and maintained in an account with Agent, as cash collateral, in an
amount equal to one hundred and five percent (105%) of the Maximum Undrawn Amount of all
outstanding Letters of Credit, and each Borrower hereby irrevocably authorizes Agent, in its
discretion, on such Borrower’s behalf and in such Borrower’s name, to open such an account and to
make and maintain deposits therein, or in an account opened by such Borrower, in the amounts
required to be made by such Borrower, out of the proceeds of Receivables or other Collateral or out
of any other funds of such Borrower coming into any Lender’s possession at any time. Agent will
invest such cash collateral (less applicable reserves) in such short-term money-market items as to
which Agent and such Borrower mutually agree and the net return on such investments shall be
credited to such account and constitute additional cash collateral. No Borrower may withdraw
amounts credited to any such account except upon the occurrence of all of the following: (w)
payment and performance in full of all Obligations, (x) expiration of all Letters of Credit, (y)
termination of this Agreement or (z) upon written waiver of all existing Events of Default.




     3.3. Closing Fee and Facility Fee.



          (a) Closing Fee. Upon the execution of this Agreement, Borrowers shall pay to Agent
for the ratable benefit of Lenders a closing fee of $100,000 less that portion of the
deposit of $65,000 heretofore paid by DRI to Agent remaining after application of such deposit to
out of pocket expenses and the underwriting fee referenced in Section 3.3(c).




          (b) Facility Fee. If, for any calendar quarter during the Term, the average daily
unpaid balance of the Revolving Advances and undrawn amount of any outstanding Letters of Credit
for each day of such calendar quarter does not equal the Maximum Revolving Advance Amount, then
Borrowers shall pay to Agent for the ratable benefit of Lenders a fee at a rate equal to one half
of one percent (0.50%) per annum on the amount by which the Maximum Revolving Advance Amount
exceeds such average daily unpaid balance. Such fee shall be payable to Agent in arrears on the
first day of each calendar quarter with respect to the previous calendar quarter.




          (c) Underwriting Fee. Pursuant to the proposal letter dated June 6, 2008, from Agent
to DRI, DRI agreed to pay to Agent for the ratable benefit of Lenders an underwriting fee of
$2,500, and agreed that such fee could be deducted from the deposit of $65,000 heretofore paid by
DRI to Agent.




     3.4. Collateral Evaluation Fee and Collateral Monitoring Fee.



          (a) Collateral Evaluation Fee. Borrowers shall pay Agent a collateral evaluation fee
equal to $2,000 per month commencing on the first day of the month following the Closing Date and
on the first day of each month thereafter during the Term. The collateral evaluation fee shall be
deemed earned in full on the date when same is due and payable





37









 







hereunder and shall not be subject to rebate or proration upon termination of this Agreement
for any reason.




          (b) Collateral Monitoring Fee. Borrowers shall pay to Agent on the first day of each
month following any month in which Agent performs any collateral monitoring — namely any field
examination, collateral analysis or other business analysis, the need for which is to be determined
by Agent and which monitoring is undertaken by Agent or for Agent’s benefit — a collateral
monitoring fee in an amount equal to $750 per day for each person employed to perform such
monitoring, plus all costs and disbursements incurred by Agent in the performance of such
examination or analysis.




     3.5. Computation of Interest and Fees. Interest and fees hereunder shall be computed
on the basis of a year of 360 days and for the actual number of days elapsed. If any payment to be
made hereunder becomes due and payable on a day other than a Business Day, the due date thereof
shall be extended to the next succeeding Business Day and interest thereon shall be payable at the
applicable Revolving Interest Rate during such extension.



     3.6. Maximum Charges. In no event whatsoever shall interest and other charges charged
hereunder exceed the highest rate permissible under law. In the event interest and other charges as
computed hereunder would otherwise exceed the highest rate permitted under law, such excess amount
shall be first applied to any unpaid principal balance owed by Borrowers, and if the then remaining
excess amount is greater than the previously unpaid principal balance, Lenders shall promptly
refund such excess amount to Borrowers and the provisions hereof shall be deemed amended to provide
for such permissible rate.



     3.7. Increased Costs. In the event that any Applicable Law, or any change therein or
in the interpretation or application thereof, or compliance by any Lender (for purposes of this
Section 3.7, the term “Lender” shall include Agent or any Lender and any corporation or bank
controlling Agent or any Lender) and the office or branch where Agent or any Lender (as so defined)
makes or maintains any Eurodollar Rate Loans with any request or directive (whether or not having
the force of law) from any central bank or other financial, monetary or other authority, shall:



          (a) subject Agent or any Lender to any tax of any kind whatsoever with respect to this
Agreement or any Other Document or change the basis of taxation of payments to Agent or any Lender
of principal, fees, interest or any other amount payable hereunder or under any Other Documents
(except for changes in the rate of tax on the overall net income of Agent or any Lender by the
jurisdiction in which it maintains its principal office);




          (b) impose, modify or hold applicable any reserve, special deposit, assessment or similar
requirement against assets held by, or deposits in or for the account of, advances or loans by, or
other credit extended by, any office of Agent or any Lender, including pursuant to Regulation D of
the Board of Governors of the Federal Reserve System; or




          (c) impose on Agent or any Lender or the London interbank Eurodollar market any other
condition with respect to this Agreement or any Other Document;




38









 







and the result of any of the foregoing is to increase the cost to Agent or any Lender of making,
renewing or maintaining its Advances hereunder by an amount that Agent or such Lender deems to be
material or to reduce the amount of any payment (whether of principal, interest or otherwise) in
respect of any of the Advances by an amount that Agent or such Lender deems to be material, then,
in any case Borrowers shall promptly pay Agent or such Lender, upon its demand, such additional
amount as will compensate Agent or such Lender for such additional cost or such reduction, as the
case may be, provided that the foregoing shall not apply to increased costs which are reflected in
the Eurodollar Rate, as the case may be. Agent or such Lender shall certify the amount of such
additional cost or reduced amount to Borrowing Agent, and such certification shall be conclusive
absent manifest error.




     3.8. Basis For Determining Interest Rate Inadequate or Unfair. In the event that
Agent or any Lender shall have determined that:



          (a) reasonable means do not exist for ascertaining the Eurodollar Rate applicable pursuant to
Section 2.2 hereof for any Interest Period; or




          (b) Dollar deposits in the relevant amount and for the relevant maturity are not available in
the London interbank Eurodollar market, with respect to an outstanding Eurodollar Rate Loan, a
proposed Eurodollar Rate Loan, or a proposed conversion of a Domestic Rate Loan into a Eurodollar
Rate Loan,




then Agent shall give Borrowing Agent prompt written, telephonic or telegraphic notice of such
determination. If such notice is given, (i) any such requested Eurodollar Rate Loan shall be made
as a Domestic Rate Loan, unless Borrowing Agent shall notify Agent no later than 10:00 a.m. (New
York City time) two (2) Business Days prior to the date of such proposed borrowing, that its
request for such borrowing shall be cancelled or made as an unaffected type of Eurodollar Rate
Loan, (ii) any Domestic Rate Loan or Eurodollar Rate Loan which was to have been converted to an
affected type of Eurodollar Rate Loan shall be continued as or converted into a Domestic Rate Loan,
or, if Borrowing Agent shall notify Agent, no later than 10:00 a.m. (New York City time) two (2)
Business Days prior to the proposed conversion, shall be maintained as an unaffected type of
Eurodollar Rate Loan, and (iii) any outstanding affected Eurodollar Rate Loans shall be converted
into a Domestic Rate Loan, or, if Borrowing Agent shall notify Agent, no later than 10:00 a.m. (New
York City time) two (2) Business Days prior to the last Business Day of the then current Interest
Period applicable to such affected Eurodollar Rate Loan, shall be converted into an unaffected type
of Eurodollar Rate Loan, on the last Business Day of the then current Interest Period for such
affected Eurodollar Rate Loans. Until such notice has been withdrawn, Lenders shall have no
obligation to make an affected type of Eurodollar Rate Loan or maintain outstanding affected
Eurodollar Rate Loans and no Borrower shall have the right to convert a Domestic Rate Loan or an
unaffected type of Eurodollar Rate Loan into an affected type of Eurodollar Rate Loan.




     3.9. Capital Adequacy.



          (a) In the event that Agent or any Lender shall have determined that any Applicable Law or
guideline regarding capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by any Governmental Body, central bank or





39









 







comparable agency charged with the interpretation or administration thereof, or compliance by
Agent or any Lender (for purposes of this Section 3.9, the term “Lender” shall include Agent or any
Lender and any corporation or bank controlling Agent or any Lender) and the office or branch where
Agent or any Lender (as so defined) makes or maintains any Eurodollar Rate Loans with any request
or directive regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of reducing the rate of
return on Agent or any Lender’s capital as a consequence of its obligations hereunder to a level
below that which Agent or such Lender could have achieved but for such adoption, change or
compliance (taking into consideration Agent’s and each Lender’s policies with respect to capital
adequacy) by an amount deemed by Agent or any Lender to be material, then, from time to time,
Borrowers shall pay upon demand to Agent or such Lender such additional amount or amounts as will
compensate Agent or such Lender for such reduction. In determining such amount or amounts, Agent
or such Lender may use any reasonable averaging or attribution methods. The protection of this
Section 3.9 shall be available to Agent and each Lender regardless of any possible contention of
invalidity or inapplicability with respect to the Applicable Law or condition.




          (b) A certificate of Agent or such Lender setting forth such amount or amounts as shall be
necessary to compensate Agent or such Lender with respect to Section 3.9(a) hereof when delivered
to Borrowing Agent shall be conclusive absent manifest error.




     3.10. Gross Up for Taxes. If any Borrower shall be required by Applicable Law to
withhold or deduct any taxes from or in respect of any sum payable under this Agreement or any of
the Other Documents to Agent, or any Lender, assignee of any Lender, or Participant (each,
individually, a “Payee” and collectively, the “Payees”), (a) the sum payable to such Payee or
Payees, as the case may be, shall be increased as may be necessary so that, after making all
required withholding or deductions, the applicable Payee or Payees receives an amount equal to the
sum it would have received had no such withholding or deductions been made (the “Gross-Up
Payment”), (b) such Borrower shall make such withholding or deductions, and (c) such Borrower shall
pay the full amount withheld or deducted to the relevant taxation authority or other authority in
accordance with Applicable Law. Notwithstanding the foregoing, no Borrower shall be obligated to
make any portion of the Gross-Up Payment that is attributable to any withholding or deductions that
would not have been paid or claimed had the applicable Payee or Payees properly claimed a complete
exemption with respect thereto pursuant to Section 3.11 hereof.



     3.11. Withholding Tax Exemption.



          (a) Each Payee that is not incorporated under the Laws of the United States of America or a
state thereof (and, upon the written request of Agent, each other Payee) agrees that it will
deliver to Borrowing Agent and Agent two (2) duly completed appropriate valid Withholding
Certificates (as defined under §1.1441-1(c)(16) of the Income Tax Regulations (“Regulations”))
certifying its status (i.e., U.S. or foreign person) and, if appropriate, making a claim of
reduced, or exemption from, U.S. withholding tax on the basis of an income tax treaty or an
exemption provided by the Code. The term “Withholding Certificate” means a Form W-9; a Form
W-8BEN; a Form W-8ECI; a Form W-8IMY and the related statements and certifications as required
under §1.1441-1(e)(2) and/or (3) of the Regulations; a statement





40









 







described in §1.871-14(c)(2)(v) of the Regulations; or any other certificates under the Code
or Regulations that certify or establish the status of a payee or beneficial owner as a U.S. or
foreign person.




          (b) Each Payee required to deliver to Borrowing Agent and Agent a valid Withholding
Certificate pursuant to Section 3.11(a) hereof shall deliver such valid Withholding Certificate as
follows: (A) each Payee which is a party hereto on the Closing Date shall deliver such valid
Withholding Certificate at least five (5) Business Days prior to the first date on which any
interest or fees are payable by any Borrower hereunder for the account of such Payee; (B) each
Payee shall deliver such valid Withholding Certificate at least five (5) Business Days before the
effective date of such assignment or participation (unless Agent in its sole discretion shall
permit such Payee to deliver such Withholding Certificate less than five (5) Business Days before
such date in which case it shall be due on the date specified by Agent). Each Payee which so
delivers a valid Withholding Certificate further undertakes to deliver to Borrowing Agent and Agent
two (2) additional copies of such Withholding Certificate (or a successor form) on or before the
date that such Withholding Certificate expires or becomes obsolete or after the occurrence of any
event requiring a change in the most recent Withholding Certificate so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be reasonably requested by Borrowing
Agent or Agent.




          (c) Notwithstanding the submission of a Withholding Certificate claiming a reduced rate of or
exemption from U.S. withholding tax required under Section 3.11(b) hereof, Agent shall be entitled
to withhold United States federal income taxes at the full 30% withholding rate if in its
reasonable judgment it is required to do so under the due diligence requirements imposed upon a
withholding agent under §1.1441-7(b) of the Regulations. Further, Agent is indemnified under
§1.1461-1(e) of the Regulations against any claims and demands of any Payee for the amount of any
tax it deducts and withholds in accordance with regulations under §1441 of the Code.




IV. COLLATERAL: GENERAL TERMS




     4.1. Security Interest in the Collateral. To secure the prompt payment and
performance of the Obligations to Agent and each Lender, each Loan Party hereby assigns, pledges
and grants to Agent for its benefit and for the ratable benefit of each Lender a continuing
security interest in and to and Lien on all of its Collateral, whether now owned or existing or
hereafter acquired or arising and wheresoever located. Each Loan Party shall mark its books and
records as may be necessary or appropriate to evidence, protect and perfect Agent’s security
interest and shall cause its financial statements to reflect such security interest. Each Loan
Party shall promptly provide Agent with written notice of all commercial tort claims, such notice
to contain the case title together with the applicable court and a brief description of the
claim(s). Upon delivery of each such notice, such Loan Party shall be deemed to hereby grant to
Agent a security interest and lien in and to such commercial tort claims and all proceeds thereof.



     4.2. Perfection of Security Interest. Each Loan Party shall take all action that may
be necessary or desirable, or that Agent may request, so as at all times to maintain the validity,
perfection, enforceability and priority of Agent’s security interest in and Lien on the Collateral
or to enable Agent to protect, exercise or enforce its rights hereunder and in the Collateral,



41









 







including, but not limited to, (i) immediately discharging all Liens other than Permitted
Encumbrances, (ii) obtaining Lien Waiver Agreements, (iii) delivering to Agent, endorsed or
accompanied by such instruments of assignment as Agent may specify, and stamping or marking, in
such manner as Agent may specify, any and all chattel paper, instruments, letters of credits and
advices thereof and documents evidencing or forming a part of the Collateral, (iv) entering into
warehousing, lockbox and other custodial arrangements satisfactory to Agent, and (v) executing and
delivering financing statements, control agreements, instruments of pledge, mortgages, notices and
assignments, in each case in form and substance satisfactory to Agent, relating to the creation,
validity, perfection, maintenance or continuation of Agent’s security interest and Lien under the
Uniform Commercial Code or other Applicable Law. By its signature hereto, each Loan Party hereby
authorizes Agent to file against such Loan Party, one or more financing, continuation or amendment
statements pursuant to the Uniform Commercial Code in form and substance satisfactory to Agent
(which statements may have a description of collateral which is broader than that set forth
herein). All charges, expenses and fees Agent may incur in doing any of the foregoing, and any
local taxes relating thereto, shall be charged to Borrowers’ Account as a Revolving Advance of a
Domestic Rate Loan and added to the Obligations, or, at Agent’s option, shall be paid to Agent for
its benefit and for the ratable benefit of Lenders immediately upon demand.



     4.3. Disposition of Collateral. Each Loan Party will safeguard and protect all
Collateral for Agent’s general account and make no disposition thereof whether by sale, lease or
otherwise except (a) the sale of Inventory in the Ordinary Course of Business, (b) the disposition
or transfer of obsolete and worn-out Equipment in the Ordinary Course of Business during any fiscal
year having an aggregate fair market value of not more than $100,000 and only to the extent that
(i) the proceeds of any such disposition are used to acquire replacement Equipment which is subject
to Agent’s first priority security interest or (ii) the proceeds of which are remitted to Agent to
be applied pursuant to Section 2.21, and (c) dispositions of Equipment by any Borrower to any other
Borrower.



     4.4. Preservation of Collateral. Following the occurrence and during the continuance
of a Default or Event of Default in addition to the rights and remedies set forth in Section 11.1
hereof, Agent: (a) may at any time take such steps as Agent deems necessary to protect Agent’s
interest in and to preserve the Collateral, including the hiring of such security guards or the
placing of other security protection measures as Agent may deem appropriate; (b) may employ and
maintain at any of any Loan Party’s premises a custodian who shall have full authority to do all
acts necessary to protect Agent’s interests in the Collateral; (c) may lease warehouse facilities
to which Agent may move all or part of the Collateral; (d) may use any Loan Party’s owned or leased
lifts, hoists, trucks and other facilities or equipment for handling or removing the Collateral;
and (e) shall have, and is hereby granted, a right of ingress and egress to the places where the
Collateral is located, and may proceed over and through any of any Loan Party’s owned or leased
property. Each Loan Party shall cooperate fully with all of Agent’s efforts to preserve the
Collateral and will take such actions to preserve the Collateral as Agent may direct. All of
Agent’s expenses of preserving the Collateral, including any expenses relating to the bonding of a
custodian, shall be charged to Borrowers’ Account as a Revolving Advance and added to the
Obligations.



     4.5. Ownership of Collateral.



42









 





          (a) With respect to the Collateral, at the time the Collateral becomes subject to Agent’s
security interest: (i) each Loan Party shall be the sole owner of and fully authorized and able to
sell, transfer, pledge and/or grant a first priority security interest in each and every item of
its respective Collateral to Agent; and, except for Permitted Encumbrances the Collateral shall be
free and clear of all Liens and encumbrances whatsoever; (ii) each document and agreement executed
by each Loan Party or delivered to Agent or any Lender in connection with this Agreement shall be
true and correct in all respects; (iii) all signatures and endorsements of each Loan Party that
appear on such documents and agreements shall be genuine and each Loan Party shall have full
capacity to execute same; and (iv) each Loan Party’s Equipment and Inventory shall be located as
set forth on Schedule 4.5 and shall not be removed from such location(s) without the prior written
consent of Agent except with respect to (x) the sale of Inventory in the Ordinary Course of
Business and (y) the sale of Equipment to the extent permitted in Section 4.3 hereof.




          (b) (i) There is no location at which any Loan Party has any Inventory (except for Inventory
in transit) other than those locations listed on Schedule 4.5; (ii) Schedule 4.5 hereto contains a
correct and complete list, as of the Closing Date, of the legal names and addresses of each
warehouse at which Inventory of any Loan Party is stored; none of the receipts received by any
Loan Party from any warehouse states that the goods covered thereby are to be delivered to bearer
or to the order of a named Person or to a named Person and such named Person’s assigns; (iii)
Schedule 4.5 hereto sets forth a correct and complete list as of the Closing Date of (A) each place
of business of each Loan Party and (B) the chief executive office of each Loan Party; and (iv)
Schedule 4.5 hereto sets forth a correct and complete list as of the Closing Date of the location,
by state and street address, of all Real Property owned or leased by each Loan Party, together with
the names and addresses of any landlords.




     4.6. Defense of Agent’s and Lenders’ Interests. Until (a) payment and performance in
full of all of the Obligations and (b) termination of this Agreement, Agent’s interests in the
Collateral shall continue in full force and effect. During such period no Loan Party shall,
without Agent’s prior written consent, pledge, sell (except Inventory in the Ordinary Course of
Business and Equipment to the extent permitted in Section 4.3 hereof), assign, transfer, create or
suffer to exist a Lien upon or encumber or allow or suffer to be encumbered in any way except for
Permitted Encumbrances, any part of the Collateral. Each Loan Party shall defend Agent’s interests
in the Collateral against any and all Persons whatsoever. At any time following demand by Agent
for payment of all Obligations, Agent shall have the right to take possession of the indicia of the
Collateral and the Collateral in whatever physical form contained, including: labels, stationery,
documents, instruments and advertising materials. If Agent exercises this right to take possession
of the Collateral, Loan Parties shall, upon demand, assemble it in the best manner possible and
make it available to Agent at a place reasonably convenient to Agent. In addition, with respect to
all Collateral, Agent and Lenders shall be entitled to all of the rights and remedies set forth
herein and further provided by the Uniform Commercial Code or other Applicable Law. Each Loan
Party shall, and Agent may, at its option, instruct all suppliers, carriers, forwarders,
warehousers or others receiving or holding cash, checks, Inventory, documents or instruments in
which Agent holds a security interest to deliver same to Agent and/or subject to Agent’s order and
if they shall come into any Loan Party’s possession, they, and each of them, shall be held by such
Loan Party in trust as Agent’s trustee, and such Loan



43









 







Party will immediately deliver them to Agent in their original form together with any
necessary endorsement.



     4.7. Books and Records. Each Loan Party shall (a) keep proper books of record and
account in which full, true and correct entries will be made of all dealings or transactions of or
in relation to its business and affairs; (b) set up on its books accruals with respect to all
taxes, assessments, charges, levies and claims; and (c) on a reasonably current basis set up on its
books, from its earnings, allowances against doubtful Receivables, advances and investments and all
other proper accruals (including by reason of enumeration, accruals for premiums, if any, due on
required payments and accruals for depreciation, obsolescence, or amortization of properties),
which should be set aside from such earnings in connection with its business. All determinations
pursuant to this subsection shall be made in accordance with, or as required by, GAAP consistently
applied in the opinion of such independent public accountant as shall then be regularly engaged by
Loan Parties.



     4.8. Financial Disclosure. Each Loan Party hereby irrevocably authorizes and directs
all accountants and auditors employed by such Loan Party at any time during the Term to exhibit and
deliver to Agent and each Lender copies of any of such Loan Party’s financial statements, trial
balances or other accounting records of any sort in the accountant’s or auditor’s possession, and
to disclose to Agent and each Lender any information such accountants may have concerning such Loan
Party’s financial status and business operations. Each Loan Party hereby authorizes all
Governmental Bodies to furnish to Agent and each Lender copies of reports or examinations relating
to such Loan Party, whether made by such Loan Party or otherwise; however, Agent and each Lender
will attempt to obtain such information or materials directly from such Loan Party prior to
obtaining such information or materials from such accountants or Governmental Bodies.



     4.9. Compliance with Laws. Each Loan Party shall comply with all Applicable Laws with
respect to the Collateral or any part thereof or to the operation of such Loan Party’s business the
non-compliance with which could reasonably be expected to have a Material Adverse Effect. Each
Loan Party may, however, contest or dispute any Applicable Laws in any reasonable manner, provided
that any related Lien is inchoate or stayed and sufficient reserves are established to the
reasonable satisfaction of Agent to protect Agent’s Lien on or security interest in the Collateral.
The assets of Loan Parties at all times shall be maintained in accordance with the requirements of
all insurance carriers which provide insurance with respect to the assets of Loan Parties so that
such insurance shall remain in full force and effect.



     4.10. Inspection of Premises. At all reasonable times Agent and each Lender shall
have full access to and the right to audit, check, inspect and make abstracts and copies from each
Loan Party’s books, records, audits, correspondence and all other papers relating to the Collateral
and the operation of each Loan Party’s business. Agent, any Lender and their agents may enter upon
any premises of any Loan Party at any time during business hours and at any other reasonable time,
and from time to time, for the purpose of inspecting the Collateral and any and all records
pertaining thereto and the operation of such Loan Party’s business.



