EX-4.1 5 a2063323zex-4_1.txt LOAN AGREEMENT DTD 8-30-01 LOAN AND SECURITY AGREEMENT DATED AS OF AUGUST 30, 2001 AMONG GENERAL ELECTRIC CAPITAL CORPORATION AS LENDER AND BALLANTYNE OF OMAHA, INC., DESIGN & MANUFACTURING, INC., XENOTECH RENTAL CORP., AND XENOTECH STRONG, INC. AS BORROWERS INDEX OF EXHIBITS AND SCHEDULES Schedule A - Definitions Schedule B - Lender's and Borrowers' Addresses for Notices Schedule C - Letters of Credit (NOT USED) Schedule D - Cash Management System Schedule E - Fees and Expenses Schedule F - Schedule of Documents Schedule G - Financial Covenants Disclosure Schedule (3.2) - Places of Business; Corporate Names Disclosure Schedule (3.6) - Real Estate Disclosure Schedule (3.7) - Stock; Affiliates Disclosure Schedule (3.9) - Taxes Disclosure Schedule (3.11) - ERISA Disclosure Schedule (3.12) - Litigation Disclosure Schedule (3.13) - Intellectual Property Disclosure Schedule (3.15) - Environmental Matters Disclosure Schedule (3.16) - Insurance Disclosure Schedule (3.18) - Contracts (Offset Risk) Disclosure Schedule (5(b)) - Indebtedness Disclosure Schedule (5(e)) - Liens Disclosure Schedule (6.1) - Actions to Perfect Liens Exhibit A - Form of Notice of Revolving Credit Advance Exhibit B - Other Reports and Information Exhibit C-1 - Form of Domestic Borrowing Base Certificate Exhibit C-2 - Form of Foreign Borrowing Base Certificate Exhibit C-3 - Inventory Rollforward and Reconciliation Exhibit D - Form of Accounts Payable Analysis Exhibit E - Form of Accounts Receivable Rollforward Analysis Exhibit F-1 - Form of Domestic Revolving Credit Note Exhibit F-2 - Form of Foreign Revolving Credit Note Exhibit G - Form of Term Note Exhibit H - Form of Secretarial Certificate Exhibit I - Form of Power of Attorney Exhibit J - Form of Certificate of Compliance Exhibit K - [Intentionally Omitted] Exhibit L - Form of Landlord's Waiver and Consent Exhibit M - Form of Pledge Agreement Exhibit N - Form of Guarantee Exhibit O - Form of Opinion of Counsel to Borrower Exhibit P - Form of Intercompany Note Exhibit Q - Form of Standard Payoff Letter Exhibit R - [Intentionally Omitted] Exhibit S - Form of Payment of Proceeds Letter Exhibit T - Form of Authorized Borrowers' Representative Letter Exhibit U - Form of Trademark Security Agreement Exhibit V - Form of Patent Security Agreement Exhibit W-1 - Form of Nebraska Deed of Trust Exhibit W-2 - Form of Illinois Mortgage Exhibit X - Form of Letter to Account Debtors Exhibit Y - Form of Borrower Agreement GE CAPITAL TRANSACTION SUMMARY AS OF THE DATE OF THIS AGREEMENT DOMESTIC REVOLVING CREDIT LOAN BORROWERS: Ballantyne of Omaha, Inc., Design & Manufacturing, Inc., and Xenotech Strong, Inc. DOMESTIC MAXIMUM AMOUNT: $6,000,000 TERM: 2 years, plus two optional 1-year renewal periods DOMESTIC REVOLVING CREDIT RATE: Index Rate plus 3.375% LETTER OF CREDIT SUBFACILITY: n/a DOMESTIC BORROWING BASE: 70% of the value (as determined by Lender) of each Borrower's Eligible Domestic Accounts (PROVIDED that Lender shall reduce the foregoing percentage by one percentage point for each percentage point that the dilution of such Borrower's Accounts (calculated by Lender as the average dilution over the most recent three months) exceeds 20%); PLUS, solely with respect to the Domestic Borrowing Base of Leading Borrower, the lesser of (i) $2,200,000 or (ii) the sum of (A) the lesser of $1,600,000 or 50% of the value of Leading Borrower's Eligible Domestic Inventory consisting of lenses, (B) the lesser of $500,000 or 40% of the value of Leading Borrower's Eligible Domestic Inventory consisting of finished platters, theatre equipment, and spotlights, and (C) the lesser of $100,000 or 25% of the value of Leading Borrower's Eligible Domestic Inventory consisting of finished restaurant equipment, in each case as determined by Lender, valued on a first-in, first-out basis (at the lower of cost or market); PROVIDED that the Domestic Borrowing Base of Leading Borrower shall be reduced by the Foreign Revolver Reserve, the Inventory Reserve, the Lens Reserve, and the Domestic Environmental Reserve. FOREIGN REVOLVING CREDIT LOAN BORROWER: Ballantyne of Omaha, Inc. FOREIGN MAXIMUM AMOUNT: $2,000,000 TERM: 2 years, plus two optional 1-year renewal periods FOREIGN REVOLVING CREDIT RATE: Index Rate plus 3.375% FOREIGN BORROWING BASE: 70% of the value (as determined by Lender) of Leading Borrower's Eligible Foreign Accounts (PROVIDED that Lender shall reduce the foregoing percentage by one percentage point for each percentage point that the dilution of Leading Borrower's Accounts (calculated by Lender as the average dilution over the most recent three months) exceeds 20%); PLUS the sum of (i) 45% of the value of Leading Borrower's Eligible Export-Related Inventory consisting of theatre finished goods (other than lenses) and (ii) 15% of the value of Leading Borrower's Eligible Export-Related Inventory consisting of (X) theatre raw materials and theatre work in process (other than lenses), and (Y) bulbs, in each case as determined by Lender, valued on a first-in, first-out basis (at the lower of cost or market) in each case as determined by Lender; PROVIDED that the portion of the Foreign Borrowing Base attributable to Eligible Export-Related Inventory at any one time shall not exceed the lesser of (i) 60% of the aggregate outstanding amount of the Foreign Revolving Credit Loan at such time, (ii) the sum of the Export Order Backlog at such time plus $700,000, or (iii) the sum of the Export Order Backlog at such time plus 50% of the Foreign Borrowing Base which otherwise would consist of Eligible Export-Related Inventory in excess of the Export Order Backlog; PROVIDED that the Foreign Borrowing Base of Leading Borrower shall be reduced by the Foreign Environmental Reserve. TERM LOAN BORROWERS: Ballantyne of Omaha, Inc., and Design & Manufacturing, Inc. ORIGINAL PRINCIPAL AMOUNT: $1,875,000 TERM: 2 years AMORTIZATION: Equal monthly principal installments of $31,250 payable on the first day of each month, with a balloon payment on the Commitment Termination Date. TERM LOAN RATE: Index Rate plus 3.625% FEES CLOSING FEE: $49,375 FOREIGN FACILITY FEE $5,000 payable on the Closing Date and on each annual anniversary thereof. UNUSED LINE FEE: 0.25% LETTER OF CREDIT FEE: n/a PREPAYMENT FEE: 2% in year one and 1% in year two (or during any renewal period).
THE LOANS DESCRIBED GENERALLY HERE ARE ESTABLISHED AND GOVERNED BY THE TERMS AND CONDITIONS SET FORTH BELOW IN THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AND IF THERE IS ANY CONFLICT BETWEEN THIS GENERAL DESCRIPTION AND THE EXPRESS TERMS AND CONDITIONS BELOW OR ELSEWHERE IN THE LOAN DOCUMENTS, SUCH OTHER EXPRESS TERMS AND CONDITIONS SHALL CONTROL. 1 This LOAN AND SECURITY AGREEMENT is dated as of August 30, 2001, and agreed to by and among BALLANTYNE OF OMAHA, INC., a Delaware corporation ("LEADING BORROWER"), DESIGN & MANUFACTURING, INC., a Nebraska corporation, XENOTECH RENTAL CORP., a Nebraska corporation, and XENOTECH STRONG, INC., a Nebraska corporation ("OTHER BORROWERS"; Leading Borrower and the Other Borrowers being collectively referred to as "BORROWERS" and each a "BORROWER"), any other Credit Party executing this Agreement, and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation ("LENDER"). RECITALS A. Borrowers desire to obtain the Loans and other financial accommodations from Lender and Lender is willing to provide the Loans and accommodations all in accordance with the terms of this Agreement. B. Capitalized terms used herein shall have the meanings assigned to them in SCHEDULE A and, for purposes of this Agreement and the other Loan Documents, the rules of construction set forth in SCHEDULE A shall govern. All schedules, attachments, addenda and exhibits hereto, or expressly identified to this Agreement, are incorporated herein by reference, and taken together with this Agreement, constitute but a single agreement. AGREEMENT NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, the parties hereto agree as follows: 1. AMOUNT AND TERMS OF CREDIT 1.1 LOANS. (a) Subject to the terms and conditions of this Agreement, from the Closing Date and until the Commitment Termination Date (i) Lender agrees (A) to make available advances (each, a "DOMESTIC REVOLVING CREDIT ADVANCE") and (B) to incur Letter of Credit Obligations, in an aggregate outstanding amount for any Borrower not to exceed the Domestic Borrowing Availability of such Borrower, and (ii) any Borrower may at the request of Leading Borrower as agent for such Borrower from time to time borrow, repay and reborrow Domestic Revolving Credit Advances, and may cause Lender to incur Letter of Credit Obligations, under this SECTION 1.1(a). (b) Subject to the terms and conditions of this Agreement, from the Closing Date and until the Commitment Termination Date, (i) Lender agrees to make available to Leading Borrower only additional advances (each, a "FOREIGN REVOLVING CREDIT ADVANCE"), in an aggregate outstanding amount not to exceed the Foreign Borrowing Availability, and (ii) Leading Borrower (but not any Other Borrower) may from time to time borrow, repay and reborrow the Foreign Revolving Credit Advances, under this SECTION 1.1(b). Any Other Borrower may repay Foreign Revolving Credit Advances made to Leading Borrower to the extent such repayments also constitute repayments of outstanding Permitted Intercompany Loans from Leading Borrower to such Other Borrower. (c) Leading Borrower, as agent for each Borrower, shall request each Domestic Revolving Credit Advance, and Leading Borrower, for itself, shall request each Foreign Revolving Credit Advance, by written notice to Lender substantially in the form of EXHIBIT A (each a "NOTICE OF REVOLVING CREDIT ADVANCE") given no later than 12:00 P.M. (Chicago time) on the Business Day of the proposed advance Revolving Credit Advance. Lender shall be fully protected under this Agreement in relying upon, and shall be entitled to rely upon, (i) any Notice of Revolving Credit Advance believed by Lender to be genuine, and (ii) the assumption that the Persons making electronic requests or executing and delivering a Notice of Revolving Credit Advance were duly authorized, unless the responsible individual acting thereon for Lender shall have actual knowledge to the contrary. As an accommodation to Borrowers, Lender may permit telephonic, electronic, or facsimile requests for a Revolving Credit Advance and electronic or facsimile transmittal of instructions, authorizations, agreements or reports to Lender by any Borrower. Unless Borrowers specifically direct Lender in writing not to accept or act upon telephonic, facsimile or electronic communications from any Borrower, Lender shall have no liability to any Borrower for any loss or damage suffered by any Borrower as a result of Lender's honoring of any requests, execution of any instructions, authorizations or agreements or reliance on any reports communicated to it telephonically, by facsimile or electronically and purporting to have been sent to Lender by any Borrower and Lender shall have no duty to verify the origin of any such communication or the identity or authority of the Person sending it. The Domestic Revolving Credit Loan shall be evidenced by, and be repayable in accordance with the terms of, the Domestic Revolving Credit Notes and this Agreement. The Foreign Revolving Credit Loan shall be evidenced by, and be repayable in accordance with the terms of, the Foreign Revolving Credit Note and this Agreement. (d) In making any Loan hereunder Lender shall be entitled to rely upon the most recent Borrowing Base Certificates delivered to Lender by such Borrower and other information available to Lender. Lender shall be under no obligation to make any further Revolving Credit Advance to any Borrower or incur any other Obligation if any Borrower shall have failed to deliver any Borrowing Base Certificate to Lender by the time specified in SECTION 4.1(b). 2 (e) TERM LOAN. Subject to the terms and conditions of this Agreement, Lender agrees to make the Term Loan to the Term Loan Borrowers on the Closing Date in the original principal amount specified in the Term Note. The Term Loan shall be evidenced by, and be repayable in accordance with the terms of, the Term Note and this Agreement. (f) LETTERS OF CREDIT. Notwithstanding anything to the contrary contained in this Agreement, including SCHEDULE C, Lender shall have no obligations to incur Letter of Credit Obligations for the account of any Borrower. 1.2 TERM AND PREPAYMENT. (a) Upon the Commitment Termination Date the obligation of Lender to make Revolving Credit Advances and extend other credit hereunder shall immediately terminate and Borrowers shall pay to Lender in full, in cash: (i) all outstanding Revolving Credit Advances and all accrued but unpaid interest thereon; (ii) an amount sufficient to enable Lender to hold cash collateral as specified in SCHEDULE C; (iii) all principal and accrued but unpaid interest on the Term Loan; and (iv) all other non-contingent Obligations due to or incurred by Lender. (b) If the Domestic Revolving Credit Loan attributable to any Borrower shall at any time exceed such Borrower's Domestic Borrowing Availability, then such Borrower shall immediately repay the Domestic Revolving Credit Loan attributable to such Borrower in the amount of such excess. If the Foreign Revolving Credit Loan shall at any time exceed the Foreign Borrowing Availability, then Leading Borrower shall immediately repay the Foreign Revolving Credit Loan in the amount of such excess. (c) Each Borrower shall have the right, at any time upon 30 days prior written notice to Lender to (i) terminate voluntarily Borrowers' right to receive or benefit from, and Lender's obligation to make and to incur, Revolving Credit Advances and Letter of Credit Obligations, (ii) prepay all or a portion of the Term Loan, provided that any prepayment of less than all of the outstanding balance of the Term Loan shall be applied to the remaining installments of the Term Loan in the inverse order of their maturity, and (iii) prepay all of the Obligations. The effective date of termination of the Domestic Revolving Credit Loan, the Foreign Revolving Credit Loan, and the Term Loan specified in such notice shall be the Commitment Termination Date. If any Borrower exercises the right of termination and prepayment, or if Lender's obligation to make Loans is terminated for any reason prior to the Stated Expiry Date then in effect (including as a result of the occurrence of a Default), Borrowers shall pay to Lender the applicable Prepayment Fee. (d) If the Net Borrowing Availability for all Borrowers combined shall be less than $1,000,000 at any time, then one or more Borrowers shall immediately repay Revolving Credit Advances in the amount of such shortfall, PROVIDED that the foregoing shall not apply from and after the date upon which Lender first receives the financial statements required by SECTION 4.1(a) demonstrating to Lender's satisfaction that Borrowers have complied with Fixed Charge Coverage Ratio covenant set forth in PARAGRAPH 1 of SCHEDULE G. 1.3 USE OF PROCEEDS. Borrowers shall use the proceeds of the Loans to refinance on the Closing Date certain outstanding Indebtedness as provided in SECTION 2.1(b) and for working capital and other general corporate purposes. 1.4 SINGLE LOAN. The Loans and all of the other Obligations of any Borrower to Lender shall constitute one general obligation of such Borrower secured by all of the Collateral. 1.5 INTEREST (a) Each Borrower shall pay interest to Lender on the aggregate outstanding Revolving Credit Advances attributable to such Borrower at a floating rate per annum equal to the Index Rate plus three and three hundred seventy-five thousandths percent (3.375 %) per annum (the "REVOLVING CREDIT RATE") and the Term Loan Borrowers shall pay interest to Lender on the outstanding balance of the Term Loan at a floating rate equal to the Index Rate plus three and six hundred twenty-five thousandths percent (3.625%) per annum (the "TERM LOAN Rate"). All computations of interest, and all calculations of the Letter of Credit Fee, shall be made by Lender on the basis of a three hundred and sixty (360) day year, in each case for the actual number of days occurring in the period for which such interest or fee is payable. Each determination by Lender of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error. In no event will Lender charge interest at a rate that exceeds the highest rate of interest permissible under any law that a court of competent jurisdiction shall, in a final determination, deem applicable. (b) Interest shall be payable on the outstanding Revolving Credit Advances and balance of the Term Loan (i) in arrears for the preceding calendar month on the first day of each calendar month, (ii) on the Commitment Termination Date, and (iii) if any interest accrues or remains payable after the Commitment Termination Date, upon demand by Lender. (c) Effective upon the occurrence of any Event of Default and for so long as any Event of Default shall be continuing, the Revolving Credit Rate, the Term Loan Rate and the Letter of Credit Fee shall automatically be increased by two percentage points (2%) per annum (such increased rate, the "DEFAULT RATE"), and all outstanding Obligations, including unpaid 3 interest and Letter of Credit Fees, shall continue to accrue interest from the date of such Event of Default at the Default Rate applicable to such Obligations. (d) If any interest or any other payment (including Unused Line Fees and Foreign Facility Fees) to Lender under this Agreement becomes due and payable on a day other than a Business Day, such payment date shall be extended to the next succeeding Business Day and interest thereon shall be payable at the then applicable rate during such extension. 1.6 CASH MANAGEMENT SYSTEM. On or prior to the Closing Date and until the Termination Date, each Borrower will establish and maintain the cash management system described in SCHEDULE D. All payments in respect of the Collateral shall be made to or deposited in the blocked or lockbox accounts described in SCHEDULE D in accordance with the terms thereof. 1.7 FEES. Each Borrower agrees to pay to Lender the Fees set forth in SCHEDULE E. 1.8 RECEIPT OF PAYMENTS. Each Borrower shall make each payment under this Agreement (not otherwise made pursuant to SECTION 1.9) without set-off, counterclaim or deduction and free and clear of all Taxes not later than 11:00 A.M. (Chicago time) on the day when due in lawful money of the United States of America in immediately available funds to the Collection Account. If any Borrower shall be required by law to deduct any Taxes from any payment to Lender under any Loan Document, then the amount payable to Lender shall be increased so that, after making all required deductions, Lender receives an amount equal to that which it would have received had no such deductions been made. For purposes of computing interest and Fees, all payments shall be deemed received by Lender 1 Business Day following receipt of immediately available funds in the Collection Account. For purposes of determining the Domestic Borrowing Availability and Foreign Borrowing Availability, payments shall be deemed received by Lender upon receipt of immediately available funds in the Collection Account 1.9 APPLICATION AND ALLOCATION OF PAYMENTS. Each Borrower irrevocably agrees that Lender shall have the continuing and exclusive right to apply any and all payments against the then due and payable Obligations in such order as Lender may deem advisable. Lender is authorized to, and at its option may (without prior notice or precondition and at any time or times), but shall not be obligated to, make or cause to be made Revolving Credit Advances on behalf of any Borrower for: (a) payment of all Fees, expenses, indemnities, charges, costs, principal, interest, or other Obligations owing by such Borrower under this Agreement or any of the other Loan Documents, (b) the payment, performance or satisfaction of any of such Borrower's obligations with respect to preservation of the Collateral, or (c) any premium in whole or in part required in respect of any of the policies of insurance required by this Agreement, even if the making of any such Revolving Credit Advance causes the outstanding balance of the Domestic Revolving Credit Loan attributable to any Borrower to exceed such Borrower's Domestic Borrowing Availability or the Foreign Revolving Credit Loan to exceed Leading Borrower's Foreign Borrowing Availability, and each Borrower agrees to repay immediately, in cash, any amount by which such Borrower's Domestic Revolving Credit Loan exceeds such Borrower's Domestic Borrowing Availability, and Leading Borrower agrees to repay immediately, in cash, any amount by which Foreign Revolving Credit Loan exceeds Leading Borrower's Foreign Borrowing Availability. 1.10 ACCOUNTING. Lender is authorized to record on its books and records the date and amount of each Loan and each payment of principal thereof and such recordation shall constitute prima facie evidence of the accuracy of the information so recorded. Lender shall provide Borrowers on a monthly basis a statement and accounting of such recordations but any failure on the part of the Lender to keep any such recordation (or any errors therein) or to send a statement thereof to any Borrower shall not in any manner affect the obligation of any Borrower to repay any of the Obligations. Except to the extent that any Borrower shall, within 60 days after such statement and accounting is sent, notify Lender in writing of any objection such Borrower may have thereto (stating with particularity the basis for such objection), such statement and accounting shall be deemed final, binding and conclusive upon such Borrower, absent manifest error. 1.11 INDEMNITY. Each Borrower and each other Credit Party executing this Agreement jointly and severally agree to indemnify and hold Lender and its Affiliates, and their respective employees, attorneys and agents (each, an "INDEMNIFIED PERSON"), harmless from and against any and all suits, actions, proceedings, claims, damages, losses, liabilities and expenses of any kind or nature whatsoever (including attorneys' fees and disbursements and other costs of investigation or defense, including those incurred upon any appeal) which may be instituted or asserted against or incurred by any such Indemnified Person as the result of credit having been extended, suspended or terminated under this Agreement and the other Loan Documents or with respect to the execution, delivery, enforcement, performance and administration of, or in any other way arising out of or relating to, this Agreement and the other Loan Documents or any other documents or transactions contemplated by or referred to herein or therein and any actions or failures to act with respect to any of the foregoing, including any and all product liabilities, Environmental Liabilities, Taxes and legal costs and expenses arising out of or incurred in connection with disputes between or among any parties to any of the Loan Documents (collectively, "INDEMNIFIED LIABILITIES"), except to the extent that any such Indemnified Liability is finally determined by a court of competent jurisdiction to have resulted solely from such Indemnified Person's gross negligence or willful misconduct. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY CREDIT PARTY, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OR ANY OTHER PERSON ASSERTING CLAIMS 4 DERIVATIVELY THROUGH SUCH PARTY, FOR ANY ACT OR FAILURE TO ACT UNDER ANY POWER OF ATTORNEY FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER. 1.12 BORROWING BASE; RESERVES. The Domestic Borrowing Base and the Foreign Borrowing Base of each Borrower shall be determined by Lender (including the eligibility of Accounts and Inventory) based on the most recent Borrowing Base Certificates delivered to Lender in accordance with SECTION 4.1(b) and such other information available to Lender. The Domestic Revolving Credit Loan and the Foreign Revolving Credit Loan shall be subject to Lender's continuing right to withhold from any Borrower's Domestic Borrowing Availability or Leading Borrower's Foreign Borrowing Availability, as applicable, reserves, and to increase and decrease such reserves from time to time, if and to the extent that in Lender's good faith credit judgment such reserves are necessary, including to protect Lender's interest in the Collateral or to protect Lender against possible non-payment of Accounts for any reason by Account Debtors or possible diminution of the value of any Collateral or possible non-payment of any of the Obligations or for any Taxes or in respect of any state of facts which could constitute a Default. Lender may, at its option, implement reserves by designating as ineligible a sufficient amount of Accounts or Inventory which would otherwise be Eligible Domestic Accounts, Eligible Foreign Accounts, Eligible Domestic Inventory, or Eligible Export-Related Inventory, as the case may be, so as to reduce any Borrower's Domestic Borrowing Base or Foreign Borrowing Base (as the case may be) by the amount of the intended reserves. Without limiting the generality of the foregoing, Lender shall withhold from Leading Borrower's Domestic Revolving Credit Availability the Foreign Revolver Reserve, the Inventory Reserve, the Lens Reserve, and the Domestic Environmental Reserve, and Lender shall withhold from Leading Borrower's Foreign Revolving Credit Availability the Foreign Environmental Reserve. 