Document:

Exhibit 4.1

 

CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT (this “Agreement”)
is entered into as of June 30, 2010, by and between BALLANTYNE STRONG, INC.,
a Delaware corporation (“Borrower”), and WELLS FARGO BANK, NATIONAL ASSOCIATION
(“Bank”).

 

RECITALS

 

Borrower has requested that
Bank extend or continue credit to Borrower as described below, and Bank has
agreed to provide such credit to Borrower on the terms and conditions contained
herein.

 

NOW, THEREFORE, for valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Bank and Borrower hereby agree as follows:

 

ARTICLE I

CREDIT
TERMS

 

SECTION 1.1. LINE OF
CREDIT.

 

(a) Line of Credit.
Subject to the terms and conditions of this Agreement, Bank hereby agrees to
make advances to Borrower from time to time up to and including June 30,
2011, not to exceed at any time the aggregate principal amount of Twenty
Million Dollars ($20,000,000.00) (“Line of Credit”), the proceeds of which
shall be used to finance Borrower’s working capital requirements and for other
general corporate purposes. Borrower’s obligation to repay advances under the
Line of Credit shall be evidenced by a $20,000,000 promissory note dated as of June 30,
2010 (“Line of Credit Note”), all terms of which are incorporated herein by
this reference.

 

Borrower may request an
increase in the Line of Credit by up to an additional FIVE MILLION DOLLARS
($5,000,000.00). Borrower may request such an increase once in the minimum
amount of at least $1,000,000.00. Following Borrower’s request, Bank shall
re-underwrite the requested increase to the Line of Credit after having first
received from Borrower (i) pro-forma projections for the next four fiscal
quarters, (ii) a current compliance certificate executed by an officer of
Borrower acceptable to Bank, both showing that Borrower is and will in the
future be compliance with the terms and conditions of this Agreement. If Bank
is agreeable to meeting Borrower’s request for an increase, Borrower shall
first deliver to Bank a replacement Line of Credit Note for the full amount of
the increased Line of Credit. The amount of
the Line of Credit in excess of $20,000,000.00 is a discretionary Line of
Credit, and Wells Fargo has no obligation to make an advance with respect to
the amount of the Line of Credit in excess of $20,000,000, even if no Event of
Default has occurred or is continuing under the terms of this Agreement.

 

(b) Letter of Credit
Subfeature. As a subfeature under the Line of Credit, Bank agrees from time
to time during the term thereof to issue or cause an affiliate to issue standby
letters of credit for the account of Borrower to back a financial instrument
(each, a “Letter of Credit” and collectively, “Letters of Credit”); provided
however, that the aggregate undrawn amount of all outstanding Letters of Credit
shall not at any time exceed Ten Million Dollars ($10,000,000.00). The form and
substance of each Letter of Credit shall be subject to approval by Bank, in its
sole discretion. No Letter of Credit shall have an expiration date subsequent
to the maturity date of the Line of Credit. The undrawn amount of all Letters
of Credit shall be reserved under the Line of Credit and shall not be available
for borrowings thereunder. Each Letter of Credit shall be subject to the
additional terms and conditions of the Letter of Credit agreements,
applications and any related documents required by Bank in connection with the
issuance thereof. Each 

 

 

drawing paid under a Letter
of Credit shall be deemed an advance under the Line of Credit and shall be
repaid by Borrower in accordance with the terms and conditions of this
Agreement applicable to such advances; provided however, that if advances under
the Line of Credit are not available, for any reason, at the time any drawing
is paid, then Borrower shall immediately pay to Bank the full amount drawn,
together with interest thereon from the date such drawing is paid to the date
such amount is fully repaid by Borrower, at the rate of interest applicable to
advances under the Line of Credit. In such event Borrower agrees that Bank, in
its sole discretion, may debit any account maintained by Borrower with Bank for
the amount of any such drawing.

 

(c) Borrowing and
Repayment. Borrower may from time to time during the term of the Line of
Credit borrow, partially or wholly repay its outstanding borrowings, and
reborrow, subject to all of the limitations, terms and conditions contained
herein or in the Line of Credit Note; provided however, that the total
outstanding borrowings under the Line of Credit shall not at any time exceed
the maximum principal amount available thereunder, as set forth above.

 

SECTION 1.2.
INTEREST/FEES.

 

(a) Interest.
The outstanding principal balance of each credit subject hereto shall bear
interest, and the amount of each drawing paid under the Standby Letter of
Credit shall bear interest from the date such drawing is paid to the date such
amount is fully repaid by Borrower, at the rate of interest set forth in each
promissory note or other instrument or document executed in connection
therewith.

 

(b) Computation and
Payment. Interest shall be computed on the basis of a 360-day year, actual
days elapsed. Interest shall be payable at the times and place set forth in
each promissory note or other instrument or document required hereby.

 

(c) Unused
Commitment Fee. Borrower shall pay to Bank a fee equal to point one five
percent (.15%) per annum (computed on the basis of a 360-day year, actual days
elapsed) on the average daily unused amount of the Line of Credit, which fee
shall be calculated on a quarterly basis by Bank and shall be due and payable
by Borrower in arrears within ten (10) days after each billing is sent by
Bank.

 

(d) Letter of Credit
Fees. Borrower shall pay to Bank (i) fees upon the issuance of each
Letter of Credit equal to one and one quarter of one percent (1.25%) per annum
(computed on the basis of a 360-day year, actual days elapsed) of the face
amount thereof, and (ii) fees upon the payment or negotiation of each
drawing under any Letter of Credit and fees upon the occurrence of any other
activity with respect to any Letter of Credit (including without limitation,
the transfer, amendment or cancellation of any Letter of Credit) determined in
accordance with Bank’s standard fees and charges then in effect for such activity.

 

SECTION 1.3.
COLLATERAL.