     4.11. Insurance. The assets and properties of each Loan Party at all times shall be
maintained in accordance with the requirements of all insurance carriers which provide insurance




44











 




with respect to the assets and properties of such Loan Party so that such insurance shall remain in
full force and effect. Each Loan Party shall bear the full risk of any loss of any nature
whatsoever with respect to the Collateral. At each Loan Party’s own cost and expense in amounts
and with carriers acceptable to Agent, each Loan Party shall (a) keep all its insurable properties
and properties in which such Loan Party has an interest insured against the hazards of fire, flood,
sprinkler leakage, those hazards covered by extended coverage insurance and such other hazards, and
for such amounts, as is customary in the case of companies engaged in businesses similar to such
Loan Party’s including business interruption insurance; (b) maintain a bond in such amounts as is
customary in the case of companies engaged in businesses similar to such Loan Party insuring
against larceny, embezzlement or other criminal misappropriation of insured’s officers and
employees who may either singly or jointly with others at any time have access to the assets or
funds of such Loan Party either directly or through authority to draw upon such funds or to direct
generally the disposition of such assets; (c) maintain public and product liability insurance
against claims for personal injury, death or property damage suffered by others; (d) maintain all
such worker’s compensation or similar insurance as may be required under the laws of any state or
jurisdiction in which such Loan Party is engaged in business; (e) furnish Agent with (i) copies of
all policies and evidence of the maintenance of such policies by the renewal thereof at least
thirty (30) days before any expiration date, and (ii) appropriate lender loss payable endorsements
in form and substance satisfactory to Agent, naming Agent as a co-insured and lender loss payee as
its interests may appear with respect to all insurance coverage referred to in clauses (a), and (c)
above, and providing (A) that all proceeds thereunder shall be payable to Agent, (B) no such
insurance shall be affected by any act or neglect of the insured or owner of the property described
in such policy, and (C) that such policy and loss payable clauses may not be cancelled, amended or
terminated unless at least thirty (30) days’ prior written notice is given to Agent. In the event
of any loss thereunder, the carriers named therein hereby are directed by Agent and the applicable
Loan Party to make payment for such loss to Agent and not to such Loan Party and Agent jointly. If
any insurance losses are paid by check, draft or other instrument payable to any Loan Party and
Agent jointly, Agent may endorse such Loan Party’s name thereon and do such other things as Agent
may deem advisable to reduce the same to cash. Agent is hereby authorized to adjust and compromise
claims under insurance coverage referred to in clauses (a), and (b) above. All loss recoveries
received by Agent upon any such insurance may be applied to the Obligations, in such order as Agent
in its sole discretion shall determine. Any surplus shall be paid by Agent to Loan Parties or
applied as may be otherwise required by law. Any deficiency thereon shall be paid by Loan Parties
to Agent, on demand.




     4.12. Failure to Pay Insurance. If any Loan Party fails to obtain insurance as
hereinabove provided, or to keep the same in force, Agent, if Agent so elects, may obtain such
insurance and pay the premium therefor on behalf of such Loan Party, and charge Borrowers’ Account
therefor as a Revolving Advance of a Domestic Rate Loan and such expenses so paid shall be part of
the Obligations.



     4.13. Payment of Taxes. Each Loan Party will pay, when due, all taxes, assessments
and other Charges lawfully levied or assessed upon such Loan Party or any of the Collateral
including real and personal property taxes, assessments and charges and all franchise, income,
employment, social security benefits, withholding, and sales taxes. If any tax by any Governmental
Body is or may be imposed on or as a result of any transaction between any Loan Party and Agent or
any Lender which Agent or any Lender may be required to withhold or pay



45









 







or if any taxes, assessments, or other Charges remain unpaid after the date fixed for their
payment, or if any claim shall be made which, in Agent’s or any Lender’s opinion, may possibly
create a valid Lien on the Collateral, Agent may without notice to Loan Parties pay the taxes,
assessments or other Charges and each Loan Party hereby indemnifies and holds Agent and each Lender
harmless in respect thereof. Agent will not pay any taxes, assessments or Charges to the extent
that any applicable Loan Party has Properly Contested those taxes, assessments or Charges. The
amount of any payment by Agent under this Section 4.13 shall be charged to Borrowers’ Account as a
Revolving Advance and added to the Obligations and, until Loan Parties shall furnish Agent with an
indemnity therefor (or supply Agent with evidence satisfactory to Agent that due provision for the
payment thereof has been made), Agent may hold without interest any balance standing to Borrowers’
credit and Agent shall retain its security interest in and Lien on any and all Collateral held by
Agent.



     4.14. Payment of Leasehold Obligations. Each Loan Party shall at all times pay, when
and as due, its rental obligations under all leases under which it is a tenant, and shall otherwise
comply, in all material respects, with all other terms of such leases and keep them in full force
and effect (unless such leases are being terminated in the Ordinary Course of Business) and, at
Agent’s request will provide evidence of having done so.



     4.15. Receivables.



          (a) Nature of Receivables. Each of the Receivables shall be a bona fide and valid
account representing a bona fide indebtedness incurred by the Customer therein named, for a fixed
sum as set forth in the invoice relating thereto (provided immaterial or unintentional invoice
errors shall not be deemed to be a breach hereof) with respect to an absolute sale or lease and
delivery of goods upon stated terms of a Loan Party, or work, labor or services theretofore
rendered by a Loan Party as of the date each Receivable is created. Same shall be due and owing in
accordance with the applicable Loan Party’s standard terms of sale without dispute, setoff or
counterclaim except as may be stated on the accounts receivable schedules delivered by Loan Parties
to Agent.




          (b) Solvency of Customers. Each Customer, to the best of each Loan Party’s knowledge,
as of the date each Receivable is created, is and will be solvent and able to pay all Receivables
on which the Customer is obligated in full when due or with respect to such Customers of any Loan
Party who are not solvent such Loan Party has set up on its books and in its financial records bad
debt reserves adequate to cover such Receivables.




          (c) Location of Loan Parties. Each Loan Party’s chief executive office is located at
the location set forth on Schedule 4.5(c). Until written notice is given to Agent by Borrowing
Agent of any other office at which any Loan Party keeps its records pertaining to Receivables, all
such records shall be kept at such executive office.




          (d) Collection of Receivables. Until any Loan Party’s authority to do so is
terminated by Agent (which notice Agent may give at any time following the occurrence of an Event
of Default or a Default or when Agent in its sole discretion deems it to be in Lenders’ best
interest to do so), each Loan Party will, at such Loan Party’s sole cost and expense, but on
Agent’s behalf and for Agent’s account, collect as Agent’s property and in trust for Agent all



46









 






amounts received on Receivables, and shall not commingle such collections with any Loan
Party’s funds or use the same except to pay Obligations. Each Loan Party shall deposit in the
Blocked Account or, upon request by Agent, deliver to Agent, in original form and on the date of
receipt thereof, all checks, drafts, notes, money orders, acceptances, cash and other evidences of
Indebtedness.




          (e) Notification of Assignment of Receivables. At any time following the occurrence
and during the continuance of an Event of Default or a Default, Agent shall have the right to send
notice of the assignment of, and Agent’s security interest in and Lien on, the Receivables to any
and all Customers or any third party holding or otherwise concerned with any of the Collateral.
Thereafter, Agent shall have the sole right to collect the Receivables, take possession of the
Collateral, or both. Agent’s actual collection expenses, including, but not limited to, stationery
and postage, telephone and telegraph, secretarial and clerical expenses and the salaries of any
collection personnel used for collection, may be charged to Borrowers’ Account and added to the
Obligations.




          (f) Power of Agent to Act on Loan Parties’ Behalf. Agent shall have the right to
receive, endorse, assign and/or deliver in the name of Agent or any Loan Party any and all checks,
drafts and other instruments for the payment of money relating to the Receivables, and each Loan
Party hereby waives notice of presentment, protest and non-payment of any instrument so endorsed.
Each Loan Party hereby constitutes Agent or Agent’s designee as such Loan Party’s attorney with
power (i) to endorse such Loan Party’s name upon any notes, acceptances, checks, drafts, money
orders or other evidences of payment or Collateral; (ii) to sign such Loan Party’s name on any
invoice or bill of lading relating to any of the Receivables, drafts against Customers, assignments
and verifications of Receivables; (iii) to send verifications of Receivables to any Customer; (iv)
to sign such Loan Party’s name on all financing statements or any other documents or instruments
deemed necessary or appropriate by Agent to preserve, protect, or perfect Agent’s interest in the
Collateral and to file same; (v) to demand payment of the Receivables; (vi) to enforce payment of
the Receivables by legal proceedings or otherwise; (vii) to exercise all of such Loan Party’s
rights and remedies with respect to the collection of the Receivables and any other Collateral;
(viii) to settle, adjust, compromise, extend or renew the Receivables; (ix) to settle, adjust or
compromise any legal proceedings brought to collect Receivables; (x) to prepare, file and sign such
Loan Party’s name on a proof of claim in bankruptcy or similar document against any Customer; (xi)
to prepare, file and sign such Loan Party’s name on any notice of Lien, assignment or satisfaction
of Lien or similar document in connection with the Receivables; and (xii) to do all other acts and
things necessary to carry out this Agreement. All acts of said attorney or designee are hereby
ratified and approved, and said attorney or designee shall not be liable for any acts of omission
or commission nor for any error of judgment or mistake of fact or of law, unless done maliciously
or with gross negligence or willful misconduct (as determined by a court of competent jurisdiction
in a final non-appealable judgment); this power being coupled with an interest is irrevocable while
any of the Obligations remain unpaid. Agent shall have the right at any time following the
occurrence and during the continuance of an Event of Default or Default, to change the address for
delivery of mail addressed to any Loan Party to such address as Agent may designate and to receive,
open and dispose of all mail addressed to any Loan Party.




47









 








          (g) No Liability. Neither Agent nor any Lender shall, under any circumstances or in
any event whatsoever, have any liability for any error or omission or delay of any kind occurring
in the settlement, collection or payment of any of the Receivables or any instrument received in
payment thereof, or for any damage resulting therefrom. Following the occurrence and during the
continuance of an Event of Default or Default, Agent may, without notice or consent from any Loan
Party, sue upon or otherwise collect, extend the time of payment of, compromise or settle for cash,
credit or upon any terms any of the Receivables or any other securities, instruments or insurance
applicable thereto and/or release any obligor thereof. Agent is authorized and empowered to
accept, following the occurrence and during the continuance of an Event of Default or Default, the
return of the goods represented by any of the Receivables, without notice to or consent by any Loan
Party, all without discharging or in any way affecting any Loan Party’s liability hereunder.




          (h) Establishment of a Lockbox Account, Dominion Account. All proceeds of Collateral
shall be deposited by Loan Parties into either (i) a lockbox account, dominion account or such
other “blocked account” (“Blocked Accounts”) established at a bank or banks (each such bank, a
“Blocked Account Bank”) pursuant to an arrangement with such Blocked Account Bank as may be
selected by Borrowing Agent and be acceptable to Agent or (ii) depository accounts (“Depository
Accounts”) established at the Agent for the deposit of such proceeds. Each applicable Loan Party,
Agent and each Blocked Account Bank shall enter into a deposit account control agreement in form
and substance satisfactory to Agent directing such Blocked Account Bank to transfer such funds so
deposited to Agent, either to any account maintained by Agent at said Blocked Account Bank or by
wire transfer to appropriate account(s) of Agent. All funds deposited in such Blocked Accounts
shall immediately become the property of Agent and Borrowing Agent shall obtain the agreement by
such Blocked Account Bank to waive any offset rights against the funds so deposited. Neither Agent
nor any Lender assumes any responsibility for such blocked account arrangement, including any claim
of accord and satisfaction or release with respect to deposits accepted by any Blocked Account Bank
thereunder. All deposit accounts and investment accounts of each Loan Party are set forth on
Schedule 4.15(h).




          (i) Adjustments. No Loan Party will, without Agent’s consent, compromise or adjust
any Receivables (or extend the time for payment thereof) or accept any returns of merchandise or
grant any additional discounts, allowances or credits thereon except for those compromises,
adjustments, returns, discounts, credits and allowances as have been heretofore customary in the
business of such Loan Party.




     4.16. Inventory. To the extent Inventory held for sale or lease has been produced by
any Loan Party, it has been and will be produced by such Loan Party in accordance with the Federal
Fair Labor Standards Act of 1938, as amended, and all rules, regulations and orders thereunder.



     4.17. Maintenance of Equipment. The Equipment shall be maintained in good operating
condition and repair (reasonable wear and tear excepted) and all necessary replacements of and
repairs thereto shall be made so that the value and operating efficiency of the Equipment shall be
maintained and preserved. No Loan Party shall use or operate the Equipment in violation of any
law, statute, ordinance, code, rule or regulation. Each Loan Party shall have the right to sell
Equipment to the extent set forth in Section 4.3 hereof.



48









 





     4.18. Exculpation of Liability. Nothing herein contained shall be construed to
constitute Agent or any Lender as any Loan Party’s agent for any purpose whatsoever, nor shall
Agent or any Lender be responsible or liable for any shortage, discrepancy, damage, loss or
destruction of any part of the Collateral wherever the same may be located and regardless of the
cause thereof. Neither Agent nor any Lender, whether by anything herein or in any assignment or
otherwise, assume any of any Loan Party’s obligations under any contract or agreement assigned to
Agent or such Lender, and neither Agent nor any Lender shall be responsible in any way for the
performance by any Loan Party of any of the terms and conditions thereof.



     4.19. Environmental Matters.



          (a) Loan Parties shall ensure that the Real Property and all operations and businesses
conducted thereon remains in compliance with all Environmental Laws and they shall not place or
permit to be placed any Hazardous Substances on any Real Property except as permitted by Applicable
Law or appropriate governmental authorities.




          (b) Loan Parties shall establish and maintain a system to assure and monitor continued
compliance with all applicable Environmental Laws which system shall include periodic reviews of
such compliance.




          (c) Loan Parties shall (i) employ in connection with the use of the Real Property appropriate
technology necessary to maintain compliance with any applicable Environmental Laws and (ii) dispose
of any and all Hazardous Waste generated at the Real Property only at facilities and with carriers
that maintain valid permits under RCRA and any other applicable Environmental Laws. Loan Parties
shall use their best efforts to obtain certificates of disposal, such as hazardous waste manifest
receipts, from all treatment, transport, storage or disposal facilities or operators employed by
Loan Parties in connection with the transport or disposal of any Hazardous Waste generated at the
Real Property.




          (d) In the event any Loan Party obtains, gives or receives notice of any Release or threat of
Release of a reportable quantity of any Hazardous Substances at the Real Property (any such event
being hereinafter referred to as a “Hazardous Discharge”) or receives any notice of violation,
request for information or notification that it is potentially responsible for investigation or
cleanup of environmental conditions at the Real Property, demand letter or complaint, order,
citation, or other written notice with regard to any Hazardous Discharge or violation of
Environmental Laws affecting the Real Property or any Loan Party’s interest therein (any of the
foregoing is referred to herein as an “Environmental Complaint”) from any Person, including any
state agency responsible in whole or in part for environmental matters in the state in which the
Real Property is located or the United States Environmental Protection Agency (any such person or
entity hereinafter the “Authority”), then Borrowing Agent shall, within five (5) Business Days,
give written notice of same to Agent detailing facts and circumstances of which any Loan Party is
aware giving rise to the Hazardous Discharge or Environmental Complaint. Such information is to be
provided to allow Agent to protect its security interest in and Lien on the Real Property and the
Collateral and is not intended to create nor shall it create any obligation upon Agent or any
Lender with respect thereto.




49









 








          (e) Borrowing Agent shall promptly forward to Agent copies of any request for information,
notification of potential liability, demand letter relating to potential responsibility with
respect to the investigation or cleanup of Hazardous Substances at any other site owned, operated
or used by any Loan Party to dispose of Hazardous Substances and shall continue to forward copies
of correspondence between any Loan Party and the Authority regarding such claims to Agent until the
claim is settled. Borrowing Agent shall promptly forward to Agent copies of all documents and
reports concerning a Hazardous Discharge at the Real Property that any Loan Party is required to
file under any Environmental Laws. Such information is to be provided solely to allow Agent to
protect Agent’s security interest in and Lien on the Real Property and the Collateral.




          (f) Loan Parties shall respond promptly to any Hazardous Discharge or Environmental Complaint
and take all necessary action in order to safeguard the health of any Person and to avoid
subjecting the Collateral or Real Property to any Lien. If any Loan Party shall fail to respond
promptly to any Hazardous Discharge or Environmental Complaint or any Loan Party shall fail to
comply with any of the requirements of any Environmental Laws, Agent on behalf of Lenders may, but
without the obligation to do so, for the sole purpose of protecting Agent’s interest in the
Collateral: (A) give such notices or (B) enter onto the Real Property (or authorize third parties
to enter onto the Real Property) and take such actions as Agent (or such third parties as directed
by Agent) deem reasonably necessary or advisable, to clean up, remove, mitigate or otherwise deal
with any such Hazardous Discharge or Environmental Complaint. All reasonable costs and expenses
incurred by Agent and Lenders (or such third parties) in the exercise of any such rights, including
any sums paid in connection with any judicial or administrative investigation or proceedings, fines
and penalties, together with interest thereon from the date expended at the Default Rate for
Domestic Rate Loans constituting Revolving Advances shall be paid upon demand by Borrowers, and
until paid shall be added to and become a part of the Obligations secured by the Liens created by
the terms of this Agreement or any other agreement between Agent, any Lender and any Loan Party.




          (g) Promptly upon the written request of Agent from time to time, Loan Parties shall provide
Agent, at Loan Parties’ expense, with an environmental site assessment or environmental audit
report prepared by an environmental engineering firm acceptable in the reasonable opinion of Agent,
to assess with a reasonable degree of certainty the existence of a Hazardous Discharge and the
potential costs in connection with abatement, cleanup and removal of any Hazardous Substances found
on, under, at or within the Real Property. Any report or investigation of such Hazardous Discharge
proposed and acceptable to an appropriate Authority that is charged to oversee the clean-up of such
Hazardous Discharge shall be acceptable to Agent. If such estimates, individually or in the
aggregate, exceed $100,000, Agent shall have the right to require Loan Parties to post a bond,
letter of credit or other security reasonably satisfactory to Agent to secure payment of these
costs and expenses.




          (h) Loan Parties shall defend and indemnify Agent and Lenders and hold Agent, Lenders and
their respective employees, agents, directors and officers harmless from and against all loss,
liability, damage and expense, claims, costs, fines and penalties, including attorney’s fees,
suffered or incurred by Agent or Lenders under or on account of any Environmental Laws, including
the assertion of any Lien thereunder, with respect to any Hazardous Discharge, the presence of any
Hazardous Substances affecting the Real Property,



50









 






whether or not the same originates or emerges from the Real Property or any contiguous real
estate, including any loss of value of the Real Property as a result of the foregoing except to the
extent such loss, liability, damage and expense is attributable to any Hazardous Discharge
resulting from actions on the part of Agent or any Lender. Loan Parties’ obligations under this
Section 4.19 shall arise upon the discovery of the presence of any Hazardous Substances at the Real
Property, whether or not any federal, state, or local environmental agency has taken or threatened
any action in connection with the presence of any Hazardous Substances. Loan Parties’ obligation
and the indemnifications hereunder shall survive the termination of this Agreement.




          (i) For purposes of Section 4.19 and 5.7, all references to Real Property shall be deemed to
include all of each Loan Party’s right, title and interest in and to its owned and leased premises.




     4.20. Financing Statements. Except as respects the financing statements filed by
Agent, the financing statements described on Schedule 1.2 and the financing statements
filed by Laurus Master Fund, Ltd. to be terminated on the Closing Date, no financing statement
covering any of the Collateral or any proceeds thereof is on file in any public office.



V. REPRESENTATIONS AND WARRANTIES.




     Each Loan Party represents and warrants as follows:



     5.1. Authority. Each Loan Party has full power, authority and legal right to enter
into this Agreement and the Other Documents to which it is a party and to perform all its
respective Obligations hereunder and thereunder. This Agreement and the Other Documents have been
duly executed and delivered by each Loan Party, and this Agreement and the Other Documents
constitute the legal, valid and binding obligation of such Loan Party enforceable in accordance
with their terms, except as such enforceability may be limited by any applicable bankruptcy,
insolvency, moratorium or similar laws affecting creditors’ rights generally. The execution,
delivery and performance of this Agreement and of the Other Documents (a) are within such Loan
Party’s corporate powers, have been duly authorized by all necessary corporate action, are not in
contravention of law or the terms of such Loan Party’s by-laws, certificate of incorporation or
other applicable documents relating to such Loan Party’s formation or to the conduct of such Loan
Party’s business or of any material agreement or undertaking to which such Loan Party is a party or
by which such Loan Party is bound, including the Subordinated Loan Documentation, (b) will not
conflict with or violate any law or regulation, or any judgment, order or decree of any
Governmental Body, (c) will not require the Consent of any Governmental Body or any other Person,
except those Consents set forth on Schedule 5.1 hereto, all of which will have been duly obtained,
made or compiled prior to the Closing Date and which are in full force and effect and (d) will not
conflict with, nor result in any breach in any of the provisions of or constitute a default under
or result in the creation of any Lien except Permitted Encumbrances upon any asset of such Loan
Party under the provisions of any agreement, charter document, instrument, by-law or other
instrument to which such Loan Party is a party or by which it or its property is a party or by
which it may be bound, including under the provisions of the Subordinated Loan Documentation.



51









 





     5.2. Formation and Qualification.



          (a) Each Loan Party is duly incorporated and in good standing under the laws of the state
listed on Schedule 5.2(a) and is qualified to do business and is in good standing in the states
listed on Schedule 5.2(a) which constitute all states in which qualification and good standing are
necessary for such Loan Party to conduct its business and own its property and where the failure to
so qualify could reasonably be expected to have a Material Adverse Effect on such Loan Party. Each
Loan Party has delivered to Agent true and complete copies of its certificate of incorporation and
by-laws and will promptly notify Agent of any amendment or changes thereto.




          (b) The only Subsidiaries of each Loan Party are listed on Schedule 5.2(b).




     5.3. Survival of Representations and Warranties. All representations and warranties
of such Loan Party contained in this Agreement and the Other Documents shall be true at the time of
such Loan Party’s execution of this Agreement and the Other Documents, and shall survive the
execution, delivery and acceptance thereof by the parties thereto and the closing of the
transactions described therein or related thereto.



     5.4. Tax Returns. Each Loan Party’s federal tax identification number is set forth on
Schedule 5.4. Each Loan Party has filed all federal, state and local tax returns and other
reports each is required by law to file and has paid all taxes, assessments, fees and other
governmental charges that are due and payable. Federal, state and local income tax returns of each
Loan Party have been examined and reported upon by the appropriate taxing authority or closed by
applicable statute and satisfied for all fiscal years prior to and including the fiscal year ending
December 31, 2006. The provision for taxes on the books of each Loan Party is adequate for all
years not closed by applicable statutes, and for its current fiscal year, and no Loan Party has any
knowledge of any deficiency or additional assessment in connection therewith not provided for on
its books.



     5.5. Financial Statements.



          (a) The pro forma balance sheet of DRI on a Consolidated Basis (the “Pro Forma Balance Sheet”)
furnished to Agent on the Closing Date reflects the consummation of the transactions contemplated
by the Subordinated Loan Documentation and under this Agreement (collectively, the “Transactions”)
and is accurate, complete and correct and fairly reflects the financial condition of DRI on a
Consolidated Basis as of the Closing Date after giving effect to the Transactions, and has been
prepared in accordance with GAAP, consistently applied. The Pro Forma Balance Sheet has been
certified as accurate, complete and correct in all material respects by the President and Chief
Financial Officer of DRI. All financial statements referred to in this subsection 5.5(a),
including the related schedules and notes thereto, have been prepared, in accordance with GAAP,
except as may be disclosed in such financial statements.