2. CONDITIONS PRECEDENT 2.1 CONDITIONS TO THE INITIAL LOANS. Lender shall not be obligated to make any of the Loans or to perform any other action hereunder, until the following conditions have been satisfied in a manner satisfactory to Lender in its sole discretion, or waived in writing by Lender: (a) the Loan Documents to be delivered on or before the Closing Date shall have been duly executed and delivered by the appropriate parties, all as set forth in the Schedule of Documents (SCHEDULE F); (b) all of the obligations of Borrowers to Wells Fargo Bank N.A. under their financing documentation as in effect immediately prior to the Closing Date will be performed and paid in full from the proceeds of the initial Loans and all Liens upon any of the property of any Borrower or any other Credit Party in respect thereof shall have been terminated immediately upon such payment; (c) the insurance policies provided for in SECTION 3.16 are in full force and effect, together with appropriate evidence showing loss payable or additional insured clauses or endorsements in favor of Lender as required under such Section; (d) as of the Closing Date, Net Borrowing Availability for all Borrowers combined shall be not less than $2,000,000 after giving effect to the initial Revolving Credit Advances and Letter of Credit Obligations (on a pro forma basis, with trade payables being paid currently, and expenses and liabilities being paid in the ordinary course of business and without acceleration of sales); (e) Lender shall have received the Ex-Im Bank Guarantee duly executed by Ex-Im Bank on terms acceptable to Lender, together such waivers duly executed by Ex-Im Bank as Lender deems necessary in its sole discretion, and Leading Borrower shall have entered into the Borrower Agreement (and consented to by each Other Borrower and each Guarantor) with Ex-Im Bank in accordance with the Ex-Im Bank Guarantee; and (f) Lender shall have received an opinion of counsel to Borrowers with respect to the Loan Documents in form and substance satisfactory to Lender. 2.2 FURTHER CONDITIONS TO THE LOANS. Lender shall not be obligated to fund any Loan (including the initial Loans), if, as of the date thereof: (a) any representation or warranty by any Credit Party contained herein or in any of the other Loan Documents shall be untrue or incorrect as of such date, except to the extent that any such representation or warranty is expressly stated to relate to a specific earlier date, in which case, such representation and warranty shall be true and correct as of such earlier date; or 5 (b) any event or circumstance which has had or reasonably could be expected to have a Material Adverse Effect shall have occurred since the Closing Date; or (c) any Default shall have occurred and be continuing or would result after giving effect to such Loan; or (d) after giving effect to such Loan, the Domestic Revolving Credit Loan attributable to any Borrower would exceed the Domestic Borrowing Availability of such Borrower or the Foreign Revolving Credit Loan would exceed Leading Borrower's Foreign Borrowing Availability. 2.3 AGENT. The request and acceptance by Leading Borrower, as agent for each Borrower, of the proceeds of any Loan, and the request by Leading Borrower, as agent for each Borrower, for the incurrence by Lender of any Letter of Credit Obligations, as the case may be, shall be deemed to constitute, as of the date of such request and the date of such acceptance, (i) a representation and warranty by each Borrower that the conditions in SECTION 2.2 have been satisfied and (ii) a restatement by each Borrower of each of the representations and warranties made by such Borrower in any Loan Document and a reaffirmation by each Borrower of the granting and continuance of Lender's Liens pursuant to the Loan Documents. 3. REPRESENTATIONS, WARRANTIES AND AFFIRMATIVE COVENANTS To induce Lender to enter into this Agreement and to make the Loans, each Borrower and each other Credit Party executing this Agreement represent and warrant to Lender (each of which representations and warranties shall survive the execution and delivery of this Agreement), and promise to and agree with Lender until the Termination Date as follows: 3.1 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each Corporate Credit Party: (a) is, as of the Closing Date, and will continue to be (i) a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, (ii) duly qualified to do business and in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified could not reasonably be expected to have a Material Adverse Effect, and (iii) in compliance with all Requirements of Law and Contractual Obligations, except to the extent failure to comply therewith could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and (b) has and will continue to have (i) the requisite corporate power and authority and the legal right to execute, deliver and perform its obligations under the Loan Documents, and to own, pledge, mortgage or otherwise encumber and operate its properties, to lease the property it operates under lease, and to conduct its business as now, heretofore or proposed to be conducted, and (ii) all licenses, permits, franchises, rights, powers, consents or approvals from or by all Persons or Governmental Authorities having jurisdiction over such Corporate Credit Party which are necessary or appropriate for the conduct of its business. 3.2 EXECUTIVE OFFICES; CORPORATE OR OTHER NAMES. The location of each Corporate Credit Party's chief executive office, corporate offices, warehouses, other locations of Collateral and locations where records with respect to Collateral are kept (including in each case the county of such locations) are as set forth in DISCLOSURE SCHEDULE (3.2) and, except as set forth in such Disclosure Schedule, such locations have not changed during the preceding twelve months. As of the Closing Date, during the prior five years, except as set forth in DISCLOSURE SCHEDULE (3.2), no Corporate Credit Party has been known as or conducted business in any other name (including trade names). 3.3 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The execution, delivery and performance by each Credit Party of the Loan Documents to which it is a party, and the creation of all Liens provided for herein and therein: (a) are and will continue to be within such Credit Party's power and authority; (b) have been and will continue to be duly authorized by all necessary or proper action; (c) are not and will not be in violation of any Requirement of Law or Contractual Obligation of such Credit Party; (d) do not and will not result in the creation or imposition of any Lien (other than Permitted Encumbrances) upon any of the Collateral; and (e) do not and will not require the consent or approval of any Governmental Authority or any other Person. As of the Closing Date, each Loan Document shall have been duly executed and delivered on behalf of each Credit Party party thereto, and each such Loan Document upon such execution and delivery shall be and will continue to be a legal, valid and binding obligation of such Credit Party, enforceable against it in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency and other similar laws affecting creditors' rights generally. 3.4 FINANCIAL STATEMENTS AND PROJECTIONS; BOOKS AND RECORDS. (a) The Financial Statements delivered by each Borrower to Lender for its most recently ended Fiscal Year and Fiscal Month, are true, correct and complete and reflect fairly and accurately the financial condition of such Borrower as of the date of each such Financial Statement in accordance with GAAP. The Projections most recently delivered by each Borrower to Lender have been prepared in good faith, with care and diligence and use assumptions that are reasonable under the circumstances at the time such Projections were prepared and as of the date delivered to Lender and all such assumptions are disclosed in the Projections. 6 (b) Each Borrower and each other Corporate Credit Party shall keep adequate Books and Records with respect to the Collateral and its business activities in which proper entries, reflecting all consolidated and consolidating financial transactions, and payments and credits received on, and all other dealings with, the Collateral, will be made in accordance with GAAP and all Requirements of Law and on a basis consistent with the Financial Statements. 3.5 MATERIAL ADVERSE CHANGE. Between the date of each Borrower's most recently audited Financial Statements delivered to Lender and the Closing Date: (a) no Corporate Credit Party has incurred any obligations, contingent or non-contingent liabilities, or liabilities for Charges, long-term leases (other than the renewal or extension of Xenotech Strong, Inc.'s California real estate lease on substantially the same terms as its existing lease of such premises) or unusual forward or long-term commitments which are not reflected in the Projections delivered on the Closing Date and which could, alone or in the aggregate, reasonably be expected to have a Material Adverse Effect; (b) there has been no material deviation from such Projections; and (c) no events have occurred which alone or in the aggregate has had or could reasonably be expected to have a Material Adverse Effect. No Requirement of Law or Contractual Obligation of any Credit Party has or have had or could reasonably be expected to have a Material Adverse Effect. No Credit Party is in default, and to such Credit Party's knowledge no third party is in default, under or with respect to any of its Contractual Obligations, which alone or in the aggregate has had or could reasonably be expected to have a Material Adverse Effect. 3.6 REAL ESTATE; PROPERTY. The real estate listed in DISCLOSURE SCHEDULE (3.6) constitutes all of the real property owned, leased, or used by each Corporate Credit Party in its business, and such Credit Party will not execute any material agreement or contract in respect of such real estate after the date of this Agreement without giving Lender prompt prior written notice thereof. Each Corporate Credit Party holds and will continue to hold good and marketable fee simple title to all of its owned real estate, and good and marketable title to all of its other properties and assets, and valid and insurable leasehold interests in all of its leases (both as lessor and lessee, sublessee or assignee), and none of the properties and assets of any Corporate Credit Party are or will be subject to any Liens, except Permitted Encumbrances. With respect to each of the premises identified in DISCLOSURE SCHEDULE (3.2) on or prior the Closing Date a bailee, landlord or mortgagee agreement acceptable to Lender has been obtained. 3.7 VENTURES, SUBSIDIARIES AND AFFILIATES; OUTSTANDING STOCK AND INDEBTEDNESS. Except as set forth in DISCLOSURE SCHEDULE (3.7), as of the Closing Date no Corporate Credit Party has any Subsidiaries, is engaged in any joint venture or partnership with any other Person, or is an Affiliate of any other Person. The Leading Borrower has provided Lender with a true, correct and complete list (as of the date on such list) of all of its Stockholders who have no objection to the disclosure of their identity as Stockholders of Leading Borrower. All outstanding Indebtedness of each Corporate Credit Party as of the Closing Date is described in DISCLOSURE SCHEDULE (5(b)), subject to any exceptions shown on such schedule. 3.8 GOVERNMENT REGULATION; MARGIN REGULATIONS. No Corporate Credit Party is subject to or regulated under any Federal or state statute, rule or regulation that restricts or limits such Person's ability to incur Indebtedness, pledge its assets, or to perform its obligations under the Loan Documents. The making of the Loans, the application of the proceeds and repayment thereof, and the consummation of the transactions contemplated by the Loan Documents do not and will not violate any Requirement of Law. No Corporate Credit Party is engaged, nor will it engage in the business of extending credit for the purpose of "purchasing" or "carrying" any "margin security" as such terms are defined in Regulation U of the Federal Reserve Board as now and hereafter in effect (such securities being referred to herein as "MARGIN STOCK"). No Corporate Credit Party owns any Margin Stock, and none of the proceeds of the Loans or other extensions of credit under this Agreement will be used, directly or indirectly, for the purpose of purchasing or carrying any Margin Stock or reducing or retiring any Indebtedness which was originally incurred to purchase or carry any Margin Stock. No Corporate Credit Party will take or permit to be taken any action which might cause any Loan Document to violate any regulation of the Federal Reserve Board. 3.9 TAXES; CHARGES. Except as disclosed on DISCLOSURE SCHEDULE (3.9) all tax returns, reports and statements required by any Governmental Authority to be filed by Borrower or any other Credit Party have, as of the Closing Date, been filed and will, until the Termination Date, be filed with the appropriate Governmental Authority and no tax Lien has been filed against any Credit Party or any Credit Party's property. Proper and accurate amounts have been and will be withheld by Borrower and each other Credit Party from their respective employees for all periods in complete compliance with all Requirements of Law and such withholdings have and will be timely paid to the appropriate Governmental Authorities. DISCLOSURE SCHEDULE (3.9) sets forth as of the Closing Date those taxable years for which any Credit Party's tax returns are currently being audited by the IRS or any other applicable Governmental Authority and any assessments or threatened assessments in connection with such audit, or otherwise currently outstanding. Except as described on DISCLOSURE SCHEDULE (3.9), none of the Credit Parties and their respective predecessors are liable for any Charges: (a) under any agreement (including any tax sharing agreements or agreement extending the period of assessment of any Charges) or (b) to each Credit Party's knowledge, as a transferee. As of the Closing Date, no Credit Party has agreed or been requested to make any adjustment under IRC Section 481(a), by reason of a change in accounting method or otherwise, which could reasonably be expected to have a Material Adverse Effect. 7 3.10 PAYMENT OF OBLIGATIONS. Each Credit Party will pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all of its Charges and other obligations of whatever nature, except where either (i) the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of such Credit Party and none of the Collateral is or could reasonably be expected to become subject to any Lien or forfeiture or loss as a result of such contest or (ii) the aggregate amount of all such matured or delinquent Charges and other obligations does not exceed $25,000 at any one time. 3.11 ERISA. All Plans of each Borrower are listed on DISCLOSURE SCHEDULE (3.11). No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other existing ERISA Events, could reasonably be expected to result in a liability of any Credit Party of more than the Minimum Actionable Amount. The present value of all accumulated benefit obligations of the Credit Parties under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent Financial Statements reflecting such amounts, exceed the fair market value of the assets of such Plan by more than the Minimum Actionable Amount, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Account Standards No. 87) did not, as of the date of the most recent Financial Statements reflecting such amounts, exceed the fair market value of the assets of such underfunded Plans by more than the Minimum Actionable Amount. No Credit Party or ERISA Affiliate has incurred or reasonably expects to incur any Withdrawal Liability in excess of the Minimum Actionable Amount. 3.12 LITIGATION. No Litigation is pending or, to the knowledge of any Credit Party, threatened by or against any Credit Party or against any Credit Party's properties or revenues (a) with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby, or (b) which could reasonably be expected to have a Material Adverse Effect. Except as set forth on DISCLOSURE SCHEDULE (3.12), as of the Closing Date there is no Litigation pending or threatened against any Credit Party which seeks damages in excess of $50,000 or injunctive relief or alleges criminal misconduct of any Credit Party. Each Credit Party shall notify Lender promptly in writing upon learning of the existence, threat or commencement of any Litigation against any Credit Party, any ERISA Affiliate or any Plan or any allegation of criminal misconduct against any Credit Party. 3.13 INTELLECTUAL PROPERTY. As of the Closing Date, all material Intellectual Property owned or used by any Corporate Credit Party is listed, together with application or registration numbers, where applicable, in DISCLOSURE SCHEDULE (3.13). Each Corporate Credit Party owns, or is licensed to use, all Intellectual Property necessary to conduct its business as currently conducted except for such Intellectual Property the failure of which to own or license could not reasonably be expected to have a Material Adverse Effect. Each Corporate Credit Party will maintain the patenting and registration of all Intellectual Property with the United States Patent and Trademark Office, the United States Copyright Office, or other appropriate Governmental Authority and each Corporate Credit Party will promptly patent or register, as the case may be, all new Intellectual Property and notify Lender in writing five (5) Business Days prior to filing any such new patent or registration. 3.14 FULL DISCLOSURE. No information contained in any Loan Document, the Financial Statements or any written statement furnished by or on behalf of any Credit Party under any Loan Document, or to induce Lender to execute the Loan Documents, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which they were made. 3.15 HAZARDOUS MATERIALS. Except as set forth on DISCLOSURE SCHEDULE (3.15), as of the Closing Date, (a) each real property location owned, leased or occupied by each Corporate Credit Party (the "REAL PROPERTY") is maintained free of contamination from any Hazardous Material, (b) no Corporate Credit Party is subject to any Environmental Liabilities or, to any Credit Party's knowledge, potential Environmental Liabilities, in excess of $50,000 in the aggregate, (c) no notice has been received by any Corporate Credit Party identifying it as a "potentially responsible party" or requesting information under CERCLA or analogous state statutes, and to the knowledge of any Credit Party, there are no facts, circumstances or conditions that may result in any Corporate Credit Party being identified as a "potentially responsible party" under CERCLA or analogous state statutes; and (d) each Corporate Credit Party has provided to Lender copies of all existing environmental reports, reviews and audits and all written information pertaining to actual or potential Environmental Liabilities, in each case relating to any Corporate Credit Party. Each Corporate Credit Party: (i) shall comply in all material respects with all applicable Environmental Laws and environmental permits; (ii) shall notify Lender in writing within seven days if and when it becomes aware of any Release, on, at, in, under, above, to, from or about any of its Real Property; and (iii) shall promptly forward to Lender a copy of any order, notice, permit, application, or any communication or report received by it or any other Credit Party in connection with any such Release. 3.16 INSURANCE. As of the Closing Date, DISCLOSURE SCHEDULE (3.16) lists all insurance of any nature maintained for current occurrences by Borrowers and each other Corporate Credit Party, as well as a summary of the terms of such insurance. Each Corporate Credit Party shall deliver to Lender certified copies and endorsements to all of its and those of its Subsidiaries (a) "All Risk" and business interruption insurance policies naming Lender loss payee, and (b) general liability and other liability policies naming Lender as an additional insured, but Lender will no longer be such loss payee and additional insured from and after the Termination Date. All policies of insurance on real and personal property will contain an endorsement, in form and substance 8 acceptable to Lender, showing loss payable to Lender (Form 438 BFU or equivalent) and extra expense and business interruption endorsements. Such endorsement, or an independent instrument furnished to Lender, will provide that the insurance companies will give Lender at least 30 days prior written notice before any such policy or policies of insurance shall be altered or canceled and that no act or default of any Borrower or any other Person shall affect the right of Lender to recover under such policy or policies of insurance in case of loss or damage. Each Corporate Credit Party shall direct all present and future insurers under its "All Risk" policies of insurance to pay all proceeds payable thereunder directly to Lender. If any insurance proceeds are paid by check, draft or other instrument payable to any Credit Party and Lender jointly, Lender may endorse such Credit Party's name thereon and do such other things as Lender may deem advisable to reduce the same to cash. Lender reserves the right at any time, upon review of each Credit Party's risk profile, to require additional forms and limits of insurance. Each Corporate Credit Party shall, on each anniversary of the Closing Date and from time to time at Lender's request, deliver to Lender a report by a reputable insurance broker, satisfactory to Lender, with respect to such Person's insurance policies. 3.17 DEPOSIT AND DISBURSEMENT ACCOUNTS. ATTACHMENT I to SCHEDULE D lists all banks and other financial institutions at which any Borrower or any other Corporate Credit Party, maintains deposits and/or other accounts, including the Disbursement Accounts, and such Attachment correctly identifies the name, address and telephone number of each such depository, the name in which the account is held, a description of the purpose of the account, and the complete account number. 3.18 ACCOUNTS AND INVENTORY. As of the date of each Borrowing Base Certificate delivered to Lender, (i) each Account listed thereon as an Eligible Domestic Account shall be an Eligible Domestic Account, (ii) each Account listed thereon as an Eligible Foreign Account shall be an Eligible Foreign Account, (iii) all Inventory listed thereon as Eligible Domestic Inventory shall be Eligible Domestic Inventory, (iv) and all Inventory listed thereon as Eligible Export-Related Inventory shall be Eligible Export-Related Inventory. No Borrower has made, nor will any Borrower make, any agreement with any Account Debtor for any extension of time for the payment of any Account, any compromise or settlement for less than the full amount thereof, any release of any Account Debtor from liability therefor, or any deduction therefrom except a discount or allowance for prompt or early payment allowed by Borrower in the ordinary course of its business consistent with historical practice and as previously disclosed to Lender in writing, and except, solely with respect to Accounts that are not Eligible Domestic Accounts or Eligible Foreign Accounts, (a) to the extent such extension affects an individual Account of less than $50,000 and aggregate Accounts of less than $250,000 in any Fiscal Year, and (b) to the extent such compromises, settlements, releases, and deductions are less than $50,000 with respect any one Account and less than $250,000 in the aggregate for all Accounts in any Fiscal Year (and these exceptions shall be in addition to the exceptions provided in Section 5(b)). DISCLOSURE SCHEDULE (3.18) sets forth each Contract of any Borrower with any Account Debtor which gives such Account Debtor the right (under such Contract, under common law or otherwise) to offset any Accounts for such Borrower's failure to perform under such Contract and such Borrower has obtained an offset waiver for each such contract in form and substance satisfactory to Lender. With respect to the Accounts pledged as collateral pursuant to any Loan Document (x) the amounts shown on all invoices, statements and reports which may be delivered to the Lender with respect thereto are actually and absolutely owing to the relevant Credit Party as indicated thereon and are not in any way contingent; (y) no payments have been or shall be made thereon except payments immediately delivered to the applicable accounts described in PARAGRAPH 1 to SCHEDULE D or the Lender as required hereunder; and (z) to each Borrower's knowledge all Account Debtors have the capacity to contract. Each Borrower shall notify Lender promptly of any event or circumstance which to such Borrower's knowledge would cause Lender to consider any then existing Account or Inventory as no longer constituting an Eligible Domestic Account, Eligible Foreign Account, Eligible Domestic Inventory, or Eligible Export-Related Inventory, as the case may be. 3.19 CONDUCT OF BUSINESS. Each Corporate Credit Party (a) shall conduct its business substantially as now conducted or as otherwise permitted hereunder, and (b) shall at all times maintain, preserve and protect all of the Collateral and such Credit Party's other property, used or useful in the conduct of its business and keep the same in good repair, working order and condition and make, or cause to be made, all necessary or appropriate repairs, replacements and improvements thereto consistent with industry practices. 