10-Q

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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934

For Quarter Ended	Commission File Number
June 30, 2001	1-13906

BALLANTYNE OF OMAHA, INC.
(Exact name of Registrant as specified in its charter)

Delaware	47-0587703
(State or other jurisdiction of	(IRS Employer
Incorporation or organization)	Identification Number)

4350 McKinley Street, Omaha, Nebraska 68112
(Address of principal executive offices including zip code)

Registrant's telephone number, including area code:
(402) 453-4444

    Indicate by check mark whether Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No

    Indicate the number of shares outstanding of each of the Registrant's classes of common stock as of the latest practicable date:

Class	Outstanding as of July 31, 2001
Common Stock, $.01
par value	12,512,672 shares

BALLANTYNE OF OMAHA, INC. AND SUBSIDIARIES
Index
Part I.  FINANCIAL INFORMATION

Item 1.  Financial Statements		Page
	Consolidated Balance Sheets-June 30, 2001 and December 31, 2000	2
	Consolidated Statements of Operations- Three and Six Months Ended June 30, 2001 and 2000	3
	Consolidated Statements of Cash Flows- Six Months Ended June 30, 2001 and 2000	4
	Notes to Consolidated Financial Statements Six Months Ended June 30, 2001	5
Item 2.  Management's Discussion and Analysis of Financial Condition
	and Results of Operations	11
Item 3.  Quantitative and Qualitative Disclosures About Market Risk		18
Part II.  OTHER INFORMATION
Item 4.  Submission of Matters to a Vote of Security Holders		18
Item 6.  Exhibits and Reports on Form 8-K		20
Signatures		21

1

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

Ballantyne of Omaha, Inc. and Subsidiaries
Consolidated Balance Sheets

			June 30, 2001			December 31, 2000
			(Unaudited)
Assets
Current assets:
	Cash and cash equivalents		$	744,860		$	2,220,983
	Accounts receivable (less allowance for doubtful accounts of $1,183,340 in 2001 and $1,034,989 in 2000)			9,856,739			8,447,856
	Inventories			18,005,888			22,720,499
	Recoverable income taxes			1,649,049			1,554,853
	Deferred income taxes			2,203,472			1,875,194
	Other current assets			83,516			29,572
		Total current assets		32,543,524			36,848,957
Plant and equipment, net				11,501,475			12,324,366
Other assets, net				2,815,422			2,952,617
		Total assets	$	46,860,421		$	52,125,940
Liabilities and Stockholders' Equity
Current liabilities:
	Notes payable to bank		$	4,622,016		$	8,870,000
	Accounts payable			2,640,230			2,289,111
	Accrued expenses			4,179,640			4,052,836
		Total current liabilities		11,441,886			15,211,947
Deferred income taxes				812,838			905,007
Stockholders' equity:
	Preferred stock, par value $.01 per share; authorized 1,000,000 shares, none outstanding			—			—
	Common stock, par value $.01 per share; authorized 25,000,000 shares; issued 14,610,477 shares in 2001 and 2000			146,105			146,105
	Additional paid-in capital			31,734,787			31,734,787
	Retained earnings			18,040,259			19,443,548
				49,921,151			51,324,440
Less 2,097,805 common shares in treasury, at cost				(15,315,454	)		(15,315,454	)
		Total stockholders' equity		34,605,697			36,008,986
		Total liabilities and stockholders' equity	$	46,860,421		$	52,125,940

See accompanying notes to consolidated financial statements.

2

Ballantyne of Omaha, Inc. and Subsidiaries
Consolidated Statements of Operations
Three and Six Months Ended June 30, 2001 and 2000
(Unaudited)

			Three Months Ended June 30						Six Months Ended June 30
			2001			2000			2001			2000
Net revenues			$	10,378,487		$	15,298,514		$	21,965,334		$	27,148,100
Cost of revenues				9,273,598			13,042,688			19,305,538			22,414,394
		Gross profit		1,104,889			2,255,826			2,659,796			4,733,706
Operating expenses:
	Selling			973,299			1,172,702			1,866,752			2,548,176
	General and administrative			1,424,446			1,884,007			2,662,241			3,981,678
		Total operating expenses		2,397,745			3,056,709			4,528,993			6,529,854
		Loss from operations		(1,292,856	)		(800,883	)		(1,869,197	)		(1,796,148	)
Interest income				4,434			2,481			17,318			8,782
Interest expense				(141,188	)		(303,580	)		(262,307	)		(548,054	)
		Net interest expense		(136,754	)		(301,099	)		(244,989	)		(539,272	)
		Loss before income taxes		(1,429,610	)		(1,101,982	)		(2,114,186	)		(2,335,420	)
Income tax benefit				490,394			432,019			710,897			856,518
		Net loss	$	(939,216	)	$	(669,963	)	$	(1,403,289	)	$	(1,478,902	)
Net loss per share:
		Basic	$	(0.08	)	$	(0.05	)	$	(0.11	)	$	(0.12	)
		Diluted	$	(0.08	)	$	(0.05	)	$	(0.11	)	$	(0.12	)
Weighted average shares:
		Basic		12,512,672			12,461,187			12,512,672			12,460,255
		Diluted		12,512,672			12,461,187			12,512,672			12,460,255

    See accompanying notes to consolidated financial statements.

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Ballantyne of Omaha, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Six Months Ended June 30, 2001 and 2000
(Unaudited)

			2001			2000
Cash flows from operating activities:
	Net loss		$	(1,403,289	)	$	(1,478,902	)
	Adjustments to reconcile net loss to net cash provided by operating activities
		Depreciation and amortization		1,505,690			1,516,574
		Provision for doubtful accounts		127,942			293,998
		Gain on sale of fixed assets		(96,012	)		(28,958	)
		Reserve for term loan		—			511,744
	Changes in assets and liabilities:
		Accounts receivable		(1,536,825	)		1,277,303
		Inventories		4,714,611			1,388,722
		Other current assets		(53,944	)		39
		Accounts payable		351,119			(2,834,737	)
		Accrued expenses		126,804			(307,595	)
		Income taxes		(514,643	)		(972,663	)
		Other assets		(26,719	)		(75,811	)
		Net cash provided by (used in) operating activities		3,194,734			(710,286	)
Cash flows from investing activities:
	Proceeds from sales of fixed assets			184,342			55,525
	Capital expenditures			(607,215	)		(952,519	)
		Net cash used in investing activities		(422,873	)		(896,994	)
Cash flows from financing activities:
	Repayments of long-term debt			—			(68,877	)
	Net proceeds (payments) on note payable to bank			(4,247,984	)		1,673,000
	Proceeds from exercise of stock options			—			52,172
		Net cash provided by (used in) financing activities		(4,247,984	)		1,656,295
		Net increase (decrease) in cash and cash equivalents		(1,476,123	)		49,015
Cash and cash equivalents at beginning of period				2,220,983			857,089
Cash and cash equivalents at end of period			$	744,860		$	906,104

    See accompanying notes to consolidated financial statements.

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Ballantyne of Omaha, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Six Months Ended June 30, 2001
(Unaudited)

1.

Company

    Ballantyne of Omaha, Inc., a Delaware corporation ("Ballantyne" or the "Company"), and its wholly-owned subsidiaries Strong Westrex, Inc., Design & Manufacturing, Inc., Xenotech Rental Corp. and Xenotech Strong, Inc., design, develop, manufacture and distribute commercial motion picture equipment, lighting systems, audiovisual equipment and restaurant equipment. The Company's products are distributed worldwide through a domestic and international dealer network and are sold to major movie exhibition companies, sports arenas, auditoriums, amusement parks, special venues, restaurants, supermarkets and convenience food stores. During May 2001, BalCo Holdings L.L.C., ("BalCo Holdings") an affiliate of the McCarthy Group, Inc., an Omaha-based merchant banking firm, purchased 3,238,845 shares, or a 26% stake in Ballantyne from GMAC Financial Services, which obtained the block of shares from Ballantyne's former parent company, Canrad of Delaware, Inc. ("Canrad"), a subsidiary of ARC International Corporation.

2.

Summary of Significant Accounting Policies

    The principal accounting policies upon which the accompanying consolidated financial statements are based are summarized as follows:

a.

Basis of Presentation

    The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and include all normal and recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the periods presented. While the Company believes that the disclosures presented are adequate to make the information not misleading, it is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and related notes included in the Company's latest annual report on Form 10-K. The results of operations for the three and six month periods ended June 30, 2001 are not necessarily indicative of the operating results for the full year.

b.

Inventories

    Inventories are stated at the lower of cost (first-in, first-out) or market and include appropriate elements of material, labor and manufacturing overhead.

c.

Plant and Equipment

    Significant expenditures for the replacement or expansion of plant and equipment are capitalized. Depreciation of plant and equipment is provided over the estimated useful lives of the respective assets using the straight-line method. Estimated useful lives range from 3 to 20 years.

d.

Revenue Recognition

    The Company recognizes revenue from product sales upon shipment to the customer. Revenues related to equipment rental and services are recognized as earned over the terms of the contracts.

e.

Use of Estimates

    The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that effect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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f.

Net Loss Per Common Share

    Net loss per share—basic has been computed on the basis of the weighted average number of shares of common stock outstanding. Net loss per share—diluted has been computed on the basis of the weighted average number of shares of common stock outstanding after giving effect to potential common shares from dilutive stock options. Because the Company reported net losses for the three and six months ended June 30, 2001 and 2000, respectively, the calculation of net loss per share—diluted excludes potential common shares from stock options as they are anti-dilutive and would result in a reduction of loss per share. If the Company had reported net income for the three and six months ended June 30, 2001, there would have been 80,658 and 74,075 additional shares in the calculation of net income per share—diluted. If the Company had reported net income for the three and six months ended June 30, 2000, there would have been 4,592 and 303,358 additional shares in the calculation of net income per share—diluted.

g.

Cash and Cash Equivalents

    All highly liquid financial instruments with maturities of three months or less from date of purchase are classified as cash equivalents in the consolidated balance sheets and statements of cash flows.

h.

Stock Based Compensation

    As permitted under SFAS No. 123, "Accounting for Stock-Based Compensation", the Company elected to account for its stock based compensation plans under the provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees", and related interpretations.

i.

Income Taxes

    Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

j.

Comprehensive Income

    The Company's comprehensive income consists solely of net loss. The Company had no other comprehensive income for the three and six months ended June 30, 2001 and 2000.

3.

Inventories

    Inventories consist of the following:

	June 30, 2001		December 31, 2000
	(Unaudited)
Raw materials and component parts	$	14,035,734	$	17,511,888
Work in process		1,600,148		1,895,789
Finished goods		2,370,006		3,312,822
	$	18,005,888	$	22,720,499

4.

Stockholder Rights Plan

    On May 26, 2000 the Board of Directors of the Company adopted a Stockholder Rights Plan (the "Plan"). Under terms of the Plan, which expires June 9, 2010, the Company declared a distribution of one right for each outstanding share of common stock. The rights become exercisable only if a person

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or group (other than certain exempt persons, as defined) acquires 15 percent or more of Ballantyne common stock or announces a tender offer for 15 percent or more of Ballantyne's common stock. Under certain circumstances, the Plan allows stockholders, other than the acquiring person or group, to purchase the Company's common stock at an exercise price of half the market price. See Note 7 for a further discussion of the Plan.

5.

Related Party Transaction

    On June 24, 2000 the former Chairman of the Board of the Company (the "Former Chairman") defaulted on a term loan from the Company. The Company is vigorously pursuing collection of the defaulted loan and expects to receive a favorable court judgment in the state of Nebraska. However, since the Former Chairman is a resident of Canada there may be some uncertainty as to whether a Canadian court would enforce such a judgment. Additionally, no assurances can be given that the Former Chairman has sufficient assets to comply with such a judgment. Due to the uncertainty regarding the ultimate recovery of the note, the Company recorded a charge in the amount of $511,644 during the quarter ended June 30, 2000, which included unpaid principal and interest at that time.

6.

Notes Payable to Bank

    In October 2000, the Company was notified that it was in technical default under its $20 million revolving credit facility with Wells Fargo Bank Nebraska, N.A. ("Wells Fargo") for failing to maintain its required leverage ratio and failing to achieve the appropriate interest ratio coverage. In a letter received from Wells Fargo in October 2000, the Company was informed that Wells Fargo would temporarily defer taking any action except to reduce the aggregate amount outstanding on the credit facility to $11.5 million.

    On December 29, 2000 the Company entered into a "Loan Repayment Agreement" with Wells Fargo which restructured the revolving credit facility by reducing the aggregate amount outstanding to the lesser of $9.5 million or such amounts as determined by an asset-based lending formula and allowed the bank to reaffirm various guarantees and collateral positions. The interest rate was changed to be the prime rate, as defined. This agreement expired on January 31, 2001 at which time the Company entered into an "Extension Agreement" with essentially the same terms, expiring March 15, 2001.

    On March 15, 2001, the Company entered into a "Second Extension Agreement" with Wells Fargo expiring April 30, 2001. The terms of the Second Extension Agreement were altered to change the interest rate, effective March 16, 2001, to 1.0% in excess of the prime rate, as defined. Additionally, the credit limit of the credit facility was reduced to the lesser of $7.5 million or such amounts as determined by an asset-based lending formula, as defined.

    On April 27, 2001, the Company entered into a "Third Extension Agreement" with Wells Fargo expiring June 30, 2001. The terms of the Third Extension Agreement were essentially the same as the previous extension except the credit limit of the credit facility was reduced to the lesser of $6.5 million or such amounts as determined by an asset-based lending formula, as defined. On June 15, 2001, the Company was notified that it was in technical default under the terms of the Third Extension Agreement due to the failure to provide a signed commitment letter from a "reputable commercial lending company" by June 15, 2001. The Company subsequently signed a "First Amendment to Third Extension Agreement" extending the provision for a signed commitment letter to June 30, 2001.

    On June 28, 2001, the Company entered into a "Fourth Extension Agreement" with Wells Fargo expiring August 14, 2001. The terms of the Fourth Extension Agreement were altered to change the interest rate, effective July 1, 2001, to 2.0% in excess of the prime rate, as defined. Additionally, the credit limit of the credit facility was reduced to the lesser of $5.5 million or such amounts as determined by an asset-based lending formula, as defined.

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    On August 10, 2001, the Company entered into a "Fifth Extension Agreement" with Wells Fargo expiring August 31, 2001. The terms of the Third Extension Agreement were essentially the same as the previous extension.

    As of June 30, 2001, the amount outstanding under the credit facility was $4.6 million and the interest rate was the prime rate plus 1% (8.0%). As of August 10, 2001, the amount outstanding under the credit facility was approximately $1.5 million and the interest rate was the prime rate plus 2% (8.75%). Additionally, the credit limit, as determined by the asset-based lending formula, was $3.4 million as of August 10, 2001.

    On June 25, 2001, the Company signed a Commitment Letter with General Electric Capital Corporation ("GE Capital") to refinance the Company's existing credit facility with Wells Fargo. GE Capital has agreed to provide up to $11.4 million of financing subject to certain conditions, including, but not limited to, the completion of due diligence procedures. The Company expects the new credit facility to close in late August, although there can be no assurances that a successful final negotiation of the new credit facility will be achieved. However, the Company believes that if the closing of the new credit facility is delayed or is unsuccessful, additional extensions will be received from Wells Fargo until a long-term credit facility is secured.

7.

Significant Stockholder

    During May 2001, BalCo Holdings L.L.C., ("BalCo Holdings") an affiliate of the McCarthy Group, Inc., an Omaha-based merchant banking firm, purchased 3,238,845 shares, or a 26% stake in Ballantyne from GMAC Financial Services, which obtained the block of shares from Ballantyne's former parent company, Canrad, a subsidiary of ARC International Corporation. Ballantyne amended its Stockholder Rights Plan (the "Plan") to exclude the purchase from operation of the Plan. As permitted under a Letter Agreement between BalCo Holdings and Ballantyne, BalCo Holdings has requested that Ballantyne amend the plan to permit a resale of shares to a third party acceptable to the Ballantyne Board of Directors. Ballantyne did not issue any new shares pursuant to, nor did it receive any proceeds from, the McCarthy Group-GMAC transaction.

8.

Business Segment Information

    The presentation of segment information reflects the manner in which management organizes segments for making operating decisions and assessing performance.

    The Company's operations are conducted principally through three business segments: Theatre, Lighting and Restaurant. Theatre operations include the design, manufacture, assembly and sale of motion picture projectors, xenon lamphouses and power supplies, sound systems and the sale of film handling equipment, xenon bulbs and lenses for the theatre exhibition industry. The lighting segment operations include the sale and rental of follow spotlights, stationary searchlights and computer operated lighting systems for the motion picture production, television, live entertainment, theme parks and architectural industries, as well as the sale and rental of audiovisual products. The restaurant segment includes the design, manufacture, assembly and sale of pressure and open fryers, smoke ovens and the sale of seasonings, marinades and barbeque sauces, mesquite and hickory woods and point of purchase displays.

