NOTE E — DEBT

Revolving Credit Facility

The Company had a $125.0 million secured credit agreement (the “Revolving Credit Facility”), maturing on June 9, 2015, with a bank group led by JPMorgan Chase Bank, N.A. On October 28, 2011, the Company amended the Revolving Credit Facility to increase the commitment of the lenders to $150.0 million and to, among other things, (i) increase the borrowing base limit for eligible trademarks to $25.0 million, (ii) revise the pricing grid margins for Alternative Base Rate loans to 1.0% to 1.75% and for Adjusted LIBO Rate and Overnight LIBO Rate loans to 2.0% to 2.75%, (iii) permit borrowings in multi-currencies, primarily U.S Dollars, Euros and Pounds Sterling, (iv) extend, subject to certain conditions, the maturity date to October 28, 2016, (v) increase the expansion option which permits the Company, subject to certain conditions including the consent of the Term Loan lender, to increase the maximum borrowing up to $200.0 million, (vi) revise EBITDA (as defined) to provide for the add back of acquisition related expenses, (vii) limit the domestic and foreign borrowing base, (viii) increase limitations on foreign debt and (ix) increase the limit for investments.

Borrowings under the Revolving Credit Facility are secured by a first lien priority security interest in all of the assets of the Company and its domestic subsidiaries, including a pledge of the Company’s outstanding shares of stock in its subsidiaries (limited, in the case of its foreign subsidiaries, to 65.0% of the Company’s equity interests), except regarding the Company’s shares in its wholly-owned subsidiary LTB de Mexico, S.A. de C.V. (“LTB de Mexico”). Availability under the Revolving Credit Facility is subject to a borrowing base calculation equal to the sum of (i) 85.0% of eligible domestic accounts receivable, (ii) 85.0% of the net orderly liquidation value of eligible domestic inventory and (iii) the lesser of 50.0% of the orderly liquidation value of eligible trademarks and $25.0 million less reserves. The borrowing base is also subject to reserves that may be established by the administrative agent in its permitted discretion.

Borrowings under the Revolving Credit Facility bear interest, at the Company’s option, at one of the following rates: (i) the Alternate Base Rate, defined as the greater of the Prime Rate, Federal Funds Rate plus 0.5% or the Adjusted LIBOR rate plus 1.0%, plus a margin of 1.0% (1.25% prior to amendment) to 1.75%, or (ii) the Eurodollar Rate, defined as the Adjusted LIBOR Rate plus a margin of 2.0% (2.25% prior to amendment) to 2.75%. The respective margins are based upon availability. Interest rates on outstanding borrowings at December 31, 2011 ranged from 2.75% to 4.50%. In addition, the Company pays a commitment fee of 0.375% to 0.50% (0.50% prior to amendment) on the unused portion of the Revolving Credit Facility.

The Revolving Credit Facility provides for customary restrictions and events of default. Restrictions include limitations on additional indebtedness, acquisitions, investments and payment of dividends, among others. Furthermore, if availability under the Revolving Credit Facility is less than $17.5 million, the Company will be required to maintain a minimum fixed charge coverage ratio of 1.10 to 1.00, which covenant would remain effective until availability is at least $20.0 million for a period of three consecutive months.

At December 31, 2011, the Company had $1.4 million of open letters of credit and $57.6 million of borrowings outstanding under the Revolving Credit Facility. Availability under the Revolving Credit Facility was approximately 45% of the total loan commitment at December 31, 2011. The interest rate on the outstanding borrowings at December 31, 2011 ranged from 2.5% to 4.5%.

Pursuant to the provisions of ASC Topic No. 470-10, Short-term Obligations Expected to be Refinanced, at December 31, 2011 and 2010, the Company classified a portion of the Revolving Credit Facility as a current liability based on the Company’s intent and ability to repay the loan from cash flows from operations which are expected to occur within the year. Repayments and borrowings under the facility can vary significantly from planned levels based on cash flow needs and general economic conditions. The Company expects that it will continue to borrow and repay funds, subject to availability, under the facility based on working capital needs.