3.20 FURTHER ASSURANCES. At any time and from time to time, upon the written request of Lender and at the sole expense of Borrowers, Borrowers and each other Credit Party shall promptly and duly execute and deliver any and all such further instruments and documents and take such further action as Lender may reasonably deem desirable (a) to obtain the full benefits of this Agreement and the other Loan Documents, (b) to protect, preserve and maintain Lender's rights in any Collateral, or (c) to enable Lender to exercise all or any of the rights and powers herein granted. 4. FINANCIAL MATTERS; REPORTS 4.1 REPORTS AND NOTICES. From the Closing Date until the Termination Date, each Borrower shall deliver to Lender: (a) within 15 days following the end of each Fiscal Month, an aged trial balance by Account Debtor and an Inventory Perpetual or Physical (as requested by Lender) and as soon as available but in no event later than 30 days following the 9 end of each Fiscal Month, a reconciliation of the aged trial balance and the Inventory Perpetual or Physical (as the case may be) to such Borrower's general ledger and from the general ledger to the Financial Statements for such Fiscal Month accompanied by supporting detail and documentation as Lender may request; (b) as frequently as Lender may request and in any event no later than 15 days following the end of each Fiscal Month, a Domestic Borrowing Base Certificate in the form of EXHIBIT C-1 and Foreign Borrowing Base Certificate in the form of EXHIBIT C-2 as of the last day of the previous Fiscal Month detailing ineligible Accounts and Inventory for adjustment to the Borrowing Base, certified as true and correct by the Chief Financial Officer of such Borrower or such other officer as is acceptable to Lender, and each Foreign Borrowing Base Certificate shall be accompanied by a written report of Leading Borrower's Export Order Backlog as of the last day of the previous Fiscal Month; (c) within 15 days following the end of each Fiscal Month, an Accounts Payable Analysis in the form of EXHIBIT D (together with an accounts payable aging) and an Accounts Receivable Roll Forward Analysis in the form of EXHIBIT E, each certified as true and correct by the Chief Financial Officer of such Borrower or such other officer as is acceptable to Lender; (d) within 30 days following the end of each Fiscal Month, the Financial Statements for such Fiscal Month, which shall provide comparisons to budget and actual results for the corresponding period during the prior Fiscal Year, both on a monthly and year-to-date basis, and accompanied by a certification in the form of EXHIBIT J by the Chief Executive Officer or Chief Financial Officer of such Borrower that such Financial Statements are complete and correct, that there was no Default (or specifying those Defaults of which he or she was aware), and showing in reasonable detail the calculations used in determining compliance with the financial covenants hereunder; (e) within 90 days following the close of each Fiscal Year, the Financial Statements for such Fiscal Year certified without qualification by an independent certified accounting firm acceptable to Lender, which shall provide comparisons to the prior Fiscal Year, and shall be accompanied by (i) a statement in reasonable detail showing the calculations used in determining compliance with the financial covenants hereunder, (ii) a report from such Borrower's accountants to the effect that in connection with their audit examination nothing has come to their attention to cause them to believe that a Default has occurred or specifying those Defaults of which they are aware, and (iii) any management letter that may be issued; (f) not less than 30 days prior to the close of each Fiscal Year, the Projections, which will be prepared by such Borrower in good faith, with care and diligence, and using assumptions which are reasonable under the circumstances at the time such Projections are delivered to Lender and disclosed therein when delivered; (g) within 30 days following the end of each Fiscal Quarter, a report of Leading Borrower's Export Sale Percentage for the period of twelve (12) consecutive Fiscal Months ending with such Fiscal Quarter, which report shall be certified as true and correct by the Chief Financial Officer of such Borrower or such other officer as is acceptable to Lender; (h) promptly upon their becoming available, copies of: (i) all Financial Statements, reports, notices and proxy statements made publicly available by any Borrower to its security holders; (ii) all regular and periodic reports and all registration statements and prospectuses, if any, filed by any Credit Party with any securities exchange or with the Securities and Exchange Commission or any governmental or private regulatory authority; and (iii) all press releases and other statements made available by any Credit Party to the public concerning material changes or developments in the business of any such Person; and (i) all the reports and other information set forth on EXHIBIT B in the time frames set forth therein. 4.2 FINANCIAL COVENANTS. Each Borrower shall not breach any of the financial covenants set forth in SCHEDULE G. 4.3 OTHER REPORTS AND INFORMATION. Each Borrower shall advise Lender promptly, in reasonable detail, of: (a) any Lien, other than Permitted Encumbrances, attaching to or asserted against any of the Collateral or any occurrence causing a material loss or decline in value of any Collateral and the estimated (or actual, if available) amount of such loss or decline; (b) any material change in the composition of the Collateral; and (c) the occurrence of any Default or other event which has had or could reasonably be expected to have a Material Adverse Effect. Each Borrower shall, upon request of Lender, furnish to Lender such other reports and information in connection with the affairs, business, financial condition, operations, prospects or management of such Borrower or any other Credit Party or the Collateral as Lender may request, all in reasonable detail. 10 5. NEGATIVE COVENANTS Each Borrower and each Credit Party executing this Agreement covenants and agrees (for itself and each other Credit Party) that, without Lender's prior written consent, from the Closing Date until the Termination Date, neither any Borrower nor any other Corporate Credit Party shall, directly or indirectly, by operation of law or otherwise: (a) form any Subsidiary or merge with, consolidate with, acquire all or substantially all of the assets or capital stock of, or otherwise combine with or make any investment in or, except as provided in clause 5(c) below, loan or advance to, any Person; PROVIDED, that Leading Borrower may form a Subsidiary if (1) such Subsidiary is formed under the laws of a state located in the United States, (2) such Subsidiary is a wholly-owned Subsidiary of the Borrower (it is contemplated that Borrowers may from time to time request that Lender consent to a Corporate Credit Party's forming a Subsidiary that is not a wholly-owned Subsidiary, but Lender shall not be under any obligation to grant such consent), (3) Leading Borrower gives Lender at least 30 days prior written notice thereof, and (4) effective immediately upon the formation of such Subsidiary, (i) all Stock of such Subsidiary is pledged to Lender as security for the Obligations and Lender has control of such Stock, (ii) such Subsidiary guarantees all of the Obligations, and (iii) Lender has first-priority Lien on all of assets of such Subsidiary (subject only to Permitted Encumbrances), in each case to sole satisfaction of Lender; (b) cancel any debt owing to it (provided that the Borrowers may cancel up to $25,000 of such debt in aggregate from the date hereof until the Termination Date, and this exception shall be in addition to the exception provided in the second sentence of SECTION 3.18), or create, incur, assume or permit to exist any Indebtedness, except: (i) the Obligations, (ii) Indebtedness existing as of the Closing Date set forth on DISCLOSURE SCHEDULE 5(b), (iii) deferred taxes, (iv) by endorsement of instruments or items of payment for deposit to the general account of such Credit Party, (v) for Guaranteed Indebtedness incurred for the benefit of any Borrower if the primary obligation is permitted by this Agreement; (vi) Permitted Intercompany Loans by any Borrower to any other Borrower; (vii) Subordinated Debt in an amount not to exceed $4,000,000 in the aggregate any time owing by any or all Borrowers, and (viii) additional Indebtedness (including Purchase Money Indebtedness) incurred after the Closing Date in an aggregate outstanding amount for all such Corporate Credit Parties combined not exceeding $300,000; (c) enter into any lending, borrowing or other commercial transaction with any of its employees, directors, Affiliates or any other Credit Party (including upstreaming and downstreaming of cash and intercompany advances and payments by a Credit Party on behalf of another Credit Party which are not otherwise permitted hereunder) other than loans or advances to employees in the ordinary course of business in an aggregate outstanding amount not exceeding $50,000; (d) (i) make any changes in any of its business objectives, purposes, or operations which could reasonably be expected to adversely affect repayment of the Obligations or could reasonably be expected to have a Material Adverse Effect (ii) or engage in any business other than that presently engaged in or proposed to be engaged in the Projections delivered to Lender on the Closing Date (it being acknowledged that Borrowers propose to engage in the production, sale, and/or distribution of digital projectors, or other lines of business that are complementary to Borrowers' existing lines of business, but there shall be no obligation on Lender's part to consent to any Borrower's engaging in any of such proposed or other lines of business), or (iii) amend its charter or by-laws or other organizational documents which could reasonably be expected to adversely affect repayment of the Obligations or could reasonably be expected to have a Material Adverse Effect; (e) create or permit any Lien on any of its properties or assets, except for Permitted Encumbrances (it is contemplated that Borrowers may request from time to time that Lender consent to the grant of subordinated Liens on Borrowers' assets to secure Subordinated Debt, but Lender shall be under no obligation to grant any such consent); (f) sell, transfer, issue, convey, assign or otherwise dispose of any of its assets or properties, including its Accounts or any shares of its Stock (except sales of common stock of Leading Borrower) or engage in any sale-leaseback, synthetic lease or similar transaction (provided, that the foregoing shall not prohibit the sale of Inventory or obsolete or unnecessary Equipment in the ordinary course of its business); (g) change its name, jurisdiction of organization, form of organization, chief executive office, corporate offices, warehouses or other Collateral locations, or location of its records concerning the Collateral, or acquire, lease or use any real estate after the Closing Date without such Person, in each instance, giving thirty (30) days prior written notice thereof to Lender and taking all actions deemed necessary or appropriate by Lender to continuously protect and perfect Lender's Liens upon the Collateral; (h) establish any depository or other bank account of any kind with any financial institution (other than the accounts set forth on ATTACHMENT 1 to SCHEDULE D) without Lender's prior written consent; or 11 (i) make or permit any Restricted Payment. 6. SECURITY INTEREST 6.1 GRANT OF SECURITY INTEREST. (a) As collateral security for the prompt and complete payment and performance of the Obligations, each of the Borrowers and each other Credit Party executing this Agreement hereby grants to the Lender a security interest in and Lien upon all of its property and assets, whether real or personal, tangible or intangible, and whether now owned or hereafter acquired, or in which it now has or at any time in the future may acquire any right, title, or interest, including all of the following property in which it now has or at any time in the future may acquire any right, title or interest: all Accounts; all bank and deposit accounts and all funds on deposit therein; all cash and cash equivalents; all commodity contracts; all investments, Stock and Investment Property; all Inventory and Equipment; all Goods; all Chattel Paper, Documents and Instruments; all Books and Records; all General Intangibles; all Letter-of-Credit Rights; all Supporting Obligations; and to the extent not otherwise included, all Proceeds and products of all and any of the foregoing and all collateral security and guarantees given by any Person with respect to any of the foregoing, but excluding in all events Hazardous Waste (all of the foregoing, together with any other collateral pledged to the Lender pursuant to any other Loan Document, collectively, the "COLLATERAL"). (b) Each Borrower, Lender and each other Credit Party executing this Agreement agree that this Agreement creates, and is intended to create, valid and continuing Liens upon the Collateral in favor of Lender. Each Borrower and each other Credit Party executing this Agreement represents, warrants and promises to Lender that: (i) each Borrower and each other Credit Party granting a Lien in Collateral is the sole owner of each item of the Collateral upon which it purports to grant a Lien pursuant to the Loan Documents, and has good and marketable title thereto free and clear of any and all Liens or claims of others, other than Permitted Encumbrances; (ii) the security interests granted pursuant to this Agreement, upon completion of the filings and other actions listed on DISCLOSURE SCHEDULE 6.1 (which, in the case of all filings and other documents referred to in said Schedule, have been delivered to the Lender in duly executed form) will constitute valid perfected security interests in all of the Collateral in favor of the Lender as security for the prompt and complete payment and performance of the Obligations, enforceable in accordance with the terms hereof against any and all creditors of and purchasers from any Credit Party (other than purchasers of Inventory in the ordinary course of business) and such security interests are prior to all other Liens on the Collateral in existence on the date hereof except for Permitted Encumbrances which have priority by operation of law; and (iii) no effective security agreement, financing statement, equivalent security or Lien instrument or continuation statement covering all or any part of the Collateral is or will be on file or of record in any public office, except those relating to Permitted Encumbrances. Each Borrower and each other Credit Party executing this Agreement promise to defend the right, title and interest of Lender in and to the Collateral against the claims and demands of all Persons whomsoever, and each shall take such actions, including (x) the prompt delivery of all original Instruments, Chattel Paper and certificated Stock owned by such Borrower and each other Credit Party granting a Lien on Collateral to Lender, (y) notification of Lender's interest in Collateral at Lender's request, and (z) the institution of litigation against third parties as shall be prudent in order to protect and preserve each Credit Party's and Lender's respective and several interests in the Collateral. Each Borrower (and any other Credit Party granting a Lien in Collateral) shall mark its Books and Records pertaining to the Collateral to evidence the Loan Documents and the Liens granted under the Loan Documents. All Chattel Paper shall be marked with the following legend: "This writing and the obligations evidenced or secured hereby are subject to the security interest of General Electric Capital Corporation." 6.2 LENDER'S RIGHTS. (a) Lender may, (i) at any time in Lender's own name or in the name of any Borrower, communicate with Account Debtors, parties to Contracts, and obligors in respect of Instruments, Chattel Paper or other Collateral to verify to Lender's satisfaction, the existence, amount and terms of any such Accounts, Contracts, Instruments or Chattel Paper or other Collateral, and (ii) at any time and without prior notice to any Borrower or any other Credit Party, notify Account Debtors, parties to Contracts, and obligors in respect of Chattel Paper, Instruments, or other Collateral that the Collateral has been assigned to Lender and that payments shall be made directly to Lender. Lender shall endeavor to notify the Leading Borrower if Lender communicates with or gives any such notice to any such Account Debtor, party or obligor, but such notice may be given after such communication is made or notice is given and Lender's failure for any reason to give any such notice to the Leading Borrower shall not result in either (A) any liability on the part of Lender to any Borrower or (B) the creation of any defense, claim, counterclaim or right of set-off or recoupment on the part of any Borrower against Lender. Upon the request of Lender, each Borrower shall so notify such Account Debtors, parties to Contracts, and obligors in respect of Instruments, Chattel Paper or other Collateral. Each Borrower hereby constitutes Lender or Lender's designee as such Borrower's attorney with power to endorse such Borrower's name upon any notes, acceptance drafts, money orders or other evidences of payment or Collateral. (b) Each Borrower shall remain liable under each Contract, Instrument and License to observe and perform all the conditions and obligations to be observed and performed by it thereunder, and Lender shall have no obligation or liability whatsoever to any Person under any Contract, Instrument or License (between any Borrower or any other Credit Party and any Person other than Lender) by reason of or arising out of the execution, delivery or performance of this Agreement, and Lender shall not be required or obligated in any manner (i) to perform or fulfill any of the obligations of any Borrower, (ii) to make any payment or inquiry, or (iii) to take any action of any kind to collect, compromise or enforce any performance or the payment of 12 any amounts which may have been assigned to it or to which it may be entitled at any time or times under or pursuant to any Contract, Instrument or License. (c) Each Borrower and each other Credit Party shall, with respect to each owned, leased, or controlled property, during normal business hours and upon reasonable advance notice (unless a Default shall have occurred and be continuing, in which event no notice shall be required and Lender shall have access at any and all times): (i) provide access to such property to Lender and any of its officers, employees and agents, as frequently as Lender determines to be appropriate; (ii) permit Lender and any of its officers, employees and agents to inspect, audit and make extracts and copies (or take originals if reasonably necessary) from all of such Borrower's and such Credit Party's Books and Records; and (iii) permit Lender to inspect, review, evaluate and make physical verifications and appraisals of the Inventory and other Collateral in any manner and through any medium that Lender considers advisable, and each Borrower and such Credit Party agree to render to Lender, at such Borrower's and such Credit Party's cost and expense, such clerical and other assistance as may be reasonably requested with regard thereto. (d) After the occurrence and during the continuance of a Default, each Borrower at its own expense, shall cause the certified public accountant then engaged by such Borrower to prepare and deliver to Lender at any time and from time to time, promptly upon Lender's request, the following reports: (i) a reconciliation of all Accounts; (ii) an aging of all Accounts; (iii) trial balances; and (iv) test verifications of such Accounts as Lender may request. Each Borrower, at its own expense, shall cause its certified independent public accountants to deliver to Lender the results of any physical verifications of all or any portion of the Inventory made or observed by such accountants when and if such verification is conducted. Lender shall be permitted to observe and consult with each Borrower's accountants in the performance of these tasks. 6.3 LENDER'S APPOINTMENT AS ATTORNEY-IN-FACT. On the Closing Date, each Borrower and each other Credit Party executing this Agreement shall execute and deliver a Power of Attorney in the form attached as EXHIBIT I. The power of attorney granted pursuant to the Power of Attorney and all powers granted under any Loan Document are powers coupled with an interest and shall be irrevocable until the Termination Date. The powers conferred on Lender under the Power of Attorney are solely to protect Lender's interests in the Collateral and shall not impose any duty upon it to exercise any such powers. Lender agrees not to exercise any power or authority granted under the Power of Attorney unless an Event of Default has occurred and is continuing. Each Borrower and each other Credit Party executing this Agreement authorizes Lender to file any financing or continuation statement without the signature of such Borrower or such Credit Party to the extent permitted by applicable law. 6.4 GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY COLLATERAL. Each Borrower and each other Credit Party executing this Agreement hereby grants to Lender an irrevocable, non-exclusive license (exercisable upon the occurrence and during the continuance of an Event of Default without payment of royalty or other compensation to any Borrower or such Credit Party) to use, transfer, license or sublicense any Intellectual Property now owned, licensed to, or hereafter acquired by such Borrower or such Credit Party, and wherever the same may be located, and including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof, and represents, promises and agrees that any such license or sublicense is not and will not be in conflict with the contractual or commercial rights of any third Person; PROVIDED, that such license will terminate on the Termination Date, and provided, further, that such license shall not be deemed granted hereunder if the applicable Borrower has notified Lender in writing that such grant would cause (and such grant would in fact cause) such Borrower to be in breach of a contractual obligation with respect to such Intellectual Property. 7. EVENTS OF DEFAULT: RIGHTS AND REMEDIES 7.1 EVENTS OF DEFAULT. The occurrence of any one or more of the following events (regardless of the reason therefor) shall constitute an "EVENT OF DEFAULT" hereunder which shall be deemed to be continuing until waived in writing by Lender in accordance with SECTION 10.3: (a) any Borrower shall fail to make any payment in respect of any Obligations when due and payable or declared due and payable; or (b) any Borrower or any other Credit Party (whether or not such Credit Party has signed this Agreement) shall fail or neglect to perform, keep or observe any of the covenants, promises, agreements, requirements, conditions or other terms or provisions contained in this Agreement or any of the other Loan Documents; or (c) an event of default shall occur under any Contractual Obligation of any Borrower or any other Credit Party (other than this Agreement and the other Loan Documents), and such event of default (i) involves the failure to make any payment (whether or not such payment is blocked pursuant to the terms of an intercreditor agreement or otherwise), whether of principal, interest or otherwise, and whether due by scheduled maturity, required prepayment, acceleration, demand or otherwise, in respect 13 of any Indebtedness (other than the Obligations) of such Person in an aggregate amount exceeding the Minimum Actionable Amount, or (ii) causes (or permits any holder of such Indebtedness or a trustee to cause) such Indebtedness, or a portion thereof, in an aggregate amount exceeding the Minimum Actionable Amount to become due prior to its stated maturity or prior to its regularly scheduled date of payment; or (d) any representation or warranty in this Agreement or any other Loan Document, or in any written statement pursuant hereto or thereto, or in any report, financial statement or certificate made or delivered to Lender by any Borrower or any other Credit Party shall be untrue or incorrect as of the date when made or deemed made, regardless of whether such breach involves a representation or warranty with respect to a Credit Party that has not signed this Agreement; or (e) there shall be commenced against any Borrower or any other Credit Party any Litigation seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which remains unstayed or undismissed for thirty (30) consecutive days; or any Borrower or any other Credit Party shall have concealed, removed or permitted to be concealed or removed, any part of its property with intent to hinder, delay or defraud any of its creditors or made or suffered a transfer of any of its property or the incurring of an obligation which may be fraudulent under any bankruptcy, fraudulent transfer or other similar law; or (f) a case or proceeding shall have been commenced involuntarily against any Borrower or any other Credit Party in a court having competent jurisdiction seeking a decree or order: (i) under the United States Bankruptcy Code or any other applicable Federal, state or foreign bankruptcy or other similar law, and seeking either (x) the appointment of a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for such Person or of any substantial part of its properties, or (y) the reorganization or winding up or liquidation of the affairs of any such Person, and such case or proceeding shall remain undismissed or unstayed for sixty (60) consecutive days or such court shall enter a decree or order granting the relief sought in such case or proceeding; or (ii) invalidating or denying any Person's right, power, or competence to enter into or perform any of its obligations under any Loan Document or invalidating or denying the validity or enforceability of this Agreement or any other Loan Document or any action taken hereunder or thereunder; or (g) any Borrower or any other Credit Party shall (i) commence any case, proceeding or other action under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, conservatorship or relief of debtors, seeking to have an order for relief entered with respect to it or seeking appointment of a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for it or any substantial part of its properties, (ii) make a general assignment for the benefit of creditors, (iii) consent to or take any action in furtherance of, or, indicating its consent to, approval of, or acquiescence in, any of the acts set forth in PARAGRAPHS (e) or (f) of this SECTION 7.1 or CLAUSES (i) and (ii) of this PARAGRAPH (g), or (iv) shall admit in writing its inability to, or shall be generally unable to, pay its debts as such debts become due; or (h) a final judgment or judgments for the payment of money in excess of the Minimum Actionable Amount in the aggregate shall be rendered against any Borrower or any other Credit Party, unless the same shall be (i) fully covered by insurance and the issuer(s) of the applicable policies shall have acknowledged full coverage in writing within fifteen (30) days of judgment, or (ii) vacated, stayed, bonded, paid or discharged within a period of fifteen (30) days from the date of such judgment; or (i) any other event shall have occurred which has had or could reasonably be expected to have a Material Adverse Effect; or (j) any provision of any Loan Document shall for any reason cease to be valid, binding and enforceable in accordance with its terms, or any Lien granted, or intended by the Loan Documents to be granted, to Lender shall cease to be a valid and perfected Lien having the first priority (or a lesser priority if expressly permitted in the Loan Documents) in any of the Collateral if the aggregate fair market or book value of all such Collateral exceeds $25,000 (or any Credit Party shall so assert any of the foregoing); or (k) a Change of Control shall have occurred with respect to any Corporate Credit Party; or (l) an ERISA Event shall have occurred that, in the opinion of the Lender, when taken together with all other ERISA Events that have occurred and are then continuing, could reasonably be expected to result in liability of any Credit Party in an aggregate amount exceeding the Minimum Actionable Amount. 