    The Company allocates resources to business segments and evaluates the performance of these segments based upon reported segment gross profit. However, certain key operations of a particular segment are tracked on the basis of operating profit. There are no significant intersegment sales. All intersegment transfers are recorded at historical cost.

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Summary by Business Segments

				Three Months Ended June 30						Six Months Ended June 30
				2001			2000			2001			2000
Net revenue
	Theatre			$	7,729,618		$	12,485,156		$	15,971,426		$	21,381,122
	Lighting
		Sales			1,251,699			1,125,080			2,524,606			2,189,364
		Rental			991,675			1,173,951			2,724,884			2,621,109
			Total lighting		2,243,374			2,299,031			5,249,490			4,810,473
	Restaurant				405,495			514,327			744,418			956,505
			Total	$	10,378,487		$	15,298,514		$	21,965,334		$	27,148,100
Gross profit
	Theatre			$	810,200		$	1,751,474		$	1,559,481		$	3,444,529
	Lighting
		Sales			246,387			179,566			473,534			412,008
		Rental			40,249			260,834			590,612			724,781
			Total lighting		286,636			440,400			1,064,146			1,136,789
	Restaurant				8,053			63,952			36,169			152,388
			Total		1,104,889			2,255,826			2,659,796			4,733,706
Corporate overhead					(2,397,745	)		(3,056,709	)		(4,528,993	)		(6,529,854	)
			Loss from operations		(1,292,856	)		(800,883	)		(1,869,197	)		(1,796,148	)
Net interest expense					(136,754	)		(301,099	)		(244,989	)		(539,272	)
			Loss before income taxes	$	(1,429,610	)	$	(1,101,982	)	$	(2,114,186	)	$	(2,335,420	)
Expenditures on capital equipment
	Theatre			$	95,436		$	196,559		$	149,221		$	447,491
	Lighting				162,786			182,323			457,994			505,028
	Restaurant				—			—			—			—
			Total	$	258,222		$	378,882		$	607,215		$	952,519
Depreciation and amortization
	Theatre			$	399,095		$	414,700		$	798,228		$	903,204
	Lighting				353,729			303,724			707,462			613,370
	Restaurant				—			—			—			—
			Total	$	752,824		$	718,424		$	1,505,690		$	1,516,574

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			June 30, 2001		December 31, 2000
Identifiable assets
	Theatre		$	36,956,264	$	43,497,441
	Lighting			8,596,126		7,430,070
	Restaurant			1,308,031		1,198,429
		Total	$	46,860,421	$	52,125,940

Summary by Geographical Area:

			Three Months Ended June 30				Six Months Ended June 30
			2001		2000		2001		2000
Net revenue
	United States		$	6,679,483	$	11,469,028	$	15,214,193	$	19,337,258
	Canada			149,909		608,058		303,671		2,197,660
	Asia			1,372,793		1,165,593		2,267,919		2,265,598
	Mexico			301,837		310,676		1,185,204		575,339
	Europe			783,178		1,457,261		1,674,937		2,191,073
	Other			1,091,287		287,898		1,319,410		581,172
		Total	$	10,378,487	$	15,298,514	$	21,965,334	$	27,148,100

			June 30, 2001		December 31, 2000
Identifiable assets
	United States		$	45,940,239	$	50,994,142
	Asia			920,182		1,131,798
		Total	$	46,860,421	$	52,125,940

    Net revenues by business segment are to unaffiliated customers. Net sales by geographical area are based on destination of sales. Identifiable assets by geographical area are based on location of facilities.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

    The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this document. Management's discussion and analysis contains forward-looking statements that involve risks and uncertainties, including but not limited to, quarterly fluctuations in results; customer demand for the Company's products; the development of new technology for alternate means of motion picture presentation; domestic and international economic conditions in the theatre exhibition industry; the achievement of lower costs and expenses; the continued availability of financing in the amounts and on the terms required to support the Company's future business; credit concerns in the theatre exhibition industry; and other risks detailed from time to time in the Company's other Securities and Exchange Commission filings. Actual results may differ materially from management expectations.

Three Months Ended June 30, 2001 Compared to the Three Months Ended June 30, 2000

Revenues

    Net revenues for the three months ended June 30, 2001 decreased $4.9 million or 32.2% to $10.4 million from $15.3 million for the three months ended June 30, 2000. As discussed in further detail below, the majority of the decrease relates to lower sales of theatre products. The following table shows comparative net revenues of theatre, lighting and restaurant products for the respective periods:

		Three Months Ended June 30,
		2001		2000
Theatre		$	7,729,618	$	12,485,156
Lighting			2,243,374		2,299,031
Restaurant			405,495		514,327
	Total net revenues	$	10,378,487	$	15,298,514

Theatre Segment

    As stated above, the decrease in consolidated net revenues primarily related to lower sales of theatre products, which decreased $4.8 million or 38.1% from $12.5 million in 2000 to $7.7 million in 2001. In particular, sales of projection equipment decreased $3.9 million from $9.6 million in 2000 to $5.7 million in 2001. This decrease resulted from a continued downturn in the construction of new theatres in North America. The North American theatre exhibition industry has been experiencing poor operating results due to numerous factors including, but not limited to, over construction in certain areas of the country coupled with the difficulty in closing obsolete theatres, deteriorating credit ratings in the industry and lower theatre attendance. In particular, some theatre exhibition companies have either filed for or are considering protection under federal bankruptcy laws. To date, the Company has only been slightly impacted by these bankruptcies however, the bankruptcy of one or more of the Company's major customers could have a material adverse effect on the Company's business, financial condition and results of operations. The liquidity problems of the theatre exhibition industry result in continued exposure to the Company. This exposure is in the form of receivables from those exhibitors and continued depressed revenue levels if the industry cannot build new theatres. The Company anticipates the depressed theatre sales to continue into the third and fourth quarters, however, the Company expects the decreases to level off as the year progresses as theatre companies continue to pull themselves through the downturn.

    Sales of theatre replacement parts were also impacted by the downturn in the theatre exhibition industry decreasing from $2.1 million in 2000 to $1.2 million in 2001. Replacement part sales are not directly related to the volume of projection equipment sold, but are more a reflection of the needs of

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customers who have previously purchased projection equipment from the Company. Sales of lenses decreased $0.3 million from $0.8 million in 2000 to $0.5 million in 2001. Lens sales do not always fluctuate with the volume of projection equipment sold as the lens can be sold individually. The Company also began selling xenon bulbs in late 2000 when an agreement was entered into to be the exclusive distributor for Lighting Technologies International, a company that manufactures specialty light sources and related lighting systems. For the three months ended June 30, 2001, the Company sold $0.3 million of this product.

    Foreign sales were flat in 2001 decreasing $0.1 million from $3.8 million in 2000 to $3.7 million in 2001. This decrease related to lower shipments to Canada as the problems in the theatre exhibition industry discussed earlier are being felt throughout North America. Additionally, sales in Europe were lower than the same period one year ago.

Lighting Segment

    Sales and rentals in the lighting segment decreased $0.1 million from $2.3 million in 2000 to $2.2 million in 2001. Sales and rentals generated from the Company's audiovisual division in Florida were lower than anticipated generating $0.8 million for the quarter compared to $1.2 million during the same period in 2000. The majority of the decrease can be attributed to softer sales of audiovisual equipment. Sales and rentals of entertainment, promotional and architectural lighting products decreased $0.1 million to $0.6 million in 2001 from $0.7 million in 2000, as sales and rentals in the Los Angeles area continued to be lower than anticipated. Spotlight sales increased to $0.8 million in 2001 from $0.4 million in 2000 due to increased replacement part sales.

Restaurant Segment

    Restaurant sales decreased $0.1 million to $0.4 million in 2001 compared to $0.5 million in 2000 due to softer sales of pressure fryers.

Gross Profit

    Overall, consolidated gross profit decreased $1.2 million to $1.1 million in 2001 from $2.3 million in 2000 and as a percentage of net revenues ("gross margin") decreased to 10.6% compared to 14.7% during the second quarter of 2000. The decrease relates to the theatre segment where gross profit decreased $0.9 million compared to 2000. Additionally, the gross margin in the theatre segment decreased from 14.0% to 10.5% during 2001. Contributing to both the lower gross profit and gross margin were negative manufacturing variances created by less volume through the Company's manufacturing facilities. This has resulted in the level of sales not being sufficient to fully absorb the Company's manufacturing overhead. Additionally, the amount of sales coupled with current inventory levels has caused plant labor utilization to drop considerably leading to manufacturing inefficiencies. To correct these problems, the Company is in the process of reducing its cost structure, lowering inventory and bringing custom manufacturing work into its plants to increase labor utilization and absorb more manufacturing overhead.

    Gross profit in the lighting segment decreased to $0.3 million compared to $0.4 million for the same period one year ago. The decrease can be attributed to the same manufacturing inefficiencies discussed previously and to the lack of sufficient rental revenues to cover fixed rental expenses in the form of salaries and depreciation. Restaurant margins also decreased from $64,000 in 2000 to $8,000 in 2001 due to the manufacturing inefficiencies discussed earlier.

Operating Expenses

    Operating expenses for the three months ended June 30, 2001 decreased approximately $0.7 million compared to the three months ended June 30, 2000, but as a percentage of net revenues

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increased to 23.1% in 2001 from 19.9% in 2000. This increase was due to a decline in revenues without a proportional decrease in expenses, mainly related to certain fixed costs. Included in the 2000 expenses was a reserve of approximately $0.5 million taken for the default in repayment of a term loan made by the Company to a former Chairman of the Board. The remaining decrease in operating expenses has come from cost reductions across the board, including personnel reductions and lower selling costs. The Company is continually aligning operating costs with projected future revenue and will continue this process until the appropriate levels have been achieved.

Other Financial Items

    Net interest expense was approximately $0.1 million in 2001 compared to $0.3 million in 2000 due to lower borrowings on the Company's line of credit.

    The Company's effective tax rate for 2001 was 34.3% compared to 39.2% in 2000. The change in the tax rate resulted from the differing impact of permanent differences compared to a year ago. Net deferred tax assets were $1.4 million as of June 30, 2001. Based upon the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies, management believes it is more likely than not that the Company will realize the benefits of deferred tax assets as of June 30, 2001.

    For the reasons outlined above, the Company experienced a net loss for the three months ended June 30, 2001 of approximately $0.9 million compared to a net loss of $0.7 million for the three months ended June 30, 2000. This translated into a net loss per share—basic and diluted of $0.08 per share in 2001 compared to a net loss per share—basic and diluted of $0.05 per share in 2000.

Six Months Ended June 30, 2001 Compared to the Six Months Ended June 30, 2000

Revenues

    Net revenues for the six months ended June 30, 2001 decreased $5.2 million or 19.1% to $22.0 million from $27.2 million for the six months ended June 30, 2000. As discussed in further detail below, the majority of the decrease relates to lower sales of theatre products. The following table shows comparative net revenues of theatre, lighting and restaurant products for the respective periods:

		Six Months Ended June 30,
		2001		2000
Theatre		$	15,971,426	$	21,381,122
Lighting			5,249,490		4,810,473
Restaurant			744,418		956,505
	Total net revenues	$	21,965,334	$	27,148,100

Theatre Segment

    As stated above, the decrease in consolidated net revenues primarily related to lower sales of theatre products, which decreased $5.4 million or 25.3% from $21.4 million in 2000 to $16.0 million in 2001. In particular, sales of projection equipment decreased $4.2 million from $16.2 million in 2000 to $12.0 million in 2001. This decrease resulted from a continued downturn in the construction of new theatres in North America. The North American theatre exhibition industry is currently experiencing poor operating results due to numerous factors including, but not limited to, over construction in certain areas of the country coupled with the difficulty in closing obsolete theatres, deteriorating credit ratings in the industry and lower theatre attendance. In particular, some theatre exhibition companies have either filed for or are considering protection under federal bankruptcy laws. To date, the Company has only been slightly impacted by these bankruptcies however, the bankruptcy of one or more of the

13

Company's major customers could have a material adverse effect on the Company's business, financial condition and results of operations. The liquidity problems of the theatre exhibition industry result in continued exposure to the Company. This exposure is in the form of receivables from those exhibitors and continued depressed revenue levels if the industry cannot build new theatres. The Company anticipates the depressed theatre sales to continue into the third and fourth quarters, however, the Company expects the decreases to level off as the year progresses as theatre companies continue to pull themselves through the downturn.

    Sales of theatre replacement parts were also impacted by the downturn in the theatre exhibition industry decreasing from $4.1 million in 2000 to $2.6 million in 2001. Replacement part sales are not directly related to the volume of projection equipment sold, but are more a reflection of the needs of customers who have previously purchased projection equipment from the Company. Sales of lenses decreased approximately $0.3 million from $1.1 million in 2000 to $0.8 million in 2001. Lens sales do not always fluctuate with the volume of projection equipment sold as the lens can be sold individually. As stated during the discussion of the results for the three months ended June 30, 2001, the Company began selling xenon bulbs in late 2000. During the six months ended June 30, 2001 sales of these bulbs were approximately $0.6 million.

    Foreign sales were flat in 2001 decreasing $1.0 million from $7.8 million in 2000 to $6.8 million in 2001. This decrease related to lower shipments to Canada as the problems in the theatre exhibition industry discussed earlier were felt throughout North America. Sales to European companies were also lower in the second quarter of 2001, which contributed to year-to-date European sales being lower by approximately $0.5 million compared to 2000.

Lighting Segment

    Sales and rentals in the lighting segment increased $0.4 million from $4.8 million in 2000 to $5.2 million in 2001. The increase mainly relates to higher sales of spotlights, which rose $0.5 million from $0.9 million in 2000 to $1.4 million in 2001. Sales and rentals of audiovisual products also increased $0.2 million from the same period a year ago despite revenues being lower than anticipated during the second quarter. Since the audiovisual location was established in Orlando and Ft. Lauderdale, Florida in 1998, the Company has been slowly increasing the product line's infrastructure to achieve slow, but steady growth. Sales and rentals of entertainment, promotional and architectural lighting products decreased $0.3 million to $1.4 million in 2001 from $1.7 million in 2000, as sales and rentals in the Los Angeles area continued to be lower than anticipated.

Restaurant Segment

    Restaurant sales decreased $0.2 million to $0.9 million in 2001 compared to $0.7 million in 2000 due to softer sales of pressure fryers.

Gross Profit

    Overall, consolidated gross profit decreased $2.0 million to $2.7 million in 2001 from $4.7 million in 2000 and as a percentage of net revenues ("gross margin") decreased to 12.1% compared to 17.4% in 2000. The decrease relates to the theatre segment where gross profit decreased $1.9 million compared to 2000. Additionally, the gross margin in the theatre segment decreased from 16.1% to 9.8% during 2001. Contributing to the lower gross profit were lower theatre revenues that resulted in lost gross profit of approximately $1.3 million. Contributing to both the lower gross profit and gross margin were negative manufacturing variances created by less volume through the Company's manufacturing facilities. This has resulted in the level of sales not being sufficient to fully absorb the Company's manufacturing overhead. Additionally, the amount of sales coupled with current inventory levels has caused plant labor utilization to drop considerably leading to manufacturing inefficiencies. To

14

correct these problems, the Company is in the process of reducing its cost structure, lowering inventory and bringing custom manufacturing work into its plants to increase labor utilization and absorb more manufacturing overhead.

    Gross profit in the lighting segment was lower by approximately $0.1 million compared to 2000 due to lower margins from rental activities due to a lack of sufficient rental revenues to cover certain fixed rental expenses, mainly salaries and depreciation.

    Restaurant margins also decreased in 2001 from $0.15 million in 2000 to $0.04 million in 2001 due to the same manufacturing inefficiencies discussed previously.

Operating Expenses

    Operating expenses for the six months ended June 30, 2001 decreased approximately $2.0 million compared to the six months ended June 30, 2000 and as a percentage of net revenues, decreased to 20.6% in 2001 from 24.1% in 2000. Included in the 2000 expenses were restructuring charges of approximately $0.5 million relating to the Company reducing its workforce during the first quarter of 2000 and $0.5 million relating to a reserve set up for the default of a term loan made by the Company to a former Chairman of the Board. The remaining decrease in operating expenses has come from cost reductions across the board, including personnel reductions and lower selling costs. The Company is continually aligning operating costs with projected future revenue and will continue this process until the appropriate levels have been achieved.

