**EXHIBIT10.85**

 

AMENDMENT NO. 5

TO

FINANCING AGREEMENT

 

This AMENDMENT NO. 5 TO FINANCING AGREEMENT (this “Amendment”),made as of June 30, 2002, between U.S. BANK NATIONAL ASSOCIATION (formerlyknown as Firstar Bank, National Association), a national banking association(“Bank”) and VARI-LITE, INC., a Delaware corporation (“Borrower”),

 

WITNESSETH:

 

WHEREAS, Borrower and Bank have entered into that certain FinancingAgreement, dated as of December 29, 2000, as amended by that certainAmendment No. 1 to Financing Agreement, dated as of March 30, 2001,Amendment No. 2 to Financing Agreement, dated as of June 30, 2001,Amendment No. 3 to Financing Agreement, dated as of December 31,2001, and Amendment No. 4 to Financing Agreement, dated as ofMarch 31, 2002 (as so amended, the “Financing Agreement”), pursuant towhich Bank has made certain loans and financial accommodations available toBorrower; and

 

WHEREAS, Borrower and Bank desire to further amend the FinancingAgreement as hereinafter set forth;

 

NOW, THEREFORE, in consideration of the mutual promises and agreementscontained herein and other good and valuable consideration, the receipt andadequacy of which are hereby acknowledged, Bank and Borrower agree as follows:

 

# 1.  DEFINED TERMS.

 

Each defined term used herein and not otherwise defined herein has themeaning ascribed to such term in the Financing Agreement.

 

# 2.  AMENDMENT TO FINANCING AGREEMENT.

 

The Financing Agreement is amended, effective as ofthe date of this Agreement, as follows:

 

2.1           Amendment to Section 1.  Section 1 of the Financing Agreementshall be amended by deleting the definitions of “Applicable LIBOR Rate Margin”and “Applicable Prime Rate Margin” in their entirety and by substituting thefollowing new definitions in lieu thereof:

 

“Applicable LIBOR RateMargin” means (i) from August 1 through and excludingNovember 15, 2002, a rate equal to (A) 3.50% per annum with respectto Revolving Loans, and (B) 3.50% per annum with respect to the Term LoanA and the CapEx Term Loans (collectively, the “Term Loans”), and(ii) thereafter, so long as no Event of Default shall have occurred and becontinuing, a per annum rate which shall adjust as of each Applicable MarginAdjustment Date based on the Leverage Ratio for the most recent four (4) fiscalquarters preceding such Applicable Margin Adjustment Date, as determined by theBank from the

 

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quarterly reports and annual reports required by Section8.7 and Section 8.8, respectively, in accordance with the followingtable:

 
| **Leverage Ratio**                                        |   | **Applicable  LIBOR**

**Rate  Margin for**

**Revolving  Loans** |   | **Applicable  LIBOR**

**Rate  Margin for**

**Term Loans** |   |
|-----------------------------------------------------------|--------|-------------------------------------------------------------------|--------|-------------------------------------------------------------|--------|
| Greater than or  equal to 2.5 to 1                        |   | 3.50%                                                             |   | 3.50%                                                       |   |
| Greater than or  equal to 2.0 to 1 but less than 2.5 to 1 |   | 3.25%                                                             |   | 3.25%                                                       |   |
| Less than or  equal to 2.0 to 1                           |   | 3.00%                                                             |   | 3.00%                                                       |   |

 

“ApplicablePrime Rate Margin” means (i)  from August 1 through and excludingNovember 15, 2002, a rate equal to (A) 1.75% per annum with respectto Revolving Loans, and (B) 1.75% per annum with respect to the Term Loansand (ii) thereafter, so long as no Event of Default shall have occurredand be continuing, a per annum rate which shall adjust as of each ApplicableMargin Adjustment Date based on the Leverage Ratio for the most recent four (4)fiscal quarters preceding such Applicable Margin Adjustment Date, as determinedby the Bank from the quarterly reports and annual reports required by Section8.7 and Section 8.8, respectively, in accordance with the followingtable:

 
| **Leverage Ratio**                                           |   | **Applicable  Prime**