7.2 REMEDIES. (a) If any Default shall have occurred and be continuing, then Lender may terminate or suspend its obligation to make further Revolving Credit Advances and to incur additional Letter of Credit Obligations. In addition, if any Event of Default shall have occurred and be continuing, Lender may, without notice, take any one or more of the following actions: (i) declare all or any portion of the Obligations to be forthwith due and payable, including contingent liabilities with respect to 14 Letter of Credit Obligations, whereupon such Obligations shall become and be due and payable; (ii) require that all Letter of Credit Obligations be fully cash collateralized pursuant to SCHEDULE C; or (iii) exercise any rights and remedies provided to Lender under the Loan Documents or at law or equity, including all remedies provided under the Code; PROVIDED, that upon the occurrence of any Event of Default specified in SECTIONS 7.1 (e), (f) or (g), the Obligations shall become immediately due and payable (and any obligation of Lender to make further Loans, if not previously terminated, shall immediately be terminated) without declaration, notice or demand by Lender. (b) Without limiting the generality of the foregoing, each Borrower and each other Credit Party executing this Agreement expressly agrees that upon the occurrence of any Event of Default, Lender may collect, receive, assemble, process, appropriate and realize upon the Collateral, or any part thereof, and may forthwith sell, lease, assign, give an option or options to purchase or otherwise dispose of and deliver said Collateral (or contract to do so), or any part thereof, in one or more parcels at public or private sale or sales, at any exchange at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. Lender shall have the right upon any such public sale, to the extent permitted by law, to purchase for the benefit of Lender the whole or any part of said Collateral so sold, free of any right of equity of redemption, which right each Borrower and each other Credit Party executing this Agreement hereby releases. Such sales may be adjourned, or continued from time to time with or without notice. Lender shall have the right to conduct such sales on any Credit Party's premises or elsewhere and shall have the right to use any Credit Party's premises without rent or other charge for such sales or other action with respect to the Collateral for such time as Lender deems necessary or advisable. (c) Upon the occurrence and during the continuance of an Event of Default and at Lender's request, each Borrower and each other Credit Party executing this Agreement agrees to assemble the Collateral and make it available to Lender at places which Lender shall reasonably select, whether at its premises or elsewhere. Until Lender is able to effect a sale, lease, or other disposition of the Collateral, Lender shall have the right to complete, assemble, use or operate the Collateral or any part thereof, to the extent that Lender deems appropriate, for the purpose of preserving such Collateral or its value or for any other purpose. Lender shall have no obligation to any Credit Party to maintain or preserve the rights of such Credit Party as against third parties with respect to any Collateral while such Collateral is in the possession of Lender. Lender may, if it so elects, seek the appointment of a receiver or keeper to take possession of any Collateral and to enforce any of Lender's remedies with respect thereto without prior notice or hearing. To the maximum extent permitted by applicable law, each Borrower and each other Credit Party executing this Agreement waives all claims, damages, and demands against Lender, its Affiliates, agents, and the officers and employees of any of them arising out of the repossession, retention or sale of any Collateral except such as are determined in a final judgment by a court of competent jurisdiction to have arisen solely out of the gross negligence or willful misconduct of such Person. Each Borrower and each other Credit Party executing this Agreement agrees that ten (10) days prior notice by Lender to such Credit Party of the time and place of any public sale or of the time after which a private sale may take place is reasonable notification of such matters. Each Borrower and each other Credit Party shall remain liable for any deficiency if the proceeds of any sale or disposition of the Collateral are insufficient to pay all amounts to which Lender is entitled. (d) Lender's rights and remedies under this Agreement shall be cumulative and nonexclusive of any other rights and remedies which Lender may have under any Loan Document or at law or in equity. Recourse to the Collateral shall not be required. All provisions of this Agreement are intended to be subject to all applicable mandatory provisions of law that may be controlling and to be limited, to the extent necessary, so that they do not render this Agreement invalid or unenforceable, in whole or in part. 7.3 WAIVERS BY CREDIT PARTIES. Except as otherwise provided for in this Agreement and to the fullest extent permitted by applicable law, each Borrower and each other Credit Party executing this Agreement waives: (a) presentment, demand and protest, and notice of presentment, dishonor, intent to accelerate, acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all Loan Documents, the Notes or any other notes, commercial paper, Accounts, Contracts, Documents, Instruments, Chattel Paper and guaranties at any time held by Lender on which such Credit Party may in any way be liable, and hereby ratifies and confirms whatever Lender may do in this regard; (b) all rights to notice and a hearing prior to Lender's taking possession or control of, or to Lender's replevy, attachment or levy upon, any Collateral or any bond or security which might be required by any court prior to allowing Lender to exercise any of its remedies; and (c) the benefit of all valuation, appraisal and exemption laws. Each Borrower and each other Credit Party executing this Agreement acknowledges that it has been advised by counsel of its choices and decisions with respect to this Agreement, the other Loan Documents and the transactions evidenced hereby and thereby. 7.4 PROCEEDS. The Proceeds of any sale, disposition or other realization upon any Collateral shall be applied by Lender upon receipt to the Obligations in such order as Lender may deem advisable in its sole discretion (including the cash collateralization of any Letter of Credit Obligations), and after the indefeasible payment and satisfaction in full in cash of all of the Obligations, and after the payment by Lender of any other amount required by any provision of law, including Section 9-504(1)(c) of the Code (but only after Lender has received what Lender considers reasonable proof of a subordinate party's security interest), the surplus, if 15 any, shall be paid to Borrowers or their representatives or to whomsoever may be lawfully entitled to receive the same, or as a court of competent jurisdiction may direct. 8. SUCCESSORS AND ASSIGNS Each Loan Document shall be binding on and shall inure to the benefit of each Borrower and each other Credit Party executing such Loan Document, Lender, and their respective successors and assigns, except as otherwise provided herein or therein. Neither any Borrower nor any other Credit Party may assign, transfer, hypothecate, delegate or otherwise convey its rights, benefits, obligations or duties under any Loan Document without the prior express written consent of Lender. Any such purported conveyance by such Borrower or such Credit Party without the prior express written consent of Lender shall be void. There shall be no third party beneficiaries of any of the terms and provisions of any of the Loan Documents. Lender reserves the right at any time to create and sell participations in the Loans and the Loan Documents and to sell, transfer or assign any or all of its rights in the Loans and under the Loan Documents (but Lender shall bear its own expenses of such transfer or assignment if no Event of Default is then in existence) 9. GUARANTOR WAIVERS BY BORROWERS IF AND TO THE EXTENT THAT ANY OBLIGATION OF ANY BORROWER TO LENDER SHALL BE CONSIDERED AN OBLIGATION OF GUARANTY OR SURETYSHIP, THEN THE FOLLOWING PROVISIONS OF THIS SECTION 9 SHALL APPLY WITH RESPECT TO EACH SUCH BORROWER SOLELY TO THE EXTENT THAT SUCH BORROWER IS DEEMED TO ACT IN THE CAPACITY OF A GUARANTOR AND SHALL NOT EFFECT A WAIVER OF RIGHTS IN SUCH PERSON'S CAPACITY AS A BORROWER: (a) SUCH BORROWER EXPRESSLY WAIVES THE RIGHT TO REQUIRE LENDER FIRST TO PURSUE ANY OTHER PERSON, THE COLLATERAL, OR ANY OTHER SECURITY OR GUARANTY THAT MAY BE HELD FOR THE OBLIGATIONS, OR TO APPLY ANY SUCH SECURITY OR GUARANTY TO THE OBLIGATIONS BEFORE SEEKING FROM SUCH BORROWER PAYMENT IN FULL OF ITS LIABILITIES TO LENDER OR PROCEEDING AGAINST SUCH BORROWER FOR SAME. (b) SUCH BORROWER ACKNOWLEDGES THAT IF LENDER MAY, UNDER APPLICABLE LAW, PROCEED TO REALIZE ITS BENEFITS UNDER ANY OF THE LOAN DOCUMENTS GIVING LENDER A LIEN UPON ANY COLLATERAL, WHETHER OWNED BY ANY BORROWER OR BY ANY OTHER PERSON, EITHER BY JUDICIAL FORECLOSURE OR BY NON-JUDICIAL SALE OR ENFORCEMENT, LENDER MAY, AT ITS SOLE OPTION, DETERMINE WHICH OF ITS REMEDIES OR RIGHTS IT MAY PURSUE WITHOUT AFFECTING ANY OF ITS RIGHTS AND REMEDIES. IF, IN THE EXERCISE OF ANY OF ITS RIGHTS AND REMEDIES, LENDER SHALL FORFEIT ANY OF ITS RIGHTS OR REMEDIES, INCLUDING ITS RIGHT TO ENTER A DEFICIENCY JUDGMENT AGAINST ANY BORROWER OR ANY OTHER PERSON, WHETHER BECAUSE OF ANY APPLICABLE LAWS PERTAINING TO "ELECTION OF REMEDIES" OR THE LIKE, SUCH BORROWER HEREBY CONSENTS TO SUCH ACTION BY LENDER AND WAIVES ANY CLAIM BASED UPON SUCH ACTION, EVEN IF SUCH ACTION BY LENDER SHALL RESULT IN A FULL OR PARTIAL LOSS OF ANY RIGHTS OF SUBROGATION WHICH SUCH BORROWER MIGHT OTHERWISE HAVE HAD BUT FOR SUCH ACTION BY LENDER. ANY ELECTION OF REMEDIES WHICH RESULTS IN THE DENIAL OR IMPAIRMENT OF THE RIGHT OF LENDER TO SEEK A DEFICIENCY JUDGMENT AGAINST ANY BORROWER SHALL NOT IMPAIR ANY OTHER BORROWER'S OBLIGATION TO PAY THE FULL AMOUNT OF THE OBLIGATIONS. IN THE EVENT LENDER SHALL BID AT ANY FORECLOSURE OR TRUSTEE'S SALE OR AT ANY PRIVATE SALE PERMITTED BY LAW OR THE LOAN DOCUMENTS, LENDER MAY BID ALL OR LESS THAN THE AMOUNT OF THE OBLIGATIONS AND THE AMOUNT OF SUCH BID NEED NOT BE PAID BY LENDER BUT SHALL BE CREDITED AGAINST THE OBLIGATIONS. THE AMOUNT OF THE SUCCESSFUL BID AT ANY SUCH SALE, WHETHER LENDER OR ANY OTHER PARTY IS THE SUCCESSFUL BIDDER, SHALL BE CONCLUSIVELY DEEMED TO BE THE FAIR MARKET VALUE OF THE COLLATERAL AND THE DIFFERENCE BETWEEN SUCH BID AMOUNT AND THE REMAINING BALANCE OF THE OBLIGATIONS SHALL BE CONCLUSIVELY DEEMED TO BE THE AMOUNT OF THE OBLIGATIONS GUARANTEED BY SUCH BORROWER, NOTWITHSTANDING THAT ANY PRESENT OR FUTURE LAW OR COURT DECISION OR RULING MAY HAVE THE EFFECT OF REDUCING THE AMOUNT OF ANY DEFICIENCY CLAIM TO WHICH LENDER MIGHT OTHERWISE BE ENTITLED BUT FOR SUCH BIDDING AT ANY SUCH SALE. (c) SUCH BORROWER AGREES THAT LENDER SHALL BE UNDER NO OBLIGATION TO (I) MARSHAL ANY ASSETS IN FAVOR OF SUCH BORROWER, (II) PROCEED FIRST AGAINST ANY OTHER BORROWER OR PERSON OR ANY PROPERTY OF ANY OTHER BORROWER OR PERSON OR AGAINST ANY COLLATERAL, (III) ENFORCE FIRST ANY OTHER GUARANTY OBLIGATIONS WITH RESPECT TO, OR SECURITY FOR, THE OBLIGATIONS, OR (IV) PURSUE ANY OTHER REMEDY IN LENDER'S POWER THAT SUCH BORROWER MAY NOT 16 BE ABLE TO PURSUE ITSELF AND THAT MAY LIGHTEN SUCH BORROWER'S BURDEN, ANY RIGHT TO WHICH SUCH BORROWER HEREBY EXPRESSLY WAIVES. (d) EACH BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO LENDER'S ENTERING INTO THIS AGREEMENT AND THAT LENDER IS RELYING UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH SUCH BORROWER. EACH BORROWER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. 10. MISCELLANEOUS 10.1 COMPLETE AGREEMENT; MODIFICATION OF AGREEMENT. This Agreement and the other Loan Documents constitute the complete agreement among the parties with respect to the subject matter hereof and thereof, supersede all prior agreements, commitments, understandings or inducements (oral or written, expressed or implied). No Loan Document may be modified, altered or amended except by a written agreement signed by Lender, and each other Credit Party a party to such Loan Document. Each Borrower and each other Credit Party executing this Agreement or any other Loan Document shall have all duties and obligations under this Agreement and such other Loan Document from the date of its execution and delivery, regardless of whether the initial Loan has been funded at that time. 10.2 EXPENSES. Borrower agrees to pay or reimburse Lender for all costs and expenses (including the fees and expenses of all counsel, advisors, consultants (including environmental and management consultants) and auditors retained in connection therewith), incurred in connection with: (a) the preparation, negotiation, execution, delivery, performance and enforcement of the Loan Documents and the preservation of any rights thereunder; (b) collection, including deficiency collections; (c) the forwarding to Borrower or any other Person on behalf of Borrower by Lender of the proceeds of any Loan (including a wire transfer fee of $25 per wire transfer); (d) any amendment, waiver or other modification with respect to any Loan Document or advice in connection with the administration of the Loans or the rights thereunder; (e) any litigation, dispute, suit, proceeding or action (whether instituted by or between any combination of Lender, Borrower or any other Person), and an appeal or review thereof, in any way relating to the Collateral, any Loan Document, or any action taken or any other agreements to be executed or delivered in connection therewith, whether as a party, witness or otherwise; and (f) any effort (i) to monitor the Loans, (ii) to evaluate, observe or assess Borrower or any other Credit Party or the affairs of such Person, and (iii) to verify, protect, evaluate, assess, appraise, collect, sell, liquidate or otherwise dispose of the Collateral. 10.3 NO WAIVER. Neither Lender's failure, at any time, to require strict performance by any Borrower or any other Credit Party of any provision of any Loan Document, nor Lender's failure to exercise, nor any delay in exercising, any right, power or privilege hereunder, shall operate as a waiver thereof or waive, affect or diminish any right of Lender thereafter to demand strict compliance and performance therewith. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or future exercise thereof or the exercise of any other right, power or privilege. Any suspension or waiver of a Default or other provision under the Loan Documents shall not suspend, waive or affect any other Default or other provision under any Loan Document, and shall not be construed as a bar to any right or remedy which Lender would otherwise have had on any future occasion. None of the undertakings, indemnities, agreements, warranties, covenants and representations of any Borrower or any other Credit Party to Lender contained in any Loan Document and no Default by any Borrower or any other Credit Party under any Loan Document shall be deemed to have been suspended or waived by Lender, unless such waiver or suspension is by an instrument in writing signed by an officer or other authorized employee of Lender and directed to such Borrower specifying such suspension or waiver (and then such waiver shall be effective only to the extent therein expressly set forth), and Lender shall not, by any act (other than execution of a formal written waiver), delay, omission or otherwise, be deemed to have waived any of its rights or remedies hereunder. 10.4 SEVERABILITY; SECTION TITLES. Wherever possible, each provision of the Loan Documents shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of any Loan Document shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of such Loan Document. Except as otherwise expressly provided for in the Loan Documents, no termination or cancellation (regardless of cause or procedure) of any financing arrangement under the Loan Documents shall in any way affect or impair the Obligations, duties, covenants, representations and warranties, indemnities, and liabilities of any Borrower or any other Credit Party or the rights of Lender relating to any unpaid Obligation (due or not due, liquidated, contingent or unliquidated), or any transaction or event occurring prior to such termination, or any transaction or event, the performance of which is not required until after the Commitment Termination Date, all of which shall not terminate or expire, but rather shall survive such termination or cancellation and shall continue in full force and effect until the Termination Date; provided, that all indemnity obligations of the Credit Parties under the Loan Documents shall survive the Termination Date. The 17 Section titles contained in any Loan Document are and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto. 10.5 AUTHORIZED SIGNATURE. Until Lender shall be notified in writing by any Borrower or any other Credit Party to the contrary, the signature upon any document or instrument delivered pursuant hereto and believed by Lender or any of Lender's officers, agents, or employees to be that of an officer of such Borrower or such other Credit Party shall bind such Borrower and such other Credit Party and be deemed to be the act of such Borrower or such other Credit Party affixed pursuant to and in accordance with resolutions duly adopted by such Borrower's or such other Credit Party's Board of Directors, and Lender shall be entitled to assume the authority of each signature and authority of the person whose signature it is or appears to be unless the person acting in reliance thereon shall have actual knowledge to the contrary. 10.6 NOTICES. Except as otherwise provided herein, whenever any notice, demand, request or other communication shall or may be given to or served upon any party by any other party, or whenever any party desires to give or serve upon any other party any communication with respect to this Agreement, each such communication shall be in writing and shall be deemed to have been validly served, given or delivered (a) upon the earlier of actual receipt and three (3) days after deposit in the United States Mail, registered or certified mail, return receipt requested, with proper postage prepaid, (b) upon transmission, when sent by telecopy or other similar facsimile transmission (with such telecopy or facsimile promptly confirmed by delivery of a copy by personal delivery or United States Mail as otherwise provided in this SECTION 10.6), (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid or (d) when hand-delivered, all of which shall be addressed to the party to be notified and sent to the address or facsimile number indicated in SCHEDULE B or to such other address (or facsimile number) as may be substituted by notice given as herein provided. Failure or delay in delivering copies of any communication to any Person (other than any Borrower or Lender) designated in SCHEDULE B to receive copies shall in no way adversely affect the effectiveness of such communication. 10.7 COUNTERPARTS. Any Loan Document may be executed in any number of separate counterparts by one or more of the parties thereto, and all of said counterparts taken together shall constitute one and the same instrument. 10.8 TIME OF THE ESSENCE. Time is of the essence for performance of the Obligations under the Loan Documents. 10.9 GOVERNING LAW. THE LOAN DOCUMENTS AND THE OBLIGATIONS ARISING UNDER THE LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF LAWS. 10.10 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. (a) EACH BORROWER AND EACH OTHER CREDIT PARTY EXECUTING THIS AGREEMENT HEREBY CONSENT AND AGREE THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK COUNTY, NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN SUCH BORROWER AND SUCH CREDIT PARTY AND LENDER PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED, THAT LENDER, SUCH BORROWER AND SUCH CREDIT PARTY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK COUNTY, NEW YORK; AND FURTHER PROVIDED, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF LENDER. SUCH BORROWER AND EACH OTHER CREDIT PARTY EXECUTING THIS AGREEMENT EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND SUCH BORROWER AND SUCH CREDIT PARTY HEREBY WAIVE ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. EACH BORROWER AND EACH OTHER CREDIT PARTY EXECUTING THIS AGREEMENT HEREBY WAIVE PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREE THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH BORROWER OR SUCH CREDIT PARTY AT THE ADDRESS SET FORTH IN SCHEDULE B OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH BORROWER'S OR SUCH CREDIT PARTY'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID. (b) THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE 18 BETWEEN LENDER, ANY BORROWER AND ANY CREDIT PARTY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THE LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO. 10.11 PRESS RELEASES. Neither any Credit Party nor any of its Affiliates will in the future issue any press release or other public disclosure using the name of General Electric Capital Corporation or its affiliates or referring to this Agreement or the other Loan Documents without at least two (2) Business Days' prior notice to Lender and without the prior written consent of Lender unless (and only to the extent that) such Credit Party or Affiliate is required to do so under law and then, in any event, such Credit Party or Affiliate shall use its best efforts to consult with Lender before issuing such press release or other public disclosure. 