Other Financial Items

    Net interest expense was approximately $0.2 million in 2001 compared to $0.5 million in 2000 due to lower borrowings on the Company's line of credit.

    The Company's effective tax rate for 2001 was 33.6% compared to 36.7% in 2000. The change in the tax rate resulted from the differing impact of permanent differences compared to a year ago. Net deferred tax assets were $1.4 million as of June 30, 2001. Based upon the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies, management believes it is more likely than not that the Company will realize the benefits of deferred tax assets as of June 30, 2001.

    For the reasons outlined above, the Company experienced a net loss for the six months ended June 30, 2001 of approximately $1.4 million compared to a net loss of $1.5 million for the three months ended June 30, 2000. This translated into a net loss per share—basic and diluted of $0.11 per share in 2001 compared to a net loss per share—basic and diluted of $0.12 per share in 2000.

Liquidity and Capital Resources

    In October 2000, the Company was notified that it was in technical default under its $20 million revolving credit facility with Wells Fargo Bank Nebraska, N.A. ("Wells Fargo") for failing to maintain its required leverage ratio and failing to achieve the appropriate interest ratio coverage. In a letter received from Wells Fargo in October 2000, the Company was informed that Wells Fargo would temporarily defer taking any action except to reduce the aggregate amount outstanding on the credit facility to $11.5 million.

    On December 29, 2000 the Company entered into a "Loan Repayment Agreement" with Wells Fargo which restructured the revolving credit facility by reducing the aggregate amount outstanding to the lesser of $9.5 million or such amounts as determined by an asset-based lending formula and allowed the bank to reaffirm various guarantees and collateral positions. The interest rate was changed to be the prime rate, as defined. This agreement expired on January 31, 2001 at which time the

15

Company entered into an "Extension Agreement" with essentially the same terms, expiring March 15, 2001.

    On March 15, 2001, the Company entered into a "Second Extension Agreement" with Wells Fargo expiring April 30, 2001. The terms of the Second Extension Agreement were altered to change the interest rate, effective March 16, 2001, to 1.0% in excess of the prime rate, as defined. Additionally, the credit limit of the credit facility was reduced to the lesser of $7.5 million or such amounts as determined by an asset-based lending formula, as defined.

    On April 27, 2001, the Company entered into a "Third Extension Agreement" with Wells Fargo expiring June 30, 2001. The terms of the Third Extension Agreement were essentially the same as the previous extension except the credit limit of the credit facility was reduced to the lesser of $6.5 million or such amounts as determined by an asset-based lending formula, as defined. On June 15, 2001, the Company was notified that it was in technical default under the terms of the Third Extension Agreement due to the failure to provide a signed commitment letter from a "reputable commercial lending company" by June 15, 2001. The Company subsequently signed a "First Amendment to Third Extension Agreement" extending the provision for a signed commitment letter to June 30, 2001.

    On June 28, 2001, the Company entered into a "Fourth Extension Agreement" with Wells Fargo expiring August 14, 2001. The terms of the Fourth Extension Agreement were altered to change the interest rate, effective July 1, 2001, to 2.0% in excess of the prime rate, as defined. Additionally, the credit limit of the credit facility was reduced to the lesser of $5.5 million or such amounts as determined by an asset-based lending formula, as defined.

    On August 10, 2001, the Company entered into a "Fifth Extension Agreement" with Wells Fargo expiring August 31, 2001. The terms of the Third Extension Agreement were essentially the same as the previous extension.

    As of June 30, 2001, the amount outstanding under the credit facility was $4.6 million and the interest rate was the prime rate plus 1% (8.0%). As of August 10, 2001, the amount outstanding under the credit facility was approximately $1.5 million and the interest rate was the prime rate plus 2% (8.75%). Additionally, the credit limit, as determined by the asset-based lending formula, was $3.4 million as of August 10, 2001.

    On June 25, 2001, the Company signed a Commitment Letter with General Electric Capital Corporation ("GE Capital") to refinance the Company's existing credit facility with Wells Fargo. GE Capital has agreed to provide up to $11.4 million of financing subject to certain conditions, including, but not limited to, the completion of due diligence procedures. The Company expects the new credit facility to close in late August, although there can be no assurances that a successful final negotiation of the new credit facility will be achieved. However, the Company believes that if the closing of the new credit facility is delayed or is unsuccessful, additional extensions will be received from Wells Fargo until a long-term credit facility is secured.

    Historically, the Company has funded its working capital requirements through cash flow generated by its operations and use of its line of credit. The Company anticipates that internally generated funds and borrowings available under the Company's line of credit will be sufficient to meet its working capital needs and planned 2001 capital expenditures unless it is unable to negotiate adequate terms under a new long-term credit facility. See the prior paragraph for further discussion of the Company's revolving credit facility. In the event that digital projection becomes a commercially viable product, the Company may need to raise additional funds other than those available under a revolving credit facility in order to fully develop such a product. If adequate funds are not available on acceptable terms, the Company may be unable to take advantage of future digital projection opportunities or respond to competitive pressures any of which could have a material adverse effect on the Company's business, financial condition and operating results. On June 6, 2001, the Company announced that it had

16

suspended funding for a research and development project with Lumavision Display, Inc. ("Lumavision"). Lumavision was to develop a proprietary digital projector for exclusive use by the Company for the Digital Cinema market. The project was suspended due to unresolved differences between the parties concerning the original agreement. The Company felt it was not prudent to continue funding unless a new agreement could be negotiated. If a new agreement were entered into, the Company would consider continuing the financing. In accordance with the agreement, the funding since September 26, 2000 was in the form of notes receivable due from Lumavision. Through the date of suspension of the project, $400,000 of notes receivable is due from Lumavision. Due to the nature of Lumavision's business, the individual notes were reserved into expense for financial purposes, as there was uncertainty as to their ultimate collectibility. The expense was included as research and development expenses when the funds were transferred on each note. Since the inception of the project, a total of $0.9 million has been expensed as research and development costs including the reserve for the notes discussed earlier. The Company continues to pursue other opportunities to have a commercially viable digital projection system available for the Digital Cinema market when it becomes acceptable to the motion picture industry. See page 4 in the "Business Strategy" section of the Company's Annual Report on Form 10-K under the caption "Explore Digital Cinema" for a further discussion of digital projectors.

    Net cash provided by operating activities was $3.2 million for the six months ended June 30, 2001 compared to net cash used in operating activities of $0.7 million for the six months ended June 30, 2000. The increase in operating cash flow was due to cutbacks in inventory purchases as the Company is aggressively lowering inventory levels built up before the sharp downturn in theatre sales during 2000 and 2001.

    Net cash used in investing activities was $0.4 million for the six months ended June 30, 2001 compared to $0.9 million a year ago. Investing activities in both periods mainly reflect capital expenditures, which have decreased due to fewer purchases of lighting equipment and a general reduction of capital expenditures as part of the Company's cost cutting program.

    Net cash used in financing activities was $4.3 million for the six months ended June 30, 2001 compared to cash provided by financing activities of $1.7 million a year ago. The change from year to year represents the fact that in 2000 the Company was borrowing funds on the line of credit to pay for the inventory purchases discussed above, but during 2001, the Company has substantially reduced inventory purchases and is paying down debt.

    The Company does not engage in any hedging activities, including currency-hedging activities, in connection with its foreign operations and sales. To date, all of the Company's international sales have been denominated in U.S. dollars, exclusive of Strong Westrex, Inc. sales, which are denominated in Hong Kong dollars.

Seasonality

    Generally, the Company's business exhibits a moderate level of seasonality as sales of theatre products typically increase during the third and fourth quarters. The Company believes that such increased sales reflect seasonal increases in the construction of new motion picture screens in anticipation of the holiday movie season.

Inflation

    The Company believes that the relatively moderate rates of inflation in recent years have not had a significant impact on its net revenues or profitability. Historically, the Company has been able to offset any inflationary effects by either increasing prices or improving cost efficiencies.

17

Recent Accounting Pronouncements

    In June 2000, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 138, Accounting for Certain Derivative Investments and Certain Hedging Activities. The standard amends certain provisions of SFAS No. 133, Accounting for Derivative Investments and Hedging Activities, which was issued in June 1998 to establish accounting standards for derivative instruments and for hedging activities. The Company adopted these accounting pronouncements effective January 1, 2001. The adoption of these standards did not significantly impact the Company's consolidated financial statements.

    The Financial Accounting Standards Board has approved for issuance SFAS No. 141, Business Combinations and No. 142 Goodwill and Other Intangible Assets. SFAS No. 141 will require that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 and that the use of the pooling-of-interest method is no longer allowed. SFAS No. 142 requires that upon adoption, amortization of goodwill and other intangible assets with indefinite lives will cease and instead, the carrying value of goodwill will be evaluated for impairment on an annual basis. Other identifiable intangible assets will continue to be amortized over their useful lives and reviewed for impairment in accordance with SFAS No. 121 Accounting for the Impairment of Long-Lived Assets to be Disposed Of. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001. The Company is evaluating the impact of the adoption of these standards and has not yet determined the effect of adoption on its financial position and results of operations.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

    The Company markets its products throughout the United Sates and the world. As a result, the Company could be adversely affected by such factors as changes in foreign currency exchange rates and weak economic conditions. In particular, the Company can be and was impacted by the recent downturn in the North American theatre exhibition industry in the form of lost revenues. Additionally, as a majority of sales are currently denominated in U.S. dollars, a strengthening of the dollar can and sometimes has made the Company's products less competitive in foreign markets. As stated above, the majority of the Company's foreign sales are denominated in U.S. dollars except for its subsidiary in Hong Kong.

    The Company has also evaluated its exposure to fluctuations in interest rates and the corresponding effect on the rate of interest on the Company's floating rate line of credit. Assuming amounts remain outstanding on the line of credit, increases in interest rates would increase interest expense. At current amounts outstanding on the line of credit, a one percent increase in the interest rate would increase yearly interest expense by approximately $50,000. The Company has not historically and is not currently using derivative instruments to manage the above risks.

PART II. OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders

    The Company's regular annual meeting of stockholders was held on May 23, 2001 for the purpose of electing one nominee as Director, approving an amendment to the Company's 1995 stock option plan increasing the total number of shares for which options can be granted under the plan and adopting the 2000 Employee Stock Purchase Plan. As there was not the requisite Quorum of shares represented in person or by proxy at the annual meeting (over 50% is required) the meeting was adjourned until June 1, 2001. The meeting was reconvened on that date, at which time the Quorum was obtained, ballots were cast and tabulations of the votes were performed. There were 12,512,672 shares outstanding and eligible to vote of which 6,852,882 were present at the June 1, 2001 meeting or by proxy.

18

    The tabulation for the election of the Director was as follows:

Director	For	Withheld	Abstain
John Wilmers	6,106,067	746,815	—

    Following the election of Mr. Wilmers, the Board of Directors numbered five members.

    The tabulations for the amendment to the Company's 1995 stock option plan and adopting the 2000 Employee Stock Purchase plan were as follows:

	For	Against	Abstain
1995 Stock Option Plan	5,815,727	1,022,481	14,674
2000 Employee Stock Purchase Plan	6,514,245	326,425	12,212

    The 2000 Employee Stock Purchase plan received sufficient votes for approval, however the 1995 Stock Option did not receive the necessary percentage of votes for approval and therefore was not adopted.

19

Item 6. Exhibits and Reports on Form 8-K

(a)	EXHIBITS
	4.9.1	First Amendment to Third Extension Agreement dated June 14, 2001 between Ballantyne of Omaha, Inc. ("the Company") and Wells Fargo Bank Nebraska N.A. ("Wells Fargo")*
	4.9.2	Fourth Extension Agreement dated June 28, 2001 to Loan Repayment Agreement between the Company and Wells Fargo*
	4.9.3	Fifth Extension Agreement dated August 10, 2001 to Loan Repayment Agreement between the Company and Wells Fargo*
	10.8.1	Second Amendment to 1995 Outside Directors Stock Option Plan, as amended*
	10.8.2	Form of 2001 Non-Employee Directors Stock Option Plan*
	10.9.1	Form of 2000 Employee Stock Purchase Plan, as amended*
	11	Computation of net loss per share*
	*	Filed herewith
(b)		Reports on Form 8-K filed for the six months ended June 30, 2001
		No reports on Form 8-K were filed during the six months ended June 30, 2001.

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SIGNATURES

    Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BALLANTYNE OF OMAHA, INC.
By:	/s/ JOHN WILMERS John Wilmers, President, Chief Executive Officer and Director	By:	/s/ BRAD FRENCH Brad French, Secretary/Treasurer, Chief Financial Officer and Chief Operating Officer
Date: August 10, 2001		Date: August 10, 2001

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QuickLinks

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk

PART II. OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders

Item 6. Exhibits and Reports on Form 8-K

SIGNATURES

EX-4.9(1)

                  FIRST AMENDMENT TO THIRD EXTENSION AGREEMENT


     This First Amendment to Third Extension Agreement ("First Amendment") is
entered into this 14th day of June, 2001, by and between Ballantyne of Omaha,
Inc. ("Borrower"); Design and Manufacturing, Inc., Xenotech Strong, Inc., Strong
Westrex, Inc. and Xenotech Rental Corp. (collectively the "Guarantors") and
Wells Fargo Bank Nebraska, National Association ("Bank").

                                    RECITALS

     A.   The Borrower and the Guarantors executed a Loan Repayment Agreement
dated December 29, 2000; an Extension Agreement dated January 31, 2001; Second
Extension Agreement dated March 15, 2001 and a Third Extension Agreement dated
April 27, 2001 (collectively the "Agreement"), with regard to the repayment of
the obligations of Borrower to the Bank as more fully described in the
Agreement.

     B.   The Borrower is indebted to the Bank as evidenced by a Revolving Note
dated January 5, 2001, in the maximum principal amount of $9,500,000.00 as
modified by Note Modifications dated January 31, 2001, March 15, 2001, and April
27, 2001. The principal balance outstanding on June 13, 2001 under the Revolving
Note is $4,428,346.64; accrued and unpaid interest to that date amount to
$11,995.56; interest continues to accrue at the rate of $975.94 per day based
upon the interest rate presently in effect.

     C.   The Borrower is in default under the terms of the Agreement due to its
failure to provide a signed commitment letter by June 15, 2001, and the Borrower
has requested that the Bank forbear from making demand, and the Bank has agreed
to do so pursuant to the terms and conditions in this First Amendment.

                                    AMENDMENT

     NOW, THEREFORE, in consideration of the premises and other valuable
consideration, the Borrower and the Bank hereby agree as follows:

     1.   TERMS. All capitalized terms not otherwise defined herein shall have
the same meaning as such terms have in the Agreement.

     2.   ACKNOWLEDGMENT. The Borrower and Guarantors acknowledge and agree that
the recitals herein are true and correct and that the indebtedness evidenced by
the Revolving Note is due and owing to the Bank without offset, defense or
counterclaims and further acknowledge that the Security Agreement, Deed of Trust
and Assignment and other documents evidencing the security for the Revolving
Note are valid, binding and fully enforceable according to their terms; and
further acknowledge that the Guaranties and security agreements therefor are
valid and binding and fully enforceable according to their terms.

     3.   AMENDMENTS TO AGREEMENT.

          3.1. Section 5.5 of the Third Extension Agreement is hereby amended in
               its entirety to read as follows:





               "Prior to June 22, 2001, a signed commitment letter (in form
               acceptable to the Bank) for the refinancing of all the
               outstanding indebtedness prior to June 30, 2001, from a reputable
               commercial lending company."

     4.   WARRANTIES AND REPRESENTATIONS. The Borrower and the Guarantors
reaffirm each and every representation and warranty set forth in the Agreement
as true and correct as of the effective date of this First Amendment.

     5.   RELEASE. In consideration of the accommodations by the Bank hereunder,
the Borrower and Guarantors do hereby, on behalf of themselves, their agents,
insurers, heirs, successors and assigns, release, acquit and forever discharge
the Bank and Wells Fargo & Company, (and any and all of their parent
corporations, subsidiary corporations, affiliated corporations, insurers,
indemnitors, successors and assigns, together with all of their present and
former directors, officers, agents and employees) from any and all claims,
demands or causes of action of any kind, nature or description whether arising
in law or equity or upon contract or tort or under any state or federal law or
otherwise, which the Borrower or the Guarantors have had, now have or have made
claim to have against any such party for or by reason of any act, omission,
matter, cause or thing whatsoever from the beginning of time to and including
the date of this First Amendment, whether such claims, demands and causes of
action are matured or unmatured or known or unknown.

     6.   MISCELLANEOUS.

          6.1. Except as revised or amended or modified herein, all other terms
     and conditions of the Agreement, Revolving Note and all other loan
     documents attached thereto or incorporated therein remain fully enforceable
     and in effect and are incorporated herein and shall remain fully
     enforceable and in effect and survive any default herein by the Borrower
     and/or Guarantors.