**Rate Margin  for**

**Revolving  Loans** |   | **Applicable  Prime**

**Rate  Margin for**

**Term Loans** |   |
|--------------------------------------------------------------|--------|------------------------------------------------------------------------|--------|-------------------------------------------------------------|--------|
| Greater than or  equal to 2.5 to 1                           |   | 1.75%                                                                  |   | 1.75%                                                       |   |
| Greater than or  equal to 2.0 to 1 but less than to 2.5 to 1 |   | 1.50%                                                                  |   | 1.50%                                                       |   |
| Less than or  equal to 2.0 to 1                              |   | 1.25%                                                                  |   | 1.25%                                                       |   |

 

2.2           Amendment to Section 8.3(b).  Section 8.3(b) of the FinancingAgreement shall be amended by deleting Section 8.3(b) in its entirety andby substituting the following new Section 8.3(b) in lieu thereof:

 

(b)         Borrower shall deliver to Bank aborrowing base certificate in the form of Exhibit H attached heretoand incorporated herein by reference (a “Borrowing Base Certificate”), (i) forthe period beginning on the first day of each month and ending on the fifteenthday of such month, no later than thirty (30) days after the beginning of eachsuch month, and (ii) for the period beginning on the first day of each monthand ending on the last day of such month, no later than

 

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fifteen (15) days afterthe end of each such month.  TheBorrowing Base Certificate delivered with respect to the monthly period shallbe reconciled to the financial statements required to be delivered pursuant to Section 8.5hereof, and, together with such Borrowing Base Certificate, Borrower shalldeliver to Bank monthly reports of Borrower’s sales, leases, credits to sales,credits to leases, or credit memoranda applicable to sales, leases, collectionsand non-cash charges (from whatever source, including, without limitation,sales and noncash journals or other credits to Receivables).

 

2.3           Amendment to Section 12(b).  Section 12(b) of the FinancingAgreement shall be amended by deleting Section 12(b) in its entirety andby substituting the following new Section 12(b) in lieu thereof:

 

(b)Borrower or International shall commit any breach of this Agreementunder Section 8, Section 10.1, Section 10.11through Section 10.33, or Section 10.35 through Section 10.37hereof;

 

2.4           Amendment to Section 10.  Section 10 of the Financing Agreementshall be amended by adding the following new Section 10.38 thereto:

 

10.38       Asset Appraisal.

 

Borrower will, nolater than October 30, 2002, deliver an appraisal of Borrower’s RentalInventory, which appraisal shall be in form and substance satisfactory to Bank,in its sole discretion.

 

2.5           Amendment to Exhibit J.Exhibit J to the Financing Agreement is amended in its entirety to read asset forth on Exhibit J attached hereto and by reference made a parthereof.

 

# 3.  REPRESENTATIONSAND WARRANTIES.

 

Borrower represents and warrants to Bank as follows:

 

3.1           The Amendment.  This Amendment has been duly and validlyexecuted by an authorized executive officer of Borrower and constitutes thelegal, valid and binding obligation of Borrower enforceable against Borrower inaccordance with its terms.

 

3.2           Financing Agreement.  The Financing Agreement as amended by thisAmendment remains in full force and effect and remains the valid and bindingobligation of Borrower enforceable against Borrower in accordance with itsterms.  Borrower hereby ratifies andconfirms the Financing Agreement as amended by this Amendment.

 

3.3           Nonwaiver.  Neither the execution, delivery, performanceor effectiveness of this Amendment shall operate nor be deemed to be norconstrued as a waiver (i) of any right, power or remedy of Bank under theFinancing Agreement, nor (ii) of any term, provision, representation, warrantyor covenant contained in the Financing Agreement or any other documentationexecuted in connection therewith. Further, none of the provisions of this

 

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Amendment shall constitute, or be deemed to be orconstrued as, a waiver of any Event of Default under the Financing Agreement asamended by this Amendment.