          (b) The twelve-month cash flow projections of Loan Parties on a Consolidated Basis and their
projected balance sheets as of the Closing Date, copies of which are annexed hereto as Exhibit
5.5(b) (the “Projections”) were prepared by the Chief Financial Officer of DRI, are based on
underlying assumptions which provide a reasonable basis for the projections



52









 






contained therein and reflect Loan Parties’ judgment based on present circumstances of the
most likely set of conditions and course of action for the projected period. The cash flow
Projections together with the Pro Forma Balance Sheet, are referred to as the “Pro Forma Financial
Statements”.




          (c) The consolidated and consolidating balance sheet of DRI and such other Persons described
therein (including the accounts of all Subsidiaries for the respective periods during which a
subsidiary relationship existed) as of December 31, 2006 and December 31, 2007, and the related
statements of income, changes in stockholder’s equity, and changes in cash flow for the period
ended on such date, all accompanied by reports thereon containing opinions by independent certified
public accountants, copies of which have been delivered to Agent, have been prepared in accordance
with GAAP, consistently applied (except for changes in application in which such accountants concur
and present fairly the financial position of DRI and its Subsidiaries at such date and the results
of their operations for such period. Since December 31, 2007, there has been no change in the
condition, financial or otherwise, of any Loan Party as shown on DRI’s consolidating balance sheet
as of such date and no change in the aggregate value of machinery, equipment and Real Property
owned by each Loan Party, except changes in the Ordinary Course of Business, none of which
individually or in the aggregate has been materially adverse.




     5.6. Entity Names. No Loan Party has been known by any other corporate name in the
past five years and does not sell or lease Inventory or provide services under any other name
except as set forth on Schedule 5.6, nor has any Loan Party been the surviving corporation of a
merger or consolidation or acquired all or substantially all of the assets of any Person during the
preceding five (5) years.



     5.7. O.S.H.A. and Environmental Compliance.



          (a) Each Loan Party has duly complied with, and its facilities, business, assets, property,
leaseholds, Real Property and Equipment are in compliance in all material respects with, the
provisions of the Federal Occupational Safety and Health Act, the Environmental Protection Act,
RCRA and all other Environmental Laws; there have been no outstanding citations, notices or orders
of non-compliance issued to any Loan Party or relating to its business, assets, property,
leaseholds or Equipment under any such laws, rules or regulations.




          (b) Each Loan Party has been issued all required federal, state and local licenses,
certificates or permits relating to all applicable Environmental Laws.




          (c) (i) There are no visible signs of releases, spills, discharges, leaks or disposal
(collectively referred to as “Releases”) of Hazardous Substances at, upon, under or within any Real
Property or any premises leased by any Loan Party; (ii) there are no underground storage tanks or
polychlorinated biphenyls on the Real Property or any premises leased by any Loan Party; (iii)
neither the Real Property nor any premises leased by any Loan Party has ever been used as a
treatment, storage or disposal facility of Hazardous Waste; and (iv) no Hazardous Substances are
present on the Real Property or any premises leased by any Loan Party, excepting such quantities as
are handled in accordance with all applicable manufacturer’s



53









 






instructions and governmental regulations and in proper storage containers and as are
necessary for the operation of the commercial business of any Loan Party or of its tenants.




     5.8. Solvency; No Litigation, Violation, Indebtedness or Default.



          (a) After giving effect to the Transactions, each Loan Party will be solvent, able to pay its
debts as they mature, will have capital sufficient to carry on its business and all businesses in
which it is about to engage, and (i) as of the Closing Date, the fair present saleable value of its
assets, calculated on a going concern basis, is in excess of the amount of its liabilities and (ii)
subsequent to the Closing Date, the fair saleable value of its assets (calculated on a going
concern basis) will be in excess of the amount of its liabilities.




          (b) Except as disclosed in Schedule 5.8(b), no Loan Party has (i) any pending or threatened
litigation, arbitration, actions or proceedings which involve the possibility of having a Material
Adverse Effect, and (ii) any liabilities or indebtedness for borrowed money other than the
Obligations.




          (c) No Loan Party is in violation of any applicable statute, law, rule, regulation or
ordinance in any respect which could reasonably be expected to have a Material Adverse Effect, nor
is any Loan Party in violation of any order of any court, Governmental Body or arbitration board or
tribunal.




          (d) No Loan Party nor any member of the Controlled Group maintains or contributes to any Plan
other than those listed on Schedule 5.8(d) hereto. (i) No Plan has incurred any “accumulated
funding deficiency,” as defined in Section 302(a)(2) of ERISA and Section 412(a) of the Code,
whether or not waived, and each Loan Party and each member of the Controlled Group has met all
applicable minimum funding requirements under Section 302 of ERISA in respect of each Plan; (ii)
each Plan which is intended to be a qualified plan under Section 401(a) of the Code as currently in
effect has been determined by the Internal Revenue Service to be qualified under Section 401(a) of
the Code and the trust related thereto is exempt from federal income tax under Section 501(a) of
the Code; (iii) neither any Loan Party nor any member of the Controlled Group has incurred any
liability to the PBGC other than for the payment of premiums, and there are no premium payments
which have become due which are unpaid; (iv) no Plan has been terminated by the plan administrator
thereof nor by the PBGC, and there is no occurrence which would cause the PBGC to institute
proceedings under Title IV of ERISA to terminate any Plan; (v) at this time, the current value of
the assets of each Plan exceeds the present value of the accrued benefits and other liabilities of
such Plan and neither any Loan Party nor any member of the Controlled Group knows of any facts or
circumstances which would materially change the value of such assets and accrued benefits and other
liabilities; (vi) neither any Loan Party nor any member of the Controlled Group has breached any of
the responsibilities, obligations or duties imposed on it by ERISA with respect to any Plan; (vii)
neither any Loan Party nor any member of a Controlled Group has incurred any liability for any
excise tax arising under Section 4972 or 4980B of the Code, and no fact exists which could give
rise to any such liability; (viii) neither any Loan Party nor any member of the Controlled Group
nor any fiduciary of, nor any trustee to, any Plan, has engaged in a “prohibited transaction”
described in Section 406 of the ERISA or Section 4975 of the Code nor taken any action which would
constitute or result in a Termination Event with respect to any such Plan which is subject



54









 






to ERISA; (ix) each Loan Party and each member of the Controlled Group has made all
contributions due and payable with respect to each Plan; (x) there exists no event described in
Section 4043(b) of ERISA, for which the thirty (30) day notice period has not been waived; (xi)
neither any Loan Party nor any member of the Controlled Group has any fiduciary responsibility for
investments with respect to any plan existing for the benefit of persons other than employees or
former employees of any Loan Party and any member of the Controlled Group; (xii) neither any Loan
Party nor any member of the Controlled Group maintains or contributes to any Plan which provides
health, accident or life insurance benefits to former employees, their spouses or dependents, other
than in accordance with Section 4980B of the Code; (xiii) neither any Loan Party nor any member of
the Controlled Group has withdrawn, completely or partially, from any Multiemployer Plan so as to
incur liability under the Multiemployer Pension Plan Amendments Act of 1980 and there exists no
fact which would reasonably be expected to result in any such liability; and (xiv) no Plan
fiduciary (as defined in Section 3(21) of ERISA) has any liability for breach of fiduciary duty or
for any failure in connection with the administration or investment of the assets of a Plan.




     5.9. Patents, Trademarks, Copyrights and Licenses. All patents, patent applications,
trademarks, trademark applications, service marks, service mark applications, copyrights, copyright
applications, design rights, tradenames, assumed names, trade secrets and licenses owned or
utilized by any Loan Party are set forth on Schedule 5.9, are valid and have been duly registered
or filed with all appropriate Governmental Bodies and constitute all of the intellectual property
rights which are necessary for the operation of its business; there is no objection to or pending
challenge to the validity of any such patent, trademark, copyright, design rights, tradename, trade
secret or license and no Loan Party is aware of any grounds for any challenge, except as set forth
in Schedule 5.9 hereto. Each patent, patent application, patent license, trademark, trademark
application, trademark license, service mark, service mark application, service mark license,
design rights, copyright, copyright application and copyright license owned or held by any Loan
Party and all trade secrets used by any Loan Party consist of original material or property
developed by such Loan Party or was lawfully acquired by such Loan Party from the proper and lawful
owner thereof. Each of such items has been maintained so as to preserve the value thereof from the
date of creation or acquisition thereof. With respect to all software used by any Loan Party
(other than “off-the-shelf” or public software), such Loan Party is in possession of all source and
object codes related to each piece of software or is the beneficiary of a source code escrow
agreement, each such source code escrow agreement being listed on Schedule 5.9 hereto.



     5.10. Licenses and Permits. Except as set forth in Schedule 5.10, each Loan
Party (a) is in compliance with and (b) has procured and is now in possession of, all material
licenses or permits required by any applicable federal, state, provincial or local law, rule or
regulation for the operation of its business in each jurisdiction wherein it is now conducting or
proposes to conduct business and where the failure to procure such licenses or permits could have a
Material Adverse Effect.



     5.11. Default of Indebtedness. No Loan Party is in default in the payment of the
principal of or interest on any Indebtedness or under any instrument or agreement under or subject
to which any such Indebtedness has been issued and no event has occurred under the



55









 







provisions of any such instrument or agreement which with or without the lapse of time or the
giving of notice, or both, constitutes or would constitute an event of default thereunder.



     5.12. No Default. No Loan Party is in default in the payment or performance of any of
its contractual obligations and no Default has occurred.



     5.13. No Burdensome Restrictions. No Loan Party is party to any contract or agreement
the performance of which could have a Material Adverse Effect. Each Loan Party has heretofore
delivered to Agent true and complete copies of all material contracts to which it is a party or to
which it or any of its properties is subject. No Loan Party has agreed or consented to cause or
permit in the future (upon the happening of a contingency or otherwise) any of its property,
whether now owned or hereafter acquired, to be subject to a Lien which is not a Permitted
Encumbrance.



     5.14. No Labor Disputes. No Loan Party is involved in any labor dispute; there are no
strikes or walkouts or union organization of any Loan Party’s employees threatened or in existence
and no labor contract is scheduled to expire during the Term other than as set forth on Schedule
5.14 hereto.



     5.15. Margin Regulations. No Loan Party is engaged, nor will it engage, principally
or as one of its important activities, in the business of extending credit for the purpose of
“purchasing” or “carrying” any “margin stock” within the respective meanings of each of the quoted
terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from
time to time hereafter in effect. No part of the proceeds of any Advance will be used for
“purchasing” or “carrying” “margin stock” as defined in Regulation U of such Board of Governors.



     5.16. Investment Company Act. No Loan Party is an “investment company” registered or
required to be registered under the Investment Company Act of 1940, as amended, nor is it
controlled by such a company.



     5.17. Disclosure. No representation or warranty made by any Loan Party in this
Agreement or in the Subordinated Loan Documentation, or in any financial statement, report,
certificate or any other document furnished in connection herewith or therewith contains any untrue
statement of a material fact or omits to state any material fact necessary to make the statements
herein or therein not misleading. There is no fact known to any Loan Party or which reasonably
should be known to such Loan Party which such Loan Party has not disclosed to Agent in writing with
respect to the transactions contemplated by the Subordinated Loan Documentation or this Agreement
which could reasonably be expected to have a Material Adverse Effect.



     5.18. Delivery of Subordinated Loan Documentation. Agent has received complete copies
of the Subordinated Loan Documentation (including all exhibits, schedules and disclosure letters
referred to therein or delivered pursuant thereto, if any) and all amendments thereto, waivers
relating thereto and other side letters or agreements affecting the terms thereof. None of such
documents and agreements has been amended or supplemented, nor have any of the



56









 







provisions thereof been waived, except pursuant to a written agreement or instrument which has
heretofore been delivered to Agent.



     5.19. Swaps. No Loan Party is a party to, nor will it be a party to, any swap
agreement whereby such Loan Party has agreed or will agree to swap interest rates or currencies
unless same provides that damages upon termination following an event of default thereunder are
payable on an unlimited “two-way basis” without regard to fault on the part of either party.



     5.20. Conflicting Agreements. No provision of any mortgage, indenture, contract,
agreement, judgment, decree or order binding on any Loan Party or affecting the Collateral
conflicts with, or requires any Consent which has not already been obtained to, or would in any way
prevent the execution, delivery or performance of, the terms of this Agreement or the Other
Documents.



     5.21. Application of Certain Laws and Regulations. Neither any Loan Party nor any
Affiliate of any Loan Party is subject to any law, statute, rule or regulation which regulates the
incurrence of any Indebtedness, including laws, statutes, rules or regulations relative to common
or interstate carriers or to the sale of electricity, gas, steam, water, telephone, telegraph or
other public utility services.



     5.22. Business and Property of Loan Parties. Upon and after the Closing Date, Loan
Parties do not propose to engage in any business other than their current business as described in
DRI’s 10-K filed with the SEC for the fiscal year ended December 31, 2007, and activities necessary
to conduct the foregoing. On the Closing Date, each Loan Party will own all the property and
possess all of the rights and Consents necessary for the conduct of the business of such Loan
Party.



     5.23. Section 20 Subsidiaries. Loan Parties do not intend to use and shall not use
any portion of the proceeds of the Advances, directly or indirectly, to purchase during the
underwriting period, or for 30 days thereafter, Ineligible Securities being underwritten by a
Section 20 Subsidiary.



     5.24. Anti-Terrorism Laws.



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




          (b) Executive Order No. 13224. Neither any Loan Party nor any Affiliate of any Loan
Party or their respective agents acting or benefiting in any capacity in connection with the
Advances or other transactions hereunder, is any of the following (each a “Blocked Person”):




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



57









 





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



               (iii) a Person or entity with which any Lender is prohibited from dealing or otherwise
engaging in any transaction by any Anti-Terrorism Law;



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



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



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


Neither any Loan Party nor to the knowledge of any Loan Party, any of its agents acting in any
capacity in connection with the Advances or other transactions hereunder (i) conducts any business
or engages in making or receiving any contribution of funds, goods or services to or for the
benefit of any Blocked Person, or (ii) deals in, or otherwise engages in any transaction relating
to, any property or interests in property blocked pursuant to the Executive Order No. 13224.




     5.25. Trading with the Enemy. No Loan Party has engaged, nor does it intend to
engage, in any business or activity prohibited by the Trading with the Enemy Act.



     5.26. Trade Relations. As of the Closing Date there exists no actual or threatened,
termination or cancellation of any contract, or any material adverse modification or change in the
business relationship of any Loan Party or any Subsidiary, with any customer (or group of
customers) or supplier (or group of suppliers) that either individually or in the aggregate are
material to their respective operations.



     5.27. Loans to Shareholders, Directors, Officers or Affiliates. Except as set forth
in detail on Schedule 5.27, neither any Loan Party nor any Subsidiary has made any loans or
advances to or for the benefit of any shareholder, director, officer or Affiliate of any Loan Party
or any Subsidiary.



VI. AFFIRMATIVE COVENANTS.




     Each Loan Party shall, until payment in full of the Obligations and termination of this
Agreement:



     6.1. Payment of Fees. Pay to Agent on demand all usual and customary fees and
expenses which Agent incurs in connection with (a) the forwarding of Advance proceeds and (b) the
establishment and maintenance of any Blocked Accounts or Depository Accounts as



58









 






provided for in Section 4.15(h). Agent may, without making demand, charge Borrowers’ Account
for all such fees and expenses.



     6.2. Conduct of Business and Maintenance of Existence and Assets. (a) Conduct
continuously and operate actively its business according to good business practices and maintain
all of its properties useful or necessary in its business in good working order and condition
(reasonable wear and tear excepted and except as may be disposed of in accordance with the terms of
this Agreement), including all licenses, patents, copyrights, design rights, tradenames, trade
secrets and trademarks and take all actions necessary to enforce and protect the validity of any
intellectual property right or other right included in the Collateral; (b) keep in full force and
effect its existence and comply in all material respects with the laws and regulations governing
the conduct of its business where the failure to do so could reasonably be expected to have a
Material Adverse Effect; and (c) make all such reports and pay all such franchise and other taxes
and license fees and do all such other acts and things as may be lawfully required to maintain its
rights, licenses, leases, powers and franchises under the laws of the United States or any
political subdivision thereof where the failure to do so could reasonably be expected to have a
Material Adverse Effect.



     6.3. Violations. Promptly notify Agent in writing of any violation of any law,
statute, regulation or ordinance of any Governmental Body, or of any agency thereof, applicable to
any Loan Party which could reasonably be expected to have a Material Adverse Effect.



     6.4. Government Receivables. Take all steps necessary to protect Agent’s interest in
the Collateral under the Federal Assignment of Claims Act, the Uniform Commercial Code and all
other applicable state or local statutes or ordinances and deliver to Agent appropriately endorsed,
any instrument or chattel paper connected with any Receivable arising out of contracts between any
Loan Party and the United States, any state or any department, agency or instrumentality of any of
them.



     6.5. Financial Covenants.



          (a) Fixed Charge Coverage Ratio. Cause to be maintained as of the end of each fiscal
quarter, for the twelve month period ending on the last day of such fiscal quarter, a Fixed Charge
Coverage Ratio of not less than 1.25 to 1.0.




          (b) Leverage Ratio. Maintain as of the end of each fiscal quarter, a ratio of (i)
Funded Debt of the Loan Parties on a Consolidated Basis outstanding on the last day of each fiscal
quarter set forth below to (ii) EBITDA of the Loan Parties on a Consolidated Basis, for the twelve
month period ending on the last day of such fiscal quarter, of not greater than the ratio set forth
below opposite such period:




	 	 	 
	Fiscal Quarter Ending:	 	Leverage Ratio:
	September 30, 2008

	 	3.0 to 1.0
	December 31, 2008

	 	3.0 to 1.0
	March 31, 2009

	 	3.0 to 1.0
	June 30, 2009

	 	3.0 to 1.0
	September 30, 2009

	 	3.0 to 1.0






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	Fiscal Quarter Ending:	 	Leverage Ratio:
	December 31, 2009

	 	2.5 to 1.0
	March 30, 2010

	 	2.5 to 1.0
	June 30, 2010

	 	2.5 to 1.0
	September 30, 2010

	 	2.5 to 1.0
	December 31, 2010 and each fiscal quarter ending thereafter

	 	2.0 to 1.0






          (c) Minimum EBITDA. Maintain as of the end of each fiscal quarter, for the twelve
month period ending on the last day of such fiscal quarter, EBITDA of DRI on a Consolidated Basis
of at least $5,000,000.




          (d) Availability. Maintain at all times Availability of at least $500,000.




     6.6. Execution of Supplemental Instruments. Execute and deliver to Agent from time to
time, upon demand, such supplemental agreements, statements, assignments and transfers, or
instructions or documents relating to the Collateral, and such other instruments as Agent may
request, in order that the full intent of this Agreement may be carried into effect.



     6.7. Payment of Indebtedness. Pay, discharge or otherwise satisfy at or before
maturity (subject, where applicable, to specified grace periods and, in the case of the trade
payables, to normal payment practices) all its obligations and liabilities of whatever nature,
except when the failure to do so could not reasonably be expected to have a Material Adverse Effect
or when the amount or validity thereof is currently being contested in good faith by appropriate
proceedings and each Loan Party shall have provided for such reserves as Agent may reasonably deem
proper and necessary, subject at all times to any applicable subordination arrangement in favor of
Lenders.



     6.8. Standards of Financial Statements. Cause all financial statements referred to in
Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13 and 9.14 as to which GAAP is applicable to be
complete and correct in all material respects (subject, in the case of interim financial
statements, to normal year-end audit adjustments) and to be prepared in reasonable detail and in
accordance with GAAP applied consistently throughout the periods reflected therein (except as
concurred in by such reporting accountants or officer, as the case may be, and disclosed therein).



     6.9. Federal Securities Laws. DRI will provide Agent copies of (i) all periodic
reports it is required to file under the Exchange Act and (ii) all registration statements it files
under the Securities Act.



VII. NEGATIVE COVENANTS.




     No Loan Party shall, until satisfaction in full of the Obligations and termination of this
Agreement:



     7.1. Merger, Consolidation, Acquisition and Sale of Assets.



60









 





          (a) Enter into any merger, consolidation or other reorganization with or into any other Person
or acquire all or a substantial portion of the assets or Equity Interests of any Person or permit
any other Person to consolidate with or merge with it; provided that the Borrowers shall be
permitted to merge or consolidate into each other.




          (b) Sell, lease, transfer or otherwise dispose of any of its properties or assets, except (i)
dispositions of Inventory and Equipment to the extent expressly permitted by Section 4.3 and (ii)
any other sales or dispositions expressly permitted by this Agreement.




     7.2. Creation of Liens. Create or suffer to exist any Lien or transfer upon or
against any of its property or assets now owned or hereafter acquired, except Permitted
Encumbrances.



     7.3. Guarantees. Become liable upon the obligations or liabilities of any Person by
assumption, endorsement or guaranty thereof or otherwise (other than to Lenders) except (a) as
disclosed on Schedule 7.3, (b) guarantees made in the Ordinary Course of Business up to an
aggregate amount of $250,000 and (c) the endorsement of checks in the Ordinary Course of Business.



     7.4. Investments. Purchase or acquire obligations or Equity Interests of, or any
other interest in, any Person, except (a) obligations issued or guaranteed by the United States of
America or any agency thereof, (b) commercial paper with maturities of not more than 180 days and a
published rating of not less than A-1 or P-1 (or the equivalent rating), (c) certificates of time
deposit and bankers’ acceptances having maturities of not more than 180 days and repurchase
agreements backed by United States government securities of a commercial bank if (i) such bank has
a combined capital and surplus of at least $500,000,000, or (ii) its debt obligations, or those of
a holding company of which it is a Subsidiary, are rated not less than A (or the equivalent rating)
by a nationally recognized investment rating agency, (d) U.S. money market funds that invest solely
in obligations issued or guaranteed by the United States of America or an agency thereof, (e) so
long as no Default or Event of Default has occurred and is continuing or would result therefrom,
Investments by a Loan Party in any other Loan Party (other than DRI) and (f) loans permitted by
Section 7.5.



     7.5. Loans. Make advances, loans or extensions of credit to any Person, including any
Subsidiary or Affiliate, except with respect to (a) the extension of commercial trade credit in
connection with the sale of Inventory in the Ordinary Course of Business, (b) loans made to DRI and
by DRI to its Foreign Subsidiaries on or after the Closing Date, utilizing up to $2,000,000 of the
proceeds of the Subordinated Notes, so long as such proceeds are utilized to (x) repay up to
$1,000,000 of indebtedness owed by Mobitec AB to its lender (the “Mobitec AB Loan
Repayment”) and (y) purchase the Equity Interests in Mobitec Brazil Ltda not currently owned by
DRI’s Subsidiaries, (c) so long as no Default or Event of Default has occurred and is continuing or
would result therefrom, loans by any Loan Party to another Loan Party (other than DRI) and (d)
loans or extensions of credit by the Borrowers or DRI to Foreign Subsidiaries of DRI (inclusive of
(i) amounts utilized for the Mobitec AB Loan Repayment and (ii) any and all expenses incurred by a
Loan Party and allocated to the Foreign Subsidiaries of DRI for purposes of calculating the net
income of the Loan Parties on a Consolidated Basis, unless such Loan Party has been reimbursed in
cash for such allocated expenses), so long as (x) no Default or Event of Default has occurred and
is continuing or would result therefrom, (y) Borrowers have at



61









 







least $750,000 of Undrawn Availability after giving effect to such loan or extension of credit
and (z) the aggregate amount of such loans or extensions of credit by Borrowers to Foreign
Subsidiaries of DRI do not exceed $1,000,000 in the aggregate at any time outstanding.