          6.2. Except as otherwise specifically provided in this First
     Amendment, the execution of this First Amendment shall not be deemed to be
     a waiver of any default or Event of Default, whether or not existing on the
     date of this First Amendment, and the Bank expressly denies any intention
     to waive any such default or events of default.

          6.3. The Agreement, as amended hereby, shall inure to the benefit of,
     and shall be binding upon, the respective successors and permitted assigns
     of the parties hereto. The Borrower has no right to assign any of his
     rights or obligations hereunder without the prior written consent of the
     Bank. The Agreement, as amended hereby, and the documents referred to
     herein or executed and delivered pursuant hereto, constitute the entire
     agreement between the parties, and may be amended only by a writing signed
     on behalf of each party. There are no promises, inducements or terms and
     conditions other than as specifically set forth herein.

          6.4. If any provision contained in this First Amendment or the
     Agreement is inconsistent with any of the documents described herein or any
     other document in favor of the Bank, the provision contained in this First
     Amendment or the Agreement shall supersede such inconsistent provision in
     the documents described herein or in any document in favor of the Bank.



                                       2




     7.   ADVICE OF COUNSEL. The Borrower and Guarantors acknowledge that they
have reviewed this First Amendment in its entirety, having consulted such legal,
tax or other advisors as he deems appropriate and understands and agrees to each
of the provisions of this First Amendment and further acknowledge that they have
entered into this First Amendment voluntarily.

     IN WITNESS WHEREOF, the parties hereto have duly executed this First
Amendment as of the day and year first above written.


BALLANTYNE OF OMAHA, INC.                   WELLS FARGO BANK NEBRASKA,
                                            NATIONAL ASSOCIATION



By: /s/ John Wilmers                        By:  /s/ Jerry Lundgren
    -------------------------------              ------------------------------
Its:    President                           Its:     Vice President
    -------------------------------              -------------------------------


By: /s/ Brad French
    -------------------------------
Its:    CFO
     ------------------------------



DESIGN AND MANUFACTURING, INC.              STRONG WESTREX, INC



By: /s/ John Wilmers                        By:  /s/ John Wilmers
    -------------------------------              -------------------------------
  Its:  President                             Its:     President
      -----------------------------                -----------------------------



XENOTECH STRONG, INC.                       XENOTECH RENTAL CORP.



By: /s/ John Wilmers                        By:  /s/ John Wilmers
    --------------------------------             -------------------------------
  Its:  President                             Its:     President
      ------------------------------               -----------------------------


                                       3

EX-4.9(2)

                           FOURTH EXTENSION AGREEMENT

     This Fourth Extension Agreement ("Fourth Extension") is made and entered
into this 28th day of June, 2001, by and among Ballantyne of Omaha, Inc.
("the Borrower"), Design and Manufacturing, Inc., Xenotech Strong, Inc.,
Strong Westrex, Inc., and Xenotech Rental Corp. (collectively "the
Guarantors") and Wells Fargo Bank Nebraska, National Association, ("the
Bank").

                                    RECITALS

     A.   The Borrower is indebted to the Bank as evidenced by a Revolving Note
dated January 5, 2001, in the maximum principal amount of $9,500,000.00, as
amended and modified from time to time ("Revolving Note"). The principal balance
outstanding on June 21, 2001, under the Revolving Note was $4,549,738.13;
accrued and unpaid interest to that date was $19,873.84.

     B.   Payment of the Revolving Note is secured by, without limitation, all
of the Borrower's inventory, equipment, accounts and other rights to payment,
and general intangibles as more specifically described in the Security Agreement
dated August 30, 1995 ("Security Agreement").

     C.   Payment of the Revolving Note is also secured by, without limitation,
a Deed of Trust dated August 30, 1995, and filed for record with the Douglas
County Register of Deeds on August 31, 1995, as Document No. 13536, encumbering
certain real property as more specifically described therein, as the same may
have been amended or modified ("Deed of Trust").

     D.   Payment of the Revolving Note is also secured by, without limitation,
an Assignment of Leases and Rent dated August 30, 1995, and filed for record
with the Douglas County Register of Deeds on August 31, 1995, as Document
No.9508, encumbering certain real property as more specifically described
therein, as the same may have been amended or modified ("Assignment").

     E.   Payment of the Revolving Note is guaranteed by Design and
Manufacturing, Inc., Xenotech Strong, Inc., Strong Westrex, Inc., and Xenotech
Rental Corp. by their corporate guaranties dated December 1, 1998 (collectively
"the Guaranties"). The Guaranties are secured by each respective Guarantor's
accounts, inventory, equipment, and general intangibles as more specifically
described in their security agreements dated August 30, 1995 and December 1,
1998.

     F.   The Borrower and Guarantors executed a Loan Repayment Agreement dated
December 29, 2000; an Extension Agreement dated January 31, 2001; a Second
Extension Agreement dated March 15, 2001; and a Third Extension Agreement dated
April 27, 2001, which set forth additional terms and conditions with regard to
the above described indebtedness (collectively "the Agreement"). Terms not
otherwise defined in this Fourth Extension shall have the same meanings ascribed
to them in the Agreement.

     G.   The Revolving Note again matures June 30, 2001, and the Borrower and
Guarantors have requested that the Bank extend the Revolving Note in order for
the Borrower to conclude its efforts to refinance the loan, which the Bank has
agreed to do pursuant to the terms and conditions of this Fourth Extension.





     NOW, THEREFORE, in consideration of the foregoing and for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:

     1.   ACKNOWLEDGMENT. The Borrower and the Guarantors acknowledge and agree
that the recitals herein are true and correct and that the indebtedness under
the Revolving Note is due and owing to the Bank without offset, defense or
counterclaims and further acknowledge that the Security Agreement, Deed of
Trust, Assignment and other documents evidencing the security for the Revolving
Note are valid, binding and fully enforceable according to their terms; and
further acknowledge that the Guaranties and security agreements therefor are
valid and binding and fully enforceable according to their terms.

     2.   EXTENSION OF REVOLVING NOTE. Subject to the other terms and conditions
of this Fourth Extension, and subject to all terms and conditions of the
Agreement, as amended herein, the indebtedness evidenced by the Revolving Note
shall be extended to August 14, 2001. The Borrower shall execute herewith an
appropriate Note Modification document reflecting the extended maturity date and
an increased interest rate.

     3.   ADDITIONAL AMENDMENTS TO AGREEMENT. Section 2.1 of the Agreement is
hereby amended to increase the interest rate on the New Revolving Note effective
July 1, 2001, to 2.0% over the Base Rate. Section 2.2 of the Agreement is hereby
amended to reduce the "Credit Limit" to the lessor of: the Borrowing Base or
$5,500,000. In addition, in the event the Borrower receives an income tax refund
for fiscal year 2000, said sums shall be immediately applied to the outstanding
indebtedness under the Revolving Note, and the maximum Credit Limit available
(currently $5,500,000.00) and the available Borrowing Base will be reduced in a
like amount.

     4.   COLLATERAL SECURITY AND GUARANTIES. Payment of the Revolving Note and
performance of the Borrower's obligations as set forth in this Fourth Extension
and in the Agreement shall continue to be secured by the Security Agreement,
Deed of Trust and Assignment. The Guarantors also reaffirm their guaranties of
the Revolving Note and acknowledge and agree that their guaranties apply to the
Revolving Note as extended and all other obligations of the Borrower to the
Bank.

     5.   CONDITIONS PRECEDENT. The Bank's performance hereunder is subject to
delivery to the Bank of each of the following as conditions precedent:

          5.1  Duly executed Note Modification;

          5.2  A certified copy of the resolutions of the Borrower's Board of
     Directors authorizing the execution, delivery and performance of this
     Fourth Extension and any other document to be delivered pursuant hereto;

          5.3  A certificate of the Borrower's corporate secretary as to the
     incumbency and signature of the authorizing officers signing this Fourth
     Extension and any other document to be delivered pursuant hereto; and


                                      -2-




          5.4  Copies of any commitment letters, term sheets, applications,
     correspondence or other documents relating to the Borrower's efforts to
     obtain refinancing for the Revolving Note.

     6.   REPRESENTATIONS AND WARRANTIES. To induce the Bank to enter into this
Fourth Extension, the Borrower represents and warrants to the Bank as follows:

          6.1  The Borrower is a corporation duly organized, existing and in
     good standing under the laws of the State of Delaware and is duly qualified
     to do business and is in good standing in each jurisdiction where
     registration is necessary.

          6.2  This Fourth Extension and the documents to be delivered pursuant
     hereto are valid and binding in accordance with their terms and the
     execution, delivery and performance of this Fourth Extension and the
     issuance of the security agreements and other instruments granting to Bank
     its security interest are within the corporate powers of the Borrower, have
     been duly authorized, and are not in contravention of law or the terms of
     its articles of incorporation or bylaws, or of any undertaking to which the
     Borrower is a party or by which it is bound.

          6.3  The Borrower has made no loans or transferred no interest in any
     property or asset to any person, except in the ordinary course of business.

          6.4  No consent, approval, or authorization of or declaration or
     filing with any governmental authority on the part of the Borrower is
     required in connection with the execution and delivery of this Fourth
     Extension or the consummation of any transaction contemplated hereby.

          6.5  The Borrower has not incurred or assumed indebtedness
     contingently or otherwise, except: (i) unsecured debt in the ordinary
     course of business; (ii) indebtedness arising under the Agreement; and
     (iii) indebtedness disclosed to the Bank in writing as existing at the time
     of execution of this Fourth Extension.

          6.6  The assets of the Borrower are not subject to any lien or
     encumbrance except as permitted hereunder and as disclosed to the Bank in
     writing as existing at the time of execution of this Fourth Extension.

          6.7  The Borrower has filed all Federal, state and local tax returns
     and other reports that are required by law to be filed prior to the date
     hereof and has paid or has caused to be paid all taxes, assessments and
     other governmental charges that are due and payable prior to the date
     hereof and has made adequate provision for the payment of such taxes,
     assessments or other charges accruing but not yet payable.

          6.8  All employee (union and non-union) compensation, health, welfare,
     deferred compensation or other benefits which have accrued or became
     payable prior to the date of this Fourth Extension have been paid in full
     and will, during the term of this Fourth Extension, be fully paid as and
     when such obligations become due.


                                      -3-




     7.   RELEASE. In consideration of the accommodations by the Bank hereunder,
the Borrower and the Guarantors do hereby, on behalf of themselves, their
agents, insurers, heirs, successors and assigns, release, acquit and forever
discharge the Bank and Wells Fargo & Company, (and any and all of their parent
corporations, subsidiary corporations, affiliated corporations, insurers,
indemnitors, successors and assigns, together with all of their present and
former directors, officers, agents and employees) from any and all claims,
demands or causes of action of any kind, nature or description whether arising
in law or equity or upon contract or tort or under any state or federal law or
otherwise, which the Borrower or the Guarantors have had, now have or have made
claim to have against any such party for or by reason of any act, omission,
matter, cause or thing whatsoever from the beginning of time to and including
the date of this Fourth Extension, whether such claims, demands and causes of
action are matured or unmatured or known or unknown.

     8.   EVENTS OF DEFAULT. The following shall constitute events of default
under this Extension("Event of Default"):

          8.1  Failure to pay interest, principal or other amounts payable on
     the Revolving Note no later than five days after such payments become due;
     or

          8.2  Any event of default as defined in the Revolving Note, Agreement,
     Security Agreement, Guaranties, Deeds of Trust, Assignment, or any other
     documents or agreements between the Bank and the Borrower or Bank and the
     Guarantors; or

          8.3  Breach or violation of any covenant or agreement of the Borrower
     or the Guarantors set forth herein; or

          8.4  Default by the Borrower relating to any other indebtedness for
     borrowed money or the effect of which default is to permit the holder of
     such indebtedness to declare the same due prior to the date fixed for its
     payment under the terms thereof; or

          8.5  Any representation or warranty made by the Borrower or the
     Guarantors in this Fourth Extension or by the Borrower or the Guarantors in
     any statement, certificate or instrument contemplated by or made pursuant
     to or in connection with this Fourth Extension shall have been untrue or
     incorrect when made; or

          8.6  The Borrower or the Guarantors become insolvent; make an
     assignment for the benefit of creditors; a custodian, trustee or receiver
     is appointed for the Borrower or the Guarantors, or for any of their
     properties ; or bankruptcy, reorganization or liquidation proceedings are
     instituted by or against the Borrower or the Guarantors and, if instituted
     against any of them, are consented to by them or remain undismissed for
     thirty (30) days;

          8.7  The occurrence of any litigation or governmental proceeding which
     is pending or threatened against the Borrower or the Guarantors which could
     have a material adverse effect on the Borrower's or the Guarantors'
     financial condition or business, and which is not remedied within a
     reasonable period of time, not to exceed 10 days after notice thereof to
     the Borrower or the Guarantors; or


                                      -4-




          8.8  An execution, levy, garnishment summons or attachment order
     against the Borrower or the Guarantors is served upon Bank.

     9.   REMEDIES. Upon the occurrence of any Event of Default or at any time
thereafter, the Bank or the holder of the Revolving Note may declare the Note to
be due and payable, and the Note shall immediately become due and payable, and
Bank shall be entitled to the immediate exercise of all its rights and remedies
available to it under the Revolving Note, Security Agreement, Guaranties, Deeds
of Trust, Assignment, and all other documents and agreements between the
parties.

     10.  MISCELLANEOUS.

          10.1 The provisions of this Fourth Extension shall be in addition to
     those of any guaranties, deeds of trust, assignments, pledges, security
     agreements, note or other evidence of liability held by the Bank and
     executed by the Borrower or the Guarantors, all of which shall be construed
     as complementary to each other. Nothing herein contained shall prevent the
     Bank from enforcing any or all other guaranties, deeds of trust,
     assignments, pledges, security agreements, note or other evidence of
     liability in accordance with their respective terms.

          10.2 The Bank shall have the right at all times to enforce the
     provisions of this Fourth Extension and the collateral documents in strict
     accordance with the terms hereof and thereof, notwithstanding any conduct
     or custom on the part of the Bank in refraining from so doing at any time
     or times. The failure of the Bank at any time or times to enforce its
     rights under such provisions, strictly in accordance with the same, shall
     not be construed as having created a custom, conduct or course of dealing
     in any way or manner contrary to specific provisions of this Fourth
     Extension or as having in any way or manner modified or waived the same.
     All rights and remedies of the Bank are cumulative and concurrent and the
     exercise of one right or remedy shall not be deemed a waiver or release of
     any other right or remedy.

          10.3 This Fourth Extension shall inure to the benefit of, and shall be
     binding upon, the respective successors and permitted assigns of the
     parties hereto. The Borrower and the Guarantors have no right to assign any
     of its rights or obligations hereunder without the prior written consent of
     the Bank. This Fourth Extension, and the documents referred to herein or
     executed and delivered pursuant hereto, constitute the entire agreement
     between the parties, and may be amended only by a writing signed on behalf
     of each party. There are no promises, inducements or terms and conditions
     other than as specifically set forth herein.

          10.4 If any provision of this Fourth Extension shall be held invalid
     under any applicable laws, such invalidity shall not affect any other
     provision of this Fourth Extension that can be given effect without the
     invalid provision, and, to this end, the provisions hereof are severable.

          10.5 No failure of the Bank, or of the holder of the Revolving Note,
     in exercising any right, power or privilege hereunder shall affect such
     right, power or privilege, nor shall any single or partial exercise thereof
     preclude any further


                                      -5-




     exercise thereof or the exercise of any other right, power or privilege.
     The rights and remedies of the Bank or the holder of the Revolving Note or
     other evidence of liability under this Fourth Extension are cumulative and
     not exclusive of any rights and remedies which it may otherwise have.

          10.6 This Fourth Extension may be executed in any number of
     counterparts, each of which shall be deemed to be an original, but all of
     which together shall constitute but one and the same instrument.

          10.7 If any provision contained in this Fourth Extension is
     inconsistent with any provision of any of the documents described herein or
     any other document in favor of the Bank, the provision contained in this
     Fourth Extension shall supersede such inconsistent provision in the
     document described herein or any document in favor of the Bank.

          10.8 The substantive laws of the State of Nebraska shall govern the
     construction of this Fourth Extension and the rights and remedies of the
     parties hereto.