 

As security for all
indebtedness and other obligations of Borrower to Bank subject hereto, Borrower
hereby grants to Bank security interests of first priority in all Borrower’s
accounts receivable and other rights to payment, general intangibles and
inventory. All of the foregoing shall be evidenced by and subject to the terms
of such security agreements, financing statements, deeds or mortgages, and
other documents as Bank shall reasonably require, all in form and substance
satisfactory to Bank. Borrower shall 

 

 

pay to Bank immediately upon
demand the full amount of all charges, costs and expenses (to include fees paid
to third parties and all allocated costs of Bank personnel), expended or
incurred by Bank in connection with any of the foregoing security, including
without limitation, filing and recording fees and costs of appraisals, audits
and title insurance.

 

SECTION 1.4.
GUARANTIES. The payment and performance of all indebtedness and other
obligations of Borrower to Bank shall be guaranteed jointly and severally by
Strong Westrex, Inc., Strong Technical Services, Inc. and Strong/MDI
Screen Systems Inc., as evidenced by and subject to the terms of guaranties in
form and substance satisfactory to Bank.

 

ARTICLE II

REPRESENTATIONS
AND WARRANTIES

 

Borrower makes the following
representations and warranties to Bank, which representations and warranties
shall survive the execution of this Agreement and shall continue in full force
and effect until the full and final payment, and satisfaction and discharge, of
all obligations of Borrower to Bank subject to this Agreement.

 

SECTION 2.1. LEGAL
STATUS. Borrower is a corporation, duly organized and existing and in good
standing under the laws of Delaware, and is qualified or licensed to do
business (and is in good standing as a foreign corporation, if applicable) in
all jurisdictions in which such qualification or licensing is required or in
which the failure to so qualify or to be so licensed could have a material
adverse effect on Borrower.

 

SECTION 2.2.
AUTHORIZATION AND VALIDITY. This Agreement and each promissory note, contract,
instrument and other document required hereby or at any time hereafter
delivered to Bank in connection herewith (collectively, the “Loan Documents”) have
been duly authorized, and upon their execution and delivery in accordance with
the provisions hereof will constitute legal, valid and binding agreements and
obligations of Borrower or the party which executes the same, enforceable in
accordance with their respective terms.

 

SECTION 2.3. NO
VIOLATION. The execution, delivery and performance by Borrower of each of the
Loan Documents do not violate any provision of any law or regulation, or
contravene any provision of the Articles of Incorporation or By-Laws of
Borrower, or result in any breach of or default under any contract, obligation,
indenture or other instrument to which Borrower is a party or by which Borrower
may be bound.

 

SECTION 2.4.
LITIGATION. There are no pending, or to the best of Borrower’s knowledge
threatened, actions, claims, investigations, suits or proceedings by or before
any governmental authority, arbitrator, court or administrative agency which
could have a material adverse effect on the financial condition or operation of
Borrower other than those disclosed by Borrower to Bank in writing prior to the
date hereof.

 

SECTION 2.5.
CORRECTNESS OF FINANCIAL STATEMENT. The annual financial statement of Borrower
dated December 31, 2009, and all interim financial statements delivered to
Bank since said date, true copies of which have been delivered by Borrower to
Bank prior to the date hereof, (a) are complete and correct and present
fairly the financial condition of Borrower, (b) disclose all liabilities
of Borrower that are required to be reflected or reserved against under
generally accepted accounting principles, whether liquidated or unliquidated,
fixed or contingent, and (c) have been prepared in 

 

 

accordance with generally
accepted accounting principles consistently applied. Since the dates of such
financial statements there has been no material adverse change in the financial
condition of Borrower, nor has Borrower mortgaged, pledged, granted a security
interest in or otherwise encumbered any of its assets or properties except in favor
of Bank or as otherwise permitted by Bank in writing.

 

SECTION 2.6. INCOME TAX
RETURNS. Borrower has no knowledge of any pending material assessments or
adjustments of its income tax payable with respect to any year.

 

SECTION 2.7. NO
SUBORDINATION. There is no agreement, indenture, contract or instrument to
which Borrower is a party or by which Borrower may be bound that requires the
subordination in right of payment of any of Borrower’s obligations subject to
this Agreement to any other obligation of Borrower.

 

SECTION 2.8. PERMITS,
FRANCHISES. Borrower possesses, and will hereafter possess, all permits,
consents, approvals, franchises and licenses required and rights to all
trademarks, trade names, patents, and fictitious names, if any, necessary to enable
it to conduct the business in which it is now engaged in compliance with
applicable law.

 

SECTION 2.9. ERISA.
Borrower is in compliance in all material respects with all applicable
provisions of the Employee Retirement Income Security Act of 1974, as amended
or recodified from time to time (“ERISA”); Borrower has not violated any
provision of any defined employee pension benefit plan (as defined in ERISA)
maintained or contributed to by Borrower (each, a “Plan”); no Reportable Event
as defined in ERISA has occurred and is continuing with respect to any Plan
initiated by Borrower; Borrower has met its minimum funding requirements under
ERISA with respect to each Plan; and each Plan will be able to fulfill its
benefit obligations as they come due in accordance with the Plan documents and
under generally accepted accounting principles.

 

SECTION 2.10. OTHER
OBLIGATIONS. Borrower is not in default on any obligation for borrowed money,
any purchase money obligation or any other material lease, commitment, contract,
instrument or obligation.

 

SECTION 2.11.
ENVIRONMENTAL MATTERS. Except as disclosed by Borrower in its 10-K filings with
the Securities and Exchange Commission, Borrower is in compliance in all
material respects with all applicable federal or state environmental, hazardous
waste, health and safety statutes, and any rules or regulations adopted
pursuant thereto, which govern or affect any of Borrower’s operations and/or
properties, including without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, and the Federal Toxic Substances Control Act, as any of the same may
be amended, modified or supplemented from time to time. None of the operations
of Borrower is the subject of any federal or state investigation evaluating
whether any remedial action involving a material expenditure is needed to
respond to a release of any toxic or hazardous waste or substance into the
environment. Except for the parking lot which was has been previously disclosed
by Borrower in its annual 10-K filings, Borrower has no material contingent
liability in connection with any release of any toxic or hazardous waste or substance
into the environment.