     7.6. Capital Expenditures. Contract for, purchase or make any expenditure or
commitments for Capital Expenditures in any fiscal year in an aggregate amount for all Loan Parties
in excess of $250,000.



     7.7. Dividends. Declare, pay or make any dividend or distribution on any shares of
the common stock or preferred stock of any Loan Party (other than dividends or distributions
payable in its stock, or split-ups or reclassifications of its stock) or apply any of its funds,
property or assets to the purchase, redemption or other retirement of any common or preferred
stock, or of any options to purchase or acquire any such shares of common or preferred stock of any
Loan Party; provided that Borrowers shall be permitted to make dividends or distributions
to DRI, to enable DRI to pay (i) professional fees, franchise and other taxes and other Ordinary
Course of Business operating expenses incurred by DRI in its capacity as parent corporation of the
Borrowers and (ii) up to $150,000 in the aggregate in any fiscal year of dividends or distributions
with respect to DRI’s preferred stock, so long as after giving effect to the payment of such
dividend or distribution the Borrowers have at least $750,000 of Undrawn Availability;
provided, however, that after giving effect to the payment of such dividends or
distributions there shall not exist any Default or Event of Default.



     7.8. Indebtedness. Create, incur, assume or suffer to exist any Indebtedness
(exclusive of trade debt) except in respect of (i) Indebtedness to Lenders; (ii) Indebtedness
incurred for Capital Expenditures permitted under Section 7.6 hereof; (iii) Indebtedness under the
Subordinated Notes, (iv) Indebtedness consisting of loans permitted by Section 7.5(b) or (c), (v)
Indebtedness set forth on Schedule 7.8 and any refinancing, refunding or extension thereof,
provided that in connection with any such refinancing, refunding or extension: (x) the
aggregate principal amount of such Indebtedness is not increased, (y) the scheduled maturity date
of such Indebtedness is not shortened, and (z) the covenants or defaults are not materially more
restrictive or more onerous than analogous provisions in the documentation of such Indebtedness as
in effect on the date hereof, (vi) Indebtedness consisting of loans by any Foreign Subsidiary of
DRI to any Loan Party, so long as such Indebtedness is subordinated to the Obligations on a basis
satisfactory to Agent and (vii) Indebtedness incurred in connection with the issuance of letters of
credit, surety bonds (other than bonds related to judgments or litigation), performance bonds and
other obligations of a like nature incurred in the Ordinary Course of Business.



     7.9. Nature of Business. Substantially change the nature of the business in which it
is presently engaged, nor except as specifically permitted hereby purchase or invest, directly or
indirectly, in any assets or property other than in the Ordinary Course of Business for assets or
property which are useful in, necessary for and are to be used in its business as presently
conducted.



     7.10. Transactions with Affiliates. Directly or indirectly, purchase, acquire or
lease any property from, or sell, transfer or lease any property to, or otherwise enter into any
transaction or deal with, any Affiliate, except transactions disclosed to the Agent, which are in
the Ordinary Course of Business, on an arm’s-length basis on terms and conditions no less favorable
than



62









 







terms and conditions which would have been obtainable from a Person other than an Affiliate.
Notwithstanding anything to the contrary contained in this Section 7.10, neither any Loan Party nor
any Subsidiary (other than Foreign Subsidiaries) shall enter into any transaction (specifically
including any sales and/or purchases of Inventory or any other assets or property) with or for the
benefit of, make any capital contribution or other investment in or on behalf of, or transfer any
property to, any Foreign Subsidiary other than (x) in the Ordinary Course of Business or (y) any
such transactions, capital contributions, investments and transfers, which, in the aggregate for
all such events do not exceed $3,000,000.



     7.11. Leases. Enter as lessee into any lease arrangement for real or personal
property (unless capitalized and permitted under Section 7.6 hereof) if after giving effect
thereto, aggregate annual rental payments for all leased property would increase by $100,000 or
more in any one fiscal year in the aggregate for all Loan Parties.



     7.12. Subsidiaries.



          (a) Form any Subsidiary (other than a Foreign Subsidiary) unless (i) such Subsidiary expressly
joins in this Agreement as a borrower and becomes jointly and severally liable for the obligations
of Borrowers hereunder, under the Notes, and under any other agreement between any Loan Party and
Lenders and (ii) Agent shall have received all documents, including legal opinions, it may
reasonably require to establish compliance with each of the foregoing conditions.




          (b) Enter into any partnership, joint venture or similar arrangement.




     7.13. Fiscal Year and Accounting Changes. Change its fiscal year from December 31 or
make any material change (i) in accounting treatment and reporting practices except as required by
GAAP or (ii) in tax reporting treatment except as required by law.



     7.14. Pledge of Credit. Now or hereafter pledge Agent’s or any Lender’s credit on any
purchases or for any purpose whatsoever or use any portion of any Advance in or for any business
other than such Loan Party’s business as conducted on the date of this Agreement.



     7.15. Amendment of Articles of Incorporation, By-Laws. Amend, modify or waive any
term or material provision of its Articles of Incorporation, By-Laws or any Certificate of
Designation unless required by law.



     7.16. Compliance with ERISA. (i) (x) Maintain, or permit any member of the Controlled
Group to maintain, or (y) become obligated to contribute, or permit any member of the Controlled
Group to become obligated to contribute, to any Plan, other than those Plans disclosed on Schedule
5.8(d) or such Plans as may be disclosed in writing to Agent from time to time, (ii) engage, or
permit any member of the Controlled Group to engage, in any non-exempt “prohibited transaction”, as
that term is defined in section 406 of ERISA and Section 4975 of the Code, (iii) incur, or permit
any member of the Controlled Group to incur, any “accumulated funding deficiency”, as that term is
defined in Section 302 of ERISA or Section 412 of the Code, (iv) terminate, or permit any member of
the Controlled Group to terminate, any Plan where such event could result in any liability of any
Loan Party or any member of the Controlled Group or the imposition of a lien on the property of any
Loan Party or any member of the Controlled



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Group pursuant to Section 4068 of ERISA, (v) assume, or permit any member of the Controlled
Group to assume, any obligation to contribute to any Multiemployer Plan not disclosed on Schedule
5.8(d), (vi) incur, or permit any member of the Controlled Group to incur, any withdrawal liability
to any Multiemployer Plan; (vii) fail promptly to notify Agent of the occurrence of any Termination
Event, (viii) fail to comply, or permit a member of the Controlled Group to fail to comply, with
the requirements of ERISA or the Code or other Applicable Laws in respect of any Plan, (ix) fail to
meet, or permit any member of the Controlled Group to fail to meet, all minimum funding
requirements under ERISA or the Code or postpone or delay or allow any member of the Controlled
Group to postpone or delay any funding requirement with respect of any Plan.



     7.17. Payment of Indebtedness. At any time, directly or indirectly, (x) except as set
forth in sub-clause (y) of this Section 7.17, prepay any Indebtedness (other than to Lenders), or
repurchase, redeem, retire or otherwise acquire any Indebtedness of any Loan Party, (y) pay,
prepay, repurchase, redeem, retire or otherwise acquire, or make any payment on account of any
principal of, interest on or premium payable in connection with the repayment or redemption of the
Subordinated Note, except as expressly permitted in the Intercreditor Agreement or (z) repay any
intercompany Indebtedness to any Foreign Subsidiary of DRI incurred in accordance with Section
7.8(vi), unless no Default or Event has occurred and is continuing or would result therefrom, and
after giving effect to such repayment of Indebtedness, Borrowers have at least $750,000 of Undrawn
Availability.



     7.18. Anti-Terrorism Laws. No Loan Party shall, until satisfaction in full of the
Obligations and termination of this Agreement, nor shall it permit any Affiliate or agent to:



          (a) Conduct any business or engage in any transaction or dealing with any Blocked Person,
including the making or receiving any contribution of funds, goods or services to or for the
benefit of any Blocked Person.




          (b) Deal in, or otherwise engage in any transaction relating to, any property or interests in
property blocked pursuant to the Executive Order No. 13224.




          (c) Engage in or conspire to engage in any transaction that evades or avoids, or has the
purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in the
Executive Order No. 13224, the USA PATRIOT Act or any other Anti-Terrorism Law. Loan Party shall
deliver to Lenders any certification or other evidence requested from time to time by any Lender in
its sole discretion, confirming Loan Party’s compliance with this Section.




     7.19. Membership/Partnership Interests. Elect to treat or permit any of its
Subsidiaries to (x) treat its limited liability company membership interests or partnership
interests, as the case may be, as securities as contemplated by the definition of “security” in
Section 8-102(15) and by Section 8-103 of Article 8 of Uniform Commercial Code or (y) certificate
its limited liability company membership interests or partnership interests, as the case may be.



     7.20. Trading with the Enemy Act. Engage in any business or activity in violation of
the Trading with the Enemy Act.



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     7.21. Other Agreements. Enter into any material amendment, waiver or modification of
any Subordinated Loan Documentation or any related agreements (including, without limitation, the
Warrant issued to Subordinated Lender), unless permitted by the Intercreditor Agreement.



     7.22. Robinson Turney International, Inc. Robinson Turney International, Inc., a
Texas corporation (“RTI”), shall not own any assets, have any liabilities or conduct any business,
and not withstanding anything in this Agreement, DRI shall be permitted to liquidate or dissolve
RTI.



VIII. CONDITIONS PRECEDENT.



     8.1. Conditions to Initial Advances. The agreement of Lenders to make the initial
Advances requested to be made on the Closing Date is subject to the satisfaction, or waiver by
Agent, immediately prior to or concurrently with the making of such Advances, of the following
conditions precedent:



          (a) Note. Agent shall have received the Note duly executed and delivered by an
authorized officer of each Borrower;




          (b) Filings, Registrations and Recordings. Each document (including any Uniform
Commercial Code financing statement) required by this Agreement, any related agreement or under law
or reasonably requested by the Agent to be filed, registered or recorded in order to create, in
favor of Agent, a perfected security interest in or lien upon the Collateral shall have been
properly filed, registered or recorded in each jurisdiction in which the filing, registration or
recordation thereof is so required or requested, and Agent shall have received an acknowledgment
copy, or other evidence satisfactory to it, of each such filing, registration or recordation and
satisfactory evidence of the payment of any necessary fee, tax or expense relating thereto;




          (c) Corporate Proceedings of Loan Parties. Agent shall have received a copy of the
resolutions in form and substance reasonably satisfactory to Agent, of the Board of Directors of
each Loan Party authorizing (i) the execution, delivery and performance of this Agreement, the
Notes, any related agreements, and the Subordinated Loan Documentation (collectively the
“Documents”) and (ii) the granting by each Loan Party of the security interests in and liens upon
the Collateral, in each case certified by the Secretary or an Assistant Secretary of each Loan
Party as of the Closing Date; and, such certificate shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded as of the date of such certificate;




          (d) Incumbency Certificates of Loan Parties. Agent shall have received a certificate
of the Secretary or an Assistant Secretary of each Loan Party, dated the Closing Date, as to the
incumbency and signature of the officers of each Loan Party executing this Agreement, the Other
Documents, any certificate or other documents to be delivered by it pursuant hereto, together with
evidence of the incumbency of such Secretary or Assistant Secretary;




          (e) Certificates. Agent shall have received a copy of the Articles or Certificate of
Incorporation of each Loan Party, and all amendments thereto, certified by the Secretary of State
or other appropriate official of its jurisdiction of incorporation together with



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copies of the By-Laws of each Loan Party and all agreements of each Loan Party’s shareholders
certified as accurate and complete by the Secretary of each Loan Party;




          (f) Good Standing Certificates. Agent shall have received good standing certificates
for each Loan Party dated not more than 30 days prior to the Closing Date, issued by the Secretary
of State or other appropriate official of each Loan Party’s jurisdiction of incorporation and each
jurisdiction where the conduct of each Loan Party’s business activities or the ownership of its
properties necessitates qualification;




          (g) Legal Opinion. Agent shall have received an executed legal opinion from Gray,
Layton, Kersh, Solomon, Sigmon, Furr & Smith, P.A., in form and substance satisfactory to Agent,
which shall cover such matters incident to the transactions contemplated by this Agreement, the
Notes, the Other Documents and related agreements as Agent may reasonably require and each Loan
Party hereby authorizes and directs its counsel to deliver such opinions to Agent and Lenders;




          (h) No Litigation. (i) No litigation, investigation or proceeding before or by any
arbitrator or Governmental Body shall be continuing or threatened against any Loan Party or against
the officers or directors of any Loan Party (A) in connection with this Agreement, the Other
Documents or any of the transactions contemplated thereby and which, in the reasonable opinion of
Agent, is deemed material or (B) which could, in the reasonable opinion of Agent, have a Material
Adverse Effect; and (ii) no injunction, writ, restraining order or other order of any nature
materially adverse to any Loan Party or the conduct of its business or inconsistent with the due
consummation of the Transactions shall have been issued by any Governmental Body;




          (i) Financial Condition Certificate. Agent shall have received an executed Financial
Condition Certificate in the form of Exhibit 8.1(i).




          (j) Collateral Examination. Agent shall have completed Collateral examinations and
received appraisals, the results of which shall be satisfactory in form and substance to Lenders,
of the Receivables, Inventory, General Intangibles and Equipment of each Loan Party and all books
and records in connection therewith;




          (k) Fees. Agent shall have received all fees payable to Agent and Lenders on or prior
to the Closing Date hereunder, including pursuant to Article III hereof;




          (l) Pro Forma Financial Statements. Agent shall have received a copy of the Pro Forma
Financial Statements which shall be satisfactory in all respects to Lenders;




          (m) Subordinated Loan Documentation. Agent shall have received final executed copies
of the Subordinated Loan Documentation and all related agreements, documents and instruments as in
effect on the Closing Date all of which shall be satisfactory in form and substance to Agent and
the transactions contemplated by such documentation shall be consummated prior to or simultaneously
with the making of the initial Advance including, without limitation, the receipt by Borrowers of
the proceeds of the Subordinated Note in the sum of $5,000,000;




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          (n) Intercreditor Agreements. Agent shall have entered into a Intercreditor Agreement
with Loan Parties and Subordinated Lender which shall set forth the basis upon which the
“Subordinated Lender” may receive, and Borrowers may make, payments under the Subordinated Note,
which basis shall be satisfactory in form and substance to Agent in its sole discretion;




          (o) Insurance. Agent shall have received in form and substance satisfactory to Agent,
certified copies of Loan Parties’ casualty insurance policies, together with loss payable
endorsements on Agent’s standard form of loss payee endorsement naming Agent as loss payee, and
certified copies of Loan Parties’ liability insurance policies, together with endorsements naming
Agent as a co-insured;




          (p) Payment Instructions. Agent shall have received written instructions from
Borrowing Agent directing the application of proceeds of the initial Advances made pursuant to this
Agreement;




          (q) Blocked Accounts. Agent shall have received duly executed agreements establishing
the Blocked Accounts or Depository Accounts with financial institutions acceptable to Agent for the
collection or servicing of the Receivables and proceeds of the Collateral;




          (r) Consents. Agent shall have received any and all Consents necessary to permit the
effectuation of the transactions contemplated by this Agreement and the Other Documents; and, Agent
shall have received such Consents and waivers of such third parties as might assert claims with
respect to the Collateral, as Agent and its counsel shall deem necessary;




          (s) No Adverse Material Change. (i) since December 31, 2007, there shall not have
occurred any event, condition or state of facts which could reasonably be expected to have a
Material Adverse Effect and (ii) no representations made or information supplied to Agent or
Lenders shall have been proven to be inaccurate or misleading in any material respect;




          (t) Leasehold Agreements. Agent shall have received landlord, mortgagee or
warehouseman agreements satisfactory to Agent with respect to all premises leased by Loan Parties
at which Inventory and books and records are located;




          (u) Contract Review. Agent shall have reviewed all material contracts of Loan Parties
including leases, union contracts, labor contracts, vendor supply contracts, license agreements and
distributorship agreements and such contracts and agreements shall be satisfactory in all respects
to Agent;




          (v) Closing Certificate. Agent shall have received a closing certificate signed by
the Chief Financial Officer of each Loan Party dated as of the date hereof, stating that (i) all
representations and warranties set forth in this Agreement and the Other Documents are true and
correct on and as of such date, (ii) Loan Parties are on such date in compliance with all the terms
and provisions set forth in this Agreement and the Other Documents and (iii) on such date no
Default or Event of Default has occurred or is continuing;




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          (w) Borrowing Base. Agent shall have received evidence from Borrowers that the
aggregate amount of Eligible Receivables and Eligible Inventory is sufficient in value and amount
to support Advances in the amount requested by Borrowers on the Closing Date;




          (x) Undrawn Availability. After giving effect to the initial Advances hereunder,
Borrowers shall have Undrawn Availability of at least $1,500,000;




          (y) Compliance with Laws. Agent shall be reasonably satisfied that each Loan Party is
in compliance with all pertinent federal, state, local or territorial regulations, including those
with respect to the Federal Occupational Safety and Health Act, the Environmental Protection Act,
ERISA and the Trading with the Enemy Act; and




          (z) Other. All corporate and other proceedings, and all documents, instruments and
other legal matters in connection with the Transactions shall be satisfactory in form and substance
to Agent and its counsel.




     8.2. Conditions to Each Advance. The agreement of Lenders to make any Advance
requested to be made on any date (including the initial Advance), is subject to the satisfaction of
the following conditions precedent as of the date such Advance is made:



          (a) Representations and Warranties. Each of the representations and warranties made
by any Loan Party in or pursuant to this Agreement, the Other Documents and any related agreements
to which it is a party, and each of the representations and warranties contained in any
certificate, document or financial or other statement furnished at any time under or in connection
with this Agreement, the Other Documents or any related agreement shall be true and correct in all
material respects on and as of such date as if made on and as of such date;




          (b) No Default. No Event of Default or Default shall have occurred and be continuing
on such date, or would exist after giving effect to the Advances requested to be made, on such
date; provided, however that Agent, in its sole discretion, may continue to make
Advances notwithstanding the existence of an Event of Default or Default and that any Advances so
made shall not be deemed a waiver of any such Event of Default or Default; and




          (c) Maximum Advances. In the case of any type of Advance requested to be made, after
giving effect thereto, the aggregate amount of such type of Advance shall not exceed the maximum
amount of such type of Advance permitted under this Agreement.




          Each request for an Advance by any Borrower hereunder shall constitute a representation and
warranty by each Borrower as of the date of such Advance that the conditions contained in this
subsection shall have been satisfied.



IX. INFORMATION AS TO BORROWERS.




     Each Loan Party shall, or (except with respect to Section 9.11) shall cause Borrowing Agent on
its behalf to, until satisfaction in full of the Obligations and the termination of this Agreement:



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     9.1. Disclosure of Material Matters. Immediately upon learning thereof, report to
Agent all matters materially affecting the value, enforceability or collectibility of any portion
of the Collateral, including any Loan Party’s reclamation or repossession of, or the return to any
Loan Party of, a material amount of goods or claims or disputes asserted by any Customer or other
obligor.



     9.2. Schedules. Deliver to Agent on or before Wednesday of each week, (i) a Borrowing
Base Certificate in form and substance satisfactory to Agent (which shall be calculated as of the
last day of the prior week and which shall not be binding upon Agent or restrictive of Agent’s
rights under this Agreement, including, without limitation, the right of the Agent to adjust the
Formula Amount to reflect the gross amount of Receivables that have converted to cash as evidenced
by collections received by the Agent for application to the outstanding Advances) and (ii) a sales
report. Deliver to Agent on or before the fifteenth (15th) day of each month as and for the prior
month (a) accounts receivable ageings inclusive of reconciliations to the general ledger, (b)
accounts payable schedules inclusive of reconciliations to the general ledger, and (c) Inventory
reports. In addition, each Borrower will deliver to Agent at such intervals as Agent may require:
(i) confirmatory assignment schedules, (ii) copies of Customer’s invoices, (iii) evidence of
shipment or delivery, and (iv) such further schedules, documents and/or information regarding the
Collateral as Agent may require including trial balances and test verifications. Agent shall have
the right to confirm and verify all Receivables by any manner and through any medium it considers
advisable and do whatever it may deem reasonably necessary to protect its interests hereunder. The
items to be provided under this Section are to be in form satisfactory to Agent and executed by
each Borrower and delivered to Agent from time to time solely for Agent’s convenience in
maintaining records of the Collateral, and any Borrower’s failure to deliver any of such items to
Agent shall not affect, terminate, modify or otherwise limit Agent’s Lien with respect to the
Collateral.



     9.3. Environmental Reports. Furnish Agent, concurrently with the delivery of the
financial statements referred to in Sections 9.7 and 9.8, with a certificate signed by the
President of Borrowing Agent stating, to the best of his knowledge, that each Loan Party is in
compliance in all material respects with all federal, state and local Environmental Laws. To the
extent any Loan Party is not in compliance with the foregoing laws, the certificate shall set forth
with specificity all areas of non-compliance and the proposed action such Loan Party will implement
in order to achieve full compliance.



     9.4. Litigation. Promptly notify Agent in writing of any claim, litigation, suit or
administrative proceeding affecting any Loan Party, whether or not the claim is covered by
insurance, and of any litigation, suit or administrative proceeding, which in any such case affects
the Collateral or which could reasonably be expected to have a Material Adverse Effect.



     9.5. Material Occurrences. Promptly notify Agent in writing upon the occurrence of
(a) any Event of Default or Default; (b) any event of default under the Subordinated Loan
Documentation; (c) any event, development or circumstance whereby any financial statements or other
reports furnished to Agent fail in any material respect to present fairly, in accordance with GAAP
consistently applied, the financial condition or operating results of any Loan Party as of the date
of such statements; (d) any accumulated retirement plan funding deficiency which, if such
deficiency continued for two plan years and was not corrected as provided in Section 4971



69









 







of the Code, could subject any Loan Party to a tax imposed by Section 4971 of the Code; (e)
each and every default by any Loan Party which might result in the acceleration of the maturity of
any Indebtedness, including the names and addresses of the holders of such Indebtedness with
respect to which there is a default existing or with respect to which the maturity has been or
could be accelerated, and the amount of such Indebtedness; and (f) any other development in the
business or affairs of any Loan Party or any Guarantor, which could reasonably be expected to have
a Material Adverse Effect; in each case describing the nature thereof and the action Loan Parties
propose to take with respect thereto.



     9.6. Government Receivables/Surety or Performance Bonds. Notify Agent immediately if
any of its Receivables arise out of contracts between any Loan Party and the United States, any
state, or any department, agency or instrumentality of any of them. Notify Agent immediately if
any Loan Party causes a surety or performance bond to be issued in connection with any contract by
a Loan Party to provide goods or perform services.



     9.7. Annual Financial Statements. Furnish Agent within ninety (90) days after the end
of each fiscal year of DRI, financial statements of DRI and its Subsidiaries on a consolidating and
consolidated basis including, but not limited to, statements of income and stockholders’ equity
(such statement of stockholders’ equity to be provided for DRI on a stand-alone basis) and cash
flow from the beginning of the current fiscal year to the end of such fiscal year and the balance
sheet as at the end of such fiscal year, all prepared in accordance with GAAP applied on a basis
consistent with prior practices, and in reasonable detail and reported upon without qualification
by an independent certified public accounting firm selected by DRI and satisfactory to Agent (the
“Accountants”). In addition, the reports shall be accompanied by a Compliance Certificate.