     11.  FEES AND EXPENSES. Upon execution of this Fourth Extension, the
Borrower shall pay to the Bank an extension fee of $10,000.00, which shall be
deemed fully earned and not applied to the outstanding indebtedness under the
Revolving Note. In addition the Borrower agrees, within 10 days of invoice, to
pay to the Bank all expenses including, but not limited to, (i) the reasonable
fees and expenses of legal counsel for the Bank, incurred in connection with the
preparation, administration, amendment, modification or enforcement of this
Fourth Extension and the collateral documents and the collection or attempted
collection of the indebtedness; and (ii) expenses of future collateral audits
conducted by the Bank at the Bank's customary rates.

     12.  ADVICE OF COUNSEL. The Borrower and the Guarantors acknowledge that
they have reviewed this Fourth Extension in its entirety, having consulted such
legal, tax or other advisors as they deem appropriate and understand and agree
to each of the provisions of this Fourth Extension and further acknowledge that
they have entered into this Fourth Extension voluntarily.


                                      -6-




     IN WITNESS WHEREOF, the parties hereto have duly executed this Fourth
Extension as of the day and year first above written.


BALLANTYNE OF OMAHA, INC.


By: /s/ John Wilmers
    --------------------------------
    Its: President
         ---------------------------


         And


By: /s/ Brad French
    --------------------------------
    Its: CFO
         ---------------------------



DESIGN AND MANUFACTURING, INC.              STRONG WESTREX, INC


By: /s/ John Wilmers                        By: /s/ John Wilmers
    --------------------------------            --------------------------------
    Its: President                              Its: President
         ---------------------------                 ---------------------------



XENOTECH STRONG, INC.                       XENOTECH RENTAL CORP.


By: /s/ John Wilmers                        By: /s/ John Wilmers
    --------------------------------            --------------------------------
     Its: President                             Its: President
          --------------------------                 ---------------------------



WELLS FARGO BANK NEBRASKA,
NATIONAL ASSOCIATION


By: /s/ Jerry Lundgren
    --------------------------------
    Its: Vice-president
         ---------------------------


                                      -7-

EX-4.9(3)

                                                                   Exhibit 4.9.3

                            FIFTH EXTENSION AGREEMENT

         This Fifth Extension Agreement ("Fifth Extension") is made and
entered into this 10th day of August, 2001, by and among Ballantyne of Omaha,
Inc. ("the Borrower"), Design and Manufacturing, Inc., Xenotech Strong, Inc.,
Strong Westrex, Inc., and Xenotech Rental Corp. (collectively "the
Guarantors") and Wells Fargo Bank Nebraska, National Association, ("the
Bank").

                                    RECITALS

         A. The Borrower is indebted to the Bank as evidenced by a Revolving
Note dated January 5, 2001, in the maximum principal amount of $9,500,000.00, as
amended and modified from time to time ("Revolving Note"). The principal balance
outstanding on August 9, 2001, under the Revolving Note was $1,525,126.48;
accrued and unpaid interest to that date was $3,842.06.

         B. Payment of the Revolving Note is secured by, without limitation, all
of the Borrower's inventory, equipment, accounts and other rights to payment,
and general intangibles as more specifically described in the Security Agreement
dated August 30, 1995 ("Security Agreement").

         C. Payment of the Revolving Note is also secured by, without
limitation, a Deed of Trust dated August 30, 1995, and filed for record with the
Douglas County Register of Deeds on August 31, 1995, as Document No. 13536,
encumbering certain real property as more specifically described therein, as the
same may have been amended or modified ("Deed of Trust").

         D. Payment of the Revolving Note is also secured by, without
limitation, an Assignment of Leases and Rent dated August 30, 1995, and filed
for record with the Douglas County Register of Deeds on August 31, 1995, as
Document No.9508, encumbering certain real property as more specifically
described therein, as the same may have been amended or modified ("Assignment").

         E. Payment of the Revolving Note is guaranteed by Design and
Manufacturing, Inc., Xenotech Strong, Inc., Strong Westrex, Inc., and Xenotech
Rental Corp. by their corporate guaranties dated December 1, 1998 (collectively
"the Guaranties"). The Guaranties are secured by each respective Guarantor's
accounts, inventory, equipment, and general intangibles as more specifically
described in their security agreements dated August 30, 1995 and December 1,
1998.

         F. The Borrower and Guarantors executed a Loan Repayment Agreement
dated December 29, 2000; an Extension Agreement dated January 31, 2001; a Second
Extension Agreement dated March 15, 2001; a Third Extension Agreement dated
April 27, 2001, and a Fourth Extension Agreement dated June 28, 2001, which set
forth additional terms and conditions with regard to the above described
indebtedness (collectively "the Agreement"). Terms not otherwise defined in this
Fifth Extension shall have the same meanings ascribed to them in the Agreement.

         G. The Revolving Note again matures August 14, 2001, and the Borrower
and Guarantors have requested that the Bank extend the Revolving Note in order
for the Borrower to conclude its efforts to refinance the loan, which the Bank
has agreed to do pursuant to the terms and conditions of this Fifth Extension.




         NOW, THEREFORE, in consideration of the foregoing and for good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:

         1. ACKNOWLEDGMENT. The Borrower and the Guarantors acknowledge and
agree that the recitals herein are true and correct and that the indebtedness
under the Revolving Note is due and owing to the Bank without offset, defense or
counterclaims and further acknowledge that the Security Agreement, Deed of
Trust, Assignment and other documents evidencing the security for the Revolving
Note are valid, binding and fully enforceable according to their terms; and
further acknowledge that the Guaranties and security agreements therefor are
valid and binding and fully enforceable according to their terms.

         2. EXTENSION OF REVOLVING NOTE. Subject to the other terms and
conditions of this Fifth Extension, and subject to all terms and conditions of
the Agreement, as amended herein, the indebtedness evidenced by the Revolving
Note shall be extended to August 31, 2001. The Borrower shall execute herewith
an appropriate Note Modification document reflecting the extended maturity date.

         3. COLLATERAL SECURITY AND GUARANTIES. Payment of the Revolving Note
and performance of the Borrower's obligations as set forth in this Fifth
Extension and in the Agreement shall continue to be secured by the Security
Agreement, Deed of Trust and Assignment. The Guarantors also reaffirm their
guaranties of the Revolving Note and acknowledge and agree that their guaranties
apply to the Revolving Note as extended and all other obligations of the
Borrower to the Bank.

         4. CONDITIONS PRECEDENT. The Bank's performance hereunder is subject
to delivery to the Bank of each of the following as conditions precedent:

                  4.1 Duly executed Note Modification;

                  4.2 A certified copy of the resolutions of the Borrower's
         Board of Directors authorizing the execution, delivery and performance
         of this Fifth Extension and any other document to be delivered pursuant
         hereto;

                  4.3 A certificate of the Borrower's corporate secretary as to
         the incumbency and signature of the authorizing officers signing this
         Fifth Extension and any other document to be delivered pursuant hereto;
         and

                  4.4 Copies of any commitment letters, term sheets,
         applications, correspondence or other documents relating to the
         Borrower's efforts to obtain refinancing for the Revolving Note.

         5. REPRESENTATIONS AND WARRANTIES. To induce the Bank to enter
into this Fifth Extension, the Borrower represents and warrants to the Bank as
follows:

                  5.1 The Borrower is a corporation duly organized, existing and
         in good standing under the laws of the State of Delaware and is duly
         qualified to do business and is in good standing in each jurisdiction
         where registration is necessary.

                                      -2-



                  5.2 This Fifth Extension and the documents to be delivered
         pursuant hereto are valid and binding in accordance with their terms
         and the execution, delivery and performance of this Fifth Extension and
         the issuance of the security agreements and other instruments granting
         to Bank its security interest are within the corporate powers of the
         Borrower, have been duly authorized, and are not in contravention of
         law or the terms of its articles of incorporation or bylaws, or of any
         undertaking to which the Borrower is a party or by which it is bound.

                  5.3 The Borrower has made no loans or transferred no interest
         in any property or asset to any person, except in the ordinary course
         of business.

                  5.4 No consent, approval, or authorization of or declaration
         or filing with any governmental authority on the part of the Borrower
         is required in connection with the execution and delivery of this Fifth
         Extension or the consummation of any transaction contemplated hereby.

                  5.5 The Borrower has not incurred or assumed indebtedness
         contingently or otherwise, except: (i) unsecured debt in the ordinary
         course of business; (ii) indebtedness arising under the Agreement; and
         (iii) indebtedness disclosed to the Bank in writing as existing at the
         time of execution of this Fifth Extension.

                  5.6 The assets of the Borrower are not subject to any lien or
         encumbrance except as permitted hereunder and as disclosed to the Bank
         in writing as existing at the time of execution of this Fifth
         Extension.

                  5.7 The Borrower has filed all Federal, state and local tax
         returns and other reports that are required by law to be filed prior to
         the date hereof and has paid or has caused to be paid all taxes,
         assessments and other governmental charges that are due and payable
         prior to the date hereof and has made adequate provision for the
         payment of such taxes, assessments or other charges accruing but not
         yet payable.

                  5.8 All employee (union and non-union) compensation, health,
         welfare, deferred compensation or other benefits which have accrued or
         became payable prior to the date of this Fifth Extension have been paid
         in full and will, during the term of this Fifth Extension, be fully
         paid as and when such obligations become due.

         6. RELEASE. In consideration of the accommodations by the Bank
hereunder, the Borrower and the Guarantors do hereby, on behalf of themselves,
their agents, insurers, heirs, successors and assigns, release, acquit and
forever discharge the Bank and Wells Fargo & Company, (and any and all of their
parent corporations, subsidiary corporations, affiliated corporations, insurers,
indemnitors, successors and assigns, together with all of their present and
former directors, officers, agents and employees) from any and all claims,
demands or causes of action of any kind, nature or description whether arising
in law or equity or upon contract or tort or under any state or federal law or
otherwise, which the Borrower or the Guarantors have had, now have or have made
claim to have against any such party for or by reason of any act, omission,
matter, cause or thing whatsoever from the beginning of time to and including
the date

                                      -3-



of this Fifth Extension, whether such claims, demands and causes of action are
matured or unmatured or known or unknown.

         7. EVENTS OF DEFAULT. The following shall constitute events of default
under this Extension("Event of Default"):

                  7.1 Failure to pay interest, principal or other amounts
         payable on the Revolving Note no later than five days after such
         payments become due; or

                  7.2 Any event of default as defined in the Revolving Note,
         Agreement, Security Agreement, Guaranties, Deeds of Trust, Assignment,
         or any other documents or agreements between the Bank and the Borrower
         or Bank and the Guarantors; or

                  7.3 Breach or violation of any covenant or agreement of the
         Borrower or the Guarantors set forth herein; or

                  7.4 Default by the Borrower relating to any other indebtedness
         for borrowed money or the effect of which default is to permit the
         holder of such indebtedness to declare the same due prior to the date
         fixed for its payment under the terms thereof; or

                  7.5 Any representation or warranty made by the Borrower or the
         Guarantors in this Fifth Extension or by the Borrower or the Guarantors
         in any statement, certificate or instrument contemplated by or made
         pursuant to or in connection with this Fifth Extension shall have been
         untrue or incorrect when made; or

                  7.6 The Borrower or the Guarantors become insolvent; make an
         assignment for the benefit of creditors; a custodian, trustee or
         receiver is appointed for the Borrower or the Guarantors, or for any of
         their properties ; or bankruptcy, reorganization or liquidation
         proceedings are instituted by or against the Borrower or the Guarantors
         and, if instituted against any of them, are consented to by them or
         remain undismissed for thirty (30) days;

                  7.7 The occurrence of any litigation or governmental
         proceeding which is pending or threatened against the Borrower or the
         Guarantors which could have a material adverse effect on the Borrower's
         or the Guarantors' financial condition or business, and which is not
         remedied within a reasonable period of time, not to exceed 10 days
         after notice thereof to the Borrower or the Guarantors; or

                  7.8 An execution, levy, garnishment summons or attachment
         order against the Borrower or the Guarantors is served upon Bank.

         8. REMEDIES. Upon the occurrence of any Event of Default or at any time
thereafter, the Bank or the holder of the Revolving Note may declare the Note to
be due and payable, and the Note shall immediately become due and payable, and
Bank shall be entitled to the immediate exercise of all its rights and remedies
available to it under the Revolving Note, Security Agreement, Guaranties, Deeds
of Trust, Assignment, and all other documents and agreements between the
parties.

                                      -4-



         9. MISCELLANEOUS.

                  9.1 The provisions of this Fifth Extension shall be in
         addition to those of any guaranties, deeds of trust, assignments,
         pledges, security agreements, note or other evidence of liability held
         by the Bank and executed by the Borrower or the Guarantors, all of
         which shall be construed as complementary to each other. Nothing herein
         contained shall prevent the Bank from enforcing any or all other
         guaranties, deeds of trust, assignments, pledges, security agreements,
         note or other evidence of liability in accordance with their respective
         terms.

                  9.2 The Bank shall have the right at all times to enforce the
         provisions of this Fifth Extension and the collateral documents in
         strict accordance with the terms hereof and thereof, notwithstanding
         any conduct or custom on the part of the Bank in refraining from so
         doing at any time or times. The failure of the Bank at any time or
         times to enforce its rights under such provisions, strictly in
         accordance with the same, shall not be construed as having created a
         custom, conduct or course of dealing in any way or manner contrary to
         specific provisions of this Fifth Extension or as having in any way or
         manner modified or waived the same. All rights and remedies of the Bank
         are cumulative and concurrent and the exercise of one right or remedy
         shall not be deemed a waiver or release of any other right or remedy.

                  9.3 This Fifth Extension shall inure to the benefit of, and
         shall be binding upon, the respective successors and permitted assigns
         of the parties hereto. The Borrower and the Guarantors have no right to
         assign any of its rights or obligations hereunder without the prior
         written consent of the Bank. This Fifth Extension, and the documents
         referred to herein or executed and delivered pursuant hereto,
         constitute the entire agreement between the parties, and may be amended
         only by a writing signed on behalf of each party. There are no
         promises, inducements or terms and conditions other than as
         specifically set forth herein.

                  9.4 If any provision of this Fifth Extension shall be held
         invalid under any applicable laws, such invalidity shall not affect any
         other provision of this Fifth Extension that can be given effect
         without the invalid provision, and, to this end, the provisions hereof
         are severable.

                  9.5 No failure of the Bank, or of the holder of the Revolving
         Note, in exercising any right, power or privilege hereunder shall
         affect such right, power or privilege, nor shall any single or partial
         exercise thereof preclude any further exercise thereof or the exercise
         of any other right, power or privilege. The rights and remedies of the
         Bank or the holder of the Revolving Note or other evidence of liability
         under this Fifth Extension are cumulative and not exclusive of any
         rights and remedies which it may otherwise have.

                  9.6 This Fifth Extension may be executed in any number of
         counterparts, each of which shall be deemed to be an original, but all
         of which together shall constitute but one and the same instrument.

                  9.7 If any provision contained in this Fifth Extension is
         inconsistent with any provision of any of the documents described
         herein or any other document in favor of the Bank, the provision
         contained in this Fifth Extension

                                      -5-



         shall supersede such inconsistent provision in the document described
         herein or any document in favor of the Bank.

                  9.8 The substantive laws of the State of Nebraska shall govern
         the construction of this Fifth Extension and the rights and remedies of
         the parties hereto.

         10. FEES AND EXPENSES. Upon execution of this Fifth Extension, the
Borrower shall pay to the Bank an extension fee of $0.00, which shall be deemed
fully earned and not applied to the outstanding indebtedness under the Revolving
Note. In addition the Borrower agrees, within 10 days of invoice, to pay to the
Bank all expenses including, but not limited to, (i) the reasonable fees and
expenses of legal counsel for the Bank, incurred in connection with the
preparation, administration, amendment, modification or enforcement of this
Fifth Extension and the collateral documents and the collection or attempted
collection of the indebtedness; and (ii) expenses of future collateral audits
conducted by the Bank at the Bank's customary rates.

         11. ADVICE OF COUNSEL. The Borrower and the Guarantors acknowledge that
they have reviewed this Fifth Extension in its entirety, having consulted such
legal, tax or other advisors as they deem appropriate and understand and agree
to each of the provisions of this Fifth Extension and further acknowledge that
they have entered into this Fifth Extension voluntarily.

         IN WITNESS WHEREOF, the parties hereto have duly executed this Fifth
Extension as of the day and year first above written.


BALLANTYNE OF OMAHA, INC.           WELLS FARGO BANK NEBRASKA,
                                         NATIONAL ASSOCIATION

By: /s/ John Wilmers                 By: /s/ Jerry Lundgren
   --------------------                  --------------------
   Its: President                        Its: Vice-President

         And

By: /s/ Brad French
    -------------------
    Its: CFO


DESIGN AND MANUFACTURING, INC.           STRONG WESTREX, INC

By: /s/ John Wilmers                By: /s/ John Wilmers
    -----------------                   ------------------
    Its: President                      Its: President


XENOTECH STRONG, INC.                    XENOTECH RENTAL CORP.

