NOTE 6—DEBT

SHORT-TERM

The Company entered into a Loan and Security Agreement in October 2010, as amended (“Credit Agreement”), with Capital One Business Credit Corp., formerly known as Capital One Leverage Finance Corporation, as agent and lender (“COBC”). The Credit Agreement expires December 19, 2017, (the “Maturity Date”). The Credit Agreement provides for a Revolver Loan (“Revolver”), borrowings under which are secured by the Company’s accounts receivable, mortgages on its real property located in Cranberry, PA, Jupiter, FL and Tampa, FL (“Real Property”), inventory and equipment. P&F and certain of its subsidiaries are borrowers under the Credit Agreement, and their obligations are cross-guaranteed by certain other subsidiaries. Revolver borrowings bear interest at either LIBOR (London InterBank Offered Rate) or the Base Rate, as defined in the Credit Agreement (“Base Rate”), plus the Applicable Margin (the “Applicable Margin”), as defined in the Credit Agreement. The interest rate, either LIBOR or Base Rate, which is added to the Applicable Margin, is at the option of the Company, subject to limitations on the number of LIBOR borrowings.

Contemporaneously with the ATSCO acquisition described in Note 2, the Company, on August 13, 2014, entered into an Amended and Restated Loan and Security Agreement, (the “Restated Loan Agreement”), with COBC. The Restated Loan Agreement, among other things, amended the Credit Agreement by: (1) increasing the total amount of the credit facility from $29,423,000 to $33,657,000, (2) increasing the Revolver from $20,000,000 to $22,000,000, (3) creating a new Term Loan, as defined in the Restated Loan Agreement (“Term Loan B”), and (4) re-designating as “Term Loan A”, the previously existing outstanding Term Loan, which relates primarily to the Company’s real property. In addition, the Restated Loan Agreement also reset certain financial covenants.

At December 31, 2014 and December 31, 2013, the balance of Revolver borrowings outstanding was $11,817,000 and $360,000, respectively. The primary cause for the increase in the Company’s Revolver balance at December 31, 2014, was due to the funding necessary to complete the acquisitions of ETI, UAT and ATSCO that occurred during the third quarter of 2014. See Note 2, for further discussion on the use of funds in connection with these acquisitions. Applicable Margins added to Revolver borrowings at LIBOR and the Base Rate were 2.25% and 1.25%, respectively at December 31, 2014 and were 1.75% and 0.75%, respectively, at December 31, 2013.

	LIBOR	Base Rate

Range of Applicable Margins added to Revolver borrowings during:
2014	1.50 points to 2.25 points	0.50 points to 1.25 points

2013	1.75 points to 2.25 points	0.75 points to 1.25 points

The Company is required to provide COBC with, among other things, monthly financial statements, monthly borrowing base certificates and certificates of compliance with various financial covenants. The Company believes it is in compliance with all covenants under the Restated Loan Agreement. As part of the Restated Loan Agreement, if an event of default occurs, the interest rate would increase by two percent per annum during the period of default, in addition to other remedies provided to COBC.

LONG-TERM

The Restated Loan Agreement also provides for Term Loan A, which is secured by mortgages on the Real Property, accounts receivable, inventory and equipment. Term Loan A borrowings can be at either LIBOR, or at the Base Rate, as defined in the Restated Loan Agreement, or a combination of the two plus the Applicable Margins, which for LIBOR borrowings at December 31, 2014 and December 31, 2013 was 3.0%. The Applicable Margins for borrowings at the Base rate was 2.0% at December 31, 2014 and December 31, 2013.

Additionally, the Restated Loan Agreement provides for a Term Loan B, pursuant to which the Company borrowed the maximum principal amount of $3,000,000 as part of the ATSCO acquisition. This Term Loan B is to be repaid in 36 consecutive monthly payments of $83,000, with an additional mandatory repayment each year equal to 50% of the Company’s Excess Cash Flow (as defined in the Restated Loan Agreement) for such year, if any. Term Loan B borrowings incur interest at LIBOR or the Base Rate plus the Applicable Margins, which was 3.25% and 2.25% at December 31, 2014. As the result of computing the Excess Cash Flow for the year 2014, the Company determined that, in April 2015, it will be required to repay the balance of Term Loan B, which is estimated to be approximately $2.4 million. Accordingly, the approximate payment of $2.4 million is included in “current maturities” below. The effect of this repayment in April 2015 will be to eliminate Term Loan B and increase the Revolver a like amount.

The Company borrowed $380,000 and $519,000 in March 2012 and September 2012, respectively, as loans primarily for machinery and equipment (“Capex Term Loans”). Applicable Margins added to these Capex Term Loans at both December 31, 2014 and December 31, 2013 were 3.00% and 2.00%, for borrowings at LIBOR and the Base Rate, respectively.

Long-term debt:

	December 31, 2014		December 31, 2013
Term Loan A - $23,000 payable monthly January 2013 through December 2017, balance due December 19, 2017.	$	6,440,000	$	6,720,000
Term Loan B - $83,000 payable monthly September 2014 through March 2015.		2,667,000		—
Capex Term Loan - $6,000 payable monthly May 2012 through April 2017.		178,000		254,000
Capex Term Loan - $9,000 payable monthly October 2012 through September 2017.		285,000		389,000
Other		90,000		—
		9,660,000		7,363,000
Less current maturities		3,167,000		460,000
	$	6,493,000	$	6,903,000

The aggregate amounts of long-term debt scheduled to mature in each of the years ended December 31, are approximately as follows: 2015—$3,167,000; 2016—$493,000 and 2017—$6,000,000. Interest expense on long-term debt was approximately $274,000 and $254,000, respectively, for the years ended December 31, 2014 and 2013.