     9.8. Quarterly Financial Statements. Furnish Agent within forty-five (45) days after
the end of each fiscal quarter, an unaudited balance sheet of DRI and its Subsidiaries on a
consolidated and consolidating basis and unaudited statements of income and stockholders’ equity
(such statement of stockholders’ equity to be provided for DRI on a stand-alone basis) and cash
flow of DRI and its Subsidiaries on a consolidated and consolidating basis reflecting results of
operations from the beginning of the fiscal year to the end of such quarter, prepared on a basis
consistent with prior practices and complete and correct in all material respects, subject to
normal and recurring year end adjustments that individually and in the aggregate are not material
to Loan Parties’ business. The reports shall be accompanied by a Compliance Certificate.



     9.9. Monthly Financial Statements. Furnish Agent within thirty (30) days after the
end of each month, an unaudited balance sheet of DRI and its Subsidiaries on a consolidated and
consolidating basis and unaudited statements of income of DRI and its Subsidiaries on a
consolidated and consolidating basis reflecting results of operations from the beginning of the
fiscal year to the end of such month and for such month, prepared on a basis consistent with prior
practices and complete and correct in all material respects, subject to normal and recurring year
end adjustments that individually and in the aggregate are not material to Loan Parties’ business.
The reports shall be accompanied by a Compliance Certificate.



     9.10. Other Reports. Furnish Agent as soon as available, but in any event within ten
(10) days after the issuance thereof, (i) copies of such financial statements, reports and returns
as



70









 







DRI shall send to its stockholders or as DRI shall file with the SEC and (ii) copies of all
notices, reports, financial statements and other materials sent pursuant to the Subordinated Loan
Documentation.



     9.11. Additional Information. Furnish Agent with such additional information as Agent
shall reasonably request in order to enable Agent to determine whether the terms, covenants,
provisions and conditions of this Agreement and the Notes have been complied with by Loan Parties,
including, without the necessity of any request by Agent, (a) copies of all environmental audits
and reviews, (b) at least thirty (30) days prior thereto, notice of any Loan Party’s opening of any
new office or place of business or any Loan Party’s closing of any existing office or place of
business, and (c) promptly upon any Loan Party’s learning thereof, notice of any labor dispute to
which any Loan Party may become a party, any strikes or walkouts relating to any of its plants or
other facilities, and the expiration of any labor contract to which any Loan Party is a party or by
which any Loan Party is bound.



     9.12. Projected Operating Budget. Furnish Agent, no later than thirty (30) days prior
to the beginning of each of DRI’s fiscal years, a month by month projected operating budget and
cash flow of Borrowers and their Subsidiaries on a consolidated and consolidating basis for such
fiscal year (including an income statement for each month and a balance sheet as at the end of the
last month in each fiscal quarter), such projections to be accompanied by a certificate signed by
the President or Chief Financial Officer of DRI to the effect that such projections have been
prepared on the basis of sound financial planning practice consistent with past budgets and
financial statements and that such officer has no reason to question the reasonableness of any
material assumptions on which such projections were prepared.



     9.13. Variances From Operating Budget. Furnish Agent, concurrently with the delivery
of the financial statements referred to in Section 9.7 and each quarterly report delivered pursuant
to Section 9.8, a written report summarizing all material variances from budgets submitted by Loan
Parties pursuant to Section 9.12 and a discussion and analysis by management with respect to such
variances.



     9.14. Notice of Suits, Adverse Events. Furnish Agent with prompt written notice of
(i) any lapse or other termination of any Consent issued to any Loan Party by any Governmental Body
or any other Person that is material to the operation of any Loan Party’s business, (ii) any
refusal by any Governmental Body or any other Person to renew or extend any such Consent; and (iii)
copies of any periodic or special reports filed by any Loan Party with any Governmental Body or
Person, if such reports indicate any material change in the business, operations, affairs or
condition of any Loan Party or any Guarantor, or if copies thereof are requested by Lender, and
(iv) copies of any material notices and other communications from any Governmental Body or Person
which specifically relate to any Loan Party.



     9.15. ERISA Notices and Requests. Furnish Agent with immediate written notice in the
event that (i) any Loan Party or any member of the Controlled Group knows or has reason to know
that a Termination Event has occurred, together with a written statement describing such
Termination Event and the action, if any, which such Loan Party or any member of the Controlled
Group has taken, is taking, or proposes to take with respect thereto and, when known, any action
taken or threatened by the Internal Revenue Service, Department of Labor or PBGC



71









 







with respect thereto, (ii) any Loan Party or any member of the Controlled Group knows or has
reason to know that a prohibited transaction (as defined in Sections 406 of ERISA and 4975 of the
Code) has occurred together with a written statement describing such transaction and the action
which such Loan Party or any member of the Controlled Group has taken, is taking or proposes to
take with respect thereto, (iii) a funding waiver request has been filed with respect to any Plan
together with all communications received by any Loan Party or any member of the Controlled Group
with respect to such request, (iv) any increase in the benefits of any existing Plan or the
establishment of any new Plan or the commencement of contributions to any Plan to which any Loan
Party or any member of the Controlled Group was not previously contributing shall occur, (v) any
Loan Party or any member of the Controlled Group shall receive from the PBGC a notice of intention
to terminate a Plan or to have a trustee appointed to administer a Plan, together with copies of
each such notice, (vi) any Loan Party or any member of the Controlled Group shall receive any
favorable or unfavorable determination letter from the Internal Revenue Service regarding the
qualification of a Plan under Section 401(a) of the Code, together with copies of each such letter;
(vii) any Loan Party or any member of the Controlled Group shall receive a notice regarding the
imposition of withdrawal liability, together with copies of each such notice; (viii) any Loan Party
or any member of the Controlled Group shall fail to make a required installment or any other
required payment under Section 412 of the Code on or before the due date for such installment or
payment; or (ix) any Loan Party or any member of the Controlled Group knows that (a) a
Multiemployer Plan has been terminated, (b) the administrator or plan sponsor of a Multiemployer
Plan intends to terminate a Multiemployer Plan, or (c) the PBGC has instituted or will institute
proceedings under Section 4042 of ERISA to terminate a Multiemployer Plan.



     9.16. Additional Documents. Execute and deliver to Agent, upon request, such
documents and agreements as Agent may, from time to time, reasonably request to carry out the
purposes, terms or conditions of this Agreement.



X. EVENTS OF DEFAULT.




     The occurrence of any one or more of the following events shall constitute an “Event of
Default”:



     10.1. Nonpayment. Failure by any Borrower to pay any principal or interest on the
Obligations when due, whether at maturity or by reason of acceleration pursuant to the terms of
this Agreement or by notice of intention to prepay, or by required prepayment or failure to pay any
other liabilities or make any other payment, fee or charge provided for herein when due or in any
Other Document;



     10.2. Breach of Representation. Any representation or warranty made or deemed made by
any Loan Party in this Agreement, any Other Document or any related agreement or in any
certificate, document or financial or other statement furnished at any time in connection herewith
or therewith shall prove to have been misleading in any material respect on the date when made or
deemed to have been made;



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     10.3. Financial Information. Failure by any Loan Party to (i) furnish financial
information when due or when requested which is unremedied for a period of fifteen (15) days, or
(ii) permit the inspection of its books or records;



     10.4. Judicial Actions. Issuance of a notice of Lien, levy, assessment, injunction or
attachment against any Loan Party’s Inventory or Receivables or against a material portion of any
Loan Party’s other property which is not stayed or lifted within thirty (30) days;



     10.5. Noncompliance. Except as otherwise provided for in Sections 10.1, 10.3 and
10.5(ii), (i) failure or neglect of any Loan Party to perform, keep or observe any term, provision,
condition, covenant herein contained, or contained in any Other Document or any other agreement or
arrangement, now or hereafter entered into between any Loan Party, and Agent or any Lender, or (ii)
failure or neglect of any Loan Party to perform, keep or observe any term, provision, condition or
covenant, contained in Sections 4.6, 4.7, 4.9, 6.1, 6.3, 6.4, 9.4 or 9.6 hereof which is not cured
within ten (10) days from the occurrence of such failure or neglect;



     10.6. Judgments. Any judgment or judgments are rendered against any Loan Party for an
aggregate amount in excess of $250,000 or against all Loan Parties for an aggregate amount in
excess of $250,000 and (i) enforcement proceedings shall have been commenced by a creditor upon
such judgment, (ii) there shall be any period of forty-five (45) consecutive days during which a
stay of enforcement of such judgment, by reason of a pending appeal or otherwise, shall not be in
effect, or (iii) any such judgment results in the creation of a Lien upon any of the Collateral
(other than a Permitted Encumbrance);



     10.7. Bankruptcy. Any Loan Party shall (i) apply for, consent to or suffer the
appointment of, or the taking of possession by, a receiver, custodian, trustee, liquidator or
similar fiduciary of itself or of all or a substantial part of its property, (ii) make a general
assignment for the benefit of creditors, (iii) commence a voluntary case under any state or federal
bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v)
file a petition seeking to take advantage of any other law providing for the relief of debtors,
(vi) acquiesce to, or fail to have dismissed, within thirty (30) days, any petition filed against
it in any involuntary case under such bankruptcy laws, or (vii) take any action for the purpose of
effecting any of the foregoing;



     10.8. Inability to Pay. Any Loan Party shall admit in writing its inability, or be
generally unable, to pay its debts as they become due or cease operations of its present business;



     10.9. Affiliate Bankruptcy. Any Affiliate or any Subsidiary of any Loan Party, shall
(i) apply for, consent to or suffer the appointment of, or the taking of possession by, a receiver,
custodian, trustee, liquidator or similar fiduciary of itself or of all or a substantial part of
its property, (ii) admit in writing its inability, or be generally unable, to pay its debts as they
become due or cease operations of its present business, (iii) make a general assignment for the
benefit of creditors, (iv) commence a voluntary case under any state or federal bankruptcy laws (as
now or hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a petition
seeking to take advantage of any other law providing for the relief of debtors, (vii) acquiesce to,
or fail to have dismissed, within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (viii) take any action for the purpose of effecting
any of the foregoing;



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     10.10. Material Adverse Effect. Any change in any Loan Party’s results of operations
or condition (financial or otherwise) which in Agent’s opinion has a Material Adverse Effect;



     10.11. Lien Priority. Any Lien created hereunder or provided for hereby or under any
related agreement for any reason ceases to be or is not a valid and perfected Lien having a first
priority interest;



     10.12. Subordinated Loan Default. An event of default has occurred under the
Subordinated Loan Documentation or the Intercreditor Agreement, which default shall not have been
cured or waived within any applicable grace period;



     10.13. Cross Default. A default of the obligations of any Loan Party under any other
agreement to which it is a party shall occur which adversely affects its condition, affairs or
prospects (financial or otherwise) which default is not cured within any applicable grace period;



     10.14. Breach of Guaranty. Termination or breach of any Guaranty or Guaranty Security
Agreement or similar agreement executed and delivered to Agent in connection with the Obligations
of any Borrower, or if any Guarantor attempts to terminate, challenges the validity of, or its
liability under, any such Guaranty or Guaranty Security Agreement or similar agreement;



     10.15. Change of Control. Any Change of Control shall occur;



     10.16. Invalidity. Any material provision of this Agreement or any Other Document
shall, for any reason, cease to be valid and binding on any Loan Party, or any Loan Party shall so
claim in writing to Agent or any Lender;



     10.17. Licenses. (i) Any Governmental Body shall (A) revoke, terminate, suspend or
adversely modify any license, permit, patent trademark or tradename of any Loan Party, the
continuation of which is material to the continuation of any Loan Party’s business, or (B) commence
proceedings to suspend, revoke, terminate or adversely modify any such license, permit, trademark,
tradename or patent and such proceedings shall not be dismissed or discharged within sixty (60)
days, or (c) schedule or conduct a hearing on the renewal of any license, permit, trademark,
tradename or patent necessary for the continuation of any Loan Party’s business and the staff of
such Governmental Body issues a report recommending the termination, revocation, suspension or
material, adverse modification of such license, permit, trademark, tradename or patent; (ii) any
agreement which is necessary or material to the operation of any Loan Party’s business shall be
revoked or terminated and not replaced by a substitute acceptable to Agent within thirty (30) days
after the date of such revocation or termination, and such revocation or termination and
non-replacement would reasonably be expected to have a Material Adverse Effect;



     10.18. Seizures. Any portion of the Collateral shall be seized or taken by a
Governmental Body, or any Loan Party or the title and rights of any Loan Party shall have become
the subject matter of claim, litigation, suit or other proceeding which might, in the opinion of
Agent, upon final determination, result in impairment or loss of the security provided by this
Agreement or the Other Documents;



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     10.19. Operations. The operations of any Loan Party’s manufacturing facility are
interrupted at any time for more than forty (40) hours during any period of fourteen (14)
consecutive days, unless such Loan Party shall (i) be entitled to receive for such period of
interruption, proceeds of business interruption insurance sufficient to assure that its per diem
cash needs during such period is at least equal to its average per diem cash needs for the
consecutive three month period immediately preceding the initial date of interruption and (ii)
receive such proceeds in the amount described in clause (i) preceding not later than thirty (30)
days following the initial date of any such interruption; provided, however, that notwithstanding
the provisions of clauses (i) and (ii) of this section, an Event of Default shall be deemed to have
occurred if such Loan Party shall be receiving the proceeds of business interruption insurance for
a period of thirty (30) consecutive days; or



     10.20. Pension Plans. An event or condition specified in Sections 7.16 or 9.15 hereof
shall occur or exist with respect to any Plan and, as a result of such event or condition, together
with all other such events or conditions, any Loan Party or any member of the Controlled Group
shall incur, or in the opinion of Agent be reasonably likely to incur, a liability to a Plan or the
PBGC (or both) which, in the reasonable judgment of Agent, would have a Material Adverse Effect.



XI. LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT.




     11.1. Rights and Remedies.



          (a) Upon the occurrence of (i) an Event of Default pursuant to Section 10.7 all Obligations
shall be immediately due and payable and this Agreement and the obligation of Lenders to make
Advances shall be deemed terminated; and, (ii) any of the other Events of Default and at any time
thereafter (such default not having previously been cured), at the option of Required Lenders all
Obligations shall be immediately due and payable and Lenders shall have the right to terminate this
Agreement and to terminate the obligation of Lenders to make Advances and (iii) a filing of a
petition against any Loan Party in any involuntary case under any state or federal bankruptcy laws,
all Obligations shall be immediately due and payable and the obligation of Lenders to make Advances
hereunder shall be terminated other than as may be required by an appropriate order of the
bankruptcy court having jurisdiction over such Loan Party. Upon the occurrence of any Event of
Default, Agent shall have the right to exercise any and all rights and remedies provided for
herein, under the Other Documents, under the Uniform Commercial Code and at law or equity
generally, including the right to foreclose the security interests granted herein and to realize
upon any Collateral by any available judicial procedure and/or to take possession of and sell any
or all of the Collateral with or without judicial process. Agent may enter any of any Loan Party’s
premises or other premises without legal process and without incurring liability to any Loan Party
therefor, and Agent may thereupon, or at any time thereafter, in its discretion without notice or
demand, take the Collateral and remove the same to such place as Agent may deem advisable and Agent
may require Loan Parties to make the Collateral available to Agent at a convenient place,
including, without limitation requiring Loan Parties to disassemble and re-assemble Collateral in
order to remove such Collateral to such place as Agent may deem advisable and convenient. With or
without having the Collateral at the time or place of sale, Agent may sell the Collateral, or any
part thereof, at public or private sale, at any time or place, in one or more sales, at such price
or prices, and upon such terms, either for



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cash, credit or future delivery, as Agent may elect. Except as to that part of the Collateral
which is perishable or threatens to decline speedily in value or is of a type customarily sold on a
recognized market, Agent shall give Loan Parties reasonable notification of such sale or sales, it
being agreed that in all events written notice mailed to Borrowing Agent at least ten (10) days
prior to such sale or sales is reasonable notification. At any public sale Agent or any Lender may
bid for and become the purchaser, and Agent, any Lender or any other purchaser at any such sale
thereafter shall hold the Collateral sold absolutely free from any claim or right of whatsoever
kind, including any equity of redemption and all such claims, rights and equities are hereby
expressly waived and released by each Loan Party. In connection with the exercise of the foregoing
remedies, including the sale of Inventory, Agent is granted a perpetual nonrevocable, royalty free,
nonexclusive license and Agent is granted permission to use all of each Loan Party’s (a)
trademarks, trade styles, trade names, patents, patent applications, copyrights, service marks,
licenses, franchises and other proprietary rights which are used or useful in connection with
Inventory for the purpose of marketing, advertising for sale and selling or otherwise disposing of
such Inventory and (b) Equipment for the purpose of completing the manufacture of unfinished goods.
The cash proceeds realized from the sale of any Collateral shall be applied to the Obligations in
the order set forth in Section 11.5 hereof. Noncash proceeds will only be applied to the
Obligations as they are converted into cash. If any deficiency shall arise, Loan Parties shall
remain liable to Agent and Lenders therefor.




          (b) To the extent that Applicable Law imposes duties on the Agent to exercise remedies in a
commercially reasonable manner, each Loan Party acknowledges and agrees that it is not commercially
unreasonable for the Agent (i) to fail to incur expenses reasonably deemed significant by the Agent
to prepare Collateral for disposition or otherwise to complete raw material or work in process into
finished goods or other finished products for disposition, (ii) to fail to obtain third party
consents for access to Collateral to be disposed of, or to obtain or, if not required by other law,
to fail to obtain governmental or third party consents for the collection or disposition of
Collateral to be collected or disposed of, (iii) to fail to exercise collection remedies against
Customers or other Persons obligated on Collateral or to remove Liens on or any adverse claims
against Collateral, (iv) to exercise collection remedies against Customers and other Persons
obligated on Collateral directly or through the use of collection agencies and other collection
specialists, (v) to advertise dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (vi) to contact other
Persons, whether or not in the same business as any Loan Party, for expressions of interest in
acquiring all or any portion of such Collateral, (vii) to hire one or more professional auctioneers
to assist in the disposition of Collateral, whether or not the Collateral is of a specialized
nature, (viii) to dispose of Collateral by utilizing internet sites that provide for the auction of
assets of the types included in the Collateral or that have the reasonable capacity of doing so, or
that match buyers and sellers of assets, (ix) to dispose of assets in wholesale rather than retail
markets, (x) to disclaim disposition warranties, such as title, possession or quiet enjoyment, (xi)
to purchase insurance or credit enhancements to insure the Agent against risks of loss, collection
or disposition of Collateral or to provide to the Agent a guaranteed return from the collection or
disposition of Collateral, or (xii) to the extent deemed appropriate by the Agent, to obtain the
services of other brokers, investment bankers, consultants and other professionals to assist the
Agent in the collection or disposition of any of the Collateral. Each Loan Party acknowledges that
the purpose of this Section 11.1(b) is to provide non-exhaustive indications of what actions or
omissions by the Agent would not be commercially unreasonable in the Agent’s exercise of



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remedies against the Collateral and that other actions or omissions by the Agent shall not be
deemed commercially unreasonable solely on account of not being indicated in this Section 11.1(b).
Without limitation upon the foregoing, nothing contained in this Section 11.1(b) shall be construed
to grant any rights to any Loan Party or to impose any duties on Agent that would not have been
granted or imposed by this Agreement or by Applicable Law in the absence of this Section 11.1(b).




     11.2. Agent’s Discretion. Agent shall have the right in its sole discretion to
determine which rights, Liens, security interests or remedies Agent may at any time pursue,
relinquish, subordinate, or modify or to take any other action with respect thereto and such
determination will not in any way modify or affect any of Agent’s or Lenders’ rights hereunder.



     11.3. Setoff. Subject to Section 14.12, in addition to any other rights which Agent
or any Lender may have under Applicable Law, upon the occurrence of an Event of Default hereunder,
Agent and such Lender shall have a right, immediately and without notice of any kind, to apply any
Loan Party’s property held by Agent and such Lender to reduce the Obligations.



     11.4. Rights and Remedies not Exclusive. The enumeration of the foregoing rights and
remedies is not intended to be exhaustive and the exercise of any rights or remedy shall not
preclude the exercise of any other right or remedies provided for herein or otherwise provided by
law, all of which shall be cumulative and not alternative.



     11.5. Allocation of Payments After Event of Default. Notwithstanding any other
provisions of this Agreement to the contrary, after the occurrence and during the continuance of an
Event of Default, all amounts collected or received by the Agent on account of the Obligations or
any other amounts outstanding under any of the Other Documents or in respect of the Collateral may,
at Agent’s discretion, be paid over or delivered as follows:



          FIRST, to the payment of all reasonable out-of-pocket costs and expenses (including reasonable
attorneys’ fees) of the Agent in connection with enforcing its rights and the rights of the Lenders
under this Agreement and the Other Documents and any protective advances made by the Agent with
respect to the Collateral under or pursuant to the terms of this Agreement;



          SECOND, to payment of any fees owed to the Agent;




          THIRD, to the payment of all reasonable out-of-pocket costs and expenses (including reasonable
attorneys’ fees) of each of the Lenders to the extent owing to such Lender pursuant to the terms of
this Agreement;




          FOURTH, to the payment of all of the Obligations consisting of accrued fees and interest;




          FIFTH, to the payment of the outstanding principal amount of the Obligations (including the
payment or cash collateralization of any outstanding Letters of Credit);




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          SIXTH, to all other Obligations and other obligations which shall have become due and payable
under the Other Documents or otherwise and not repaid pursuant to clauses “FIRST” through “FIFTH”
above; and




          SEVENTH, to the payment of the surplus, if any, to whoever may be lawfully entitled to receive
such surplus.




          In carrying out the foregoing, (i) amounts received shall be applied in the numerical order
provided until exhausted prior to application to the next succeeding category; (ii) each of the
Lenders shall receive (so long as it is not a Defaulting Lender) an amount equal to its pro rata
share (based on the proportion that the then outstanding Advances held by such Lender bears to the
aggregate then outstanding Advances) of amounts available to be applied pursuant to clauses
“FOURTH”, “FIFTH” and “SIXTH” above; and (iii) to the extent that any amounts available for
distribution pursuant to clause “FIFTH” above are attributable to the issued but undrawn amount of
outstanding Letters of Credit, such amounts shall be held by the Agent in a cash collateral account
and applied (A) first, to reimburse the Issuer from time to time for any drawings under such
Letters of Credit and (B) then, following the expiration of all Letters of Credit, to all other
obligations of the types described in clauses “FIFTH” and “SIXTH” above in the manner provided in
this Section 11.5.




XII. WAIVERS AND JUDICIAL PROCEEDINGS.




     12.1. Waiver of Notice. Each Loan Party hereby waives notice of non-payment of any of
the Receivables, demand, presentment, protest and notice thereof with respect to any and all
instruments, notice of acceptance hereof, notice of loans or advances made, credit extended,
Collateral received or delivered, or any other action taken in reliance hereon, and all other
demands and notices of any description, except such as are expressly provided for herein.



     12.2. Delay. No delay or omission on Agent’s or any Lender’s part in exercising any
right, remedy or option shall operate as a waiver of such or any other right, remedy or option or
of any Default or Event of Default.



     12.3. Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT OR
ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN
ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF
THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE
AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS



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WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL
BY JURY.