By: /s/ John Wilmers                By: /s/ John Wilmers
   ------------------                   ------------------
    Its: President                      Its: President

                                      -6-

EX-10.8(1)

                SECOND AMENDMENT TO THE BALLANTYNE OF OMAHA, INC.
                -------------------------------------------------
                    1995 OUTSIDE DIRECTORS' STOCK OPTION PLAN
                    -----------------------------------------



     The Ballantyne of Omaha, Inc., 1995 Outside Directors' Stock Option Plan,
as amended, is hereby further amended to read as follows:

          1.   The first paragraph of Section 6 is amended to read as follows:

               "The maximum aggregate number of Shares which may
               be subject to NQSOs granted to Non-Employee
               Directors under the Plan shall be 509,875. The
               limitation on the number of Shares which may be
               subject to NQSOs under the Plan shall be subject
               to adjustment as provided in Section 9(b)."

          2.   All other terms, conditions, and provisions of said Plan, and
the First Amendment thereto, shall remain the same.

     DATED as of the 24th day of January, 2001.

                                            BALLANTYNE OF OMAHA, INC.


                                        By: /s/ John Wilmers
                                           --------------------------
                                            John Wilmers, President

ATTEST:

/s/ Brad French

Brad French, Secretary

     I hereby certify that the above amendment to the Ballantyne of Omaha, Inc.,
1995 Stock Option Plan was approved by the Board of Directors of the corporation
by unanimous consent on the 26th day of March, 2001, and at a Special Meeting of
the Board on April 25, 2001.

     DATED at Omaha, Nebraska, this 25th day of April, 2001.

                                            /s/ Brad French

                                            Brad French, Secretary

EX-10.8(2)

                            BALLANTYNE OF OMAHA, INC.
                           2001 NON-EMPLOYEE DIRECTORS
                                STOCK OPTION PLAN


     1.   NAME.

     The name of this Plan is the Ballantyne of Omaha, Inc. 2001 Non-Employee
Directors Stock Option Plan.


     2.   DEFINITIONS.

     For the purposes of the Plan, the following terms shall be defined as set
forth below:

     (a)  "Affiliate" means any partnership, corporation, firm, joint venture,
          association, trust, limited liability company, unincorporated
          organization, or other entity (other than a Subsidiary) that, directly
          or indirectly through one or more intermediaries, is controlled by the
          Company, where the term "controlled by" means the possession, direct
          or indirect, of the power to cause the direction of the management and
          policies of such entity, whether through the ownership of voting
          interests, or voting securities, as the case may be, by contract, or
          otherwise.

     (b)  "Board" means the board of directors of the Company.

     (c)  "Code" means the Internal Revenue Code of 1986, as amended from time
          to time, and the Treasury regulations promulgated thereunder.

     (d)  "Common Stock" means the common stock, $.01 par value per share, of
          the Company or any security of the Company identified by the Board as
          having been issued in substitution or exchange therefor or in lieu
          thereof.

     (e)  "Company" means Ballantyne of Omaha, Inc., a Delaware corporation.

     (f)  "Effective Date" means May 23, 2001.

     (g)  "Employee" means an individual whose wages are subject to the
          withholding of federal income tax under Section 3401 of the Code.

     (h)  "Exchange Act" means the Securities Exchange Act of 1934, as amended
          from time to time, or any successor statute.


                                       1




     (i)  "Fair Market Value" of a Share as of a specified date means the mean
          market price of a Share determined by reference to the principal
          market or exchange on which the Shares are then traded.

     (j)  "Non-Employee Director" means an individual who: (i) is now, or
          hereafter becomes, a member of the Board; and (ii) is not an Employee
          of the Company or of any Subsidiary or Affiliate on the date of the
          grant of the NQSO.

     (k)  "NQSO" means a stock option that is not qualified under Section 422 of
          the Code.

     (l)  "Officer" means an individual elected or appointed by the Board or by
          the board of directors of a Subsidiary, or chosen in such other manner
          as may be prescribed by the by-laws of the Company or a Subsidiary, as
          the case may be, to serve as such.

     (m)  "Participant" means a Non-Employee Director who is granted a NQSO
          under the Plan.

     (n)  "Plan" means this 2001 Non-Employee Directors Stock Option Plan.

     (o)  "Rule 16b-3" means Rule 16b-3 promulgated by the Securities and
          Exchange Commission under the Exchange Act, or any successor or
          replacement rule adopted by the Securities and Exchange Commission.

     (p)  "Share" means one share of Common Stock, adjusted in accordance with
          Section 9(b), if applicable.

     (q)  "Stock Option Agreement" means the written agreement between the
          Company and the Participant that contains the terms and conditions
          pertaining to the NQSO.

     (r)  "Subsidiary" means any corporation or entity of which the Company,
          directly or indirectly, is the beneficial owner of fifty percent (50%)
          or more of the total voting power of all classes of its stock having
          voting power, unless the Board shall determine that any such
          corporation or entity shall be excluded hereunder from the definition
          of the term Subsidiary.

     3.   PURPOSE.

     The purpose of the Plan is (i) to enable the Company to grant options to
purchase Company stock to its Non-Employee Directors in lieu of all or part of
the cash retainer otherwise paid to them for service on the Board, in order to
provide incentives, which are linked directly to increases in stockholder value,
so that they will be encouraged to serve on


                                       2




the Board and exert their best efforts on behalf of the Company, and (ii) to
preserve cash for the Company.

     4.   ADMINISTRATION.

     (a)  BOARD OF DIRECTORS.

          The Plan shall be administered by the Board of Directors, which shall
          have the authority to administer the Plan in its sole and absolute
          discretion; to grant NQSOs; to determine the number of Shares subject
          to NQSOs and the price at which each Share covered by a NQSO may be
          purchased pursuant to the Plan; all as set forth in Section 8. To this
          end, the Board of Directors is authorized to construe and interpret
          the Plan and to make all other determinations necessary or advisable
          for the administration of the Plan. Subject to the foregoing, any
          determination, decision, or action of the Board of Directors in
          connection with the construction, interpretation, administration, or
          application of the Plan shall be final, conclusive and binding upon
          all Participants and any person validly claiming under or through a
          Participant.

     (b)  LIABILITY OF BOARD MEMBERS.

          No member of the Board will be liable for any action or determination
          made in good faith by the Board with respect to the Plan or any grant
          or exercise of a NQSO thereunder.

     (c)  NQSO ACCOUNTS.

          The Company shall maintain a journal in which a separate account for
          each Participant shall be established. Whenever NQSOs are granted to
          or exercised by a Participant, the Participant's account shall be
          appropriately credited or debited. Appropriate adjustment shall also
          be made in the journal with respect to each account in the event of an
          adjustment pursuant to Section 9(b).

     5.   EFFECTIVE DATE , TERM OF THE PLAN, PLAN YEAR.

     (a)  EFFECTIVE DATE OF THE PLAN.

          The Plan was adopted by the Board and became effective on May 23,
          2001.


                                       3




     (b)  TERM OF THE PLAN.

          No NQSO shall be granted pursuant to the Plan on or after May 22,
          2011, but NQSOs theretofore granted may extend beyond that date.

     (c)  PLAN YEAR.

          The initial Plan Year begins July 1, 2001 and ends June 30, 2002.
Subsequent Plan Years begin on July 1 of each year and end on June 30 of the
following calendar year.

     6.   SHARES SUBJECT TO THE PLAN.

     The maximum aggregate number of Shares which may be subject to NQSOs
granted to Non-Employee Directors under the Plan shall be One Million
(1,000,000). The limitation on the number of Shares which may be subject to
NQSOs under the Plan shall be subject to adjustment as provided in Section 9(b).

     If any NQSO granted under the Plan expires, or is terminated for any reason
without having been exercised in full, the Shares allocable to the unexercised
portion of such NQSO shall again become available for grant pursuant to the
Plan. At all times during the term of the Plan, the Company shall reserve and
keep available for issuance such number of shares as the Company is obligated to
issue upon the exercise of all then outstanding NQSOs.

     7.   SOURCE OF SHARES ISSUED UNDER THE PLAN.

     Common Stock issued under the Plan shall be authorized and unissued Shares.
No fractional Shares shall be issued under the Plan.


     8.   NON-QUALIFIED STOCK OPTIONS.

     (a)  ELECTION.

          At least thirty (30) days prior to the beginning of each Plan Year,
          the Board of Directors shall fix the amount of the Non-Employee
          Director's retainer fee for the coming year and shall notify each
          Non-Employee Director of such amount. Each Non-Employee Director may
          then elect to receive all or any part of his Director's retainer fee
          in the form of stock options ("NQSOs"). To be effective, such election
          shall be transmitted in writing to the Corporate Secretary of the
          Company and received by the Secretary on or before the beginning of
          the Plan Year for which the election is to take effect. Such


                                       4




          election shall specify the dollar amount of the Director's retainer
          fee for the Plan Year to be taken in the form of NQSOs.

     (b)  GRANT OF NQSOS; VESTING.

          Except for new Directors who become Directors during a Plan Year, all
          NQSOs shall be granted as of the first day of the Plan Year for which
          they are given. The Board shall determine the number of NQSOs to be
          issued according to the following formula: The dollar amount specified
          in the election shall be divided by the Fair Market Value of a Share
          as of the first day of the Plan Year, provided, however, if the first
          day of the Plan Year falls on a weekend or holiday, the Fair Market
          Value shall be determined as of the next business day. This quotient
          shall be multiplied by two (2) to arrive at the number of NQSOs to be
          issued. Upon receipt of an effective election by a Participant, the
          Board shall approve the issuance of the NQSOs subject, to the
          following vesting schedule: Twenty-five percent (25%) of such options
          shall be vested as of September 30 of the Plan Year, and an additional
          twenty-five percent (25%) of such options shall be vested as of
          December 31, March 31 and June 30 of the Plan Year.

     (c)  THE EXERCISE PRICE.

          The exercise price of a Share shall be the Fair Market Value of such
          Share on the first day of the Plan Year for which the options are
          granted (or the next business day if such date falls on a weekend or
          holiday).

     (d)  NEW DIRECTORS

          A person who becomes a Non-Employee Director during a Plan Year shall
          be subject to the following conditions regarding NQSOs:

          (i)  Said Director shall become a Participant in the Plan as of the
               first day of the calendar quarter if his appointment as a
               Director is effective as of the first day of the calendar
               quarter, otherwise he shall become a Participant on the first
               day of the calendar quarter next following the effective date
               of his appointment as a Director; and

          (ii) Said Director shall have the opportunity to elect to receive
               all, or any part of his Director's retainer fee as fixed by the
               Board for that Plan Year, pro-rated for the number of full
               quarters remaining in the Plan Year, in the form of stock
               options ("NQSOs"). To be effective, such election shall be
               transmitted in writing to the Corporate Secretary of the
               Company and received by the Secretary on or before the
               beginning of the first day of the calendar quarter which occurs
               on or next following the effective date of his appointment as a
               Director. Such election shall specify what dollar amount of the
               Director's retainer fee for the Plan Year shall be taken in the
               form of NQSOs.


                                       5





          (iii) The number of NQSOs to be issued shall be determined according
                to the formula set forth in Section 8(b) above, except that the
                Fair Market Value of a Share shall be determined as of the
                first business day of the calendar quarter which occurs on or
                next following the effective date of said Director's
                appointment to the Board.

          (iv) The NQSOs elected by said Director shall vest in equal
               percentages based on the number of full calendar quarters
               remaining in the Plan Year as of the time of the election.

     (e)  TERMS AND CONDITIONS.

          All NQSOs granted pursuant to the Plan shall be evidenced by a Stock
          Option Agreement (which need not be the same for each Participant or
          NQSO), approved by the Board, which shall be subject to the following
          express terms and conditions and to the other terms and conditions
          specified in this Section 8, and to such other terms and conditions as
          shall be determined by the Board in its sole and absolute discretion
          which are not inconsistent with the terms of the Plan:

          (i)   the failure of a NQSO to vest for any reason whatsoever shall
                cause the NQSO to expire and be of no further force or effect;

          (ii)  unless terminated earlier pursuant to this Plan, the term of
                each NQSO shall be five years from the date of grant;

          (iii) NQSOs shall not be transferable by the Participant otherwise
                than by will or by the laws of descent and distribution, and
                shall be exercisable during the lifetime of the Participant only
                by him or by his guardian or legal representative;

          (iv)  No NQSO or interest therein may be transferred, assigned,
                pledged, or hypothecated by the Participant during his lifetime
                whether by operation of law or otherwise, or be made subject to
                execution, attachment, or similar process; and

          (v)   payment for the Shares to be received upon exercise of a NQSO
                may be made in cash, in Shares (determined with reference to
                their Fair Market Value on the date of exercise) or any
                combination thereof.

     (f)  ADDITIONAL MEANS OF PAYMENT.

          Any Stock Option Agreement may, in the sole and absolute discretion of
          the Board, permit payment by any other form of legal consideration
          consistent with applicable law and any rules and regulations relating
          thereto, including,


                                       6




          but not limited to, the execution and delivery of a full recourse
          promissory note (bearing interest at a rate not less than the prime
          rate announced as then being in effect by the Company's principal
          lender and whose maturity date shall not exceed beyond ten years) by
          the Participant to the Company.

     (g)  EXERCISE.

          The holder of a NQSO may exercise the same by filing with the
          Corporate Secretary of the Company a written election, in such form as
          the Board may determine, specifying the number of Shares with respect
          to which such NQSO is being exercised. Such notice shall be
          accompanied by payment in full of the exercise price for such Shares.
          Notwithstanding the foregoing, the Board may specify a reasonable
          minimum number of Shares that may be purchased on any exercise of an
          Option, provided that such minimum number will not prevent the holder
          from exercising the Option with respect to the full number of Shares
          as to which the Option is then exercisable.

     (h)  TERMINATION OF NQSOS.

          NQSOs granted under the Plan shall be subject to the following events
          of termination:

          (i)   in the event a Participant is removed from the Board for cause
                (as contemplated by the Company's by-laws), all unexercised
                NQSOs held by such Participant on the date of such removal
                (whether or not vested) will expire immediately;

          (ii)  in the event a Participant ceases to be a member of the Board,
                other than by reason of removal for cause, a portion of the
                Options which would otherwise vest on the last day of the
                quarter during which a Participant leaves the Board shall vest
                on the last day of such Participant's service as a Director.
                Such portion shall be equal to that percentage of the total
                shares which would otherwise vest for that quarter,
                proportionate to the number of days the Director served as a
                Director, compared to the total number of days in that quarter.
                All other NQSOs which remain unvested shall expire immediately;
                and

          (iii) in the event a Participant becomes an Employee of the Company or
                a Subsidiary (whether or not such Participant remains as a
                member of the Board) a portion of the Options which would
                otherwise vest during the quarter in which the Director becomes
                an Employee of the Company, shall vest. All other NQSOs which
                remain unvested shall expire immediately.

     9.   RECAPITALIZATION.


                                       7




     (a)  CORPORATE FLEXIBILITY.

          The existence of the Plan and the NQSOs granted hereunder shall not
          affect or restrict in any way the right or power of the Board or the
          stockholders of the Company, in their sole and absolute discretion, to
          make, authorize or consummate any adjustment, recapitalization,
          reorganization or other change in the Company's capital structure or
          its business, any merger or consolidation of the Company, any issue of
          bonds, debentures, common stock, preferred or prior preference stocks
          ahead of or affecting the Company's capital stock or the rights
          thereof, the dissolution or liquidation of the Company, or any sale or
          transfer of all or any part of its assets or business, or any other
          grant of rights, issuance of securities, transaction, corporate act,
          or proceeding, notwithstanding the fact that any such activity,
          proceedings, action, transaction, or other event may have, or be
          expected to have, an impact (whether positive or negative) on the
          value of any NQSO.

     (b)  ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.

          Except as otherwise provided in Section 10 below and subject to any
          required action by the stockholders of the Company, in the event of
          any change in capitalization affecting the Common Stock of the
          Company, such as a stock dividend, stock split or recapitalization,
          the Board shall make proportionate adjustments with respect to: (1)
          the aggregate number of Shares available for issuance under the Plan;
          (ii) the number of Shares subject to each grant under the Plan; (iii)
          the number and exercise price of Shares subject to outstanding NQSOs;
          and (iv) such other matters as shall be appropriate in light of the
          circumstances; PROVIDED, HOWEVER, that the number of Shares subject to
          any NQSO shall always be a whole number and that no such adjustment
          shall be made if the adjustment would cause the Plan to fail to comply
          with the "formula award' exception, as set forth in Rule 16b-3
          (c)(2)(ii) of the Exchange Act, for grants of NQSOs to non-employee
          directors.

