Long Term Obligations

6 Months Ended

Jun. 30, 2011

Long Term Obligations

Long Term Obligations

4.

Long-term Obligations. Our revolving bank line of credit provides that we may borrow up to 85% of eligible accounts receivable and up to 55% of eligible inventory, but in no event more than $25,000,000 at any one time. Interest on our borrowings under the revolving line of credit is payable at the bank's prime rate plus 1.25% or, at our option (but subject to certain limitations), at LIBOR (which was 0.18% at June 30, 2011) plus 3.00% per annum. The maturity date of the bank line of credit is July 10, 2014.

At June 30, 2011, outstanding bank borrowings totaled $12.7 million. Our bank borrowings are secured by substantially all of our assets, and rank senior in priority to other indebtedness of the Company.

Our revolving bank line of credit agreement, as amended, contains a single financial covenant, which requires us to achieve a fixed charge coverage ratio of at least 1.1 to 1.0 for successive rolling 12 month periods ending on the last day of each fiscal quarter. Pursuant to an amendment to the credit line agreement entered into with the bank effective July 27, 2011, the 12 months ended September 30, 2011, will be the first of those rolling 12-month periods to which that covenant will apply.

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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