 

 

ARTICLE III

CONDITIONS

 

SECTION 3.1. CONDITIONS
OF INITIAL EXTENSION OF CREDIT. The obligation of Bank to extend any credit
contemplated by this Agreement is subject to the fulfillment to Bank’s
satisfaction of all of the following conditions:

 

(a) Approval of Bank
Counsel. All legal matters incidental to the extension of credit by Bank
shall be satisfactory to Bank’s counsel.

 

(b) Documentation.
Bank shall have received, in form and substance satisfactory to Bank, each of
the following, duly executed:

 

(i)                                     This Agreement
and each promissory note or other instrument or document required hereby.

(ii)                                  Certificate of
Incumbency.

(iii)                               Corporate
Resolution: Borrowing.

(iv)                              Disbursement
Order.

(v)                                 Continuing
Security Agreement: Rights to Payment and Inventory.

(vi)                              Exhibit A
to UCC Financing Statement.

(vii)                           Such other
documents as Bank may require under any other Section of this Agreement.

 

(c) Financial
Condition. There shall have been no material adverse change, as determined
by Bank, in the financial condition or business of Borrower, nor any material
decline, as determined by Bank, in the market value of any collateral required
hereunder or a substantial or material portion of the assets of Borrower.

 

(d) Insurance.
Borrower shall have delivered to Bank evidence of insurance coverage on all
Borrower’s property, in form, substance, amounts, covering risks and issued by
companies satisfactory to Bank, and where required by Bank, with loss payable
endorsements in favor of Bank.

 

SECTION 3.2. CONDITIONS
OF EACH EXTENSION OF CREDIT. The obligation of Bank to make each extension of
credit requested by Borrower hereunder shall be subject to the fulfillment to
Bank’s satisfaction of each of the following conditions:

 

(a) Compliance.
The representations and warranties contained herein and in each of the other
Loan Documents shall be true on and as of the date of the signing of this
Agreement and on the date of each extension of credit by Bank pursuant hereto,
with the same effect as though such representations and warranties had been
made on and as of each such date, and on each such date, no Event of Default as
defined herein, and no condition, event or act which with the giving of notice
or the passage of time or both would constitute such an Event of Default, shall
have occurred and be continuing or shall exist.

 

(b) Documentation.
Bank shall have received all additional documents which may be required in
connection with such extension of credit.

 

(c) Additional
Letter of Credit Documentation. Prior to the issuance of each Letter of
Credit, Bank shall have received a Letter of Credit Agreement, properly
completed and duly executed by borrower.

 

 

ARTICLE IV

AFFIRMATIVE
COVENANTS

 

Borrower covenants that so
long as Bank remains committed to extend credit to Borrower pursuant hereto, or
any liabilities (whether direct or contingent, liquidated or unliquidated) of
Borrower to Bank under any of the Loan Documents remain outstanding, and until
payment in full of all obligations of Borrower subject hereto, Borrower shall,
unless Bank otherwise consents in writing:

 

SECTION 4.1. PUNCTUAL
PAYMENTS. Punctually pay all principal, interest, fees or other liabilities due
under any of the Loan Documents at the times and place and in the manner
specified therein.

 

SECTION 4.2. ACCOUNTING
RECORDS. Maintain adequate books and records in accordance with generally
accepted accounting principles consistently applied, and permit any
representative of Bank, at any reasonable time, to inspect, audit and examine
such books and records, to make copies of the same, and to inspect the
properties of Borrower.

 

SECTION 4.3. FINANCIAL
STATEMENTS. Provide to Bank all of the following, in form and detail
satisfactory to Bank:

 

(a) not later than 120
days after and as of the end of each fiscal year, a unqualified audited
financial statement of Borrower, prepared by certified public accountant
acceptable to Bank, to include balance sheet, income statement and statement of
cashflow;

 

(b) not later than 60
days after and as of the end of each fiscal quarter, a financial statement of
Borrower, prepared by Borrower, to include balance sheet and income statement;

 

(c) contemporaneously
with each annual and quarterly financial statement of Borrower required hereby,
a certificate of the president or chief financial officer of Borrower that said
financial statements are accurate and that there exists no Event of Default nor
any condition, act or event which with the giving of notice or the passage of
time or both would constitute an Event of Default;

 

(d) from time to time
such other information as Bank may reasonably request.

 

SECTION 4.4.
COMPLIANCE. Preserve and maintain all licenses, permits, governmental
approvals, rights, privileges and franchises necessary for the conduct of its business;
and comply with the provisions of all documents pursuant to which Borrower is
organized and/or which govern Borrower’s continued existence and with the
requirements of all laws, rules, regulations and orders of any governmental
authority applicable to Borrower and/or its business.

 

SECTION 4.5. INSURANCE.
Maintain and keep in force, for each business in which Borrower is engaged,
insurance of the types and in amounts customarily carried in similar lines of
business, including but not limited to fire, extended coverage, public
liability, flood, property damage and workers’ compensation, with all such
insurance carried with companies and in amounts satisfactory to Bank, and
deliver to Bank from time to time at Bank’s request schedules setting forth all
insurance then in effect.

 

SECTION 4.6.
FACILITIES. Keep all properties useful or necessary to Borrower’s business in
good repair and condition, and from time to time make necessary repairs,
renewals and replacements thereto so that such properties shall be fully and
efficiently preserved and maintained.

 

 

SECTION 4.7. TAXES AND
OTHER LIABILITIES. Pay and discharge when due any and all indebtedness,
obligations, assessments and taxes, both real or personal, including without
limitation federal and state income taxes and state and local property taxes
and assessments, except (a) such as Borrower may in good faith contest or
as to which a bona fide dispute may arise, and (b) for which Borrower has
made provision, to Bank’s satisfaction, for eventual payment thereof in the
event Borrower is obligated to make such payment.

 

SECTION 4.8.
LITIGATION. Promptly give notice in writing to Bank of any litigation pending
or threatened against Borrower.