     10.  CHANGE OF CONTROL.

     In the event of a Change of Control (as defined below), all Options not
vested on or prior to the effective time of any such Change of Control shall
immediately vest as of such effective time. The Board in its discretion may make
provisions for the assumption of outstanding Options, or the substitution for
outstanding Options of new incentive awards covering the stock of a successor
corporation or a parent or subsidiary thereof, with appropriate adjustments as
to the number and kind of shares and prices so as to prevent dilution or
enlargement of rights; provided, however, that no such adjustment shall be made
if the adjustment would cause the Plan to fail to comply with the "formula
award"


                                       8




exceptions, as set forth in Rule 16b-3(c)(2)(ii) of the Exchange Act, for grants
of NQSOs to non-employee directors.

     A "Change of Control" will be deemed to occur on the date any of the
following events occur:

     (a)  any person or persons acting together which would constitute a "group"
          for purpose of Section 13(d) of the Exchange Act (other than the
          Company, any Subsidiary and any entity beneficiary owned by any of the
          foregoing), beneficially own (as defined in Rule 13d-3 under the
          Exchange Act) without Board approval, directly or indirectly, at least
          30% of the total voting power of the Company entitled to vote
          generally in the election of the Board;

     (b)  either (i) the Current Directors (as herein defined) cease for any
          reason to constitute at least a majority of the members of the Board
          (for these purposes, a "Current Director" means any member of the
          Board as of May 23, 2001, and any successor of a Current Director, and
          any additional Director filling a vacancy created by an expansion of
          the size of the Board, whose election, or nomination for election by
          the Company's shareholders, was approved by at least a majority of the
          Current Directors then on the Board) or (ii) at any meeting of the
          stockholders of the Company called for the purpose of electing
          directors, a majority of the persons nominated by the Board for
          election as directors fail to be elected;

     (c)  the stockholders of the Company approve (i) a Plan of complete
          liquidation of the Company, or (ii) an agreement providing for the
          merger or consolidation of the Company (A) in which the Company is not
          the continuing or surviving corporation (other than consolidation or
          merger with a wholly-owned subsidiary of the Company in which all
          Shares outstanding immediately prior to the effectiveness thereof are
          changed into or exchanged for the same consideration) or (B) pursuant
          to which the Shares are converted into cash, securities or other
          property, except a consolidation or merger of the Company in which the
          holders of the Shares immediately prior to the consolidation or merger
          have, directly or indirectly, at least a majority of the common stock
          of the continuing or surviving corporation immediately after such
          consolidation or merger, or in which the Board immediately prior to
          the merger or consolidation would, immediately after the merger or
          consolidation, constitute a majority of the board of directors of the
          continuing or surviving corporation; or

     (d)  the stockholders of the Company approve an agreement (or agreements)
          providing for the sale or other disposition (in one transaction or a
          series of transactions) of all or substantially all of the assets of
          the Company.

     11.  SECURITIES LAW REQUIREMENTS.


                                       9




     No Shares shall be issued under the Plan unless and until: (i) the Company
and the Participant have taken all actions required to register the Shares under
the Securities Act of 1933, as amended, or perfect an exemption from the
registration requirements thereof; (ii) any applicable requirement of Nasdaq or
any stock exchange on which the Common Stock is listed has been satisfied; and
(iii) any other applicable provisions of state or federal law have been
satisfied. The Company shall be under no obligation to register the Shares under
the Securities Act of 1933, as amended, or to effect compliance with the
registration or qualification requirements of any state securities laws.

     12.  AMENDMENT AND TERMINATION.

     (a)  MODIFICATIONS TO THE PLAN.

          The Board may, insofar as permitted by law, from time to time, with
          respect to any Shares at the time not subject to NQSOs, suspend or
          terminate the Plan or, subject to Sections 8(a) through 8(d), revise
          or amend the Plan in any respect whatsoever. However, unless the Board
          specifically otherwise provides, any revision or amendment that would
          cause the Plan to fail to comply with Rule 16b-3 or any other
          requirement of applicable law or regulation if such amendment were not
          approved by the stockholders of the Company shall not be effective
          unless and until such approval is obtained.

     (b)  RIGHTS OF PARTICIPANT.

          No amendment, suspension or termination of the Plan that would
          adversely affect the right of any Participant with respect to a NQSO
          previously granted under the Plan will be effective without the
          written consent of the affected Participant.

     13.  MISCELLANEOUS.

     (a)  STOCKHOLDERS' RIGHTS.

          No Participant and no beneficiary or other person claiming under or
          through such Participant shall acquire any rights as a stockholder of
          the Company by virtue of such Participant having been granted a NQSO
          under the Plan. No Participant and no beneficiary or other person
          claiming under or through such Participant will have any right, title
          or interest in or to any Shares, allocated or reserved under the Plan
          or subject to any NQSO except as to Shares, if any, that have been
          issued or transferred to such Participant. No adjustment shall be made
          for cash dividends for which the record date is prior to the date of
          exercise.


                                       10




     (b)  OTHER COMPENSATION ARRANGEMENTS.

          Nothing contained in the Plan shall prevent the Board from adopting
          other compensation arrangements, subject to stockholder approval if
          such approval is required. Such other arrangements may be either
          generally applicable or applicable only in specific cases.

     (c)  TREATMENT OF PROCEEDS.

          Proceeds realized from the exercise of NQSOs under the Plan shall
          constitute general funds of the Company.

     (d)  COSTS OF THE PLAN.

          The costs and expenses of administering the Plan shall be borne by the
          Company.

     (e)  NO RIGHT TO CONTINUE AS DIRECTOR.

          Nothing contained in the Plan or in any instrument executed pursuant
          to the Plan will confer upon any Participant any right to continue as
          a member of the Board or affect the right of the Company, the Board or
          the stockholders of the Company to terminate the directorship of any
          Participant at any time with or without cause.

     (f)  SEVERABILITY.

          The provisions of the Plan shall be deemed severable and the validity
          or unenforceability of any provision shall not affect the validity or
          enforceability of the other provisions hereof.

     (g)  BINDING EFFECT OF PLAN.

          The Plan shall inure to the benefit of the Company, its successors and
          assigns.

     (h)  NO WAIVER OF BREACH.

     No waiver by any party hereto at any time of any breach by another party
hereto of, or compliance with, any condition or provision of the Plan to be
performed by such other party shall be deemed a wavier of the same, any similar
or any dissimilar provisions of conditions at the same or at any prior or
subsequent time.

     (i)  GOVERNING LAW.

     The Plan and all actions taken thereunder shall be enforced, governed and
construed by and interpreted under the laws of the State of Delaware applicable
to


                                       11




contracts made and to be performed wholly within such State without giving
effect to the principles of conflict of laws thereof.

     (j)  HEADINGS.

     The headings contained in the Plan are for reference purposes only and
shall not affect in any way the meaning or interpretation of the Plan.

     14. EXECUTION.

     To record the adoption of the Plan to read as set forth herein, the Company
has caused the Plan to be signed by its President and attested by its Secretary
on May 23, 2001.


                                            BALLANTYNE OF OMAHA, INC.


                                       By:  /s/ John Wilmers
                                            --------------------------
                                            John P. Wilmers, President
ATTEST:

/s/ Brad French
- ----------------------
Brad French, Secretary


                                       12

EX-10.9(1)

                            BALLANTYNE OF OMAHA, INC.
                                  2000 EMPLOYEE
                               STOCK PURCHASE PLAN


1.   DEFINITIONS

     The following terms shall have the meanings set forth below:

          (a)  "Base Pay" shall mean an Eligible Employee's basic or regular
compensation from the Corporation, and its Subsidiaries, excluding overtime,
shift premiums, incentive payments, commissions, bonuses and other non-basic
compensation items.

          (b)  "Board" shall mean the board of directors of the corporation.

          (c)  "Business Day" shall mean any day of the week other than Saturday
or Sunday.

          (d)  "Code" shall mean the United States Internal Revenue Code of
1986, as amended.

          (e)  "Committee" shall have the meaning ascribed to that term in
Section 9.1 hereof.

          (f)  "Common Stock" shall mean the common stock, $.01 par value per
share, of the Corporation.

          (g)  "Corporate Secretary" shall mean the Corporate Secretary of the
Corporation.

          (h)  "Corporation" shall mean Ballantyne of Omaha, Inc., a Delaware
corporation.

          (i)  "Dispositive Act" shall have the meaning ascribed to that term in
Section 10.4 hereof.

          (j)  "Eligible Employee" shall mean, as of any applicable Offering
Date, each Employee who has been in the continuous employ of the Corporation or
any of its Subsidiaries for at least ninety (90) days.

          (k)  "Employee" shall mean each employee of the Corporation or any of
its Subsidiaries including, but not limited to, executive officers and directors
who are also





employees of the Corporation and/or its Subsidiaries, provided that
such employee's customary work week is more than twenty (20) hours per week.

          (l)  "1933 Act" shall mean the Securities Act of 1933, as amended.

          (m)  "1934 Act" shall mean the Securities Exchange Act of 1934, as
amended.

          (n)  "Offering Date" shall mean the first Business Day in November in
each of the years 2000 through 2004.

          (o)  "Offering Period" shall mean each of the periods commencing on an
Offering Date and ending on the Purchase Date in the year immediately following
such Offering Date.

          (p)  "Option" shall mean a right granted pursuant to the Plan to
purchase Common Stock in an amount determined in accordance with the terms of
the Plan.

          (q)  "Participant", as it relates to an Offering Period, shall mean
each Eligible Employee who has executed a subscription and payroll deduction
agreement in accordance with Section 3.1 of the Plan.

          (r)  "Plan" shall mean the Ballantyne of Omaha, Inc. 2000 Employee
Stock Purchase Plan.

          (s)  "Purchase Date" shall mean the last Business Day in October in
each of the years 2001 through 2005.

          (t)  "Stock Price", as of a specified date, shall mean the average of
the highest and lowest market prices of a share of Common Stock on the New York
Stock Exchange on such date as reported in the Eastern Edition of THE WALL
STREET JOURNAL, or if no trading of Common Stock is reported for that day, the
next preceding day on which trading was so reported. In the event that the
Common Stock is not then traded on the New York Stock Exchange, the Stock Price
shall be determined by reference to the principal market or exchange on which
the Common Stock is then traded.

          (u)  "Subsidiary" shall mean any corporation of which the Corporation,
directly or indirectly, is the beneficial owner of fifty percent (50%) or more
of the total voting power of


                                       2




all classes of its stock having voting power and which qualifies as a subsidiary
corporation pursuant to Section 424 of the Code.

2.   PURPOSE

     The purpose of the Plan is to provide a method by which Eligible Employees
may purchase Common Stock on a discounted basis through payroll deductions. The
Corporation believes that participation in the 2000 Plan provides Eligible
Employees at all levels with a greater incentive to contribute to the success of
the Corporation. It is the intention of the Corporation to have the Plan qualify
as an "employee stock purchase plan" under Section 423 of the Code. The
provisions of the Plan shall be construed so as to extend and limit
participation in a manner consistent with the requirements of Section 423 of the
Code.


                                       3





3.   PARTICIPATION

     3.1  COMMENCEMENT OF PARTICIPATION. Prior to each Offering Date, the
Corporation shall make subscription and payroll deduction agreements available
to all Eligible Employees. To subscribe for Common Stock in connection with an
Offering Period, an Eligible Employee must complete, execute and deliver a
subscription and payroll deduction agreement to the Corporate Secretary prior to
such Offering Date. Eligible Employees who desire to participate in a subsequent
Offering Period under the Plan must execute and deliver a separate subscription
and payroll deduction agreement to the Corporate Secretary. Payroll deductions
for a Participant shall commence on the applicable Offering Date when his or her
subscription and payroll deduction agreement becomes effective and shall end on
the Purchase Date to which such agreement is applicable unless sooner terminated
as provided in Section 8.

     3.2  RESTRICTIONS ON PARTICIPATION. Notwithstanding any provisions of the
Plan to the contrary, no Eligible Employee shall be granted an Option:

          (a)  if, immediately after such grant, such Eligible Employee would
for purposes of Section 423(b)(3) of the Code own stock, and/or hold outstanding
options to purchase stock, possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Corporation or of
any Subsidiary (for purposes of this paragraph, the rules of Section 424(d) of
the Code shall apply in determining stock ownership of any Eligible Employee);
or

          (b)  which permits his or her rights to purchase stock under all
employee stock purchase plans of the Corporation or any Subsidiary to accrue at
a rate which pursuant to Section 423(b)(8) of the Code exceeds $25,000 of the
fair market value of such stock (determined at the time such Option is granted)
for each calendar year in which such Option is outstanding at any time.

4.   COMMON STOCK SUBJECT TO THE PLAN

     4.1  OFFERING PERIOD AMOUNTS. The maximum number of shares of Common Stock
which may be sold pursuant to Options exercised under the Plan is 500,000,
subject to adjustment upon changes in capitalization of the Corporation as
provided in Section 4.3. The maximum number of shares of Common Stock
purchasable by all Eligible Employees during an


                                       4





Offering Period, subject to adjustment upon changes in capitalization of the
Corporation as provided in Section 4.3, shall be as follows: (a) during the
Offering Period ending in October 2001, 100,000 shares of Common Stock; (b)
during the Offering Period ending in October 2002, one-fourth of the shares of
Common Stock remaining available for purchase under the Plan; (c) during the
Offering Period ending in October 2003, one-third of the shares of Common Stock
remaining available for purchase under the Plan; (d) during the Offering Period
ending in October 2004, one-half of the shares of Common Stock remaining
available for purchase under the Plan; and (e) during the Offering Period ending
in October 2005, all of the shares of Common Stock remaining available for
purchase under the Plan. In the event of an oversubscription for shares of
Common Stock during any Offering Period, the Committee shall make a PRO RATA
allocation of the shares of Common Stock available for delivery and distribution
in as nearly a uniform manner as shall be practicable and as it shall determine
to be equitable. In such event, the Corporation shall give written notice of
such allocation to each Eligible Employee affected thereby and the surplus of
the payroll deductions credited to the account of each such Eligible Employee
shall be returned to him or her as promptly as possible.

     4.2  SOURCE OF COMMON STOCK. The Common Stock to be issued upon the
exercise of Options shall be authorized and unissued shares of Common Stock. If
for any reason shares of Common Stock as to which an Option has been granted
cease to be subject to purchase thereunder, then such shares of Common Stock
again shall be available for issuance pursuant to Options.

     4.3  ADJUSTMENT UPON CHANGES IN CAPITALIZATION. Subject to any required
action by the stockholders of the Corporation, if, while any Options are
outstanding, the outstanding shares of Common Stock have increased, decreased,
changed into or been exchanged for a different number of shares or securities of
the Corporation through reorganization, merger, subdivision, consolidation,
recapitalization, reclassification, stock split, reverse stock split, stock
dividend or similar transaction, the Committee may make appropriate and
proportionate adjustments: (a) in the number and/or kind of shares which are
subject to purchase under outstanding Options; (b) to the Stock Price applicable
to such outstanding Options; and (c) the number and/or kind of shares which may
be offered in each subsequent Offering Period. In no event, however, shall



                                       5





adjustments be made for the conversion of any convertible securities of the
Corporation or the exercise of any option or warrant to purchase securities of
the Corporation.

5.   PAYROLL DEDUCTIONS

     5.1  AMOUNT OF DEDUCTION. At the time a Participant files his or her
subscription and payroll deduction agreement, he or she shall elect to have
payroll deductions made on each payday during the Offering Period at a rate not
exceeding ten percent (10%) of his or her Base Pay as in effect on the Offering
Date.

     5.2 PARTICIPANT'S ACCOUNT. All payroll deductions made for a Participant
shall be credited to his or her account under the Plan. A Participant may not
make any separate cash payments into such account.

     5.3  CHANGES IN PAYROLL DEDUCTIONS. A Participant may withdraw from the
Plan as provided in Section 8, or may decrease (but not increase) the rate of
his or her payroll deductions a maximum of once during the Offering Period by
completing and filing with the Corporate Secretary a new subscription and
payroll deduction agreement. In the event a Participant elects to decrease the
rate of his or her payroll deductions, such decrease shall become effective no
later than fifteen (15) days after the Corporate Secretary's receipt of the new
subscription and payroll deduction agreement.

     5.4  FORM OF PAYMENT. Payment for shares of Common Stock purchased under
the Plan shall be made in United States dollars. Participants who are paid in
foreign currency must make an arrangement with their employer to pay for shares
of Common Stock purchased under the Plan in United States dollars.