XIII. EFFECTIVE DATE AND TERMINATION.




     13.1. Term. This Agreement, which shall inure to the benefit of and shall be binding
upon the respective successors and permitted assigns of each Loan Party, Agent and each Lender,
shall become effective on the date hereof and shall continue in full force and effect until the
earlier of (x) June 30, 2011, or (y) ninety-one (91) days prior to the final stated maturity of the
Subordinated Notes (the “Term”) unless sooner terminated as herein provided. Loan Parties
may terminate this Agreement at any time upon ninety (90) days’ prior written notice upon payment
in full of the Obligations. In the event the Obligations are prepaid in full prior to the last day
of the Term (the date of such prepayment hereinafter referred to as the “Early Termination Date”),
Loan Parties shall pay to Agent for the benefit of Lenders an early termination fee in an amount
equal to (x) $160,000 if the Early Termination Date occurs on or after the Closing Date to and
including the date immediately preceding the first anniversary of the Closing Date, (y) $80,000 if
the Early Termination Date occurs on or after the first anniversary of the Closing Date to and
including the date immediately preceding the second anniversary of the Closing Date, and (z)
$40,000 if the Early Termination Date occurs on or after the second anniversary of the Closing Date
to and including the date immediately preceding the third anniversary of the Closing Date.



     13.2. Termination. The termination of the Agreement shall not affect any Loan
Party’s, Agent’s or any Lender’s rights, or any of the Obligations having their inception prior to
the effective date of such termination, and the provisions hereof shall continue to be fully
operative until all transactions entered into, rights or interests created or Obligations have been
fully and indefeasibly paid, disposed of, concluded or liquidated. The security interests, Liens
and rights granted to Agent and Lenders hereunder and the financing statements filed hereunder
shall continue in full force and effect, notwithstanding the termination of this Agreement or the
fact that Borrowers’ Account may from time to time be temporarily in a zero or credit position,
until all of the Obligations of each Loan Party have been indefeasibly paid and performed in full
after the termination of this Agreement or each Loan Party has furnished Agent and Lenders with an
indemnification satisfactory to Agent and Lenders with respect thereto. Accordingly, each Loan
Party waives any rights which it may have under the Uniform Commercial Code to demand the filing of
termination statements with respect to the Collateral, and Agent shall not be required to send such
termination statements to each Loan Party, or to file them with any filing office, unless and until
this Agreement shall have been terminated in accordance with its terms and all Obligations have
been indefeasibly paid in full in immediately available funds. All representations, warranties,
covenants, waivers and agreements contained herein shall survive termination hereof until all
Obligations are indefeasibly paid and performed in full.



XIV. REGARDING AGENT.




     14.1. Appointment. Each Lender hereby designates PNC to act as Agent for such Lender
under this Agreement and the Other Documents. Each Lender hereby irrevocably authorizes Agent to
take such action on its behalf under the provisions of this Agreement and the Other Documents and
to exercise such powers and to perform such duties hereunder and



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thereunder as are specifically delegated to or required of Agent by the terms hereof and
thereof and such other powers as are reasonably incidental thereto and Agent shall hold all
Collateral, payments of principal and interest, fees (except the fees set forth in Sections 3.3(a)
and 3.4), charges and collections (without giving effect to any collection days) received pursuant
to this Agreement, for the ratable benefit of Lenders. Agent may perform any of its duties
hereunder by or through its agents or employees. As to any matters not expressly provided for by
this Agreement (including collection of the Note) Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of the Required
Lenders, and such instructions shall be binding; provided, however, that Agent shall not be
required to take any action which exposes Agent to liability or which is contrary to this Agreement
or the Other Documents or Applicable Law unless Agent is furnished with an indemnification
reasonably satisfactory to Agent with respect thereto.



     14.2. Nature of Duties. Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement and the Other Documents. Neither Agent nor any of its
officers, directors, employees or agents shall be (i) liable for any action taken or omitted by
them as such hereunder or in connection herewith, unless caused by their gross (not mere)
negligence or willful misconduct (as determined by a court of competent jurisdiction in a final
non-appealable judgment), or (ii) responsible in any manner for any recitals, statements,
representations or warranties made by any Loan Party or any officer thereof contained in this
Agreement, or in any of the Other Documents or in any certificate, report, statement or other
document referred to or provided for in, or received by Agent under or in connection with, this
Agreement or any of the Other Documents or for the value, validity, effectiveness, genuineness, due
execution, enforceability or sufficiency of this Agreement, or any of the Other Documents or for
any failure of any Loan Party to perform its obligations hereunder. 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 contained in, or conditions of, this Agreement or any of the Other Documents, or to
inspect the properties, books or records of any Loan Party. The duties of Agent as respects the
Advances to Borrowers shall be mechanical and administrative in nature; Agent shall not have by
reason of this Agreement a fiduciary relationship in respect of any Lender; and nothing in this
Agreement, expressed or implied, is intended to or shall be so construed as to impose upon Agent
any obligations in respect of this Agreement except as expressly set forth herein.



     14.3. Lack of Reliance on Agent and Resignation. Independently and without reliance
upon Agent or any other Lender, each Lender has made and shall continue to make (i) its own
independent investigation of the financial condition and affairs of each Loan Party and each
Guarantor in connection with the making and the continuance of the Advances hereunder and the
taking or not taking of any action in connection herewith, and (ii) its own appraisal of the
creditworthiness of each Loan Party. Agent shall have no duty or responsibility, either initially
or on a continuing basis, to provide any Lender with any credit or other information with respect
thereto, whether coming into its possession before making of the Advances or at any time or times
thereafter except as shall be provided by any Loan Party pursuant to the terms hereof. Agent shall
not be responsible to any Lender for any recitals, statements, information, representations or
warranties herein or in any agreement, document, certificate or a statement delivered in connection
with or for the execution, effectiveness, genuineness, validity,



80









 







enforceability, collectibility or sufficiency of this Agreement or any Other Document, or of
the financial condition of any Loan Party, or be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of this Agreement, the
Note, the Other Documents or the financial condition of any Loan Party, or the existence of any
Event of Default or any Default.



          Agent may resign on sixty (60) days’ written notice to each of Lenders and Borrowing Agent and
upon such resignation, the Required Lenders will promptly designate a successor Agent reasonably
satisfactory to Borrowers; provided that if the Subordinated Lender exercises it option
pursuant to Section 24 of the Intercreditor Agreement to purchase all of the Obligations from
Lenders, then Agent may resign by written notice to each of Lenders and Borrowing Agent, such
resignation to become effective immediately upon the closing of the purchase of the Obligations by
the Subordinated Lender and upon such resignation, the Subordinated Lender will have the right to
designate a successor Agent.




          Any such successor Agent shall succeed to the rights, powers and duties of 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. After any Agent’s resignation as Agent, the provisions of this
Article XIV shall inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement.




     14.4. Certain Rights of Agent. If Agent shall request instructions from Lenders with
respect to any act or action (including failure to act) in connection with this Agreement or any
Other Document, Agent shall be entitled to refrain from such act or taking such action unless and
until Agent shall have received instructions from the Required Lenders; and Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the foregoing, Lenders shall
not have any right of action whatsoever against Agent as a result of its acting or refraining from
acting hereunder in accordance with the instructions of the Required Lenders.



     14.5. Reliance. Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, statement, certificate, telex, teletype or
telecopier message, cablegram, order or other document or telephone message believed by it to be
genuine and correct and to have been signed, sent or made by the proper person or entity, and, with
respect to all legal matters pertaining to this Agreement and the Other Documents and its duties
hereunder, upon advice of counsel selected by it. Agent may employ agents and attorneys-in-fact
and shall not be liable for the default or misconduct of any such agents or attorneys-in-fact
selected by Agent with reasonable care.



     14.6. Notice of Default. Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder or under the Other Documents, unless Agent
has received notice from a Lender or Borrowing Agent referring to this Agreement or the Other
Documents, describing such Default or Event of Default and stating that such notice is a “notice of
default”. In the event that Agent receives such a notice, Agent shall give notice thereof to
Lenders. Agent shall take such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders; provided, that, unless and until Agent shall have
received such directions, Agent may (but shall not be obligated to) take such action, or



81









 







refrain from taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of Lenders.



     14.7. Indemnification. To the extent Agent is not reimbursed and indemnified by Loan
Parties, each Lender will reimburse and indemnify Agent in proportion to its respective portion of
the Advances (or, if no Advances are outstanding, according to its Commitment Percentage), from and
against any and all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on,
incurred by or asserted against Agent in performing its duties hereunder, or in any way relating to
or arising out of this Agreement or any Other Document; provided that, Lenders shall not be liable
for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from Agent’s gross (not mere) negligence or
willful misconduct (as determined by a court of competent jurisdiction in a final non-appealable
judgment).



     14.8. Agent in its Individual Capacity. With respect to the obligation of Agent to
lend under this Agreement, the Advances made by it shall have the same rights and powers hereunder
as any other Lender and as if it were not performing the duties as Agent specified herein; and the
term “Lender” or any similar term shall, unless the context clearly otherwise indicates, include
Agent in its individual capacity as a Lender. Agent may engage in business with any Loan Party as
if it were not performing the duties specified herein, and may accept fees and other consideration
from any Loan Party for services in connection with this Agreement or otherwise without having to
account for the same to Lenders.



     14.9. Delivery of Documents. To the extent Agent receives financial statements
required under Sections 9.7, 9.8, 9.9, 9.12 and 9.13 or Borrowing Base Certificates from any Loan
Party pursuant to the terms of this Agreement which any Loan Party is not obligated to deliver to
each Lender, Agent will promptly furnish such documents and information to Lenders.



     14.10. Loan Parties’ Undertaking to Agent. Without prejudice to their respective
obligations to Lenders under the other provisions of this Agreement, each Loan Party hereby
undertakes with Agent to pay to Agent from time to time on demand all amounts from time to time due
and payable by it for the account of Agent or Lenders or any of them pursuant to this Agreement to
the extent not already paid. Any payment made pursuant to any such demand shall pro tanto satisfy
the relevant Loan Party’s obligations to make payments for the account of Lenders or the relevant
one or more of them pursuant to this Agreement.



     14.11. No Reliance on Agent’s Customer Identification Program. Each Lender
acknowledges and agrees that neither such Lender, nor any of its Affiliates, participants or
assignees, may rely on the Agent to carry out such Lender’s, Affiliate’s, participant’s or
assignee’s customer identification program, or other obligations required or imposed under or
pursuant to the USA PATRIOT Act or the regulations thereunder, including the regulations contained
in 31 CFR 103.121 (as hereafter amended or replaced, the “CIP Regulations”), or any other
Anti-Terrorism Law, including any programs involving any of the following items relating to or in
connection with any Loan Party, its Affiliates or its agents, this Agreement, the Other Documents
or the transactions hereunder or contemplated hereby: (1) any identity verification



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procedures, (2) any record-keeping, (3) comparisons with government lists, (4) customer
notices or (5) other procedures required under the CIP Regulations or such other laws.



     14.12. Other Agreements. Each of the Lenders agrees that it shall not, without the
express consent of Agent, and that it shall, to the extent it is lawfully entitled to do so, upon
the request of Agent, set off against the Obligations, any amounts owing by such Lender to any Loan
Party or any deposit accounts of any Loan Party now or hereafter maintained with such Lender.
Anything in this Agreement to the contrary notwithstanding, each of the Lenders further agrees that
it shall not, unless specifically requested to do so by Agent, take any action to protect or
enforce its rights arising out of this Agreement or the Other Documents, it being the intent of
Lenders that any such action to protect or enforce rights under this Agreement and the Other
Documents shall be taken in concert and at the direction or with the consent of Agent or Required
Lenders.



XV. BORROWING AGENCY.




     15.1. Borrowing Agency Provisions.



          (a) Each Borrower hereby irrevocably designates Borrowing Agent to be its attorney and agent
and in such capacity to borrow, sign and endorse notes, and execute and deliver all instruments,
documents, writings and further assurances now or hereafter required hereunder, on behalf of such
Borrower or Borrowers, and hereby authorizes Agent to pay over or credit all loan proceeds
hereunder in accordance with the request of Borrowing Agent.




          (b) The handling of this credit facility as a co-borrowing facility with a borrowing agent in
the manner set forth in this Agreement is solely as an accommodation to Borrowers and at their
request. Neither Agent nor any Lender shall incur liability to Borrowers as a result thereof. To
induce Agent and Lenders to do so and in consideration thereof, each Borrower hereby indemnifies
Agent and each Lender and holds Agent and each Lender harmless from and against any and all
liabilities, expenses, losses, damages and claims of damage or injury asserted against Agent or any
Lender by any Person arising from or incurred by reason of the handling of the financing
arrangements of Borrowers as provided herein, reliance by Agent or any Lender on any request or
instruction from Borrowing Agent or any other action taken by Agent or any Lender with respect to
this Section 15.1 except due to willful misconduct or gross (not mere) negligence by the
indemnified party (as determined by a court of competent jurisdiction in a final and non-appealable
judgment).




          (c) All Obligations shall be joint and several, and each Borrower shall make payment upon the
maturity of the Obligations by acceleration or otherwise, and such obligation and liability on the
part of each Borrower shall in no way be affected by any extensions, renewals and forbearance
granted to Agent or any Lender to any Borrower, failure of Agent or any Lender to give any Borrower
notice of borrowing or any other notice, any failure of Agent or any Lender to pursue or preserve
its rights against any Borrower, the release by Agent or any Lender of any Collateral now or
thereafter acquired from any Borrower, and such agreement by each Borrower to pay upon any notice
issued pursuant thereto is unconditional and unaffected by prior recourse by Agent or any Lender to
the other Borrowers or any Collateral for such Borrower’s Obligations or the lack thereof. Each
Borrower waives all suretyship defenses.




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     15.2. Waiver of Subrogation. Each Borrower expressly waives any and all rights of
subrogation, reimbursement, indemnity, exoneration, contribution of any other claim which such
Borrower may now or hereafter have against the other Borrowers or other Person directly or
contingently liable for the Obligations hereunder, or against or with respect to the other
Borrowers’ property (including, without limitation, any property which is Collateral for the
Obligations), arising from the existence or performance of this Agreement, until termination of
this Agreement and repayment in full of the Obligations.



XVI. MISCELLANEOUS.




     16.1. Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York applied to contracts to be performed wholly within the State
of New York. Any judicial proceeding brought by or against any Loan Party with respect to any of
the Obligations, this Agreement, the Other Documents or any related agreement may be brought in any
court of competent jurisdiction in the State of New York, United States of America, and, by
execution and delivery of this Agreement, each Loan Party accepts for itself and in connection with
its properties, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid
courts, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this
Agreement. Each Loan Party hereby waives personal service of any and all process upon it and
consents that all such service of process may be made by registered mail (return receipt requested)
directed to Borrowing Agent at its address set forth in Section 16.6 and service so made shall be
deemed completed five (5) days after the same shall have been so deposited in the mails of the
United States of America, or, at the Agent’s option, by service upon Borrowing Agent which each
Loan Party irrevocably appoints as such Loan Party’s Agent for the purpose of accepting service
within the State of New York. Nothing herein shall affect the right to serve process in any manner
permitted by law or shall limit the right of Agent or any Lender to bring proceedings against any
Loan Party in the courts of any other jurisdiction. Each Loan Party waives any objection to
jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on
lack of jurisdiction or venue or based upon forum non conveniens. Each Loan Party waives the right
to remove any judicial proceeding brought against such Loan Party in any state court to any federal
court. Any judicial proceeding by any Loan Party against Agent or any Lender involving, directly
or indirectly, any matter or claim in any way arising out of, related to or connected with this
Agreement or any related agreement, shall be brought only in a federal or state court located in
the County of New York, State of New York.



     16.2. Entire Understanding.



          (a) This Agreement and the documents executed concurrently herewith contain the entire
understanding between each Loan Party, Agent and each Lender and supersedes all prior agreements
and understandings, if any, relating to the subject matter hereof. Any promises, representations,
warranties or guarantees not herein contained and hereinafter made shall have no force and effect
unless in writing, signed by each Loan Party’s, Agent’s and each Lender’s respective officers.
Neither this Agreement nor any portion or provisions hereof may be changed, modified, amended,
waived, supplemented, discharged, cancelled or terminated orally or by any course of dealing, or in
any manner other than by an agreement in writing, signed by the party to be charged. Each Loan
Party acknowledges that it has been advised by



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counsel in connection with the execution of this Agreement and Other Documents and is not
relying upon oral representations or statements inconsistent with the terms and provisions of this
Agreement.




          (b) The Required Lenders, Agent with the consent in writing of the Required Lenders, and Loan
Parties may, subject to the provisions of this Section 16.2 (b), from time to time enter into
written supplemental agreements to this Agreement or the Other Documents executed by Loan Parties,
for the purpose of adding or deleting any provisions or otherwise changing, varying or waiving in
any manner the rights of Lenders, Agent or Loan Parties thereunder or the conditions, provisions or
terms thereof or waiving any Event of Default thereunder, but only to the extent specified in such
written agreements; provided, however, that no such supplemental agreement shall, without the
consent of all Lenders:




               (i) increase the Commitment Percentage, the maximum dollar commitment of any Lender or the
Maximum Revolving Advance Amount.



               (ii) extend the maturity of any Note or the due date for any amount payable hereunder, or
decrease the rate of interest or reduce any fee payable by Borrowers to Lenders pursuant to this
Agreement.



               (iii) alter the definition of the term Required Lenders or alter, amend or modify this Section
16.2(b).



               (iv) release any Collateral during any calendar year (other than in accordance with the
provisions of this Agreement) having an aggregate value in excess of $500,000.



               (v) change the rights and duties of Agent.



               (vi) permit any Revolving Advance to be made if after giving effect thereto the total of
Revolving Advances outstanding hereunder would exceed the Formula Amount for more than sixty (30)
consecutive Business Days or exceed one hundred and five percent (105%) of the Formula Amount.



               (vii) increase the Advance Rates above the Advance Rates in effect on the Closing Date.



               (viii) release any Guarantor.



          Any such supplemental agreement shall apply equally to each Lender and shall be binding upon
each Loan Party, Lenders and Agent and all future holders of the Obligations. In the case of any
waiver, Loan Parties, Agent and Lenders shall be restored to their former positions and rights, and
any Event of Default waived shall be deemed to be cured and not continuing, but no waiver of a
specific Event of Default shall extend to any subsequent Event of Default (whether or not the
subsequent Event of Default is the same as the Event of Default which was waived), or impair any
right consequent thereon.




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          In the event that Agent requests the consent of a Lender pursuant to this Section 16.2 and
such consent is denied, then PNC may, at its option, require such Lender to assign its interest in
the Advances to PNC or to another Lender or to any other Person designated by the Agent (the
“Designated Lender”), for a price equal to (i) the then outstanding principal amount thereof plus
(ii) accrued and unpaid interest and fees due such Lender, which interest and fees shall be paid
when collected from Borrowers. In the event PNC elects to require any Lender to assign its
interest to PNC or to the Designated Lender, PNC will so notify such Lender in writing within forty
five (45) days following such Lender’s denial, and such Lender will assign its interest to PNC or
the Designated Lender no later than five (5) days following receipt of such notice pursuant to a
Commitment Transfer Supplement executed by such Lender, PNC or the Designated Lender, as
appropriate, and Agent.




          Notwithstanding (a) the existence of a Default or an Event of Default, (b) that any of the
other applicable conditions precedent set forth in Section 8.2 hereof have not been satisfied or
(c) any other provision of this Agreement, Agent may at its discretion and without the consent of
the Required Lenders, voluntarily permit the sum of the outstanding Revolving Advances and the
Maximum Undrawn Amount at any time to exceed the Formula Amount hereof at such time (such sum, the
“Overadvance Threshold Amount”) by up to ten percent (10%) of the Formula Amount for up to thirty
(30) consecutive Business Days (the “Out-of-Formula Loans”); provided, that, such
outstanding Advances do not exceed the Maximum Revolving Advance Amount. If Agent is willing in
its sole and absolute discretion to make such Out-of-Formula Loans, such Out-of-Formula Loans shall
be payable on demand and shall bear interest at the Default Rate for Revolving Advances consisting
of Domestic Rate Loans; provided that, if Lenders do make Out-of-Formula Loans, neither Agent nor
Lenders shall be deemed thereby to have changed the limits of Section 2.1(a). For purposes of this
paragraph, the discretion granted to Agent hereunder shall not preclude involuntary overadvances
that may result from time to time due to the fact that the Formula Amount or the Overadvance
Threshold Amount was unintentionally exceeded for any reason, including, but not limited to,
Collateral previously deemed to be either “Eligible Receivables” or “Eligible Inventory”, as
applicable, becomes ineligible, collections of Receivables applied to reduce outstanding Revolving
Advances are thereafter returned for insufficient funds or overadvances are made to protect or
preserve the Collateral. In the event Agent involuntarily permits the outstanding Revolving
Advances to exceed the Formula Amount or Overadvance Threshold Amount by more than ten percent
(10%), Agent shall use its efforts to have Borrowers decrease such excess in as expeditious a
manner as is practicable under the circumstances and not inconsistent with the reason for such
excess. Revolving Advances made after Agent has determined the existence of involuntary
overadvances shall be deemed to be involuntary overadvances and shall be decreased in accordance
with the preceding sentence.




          In addition to (and not in substitution of) the discretionary Revolving Advances permitted
above in this Section 16.2, the Agent is hereby authorized by Borrowers and the Lenders, from time
to time in the Agent’s sole discretion, (A) after the occurrence and during the continuation of a
Default or an Event of Default, or (B) at any time that any of the other applicable conditions
precedent set forth in Section 8.2 hereof have not been satisfied, to make Revolving Advances to
Borrowers on behalf of the Lenders which the Agent, in its reasonable business judgment, deems
necessary or desirable (a) to preserve or protect the Collateral, or any portion thereof, (b) to
enhance the likelihood of, or maximize the amount of, repayment of the



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Advances and other Obligations, or (c) to pay any other amount chargeable to Borrowers
pursuant to the terms of this Agreement; provided, that at any time after giving effect to any such
Revolving Advances the outstanding Revolving Advances do not exceed one hundred and ten percent
(110%) of the Formula Amount.




     16.3. Successors and Assigns; Participations; New Lenders.



          (a) This Agreement shall be binding upon and inure to the benefit of Loan Parties, Agent, each
Lender, all future holders of the Obligations and their respective successors and assigns, except
that no Loan Party may assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of Agent and each Lender.




          (b) Each Loan Party acknowledges that in the regular course of commercial banking business one
or more Lenders may at any time and from time to time sell participating interests in the Advances
to other financial institutions (each such transferee or purchaser of a participating interest, a
“Participant”). Each Participant may exercise all rights of payment (including rights of set-off)
with respect to the portion of such Advances held by it or other Obligations payable hereunder as
fully as if such Participant were the direct holder thereof provided that Loan Parties shall not be
required to pay to any Participant more than the amount which it would have been required to pay to
Lender which granted an interest in its Advances or other Obligations payable hereunder to such
Participant had such Lender retained such interest in the Advances hereunder or other Obligations
payable hereunder and in no event shall Loan Parties be required to pay any such amount arising
from the same circumstances and with respect to the same Advances or other Obligations payable
hereunder to both such Lender and such Participant. Each Loan Party hereby grants to any
Participant a continuing security interest in any deposits, moneys or other property actually or
constructively held by such Participant as security for the Participant’s interest in the Advances.