10.12 REINSTATEMENT. This Agreement shall continue to be effective, or be reinstated, as the case may be, if at any time payment of all or any part of the Obligations is rescinded or must otherwise be returned or restored by Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of any Borrower or any other Credit Party, or otherwise, all as though such payments had not been made. 11. CROSS-GUARANTY 11.1 CROSS-GUARANTY. Each Borrower hereby absolutely and unconditionally guarantees to Lender and its successors and assigns the full and prompt payment (whether at stated maturity, by acceleration or otherwise) and performance of all Obligations owed or hereafter owing to Lender by each other Borrower, including that portion of the Revolving Credit Loan attributable to each other Borrower. Each Borrower agrees that its guaranty obligation hereunder is a continuing guaranty of payment and performance and not of collection, and that its obligations under this SECTION 11 shall be absolute and unconditional, irrespective of, and unaffected by: (a) the genuineness, validity, regularity, enforceability or any future amendment of, or change in, this Agreement, any other Loan Document or any other agreement, document or instrument to which any Borrower is or may become a party; (b) the absence of any action to enforce this Agreement (including this SECTION 11) or any other Loan Document or the waiver or consent by Lender with respect to any of the provisions hereof or thereof; (c) the existence, value or condition of, or failure to perfect its Lien against, any security for the Obligations or any action, or the absence of any action, by Lender in respect thereof (including the release of any such security); (d) the insolvency of any Credit Party; or (e) any other action or circumstances which might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being agreed by each Borrower that its obligations under this SECTION 11 shall not be discharged until the payment and performance, in full, of the Obligations has occurred. Each Borrower shall be regarded, and shall be in the same position, as principal debtor with respect to the Obligations guaranteed hereunder. 11.2 WAIVERS BY BORROWERS. Each Borrower expressly waives all rights it may have now or in the future under any statute, or at common law, or at law or in equity, or otherwise, to compel Lender to marshal assets or to proceed in respect of the Obligations guaranteed hereunder against any other Credit Party, any other party or against any security for the payment and performance of the Obligations before proceeding against, or as a condition to proceeding against, such Borrower. It is agreed among each Borrower and Lender that the foregoing waivers are of the essence of the transactions contemplated by this Agreement and the other Loan Documents and that, but for the provisions of this SECTION 11 and such waivers, Lender would decline to enter into this Agreement. 11.3 BENEFIT OF GUARANTY. Each Borrower agrees that the provisions of this SECTION 11 are for the benefit of Lender and its successors, transferees, endorsees and assigns, and nothing herein contained shall impair, as between any other Borrower and Lender, the obligations of such other Borrower under the Loan Documents. 11.4 SUBORDINATION OF SUBROGATION. Notwithstanding anything to the contrary in this Agreement or in any other Loan Document, and except as set forth in SECTION 11.7, each Borrower hereby expressly and irrevocably subordinates to payment of the Obligations any and all rights at law or in equity to subrogation, reimbursement, exoneration, contribution, indemnification or set off and any and all defenses available to a surety, guarantor or accommodation co-obligor until the Obligations are indefeasibly paid in full in cash. Each Borrower acknowledges and agrees that this waiver is intended to benefit Lender and shall not limit or 19 otherwise affect such Borrower's liability hereunder or the enforceability of this SECTION 11, and that Lender and its successors and assigns are intended third party beneficiaries of the waivers and agreements set forth in this SECTION 11.4. 11.5 ELECTION OF REMEDIES. If Lender may, under applicable law, proceed to realize its benefits under any of the Loan Documents giving Lender a Lien upon any Collateral, whether owned by any Borrower or by any other Person, either by judicial foreclosure or by non-judicial sale or enforcement, Lender may, at its sole option, determine which of its remedies or rights it may pursue without affecting any of its rights and remedies under this SECTION 11. If, in the exercise of any of its rights and remedies, Lender shall forfeit any of its rights or remedies, including its right to enter a deficiency judgment against any Borrower or any other Person, whether because of any applicable laws pertaining to "election of remedies" or the like, each Borrower hereby consents to such action by Lender and waives any claim based upon such action, even if such action by Lender shall result in a full or partial loss of any rights of subrogation which such Borrower might otherwise have had but for such action by Lender. Any election of remedies which results in the denial or impairment of the right of Lender to seek a deficiency judgment against any Borrower shall not impair any other Borrower's obligation to pay the full amount of the Obligations. In the event Lender shall bid at any foreclosure or trustee's sale or at any private sale permitted by law or the Loan Documents, Lender may bid all or less than the amount of the Obligations and the amount of such bid need not be paid by Lender but may be credited against the Obligations. The amount of the successful bid at any such sale, whether Lender or any other party is the successful bidder, shall be conclusively deemed to be the fair market value of the Collateral and the difference between such bid amount and the remaining balance of the Obligations shall be conclusively deemed to be the amount of the Obligations guaranteed under this SECTION 11, notwithstanding that any present or future law or court decision or ruling may have the effect of reducing the amount of any deficiency claim to which Lender might otherwise be entitled but for such bidding at any such sale. 11.6 LIMITATION. Notwithstanding any provision herein contained to the contrary, each Borrower's liability under this SECTION 11 (which liability is in any event in addition to amounts for which such Borrower is primarily liable under SECTION 1) shall be limited to an amount not to exceed as of any date of determination the greater of: (a) the net amount of all Loans advanced to any other Borrower under this Agreement and then re-loaned or otherwise transferred to, or for the benefit of, such Borrower; and (b) the amount which could be claimed by Lender from such Borrower under this SECTION 11 without rendering such claim voidable or avoidable under Section 548 of Chapter 11 of the United States Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law after taking into account, among other things, such Borrower's right of contribution and indemnification from each other Borrower under SECTION 11.7. 11.7 CONTRIBUTION WITH RESPECT TO GUARANTY OBLIGATIONS. (a) To the extent that any Borrower shall make a payment under this SECTION 11 of all or any of the Obligations (other than Loans made to that Borrower for which it is primarily liable) (a "GUARANTOR PAYMENT") which, taking into account all other Guarantor Payments then previously or concurrently made by any other Borrower, exceeds the amount which such Borrower would otherwise have paid if each Borrower had paid the aggregate Obligations satisfied by such Guarantor Payment in the same proportion that such Borrower's "ALLOCABLE AMOUNT" (as defined below) (as determined immediately prior to such Guarantor Payment) bore to the aggregate Allocable Amounts of each of the Borrowers as determined immediately prior to the making of such Guarantor Payment, then, following indefeasible payment in full in cash of the Obligations and termination of the Commitments, such Borrower shall be entitled to receive contribution and indemnification payments from, and be reimbursed by, each other Borrower for the amount of such excess, pro rata based upon their respective Allocable Amounts in effect immediately prior to such Guarantor Payment. (b) As of any date of determination, the "Allocable Amount" of any Borrower shall be equal to the maximum amount of the claim which could then be recovered from such Borrower under this SECTION 11 without rendering such claim voidable or avoidable under Section 548 of Chapter 11 of the United States Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law. (c) This SECTION 11.7 is intended only to define the relative rights of Borrowers and nothing set forth in this SECTION 11.7 is intended to or shall impair the obligations of each Borrower to pay any amounts as and when the same shall become due and payable in accordance with the terms of this Agreement, including SECTION 11.1. Nothing contained in this SECTION 11.7 shall limit the liability of any Borrower to pay the Loans made directly or indirectly to that Borrower and accrued interest, Fees and expenses with respect thereto for which such Borrower shall be primarily liable. (d) The parties hereto acknowledge that the rights of contribution and indemnification hereunder shall constitute assets of Borrower to which such contribution and indemnification is owing. 20 (e) The rights of the indemnifying Borrowers against other Credit Parties under this SECTION 11.7 shall be exercisable upon the full and indefeasible payment of the Obligations and the termination of Lender's obligation to extend any credit under this Agreement. 11.8 LIABILITY CUMULATIVE. The liability of Borrowers under this SECTION 11 is in addition to and shall be cumulative with all liabilities of each Borrower to Lender under this Agreement and the other Loan Documents to which such Borrower is a party or in respect of any Obligations or obligation of the other Borrower, without any limitation as to amount, unless the instrument or agreement evidencing or creating such other liability specifically provides to the contrary. 21 IN WITNESS WHEREOF, this Loan and Security Agreement has been duly executed as of the date first written above. BALLANTYNE OF OMAHA, INC. By: /s/ John P. Wilmers --------------------------------- Name: John P. Wilmers Title: President DESIGN & MANUFACTURING, INC. By: /s/ John P. Wilmers --------------------------------- Name: John P. Wilmers Title: President XENOTECH RENTAL CORP. By: /s/ John P. Wilmers --------------------------------- Name: John P. Wilmers Title: President XENOTECH STRONG, INC. By: /s/ John P. Wilmers --------------------------------- Name: John P. Wilmers Title: President BALLANTYNE OVERSEAS CORP. By: /s/ John P. Wilmers --------------------------------- Name: John P. Wilmers Title: President GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ Marian H. Kammerer --------------------------------- Name: Marian H. Kammerer Title: Duly Authorized Signatory 22 SCHEDULE A - DEFINITIONS Capitalized terms used in this Agreement and the other Loan Documents shall have (unless otherwise provided elsewhere in this Agreement or in the other Loan Documents) the following respective meanings: "Account Debtor" shall mean any Person who is or may become obligated with respect to, or on account of, an Account. "Accounts" shall mean all "accounts," as such term is defined in the Code, now owned or hereafter acquired by any Person, including: (i) all accounts receivable, other receivables, book debts and other forms of obligations (other than forms of obligations evidenced by Chattel Paper, Documents or Instruments), whether arising out of goods sold or services rendered or from any other transaction (including any such obligations which may be characterized as an account or contract right under the Code); (ii) all of such Person's rights in, to and under all purchase orders or receipts for goods or services; (iii) all of such Person's rights to any goods represented by any of the foregoing (including unpaid sellers' rights of rescission, replevin, reclamation and stoppage in transit and rights to returned, reclaimed or repossessed goods); (iv) all moneys due or to become due to such Person under all purchase orders and contracts for the sale of goods or the performance of services or both by such Person or in connection with any other transaction (whether or not yet earned by performance on the part of such Person), including the right to receive the proceeds of said purchase orders and contracts; and (v) all collateral security and guarantees of any kind given by any other Person with respect to any of the foregoing. "Accounts Payable Analysis" shall mean a certificate in the form of EXHIBIT D. "Accounts Receivable Roll Forward Analysis" shall mean a certificate in the form of EXHIBIT E. "Affiliate" shall mean, with respect to any Person: (i) each other Person that, directly or indirectly, owns or controls, whether beneficially, or as a trustee, guardian or other fiduciary, five percent (5%) or more of the Stock having ordinary voting power for the election of directors of such Person; (ii) each other Person that controls, is controlled by or is under common control with such Person or any Affiliate of such Person; or (iii) each of such Person's officers, directors, joint venturers and partners. For the purpose of this definition, "control" of a Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise. "Agreement" shall mean this Agreement including all appendices, exhibits or schedules attached or otherwise identified thereto, restatements and modifications and supplements thereto, and any appendices, exhibits or schedules to any of the foregoing, each as in effect at the time such reference becomes operative; provided, that except as specifically set forth in this Agreement, any reference to the Disclosure Schedules to this Agreement shall be deemed a reference to the Disclosure Schedules as in effect on the Closing Date or in a written amendment thereto executed by Borrower and Lender. "Books and Records" shall mean all books, records, board minutes, contracts, licenses, insurance policies, environmental audits, business plans, files, computer files, computer discs and other data and software storage and media devices, accounting books and records, financial statements (actual and pro forma), filings with Governmental Authorities and any and all records and instruments relating to the Collateral or any Borrower's business. "Borrower" and "Borrowers" shall have the meanings assigned to them in the preamble of this Agreement. "Borrower Agreement" shall mean the Borrower Agreement among Borrower, Lender, and Ex-Im Bank, in the form of EXHIBIT Y. "Borrowing Base Certificate" shall mean a Domestic Borrowing Base Certificate or a Foreign Borrowing Base Certificate. Schedule A - Page 1 "Business Day" shall mean any day that is not a Saturday, a Sunday or a day on which banks are required or permitted to be closed in the State of New York. "Capital Expenditures" shall mean all payments or accruals (including Capital Lease Obligations) for any fixed assets or improvements or for replacements, substitutions or additions thereto, that have a useful life of more than one year and that are required to be capitalized under GAAP. "Capital Lease" shall mean, with respect to any Person, any lease of any property (whether real, personal or mixed) by such Person as lessee that, in accordance with GAAP, either would be required to be classified and accounted for as a capital lease on a balance sheet of such Person or otherwise would be disclosed as such in a note to such balance sheet, other than, in the case of any Borrower, any such lease under which such Borrower is the lessor. "Capital Lease Obligation" shall mean, with respect to any Capital Lease, the amount of the obligation of the lessee thereunder that, in accordance with GAAP, would appear on a balance sheet of such lessee in respect of such Capital Lease or otherwise be disclosed in a note to such balance sheet. "Cash Collateral Account" shall have the meaning assigned to it in SCHEDULE C. "Change of Control" shall mean, with respect to any Person on or after the Closing Date, that any change in the composition of such Person's stockholders as of the Closing Date shall occur which would result in any stockholder or group acquiring 49.9% or more of any class of Stock of such Person, or that any Person (or group of Persons acting in concert) shall otherwise acquire, directly or indirectly (including through Affiliates), the power to elect a majority of the Board of Directors of such Person or otherwise direct the management or affairs of such Person by obtaining proxies, entering into voting agreements or trusts, acquiring securities or otherwise. "Charges" shall mean all Federal, state, county, city, municipal, local, foreign or other governmental taxes (including taxes owed to PBGC at the time due and payable), levies, customs or other duties, assessments, charges, liens, and all additional charges, interest, penalties, expenses, claims or encumbrances upon or relating to (i) the Collateral, (ii) the Obligations, (iii) the employees, payroll, income or gross receipts of any Credit Party, (iv) the ownership or use of any assets by any Credit Party, or (v) any other aspect of any Credit Party's business. "Chattel Paper" shall mean all "chattel paper," as such term is defined in the Code, now owned or hereafter acquired by any Person, wherever located. "Closing Date" shall mean the Business Day on which the conditions precedent set forth in SECTION 2 have been satisfied or specifically waived in writing by Lender, and the initial Loan has been made. "Closing Fee" shall have the meaning assigned to it in SCHEDULE E. "Code" shall mean the Uniform Commercial Code as the same may, from time to time, be in effect in the State of New York; provided, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of Lender's security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, the term "Code" shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions of this Agreement relating to such attachment, perfection or priority and for purposes of definitions related to such provisions. "Collateral" shall have the meaning assigned to it in SECTION 6.1. "Collection Account" shall mean that certain account of Lender, account number 50-232-854 in the name of GECC CAF Depository at Bankers Trust Company, 1 Bankers Trust Plaza, New York, New York, ABA number 021-001-033. Schedule A - Page 2 "Commitment Termination Date" shall mean the earliest of (i) the Stated Expiry Date, (ii) the date Lender's obligation to advance funds is terminated pursuant to SECTION 7.2, and (iii) the date of indefeasible prepayment in full by Borrowers of the Obligations in accordance with the provisions of SECTION 1.2(c). "Contracts" shall mean all the contracts, undertakings, or agreements (other than rights evidenced by Chattel Paper, Documents or Instruments) in or under which any Person may now or hereafter have any right, title or interest, including any agreement relating to the terms of payment or the terms of performance of any Account. "Contractual Obligation" shall mean as to any Person, any provision of any security issued by such Person or of any agreement, instrument, or other undertaking to which such Person is a party or by which it or any of its property is bound. "Copyright License" shall mean rights under any written agreement now owned or hereafter acquired by any Person granting the right to use any Copyright or Copyright registration. "Copyrights" shall mean all of the following now owned or hereafter acquired by any Person: (i) all copyrights in any original work of authorship fixed in any tangible medium of expression, now known or later developed, all registrations and applications for registration of any such copyrights in the United States or any other country, including registrations, recordings and applications, and supplemental registrations, recordings, and applications in the United States Copyright Office; and (ii) all Proceeds of the foregoing, including license royalties and proceeds of infringement suits, the right to sue for past, present and future infringements, all rights corresponding thereto throughout the world and all renewals and extensions thereof. "Corporate Credit Party" shall mean any Credit Party that is a corporation, partnership or limited liability company. "Credit Party" shall mean each Borrower, and each other Person (other than Lender) that is or may become a party to this Agreement or any other Loan Document. "Default" shall mean any Event of Default or any event which, with the passage of time or notice or both, would, unless cured or waived, become an Event of Default. "Default Rate" shall have the meaning assigned to it in SECTION 1.5(c). "Design & Manufacturing" shall mean Design & Manufacturing, Inc., a Nebraska corporation. "Documents" shall mean all "documents," as such term is defined in the Code, now owned or hereafter acquired by any Person, wherever located, including all bills of lading, dock warrants, dock receipts, warehouse receipts, and other documents of title, whether negotiable or non-negotiable. "Domestic Borrowing Availability" shall mean with respect to any Borrower, at any time, the lesser of (i) the Domestic Maximum Amount less the sum of the aggregate Domestic Revolving Credit Advances attributable to the other Borrowers or (ii) such Borrower's Domestic Borrowing Base, in each case less reserves established by Lender from time to time. "Domestic Borrowing Base" shall mean at any time an amount equal to the sum at such time of: (a) 70% of the value (as determined by Lender) of each Borrower's Eligible Domestic Accounts (PROVIDED that Lender shall reduce the foregoing percentage by one percentage point for each percentage point that the dilution of such Borrower's Accounts (calculated by Lender as the average dilution over the most recent three months) exceeds 20%); PLUS (b) solely with respect to the Domestic Borrowing Base of Leading Borrower, the lesser of (i) $2,200,000 or (ii) the sum of (A) the lesser of $1,600,000 or 50% of the value of Leading Borrower's Eligible Domestic Inventory consisting of lenses, (B) the lesser of $500,000 or 40% of the value of Leading Borrower's Eligible Domestic Inventory consisting of finished platters, theatre equipment, and spotlights, and (C) the lesser of $100,000 or 25% of the value of Leading Borrower's Schedule A - Page 3 Eligible Domestic Inventory consisting of finished restaurant equipment, in each case as determined by Lender, valued on a first-in, first-out basis (at the lower of cost or market); PROVIDED that the Domestic Borrowing Base of Leading Borrower shall be reduced by the Foreign Revolver Reserve, the Inventory Reserve, the Lens Reserve, and the Domestic Environmental Reserve. "Domestic Borrowing Base Certificate" shall mean a certificate in the form of EXHIBIT C-1. "Domestic Environmental Reserve" shall mean an amount equal to $750,000; PROVIDED that if no Default or Event of Default exists as of August 31, 2002, as demonstrated to the sole satisfaction of Lender by the Financial Statements delivered with respect to such date, then the Domestic Environmental Reserve shall be reduced to $562,500 commencing with the Fiscal Month immediately after Lender's receipt of such Financial Statements; and PROVIDED FURTHER, that if no Default or Event of Default exists as of February 28, 2003, as demonstrated to the sole satisfaction of Lender by the Financial Statements delivered with respect to such date, then the Domestic Environmental Reserve shall be reduced to $375,000 commencing with the Fiscal Month immediately after Lender's receipt of such Financial Statements. "Domestic Maximum Amount" shall mean $6,000,000. "Domestic Revolving Credit Advances" shall have the meaning assigned to it in SECTION 1.1(a). "Domestic Revolving Credit Loan" shall mean at any time the sum of (i) the aggregate amount of Domestic Revolving Credit Advances then outstanding, plus (ii) the total Letter of Credit Obligations incurred by Lender and outstanding at such time, plus (iii) the amount of accrued but unpaid interest thereon and Letter of Credit Fees with respect thereto. "Domestic Revolving Credit Notes" shall mean each promissory note executed by a Borrower substantially in the form of EXHIBIT F-1. "Eligible Domestic Accounts" shall mean, as at the date of determination with respect to any Borrower, all Accounts of such Borrower (other than Foreign Accounts) except any Account: (a) that does not arise from the sale of goods or the performance of services by such Borrower in the ordinary course of such Borrower's business; (b) upon which (i) such Borrower's right to receive payment is not absolute or is contingent upon the fulfillment of any condition whatsoever or (ii) such Borrower is not able to bring suit or otherwise enforce its remedies against the Account Debtor through judicial process; (c) against which any defense, counterclaim or setoff, whether well-founded or otherwise, is asserted or which is a "contra" Account; (d) that is not a true and correct statement of a bona fide indebtedness incurred in the amount of the Account for merchandise sold or services performed and accepted by the Account Debtor obligated upon such Account; (e) with respect to which an invoice, acceptable to Lender in form and substance, has not been sent; (f) that is not owned by such Borrower or is subject to any right, claim, or interest of another Person, other than the Lien in favor of Lender; (g) that arises from a sale to or performance of services for an employee, Affiliate, Subsidiary or Stockholder of any Borrower or any other Credit Party, or an entity which has common officers or directors with any Borrower or any other Credit Party; (h) that is the obligation of an Account Debtor that is the Federal (or local) government or a political subdivision thereof, unless Lender has agreed to the contrary in writing and such Borrower has complied with the Federal Assignment of Claims Act of 1940 (or the state equivalent thereof, if any) with respect to such obligation; Schedule A - Page 4 (i) that is the obligation of an Account Debtor located in a foreign country unless such Account is supported by a letter of credit in which Lender has a first priority perfected security interest