Video Display (VIDE)

Note 9. Lines of Credit

The Company maintains a $27.5 million credit facility, executed in November 2004, with a bank, collateralized by equipment, inventories and accounts receivable of the Company. The interest rate on this line is a floating LIBOR rate based on a ratio of debt to EBITDA, as defined in the loan documents. As of February 28, 2006, the outstanding balance of this line of credit was $14.1 million and the available amount for borrowing was $13.0 million, including the impact of $400,000 in outstanding letters of credit. The line of credit agreement contains covenants, including requirements related to tangible cash flow, ratio of debt to cash flow and asset coverage. Additionally, the bank requires that any contemplated acquisitions be accretive. The Company was not in compliance with the consolidated Fixed Charge Coverage Ratio and the consolidated Senior Funded Debt to EBITDA ratio covenants at February 28, 2006. To provide additional flexibility in funding for working capital requirements, and to cure the covenant violations existing under this line, on June 9, 2006 the Company negotiated a new line of credit with a syndicate of two banks as discussed in Note. 21 Subsequent Event.

Additionally, in April 2005, the Company converted a $2.8 million short term line of credit (collateralized by assets of Fox International, Inc.) with a bank to a $3.5 million line of credit with another bank. (The $2.8 million short term line of credit repaid during Fiscal 2006 replaced a term loan facility with a bank, also collateralized by assets of Fox International, Inc., executed on July 31, 2004.) As part of the new financing, the lender paid off the balance of the short term line of credit and a mortgage secured by the land and building of Fox International, Inc. The interest rate on this line is a floating LIBOR rate based on a ratio of debt to EBITDA, as defined in the loan documents. As of February 28, 2006, the outstanding balance of this line of credit was $3.5 million with no remaining borrowing availability. The line of credit agreement contains covenants, including requirements related to tangible cash flow, ratio of debt to cash flow and asset coverage. Additionally, the bank requires that any contemplated acquisitions be accretive. The Company was not in compliance with the consolidated Fixed Charge Coverage Ratio and the consolidated Senior Funded Debt to EBITDA ratio covenants at February 28, 2006. To provide additional flexibility in funding for working capital requirements, and to cure the covenant violations existing under this line, on June 9, 2006 the Company negotiated a new line of credit with a syndicate of two banks as discussed in Note. 21 Subsequent Event.

Prior to repayment in November 2004, in conjunction with the execution of the current $27.5 million line of credit, the Company had a $12.0 million credit facility with a bank. The interest rate on the line of credit was a floating LIBOR rate based on a ratio of debt to EBITDA, as defined. The weighted average interest rate during the nine months ended November 30, 2004 and the year ended February 29, 2004 was 3.84% and 3.70%. The average amount and maximum amount outstanding were $8.8 million and $9.6

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Video Display Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

million, respectively, during the nine months ended November 30, 2004, and $6.8 million and $8.8 million, respectively, for the fiscal year ended February 29, 2004. Borrowings under the line of credit were limited by eligible accounts receivable, inventory and real estate, as defined, and includes a commitment fee of 0.25% for the unused portion.