 

SECTION 4.9. FINANCIAL
CONDITION. Maintain Borrower’s financial condition as follows using generally
accepted accounting principles consistently applied and used consistently with
prior practices (except to the extent modified by the definitions herein):

 

(a) Minimum Net Profit
before taxes plus or minus non cash equity in income of the Digital Link II LLC
joint venture, plus any non-cash charges related to the legacy film projector
business of $1.00, measured quarterly, on a rolling 4-quarter basis.

 

SECTION 4.10. DEPOSIT
ACCOUNTS AND FOREIGN EXCHANGE. Within ninety (90) days of the closing of this
Agreement, maintain Borrower’s primary deposit operating accounts with Bank,
and conduct primarily all of Borrower’s foreign exchange business and
transactions through Bank.

 

SECTION 4.11. NOTICE TO
BANK. Promptly (but in no event more than five (5) days after the
occurrence of each such event or matter) give written notice to Bank in
reasonable detail of: (a) the occurrence of any Event of Default, or any
condition, event or act which with the giving of notice or the passage of time
or both would constitute an Event of Default; (b) any change in the name
or the organizational structure of Borrower; (c) the occurrence and nature
of any Reportable Event or Prohibited Transaction, each as defined in ERISA, or
any funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any uninsured or partially uninsured loss through liability or property damage,
or through fire, theft or any other cause affecting Borrower’s property.

 

ARTICLE V

NEGATIVE
COVENANTS

 

Borrower further covenants
that so long as Bank remains committed to extend credit to Borrower pursuant
hereto, or any liabilities (whether direct or contingent, liquidated or
unliquidated) of Borrower to Bank under any of the Loan Documents remain
outstanding, and until payment in full of all obligations of Borrower subject
hereto, Borrower will not without Bank’s prior written consent:

 

SECTION 5.1. USE OF
FUNDS. Use any of the proceeds of any credit extended hereunder except for the
purposes stated in Article I hereof.

 

SECTION 5.2. LEASE
EXPENDITURES. Incur operating lease expense in any fiscal year in an amount in
excess of $1,000,000.00.

 

SECTION 5.3. OTHER
INDEBTEDNESS. Create, incur, assume or permit to exist any indebtedness or
liabilities resulting from borrowings, loans or advances, whether 

 

 

secured or unsecured,
matured or unmatured, liquidated or unliquidated, joint or several, except (a) the
liabilities of Borrower to Bank, (b) indebtedness incurred to purchase the
property and equipment of Marcel Desrochers, Inc. in an amount not in
excess of $5,000,000.00, (c) purchase money indebtedness relating to the
acquisition of equipment in an amount not in excess of $1,000,000.00, (d) indebtedness
to other third parties unrelated to the indebtedness permitted under (b) or
(c) above that is in an aggregate amount at any one time not in excess of
$2,000,000.00.

 

SECTION 5.4. MERGER,
CONSOLIDATION, TRANSFER OF ASSETS. Merge into or consolidate with any other
entity; make any substantial change in the nature of Borrower’s business as
conducted as of the date hereof; acquire all or substantially all of the assets
of any other entity in a single transaction for a consideration in excess of
$7,500,000.00; nor sell, lease, transfer or otherwise dispose of all or a
substantial or material portion of Borrower’s assets except in the ordinary
course of its business.

 

SECTION 5.5.
GUARANTIES. Guarantee or become liable in any way as surety, endorser (other
than as endorser of negotiable instruments for deposit or collection in the
ordinary course of business), accommodation endorser or otherwise for, nor
pledge or hypothecate any assets of Borrower as security for, any liabilities
or obligations of any other person or entity, except (a) any of the
foregoing in favor of Bank, or (b) guaranties of indebtedness that do not
at any one time exceed in the aggregate $4,000,000.00.

 

SECTION 5.6. LOANS,
ADVANCES, INVESTMENTS. Make any loans or advances to or investments in any
person or entity, except any of the foregoing existing as of, and disclosed to
Bank prior to, the date hereof, and additional loans or advances to any third
party are prohibited in amounts not to exceed an aggregate of $1,000,000.00 per
year.

 

SECTION 5.7. DIVIDENDS,
DISTRIBUTIONS. Declare or pay any dividend or distribution either in cash,
stock or any other property on Borrower’s stock now or hereafter outstanding,
nor redeem, retire, repurchase or otherwise acquire any shares of any class of
Borrower’s stock now or hereafter outstanding, in an amount that is in the
aggregate in excess of $7,500,000.00 during any twelve month period, , and
Borrower shall provide to Bank, upon request, any documentation required by
Bank to substantiate the appropriateness of amounts paid or to be paid.

 

SECTION 5.8. PLEDGE OF
ASSETS. Mortgage, pledge, grant or permit to exist a security interest in, or
lien upon, all or any portion of Borrower’s assets now owned or hereafter
acquired, except (a) any of the foregoing in favor of Bank, (b) any
of the foregoing that is existing as of, and disclosed to Bank in writing prior
to the date hereof, (c) purchase money security interests securing
transactions permitted under Section 5.3 herein, and (d) security
interests securing non purchase money transactions where the indebtedness
secured does not in the aggregate exceed $2,000,000.00.

 

ARTICLE VI

EVENTS
OF DEFAULT

 

SECTION 6.1. The
occurrence of any of the following shall constitute an “Event of Default” under
this Agreement:

 

(a) Borrower shall fail
to pay when due any principal, interest, fees or other amounts payable under
any of the Loan Documents within five (5) days after the date that such
payment is due in accordance with the terms of any payment invoice relating to
such amounts that are due.

 

 

(b) Any financial
statement or certificate furnished to Bank in connection with, or any
representation or warranty made by Borrower or any other party under this
Agreement or any other Loan Document shall prove to be incorrect, false or
misleading in any material respect when furnished or made.

 

(c) Any default in the
performance of or compliance with any obligation, agreement or other provision
contained herein or in any other Loan Document (other than those specifically
described as an “Event of Default” in this section 6.1), and with respect to
any such default that by its nature can be cured, such default shall continue
for a period of thirty (30) days from its occurrence.