by possession or credit insurance acceptable to Lender (and naming Lender as loss payee); (j) that is the obligation of an Account Debtor to whom any Borrower is or may become liable for goods sold or services rendered by the Account Debtor to any Borrower, to the extent of any Borrower's liability to such Account Debtor; (k) that arises with respect to goods which are delivered on a cash-on-delivery basis or placed on consignment, guaranteed sale or other terms by reason of which the payment by the Account Debtor may be conditional; (l) that is an obligation for which the total unpaid Accounts of the Account Debtor exceed 20%of the aggregate of all Accounts, to the extent of such excess; (m) that is not paid within 60 days from its due date or 90 days from its invoice date or that are Accounts of an Account Debtor if 25% (or, with respect to the accounts of National Cinema Supply, Inc. or Capital City Supply, Inc., 10%) or more of the Accounts owing from such Account Debtor remain unpaid within such time periods; (n) is an obligation of an Account Debtor that has suspended business, made a general assignment for the benefit of creditors, is unable to pay its debts as they become due or as to which a petition has been filed (voluntary or involuntary) under any law relating to bankruptcy, insolvency, reorganization or relief of debtors; (o) that arises from any bill-and-hold or other sale of goods which remain in any Borrower's possession or under any Borrower's control; (p) as to which Lender's interest therein is not a first priority perfected security interest; (q) to the extent that such Account exceeds any credit limit established by Lender in Lender's good faith credit judgment; (r) as to which any of such Borrower's representations or warranties pertaining to Accounts are untrue; (s) that represents interest payments, late or finance charges, or service charges owing to such Borrower; (t) that is an obligation of National Cinema Supply, Inc. or Capital City Supply, Inc. unless the Borrowers have satisfied each of the following conditions: a) the Borrowers' Fixed Charge Coverage Ratio, calculated as of any three consecutive Fiscal Months ending after the Closing Date exceeded 1.10 : 1.00 for such period (as demonstrated to Lender's sole satisfaction on the relevant Financial Statements); and b) the Borrowers' Fixed Charge Coverage Ratio, calculated as of every three consecutive Fiscal Months ending after the condition in clause (a) is satisfied exceeded 0.80 : 1.00 for each such period (as demonstrated to Lender's sole satisfaction on the relevant Financial Statements); (u) that is an obligation of National Cinema Supply, Inc. or Capital City Supply, Inc. to the extent the aggregate outstanding amount of the obligations of both such Persons to any Borrower exceeds $500,000 (regardless of whether the conditions in clause (t) are satisfied); or (v) that is not otherwise acceptable in the good faith discretion of Lender, provided, that Lender shall have the right to create and adjust eligibility standards and related reserves from time to time in its good faith credit judgment. "Eligible Domestic Inventory" shall mean as at the date of determination as to any Borrower, all Inventory of such Borrower (other than Export-Related Inventory), except any Inventory that: (a) is not subject to a first priority perfected security interest of Lender or is not owned by such Borrower free and clear of all Liens and rights of others (except the Liens in favor of Lender); (b) is not located on premises owned, leased, or operated by such Borrower and referenced in DISCLOSURE SCHEDULE (3.2), Schedule A - Page 5 (c) is not located on premises where the aggregate amount of all Inventory (valued at cost) of such Borrower located thereon is greater than $100,000; (d) is located on premises with respect to which Lender has not received a landlord or mortgagee letter acceptable in form and substance to Lender (unless Lender has placed a Reserve satisfactory to Lender on the applicable Borrower's Borrowing Base with respect to such Inventory); (e) is in transit; (f) is covered by a negotiable document of title, unless such document and evidence of acceptable insurance covering such Inventory has been delivered to Lender, (g) in Lender's good faith credit judgment, is obsolete, unsalable, shopworn, damaged, unfit for further processing, is of substandard quality or is not of good and merchantable quality, free from any defects; (h) consists of (i) discontinued items, (ii) slow-moving or excess items held in inventory, or (iii) used items held for resale; (i) does not consist of raw materials or finished goods; (j) does not meet all standards imposed by any Governmental Authority, including with respect to its production, acquisition or importation (as the case may be); (k) is placed by such Borrower on consignment or held by such Borrower on consignment from another Person; (l) is held for rental or lease by or on behalf of such Borrower; (m) is produced in violation of the Fair Labor Standards Act and subject to the "hot goods" provisions contained in 29 U.S.C. Section 215 or any successor statute or section; (n in any way fails to meet or violates any warranty, representation or covenant contained in this Agreement or any other Loan Document; (o) is subject to any licensing, patent, royalty, trademark, trade name or copyright agreement with any third parties; (p) requires the consent of any Person for the completion of manufacture, sale or other disposition of such Inventory by Lender following an Event of Default and such completion, manufacture or sale constitutes a breach or default under any contract or agreement to which such Borrower is a party or to which such Inventory is or may become subject; or (q) is not otherwise acceptable in the good faith discretion of Lender, provided, that Lender shall have the right to create and adjust eligibility standards and related reserves from time to time in its good faith credit judgment. "Eligible Export-Related Inventory" shall mean with respect to Leading Borrower, at the date of determination, all Export-Related Inventory of such Borrower (a) which would be included in the determination of such Borrower's Foreign Borrowing Base in accordance with the Ex-Im Bank Documents, (b) which would be considered Eligible Domestic Inventory but for the fact that such Inventory is Export-Related Inventory, (c) as to which all of Leading Borrower's representations and warranties in the Loan Documents are true and correct in all respects, (d) with respect to which Leading Borrower has complied with all of its covenants and duties in the Loan Documents, and (e) in which Lender has a first-priority and perfected security interest under this Agreement. "Eligible Foreign Accounts" shall mean with respect to Leading Borrower, at the date of determination, all Foreign Accounts of Leading Borrower (a) which would be included in the determination of Leading Borrower's Foreign Borrowing Base in accordance with the Ex-Im Bank Documents, (b) would otherwise be an Eligible Domestic Account of such Borrower but for clauses (g), (h), (i), (l), (m), (n), (q), (t), and (u) of the definition thereof, (c) as to which all of Leading Borrower's representations and warranties in the Loan Documents are true and correct in all respects, (d) with respect to which Leading Borrower has complied Schedule A - Page 6 with all of its covenants and duties in the Loan Documents, and (e) in which Lender has a first-priority and perfected security interest under this Agreement. "Environmental Laws" shall mean all Federal, state and local laws, statutes, ordinances and regulations, now or hereafter in effect, and in each case as amended or supplemented from time to time, and any applicable judicial or administrative interpretation thereof relating to the regulation and protection of human health, safety, the environment and natural resources (including ambient air, surface water, groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic species and vegetation). "Environmental Liabilities" shall mean all liabilities, obligations, responsibilities, remedial actions, removal costs, losses, damages of whatever nature, costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts and consultants and costs of investigation and feasibility studies), fines, penalties, sanctions and interest incurred as a result of any claim, suit, action or demand of whatever nature by any Person and which relate to any health or safety condition regulated under any Environmental Law, environmental permits or in connection with any Release, threatened Release, or the presence of a Hazardous Material. "Equipment" shall mean all "equipment" as such term is defined in the Code, now owned or hereafter acquired by any Person, wherever located, including any and all machinery, apparatus, equipment, fittings, furniture, fixtures, motor vehicles and other tangible personal property (other than Inventory) of every kind and description which may be now or hereafter used in such Person's operations or which are owned by such Person or in which such Person may have an interest, and all parts, accessories and accessions thereto and substitutions and replacements therefor. "ERISA" shall mean the Employee Retirement Income Security Act of 1974 (or any successor legislation thereto), as amended from time to time, and any regulations promulgated thereunder. "ERISA Affiliate" shall mean any trade or business (whether or not incorporated) that, together with any Credit Party, is treated as a single employer under Section 414(b), (c), (m) or (o) of the IRC, or, solely for the purposes of Section 302 of ERISA and Section 412 of the IRC, is treated as a single employer under Section 414 of the IRC. "ERISA Event" shall mean (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the IRC or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(b) of the IRC or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by any Credit Party or any ERISA Affiliate of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by any Credit Party or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or to appoint a trustee to administer any Plan; (f) the incurrence by any Credit Party or any ERISA Affiliate of any liability with respect to any withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by any Credit Party or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from any Credit Party or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA. "Event of Default" shall have the meaning assigned to it in SECTION 7.1. "Ex-Im Bank" shall mean the Export-Import Bank of the United States. "Ex-Im Bank Documents" shall mean the Ex-Im Bank Guarantee, the Loan Authorization Agreement between Lender and Ex-Im Bank, and the Borrower Agreement. Schedule A - Page 7 "Ex-Im Bank Guarantee" shall mean the guarantee executed by Ex-Im Bank in favor of Lender and in a form satisfactory to Lender, together with all amendments, modifications and supplements thereto. "Export Order Backlog" shall mean, at any date of determination thereof, the aggregate dollar amount of unfulfilled orders received by Leading Borrower which will be Export Transactions. "Export-Related Inventory" shall mean, at the date of determination thereof, such portion of Leading Borrower's total Inventory consisting of theatre raw materials, theatre work in process and theatre finished goods (other than lenses) or bulbs as is equal to Leading Borrower's Export Sales Percentage as of the end of the most recently completed period of twelve (12) Fiscal Months. "Export Sale Percentage" shall mean, for any period of time, the percentage of Leading Borrower's total sales of theatre raw materials, theatre work in process and theatre finished goods or bulbs during such period that constitute Export Transactions. "Export Transaction" shall mean any transaction in which any Borrower will sell Inventory to an Account Debtor located in a foreign country. "Fees" shall mean the fees due to Lender as set forth in SCHEDULE E. "Financial Statements" shall mean the consolidated and consolidating income statement, balance sheet and statement of cash flows of each Borrower and its Subsidiaries, internally prepared for each Fiscal Month, and audited for each Fiscal Year, prepared in accordance with GAAP. "Fiscal Month" shall mean any of the monthly accounting periods of Borrowers. "Fiscal Quarter" shall mean any of the quarterly accounting periods of Borrowers. "Fiscal Year" shall mean the 12 month period of Borrowers ending December 31 of each year. Subsequent changes of the fiscal year of Borrowers shall not change the term "Fiscal Year" unless Lender shall consent in writing to such change. "Foreign Accounts" shall mean those Accounts of any Borrower that are an obligation of an Account Debtor located in a foreign country and which are not otherwise Eligible Domestic Accounts. "Foreign Borrowing Availability" shall mean, at any time, the lesser of (i) the Foreign Maximum Amount or (ii) the Foreign Borrowing Base, in each case less reserves as established by Lender from time to time. "Foreign Borrowing Base" shall mean at any time an amount equal to the sum at such time of: (a) 70% of the value (as determined by Lender) of Leading Borrower's Eligible Foreign Accounts (provided, that Lender shall reduce the foregoing percentage by one percentage point for each percentage point that the dilution of Leading Borrower's Accounts (calculated by Lender as the average dilution over the most recent three months) exceeds 20%); plus (b) the sum of (i) 45% of the value of Leading Borrower's Eligible Export-Related Inventory consisting of theatre finished goods (other than lenses) and (ii) 15% of the value of Leading Borrower's Eligible Export-Related Inventory consisting of (X) theatre raw materials and theatre work in process (other than lenses), and (Y) bulbs, in each case as determined by Lender, valued on a first-in, first-out basis (at the lower of cost or market); PROVIDED, that the portion of the Foreign Borrowing Base attributable to Eligible Export-Related Inventory at any one time shall not exceed the lesser of (i) 60% of the aggregate outstanding amount of the Foreign Revolving Credit Loan at such time, (ii) the sum of the Export Order Backlog at such time plus $700,000, or (iii) the sum of the Export Order Backlog at such time plus 50% of the Foreign Borrowing Base which otherwise would consist of Eligible Export-Related Inventory in excess of the Export Order Backlog; and, PROVIDED FURTHER; that the Foreign Borrowing Base shall be reduced by the Foreign Environmental Reserve. "Foreign Borrower Base Certificate" shall mean a certificate in the form of EXHIBIT C-2. "Foreign Environmental Reserve" shall mean an amount equal to $250,000; PROVIDED that if no Default or Event of Default exists as of August 31, 2002, as demonstrated to the sole satisfaction of Lender by the Schedule A - Page 8 Financial Statements delivered with respect to such date, then the Foreign Environmental Reserve shall be reduced to $187,500, commencing with the Fiscal Month immediately after Lender's receipt of such Financial Statements; and PROVIDED FURTHER, that if no Default or Event of Default exists as of February 28, 2003, as demonstrated to the sole satisfaction of Lender by the Financial Statements delivered with respect to such date, then the Foreign Environmental Reserve shall be reduced to $125,000 commencing with the Fiscal Month immediately after Lender's receipt of such Financial Statements. "Foreign Facility Fee" shall have the meaning assigned to it in SCHEDULE E. "Foreign Maximum Amount" shall mean $2,000,000. "Foreign Revolver Reserve" shall mean, at any time of determination thereof, an amount equal to the greater of (a) 10% of the aggregate outstanding Foreign Revolving Credit Loan at such time, or (b) such percentage of the aggregate outstanding Foreign Revolving Credit Loan at such time which is not guaranteed by Ex-Im Bank pursuant to the Ex-Im Bank Guarantee. "Foreign Revolving Credit Advance" shall have the meaning assigned to it in SECTION 1.1(b). "Foreign Revolving Credit Loan" shall mean at any time the sum of (i) the aggregate amount of Foreign Revolving Credit Advances then outstanding, plus (ii) the amount of accrued but unpaid interest thereon with respect thereto. "Foreign Revolving Credit Note" shall mean the promissory note executed by Leading Borrower substantially in the form of EXHIBIT F-2. "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect from time to time, consistently applied. "General Intangibles" shall mean all "general intangibles," as such term is defined in the Code, now owned or hereafter acquired by any Person, including all right, title and interest which such Person may now or hereafter have in or under any Contract, Intellectual Property, interests in partnerships, joint ventures and other business associations, permits, proprietary or confidential information, inventions (whether or not patented or patentable), technical information, procedures, designs, knowledge, know-how, software, data bases, data, skill, expertise, experience, processes, models, drawings, materials, Books and Records, Goodwill (including the Goodwill associated with any Intellectual Property), all rights and claims in or under insurance policies (including insurance for fire, damage, loss, and casualty, whether covering personal property, real property, tangible rights or intangible rights, all liability, life, key-person, and business interruption insurance, and all unearned premiums), uncertificated securities, choses in action, deposit accounts, rights to receive tax refunds and other payments and rights of indemnification. "Goods" shall mean all "goods," as such term is defined in the Code, now owned or hereafter acquired by any Person, wherever located, including movables, fixtures, equipment, inventory, or other tangible personal property. "Goodwill" shall mean all goodwill, trade secrets, proprietary or confidential information, technical information, procedures, formulae, quality control standards, designs, operating and training manuals, customer lists, and distribution agreements now owned or hereafter acquired by any Person. "Governmental Authority" shall mean any nation or government, any state or other political subdivision thereof, and any agency, department or other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guaranteed Indebtedness" shall mean, as to any Person, any obligation of such Person guaranteeing any indebtedness, lease, dividend, or other obligation ("primary obligations") of any other Person (the "primary obligor") in any manner, including any obligation or arrangement of such guaranteeing Person (whether or not contingent): (i) to purchase or repurchase any such primary obligation; (ii) to advance or supply funds (a) for the purchase or payment of any such primary obligation or (b) to maintain working capital or equity Schedule A - Page 9 capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet condition of the primary obligor; (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation; or (iv) to indemnify the owner of such primary obligation against loss in respect thereof. "Guarantor" shall mean each Person which executes a guaranty or a support, put or other similar agreement in favor of Lender in connection with the transactions contemplated by this Agreement. "Guaranty" shall mean any agreement to perform all or any portion of the Obligations on behalf of Borrower or any other Credit Party, in favor of, and in form and substance satisfactory to, Lender, together with all amendments, modifications and supplements thereto, and shall refer to such Guaranty as the same may be in effect at the time such reference becomes operative. "Hazardous Material" shall mean any substance, material or waste which is regulated by or forms the basis of liability now or hereafter under, any Environmental Laws, including any material or substance which is (a) defined as a "solid waste," "hazardous waste," "hazardous material," "hazardous substance," "extremely hazardous waste," "restricted hazardous waste," "pollutant," "contaminant," "hazardous constituent," "special waste," "toxic substance" or other similar term or phrase under any Environmental Laws, (b) petroleum or any fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB's), or any radioactive substance. "Hazardous Waste" shall have the meaning ascribed to such term in the Resource Conservation and Recovery Act (42 U.S.C. Sections 6901 et. seq.). "Indebtedness" of any Person shall mean: (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (including reimbursement and all other obligations with respect to surety bonds, letters of credit and bankers' acceptances, whether or not matured, but not including obligations to trade creditors incurred in the ordinary course of business and not more than 45 days past due); (ii) all obligations evidenced by notes, bonds, debentures or similar instruments; (iii) all indebtedness created or arising under any conditional sale or other title retention agreements with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property); (iv) all Capital Lease Obligations; (v) all Guaranteed Indebtedness; (vi) all Indebtedness referred to in clauses (i), (ii), (iii), (iv) or (v) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness; (vii) the Obligations; and (viii) all liabilities under Title IV of ERISA. "Indemnified Liabilities" and "Indemnified Person" shall have the meaning assigned to such terms in SECTION 1.11. "Index Rate" shall mean the latest rate for 30-day dealer placed commercial paper (which for purposes hereof shall mean high grade unsecured notes sold through dealers by major corporations in multiples of $1,000), which normally is published in the "Money Rates" section of The Wall Street Journal (or if such rate ceases to be so published, as quoted from such other generally available and recognizable source as Lender may select). The Index Rate shall be determined (i) on the first Business Day immediately prior to the Closing Date and (ii) thereafter, on the last Business Day of each calendar month for calculation of interest for the following month. "Instruments" shall mean all "instruments," as such term is defined in the Code, now owned or hereafter acquired by any Person, wherever located, including all certificated securities and all notes and other evidences of indebtedness, other than instruments that constitute, or are a part of a group of writings that constitute, Chattel Paper. Schedule A - Page 10 "Intellectual Property" shall mean any and all Licenses, Patents, Copyrights, Trademarks, trade secrets and customer lists. "Inventory" shall mean all "inventory," as such term is defined in the Code, now or hereafter owned or acquired by any Person, wherever located, including all inventory, merchandise, goods and other personal property which are held by or on behalf of such Person for sale or lease or are furnished or are to be furnished under a contract of service or which constitute raw materials, work in process or materials used or consumed or to be used or consumed in such Person's business or in the processing, production, packaging, promotion, delivery or shipping of the same, including other supplies. "Inventory Reserve" shall mean, at any date of determination thereof, an amount equal to the greater of (a) 10% of the value (as determined by Lender) of the Borrowers' Eligible Domestic Inventory at such time or (b) $150,000. "Investment Property" shall mean all "investment property," as such term is defined in the Code, now or hereafter acquired by an Person, wherever located. "IRC" and "IRS" shall mean respectively, the Internal Revenue Code of 1986 and the Internal Revenue Service, and any successor thereto. "Lender" shall mean General Electric Capital Corporation and, if at any time Lender shall decide to assign or syndicate all or any of the Obligations, such term shall include such assignee or such other members of the syndicate. "Lens Reserve" shall mean, at any date of determination thereof, a cost test reserve determined by Lender in its sole good faith discretion with respect to Borrowers' Inventory at such time consisting of lenses, subject to adjustment by Lender in its good faith discretion after cost test adjustments are completed by the Leading Borrower to the Lender's satisfaction. "Letters of Credit" shall mean any and all commercial or standby letters of credit issued at the request and for the account of any Borrower for which Lender has incurred Letter of Credit Obligations. "Letter of Credit Fee" shall have the meaning assigned to it in SCHEDULE E. "Letter of Credit Obligations" shall mean all outstanding obligations (including all duty, freight, taxes, costs, insurance and any other charges and expenses) incurred by Lender, whether direct or indirect, contingent or otherwise, due or not due, in connection with the issuance or guarantee, by Lender or another, of Letters of Credit, all as further set forth in SCHEDULE C. "Letter-of-Credit Rights" shall mean all "letter-of-credit rights," as such term is defined in the Code, now owned or hereafter acquired by an Person. "License" shall mean any Copyright License, Patent License, Trademark License or other license of rights or interests now held or hereafter acquired by any Person. "Lien" shall mean any mortgage, security deed or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, security title, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Code or comparable law of any jurisdiction). "Litigation" shall mean any claim, lawsuit, litigation, investigation