 

3.4           Reference to and Effect on theFinancing Agreement.  Upon theeffectiveness of this Amendment, each reference in the Financing Agreement to“this Agreement”, “hereunder”, “hereof”, “herein”, or words of like importshall mean and be a reference to the Financing Agreement as amended hereby, andeach reference to the Financing Agreement in any other document, instrument oragreement executed and/or delivered in connection with the Financing Agreementshall mean and be a reference to the Financing Agreement as amended hereby.

 

3.5           Claims and Defenses.  As of the date of this Amendment, Borrowerhas no defenses, claims, counterclaims or setoffs with respect to the FinancingAgreement or its Obligations thereunder or with respect to any actions of theBank or any of its officers, directors, shareholders, employees, agents orattorneys, and Borrower irrevocably and absolutely waives any such defenses,claims, counterclaims and setoffs and releases the Bank and each of itsofficers, directors, shareholders, employees, agents and attorneys from thesame.

 

# 4.  CONDITIONS PRECEDENT TO EFFECTIVENESS OFTHIS AMENDMENT NO. 5.

 

In addition to all of the other conditions andagreements set forth herein, the effectiveness of this Amendment is subject tothe each of the following conditions precedent:

 

4.1           Amendment No. 5 to FinancingAgreement.  Bank shall have receivedan original counterpart of this Amendment No. 5 to Financing Agreement,executed and delivered by a duly authorized officer of Borrower.

 

4.2           Acknowledgment of Guarantor.  Bank shall have received an original of theattached Acknowledgment of Vari-Lite International, Inc., a Delawarecorporation, executed and delivered by a duly authorized officer of Vari-LiteInternational, Inc..

 

4.3           No Material Adverse Change.  There shall have occurred no material andadverse change in the Borrower’s assets, liabilities or financial conditionsince the date of the last Financials delivered by Borrower to Bank nor shallthere have been any material damage to or loss of any of Borrower’s assets orproperties since such date.

 

4.4           Amendment Fee.  Borrower shall have paid Bank an amendmentfee in an amount of Twenty-Five Thousand Dollars ($25,000.00).

 

# 5.  MISCELLANEOUS.

 

5.1           Governing Law.  This Amendment has been delivered andaccepted at and shall be deemed to have been made at Cleveland, Ohio.  This Amendment shall be interpreted and therights and liabilities of the parties hereto determined in accordance with thelaws of the State of Ohio, without regard to principles of conflict of law, andall other laws of mandatory application.

 

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5.2           Severability.  Each provision of this Amendment shall beinterpreted in such manner as to be valid under applicable law, but if anyprovision hereof shall be invalid under applicable law, such provision shall beineffective to the extent of such invalidity, without invalidating theremainder of such provision or the remaining provisions hereof.

 

5.3           Counterparts.  This Amendment may be executed in one ormore counterparts, each of which, when taken together, shall constitute but oneand the same agreement.

 

 

[REMAINDER OF PAGE INTENTIONALLY BLANK]

 

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IN WITNESS WHEREOF, Borrower has caused this Amendment No. 5 toFinancing Agreement to be duly executed and delivered by its duly authorizedofficer as of the date first above written.

 
| Signed and  acknowledged | VARI-LITE, INC. |
|--------------------------|-----------------|
| in the presence  of:     |            |
|                     |            |
|                     |            | By: |   |   |
| Name:                    |            |   |   |
|                     | Its:            |   |   |
|                     |            |   |
| Name:                    |            |   |   |
|                     |            |

 

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| STATE OF  | )     |
|-----------|-------|
|      | ) ss: |
| COUNTY OF | )     |

 

 

 

The foregoing instrument was acknowledged before me this       day of August, 2002, by                              ,the                                       of Vari-Lite, Inc., a Delaware corporation, on behalf of the corporation.