 

(d) Any default in the
payment or performance of any obligation, or any defined event of default,
under the terms of any contract, instrument or document (other than any of the
Loan Documents) pursuant to which Borrower, any guarantor hereunder or any
general partner or joint venturer in Borrower if a partnership or joint venture
(with each such guarantor, general partner and/or joint venturer referred to
herein as a “Third Party Obligor”) has incurred any debt or other liability to
any person or entity, including Bank.

 

(e) Borrower or any
Third Party Obligor shall become insolvent, or shall suffer or consent to or
apply for the appointment of a receiver, trustee, custodian or liquidator of
itself or any of its property, or shall generally fail to pay its debts as they
become due, or shall make a general assignment for the benefit of creditors;
Borrower or any Third Party Obligor shall file a voluntary petition in
bankruptcy, or seeking reorganization, in order to effect a plan or other
arrangement with creditors or any other relief under the Bankruptcy Reform Act,
Title 11 of the United States Code, as amended or recodified from time to time
(“Bankruptcy Code”), or under any state or federal law granting relief to
debtors, whether now or hereafter in effect; or Borrower or any Third Party
Obligor shall file an answer admitting the jurisdiction of the court and the
material allegations of any involuntary petition; or Borrower or any Third
Party Obligor shall be adjudicated a bankrupt, or an order for relief shall be
entered against Borrower or any Third Party Obligor by any court of competent
jurisdiction under the Bankruptcy Code or any other applicable state or federal
law relating to bankruptcy, reorganization or other relief for debtors.

 

(f) The filing of a
notice of judgment lien in a material amount against Borrower or any Third Party
Obligor; or the recording of any abstract of judgment in a material amount
against Borrower or any Third Party Obligor in any county in which Borrower or
such Third Party Obligor has an interest in real property; or the service of a
notice of levy and/or of a writ of attachment or execution, or other like
process, against the assets of Borrower or any Third Party Obligor for a
material amount; or the entry of a judgment for a material amount against
Borrower or any Third Party Obligor, unless Borrower is contesting the judgment
in good faith and has posted sufficient bond to prevent execution during the
pendency of any appeal; or any involuntary petition or proceeding pursuant to
the Bankruptcy Code or any other applicable state or federal law relating to
bankruptcy, reorganization or other relief for debtors is filed or commenced
against Borrower or any Third Party Obligor, and more than ten (10) days
have lapsed following the filing of the petition, unless Borrower elects to
contest the petition by filing a response with the bankruptcy court within that
time period, in which event Borrower shall not be deemed to be in default until
sixty (60) days following the filing of the petition, unless the petition is
dismissed before the end of that time period. For purposes of this Section 6.1(f),
a material amount shall mean $5,000,000.00.

 

(g) There shall exist
or occur any event or condition that Bank in good faith believes impairs, or is
substantially to impair, the prospect of payment or performance by 

 

 

Borrower, any Third Party
Obligor, or the general partner of either if such entity is a partnership, of
its obligations under any of the Loan Documents.

 

(h) The death or
incapacity of Borrower or any Third Party Obligor if an individual. The
dissolution or liquidation of Borrower or any Third Party Obligor if a
corporation, partnership, joint venture or other type of entity; or Borrower or
any such Third Party Obligor, or any of its directors, stockholders or members,
shall take action seeking to effect the dissolution or liquidation of Borrower
or such Third Party Obligor.

 

(i) Any change in
control of Borrower or any entity or combination of entities that directly or
indirectly control Borrower, with “control” defined as ownership of an
aggregate of fifty-one percent (51%) or more of the common stock, members’
equity or other ownership interest (other than a limited partnership interest).

 

SECTION 6.2. REMEDIES.
Upon the occurrence of any Event of Default: (a) all indebtedness of
Borrower under each of the Loan Documents, any term thereof to the contrary
notwithstanding, shall at Bank’s option and without notice become immediately
due and payable without presentment, demand, protest or notice of dishonor, all
of which are hereby expressly waived by Borrower; (b) the obligation, if
any, of Bank to extend any further credit under any of the Loan Documents shall
immediately cease and terminate; and (c) Bank shall have all rights,
powers and remedies available under each of the Loan Documents, or accorded by
law, including without limitation the right to resort to any or all security
for any credit subject hereto and to exercise any or all of the rights of a
beneficiary or secured party pursuant to applicable law. All rights, powers and
remedies of Bank may be exercised at any time by Bank and from time to time
after the occurrence of an Event of Default, are cumulative and not exclusive,
and shall be in addition to any other rights, powers or remedies provided by
law or equity.

 

ARTICLE VII

MISCELLANEOUS

 

SECTION 7.1. NO WAIVER.
No delay, failure or discontinuance of Bank in exercising any right, power or
remedy under any of the Loan Documents shall affect or operate as a waiver of
such right, power or remedy; nor shall any single or partial exercise of any
such right, power or remedy preclude, waive or otherwise affect any other or
further exercise thereof or the exercise of any other right, power or remedy.
Any waiver, permit, consent or approval of any kind by Bank of any breach of or
default under any of the Loan Documents must be in writing and shall be
effective only to the extent set forth in such writing.

 

SECTION 7.2. NOTICES.
All notices, requests and demands which any party is required or may desire to
give to any other party under any provision of this Agreement must be in
writing delivered to each party at the following address:

 

BORROWER:
BALLANTYNE STRONG, INC.

4350 McKinley Street

Omaha, NE 68112

Attention: Kevin Herrmann

 

BANK: WELLS FARGO BANK, NATIONAL ASSOCIATION

13625 California Street, Suite 200

Omaha, NE 68154-5246

 

 

or to such other address as
any party may designate by written notice to all other parties. Each such
notice, request and demand shall be deemed given or made as follows: (a) if
sent by hand delivery, upon delivery; (b) if sent by mail, upon the
earlier of the date of receipt or three (3) days after deposit in the U.S.
mail, first class and postage prepaid; and (c) if sent by telecopy, upon
receipt.

