TERM LOAN AND REVOLVER

6 Months Ended

Jun. 30, 2011

5.	TERM LOAN AND REVOLVER

The Company has a $52.5 million term loan and a $20.0 million revolving line of credit through a loan and security agreement with Silicon Valley Bank and JPMorgan Chase Bank. The term loan is payable in 20 quarterly installments of principal and the payments commenced on October 1, 2007. Interest is paid monthly and is based upon the prime rate of interest plus 0.5%. Under the terms of the term loan, when the total funded debt drops below earnings before income tax expense, interest expense, and depreciation and amortization expense, or EBITDA, the interest rate will decline by 0.5%. The interest rate applicable to the term loan as of June 30, 2011 was 3.75%. The term loan is secured by certain of the Company’s assets, a pledge of the Company’s membership interests in the Company’s wholly-owned subsidiary GAIN Holdings, LLC and a guarantee by GAIN Holdings, LLC. The term loan maturity date is July 1, 2012. Interest for the revolving line of credit accrues at a floating rate per annum equal to the prime rate of interest plus 0.5%. The amount of availability under the revolving line of credit is determined by subtracting from $20.0 million the amount outstanding under the revolving line of credit. The maturity date of the revolving line of credit was June 16, 2011.

On March 29, 2011, the Company and Lenders entered into a seventh loan modification agreement which, among other things, changed the required debt service coverage ratio to a minimum of 3.0 to 1.0 from 2.0 to 1.0. On June 16, 2011, the Company entered into an eighth loan modification agreement related to its existing loan and security agreement with Silicon Valley Bank and JPMorgan Chase Bank. The loan modification extended the maturity date of the revolving line of credit from June 16, 2011 to August 15, 2011. No other changes were made to the terms of the revolving line of credit.

As of June 30, 2011, the Company had $13.1 million outstanding under the term loan and no amounts were outstanding under the revolving line of credit. In accordance with the provisions of the Company’s term loan and revolving line of credit as outlined in the loan and security agreement and subsequent modifications, the Company is required to adhere to various financial, regulatory, operational and reporting covenants. As of June 30, 2011 and during the entire term of the loan and security agreement, the Company was and has been in compliance with such covenants.

The carrying amount of the Company’s term loan approximates fair value. As of June 30, 2011, the following amounts were due for future maturities of the notes (amounts in thousands):


Years Ended December 31:
2011	$	5,250
2012		7,875

	$	13,125

Loan fees were capitalized to deferred finance costs and are being amortized over the life of the loan. Deferred loan costs amortized to interest expense were immaterial for the three months and six months ended June 30, 2011 and 2010, respectively. The Company had deferred financing costs of $0.1 million at June 30, 2011 and December 31, 2010, which were classified within Other assets on the Condensed Consolidated Balance Sheet.

- Definition

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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