 

 

 

 
|   |          |   |
|--------|---------------|--------|
|   | Notary Public |

 

 

 

 

 

 

Accepted atCleveland, Ohio,

Effective as ofJune 30, 2002.

 
| U.S. BANK  NATIONAL ASSOCIATION |
|---------------------------------|
|                            |
| By:                             |   |
| Its:                            |   |

 

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ACKNOWLEDGMENT OFGUARANTOR

 

 

The undersigned, Vari-LiteInternational, Inc., a Delaware corporation, having guaranteed all of theobligations of Vari-Lite, Inc. to U.S. Bank National Association (formerlyknown as Firstar Bank, National Association) (“Bank”), hereby acknowledges andagrees, effective as of June 30, 2002, to the terms of the foregoingAmendment No. 5 to Financing Agreement. The undersigned represents and warrants to Bank that the Guarantyexecuted and delivered by the undersigned to Bank, dated as ofDecember 29, 2000, remains the valid and binding obligation of theundersigned, enforceable against it in accordance with its terms.

 
|   | VARI-LITE  INTERNATIONAL, INC. |
|--------|--------------------------------|
|   |                           |
|   | By:                            |   |   |
|   |                           |
|   | Its:                           |   |   |

 

 

 
| STATE OF  | )     |
|-----------|-------|
|      | ) ss: |
| COUNTY OF | )     |

 

The foregoing instrumentwas acknowledged before me this        day ofAugust, 2002, by                                    ,the                     of VARI-LITE INTERNATIONAL, INC., a Delaware corporation, on behalf of thecompany.

 

 

 
|   |          |   |
|--------|---------------|--------|
|   | Notary Public |

 

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**Exhibit J**

**Financial Covenants**

 

Financial Covenants.  Borroweragrees that it shall:

 

(A)                              Net Capital Expenditures. Not make nor permit International to make Net Capital Expenditures in anaggregate amount exceeding $6,000,000 for any fiscal year.

 

(B)                                Earnings Before Interest, Taxes,Depreciation and Amortization.  Not permitInternational’s Earnings Before Interest, Taxes, Depreciation and Amortization(“EBITDA”) to be less than the following amounts for the following periods:

 

| **EBIDTA**  |   | **Period** |                |
|-------------|--------|------------|---------------------|
| $2,931,000  |   |       | 10/01/00 - 12/31/00 |   |
| $6,234,000  |   |       | 10/01/00 - 03/31/01 |   |
| $7,461,000  |   |       | 10/01/00 - 06/30/01 |   |
| $9,491,000  |   |       | 10/01/00 - 09/30/01 |   |
| $7,650,000  |   |       | 01/01/01 - 12/31/01 |   |
| $6,940,000  |   |       | 04/01/01 - 03/31/02 |   |
| $7,247,000  |   |       | 07/01/01 - 06/30/02 |   |
| $8,500,000  |   |       | 10/01/01 - 09/30/02 |   |
| $16,314,000 |   |       | 01/01/02 - 12/31/02 |   |
| $16,882,000 |   |       | 04/01/02 - 03/31/03 |   |
| $17,385,000 |   |       | 07/01/02 - 06/30/03 |   |
| $18,123,000 |   |       | 10/01/02 - 09/30/03 |   |
|        |   |       |                |   |
| $1,110,000  |   |       | 07/01/02 - 07/31/02 |   |
| $2,295,000  |   |       | 07/01/02 - 08/31/02 |   |
| $3,555,000  |   |       | 07/01/02 - 09/30/02 |   |

 

(C)                                Net Worth.  Not permitInternational’s Net Worth to be less than the following amounts as of thefollowing dates:

 

| **Net Worth** |   | **Date** |   |
|---------------|--------|----------|--------|
| $45,000,000   |   | 12/31/00 |   |
| $45,000,000   |   | 03/31/01 |   |
| $45,000,000   |   | 06/30/01 |   |
| $44,600,000   |   | 09/30/01 |   |
| $44,000,000   |   | 12/31/01 |   |
| $43,041,000   |   | 03/31/02 |   |
| $37,200,000   |   | 06/30/02 |   |
| $37,200,000   |   | 09/30/02 |   |
| $47,750,000   |   | 12/31/02 |   |
| $47,750,000   |   | 03/31/03 |   |
| $47,750,000   |   | 06/30/03 |   |
| $47,750,000   |   | 09/30/03 |   |

 

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(D)                               Maximum Debt. Not permit International’s Total Funded Indebtedness to exceed thefollowing amounts at any time during the following periods:

 

| **Total Funded Indebtedness** |   | **Period**             |   |
|-------------------------------|--------|------------------------|--------|
| $29,000,000                   |   | 01/01/01 - 06/30/01    |   |
| $27,000,000                   |   | 07/01/01 - 09/30/01    |   |
| $25,000,000                   |   | 10/01/01 - 12/31/01    |   |
| $25,000,000                   |   | 01/01/02 - 03/31/02    |   |
| $25,000,000                   |   | 04/01/02 - 06/30/02    |   |
| $25,000,000                   |   | 07/01/02 - 09/30/02    |   |
| $25,000,000                   |   | 10/01/02 - 12/31/02    |   |
| $27,000,000                   |   | 01/01/03 - 03/31/03    |   |
| $27,000,000                   |   | 04/01/03 - 06/30/03    |   |
| $27,000,000                   |   | 07/01/03 - 09/30/03    |   |
| $27,000,000                   |   | at any time thereafter |   |

 

(E)                                 Leverage Ratio. Not permit International’s Leverage Ratio to exceed the following ratiosas of the following dates:

 

| **Leverage Ratio** |   | **Date** |   |
|--------------------|--------|----------|--------|
| 4.65 to 1          |   | 03/31/01 |   |
| 3.23 to 1          |   | 06/30/01 |   |
| 2.56 to 1          |   | 09/30/01 |   |
| 2.90 to 1          |   | 12/31/01 |   |
| 3.05 to 1          |   | 03/31/02 |   |
| 3.21 to 1          |   | 06/30/02 |   |
| 2.76 to 1          |   | 09/30/02 |   |
| 1.80 to 1          |   | 12/31/02 |   |
| 1.75 to 1          |   | 03/31/03 |   |
| 1.65 to 1          |   | 06/30/03 |   |
| 1.65 to 1          |   | 09/30/03 |   |

 

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(F)                                 Total Debt Service Ratio. Not permit International’s Total Debt Service Ratio to be less than thefollowing ratios as of the following dates:

 

| **Total Debt Service Ratio** |   | **Date** |   |
|------------------------------|--------|----------|--------|
| 0.61 to 1                    |   | 09/30/01 |   |
| 0.60 to 1                    |   | 12/31/01 |   |
| 0.53 to 1                    |   | 03/31/02 |   |
| 0.77 to 1                    |   | 06/30/02 |   |
| 0.81 to 1                    |   | 09/30/02 |   |
| 1.20 to 1                    |   | 12/31/02 |   |
| 1.20 to 1                    |   | 03/31/03 |   |
| 1.20 to 1                    |   | 06/30/03 |   |
| 1.20 to 1                    |   | 09/30/03 |   |

 

II.                                     Definitions

 

(A)                              The term “Net Capital Expenditures”for purposes of this Exhibit J shall mean the sum of  (a) International’s consolidated capitalexpenditures (including, but not by way of limitation, expenditures for fixedassets or leases capitalized or required to be capitalized on International’sconsolidated books by purchase, lease-purchase agreement, option or otherwise),minus  (b) the net bookvalue of capital assets previously sold and replaced by such capitalexpenditures.