 

SECTION 7.3. COSTS,
EXPENSES AND ATTORNEYS’ FEES. Borrower shall pay to Bank immediately upon
demand the full amount of all payments, advances, charges, costs and expenses,
including reasonable attorneys’ fees (to include outside counsel fees and all
allocated costs of Bank’s in-house counsel), expended or incurred by Bank in
connection with (a) the negotiation and preparation of this Agreement and
the other Loan Documents, Bank’s continued administration hereof and thereof,
and the preparation of any amendments and waivers hereto and thereto, (b) the
enforcement of Bank’s rights and/or the collection of any amounts which become
due to Bank under any of the Loan Documents, and (c) the prosecution or
defense of any action in any way related to any of the Loan Documents,
including without limitation, any action for declaratory relief, whether
incurred at the trial or appellate level, in an arbitration proceeding or
otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to
Borrower or any other person or entity.

 

SECTION 7.4.
SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the heirs, executors, administrators, legal representatives, successors
and assigns of the parties; provided however, that Borrower may not assign or
transfer its interests or rights hereunder without Bank’s prior written
consent. Bank reserves the right to sell, assign, transfer, negotiate or grant
participations in all or any part of, or any interest in, Bank’s rights and
benefits under each of the Loan Documents. In connection therewith, Bank may
disclose all documents and information which Bank now has or may hereafter
acquire relating to any credit subject hereto, Borrower or its business

 

SECTION 7.5. ENTIRE
AGREEMENT; AMENDMENT. This Agreement and the other Loan Documents constitute
the entire agreement between Borrower and Bank with respect to each credit
subject hereto and supersede all prior negotiations, communications,
discussions and correspondence concerning the subject matter hereof. This
Agreement may be amended or modified only in writing signed by each party
hereto.

 

SECTION 7.6. NO THIRD
PARTY BENEFICIARIES. This Agreement is made and entered into for the sole
protection and benefit of the parties hereto and their respective permitted
successors and assigns, and no other person or entity shall be a third party
beneficiary of, or have any direct or indirect cause of action or claim in
connection with, this Agreement or any other of the Loan Documents to which it
is not a party.

 

SECTION 7.7. TIME. Time
is of the essence of each and every provision of this Agreement and each other
of the Loan Documents.

 

SECTION 7.8.
SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective 

 

 

only to the extent of such
prohibition or invalidity without invalidating the remainder of such provision
or any remaining provisions of this Agreement.

 

SECTION 7.9.
COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each of which when executed and delivered shall be deemed to be an original,
and all of which when taken together shall constitute one and the same
Agreement.

 

SECTION 7.10. GOVERNING
LAW. This Agreement shall be governed by and construed in accordance with the
laws of the State of Nebraska.

 

SECTION 7.11.
ARBITRATION.

 

(a) Arbitration.
The parties hereto agree, upon demand by any party, to submit to binding
arbitration all claims, disputes and controversies between or among them (and
their respective employees, officers, directors, attorneys, and other agents),
whether in tort, contract or otherwise in any way arising out of or relating to
(i) any credit subject hereto, or any of the Loan Documents, and their
negotiation, execution, collateralization, administration, repayment,
modification, extension, substitution, formation, inducement, enforcement,
default or termination; or (ii) requests for additional credit.

 

(b) Governing Rules.
Any arbitration proceeding will (i) proceed in a location in Nebraska
selected by the American Arbitration Association (“AAA”); (ii) be governed
by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding
any conflicting choice of law provision in any of the documents between the
parties; and (iii) be conducted by the AAA, or such other administrator as
the parties shall mutually agree upon, in accordance with the AAA’s commercial
dispute resolution procedures, unless the claim or counterclaim is at least
$1,000,000.00 exclusive of claimed interest, arbitration fees and costs in
which case the arbitration shall be conducted in accordance with the AAA’s
optional procedures for large, complex commercial disputes (the commercial
dispute resolution procedures or the optional procedures for large, complex
commercial disputes to be referred to herein, as applicable, as the “Rules”).
If there is any inconsistency between the terms hereof and the Rules, the terms
and procedures set forth herein shall control. Any party who fails or refuses
to submit to arbitration following a demand by any other party shall bear all
costs and expenses incurred by such other party in compelling arbitration of
any dispute. Nothing contained herein shall be deemed to be a waiver by any
party that is a bank of the protections afforded to it under 12 U.S.C. §91 or
any similar applicable state law.

 

(c) No
Waiver of Provisional Remedies, Self-Help and Foreclosure. The arbitration
requirement does not limit the right of any party to (i) foreclose against
real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or
repossession; or (iii) obtain provisional or ancillary remedies such as
replevin, injunctive relief, attachment or the appointment of a receiver,
before during or after the pendency of any arbitration proceeding. This
exclusion does not constitute a waiver of the right or obligation of any party
to submit any dispute to arbitration or reference hereunder, including those
arising from the exercise of the actions detailed in sections (i), (ii) and
(iii) of this paragraph.

 

(d) Arbitrator
Qualifications and Powers. Any arbitration proceeding in which the amount
in controversy is $5,000,000.00 or less will be decided by a single arbitrator
selected according to the Rules, and who shall not render an award of greater
than $5,000,000.00. Any dispute in which the amount in controversy exceeds
$5,000,000.00 shall be decided by majority vote of a panel of three
arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations. The 

 

 

arbitrator will be a neutral
attorney licensed in the State of Nebraska or a neutral retired judge of the
state or federal judiciary of Nebraska, in either case with a minimum of ten
years experience in the substantive law applicable to the subject matter of the
dispute to be arbitrated. The arbitrator will determine whether or not an issue
is arbitratable and will give effect to the statutes of limitation in
determining any claim. In any arbitration proceeding the arbitrator will decide
(by documents only or with a hearing at the arbitrator’s discretion) any
pre-hearing motions which are similar to motions to dismiss for failure to
state a claim or motions for summary adjudication. The arbitrator shall resolve
all disputes in accordance with the substantive law of Nebraska and may grant
any remedy or relief that a court of such state could order or grant within the
scope hereof and such ancillary relief as is necessary to make effective any
award. The arbitrator shall also have the power to award recovery of all costs
and fees, to impose sanctions and to take such other action as the arbitrator
deems necessary to the same extent a judge could pursuant to the Federal Rules of
Civil Procedure, the Nebraska Rules of Civil Procedure or other applicable
law. Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction. The institution and maintenance of an action for
judicial relief or pursuit of a provisional or ancillary remedy shall not
constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration if any other party contests such
action for judicial relief.