or proceeding of or before any arbitrator or Governmental Authority. "Loan Documents" shall mean this Agreement, the Notes, the Financial Statements, each Guaranty, the Power of Attorney, the Lock Box Account Agreements, the Borrower Agreement, the Mortgages, the Pledge Agreement, the Trademark Security Agreements, the Patent Security Agreements, and the other documents Schedule A - Page 11 and instruments listed in SCHEDULE F, and all security agreements, mortgages and all other documents, instruments, certificates, and notices at any time delivered by any Person (other than Lender) in connection with any of the foregoing. "Loans" shall mean the Revolving Credit Loan including the Letter of Credit Obligations, and the Term Loan. "Lock Box Account" and "Lock Box Account Agreement" shall have the meanings assigned to such terms in SCHEDULE D. "Material Adverse Effect" shall mean: a material adverse effect on (a) the business, assets, operations, prospects or financial or other condition of any Borrower or any other Credit Party, (b) any Borrower's or any other Credit Party's ability to pay or perform the Obligations under the Loan Documents to which such Credit Party is a party in accordance with the terms thereof, (c) the Collateral or Lender's Liens on the Collateral or the priority of any such Lien, or (d) Lender's rights and remedies under this Agreement and the other Loan Documents. "Minimum Actionable Amount" shall mean $100,000. "Mortgages" shall mean the Nebraska Deed of Trust in the form of EXHIBIT W-1 executed by Leading Borrower in favor of Lender and the Illinois Mortgage in the form of EXHIBIT W-2 executed by Design & Manufacturing in favor of Lender. "Mortgaged Properties" shall have the meaning assigned to it in SCHEDULE F. "Multiemployer Plan" shall mean a "multiemployer plan," as defined in Section 4001(a) (3) of ERISA, to which Borrower, any other Credit Party or any ERISA Affiliate is making, is obligated to make, has made or been obligated to make, contributions on behalf of participants who are or were employed by any of them. "Net Borrowing Availability" shall mean at any time with respect to any Borrower, sum of (i) such Borrower's Domestic Borrowing Availability less the Domestic Revolving Credit Loan attributable to such Borrower plus (ii) in the case of Leading Borrower only, such Borrower's Foreign Borrowing Availability less the Foreign Revolving Credit Loan attributable to such Borrower. "Notes" shall mean the Domestic Revolving Credit Notes, the Foreign Revolving Credit Note, and the Term Note. "Notice of Revolving Credit Advance" shall have the meaning assigned to it in SECTION 1.1(c). "Obligations" shall mean all loans, advances, debts, expense reimbursement, fees, liabilities, and obligations for the performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such performance is then required or contingent, or amounts are liquidated or determinable) owing by any Borrower and any other Credit Party to Lender, of any kind or nature, present or future, whether or not evidenced by any note, agreement or other instrument, whether arising under any of the Loan Documents or under any other agreement between such Borrower, such Credit Party and Lender, and all covenants and duties regarding such amounts. This term includes all principal, interest (including interest accruing at the then applicable rate provided in this Agreement after the maturity of the Loans and interest accruing at the then applicable rate provided in this Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), Fees, Charges, expenses, attorneys' fees and any other sum chargeable to any Borrower under any of the Loan Documents, and all principal and interest due in respect of the Loans and all obligations and liabilities of any Guarantor under any Guaranty. "Patent License" shall mean rights under any written agreement now owned or hereafter acquired by any Person granting any right with respect to any invention on which a Patent is in existence. "Patents" shall mean all of the following in which any Person now holds or hereafter acquires any interest: (i) all letters patent of the United States or any other country, all registrations and recordings thereof, and all Schedule A - Page 12 applications for letters patent of the United States or any other country, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State or Territory thereof, or any other country; and (ii) all reissues, continuations, continuations-in-part or extensions thereof. "PBGC" shall mean the Pension Benefit Guaranty Corporation or any successor thereto. "Permitted Encumbrances" shall mean the following encumbrances: (i) Liens for taxes or assessments or other governmental Charges or levies, either not yet due and payable or to the extent that nonpayment thereof is permitted by the terms of SECTION 3.10; (ii) pledges or deposits securing obligations under worker's compensation, unemployment insurance, social security or public liability laws or similar legislation; (iii) pledges or deposits securing bids, tenders, contracts (other than contracts for the payment of money) or leases to which any Credit Party is a party as lessee made in the ordinary course of business; (iv) deposits securing public or statutory obligations of any Credit Party; (v) inchoate and unperfected workers', mechanics', or similar liens arising in the ordinary course of business so long as such Liens attach only to Equipment, fixtures or real estate; (vi) carriers', warehouseman's', suppliers' or other similar possessory liens arising in the ordinary course of business and securing indebtedness not yet due and payable in an outstanding aggregate amount not in excess of $50,000 at any time so long as such Liens attach only to Inventory; (vii) deposits of money securing, or in lieu of, surety, appeal or customs bonds in proceedings to which any Credit Party is a party; (viii) zoning restrictions, easements, licenses, or other restrictions on the use of real property or other minor irregularities in title (including leasehold title) thereto, so long as the same do not materially impair the use, value, or marketability of such real estate; (ix) Purchase Money Liens securing Purchase Money Indebtedness (or rent) to the extent permitted under SECTION 5(b)(vii); (x) Liens in existence on the Closing Date as disclosed on DISCLOSURE SCHEDULE 5(e) provided that no such Lien is spread to cover additional property after the Closing Date and the amount of Indebtedness secured thereby is not increased; (xi) Liens in favor of Lender securing the Obligations; and (xii) other Liens expressly permitted in writing by Lender in its sole discretion. "Permitted Intercompany Loans" shall mean any loan or advance of money by Leading Borrower to Design & Manufacturing, Xenotech Strong, Inc., or Strong Westrex, Inc. (the "BORROWING AFFILIATE"); PROVIDED that each of the following conditions is met at the time of and after giving effect to the making of such loan or advance and the use of the proceeds thereof: (i) no Default or Event of Default shall be in existence, (ii) each of the Leading Borrower and the Borrowing Affiliate shall be Solvent, (iii) the aggregate outstanding principal amount at any one time of all such loans or advances made by Leading Borrower to Design & Manufacturing shall not exceed $5,500,000 (such maximum amount to increase by $350,000 each Fiscal Year commencing with the Fiscal Year ending December 31, 2002), by Leading Borrower to Xenotech Strong, Inc. shall not exceed $5,200,000 (such maximum amount to increase by $350,000 each Fiscal Year commencing with the Fiscal Year ending December 31, 2002), and by Leading Borrower to Strong Westrex, Inc. shall not exceed $150,000 (such maximum amount to increase by $50,000 each Fiscal Year commencing with the Fiscal Year ending December 31, 2002), (iv) such loan or advance shall be evidenced by appropriate entries made on the books and records of the Leading Borrower and the Borrowing Affiliate and by a duly executed promissory note (in the form of EXHIBIT P) from the Borrowing Affiliate to the Leading Borrower which shall have been endorsed with recourse by the Leading Borrower to Lender and shall have been delivered to Lender. "Person" shall mean any individual, sole proprietorship, partnership, limited liability partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, public benefit corporation, entity or government (whether Federal, state, county, city, municipal or otherwise, including any instrumentality, division, agency, body or department thereof), and shall include such Person's successors and assigns. "Plan" shall mean any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the IRC or Section 302 of ERISA, and in respect of which Schedule A - Page 13 any Credit Party or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Pledge Agreement" shall have the meaning given such term in SCHEDULE F. "Prepayment Fee" shall mean the prepayment fee specified in SCHEDULE E. "Proceeds" shall mean "proceeds," as such term is defined in the Code and, in any event, shall include: (i) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to any Borrower or any other Credit Party from time to time with respect to any Collateral; (ii) any and all payments (in any form whatsoever) made or due and payable to any Borrower or any other Credit Party from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of any Collateral by any governmental body, authority, bureau or agency (or any person acting under color of governmental authority); (iii) any claim of any Borrower or any other Credit Party against third parties (a) for past, present or future infringement of any Intellectual Property or (b) for past, present or future infringement or dilution of any Trademark or Trademark License or for injury to the goodwill associated with any Trademark, Trademark registration or Trademark licensed under any Trademark License; (iv) any recoveries by any Borrower or any other Credit Party against third parties with respect to any litigation or dispute concerning any Collateral; and (v) any and all other amounts from time to time paid or payable under or in connection with any Collateral, upon disposition or otherwise. "Projections" shall mean as of any date the consolidated and consolidating balance sheet, statements of income and cash flow for each Borrower and its Subsidiaries (including forecasted Capital Expenditures and Net Borrowing Availability) (i) by month for the next Fiscal Year, and (ii) by year for the following three Fiscal Years, in each case prepared in a manner consistent with GAAP and accompanied by senior management's discussion and analysis of such plan. "Purchase Money Indebtedness" shall mean (i) any Indebtedness incurred for the payment of all or any part of the purchase price of any fixed asset, (ii) any Indebtedness incurred for the sole purpose of financing or refinancing all or any part of the purchase price of any fixed asset, and (iii) any renewals, extensions or refinancings thereof (but not any increases in the principal amounts thereof outstanding at that time). "Purchase Money Lien" shall mean any Lien upon any fixed assets which secures the Purchase Money Indebtedness related thereto but only if such Lien shall at all times be confined solely to the asset the purchase price of which was financed or refinanced through the incurrence of the Purchase Money Indebtedness secured by such Lien and only if such Lien secures only such Purchase Money Indebtedness. "Real Property" shall have the meaning assigned to it in SECTION 3.15. "Release" shall mean, as to any Person, any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Materials in the indoor or outdoor environment by such Person, including the movement of Hazardous Materials through or in the air, soil, surface water, ground water or property. "Requirement of Law" shall mean as to any Person, the Certificate or Articles of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case binding upon such Person or any of its property or to which such Person or any of its property is subject. "Restricted Payment" shall mean: (i) the declaration or payment of any dividend or the incurrence of any liability to make any other payment or distribution of cash or other property or assets on or in respect of any Borrower's or any other Credit Party's Stock (except a dividend or other payment or distribution to Leading Borrower from any Other Borrower); (ii) any payment or distribution made in respect of any subordinated Indebtedness of any Borrower or any other Credit Party in violation of any subordination or other agreement made in favor of Lender; (iii) any payment on account of the purchase, redemption, defeasance or other Schedule A - Page 14 retirement of any Borrower's or any other Credit Party's Stock or Indebtedness or any other payment or distribution made in respect of any thereof, either directly or indirectly; other than (a) that arising under this Agreement or (b) interest and principal, when due without acceleration or modification of the amortization as in effect on the Closing Date, under Indebtedness (not including subordinated Indebtedness, payments of which shall be permitted only in accordance with the terms of the relevant subordination agreement made in favor of Lender) described in DISCLOSURE SCHEDULE (5(b)) or otherwise permitted under SECTION 5(b)(vi); or (iv) any payment, loan, contribution, or other transfer of funds or other property to any Stockholder of such Person which is not expressly and specifically permitted in this Agreement; provided, that no payment to Lender shall constitute a Restricted Payment. "Revolving Credit Advances" shall mean the Domestic Revolving Credit Advances and the Foreign Revolving Credit Advances. "Revolving Credit Loan" shall mean the Domestic Revolving Credit Loan and the Foreign Revolving Credit Loan. "Revolving Credit Rate" shall have the meaning assigned to it in SECTION 1.5(a). "Stated Expiry Date" shall mean August 30, 2003; PROVIDED that the Stated Expiry Date shall automatically be extended for two (2) consecutive one (1) year periods, the first of which shall commence on the second (2nd) anniversary of the date of this Agreement and, if so extended for such first one year period, the second of which shall commence on the third (3rd) anniversary of the date of this Agreement, unless, in each case, prior to the then-current Stated Expiry Date (a) Borrowers provide written notice to Lender not less than ninety (90) days prior to the then current Stated Expiry Date that Borrowers have elected not to extend the then current Stated Expiry Date, or (b) Lender provides written notice to any Borrower not less than ninety (90) days prior to the then current Stated Expiry Date that Lender has elected not to extend the then current Stated Expiry Date. The foregoing notwithstanding, the Stated Expiry Date shall not be extended if, as of the then current Stated Expiry Date, a Default shall have occurred and is continuing. Nothing contained herein shall be deemed to be a commitment by Lender to extend the Stated Expiry Date at any time in effect. The Stated Expiry Date shall in no event be later than the fourth (4th) anniversary of the date of this Agreement. "Stock" shall mean all certificated and uncertificated shares, options, warrants, membership interests, general or limited partnership interests, participation or other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company or equivalent entity whether voting or nonvoting, including common stock, preferred stock, or any other "equity security" (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934). "Stockholder" shall mean each holder of Stock of any Borrower or any other Credit Party. "Subordinated Debt" shall mean Indebtedness of any Borrower in such amounts, incurred pursuant to such terms and conditions, and subject to such terms and conditions of subordination, as may be satisfactory to Lender in its sole discretion (including, without limitation, the satisfaction of any requirement by Lender that the holder of such Indebtedness enter into a written subordination agreement with such Borrower and Lender in form and substance satisfactory to Lender in its sole discretion. "Subsidiary" shall mean, with respect to any Person, (i) any corporation of which an aggregate of more than 50% of the outstanding Stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, Stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned legally or beneficially by such Person and/or one or more Subsidiaries of such Person, or with respect to which any such Person has the right to vote or designate the vote of 50% or more of such Stock whether by proxy, agreement, operation of law or otherwise, and (ii) any partnership or limited liability company in which such Person or one or more Subsidiaries of such Person has an equity interest Schedule A - Page 15 (whether in the form of voting or participation in profits or capital contribution) of more than 50% or of which any such Person is a general partner or manager or may exercise the powers of a general partner or manager. "Supporting Obligations" shall mean all "supporting obligations," as such term is defined in the Code, now owned or hereafter acquired by any Person. "Taxes" shall mean taxes, levies, imposts, deductions, Charges or withholdings, and all liabilities with respect thereto, excluding taxes imposed on or measured by the net income of Lender. "Term Loan" shall mean the loan in the amount specified in and evidenced by the Term Note, and made to Borrowers under the terms of the Agreement, and any renewals, extensions, revisions, modifications or replacements therefor or thereof. "Term Loan Borrowers" shall mean Leading Borrower and Design & Manufacturing. "Term Loan Rate" shall have the meaning assigned to it in SECTION 1.5(a). "Term Note" shall mean the promissory note of Borrowers dated the Closing Date, substantially in the form of EXHIBIT G. "Termination Date" shall mean the date on which all Obligations under this Agreement are indefeasibly paid in full, in cash (other than amounts in respect of Letter of Credit Obligations if any, then outstanding, provided that Borrowers shall have funded such amounts in cash in full into the Cash Collateral Account), and Borrowers shall have no further right to borrow any moneys or obtain other credit extensions or financial accommodations under this Agreement. "Total Maximum Amount" shall mean the sum of the Domestic Maximum Amount plus the Foreign Maximum Amount. "Trademark License" shall mean rights under any written agreement now owned or hereafter acquired by any Person granting any right to use any Trademark or Trademark registration. "Trademarks" shall mean all of the following now owned or hereafter acquired by any Person: (i) all trademarks, trade names, corporate names, business names, trade styles, service marks, logos, other source or business identifiers, prints and labels on which any of the foregoing have appeared or appear, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, including all registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State or Territory thereof, or any other country or any political subdivision thereof, and (ii) all reissues, extensions or renewals thereof. "Unused Line Fee" shall have the meaning assigned to it in SCHEDULE E. "Withdrawal Liability" shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. Any accounting term used in this Agreement or the other Loan Documents shall have, unless otherwise specifically provided therein, the meaning customarily given such term in accordance with GAAP, and all financial computations thereunder shall be computed, unless otherwise specifically provided therein, in accordance with GAAP consistently applied; provided, that all financial covenants and calculations in the Loan Documents shall be made in accordance with GAAP as in effect on the Closing Date unless Borrower and Lender shall otherwise specifically agree in writing. That certain items or computations are explicitly modified by the phrase "in accordance with GAAP" shall in no way be construed to limit the foregoing. All other undefined terms contained in this Agreement or the other Loan Documents shall, unless the context indicates otherwise, have the meanings provided for by the Code. The words "herein," "hereof" and Schedule A - Page 16 "hereunder" or other words of similar import refer to this Agreement as a whole, including the exhibits and schedules thereto, as the same may from time to time be amended, modified or supplemented, and not to any particular section, subsection or clause contained in this Agreement. For purposes of this Agreement and the other Loan Documents, the following additional rules of construction shall apply, unless specifically indicated to the contrary: (a) wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural; (b) the term "or" is not exclusive; (c) the term "including" (or any form thereof) shall not be limiting or exclusive; (d) all references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations; and (e) all references to any instruments or agreements, including references to any of the Loan Documents, shall include any and all modifications or amendments thereto and any and all extensions or renewals thereof. Schedule A - Page 17 SCHEDULE B LENDER'S AND BORROWERS' ADDRESSES FOR NOTICES Lender's Address: Name: General Electric Capital Corporation Address: 200 West Madison Street, Suite 2300 Chicago, IL 60606 Att'n: Ballantyne of Omaha, Inc. Account Manager Telephone: 312-827-3800 Facsimile: 312-827-3855 Leading Borrower's Address: Name: Ballantyne of Omaha, Inc. Address: 4350 McKinley Street Omaha, NE 68112 Att'n: Brad French, Chief Financial Officer Telephone: 402-453-4444 Facsimile: 402-453-7238 Other Borrowers' Addresses: Name: Design & Manufacturing, Inc. Address: 4350 McKinley Street Omaha, NE 68112 Att'n: Brad French, Chief Financial Officer Telephone: 402-453-4444 Facsimile: 402-453-7238 Name: Xenotech Strong, Inc. Address: 4350 McKinley Street Omaha, NE 68112 Att'n: Brad French, Chief Financial Officer Telephone: 402-453-4444 Facsimile: 402-453-7238 Name: Xenotech Rental, Inc. Address: 4350 McKinley Street Omaha, NE 68112 Att'n: Brad French, Chief Financial Officer Telephone: 402-453-4444 Facsimile: 402-453-7238 with a courtesy copy of any notice to any Borrower to: Daniel Etna, Esq. Herrick, Feinstein LLP 2 Park Avenue New York, New York 10016 Telephone: 212-592-1557 Schedule B - Page 1 Facsimile: 212-592-1500 Schedule B - Page 2 SCHEDULE C LETTERS OF CREDIT 1. Lender agrees, subject to the terms and conditions hereinafter set forth, to incur Letter of Credit Obligations in respect of the issuance of Letters of Credit issued on terms acceptable to Lender and supporting obligations of each Borrower incurred in the ordinary course of such Borrower's business, in order to support the payment of such Borrower's inventory purchase obligations, insurance premiums, or utility or other operating expenses and obligations, as Ballantyne of Omaha, Inc. shall request as agent for such Borrower by written notice to Lender that is received by Lender not less than five Business Days prior to the requested date of issuance of any such Letter of Credit; PROVIDED, that: (a) that the aggregate amount of all Letter of Credit Obligations in favor of such Borrower at any one time outstanding (whether or not then due and payable) shall not exceed [n/a]; (b) no Letter of Credit shall have an expiry date which is later than the Stated Expiry Date or one year following the date of issuance thereof; and (c) Lender shall be under no obligation to incur any Letter of Credit Obligation if after giving effect to the incurrence of such Letter of Credit Obligation, the Net Borrowing Availability would be less than zero. The maximum amount payable in respect of each Letter of Credit requested by any Borrower will be guaranteed by Lender in favor of the issuing bank under terms of a separate agreement between Lender and the issuing bank. Each Borrower will enter into an application and agreement for such Letter of Credit with the issuing bank selected by Lender (which may be an Affiliate of Lender). The bank that issues any Letter of Credit pursuant to this Agreement shall be determined by Lender in its sole discretion. 2. The notice to be provided to Lender requesting that Lender incur Letter of Credit Obligations shall be in the form of a Letter of Credit application in the form customarily employed by the issuing bank, together with a written request by the applicable Borrower and the bank that Lender approve such Borrower's application. Upon receipt of such notice Lender shall establish a reserve against such Borrower's Borrowing Availability in the amount of 100% of the face amount of the Letter of Credit Obligation to be incurred. Approval by Lender in the written form agreed upon between Lender and the issuing bank (a) will authorize the bank to issue the requested Letter of Credit, and (b) will conclusively establish the existence of the Letter of Credit Obligation as of the date of such approval. 3. In the event that Lender shall make any payment on or pursuant to any Letter of Credit Obligation, Borrower shall be unconditionally obligated to reimburse Lender therefor, and such payment shall then be deemed to constitute a Revolving Credit Advance in favor of such Borrower. For purposes of computing interest under SECTION 1.5, a Revolving Credit Advance made in satisfaction of a Letter of Credit Obligation shall be deemed to have been made as of the date on which the issuer or endorser makes the related payment under the underlying Letter of Credit. 