 

(B)                                The term “Earnings Before Interest,Taxes, Depreciation, and Amortization” or “EBITDA”****forpurposes of this Exhibit J shall mean International’s consolidatedearnings from operations before income taxes and interest income or expense plusdepreciation, plus amortization of all non-cash charges, all asdetermined in accordance with generally accepted accounting principles, andshall not include any gains or losses from the sale of assets outside thenormal course of business or any other extraordinary accounting adjustments ornon-recurring items of income or loss.

 

(C)                                The term “Net Worth” for purposesof this Exhibit J shall mean the total of International’sconsolidated shareholders equity, as determined in accordance with generallyaccepted accounting principles, consistently applied.

 

(D)                               The term “Total Funded Indebtedness”for purposes of this Exhibit J shall have the meaning and bedetermined in accordance with generally accepted accounting principlesconsistently applied by International on a consolidated basis in accordancewith past practices.

 

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(E)                                 The term “Leverage Ratio” forpurposes of this Exhibit J shall mean:

 

1.             ***As of 03/31/01***,  the ratio of Total Funded Indebtedness as ofsuch date to EBITDA as measured from 10/01/00 to 03/31/01;

 

2.             ***As of 06/30/01***, theratio of Total Funded Indebtedness as of such date to EBITDA as measured from10/01/00 to 06/30/01;

 

3.             ***As of 09/30/01***, theratio of Total Funded Indebtedness as of such date to EBITDA as measured from10/01/00 to 09/30/01; and

 

4.             ***As of 12/31/01 and as of the lastday of any fiscal quarter thereafter***, the ratio of Total FundedIndebtedness as of such date to EBITDA as measured on a four quarter trailingbasis.

 

(F)                                 The term “Unfunded Capital ExpenditurePayments” for purposes of this Exhibit J shall mean the amountof consolidated capital expenditures of International which are not financedunder the CapEx Facility nor any other financing arrangement with any otherperson.

 

(G)                                The term “Total Debt Service Ratio”for purposes of this Exhibit J shall mean:

 

1.             ***For the period commencing on the07/01/01 and ending on 09/30/01***, the ratio of (a) EBITDA asmeasured from 01/01/01 to 09/30/01 to (b) the sum of  (i) the total consolidated andregularly scheduled principal and interest payments of Total FundedIndebtedness for the period 01/01/01 to 09/30/01,  plus  (ii) UnfundedCapital Expenditure Payments for the period 01/01/01 to 09/30/01, minus(iii) the US $1,000,000 Japanese principal payment paid by Vari-Lite Asia,Inc. in March, 2001;

 

                                                2.             ***For the period commencing on the10/01/01 and ending on 12/31/01***, the ratio of (a) EBITDA asmeasured on a four quarter trailing basis to (b) the sum of  (i) the total consolidated andregularly scheduled principal and interest payments of Total FundedIndebtedness for such four quarter trailing period,  plus (ii) Unfunded Capital Expenditure Payments for suchfour quarter trailing period,  minus  (iii) the US $1,000,000 Japaneseprincipal payment paid by Vari-Lite Asia, Inc. in March, 2001, plus (iv)the amount of taxes paid by International on a consolidated basis during suchfour quarter trailing period, minus (v) the amount of Japanese taxespaid by Vari-Lite Asia, Inc. in February, 2001; and

 

                                                3.             ***For all periods after 12/31/01***,the ratio of (a) EBITDA as measured on a four quarter trailing basis to (b) thesum of  (i) the totalconsolidated and regularly scheduled principal and interest payments of TotalFunded Indebtedness for such four quarter trailing period,  plus (ii) Unfunded CapitalExpenditure Payments for such four quarter trailing period, plus (iii)the amount of taxes paid by International on a consolidated basis during suchfour quarter trailing period.

 

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