 

(e) Discovery.
In any arbitration proceeding, discovery will be permitted in accordance with
the Rules. All discovery shall be expressly limited to matters directly
relevant to the dispute being arbitrated and must be completed no later than 20
days before the hearing date. Any requests for an extension of the discovery
periods, or any discovery disputes, will be subject to final determination by
the arbitrator upon a showing that the request for discovery is essential for
the party’s presentation and that no alternative means for obtaining
information is available.

 

(f) Class Proceedings
and Consolidations. No party hereto shall be entitled to join or
consolidate disputes by or against others in any arbitration, except parties
who have executed any Loan Document, or to include in any arbitration any
dispute as a representative or member of a class, or to act in any arbitration
in the interest of the general public or in a private attorney general
capacity.

 

(g) Payment Of
Arbitration Costs And Fees. The
arbitrator shall award all costs and expenses of the arbitration proceeding.

 

(h) Miscellaneous.
To the maximum extent practicable, the AAA, the arbitrators and the parties
shall take all action required to conclude any arbitration proceeding within
180 days of the filing of the dispute with the AAA. No arbitrator or other
party to an arbitration proceeding may disclose the existence, content or
results thereof, except for disclosures of information by a party required in
the ordinary course of its business or by applicable law or regulation. If more
than one agreement for arbitration by or between the parties potentially
applies to a dispute, the arbitration provision most directly related to the
Loan Documents or the subject matter of the dispute shall control. This
arbitration provision shall survive termination, amendment or expiration of any
of the Loan Documents or any relationship between the parties.

 

A CREDIT AGREEMENT MUST BE
IN WRITING TO BE ENFORCEABLE UNDER NEBRASKA LAW. TO PROTECT THE PARTIES FROM
ANY MISUNDERSTANDINGS OR DISAPPOINTMENTS, ANY CONTRACT, PROMISE, UNDERTAKING OR
OFFER TO FOREBEAR REPAYMENT OF MONEY OR TO MAKE ANY OTHER FINANCIAL
ACCOMMODATION IN CONNECTION WITH THIS LOAN OF MONEY OR GRANT OR EXTENSION OF
CREDIT, OR ANY AMENDMENT OF, CANCELLATION OF, WAIVER 

 

 

OF, OR SUBSTITUTION FOR ANY
OR ALL OF THE TERMS OR PROVISIONS OF ANY INSTRUMENT OR DOCUMENT EXECUTED IN
CONNECTION WITH THIS LOAN OF MONEY OR GRANT OR EXTENSION OF CREDIT, MUST BE IN
WRITING TO BE EFFECTIVE.

 

IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be executed as of the day and year
first written above.

 

WELLS FARGO BANK, NATIONAL
ASSOCIATION

BALLANTYNE STRONG, INC.

 

	
  By:

  	
  /s/ John Wilmers

  	
   

  	
  By:

  	
  /s/ Timothy P. Sullivan

  
	
  John
  Willmers, President

  	
   

  	
  Timothy P. Sullivan, RVPExhibit 4.2

 

REVOLVING LINE OF CREDIT NOTE

 

	
  $20,000,000.00

  	
   

  	
  Omaha, Nebraska

  

June 30, 2010

 

FOR VALUE RECEIVED, the
undersigned BALLANTYNE STRONG, INC. (“Borrower”) promises to pay to the
order of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”) at its office at 13625
California Street, Suite 200, Omaha, Nebraska 68154, or at such other
place as the holder hereof may designate, in lawful money of the United States
of America and in immediately available funds, the principal sum of Twenty
Million Dollars ($20,000,000.00), or so much thereof as may be advanced and be
outstanding, with interest thereon, to be computed on each advance from the
date of its disbursement as set forth herein.

 

DEFINITIONS:

 

As used herein, the
following terms shall have the meanings set forth after each, and any other
term defined in this Note shall have the meaning set forth at the place
defined:

 

(a) “Business Day”
means any day except a Saturday, Sunday or any other day on which commercial
banks in Nebraska are authorized or required by law to close.

 

(b) “Daily One Month
LIBOR” means, for any day, the rate of interest equal to LIBOR then in effect
for delivery for a one (1) month period.

 

(c) “LIBOR” means the
rate per annum (rounded upward, if necessary, to the nearest whole 1/8 of 1%)
and determined pursuant to the following formula:

 

	
  LIBOR =

  	
   

  	
  Base LIBOR

  
	
   

  	
   

  	
  100% - LIBOR Reserve Percentage

  

 

(i) “Base LIBOR” means
the rate per annum for United States dollar deposits quoted by Bank as the
Inter-Bank Market Offered Rate, with the understanding that such rate is quoted
by Bank for the purpose of calculating effective rates of interest for loans
making reference thereto, for delivery of funds for one (1) month in an
amount equal to the outstanding principal balance of this Note. Borrower
understands and agrees that Bank may base its quotation of the Inter-Bank
Market Offered Rate upon such offers or other market indicators of the
Inter-Bank Market as Bank in its discretion deems appropriate including, but
not limited to, the rate offered for U.S. dollar deposits on the London
Inter-Bank Market.

 

(ii) “LIBOR Reserve
Percentage” means the reserve percentage prescribed by the Board of Governors
of the Federal Reserve System (or any successor) for “Eurocurrency Liabilities”
(as defined in Regulation D of the Federal Reserve Board, as amended), adjusted
by Bank for expected changes in such reserve percentage during the term of this
Note.