The loss on early retirement of debt in the accompanying consolidated statement of operations includes approximately $408,000 in 2010 for the write-off of unamortized debt issuance costs related to the repayment of amounts under the prior credit agreement.

Term Loan

The Company has a $40.0 million second lien credit agreement (the “Term Loan”), which matures on June 8, 2015, with Citibank, N.A.

The Term Loan bears interest, at the Company’s option, at one of the following rates: (i) the Alternate Base Rate, defined as the greater of the corporate rate published by the lender and the Federal Funds Rate plus 0.50% provided that such calculated rate is a minimum of 2.50%, plus a margin of 7.50%, or (ii) the Adjusted LIBOR rate which shall be a minimum of 1.50%, plus a margin of 8.50%. The interest rate on the outstanding borrowings at December 31, 2011 was 10.0%.

On October 28, 2011, the Company amended the Term Loan to, among other things, (i) revise Permitted Acquisitions (as defined), for which the lender gives prior written consent, to (a) allow Permitted Non-Control Acquisitions and (b) reduce the limit on Permitted Acquisitions, (ii) increase the minimum consolidated EBITDA covenant for the trailing twelve month periods ending March 31, 2012, June 30, 2012, September 30, 2012 and December 31, 2012 and thereafter to $31.0 million, $31.0 million, $33.0 million and $34.0 million, respectively, (iii) increase the limit for other investments, (iv) increase limitations on foreign subsidiary debt, (v) revise EBITDA (as defined) to provide for the add back of acquisition related expenses, and (vi) revise the limitation on indebtedness incurred to finance acquisitions.

The Term Loan requires the Company to have EBITDA, as defined, of not less than $30.0 million for the trailing four fiscal quarters through December 31, 2011 and limits capital expenditures to $7.5 million for 2011. The Company was in compliance with the financial covenants of the Term Loan and Revolving Credit Facility at December 31, 2011.

4.75% Convertible Senior Notes

At December 31, 2010, the Company had outstanding $24.1 million aggregate principal amount of the Notes due July 15, 2011. Pursuant to the provisions of ASC Topic No. 470-10, the Company had classified the Notes as a long-term liability based on the Company’s intent and ability to refinance the Notes using the proceeds from the Revolving Credit Facility.

In June 2010, the Company purchased $50.9 million principal amount of the Notes in privately negotiated transactions for $51.0 million, reducing the aggregate principal amount to $24.1 million. Pursuant to the provisions of ASC Topic No. 470-20, Debt with Conversion and Other Options, the Company allocated the consideration paid to repurchase the Notes to the debt and equity components of the Notes based on the fair value of the debt component on the date the Company repurchased the Notes. The loss on early retirement of debt in the accompanying consolidated statement of operations includes approximately $356,000 in 2010 for the write-off of unamortized debt issuance costs related to notes which were repurchased. In addition, the Company recorded a reduction of additional paid in capital of $2.4 million representing the portion of the consideration paid that was allocated to the equity component of the Notes.

On July 15, 2011, the Company retired the $24.1 million aggregate principle amount of the Notes then outstanding with borrowings from the Revolving Credit Facility.

Effective January 1, 2009, the Company adopted the provisions of ASC Topic No. 470-20 on a retrospective basis as though the provisions were in effect at the date of issuance of the Notes in June 2006. As a result of the adoption, on January 1, 2009 the Company reclassified $7.9 million (net of taxes of $2.8 million) of the principal of the Notes to additional paid-in-capital and recorded a debt discount of $12.8 million that was amortized to interest expense over the remaining term of the Notes.

At December 31, 2010, the carrying amounts of the debt and equity components of the Notes were as follows (in thousands):


	December 31, 2010
Carrying amount of equity component, net of tax	$	8,262

Principal amount of debt component	$	24,100
Unamortized discount		(543	)

Carrying amount of debt component	$	23,557