6.   GRANT OF OPTIONS

     6.1  ENTITLEMENT. On each Offering Date, each Participant shall be deemed
to have been granted an Option by the Corporation to purchase that number of
whole shares of Common Stock determined by dividing the aggregate amount of the
Participant's payroll deductions which will be made during the Offering Period
(not to exceed an amount equal to ten percent (10%) of his or her Base Pay
during the Offering Period) by the lesser of: (a) eighty-five percent (85%) of
the Stock Price on the Offering Date, or (b) eighty-five percent (85%) of the
Stock Price on the


                                       6





Purchase Date; PROVIDED, HOWEVER, that, subject to Section 3.2(b), the maximum
number of shares of Common Stock that can be purchased pursuant to any Option is
two thousand (2,000).

     6.2  OPTION PRICE. The per share price at which Common Stock will be sold
upon exercise of an Option shall be equal to the lesser of: (a) eighty-five
percent (85%) of the Stock Price on the Offering Date, or (b) eighty-five
percent (85%) of the Stock Price on the Purchase Date.

7.   EXERCISE OF OPTION

     7.1  AUTOMATIC EXERCISE. Unless a Participant gives written notice as
hereinafter provided, his or her Option shall be deemed to have been exercised
automatically on the Purchase Date for the maximum number of whole shares of
Common Stock which may be purchased under such Option with the accumulated
payroll deductions in his or her account on the Purchase Date, and any surplus
cash in his or her account at that time will be returned to him or her, without
interest, as promptly as practicable thereafter.

     7.2  FRACTIONAL SHARES. Fractional shares of Common Stock will not be
issued under the Plan and any accumulated payroll deductions which would have
been used to purchase fractional shares of Common Stock will be returned to each
Participant as promptly as practicable following the termination of an Offering
Period without interest.

     7.3  EXERCISE OF OPTION. During a Participant's lifetime, Options held by
such Participant shall be exercisable only by that Participant.

     7.4  DELIVERY OF STOCK CERTIFICATES. As promptly as practicable after the
Purchase Date of each Offering Period, the Corporation will deliver to each
Participant, one or more certificates representing the number of shares of
Common Stock purchased upon exercise of his or her Option.

8.   WITHDRAWAL

     8.1  GENERAL. A Participant may withdraw all, but not less than all, of the
accumulated payroll deductions credited to his or her account under the Plan at
any time prior to the Purchase Date by giving written notice to the Corporate
Secretary. All of the Participant's payroll


                                       7





deductions credited to his or her account will be paid to him or her as promptly
as practicable after receipt of his or her notice of withdrawal, and no further
payroll deductions for the purchase of shares of Common Stock will be made
during such Offering Period. The Corporation may, at its option, treat any
attempt to borrow by a Participant on the security of his or her accumulated
payroll deductions as an election to withdraw such deductions.

     8.2  EFFECT ON SUBSEQUENT PARTICIPATION. A withdrawal from the Plan by a
Participant not subject to Section 16 of the 1934 Act will not have any effect
upon his or her eligibility to participate in any succeeding Offering Period or
in any similar plan which may hereafter be adopted by the Corporation. Each
Participant subject to Section 16 of the 1934 Act who withdraws from the Plan
must wait at least six (6) months from the date of his or her withdrawal before
participating in the Plan again.

     8.3  TERMINATION OF EMPLOYMENT NOT ATTRIBUTABLE TO DEATH. Upon the
termination of a Participant's employment for any reason other than death, such
Participant shall elect, by written notice given to the Corporate Secretary
within ten (10) Business Days of the effective date of his or her termination,
either:

          (a)  to be paid all of the payroll deductions credited to his or her
account under the Plan, without interest, as promptly as practicable; or

          (b)  to discontinue contributions to the Plan but remain a
Participant. In the event that no such written election shall be timely received
by the Corporate Secretary, the Participant shall automatically be deemed to
have elected, pursuant to clause (b) of this Section 8.3, to discontinue his or
her contributions to the Plan but remain a Participant.

     8.4  TERMINATION OF EMPLOYMENT DUE TO DEATH. Upon the termination of a
Participant's employment because of his or her death, his or her beneficiary (as
defined in Section 10.3) shall elect, by written notice given to the Corporate
Secretary prior to the earlier of the Purchase Date or the expiration of a
period of sixty (60) days commencing with the date of the death of the
Participant, either:

          (a)  to be paid all of the payroll deductions credited to such
Participant's account under the Plan, without interest, as promptly as
practicable; or


                                       8





          (b)  to exercise such Participant's Option on the Purchase Date next
following the date of such Participant's death for the purchase of that number
of whole shares of Common Stock which may be purchased at the applicable Stock
Price with the accumulated payroll deductions in such Participant's account on
the date of his or her death, and any surplus cash in such account will be
returned to said beneficiary without interest as promptly as practicable after
the Purchase Date.

In the event that no such written notice of election shall be timely received by
the Corporate Secretary, the beneficiary shall automatically be deemed to have
elected, pursuant to clause (b) of this Section 8.4, to exercise the deceased
Participant's Option.

9.   ADMINISTRATION

     9.1  APPOINTMENT OF COMMITTEE. The Board shall appoint a committee (the
"Committee") to administer the Plan, which shall consist of no less than two (2)
members of the Board. The Plan shall be administered in a manner that assures
all Participants the same rights and privileges. Members of the Committee who
are Eligible Employees are permitted to participate in the Plan.

     9.2  AUTHORITY OF COMMITTEE. Subject to the express provisions of the Plan,
the Committee shall have plenary authority in its discretion to interpret and
construe any and all provisions of the Plan, to adopt rules and regulations for
administering the Plan, and to make all other determinations deemed necessary or
advisable for administering the Plan. The Committee's determination on the
foregoing matters shall be conclusive.

     9.3  RULES GOVERNING THE ADMINISTRATION OF THE COMMITTEE. The Board may
from time to time appoint members of the Committee in substitution for or in
addition to members previously appointed and may fill vacancies, however caused,
in the Committee. The Committee may select one of its members as its Chairman
and shall hold its meetings at such times and places as it shall deem advisable
and may hold telephonic meetings. A majority of its members shall constitute a
quorum. All determinations of the Committee shall be made by a majority of its
members. The Committee may correct any defect or omission or reconcile any
inconsistency in the Plan, in the manner and to the extent it shall deem
desirable. Any decision or


                                       9





determination reduced to writing and signed by a majority of the members of the
Committee shall be as fully effective as if it had been made by a majority vote
at a meeting duly called and held. The Committee may appoint a secretary and
shall make such rules and regulations for the conduct of its business as it
shall deem advisable.

     9.4  LIABILITY. No member of the Board or the Committee shall be liable for
any action or determination made in good faith by the Board or the Committee
with respect to the Plan or any Option granted thereunder.

10.  MISCELLANEOUS

     10.1 STOCKHOLDERS' RIGHTS. A Participant will have no interest or voting
right in the shares of Common Stock covered by his or her Option until such
Option has been exercised.

     10.2 REGISTRATION OF COMMON STOCK. The shares of Common Stock to be
delivered to a Participant under the Plan will be registered in the name of the
Participant or, if the Participant so directs by written notice to the Corporate
Secretary prior to the Purchase Date applicable thereto, in the names of the
Participant and one such other person as may be designated by the Participant,
as joint tenants with rights of survivorship or as tenants by the entireties, to
the extent permitted by applicable law.

     10.3 DESIGNATION OF BENEFICIARY. A Participant may file a written
designation of a beneficiary who is to receive any shares of Common Stock and/or
cash upon his or her death. Such designation of beneficiary may be changed by
the Participant at any time by written notice to the Corporate Secretary. Upon
the death of a Participant and the receipt by the Corporation of proof of
identity and existence at the time of such Participant's death of a beneficiary
validly designated by him or her under the Plan, the Corporation shall deliver
such shares of Common Stock and/or cash to such beneficiary. In the event that a
beneficiary validly designated under the Plan by a Participant is not living at
the time of such Participant's death, (a) the Corporation shall deliver such
shares of Common Stock and/or cash to the executor or administrator of the
estate of the Participant, or (b) if no such executor or administrator has been
appointed (to the knowledge of the Corporation), the Corporation, in its
discretion, may deliver such shares of Common Stock and/or cash to the spouse or
to any one or more dependents of the Participant as the Corporation


                                       10





may designate. No beneficiary shall, prior to the death of the Participant by
whom he or she has been designated, acquire any interest in the shares of Common
Stock and/or cash credited to such Participant's account under the Plan.

     10.4 TRANSFERABILITY. Neither payroll deductions credited to a
Participant's account nor any rights with regard to the exercise of an Option or
to receive shares of Common Stock under the Plan may be assigned, transferred,
pledged, hypothecated or otherwise disposed of by the Participant, whether by
operation of law or otherwise, or be made subject to execution, attachment or
similar process (each a "Dispositive Act"), other than by will or the laws of
descent and distribution. Any attempted Dispositive Act shall be without effect,
except that the Corporation may treat such act as an election to withdraw from
the Plan in accordance with Section 8.

     10.5 RESALE RESTRICTION. Each Participant subject to Section 16 of the 1934
Act who purchases shares of Common Stock under the Plan may not sell or
otherwise transfer such shares of Common Stock for at least six (6) months from
the applicable Purchase Date.

     10.6 TREATMENT OF PROCEEDS. All payroll deductions and other amounts
received or held by the Corporation under the Plan may be used by the
Corporation or its Subsidiaries for any corporate purpose, and neither the
Corporation nor any of its Subsidiaries shall be obligated to segregate such
funds.

     10.7 NO INTEREST. No interest shall accrue on the payroll deductions or
other amounts contributed by a Participant under the Plan.

     10.8 SECURITIES LAW REQUIREMENTS. The Corporation shall not be obligated to
deliver any shares of Common Stock upon the exercise of an Option unless and
until: (a) the Corporation and the Participant have taken all actions required
to register such shares of Common Stock under the 1933 Act or perfect an
exemption from the registration requirements thereof; (b) any applicable
requirement of the New York Stock Exchange or any stock exchange on which the
Common Stock is listed has been satisfied; and (c) any other applicable
provision of state or Federal law has been satisfied. The Corporation shall be
under no obligation to register the shares of Common Stock subject to the Plan
under the 1933 Act or to effect compliance with the registration or
qualification requirements of any state securities laws.


                                       11





     10.9 TERMINATION AND AMENDMENT. The Board may, insofar as permitted by law,
from time to time, with respect to any shares of Common Stock at the time not
subject to Options, suspend or terminate the Plan or revise or amend the Plan in
any respect whatsoever. However, unless the Board specifically otherwise
provides, any revision or amendment that would cause the Plan to fail to comply
with Rule 16b-3 under the 1934 Act, Section 423 of the Code or any other
requirement of applicable law or regulation if such revision or amendment was
not approved by the stockholders of the Corporation shall not be effective
unless and until such approval is obtained. Furthermore, no suspension,
termination or amendment of the Plan that would adversely affect the right of
any Participant with respect to an Option previously granted will be effective
without the written consent of the affected Participant.

     10.10 EFFECTIVE DATE. The Plan shall become effective as of November 1,
2000, subject to approval by the holders of the majority of the shares of Common
Stock present and represented at a special and/or annual meeting of the
stockholders held within twelve (12) months before or after such date. If the
Plan is not so approved, the Plan shall not become effective.

     10.11 NO RIGHT TO CONTINUE EMPLOYMENT OR SERVICES. Nothing contained in the
Plan or in any instrument executed pursuant to the Plan will confer upon any
Participant any right to continue to render services to the Corporation or its
Subsidiaries; to continue as a director, officer or employee of the Corporation
or its Subsidiaries; or affect the right of the Corporation, a Subsidiary, the
Board, the board of directors of a Subsidiary, or the shareholders of the
Corporation or a Subsidiary, as applicable, to terminate the directorship,
office or employment, as the case may be, of any Participant at any time with or
without cause, reason or justification.

     10.12 EFFECT OF PLAN. The provisions of the Plan shall, in accordance with
its terms, be binding upon, and inure to the benefit of, all successors of each
Participant, including, without limitation, such Participant's estate and the
executors, administrators or trustees thereof, heirs and legatees, and any
receiver, trustee in bankruptcy or representative of creditors of such
Participant.

     10.13 REPORTS. Individual accounts will be maintained for each Participant.
Statements of account will be furnished to each Participant within a reasonable
period of time following each Purchase Date. Each such statement shall set forth
the aggregate amount of payroll deductions made on behalf of the Participant
during the Offering Period, the Stock Price used to purchase


                                       12





shares of Common Stock, the number of shares of Common Stock purchased by such
Participant, and the amount, if any, of the surplus cash not used to purchase
shares of Common Stock on the Purchase Date.

     10.14 NOTICES. All notices or communications by a Participant to the
Corporation under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Corporation at the
location, or by the individual, designated by the Corporation for the receipt
thereof.

     10.15 GOVERNING LAW. The Plan and all actions taken thereunder shall be
enforced, governed and construed by and interpreted under the laws of the State
of Delaware applicable to contracts made and to be performed wholly within such
State without giving effect to the principles of conflict of laws thereof.

     10.16 HEADINGS. The headings contained in the Plan are for reference
purposes only and shall not affect in any way the meaning or interpretation of
the Plan.

     10.17 COSTS OF THE PLAN. The costs and expenses of administering the Plan
shall be borne by the Corporation.

     10.18 OTHER COMPENSATION ARRANGEMENTS. Nothing contained in the Plan shall
prevent the Board from adopting other compensation arrangements, subject to
stockholder approval if such approval is required. Such other arrangements may
be either generally applicable or applicable only in specific cases.

     10.19 CORPORATE FLEXIBILITY. The existence of the Plan and the Options
granted thereunder shall not affect or restrict in any way the right or power of
the Board or the stockholders of the Corporation, in their sole and absolute
discretion, to make, authorize or consummate any adjustment, recapitalization,
reorganization or other change in the Corporation's capital structure or its
business, any merger or consolidation of the Corporation, any issue of bonds,
debentures, common stock, preferred or prior preference stock ahead of or
affecting the Corporation's capital stock or the rights thereof, the dissolution
or liquidation of the Corporation or any sale or transfer of all or any part of
its assets or business, or any other grant of rights, issuance of


                                       13





securities, transaction, corporate act or proceeding and notwithstanding the
fact that any such activity, proceeding, action, transaction or other event may
have, or be expected to have, an impact (whether positive or negative) on the
value of any Option.

11.  EXECUTION

     To record the adoption of the Plan to read as set forth herein, the Company
has caused the Plan to be signed by its President and attested by its Secretary
on October 31, 2000.


                                        BALLANTYNE OF OMAHA, INC.


                                    BY: /s/ John Wilmers
                                        --------------------------
                                        JOHN P. WILMERS, President

ATTEST:



By:  /s/ Brad French
    -----------------------
     Brad French, Secretary


                                       14

EX-11

Exhibit 11

                   Ballantyne of Omaha, Inc. and Subsidiaries
                Computation of Net Loss Per Share of Common Stock
                Three and Six Months Ended June 30, 2001 and 2000




                                                            Three Months Ended                    Six Months Ended
                                                                 June 30                               June 30
                                                                 -------                               -------
                                                          2001                2000               2001                2000
                                                          ----                ----               ----                ----
                                                                                                   
BASIC NET LOSS PER SHARE

Net loss applicable to
common stock                                         $     (939,216)      $     (669,963)    $  (1,403,289)    $   (1,478,902)

Weighted average common
shares outstanding                                       12,512,672           12,461,187        12,512,672         12,460,255
                                                     --------------       --------------     -------------     --------------

Basic loss per share                                 $        (0.08)      $        (0.05)    $       (0.11)    $        (0.12)
                                                     ==============       ==============     =============     ==============

DILUTED NET LOSS PER SHARE

Net loss applicable to
common stock                                         $     (939,216)      $     (669,963)    $  (1,403,289)    $   (1,478,902)

Weighted average common
shares outstanding                                       12,512,672           12,461,187        12,512,672         12,460,255

Assuming conversion
of options outstanding *                                          -                    -                 -                  -
                                                     --------------       --------------     -------------     --------------

Weighted average common
shares outstanding, as adjusted                          12,512,672           12,461,187        12,512,672         12,460,255
                                                     --------------       --------------     -------------     --------------

Diluted net loss per share                           $        (0.08)      $        (0.05)    $       (0.11)    $        (0.12)
                                                     ==============       ==============     =============     ==============


*Because the Company reported net losses for the periods presented, the
calculation excludes the potential common shares from stock options as they are
anti-dilutive and would result in a reduction of loss per share. If the Company
had reported net income in those periods, there would have been 80,658 and
74,075 additional shares for the three and six months ended June 30, 2001 and
4,592 and 303,358 additional shares for the three and six months ended June 30,
2000.