 

INTEREST:

 

(a) Interest.
The outstanding principal balance of this Note shall bear interest (computed on
the basis of a 360-day year, actual days elapsed) at a fluctuating rate per
annum determined by Bank to be one and one quarter percent (1.25%) above Daily
One Month LIBOR in effect from time to time. Each change in the rate of
interest hereunder shall become effective on each Business Day a change in 

 

 

Daily One Month LIBOR is
announced within Bank. Bank is hereby authorized to note the date and interest
rate applicable to this Note and any payments made thereon on Bank’s books and
records (either manually or by electronic entry) and/or on any schedule
attached to this Note, which notations shall be prima facie evidence of the
accuracy of the information noted.

 

(b) Taxes and
Regulatory Costs. Borrower shall pay to Bank immediately upon demand, in
addition to any other amounts due or to become due hereunder, any and all (i) withholdings,
interest equalization taxes, stamp taxes or other taxes (except income and
franchise taxes) imposed by any domestic or foreign governmental authority and
related in any manner to LIBOR, and (ii) future, supplemental, emergency
or other changes in the LIBOR Reserve Percentage, assessment rates imposed by
the Federal Deposit Insurance Corporation, or similar requirements or costs
imposed by any domestic or foreign governmental authority or resulting from
compliance by Bank with any request or directive (whether or not having the
force of law) from any central bank or other governmental authority and related
in any manner to LIBOR to the extent they are not included in the calculation
of LIBOR. In determining which of the foregoing are attributable to any LIBOR
option available to Borrower hereunder, any reasonable allocation made by Bank
among its operations shall be conclusive and binding upon Borrower.

 

(c) Payment of Interest.
Interest accrued on this Note shall be payable on the first day of each month,
commencing August 1, 2010.

 

(d) Default Interest.
From and after the maturity date of this Note, or such earlier date as all
principal owing hereunder becomes due and payable by acceleration or otherwise,
or at Bank’s option upon the occurrence, and during the continuance of an Event
of Default, the outstanding principal balance of this Note shall bear interest
at an increased rate per annum (computed on the basis of a 360-day year, actual
days elapsed) equal to four percent (4%) above the rate of interest from time
to time applicable to this Note.

 

BORROWING AND REPAYMENT:

 

(a) Borrowing and
Repayment. Borrower may from time to time during the term of this Note
borrow, partially or wholly repay its outstanding borrowings, and reborrow,
subject to all of the limitations, terms and conditions of this Note and of any
document executed in connection with or governing this Note; provided however,
that the total outstanding borrowings under this Note shall not at any time
exceed the principal amount stated above. The unpaid principal balance of this
obligation at any time shall be the total amounts advanced hereunder by the
holder hereof less the amount of principal payments made hereon by or for
Borrower, which balance may be endorsed hereon from time to time by the holder.
The outstanding principal balance of this Note shall be due and payable in full
on June 30, 2011.

 

(b) Advances.
Advances hereunder, to the total amount of the principal sum stated above, may
be made by the holder at the oral or written request of (i)                                           
or
                                                ,
any one acting alone, who are authorized to request advances and direct the
disposition of any advances until written notice of the revocation of such
authority is received by the holder at the office designated above, or (ii) any
person, with respect to advances deposited to the credit of any deposit account
of Borrower, which advances, when so deposited, shall be conclusively presumed
to have been made to or for the benefit of Borrower regardless of 

 

 

the fact that persons other
than those authorized to request advances may have authority to draw against
such account. The holder shall have no obligation to determine whether any
person requesting an advance is or has been authorized by Borrower.

 

(c) Application of
Payments. Each payment made on this Note shall be credited first, to any
interest then due and second, to the outstanding principal balance hereof.

 

EVENTS OF DEFAULT:

 

This Note is made pursuant
to and is subject to the terms and conditions of that certain Credit Agreement
between Borrower and Bank dated as of June 30, 2010, as amended from time
to time (the “Credit Agreement”). Any default in the payment or performance of
any obligation under this Note, or any defined event of default under the
Credit Agreement, shall constitute an “Event of Default” under this Note.

 

MISCELLANEOUS:

 

(a) Remedies.
Upon the occurrence of any Event of Default, the holder of this Note, at the
holder’s option, may declare all sums of principal and interest outstanding
hereunder to be immediately due and payable without presentment, demand, notice
of nonperformance, notice of protest, protest or notice of dishonor, all of
which are expressly waived by Borrower, and the obligation, if any, of the
holder to extend any further credit hereunder shall immediately cease and
terminate. Borrower shall pay to the holder immediately upon demand the full
amount of all payments, advances, charges, costs and expenses, including
reasonable attorneys’ fees (to include outside counsel fees and all allocated
costs of the holder’s in-house counsel), expended or incurred by the holder in
connection with the enforcement of the holder’s rights and/or the collection of
any amounts which become due to the holder under this Note, and the prosecution
or defense of any action in any way related to this Note, including without
limitation, any action for declaratory relief, whether incurred at the trial or
appellate level, in an arbitration proceeding or otherwise, and including any
of the foregoing incurred in connection with any bankruptcy proceeding
(including without limitation, any adversary proceeding, contested matter or
motion brought by Bank or any other person) relating to Borrower or any other
person or entity.

 

(b) Obligations
Joint and Several. Should more than one person or entity sign this Note as
a Borrower, the obligations of each such Borrower shall be joint and several.

 

(c) Governing Law.
This Note shall be governed by and construed in accordance with the laws of the
State of Nebraska.

 

IN WITNESS WHEREOF, the
undersigned has executed this Note as of the date first written above.

 

 

	
  BALLANTYNE
  STRONG, INC.

  	
   

  
	
   

  	
   

  
	
  By: 

  	
  /s/ John Wilmers

  	
   

  
	
  John
  Willmers, President

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00175-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00175-of-00352.parquet"}]]