          (c) Any Lender, with the consent of Agent which shall not be unreasonably withheld or delayed,
may sell, assign or transfer all or any part of its rights and obligations under or relating to
Revolving Advances under this Agreement and the Other Documents to one or more additional banks or
financial institutions and one or more additional banks or financial institutions may commit to
make Advances hereunder (each a “Purchasing Lender”), in minimum amounts of not less than
$1,000,000, pursuant to a Commitment Transfer Supplement, executed by a Purchasing Lender, the
transferor Lender, and Agent and delivered to Agent for recording. Upon such execution, delivery,
acceptance and recording, from and after the transfer effective date determined pursuant to such
Commitment Transfer Supplement, (i) Purchasing Lender thereunder shall be a party hereto and, to
the extent provided in such Commitment Transfer Supplement, have the rights and obligations of a
Lender thereunder with a Commitment Percentage as set forth therein, and (ii) the transferor Lender
thereunder shall, to the extent provided in such Commitment Transfer Supplement, be released from
its obligations under this Agreement, the Commitment Transfer Supplement creating a novation for
that purpose. Such Commitment Transfer Supplement shall be deemed to amend this Agreement to the
extent, and only to the extent, necessary to reflect the addition of such Purchasing Lender and the
resulting adjustment of the Commitment Percentages arising from the purchase by such Purchasing
Lender of all or a portion of the rights and obligations of such transferor Lender under this
Agreement and the Other Documents. Each Loan Party hereby consents to the addition of such



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Purchasing Lender and the resulting adjustment of the Commitment Percentages arising from the
purchase by such Purchasing Lender of all or a portion of the rights and obligations of such
transferor Lender under this Agreement and the Other Documents. Loan Parties shall execute and
deliver such further documents and do such further acts and things in order to effectuate the
foregoing.




          (d) Any Lender, with the consent of Agent which shall not be unreasonably withheld or delayed,
may directly or indirectly sell, assign or transfer all or any portion of its rights and
obligations under or relating to Revolving Advances under this Agreement and the Other Documents to
an entity, whether a corporation, partnership, trust, limited liability company or other entity
that (i) is engaged in making, purchasing, holding or otherwise investing in bank loans and similar
extensions of credit in the ordinary course of its business and (ii) is administered, serviced or
managed by the assigning Lender or an Affiliate of such Lender (a “Purchasing CLO” and together
with each Participant and Purchasing Lender, each a “Transferee” and collectively the
“Transferees”), pursuant to a Commitment Transfer Supplement modified as appropriate to reflect the
interest being assigned (“Modified Commitment Transfer Supplement”), executed by any intermediate
purchaser, the Purchasing CLO, the transferor Lender, and Agent as appropriate and delivered to
Agent for recording. Upon such execution and delivery, from and after the transfer effective date
determined pursuant to such Modified Commitment Transfer Supplement, (i) Purchasing CLO thereunder
shall be a party hereto and, to the extent provided in such Modified Commitment Transfer
Supplement, have the rights and obligations of a Lender thereunder and (ii) the transferor Lender
thereunder shall, to the extent provided in such Modified Commitment Transfer Supplement, be
released from its obligations under this Agreement, the Modified Commitment Transfer Supplement
creating a novation for that purpose. Such Modified Commitment Transfer Supplement shall be deemed
to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of
such Purchasing CLO. Each Loan Party hereby consents to the addition of such Purchasing CLO. Loan
Parties shall execute and deliver such further documents and do such further acts and things in
order to effectuate the foregoing.




          (e) Agent shall maintain at its address a copy of each Commitment Transfer Supplement and
Modified Commitment Transfer Supplement delivered to it and a register (the “Register”) for the
recordation of the names and addresses of each Lender and the outstanding principal, accrued and
unpaid interest and other fees due hereunder. The entries in the Register shall be conclusive, in
the absence of manifest error, and each Loan Party, Agent and Lenders may treat each Person whose
name is recorded in the Register as the owner of the Advance recorded therein for the purposes of
this Agreement. The Register shall be available for inspection by any Loan Party or any Lender at
any reasonable time and from time to time upon reasonable prior notice. Agent shall receive a fee
in the amount of $3,500 payable by the applicable Purchasing Lender and/or Purchasing CLO upon the
effective date of each transfer or assignment (other than to an intermediate purchaser) to such
Purchasing Lender and/or Purchasing CLO.




          (f) Each Loan Party authorizes each Lender to disclose to any Transferee and any prospective
Transferee any and all financial information in such Lender’s possession concerning such Loan Party
which has been delivered to such Lender by or on behalf of such



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Loan Party pursuant to this Agreement or in connection with such Lender’s credit evaluation of
such Loan Party.




     16.4. Application of Payments. Agent shall have the continuing and exclusive right to
apply or reverse and re-apply any payment and any and all proceeds of Collateral to any portion of
the Obligations. To the extent that any Loan Party makes a payment or Agent or any Lender receives
any payment or proceeds of the Collateral for any Loan Party’s benefit, which are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a
trustee, debtor in possession, receiver, custodian or any other party under any bankruptcy law,
common law or equitable cause, then, to such extent, the Obligations or part thereof intended to be
satisfied shall be revived and continue as if such payment or proceeds had not been received by
Agent or such Lender.



     16.5. Indemnity. Each Loan Party shall indemnify Agent, each Lender and each of their
respective officers, directors, Affiliates, attorneys, employees and agents from and against any
and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and disbursements of any kind or nature whatsoever (including fees and disbursements of
counsel) which may be imposed on, incurred by, or asserted against Agent or any Lender in any
claim, litigation, proceeding or investigation instituted or conducted by any Governmental Body or
instrumentality or any other Person with respect to any aspect of, or any transaction contemplated
by, or referred to in, or any matter related to, this Agreement or the Other Documents, whether or
not Agent or any Lender is a party thereto, except to the extent that any of the foregoing arises
out of the gross negligence or willful misconduct of the party being indemnified (as determined by
a court of competent jurisdiction in a final and non-appealable judgment). Without limiting the
generality of the foregoing, this indemnity shall extend to any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or
nature whatsoever (including fees and disbursements of counsel) asserted against or incurred by any
of the indemnitees described above in this Section 16.5 by any Person under any Environmental Laws
or similar laws by reason of any Loan Party’s or any other Person’s failure to comply with laws
applicable to solid or hazardous waste materials, including Hazardous Substances and Hazardous
Waste, or other Toxic Substances. Additionally, if any taxes (excluding taxes imposed upon or
measured solely by the net income of Agent and Lenders, but including any intangibles taxes, stamp
tax, recording tax or franchise tax) shall be payable by Agent, Lenders or Loan Parties on account
of the execution or delivery of this Agreement, or the execution, delivery, issuance or recording
of any of the Other Documents, or the creation or repayment of any of the Obligations hereunder, by
reason of any Applicable Law now or hereafter in effect, Loan Parties will pay (or will promptly
reimburse Agent and Lenders for payment of) all such taxes, including interest and penalties
thereon, and will indemnify and hold the indemnitees described above in this Section 16.5 harmless
from and against all liability in connection therewith.



     16.6. Notice. Any notice or request hereunder may be given to Borrowing Agent or any
Loan Party or to Agent or any Lender at their respective addresses set forth below or at such other
address as may hereafter be specified in a notice designated as a notice of change of address under
this Section. Any notice, request, demand, direction or other communication (for purposes of this
Section 16.6 only, a “Notice”) to be given to or made upon any party hereto under any provision of
this Loan Agreement shall be given or made by telephone or in writing



89









 




(which includes by means of electronic transmission (i.e., “e-mail”) or facsimile transmission
or by setting forth such Notice on a site on the World Wide Web (a “Website Posting”) if Notice of
such Website Posting (including the information necessary to access such site) has previously been
delivered to the applicable parties hereto by another means set forth in this Section 16.6) in
accordance with this Section 16.6. Any such Notice must be delivered to the applicable parties
hereto at the addresses and numbers set forth under their respective names on Section 16.6 hereof
or in accordance with any subsequent unrevoked Notice from any such party that is given in
accordance with this Section 16.6. Any Notice shall be effective:




          (a) In the case of hand-delivery, when delivered;




          (b) If given by mail, four days after such Notice is deposited with the United States Postal
Service, with first-class postage prepaid, return receipt requested;




          (c) In the case of a telephonic Notice, when a party is contacted by telephone, if delivery of
such telephonic Notice is confirmed no later than the next Business Day by hand delivery, a
facsimile or electronic transmission, a Website Posting or an overnight courier delivery of a
confirmatory Notice (received at or before noon on such next Business Day);




          (d) In the case of a facsimile transmission, when sent to the applicable party’s facsimile
machine’s telephone number, if the party sending such Notice receives confirmation of the delivery
thereof from its own facsimile machine;




          (e) In the case of electronic transmission, when actually received;




          (f) In the case of a Website Posting, upon delivery of a Notice of such posting (including the
information necessary to access such site) by another means set forth in this Section 16.6; and




          (g) If given by any other means (including by overnight courier), when actually received.




     Any Lender giving a Notice to Borrowing Agent or any Loan Party shall concurrently send a copy
thereof to the Agent, and the Agent shall promptly notify the other Lenders of its receipt of such
Notice.



          (A) If to Agent or PNC at:



PNC Bank, National Association

70 East 55th Street

New York, NY 10022

Attention: John Trieu

Telephone: 212-752-6091

Facsimile: 212-303-0060



with a copy to:



Hahn & Hessen LLP




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488 Madison Avenue

New York, New York 10022

Attention:     Steven J. Seif, Esq.

Telephone:     212-478-7200

Facsimile:     212-478-7400




          (B) If to a Lender other than Agent, as specified on the signature
pages hereof.




          (C) If to Borrowing Agent or any Loan Party:



DRI Corporation, Inc.

13760 Noel Road, Suite 830

Dallas, Texas 75240

Attention:     Stephen P. Slay

Telephone:     214-346-0269

Facsimile:     214-378-8437



with a copy to:



Gray, Layton, Kersh, Solomon, Furr & Smith, P.A.

516 S. New Hope Road

Post Office Box 2636

Gastonia, NC 28053-2636

Attention:     David M. Furr, Esq.

Telephone:     704-865-4400

Facsimile:     704-866-8010




     16.7. Survival. The obligations of Borrowers and the other Loan Parties, as
applicable, under Sections 2.2(f), 3.7, 3.8, 3.9, 4.19(h), and 16.5 and the obligations of Lenders
under Section 14.7, shall survive termination of this Agreement and the Other Documents and payment
in full of the Obligations.



     16.8. Severability. If any part of this Agreement is contrary to, prohibited by, or
deemed invalid under Applicable Laws, such provision shall be inapplicable and deemed omitted to
the extent so contrary, prohibited or invalid, but the remainder hereof shall not be invalidated
thereby and shall be given effect so far as possible.



     16.9. Expenses. All costs and expenses including reasonable attorneys’ fees
(including the allocated costs of in house counsel) and disbursements incurred by Agent on its
behalf or on behalf of Lenders (a) in all efforts made to enforce payment of any Obligation or
effect collection of any Collateral, or (b) in connection with the entering into, modification,
amendment, administration and enforcement of this Agreement, the Intercreditor Agreement or any
consents or waivers hereunder or thereunder and all related agreements, documents and instruments,
or (c) in instituting, maintaining, preserving, enforcing and foreclosing on Agent’s security
interest in or Lien on any of the Collateral, or maintaining, preserving or enforcing any of
Agent’s or any Lender’s rights hereunder or under the Subordination Agreement and under all related
agreements, documents and instruments, whether through judicial proceedings or



91









 







otherwise, or (d) in defending or prosecuting any actions or proceedings arising out of or
relating to Agent’s or any Lender’s transactions with any Loan Party or Subordinated Lender or (e)
in connection with any advice given to Agent or any Lender with respect to its rights and
obligations under this Agreement, the Intercreditor Agreement and all related agreements, documents
and instruments, may be charged to Borrowers’ Account and shall be part of the Obligations.



     16.10. Injunctive Relief. Each Loan Party recognizes that, in the event any Loan
Party fails to perform, observe or discharge any of its obligations or liabilities under this
Agreement, or threatens to fail to perform, observe or discharge such obligations or liabilities,
any remedy at law may prove to be inadequate relief to Lenders; therefore, Agent, if Agent so
requests, shall be entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving that actual damages are not an adequate remedy.



     16.11. Consequential Damages. Neither Agent nor any Lender, nor any agent or attorney
for any of them, shall be liable to any Loan Party (or any Affiliate of any such Person) for
indirect, punitive, exemplary or consequential damages arising from any breach of contract, tort or
other wrong relating to the establishment, administration or collection of the Obligations or as a
result of any transaction contemplated under this Agreement or any Other Document.



     16.12. Captions. The captions at various places in this Agreement are intended for
convenience only and do not constitute and shall not be interpreted as part of this Agreement.



     16.13. Counterparts; Facsimile Signatures. This Agreement may be executed in any
number of and by different parties hereto on separate counterparts, all of which, when so executed,
shall be deemed an original, but all such counterparts shall constitute one and the same agreement.
Any signature delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.



     16.14. Construction. The parties acknowledge that each party and its counsel have
reviewed this Agreement and that the normal rule of construction to the effect that any ambiguities
are to be resolved against the drafting party shall not be employed in the interpretation of this
Agreement or any amendments, schedules or exhibits thereto.



     16.15. Confidentiality; Sharing Information. Agent, each Lender and each Transferee
shall hold all non-public information obtained by Agent, such Lender or such Transferee pursuant to
the requirements of this Agreement in accordance with Agent’s, such Lender’s and such Transferee’s
customary procedures for handling confidential information of this nature; provided, however,
Agent, each Lender and each Transferee may disclose such confidential information (a) to its
examiners, Affiliates, outside auditors, counsel and other professional advisors, (b) to Agent, any
Lender or to any prospective Transferees, and (c) as required or requested by any Governmental Body
or representative thereof or pursuant to legal process; provided, further that (i) unless
specifically prohibited by Applicable Law, Agent, each Lender and each Transferee shall use its
reasonable best efforts prior to disclosure thereof, to notify the applicable Loan Party of the
applicable request for disclosure of such non-public information (A) by a Governmental Body or
representative thereof (other than any such request in connection with an examination of the
financial condition of a Lender or a Transferee by such Governmental



92









 







Body) or (B) pursuant to legal process and (ii) in no event shall Agent, any Lender or any
Transferee be obligated to return any materials furnished by any Loan Party other than those
documents and instruments in possession of Agent or any Lender in order to perfect its Lien on the
Collateral once the Obligations have been paid in full and this Agreement has been terminated.
Each Loan Party acknowledges that from time to time financial advisory, investment banking and
other services may be offered or provided to such Loan Party or one or more of its Affiliates (in
connection with this Agreement or otherwise) by any Lender or by one or more Subsidiaries or
Affiliates of such Lender and each Loan Party hereby authorizes each Lender to share any
information delivered to such Lender by such Loan Party and its Subsidiaries pursuant to this
Agreement, or in connection with the decision of such Lender to enter into this Agreement, to any
such Subsidiary or Affiliate of such Lender, it being understood that any such Subsidiary or
Affiliate of any Lender receiving such information shall be bound by the provisions of this Section
16.15 as if it were a Lender hereunder. Such authorization shall survive the repayment of the
other Obligations and the termination of this Agreement.



     16.16. Publicity. Each Loan Party and each Lender hereby authorizes Agent to make
appropriate announcements of the financial arrangement entered into among Loan Parties, Agent and
Lenders, including announcements which are commonly known as tombstones, in such publications and
to such selected parties as Agent shall in its sole and absolute discretion deem appropriate.



     16.17. Certifications From Banks and Participants; US PATRIOT Act. Each Lender or
assignee or participant of a Lender that is not incorporated under the Laws of the United States of
America or a state thereof (and is not excepted from the certification requirement contained in
Section 313 of the USA PATRIOT Act and the applicable regulations because it is both (i) an
affiliate of a depository institution or foreign bank that maintains a physical presence in the
United States or foreign country, and (ii) subject to supervision by a banking authority regulating
such affiliated depository institution or foreign bank) shall deliver to the Agent the
certification, or, if applicable, recertification, certifying that such Lender is not a “shell” and
certifying to other matters as required by Section 313 of the USA PATRIOT Act and the applicable
regulations: (1) within 10 days after the Closing Date, and (2) as such other times as are required
under the USA PATRIOT Act.



XVII. GUARANTY.




     17.1. Guaranty. Each Guarantor hereby unconditionally guarantees, as a primary
obligor and not merely as a surety, jointly and severally with each other Guarantor when and as
due, whether at maturity, by acceleration, by notice of prepayment or otherwise, the due and
punctual performance of all Obligations of the Borrowers. Each payment made by any Guarantor
pursuant to this Guarantee shall be made in lawful money of the United States in immediately
available funds, (a) without set-off or counterclaim and (b) free and clear of and without
deduction or withholding for or on account of any present and future taxes, levies, imposts, stamp
taxes, duties, charges to tax, fees, deductions, withholdings and any conditions or restrictions
resulting in charges to tax and all penalties, interest and other payments on or in respect thereof
(except for charges based on the overall net income of Agent or a Lender) (“Tax” or “Taxes”).



93









 





     17.2. Waivers. Each Guarantor hereby absolutely, unconditionally and irrevocably
waives (i) promptness, diligence, notice of acceptance, notice of presentment of payment and any
other notice hereunder, (ii) demand of payment, protest, notice of dishonor or nonpayment, notice
of the present and future amount of the Obligations and any other notice with respect to the
Obligations, (iii) any requirement that the Agent or any Lender protect, secure, perfect or insure
any security interest or Lien or any property subject thereto or exhaust any right or take any
action against any other Loan Party, or any Person or any Collateral, (iv) any other action, event
or precondition to the enforcement hereof or the performance by each such Guarantor of the
Obligations, (v) all suretyship defenses and (vi) any defense arising by any lack of capacity or
authority or any other defense of any Loan Party or any notice, demand or defense by reason of
cessation from any cause of Obligations other than payment and performance in full of the
Obligations by the Loan Parties and any defense that any other guarantee or security was or was to
be obtained by Agent.



     17.3. No Defense. No invalidity, irregularity, voidableness, voidness or
unenforceability of this Agreement or any Other Document or any other agreement or instrument
relating thereto, or of all or any part of the Obligations or of any collateral security therefor
shall affect, impair or be a defense hereunder.



     17.4. Guaranty of Payment. The Guaranty hereunder is one of payment and performance,
not collection, and the obligations of each Guarantor hereunder are independent of the Obligations
of the other Loan Parties, and a separate action or actions may be brought and prosecuted against
any Guarantor to enforce the terms and conditions of this Article XVII, irrespective of whether any
action is brought against any other Loan Party or other Persons or whether any other Loan Party or
other Persons are joined in any such action or actions. Each Guarantor waives any right to require
that any resort be had by Agent or any Lender to any security held for payment of the Obligations
or to any balance of any deposit account or credit on the books of any Agent or any Lender in favor
of any Loan Party or any other Person. No election to proceed in one form of action or
proceedings, or against any Person, or on any Obligations, shall constitute a waiver of Agent’s
right to proceed in any other form of action or proceeding or against any other Person unless Agent
has expressed any such right in writing. Without limiting the generality of the foregoing, no
action or proceeding by Agent against any Loan Party under any document evidencing or securing
indebtedness of any Loan Party to Agent shall diminish the liability of any Guarantor hereunder,
except to the extent Agent receives actual payment on account of Obligations by such action or
proceeding, notwithstanding the effect of any such election, action or proceeding upon the right of
subrogation of any Guarantor in respect of any Loan Party.



     17.5. Indemnity. As an original and independent obligation under this Agreement, each
Guarantor shall (a) indemnify the Agent and each of the Lenders and keep the Agent and each of the
Lenders indemnified against all costs, losses, expenses and liabilities of whatever kind resulting
from the failure by any party to make due and punctual payment of any of the Obligations or
resulting from any of the Obligations being or becoming void, voidable, unenforceable or
ineffective against any Borrower (including, but without limitation, all legal and other costs,
charges and expenses incurred by Agent and each of the Lenders, or any of them in connection with
preserving or enforcing, or attempting to preserve or enforce, its rights under this Agreement);
and (b) pay on demand the amount of such costs, losses, expenses and



94









 







liabilities whether or not Agent or any of the Lenders have attempted to enforce any rights
against any Borrower or any other Person or otherwise, except to the extent that any of the
foregoing arises out of the gross negligence or willful misconduct of the party being indemnified
as mutually agreed in writing by the party being indemnified and Guarantor, or as determined by a
final non-appealable judgment of a court of competent jurisdiction.



     17.6. Liabilities Absolute. The liability of each Guarantor hereunder shall be
absolute, unlimited and unconditional and shall not be subject to any reduction, limitation,
impairment, discharge or termination for any reason, including, without limitation, any claim of
waiver, release, surrender, alteration or compromise, and shall not be subject to any claim,
defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity,
illegality or unenforceability of any other Obligation or otherwise. Without limiting the
generality of the foregoing, the obligations of each Guarantor shall not be discharged or impaired,
released, limited or otherwise affected by:



          (a) any change in the manner, place or terms of payment or performance, and/or any change or
extension of the time of payment or performance of, release, renewal or alteration of, or any new
agreements relating to any Obligation, any security therefor, or any liability incurred directly or
indirectly in respect thereof, or any rescission of, or amendment, waiver or other modification of,
or any consent to departure from, this Agreement or any Other Document, including any increase in
the Obligations resulting from the extension of additional credit to any Borrower or otherwise;




          (b) any sale, exchange, release, surrender, loss, abandonment, realization upon any property
by whomsoever at any time pledged or mortgaged to secure, or howsoever securing, all or any of the
Obligations, and/or any offset there against, or failure to perfect, or continue the perfection of,
any Lien in any such property, or delay in the perfection of any such Lien, or any amendment or
waiver of or consent to departure from any other guaranty for all or any of the Obligations;




          (c) the failure of the Agent or any Lender to assert any claim or demand or to enforce any
right or remedy against any Borrower or any other Loan Party or any other Person under the
provisions of this Agreement or any Other Document or any other document or instrument executed and
delivered in connection herewith or therewith;




          (d) any settlement or compromise of any Obligation, any security therefor or any liability
(including any of those hereunder) incurred directly or indirectly in respect thereof or hereof,
and any subordination of the payment of all or any part thereof to the payment of any obligation
(whether due or not) of any Loan Party to creditors of any Loan Party other than any other Loan
Party;




          (e) any manner of application of Collateral, or proceeds thereof, to all or any of the
Obligations, or any manner of sale or other disposition of any Collateral for all or any of the
Obligations or any other assets of any Loan Party; and




          (f) any other agreements or circumstance of any nature whatsoever that may or might in any
manner or to any extent vary the risk of any Guarantor, or that might otherwise at



95









 






law or in equity constitute a defense available to, or a discharge of, the Guaranty hereunder
and/or the obligations of any Guarantor, or a defense to, or discharge of, any Loan Party or any
other Person or party hereto or the Obligations or otherwise with respect to the Advances, Letters
of Credit or other financial accommodations to any Borrower pursuant to this Agreement and/or the
Other Documents.




     17.7. Waiver of Notice. The Agent shall have the right to do any of the above without
notice to or the consent of any Guarantor and each Guarantor expressly waives any right to notice
of, consent to, knowledge of and participation in any agreements relating to any of the above or
any other present or future event relating to Obligations whether under this Agreement or otherwise
or any right to challenge or question any of the above and waives any defenses of such Guarantor
which might arise as a result of such actions.



     17.8. Agent’s Discretion. Agent may at any time and from time to time (whether prior
to or after the revocation or termination of this Agreement) without the consent of, or notice to,
any Guarantor, and without incurring responsibility to any Guarantor or impairing or releasing the
Obligations, apply any sums by whomsoever paid or howsoever realized to any Obligations regardless
of what Obligations remain unpaid.



