NOTE 10 – LONG-TERM DEBT

Long-term debt consisted of the following at March 31, 2016 and December 31, 2015 (in thousands):

	March 31, 2016			December 31, 2015

Line of credit	$	198,139		$	172,147
Term loan		162,500			175,000
Promissory note payable in monthly installments at 2.9% through January 2021, collateralized by equipment		4,203			4,408
Less unamortized debt issuance costs		(1,321	)		(2,046	)
		363,521			349,509
Less: Current portion		363,521			(50,829	)
Long-term debt less current maturities	$	-		$	298,680

All of our debt under the DXP’s credit facility has been characterized as current because we failed to comply with two of our financial covenants under the credit facility on March 31, 2016, prior to the amendment on May 12, 2016. While the amendment on May 12, 2016 provided us with a holiday from, and an amendment to, certain financial covenants, we expect that we will not be able to comply with the financial covenants in our credit facility in the upcoming quarter and will need to amend our credit facility or obtain alternative financing. If such an amendment or alternate financing is not obtained, then we believe that the liquidity of our balance sheet and credit facility at March 31, 2016 may not provide us with the ability to meet our working capital needs, scheduled principal payments, capital expenditures and Series B convertible preferred stock dividend payments during 2016.

On July 11, 2012, DXP entered into a credit facility with Wells Fargo Bank National Association, as Issuing Lender, Swingline Lender and Administrative Agent for the lenders (as amended, the “Original Facility”). On January 2, 2014, the Company entered into an Amended and Restated Credit Agreement with Wells Fargo Bank, National Association, as Issuing Lender and Administrative Agent for other lenders (as amended by that certain First Amendment to Amended and Restated Credit Agreement, dated as of August 6, 2015 (the “First Amendment”), that certain Second Amendment to Amended and Restated Credit Agreement, dated as of September 30, 2015 (the “Second Amendment”) and that certain Third Amendment to Amended and Restated Credit Agreement, dated as of May 12, 2016 (the “Third Amendment”), the “Facility”), amending and restating the Original Facility.Pursuant to the Facility, the lenders named therein provided to DXP a $250 million term loan and a $350 million revolving line of credit. The Facility expires on January 2, 2019. Loans made from the Facility may be used for working capital and general corporate purposes of DXP and its subsidiaries.

Amortization payments are required with respect to the Facility on the last business day of each fiscal quarter, payable at $12.5 million per quarter for the fiscal quarter periods ending March 31, 2016 through and including December 31, 2016, and payable at $15.625 million per quarter for the fiscal quarter periods ending March 31, 2017 and thereafter. At March 31, 2016, the aggregate principal amount of term loans outstanding under the Facility was $162.5 million.

Under the terms of the First Amendment. the pricing grid was modified to add a new interest rate level in the event that DXP’s consolidated leverage ratio as defined by the Facility as of the last day of the fiscal quarter most recently ended is greater than or equal to 4.00 to 1.00 and certain modifications were made to the financial covenant ratios applicable after June 30, 2015. Under the terms of the Second Amendment, an adjustment was made to the calculation of consolidated EBITDA as defined by the Facility. Under the terms of the Third Amendment:

The revolving line of credit commitment was reduced by $100 million, from $350 million to $250 million;

Certain modifications were made to the pricing grid set forth in the Facility to change the rate at which the Facility bears interest to a rate equal to LIBOR (or CDOR for Canadian dollar loans) plus 1.75% to 3.25% and Base Rate (or Canadian Base Rate for Canadian dollar loans) plus 0.75% to 2.25%;

Certain technical amendments were made with respect to the impact of European Union bail-in legislation on liabilities of certain non-U.S. financial institutions;

A weekly cash sweep mechanism was added in respect of the consolidated cash balances of DXP in excess of $3,000,000 calculated based upon a thirty-day average balance;

A financial covenant holiday has been provided from January 1, 2016 through, and including, March 31, 2016 for the Consolidated Leverage Ratio and the Consolidated Fixed Charge Ratio; and

The minimum Asset Coverage Ratio was reduced to 0.90 to 1.00 beginning on March 31, 2016, and all times thereafter until July 31, 2016.

The Facility provides the option of interest at LIBOR (or CDOR for Canadian dollar loans) plus an applicable margin ranging from 1.75% to 3.25% or prime plus an applicable margin from 0.75% to 2.25% where the applicable margin is determined by the Company’s leverage ratio as defined by the Facility as of the last day of the fiscal quarter most recently ended. Commitment fees of 0.20% to 0.50% per annum are payable on the portion of the Facility capacity not in use at any given time on the line of credit. Commitment fees are included as interest in the consolidated statements of income.

On March 31, 2016, the LIBOR based rate in effect under the Facility was LIBOR plus 2.25% the prime based rate of the Facility was prime plus 1.25%, and the commitment fee was 0.50%. The Third Amendment increased the LIBOR based rate under the Facility to LIBOR plus 3.25% and the prime based rate of the Facility to prime plus 2.25% as of the date of the amendment. At March 31, 2016, $360.6 million was borrowed under the Facility at a weighted average interest rate of approximately 2.69% under the LIBOR options. At March 31, 2016, the Company had $22.3 million available for borrowing under the Facility.

The Facility contains financial covenants defining various financial measures and levels of these measures with which the Company must comply. Covenant compliance is assessed as of each quarter end. Substantially all of the Company’s assets are pledged as collateral to secure the Facility.