NOTE 6 - NOTES PAYABLE AND LONG-TERM DEBT

On March 29, 2017, the Company entered into to a credit agreement with a commercial bank (“Credit Agreement”). The Credit Agreement, which replaced the Company’s prior credit agreement which was executed effective April 9, 2015 with another commercial bank, provides for a $14.0 million line of credit facility, the proceeds of which may be utilized as follows: (i) $6.0 million for working capital, letters of credit (up to $2.0 million) and general corporate purposes and (ii) $8.0 million for acquisitions. Indebtedness under the Credit Agreement is secured by the Company’s accounts receivable and inventory with advances outstanding under the working capital portion of the credit facility at any time limited to a Borrowing Base (as defined in the Credit Agreement) equal to 80% of eligible accounts receivable plus 50% of eligible inventory. Advances under the acquisition portion of the credit facility are limited to 75% of the purchase price of an acquired company and convert to a five-year term note. Borrowings bear interest at the greater of (a) zero percent or (b) the One Month ICE LIBOR plus a LIBOR Margin of 2.5%. The LIBOR Margin may increase to as high as 3.0% after September 30, 2017 depending on the Company’s cash flow leverage ratio. The interest rate as of March 31, 2017 was approximately 3.48%. The Company pays a fee of 0.25% per annum on the unused amount of the line of credit.

At March 31, 2017, long-term debt consisted of the following (in thousands):

Non-interest bearing, unsecured note payable assumed in acquisition (See Note 13), monthly payments of $7; maturing September 2018.	$	125

Term loan, bearing interest at 3.48%, monthly payments of $43; maturing March 2022.		2,600

Total long-term debt		2,725
Less: current portion		604
Long-term debt, net of current portion	$	2,121

The Company’s availability under its credit facilities is currently approximately $11.4 million ($6.0 million for the working capital and $5.4 million for the acquisitions).

The Credit Agreement contains affirmative and negative covenants that, among other things, require the Company to maintain, beginning with the twelve-month period ending September 30, 2017, a maximum cash flow leverage ratio of no more than 3.5 to 1.0 and a minimum debt service coverage ratio of not less than 1.15 to 1.00. The maximum cash flow leverage ratio decreases to 3.25 to 1.0 on December 31, 2017 and to 3.0 to 1.0 on March 31, 2018. The Credit Agreement, which expires on March 29, 2019, also contains customary events of default which, if uncured, may terminate the Credit Agreement and require immediate repayment of all indebtedness to the lenders.

Payments due on long-term debt during each of the five years subsequent to March 31, 2017 are as follows (in thousands):

Twelve Months Ending March 31,
2018	$	604
2019		561
2020		520
2021		520
2022		520
	$	2,725

The Prior Credit Agreement, which was effective through March 29, 2017, provided for a $9.0 million line of credit facility with a maturity date of April 9, 2018. No amounts related to the Prior Credit Agreement were outstanding as of March 31, 2017 other than letters of credit of approximately $0.3 million, which are in the process of being released.