     17.9. Reinstatement.



          (a) The Guaranty provisions herein contained shall continue to be effective or be reinstated,
as the case may be, if claim is ever made upon the Agent or any Lender for repayment or recovery of
any amount or amounts received by such Person in payment or on account of any of the Obligations
and such Person repays all or part of said amount for any reason whatsoever, including, without
limitation, by reason of any judgment, decree or order of any court or administrative body having
jurisdiction over such Person or the respective property of each, or any settlement or compromise
of any claim effected by such Person with any such claimant (including any Loan Party); and in such
event each Guarantor hereby agrees that any such judgment, decree, order, settlement or compromise
or other circumstances shall be binding upon such Guarantor, notwithstanding any revocation hereof
or the cancellation of any note or other instrument evidencing any Obligation, and each Guarantor
shall be and remain liable to the Agent and/or Lenders for the amount so repaid or recovered to the
same extent as if such amount had never originally been received by such Person(s).




          (b) Agent shall not be required to marshal any assets in favor of any Guarantor, or against or
in payment of Obligations.




          (c) No Guarantor shall be entitled to claim against any present or future security held by
Agent from any Person for Obligations in priority to or equally with any claim of Agent, or assert
any claim for any liability of any Loan Party to any Guarantor in priority to or equally with
claims of Agent for Obligations, and no Guarantor shall be entitled to compete with Agent with
respect to, or to advance any equal or prior claim to any security held by Agent for Obligations.




          (d) If any Loan Party makes any payment to Agent, which payment is wholly or partly
subsequently invalidated, declared to be fraudulent or preferential, set aside or required



96









 






to be repaid to any Person under any federal or provincial statute or at common law or under
equitable principles, then to the extent of such payment, the Obligation intended to be paid shall
be revived and continued in full force and effect as if the payment had not been made, and the
resulting revived Obligation shall continue to be guaranteed, uninterrupted, by each Guarantor
hereunder.




          (e) All present and future monies payable by any Loan Party to any Guarantor, whether arising
out of a right of subrogation or otherwise, are assigned to Agent for its benefit and for the
ratable benefit of Lenders as security for such Guarantor’s liability to Agent and Lenders
hereunder and are postponed and subordinated to Agent’s prior right to payment in full of
Obligations. All monies received by any Guarantor from any Loan Party shall be held by such
Guarantor as agent and trustee for Agent. This assignment, postponement and subordination shall
only terminate when the Obligations are paid in full in cash and this Agreement is irrevocably
terminated.




          (f) Each Loan Party acknowledges this assignment, postponement and subordination and, except
as otherwise set forth herein, agrees to make no payments to any Guarantor without the prior
written consent of Agent. Each Loan Party agrees to give full effect to the provisions hereof.




     17.10. Action Upon Event of Default. Upon the occurrence and during the continuance
of any Event of Default, the Agent may, and upon written request of the Required Lenders shall,
without notice to or demand upon any Loan Party or any other Person, declare any obligations of
such Guarantor hereunder immediately due and payable, and shall be entitled to enforce the
obligations of each Guarantor. Upon such declaration by the Agent, the Agent and Lenders are
hereby authorized at any time and from time to time to set off and apply any and all deposits
(general or special, time or demand, provisions or final) at any time held and other indebtedness
at any time owing by the Agent or Lenders to or for the credit or the account of any Guarantor
against any and all of the obligations of each Guarantor now or hereafter existing hereunder,
whether or not the Agent or Lenders shall have made any demand hereunder against any other Loan
Party and although such obligations may be contingent and unmatured. The rights of the Agent and
Lenders hereunder are in addition to other rights and remedies (including other rights of set-off)
which the Agent and Lenders may have. Upon such declaration by the Agent, with respect to any
claims (other than those claims referred to in the immediately preceding paragraph) of any
Guarantor against any Loan Party (the “Claims”), the Agent shall have the full right on the part of
the Agent in its own name or in the name of such Guarantor to collect and enforce such Claims by
legal action, proof of debt in bankruptcy or other liquidation proceedings, vote in any proceeding
for the arrangement of debts at any time proposed, or otherwise, the Agent and each of its officers
being hereby irrevocably constituted attorneys-in-fact for each Guarantor for the purpose of such
enforcement and for the purpose of endorsing in the name of each Guarantor any instrument for the
payment of money. Each Guarantor will receive as trustee for the Agent and will pay to the Agent
forthwith upon receipt thereof any amounts which such Guarantor may receive from any Loan Party on
account of the Claims. Each Guarantor agrees that at no time hereafter will any of the Claims be
represented by any notes, other negotiable instruments or writings, except and in such event they
shall either be made payable to the Agent, or if payable to any Guarantor, shall forthwith be
endorsed by such Guarantor to the Agent. Each Guarantor agrees that no payment on account of the
Claims or any



97









 







security interest therein shall be created, received, accepted or retained during the
continuance of any Event of Default nor shall any financing statement be filed with respect thereto
by any Guarantor.



     17.11. Statute of Limitations. Any acknowledgment or new promise, whether by payment
of principal or interest or otherwise and whether by any Loan Party or others (including any
Lenders) with respect to any of the Obligations shall, if the statute of limitations in favor of
any Guarantor against the Agent or Lenders shall have commenced to run, toll the running of such
statute of limitations and, if the period of such statute of limitations shall have expired,
prevent the operation of such statute of limitations.



     17.12. Interest. All amounts due, owing and unpaid from time to time by any Guarantor
hereunder shall bear interest at the interest rate per annum then chargeable with respect to
Domestic Rate Loans constituting Revolving Advances.



     17.13. Guarantor’s Investigation. Each Guarantor acknowledges receipt of a copy of
each of this Agreement and the Other Documents. Each Guarantor has made an independent
investigation of the Loan Parties and of the financial condition of the Loan Parties. Neither
Agent nor any Lender has made and neither Agent nor any Lender does make any representations or
warranties as to the income, expense, operation, finances or any other matter or thing affecting
any Loan Party nor has Agent or any Lender made any representations or warranties as to the amount
or nature of the Obligations of any Loan Party to which this Article XVII applies as specifically
herein set forth, nor has Agent or any Lender or any officer, agent or employee of Agent or any
Lender or any representative thereof, made any other oral representations, agreements or
commitments of any kind or nature, and each Guarantor hereby expressly acknowledges that no such
representations or warranties have been made and such Guarantor expressly disclaims reliance on any
such representations or warranties.



     17.14. Termination. The provisions of this Article XVII shall remain in effect until
the indefeasible payment in full in cash of all Obligations and irrevocable termination of this
Agreement.



98









 





     Each of the parties has signed this Agreement as of the day and year first above written.



	 	 	 	 	 	 	 	 	 
	ATTEST:	 	 	 	DIGITAL RECORDERS, INC.,	 	 
	 	 	 	 	as a Borrower	 	 
	 
	 	 	 	 	 	 	 	 
	/S/ STEPHEN P. SLAY

	 	 	 	By:
	 	/S/ DAVID L. TURNEY	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	David L. Turney	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:
	 	CEO/President	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	ATTEST:	 	 	 	TWINVISION OF NORTH AMERICA,	 	 
	 	 	 	 	INC., as a Borrower	 	 
	 
	 	 	 	 	 	 	 	 
	/S/ STEPHEN P. SLAY

	 	 	 	By:
	 	/S/ DAVID L. TURNEY	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	David L. Turney	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:
	 	CEO/President	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	ATTEST:	 	 	 	DRI CORPORATION, as a Guarantor and Borrowing Agent	 	 
	 
	 	 	 	 	 	 	 	 
	/S/ STEPHEN P. SLAY

	 	 	 	By:
	 	/S/ DAVID L. TURNEY	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	David L. Turney	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:
	 	CEO/President	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	PNC BANK, NATIONAL ASSOCIATION,

as Lender and as Agent	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/S/ JEFFREY J. BENDER	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Jeffrey J. Bender	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:
	 	V.P.	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	Commitment Percentage: 100%	 	 







 












 





SCHEDULE 1.2

PERMITTED ENCUMBRANCES




Lease of HAAS Vertical Machining Center, Model VF-6/40 including 10,000 rpm Spindle, 20-hp from CNC
Associates. UCC-1 recorded 8/6/04 with NC Secretary of State, File No. 20040078488B.



GMC Lease for 2008 Chevrolet Tahoe, VIN 1GNFC13018R146599 dated March 7, 2008 – June 6, 2011.



2003 Chrysler Town and Country Van, VIN 2C4GP44363R117386 (as of May 31, 2008, $1,950.80 owed on
Note to Chase Auto Finance)



	 	 	 	 	 
	 	 	Digital Recorders,	 	 
	 	 	Inc.	 	 
	 
	Jurisdiction:
	 	 	 	 
	NORTH CAROLINA

	 	 
	 	May 23, 2008 Search Report
	 
	Filing

	 	Creditor
	 	Security
	UCC-1 Presently on
Record 
08/06/04
20040078488B

	 	CNC Associates
	 	Lease (1) HAAS Vertical

Machining Center, Model

VF-6/40 including: (1)

10,000 rpm Spindle, 20-hp






 









 






SCHEDULE 4.5

EQUIPMENT AND INVENTORY LOCATIONS




Chief Executive Office:




	 	 	 	 	 
	13760 Noel Road, Suite 830

	 	Landlord:
	 	St. Noel, LP
	Dallas, TX 75240 (Dallas County)

	 	 	 	P.O. Box 650759
	 

	 	 	 	Dallas TX 75265-0759
	(Some office equipment and business records)
	 	 	 	 






Manufacturing Facility:




	 	 	 	 	 
	4018 Patriot Drive

	 	Landlord:
	 	Property Reserve, Inc.
	One Park Center, Suite 100

	 	 	 	6340 Quadrangle Dr.
	Durham, NC 27703 (Durham County)

	 	 	 	Suite 150
	 

	 	 	 	Raleigh, NC 27619
	 
	 	 	 	 
	(Inventory, equipment and office equipment)
	 	 	 	 






Mr. Juan Castelan (service technician)

11748 Rincon Drive

Whittier, CA 90606 (de minimus inventory held by service technician at his home)




 









 





SCHEDULE 4.5(c)

CHIEF EXECUTIVE OFFICE




13760 Noel Road, Suite 830

Dallas, TX 75240 (Dallas County)



 









 





SCHEDULE 4.15 (h)

DEPOSIT AND INVESTMENT ACCOUNTS




			
	 	 	 
	DRI Corporation
	 	06/11/2008






	 	 	 	 	 	 	 
	BANK NAME	 	ACCOUNT NAME	 	ACCOUNT NO.	 	TYPE
	LaSalle Bank N.A.

135 South LaSalle Street;

Chicago IL 60603

	 	Digital Recorders AP Account
	 	***
	 	Deposit /Adminstration
of
Analysis Fees for
Blocked Accts
	 
	LaSalle Bank N.A.

135 South LaSalle Street;

Chicago IL 60603

	 	TwinVision Blocked Account
	 	***
	 	Lockbox / Deposit
	 
	LaSalle Bank N.A.

135 South LaSalle Street;

Chicago IL 60603

	 	Digital Recorders Blocked

Account
	 	***
	 	Lockbox / Deposit
	 
	LaSalle Bank N.A.

135 South LaSalle Street;

Chicago IL 60603

	 	Digital Audio Corporation

AP Acct
	 	***
	 	Not Active
	 
	RBC Bank 

PO Box 1220

Rocky Mount NC 27802

	 	Digital Recorders, Inc.
	 	***
	 	Deposit Acct
	 
	Wachovia

1525 West WT Harris Blvd

Charlotte NC 28262-8522

	 	Digital Recorders, Inc.
	 	***
	 	Operating Account
	 
	Wachovia 

1525 West WT Harris Blvd

Charlotte NC 28262-8522

	 	Digital Recorders, Inc.
Payroll Acct
	 	***
	 	Not Active








 




			
	***	 	Confidential material redacted and filed separately with the Commission.




 









 










SCHEDULE 4.19

REAL PROPERTY




	 	 	 	 	 
	13760 Noel Road, Suite 830

	 	Landlord:
	 	St. Noel, LP
	Dallas, TX 75240 (Dallas County)

	 	 	 	P.O. Box 650759
	 

	 	 	 	Dallas TX 75265-0759
	 
	 	 	 	 
	4018 Patriot Drive

	 	Landlord:
	 	Property Reserve, Inc.
	One Park Center, Suite 100

	 	 	 	6340 Quadrangle Dr.
	Durham, NC 27703 (Durham County)

	 	 	 	Suite 150
	 

	 	 	 	Raleigh, NC 27619






 









 






SCHEDULE 5.1

CONSENTS




NONE



 









 





SCHEDULE 5.2(a)

STATES OF QUALIFICATION AND GOOD STANDING




DRI Corporation – a North Carolina corporation

Digital Recorders, Inc. — a North Carolina corporation

TwinVision of North America, Inc. – a North Carolina corporation

Robinson Turney International, Inc. – a Texas corporation (shell)




 









 





SCHEDULE 5.2(b)

SUBSIDIARIES




DRI Corporation – a North Carolina corporation (Parent)

Digital Recorders, Inc. — a North Carolina corporation (Subsidiary of Parent)

TwinVision of North America, Inc. – a North Carolina corporation (Subsidiary of Parent)

Robinson Turney International, Inc. – a Texas corporation (Subsidiary of Parent — shell)

DRI Europa AB, foreign subsidiary of DRI Corporation

DRI Europa AB has the following wholly-owned subsidiaries:

      Mobitec AB

           Mobitec Australia Pty Ltd. is the wholly-owned subsidiary of Mobitec AB

      Mobitec GmbH




Mobitec Brazil Ltda (50% ownership) by Mobitec AB

Cast Master Mobitec India Private Limited (51% ownership by Mobitec AB and Mobitec GmbH)



 









 





SCHEDULE 5.4

FEDERAL TAX IDENTIFICATION NUMBER




DRI Corporation – 56-1362926

TwinVision of North America, Inc. – 56-1980572

Robinson Turney International, Inc. – 75-2555167

Digital Recorders, Inc. – 80-0199815




 









 





SCHEDULE 5.6

PRIOR NAMES




On June 13, 2007, the shareholders of Digital Recorders, Inc. voted to amend the articles of
incorporation to change the name to DRI Corporation. Thereafter, on August 1, 2007, the
corporation formed Digital Recorders, Inc., as a subsidiary of the parent corporation (DRI
Corporation) from which the systems business operates.



On April 30, 2007, Digital Recorders, Inc. sold a wholly-owned subsidiary, Digital Audio
Corporation (“DAC”), for cash and a promissory note.



 









 





SCHEDULE 5.8(b)

LITIGATION




None; however, there is a disclosure in our Form 10-K under Risks Related to Human Resources and
Employment Relations (page 18). On April 1, 2006, DRI Corporation entered into a contractual
relationship with The Castleton Group (“Castleton”), a professional employment organization
(“PEO”), whereby Castleton provided payroll processing and personnel administrative services and
became the employer of record for all of DRI’s U.S.– based workforce, as well as that of 89 other
companies employing approximately 6,000 people. DRI received notice on January 2, 2008 that DRI’s
contractual relationship with Castleton was terminated effective November 30, 2007, which coincided
with the pay period end date of the final payroll processed by Castleton. Castleton had been deemed
insolvent by the North Carolina Department of Insurance and on December 22, 2007, Castleton filed
for Chapter 7 Bankruptcy protection in the Eastern District of North Carolina. Allegations exist
that Castleton failed to properly discharge its responsibilities to various government agencies,
pension companies and insurers (DRI only used Castleton for payroll, not any benefits). To
date, DRI is unable to obtain or estimate what obligations, if any, Castleton failed to perform as
the information is unavailable from the Bankruptcy Trustee or other source. DRI made all payments
required under its contract with Castleton to Castleton. No contact from any governmental agency
has been made regarding any potential or asserted liability of DRI Corporation. DRI filed a
protective claim for an undetermined amount in the Chapter 7 bankruptcy. DRI has also discussed
with its D & O insurer potential coverage under that policy for any losses that may arise in the
future; however, no formal claim has been made as DRI has been advised such would be premature
under the facts as they exist.



 









 





SCHEDULE 5.8(d)

PLANS




401K Plan




DRI Corporation also has a 2003 Stock Option Plan



 









 





SCHEDULE 5.9

INTELLECTUAL PROPERTY – SOURCE CODE ESCROW AGREEMENTS




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	Registration	 	 	 	 	 	 	 	Renewal
	 	 	 	 	Business	 	Owner	 	Docket	 	or Grant	 	 	 	 	 	 	 	or Expire
	Title	 	Country	 	Unit	 	Applicant	 	No.	 	Number	 	Grant Date	 	Type	 	Status	 	Date
	Digital Recorders & Design

	 	USA
	 	DR
	 	DR
	 	 	27747	 	 	 	2,683,020	 	 	02/04/2003
	 	Trademark
	 	Registered
	 	2/4/2009
	DR500C+

	 	USA
	 	DR
	 	DR
	 	 	27751	 	 	 	2,902,980	 	 	11/16/2004
	 	Trademark
	 	Registered
	 	11/16/2010
	DR600

	 	USA
	 	DR
	 	DR
	 	 	27752	 	 	 	3,018,300	 	 	11/22/2005
	 	Trademark
	 	Registered
	 	11/22/2011
	Talking Bus

	 	USA
	 	DR
	 	DR
	 	 	27737	 	 	 	1,796,858	 	 	10/05/1993
	 	Trademark
	 	Registered
	 	10/5/2013
	Urban Transit Vehicle Microphone Housing

	 	USA
	 	DR
	 	DR
	 	 	27713	 	 	DES	429719	 	 	08/22/2000
	 	U.S. Design Patent
	 	Granted
	 	8/22/2014
	ELYSE

	 	USA
	 	TwinVision na, Inc.
	 	DR
	 	 	27733	 	 	 	2,166,496	 	 	06/16/1998
	 	Trademark
	 	Registered
	 	6/16/2018
	Retainer Clip for Ribbon Cable Connectors

	 	USA
	 	TwinVision na, Inc.
	 	DR
	 	 	27709	 	 	 	6,851,964	 	 	02/08/2005
	 	U.S. Patent
	 	Granted
	 	6/3/2023
	TwinVision

	 	USA
	 	TwinVision na, Inc.
	 	DR
	 	 	27732	 	 	 	2,166,426	 	 	06/16/1998
	 	Trademark
	 	Registered
	 	6/16/2018
	LED Sign Cover and Method of Manufacture

	 	USA
	 	TwinVision na, Inc.
	 	DR
	 	 	27707	 	 	 	7,287,878	 	 	10/30/2007
	 	U.S. Patent
	 	Granted
	 	7/4/2024
	Public Address System and Method for an
Urban Transit Vehicle

	 	USA
	 	DR
	 	DR
	 	 	27708	 	 	 	7,068,795	 	 	06/27/2006
	 	U.S. Patent
	 	Granted
	 	10/16/2020
	VacTell

	 	European Community
	 	DRI
	 	DR
	 	 	27765	 	 	 	4689543	 	 	10/17/2006
	 	Trademark
	 	Granted
	 	10/28/2015
	VacTell

	 	Mexico
	 	DR
	 	DR
	 	 	27768	 	 	 	916961	 	 	01/26/2006
	 	Trademark
	 	Registered
	 	11/04/2015






U.S. Copyright Registrations




	 	 	 	 	 	 	 
	Title	 	Reg. No.	 	Reg. Date	 	Owner of Record
	Digital Recorders, Inc.

	 	TXU 836-205
	 	01/23/1998
	 	Digital Recorders, Inc.
	Elyse

	 	TXU 791-201
	 	03/26/1997
	 	TwinVision na, Inc.






Pending Applications



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Owner	 	 	 	 	 	Application	 	Application	 	 	 	 
	Title	 	Country	 	Business Unit	 	Applicant	 	Docket No.	 	Number	 	Date	 	Type	 	Status
	Advanced
Technology.
Enhancing Mobility.
Enabling Security.

	 	USA
	 	DRI Public Company
	 	DR
	 	 	700800/3031	 	 	 	78/635,663	 	 	05/24/2005
	 	Trademark
	 	Pending
	LiveLook-In

	 	USA
	 	DRI
	 	Digital Recorders,
Inc.
	 	 	27759	 	 	 	78/771,572	 	 	12/12/2005
	 	Trademark
	 	Allowed
	Tomorrow’s 

Technology Coloring 

Today’s Transit

	 	USA
	 	TwinVision na, Inc.
	 	TwinVision na, Inc.
	 	 	27754	 	 	 	76/636,317	 	 	04/18/2005
	 	Trademark
	 	Allowed
	VacTell

	 	USA
	 	DRI
	 	Digital Reccorders,
Inc.
	 	 	27757	 	 	 	78/688,045	 	 	08/08/2005
	 	Trademark
	 	Allowed
	VacTell

	 	Australia
	 	DRI
	 	Digital Recorders,
Inc.
	 	 	27766	 	 	 	1083428	 	 	10/31/2005
	 	Trademark
	 	Pending
	VacTell

	 	Brazil
	 	DRI
	 	Digital Recorders,
Inc.
	 	 	27767	 	 	 	827964331	 	 	12/02/2005
	 	Trademark
	 	Allowed
	VacTell

	 	Canada
	 	DRI
	 	Digital Recorders,
Inc.
	 	 	27764	 	 	 	1277913	 	 	11/01/2005
	 	Trademark
	 	Pending
	Public Address
System and Method
for an Urban
Transit Vehicle

	 	USA
	 	DRI
	 	Digital Recorders,
Inc.
	 	 	27710	 	 	 	10/880,811	 	 	06/30/2004
	 	U.S. Patent
	 	Pending
	TransitVision

	 	USA
	 	DRI
	 	Digital Recorders,
Inc.
	 	 	28702	 	 	 	77/366,775	 	 	01/08/2008
	 	Trademark
	 	Pending
	Security System and
Method for Mass
Transit Vehicles

	 	USA
	 	?
	 	Digital Recorders,
Inc.
	 	 	27844	 	 	 	11/469,777	 	 	09/01/2006
	 	U.S. Patent
	 	Pending
	Rapid Messaging
Protocol Wireless
Network Data
Communication
System

	 	USA
	 	DRI
	 	Digital Recorders,
Inc.
	 	 	28022	 	 	 	11/610,417	 	 	12/13/2006
	 	U.S. Patent
	 	Pending
	Advanced
Technology.
Enhancing Mobility
& Security.

	 	USA
	 	DRI
	 	DRI
	 	 	27755	 	 	 	78/635,663	 	 	05/24/2005
	 	Trademark
	 	Allowed






 









 






SCHEDULE 5.10

LICENSES AND PERMITS




None



 









 





SCHEDULE 5.14

LABOR DISPUTES




None



 









 





SCHEDULE 5.27

LOANS TO SHAREHOLDERS, DIRECTORS, OFFICERS OR AFFILIATES




None



 









 





SCHEDULE 7.3

GUARANTEES




DRI Corporation will be guarantor for BHC Interim Funding III, L.P. loan



 









 





SCHEDULE 7.8

EXISTING INDEBTEDNESS




Lease of HAAS Vertical Machining Center, Model VF-6/40 including 10,000 rpm Spindle, 20-hp from CNC
Associates. UCC-1 recorded 8/6/04 with NC Secretary of State, File No. 20040078488B.



GMC Lease for 2008 Chevrolet Tahoe, VIN 1GNFC13018R146599 dated March 7, 2008 – June 6, 2011.



2003 Chrysler Town and Country Van, VIN 2C4GP44363R117386 (as of May 31, 2008, $1,950.80 owed on
Note to Chase Auto Finance)