4. In the event that any Letter of Credit Obligations, whether or not then due or payable, shall for any reason be outstanding on the Commitment Termination Date, Borrower will either (a) cause the underlying Letter of Credit to be returned and canceled and each corresponding Letter of Credit Obligation to be terminated, or (b) pay to Lender, in immediately available funds, an amount equal to 105% of the maximum amount then available to be drawn under all Letters of Credit in favor of such Borrower not so returned and canceled to be held by Lender as cash collateral in an account under the exclusive dominion and control of Lender (the "Cash Collateral Account"). 5. In the event that Lender shall incur any Letter of Credit Obligations in favor of any Borrower, such Borrower agrees to pay the Letter of Credit Fee to Lender as compensation to Lender for incurring such Letter of Credit Obligations. In addition, such Borrower shall reimburse Lender for all fees and charges paid by Lender on account of any such Letters of Credit or Letter of Credit Obligations to the issuing bank. Schedule C - Page 1 6. Each Borrower's Obligations to lender with respect to any Letter of Credit or Letter of Credit Obligation shall be evidenced by Lender's records and shall be absolute, unconditional and irrevocable and shall not be affected, modified or impaired by (a) any lack of validity or enforceability of the transactions contemplated by or related to such Letter of Credit or Letter of Credit Obligation; (b) any amendment or waiver of or consent to depart from all or any of the terms of the transactions contemplated by or related to such Letter of Credit or Letter of Credit Obligation; (c) the existence of any claim, set-off, defense or other right which any Borrower or any other Credit Party may have against Lender, the issuer or beneficiary of such Letter of Credit, or any other Person, whether in connection with this Agreement, any other Loan Document or such Letter of Credit or the transactions contemplated thereby or any unrelated transactions; or (d) the fact that any draft, affidavit, letter, certificate, invoice, bill of lading or other document presented under or delivered in connection with such Letter of Credit or any other Letter of Credit proves to have been forged, fraudulent, invalid or insufficient in any respect or any statement therein proves to have been untrue or incorrect in any respect. 7. In addition to any other indemnity obligations which any Borrower may have to Lender under this Agreement and without limiting such other indemnification provisions, Each Borrower hereby agrees to indemnify Lender from and to hold Lender harmless against any and all claims, liabilities, losses, costs and expenses (including, attorneys' fees and expenses) which Lender may (other than as a result of its own gross negligence or willful misconduct) incur or be subject to as a consequence, directly or indirectly, of (a) the issuance of or payment of or failure to pay under any Letter of Credit or Letter of Credit Obligation or (b) any suit, investigation or proceeding as to which Lender is or may become a party as a consequence, directly or indirectly, of the issuance of any Letter of Credit, the incurring of any Letter of Credit Obligation or any payment of or failure to pay under any Letter of Credit or Letter of Credit Obligation. The obligations of each Borrower under this paragraph shall survive any termination of this Agreement and the payment in full of the Obligations. 8. Each Borrower hereby assumes all risks of the acts, omissions or misuse of each Letter of Credit by the beneficiary or issuer thereof and, in connection therewith, Lender shall not be responsible (a) for the validity, sufficiency, genuineness or legal effect of any document submitted in connection with any drawing under any Letter of Credit even if it should in fact prove in any respect to be invalid, insufficient, inaccurate, untrue, fraudulent or forged; (b) for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or any rights or benefits thereunder or any proceeds thereof, in whole or in part, even if it should prove to be invalid or ineffective for any reason; (c) for the failure of any issuer or beneficiary of any Letter of Credit to comply fully with the terms thereof, including the conditions required in order to effect or pay a drawing thereunder; (d) for any errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, telecopy, telex or otherwise; (e) for any loss or delay in the transmission or otherwise of any document or draft required in order to make a drawing under any Letter of Credit; or (f) for any consequences arising from causes beyond the direct control of Lender. Schedule C - Page 2 SCHEDULE D CASH MANAGEMENT Borrowers agree to establish, and to maintain, until the Termination Date, the cash management system described below: 1. No Corporate Credit Party: (i) shall (nor shall it permit any of its Subsidiaries to) open or maintain any deposit, checking, operating or other bank account, or similar money handling account, with any bank or other financial institution except for those accounts identified in ATTACHMENT I hereto (to include a petty cash account not to exceed $5,000 during any Fiscal Month, and a payroll account not to exceed an amount equal to one regular payroll at any time); and (ii) shall close or permit to be closed any of the accounts listed in ATTACHMENT I hereto, in each case without Lender's prior written consent, and then only after such Credit Party has implemented agreements with such bank or financial institution and Lender acceptable to Lender. 2. Commencing on the Closing Date and continuing until the Termination Date, each Corporate Credit Party shall deposit or cause to be deposited directly all cash, checks, notes, drafts or other similar items relating to or constituting proceeds of or payments made in respect of any and all Collateral (collectively, the "RECEIPTS") into accounts in such Credit Party's name (collectively, the "DOMESTIC DEPOSIT ACCOUNTS") set forth in paragraph 1 of ATTACHMENT I hereto; PROVIDED that all Receipts that relate to Foreign Accounts shall be deposited to the Foreign Deposit Account set forth in paragraph 3 of ATTACHMENT 1 hereto (collectively, together with Domestic Deposit Accounts, the "DEPOSIT ACCOUNTS"). 3. On or before the Closing Date, each Corporate Credit Party shall execute a tri-party agreement with Lender and each bank where a Deposit Account is located, which agreement shall provide for the establishment of a post office box under the control of such bank (each, a "LOCK BOX") for collection of Receipts intended for the relevant Deposit Account. Each Corporate Credit Party hereby authorizes Lender (and grants an irrevocable power of attorney to Lender coupled with an interest) to deliver such agreements and to take such other actions as Lender deems necessary to accomplish the purposes of this paragraph. 4. Commencing on the date on which the combined Net Borrowing Availability of all Borrowers is less than $1,500,000 and continuing until the earlier of the Termination Date or the date (if any) on which Lender in its sole discretion waives in writing the requirements of this sentence, (i) each Corporate Credit Party (other than Design & Manufacturing, Inc.) shall instruct each of its Account Debtors to send all Receipts to a Lock Box (and each Corporate Credit Party hereby authorizes Lender to issue such instructions on such Credit Party's behalf) and (ii) such Corporate Credit Party shall authorize and direct such bank to endorse and deposit such Receipts in the Deposit Account attached to such Lock Box (subject to standard lock box exceptions for checks marked "in full and final settlement" and the like), and (iii) if any Corporate Credit Party receives any Receipts, such Corporate Credit Party shall promptly deposit such Receipts directly in such Corporate Credit Party's Deposit Account. 5. On or before the Closing Date, each bank at which the Deposit Accounts are held shall have entered into tri-party lock box agreements (the "DEPOSIT ACCOUNT AGREEMENTS") with Lender and the applicable Credit Party, in form and substance acceptable to Lender. Each such Deposit Account Agreement shall provide, among other things, that (a) such bank executing such agreement has no rights of setoff or recoupment or any other claim against such Deposit Account, other than for payment of its service fees and other charges directly related to the administration of such account, and (b) such bank agrees to sweep on a daily basis all amounts in the Deposit Account to the Collection Account. 6. On the Closing Date, (a) the blocked account arrangements shall immediately become operative at the banks at which the Deposit Accounts are maintained, and (b) amounts outstanding under the Revolving Credit Schedule D - Page 1 Loan (for purposes of the Borrowing Availability) shall be reduced through daily sweeps, by wire transfer, of the Deposit Accounts into the Collection Account. Borrowers acknowledge that they shall have no right to gain access to any of the moneys in the Deposit Accounts until after the Termination Date. 7. Each Borrower may maintain, in its name, accounts (the "DISBURSEMENT ACCOUNTS") at a bank or banks acceptable to Lender into which Lender shall, from time to time, deposit proceeds of Revolving Credit Advances made pursuant to SECTION 1.1 for use solely in accordance with the provisions of SECTION 1.3. All of the Disbursement Accounts as of the Closing Date are listed in paragraph 3 of ATTACHMENT I hereto. 8. Upon the request of Lender, each Corporate Credit Party shall forward to Lender, on a daily basis, evidence of the deposit of all items of payment received by such Credit Party into the Deposit Accounts and copies of all such checks and other items, together with a statement showing the application of those items relating to payments on Accounts to outstanding Accounts and a collection report with regard thereto in form and substance satisfactory to Lender. Schedule D - Page 2 ATTACHMENT 1 TO SCHEDULE D LIST OF BANK ACCOUNTS 1. OPERATING ACCOUNTS BORROWER BANK ACCOUNT # Ballantyne of Omaha, Inc. Wells Fargo Bank (Omaha, NE) 1150-004-060 Xenotech Strong, Inc. Wells Fargo Bank (Omaha, NE) 1155-094-747 Xenotech Strong, Inc. Wells Fargo Bank 4801-904-368 (Los Angeles, CA) Ballantyne of Omaha, Inc. Bank of America 003660792467 DBA Strong Communications (Orlando, FL) Xenotech Strong, Inc. DBA Bank of America 003660660816 Skytracker (Orlando, FL) Design & Manufacturing, Inc Fisher National Bank 101-170 (Fisher, IL) 2. DOMESTIC DEPOSIT ACCOUNTS. BORROWER BANK ACCOUNT # Ballantyne of Omaha, Inc. Wells Fargo Bank (Omaha, NE) 0687170431 Xenotech Strong, Inc. Wells Fargo Bank (Omaha, NE) 0687170456 2. FOREIGN DEPOSIT ACCOUNT. Ballantyne of Omaha, Inc. Wells Fargo Bank (Omaha, NE) 0687170449 3. DISBURSEMENT ACCOUNTS. Same as Operating Accounts. 4. PETTY CASH ACCOUNT. (not to exceed $5,000). None. 5. PAYROLL ACCOUNT (not to exceed one regular payroll). Schedule D - Page 3 None. Schedule D - Page 4 SCHEDULE E - FEES 1. UNUSED LINE FEE: For each day from the Closing Date, and through and including the Termination Date, an amount equal to the Total Maximum Amount less the Revolving Credit Advances outstanding as of such day multiplied by .25%, the product of which is then divided by 360. The Unused Line Fee for each month (except for the month in which the Termination Date occurs) is payable on the first day of each calendar month following the Closing Date; the final monthly installment of the Unused Line Fee is payable on the Termination Date. Notwithstanding the foregoing, any unpaid Unused Line Fee is immediately due and payable on the Commitment Termination Date. 2. LETTER OF CREDIT FEE: For each day for which Lender maintains Letter of Credit Obligations outstanding, an amount equal to the amount of the Letter of Credit Obligations outstanding on such day, multiplied by [n/a] %, the product of which is then divided by 360. The Letter of Credit Fee incurred for each month is payable at the same time each payment of the Unused Line Fee is due. Notwithstanding the foregoing, any unpaid Letter of Credit Fee is immediately due and payable on the Commitment Termination Date. 3. CLOSING FEE: A non-refundable closing fee of $49,375, payable and fully earned at closing (the "CLOSING FEE"). 4. PREPAYMENT FEE: The Prepayment Fee shall be an amount equal to the sum of (x) the Domestic Maximum Amount, PLUS (y) the Foreign Maximum Amount, PLUS (z) the principal amount outstanding under the Term Loan on the date of prepayment and termination, multiplied by: 2% if Lender's obligation to make further Revolving Credit Advances or incur additional Letter of Credit Obligations is terminated (voluntarily by Borrowers, upon Default or otherwise) on or after the Closing Date and on or before the first anniversary of the Closing Date, payable on the Commitment Termination Date; or 1% if Lender's obligation to make further Revolving Credit Advances or incur additional Letter of Credit Obligations is terminated (voluntarily by Borrowers, upon Default or otherwise) after the first anniversary of the Closing Date and on or before the Stated Expiry Date then in effect, payable on the Commitment Termination Date. Each Borrower acknowledges and agrees that (i) it would be difficult or impractical to calculate Lender's actual damages from early termination of Lender's obligation to make further Revolving Credit Advances and incur additional Letter of Credit Obligations for any reason pursuant to SECTION 1.2(c) or SECTION 7.2, (ii) the Prepayment Fees provided above are intended to be fair and reasonable approximations of such damages, and (iii) the Prepayment Fees are not intended to be penalties. 5. AUDIT FEES: Borrowers jointly and severally agree to reimburse Lender at the rate of $750 per person per day, plus out of pocket expenses, for the audit reviews, field examinations and collateral examinations conducted by Lender. 6. FOREIGN FACILITY FEES: Borrowers jointly and severally agree to pay Lender an annual foreign facility fee (the "FOREIGN FACILITY FEE") in an amount of $5,000, which fee shall be payable on the Closing Date and on each anniversary thereof until the Termination Date, and Borrowers jointly and severally agree to pay Lender from time to time any and all other fees payable by Lender to Ex-Im Bank in connection with the Ex-Im Bank Guarantee. Schedule E - Page 1 SCHEDULE F SCHEDULE OF DOCUMENTS The obligation of Lender to make the initial Revolving Credit Advances and extended other credit is subject to satisfaction of the condition precedent that Lender shall have received the following, each, unless otherwise specified below or the context otherwise requires, dated the Closing Date, in form and substance satisfactory to Lender and its counsel: PRINCIPAL LOAN DOCUMENTS. 1. AGREEMENT. The Loan and Security Agreement duly executed by Borrowers. 2. NOTES. Duly executed Note(s) to the order of Lender evidencing the Loans. 3. BORROWING BASE CERTIFICATES. An original Domestic Borrowing Base Certificate for each Borrower duly executed by a responsible officer of such Borrower and an original Foreign Borrowing Base Certificate duly executed by a responsible officer of Leading Borrower. 4. NOTICE OF REVOLVING CREDIT ADVANCE. An original Notice of Revolving Credit Advance duly executed by a responsible officer of Borrowers. COLLATERAL DOCUMENTS. 1. ACKNOWLEDGMENT COPIES OF FINANCING STATEMENTS. Acknowledgment copies of proper Financing Statements (Form UCC-l) (the "FINANCING STATEMENTS") duly filed under the Code in all jurisdictions as may be necessary or, in the opinion of Lender, desirable to perfect Lender's Lien on the Collateral. 2. UCC SEARCHES. Certified copies of UCC Searches, or other evidence satisfactory to Lender, listing all effective financing statements which name Borrower(s) (under present name, any previous name or any trade or doing business name) as debtor and covering all jurisdictions referred to in paragraph (1) immediately above, together with copies of such other financing statements. 3. PATENT AND TRADEMARK SECURITY AGREEMENTS. Trademark Security Agreement (in the form of EXHIBIT U) executed by each Borrower (the "TRADEMARK SECURITY AGREEMENTS") and Patent Security Agreement (in the form of EXHIBIT V) executed by each Borrower (the "PATENT SECURITY AGREEMENT"). 4. OTHER RECORDINGS AND FILINGS. Evidence of the completion of all other recordings and filings (including UCC-3 termination statements and other Lien release documentation) as may be necessary or, in the opinion of and at the request of Lender, desirable to perfect Lender's Lien on the Collateral and ensure such Collateral is free and clear of other Liens. 5. POWER OF ATTORNEY. Powers of Attorney duly executed by each Credit Party executing the Agreement. 6. PLEDGE AGREEMENT. The Pledge Agreement (in the form of EXHIBIT M) duly completed and executed by Leading Borrower and covering all of the outstanding Stock of the Other Borrowers (the "PLEDGE AGREEMENT"), together with all certificates evidencing the shares of the Stock or the Borrower's Subsidiaries covered thereby and accompanied by duly executed blank and undated transfer powers for such certificates. 7. MORTGAGES AND RELATED DOCUMENTS. (a) The Mortgages in the form of EXHIBIT W-1 duly executed by Leading Borrower and EXHIBIT W-2 duly executed by Design & Manufacturing, and covering all of such Borrowers' Real Property located in Omaha, Nebraska, and Fisher, Illinois, respectively (collectively, the "MORTGAGED PROPERTIES"), together with (i) lender's title insurance commitments for the Mortgaged Properties, all in form and substance to the Lender in its sole discretion; (ii) current as-built surveys for the Mortgaged Properties in form and substance satisfactory to Lender, (iii) evidence that a counterpart of each Mortgage has been recorded in all places to the extent necessary or desirable, in the judgment of Lender, to create a valid, enforceable and perfected Lien (subject only to Permitted Encumbrances) on the Mortgaged Property covered thereby in favor of the Lender (or in favor of such trustee for the Lender as may be required under local law), and (iv) such opinions of such Borrowers' counsel with respect to the Mortgages as Lender may require. Schedule F - Page 1 THIRD PARTY AGREEMENTS. 1. LANDLORD CONSENTS. Unless otherwise agreed to in writing by Lender, duly executed landlord waivers and consents from the landlords of all of each Borrower's leased or owned locations where Collateral is held, in each case, in form and substance satisfactory to Lender. 2. CASH MANAGEMENT SYSTEM. Duly executed Deposit Account Agreements, Lockbox Account Agreements, and, if required by Lender, pledged account agreements in respect of the Disbursement Accounts as contemplated by SCHEDULE D. 3. GUARANTEE. Guarantees executed by Strong Westrex, Inc. and by Ballantyne Overseas Corp. 4. RELIANCE LETTERS. Reliance letters from M.B. Valuation Services, Inc., with respect to the inventory and equipment appraisals performed on behalf of Wells Fargo Bank Nebraska, National Association, and from Heyden, Rench & Associates, Inc., with respect to the real estate appraisal performed on behalf of Wells Fargo Bank Nebraska, National Association 5. PAYOFF LETTER. A Payoff Letter in the form of EXHIBIT Q executed Wells Fargo Bank Nebraska, National Association 6. INTERCREDITOR AGREEMENT. An Intercreditor Agreement, in form and substance satisfactory to Lender in its sole discretion, with Sanyo Fisher Company. OTHER DOCUMENTS. 1. SECRETARY CERTIFICATE. A Secretary Certificate in the form of EXHIBIT H to the Agreement duly completed and executed by the Secretary of each Credit Party executing the Agreement, together with all attachments thereto. 2. ENVIRONMENTAL AUDIT. An environmental assessment of Leading Borrower's Omaha, Nebraska real property in form and substance (and issued by an environmental engineering or assessment firm) satisfactory to Lender and on which Lender is expressly permitted to rely. 3. FINANCIAL STATEMENTS AND PROJECTIONS. Copies of the Financial Statements and Projections, which Projections shall include a capital expenditures budget for Borrower(s) in form and substance satisfactory to Lender. 4. INSURANCE POLICIES. Certified copies of insurance policies described in Section 3.16, together with evidence showing loss payable or additional insured clauses or endorsements in favor of Lender. 5. EXISTING LEASE AGREEMENTS. Copies of any existing real property leases and equipment leases to which (each) Borrower is a party and any other document or instrument evidencing or relating to existing Indebtedness of Borrower(s), together with all certificates, opinions, instruments, security documents and other documents relating thereto, all of which shall be satisfactory in form and substance to Lender, certified by an authorized officer of Borrower(s) as true, correct and complete copies thereof. 6. AUTHORIZED BORROWERS' REPRESENTATIVE LETTER. A letter (in the form of EXHIBIT T) duly completed and executed on behalf of the Borrower. 7. PAYMENT OF PROCEEDS LETTER. A letter (in the form of EXHIBIT S) duly completed and executed on behalf of Borrowers. 8. LETTER TO ACCOUNT DEBTORS. Multiple undated letters (in the form of EXHIBIT X) to Account Debtors duly executed in blank on behalf of Borrowers. EX-IM BANK DOCUMENTS. 1 MASTER GUARANTEE AGREEMENT. A copy of the Master Guarantee Agreement between Ex-Im Bank and Lender. 2. WAIVER LETTER. A waiver letter, containing such waivers as Lender deems necessary, duly executed by Ex-Im Bank. 3. BORROWER AGREEMENT. The Borrower Agreement, with a copy of the Country Limitation Schedule, duly completed and executed by Borrowers and Ex-Im Bank. Schedule F - Page 2 4. LOAN AUTHORIZATION NOTICE, WITH ACKNOWLEDGEMENT OF RECEIPT BY BORROWER. The Loan Authorization Notice, duly executed by Ex-Im Bank, and receipt thereof acknowledged by Borrower. Schedule F - Page 3 SCHEDULE G FINANCIAL COVENANTS 1. FIXED CHARGE COVERAGE RATIO. For each period set forth below, Borrowers shall maintain a Fixed Charge Coverage Ratio of not less than the amount set forth opposite such period:
PERIOD MINIMUM RATIO September 1, 2001 through September 30, 2001 0.75 : 1.00 September 1, 2001 through October 31, 2001 0.75 : 1.00 September 1, 2001 through November 30, 2001 0.75 : 1.00 September 1, 2001 through December 31, 2001 1.00 : 1.00 September 1, 2001 through January 31, 2002 1.00 : 1.00 September 1, 2001 through February 28, 2002 1.00 : 1.00 September 1, 2001 through March 31, 2002 1.00 : 1.00 September 1, 2001 through April 30, 2002 1.05 : 1.00 September 1, 2001 through May 31, 2002 1.05 : 1.00 September 1, 2001 through June 30, 2002 1.05 : 1.00 September 1, 2001 through July 31, 2002 1.10 : 1.00 September 1, 2001 through August 31, 2002 1.10 : 1.00 October 1, 2001 through September 30, 2002 1.10 : 1.00 November 1, 2001 through October 31, 2002, and each 1.15 : 1.00 rolling twelve-month Fiscal Month period thereafter
As used in this Agreement (including this SCHEDULE G covenant), the following terms shall have the following meanings: "EBITDA" shall mean, for any period, the Net Income (Loss) of Borrowers and their Subsidiaries on a consolidated basis for such period, PLUS interest expense, income tax expense, amortization expense, depreciation expense and extraordinary losses and MINUS extraordinary gains, in each case, of Borrowers and their Subsidiaries on a consolidated basis for such period determined in accordance with GAAP to the extent included in the determination of such Net Income (Loss). Schedule G - Page 1 "FIXED CHARGE COVERAGE RATIO" shall mean, for any period, the ratio of the following for Borrowers and their Subsidiaries on a consolidated basis determined in accordance with GAAP: (a) EBITDA for such period LESS Capital Expenditures for such period which are not financed through the incurrence of any Indebtedness (excluding the Revolving Credit Loan) to (b) the sum of (i) interest expense paid or accrued in respect of any Indebtedness during such period, PLUS (ii) taxes to the extent accrued or otherwise payable with respect to such period PLUS (iii) regularly scheduled payments of principal paid or that were required to be paid on Funded Debt (excluding the Revolving Credit Loan) during such period, PLUS (iv) the aggregate amount of Permitted Intercompany Loans made by Leading Borrower to Strong Westrex, Inc. during such period. "FUNDED DEBT" shall mean, for any Person, all of such Person's Indebtedness (other than the Loans) which by the terms of the agreement governing or instrument evidencing such Indebtedness matures more than one year from, or is directly or indirectly renewable or extendible at the option of such Person under a revolving credit or similar agreement obligating the lender or lenders to extend credit over a period of more than one year from, the date of creation thereof, including current maturities of long-term debt, revolving credit, and short-term debt extendible beyond one year at the option of such Person. "NET INCOME (LOSS)" shall mean with respect to any Person and for any period, the aggregate net income (or loss) after taxes of such Person for such period, determined in accordance with GAAP. 2 CAPITAL EXPENDITURES. Borrowers and their Subsidiaries on a consolidated basis shall not make aggregate Capital Expenditures, other than Capital Expenditures financed through the incurrence of Indebtedness (excluding the Revolving Credit Loan), in any Fiscal Year in excess of $1,250,000. Schedule G - Page 2