. DEBT

Long-term Debt

June 29, 2018,

the Company entered into a new credit agreement (the “Credit Agreement”) with BMO Harris Bank N.A. (“BMO”) that provided for the assignment and assumption of the previously existing loans between the Company and Bank of Montreal (the

“2016

Credit Agreement”) and subsequent amendments into a term loan (the “Term Loan”) and revolving credit loans (each a “Revolving Loan” and, collectively, the “Revolving Loans,” and, together with the Term Loan, the “Loans”). Pursuant to the Credit Agreement, BMO agreed to make the Term Loan to the Company in a principal amount

not

to exceed

$35,000

and the Company

may,

from time to time prior to the maturity date, enter into Revolving Loans in amounts

not

to exceed, in the aggregate,

$50,000

(the “Revolving Credit Commitment”). The Credit Agreement also allows the Company to obtain Letters of Credit from BMO, which if drawn upon by the beneficiary thereof and paid by BMO, would become Revolving Loans.

July 2, 2018,

in connection with the acquisition of Veth Propulsion, as described in Note B, Acquisition of Veth Propulsion Holding B.V., the Company drew a total of

$60,729

of additional borrowings on the Credit Agreement, consisting of a

$35,000

Term Loan payable and revolver borrowings of

$25,729.

The new borrowing was used to pay the cash consideration at closing of

$58,862,

and to pay off the loan owed to the prior parent of Veth Propulsion in the amount of

$1,865.

September 25, 2018,

the Company used the proceeds of a stock offering (see Note K, Shareholders’ Equity) of

$32,210

to partially pay down the Term Loan and Revolving Loans.

March 4, 2019,

the Company entered into a

second

amendment (the “Second Amendment”) to the Credit Agreement. The Second Amendment reduced the principal amount of the Term Loan commitment under the Credit Agreement from

$35,000

$20,000.

In connection with the Second Amendment, the Company issued an amended and restated term note in the amount of

$20,000

to BMO, which amended the original

$35,000

note provided under the Credit Agreement.

Prior to entering into the Second Amendment, the outstanding principal amount of the Term Loan under the Credit Agreement was

$10,849.

On the date of the Second Amendment, the BMO made an additional advance on the Term Loan to the Company in the amount of

$9,151.

The Second Amendment also extended the maturity date of the Term Loan from

January 2, 2020

March 4, 2026,

and added a requirement that the Company make principal installments of

$500

per quarter starting with the quarter ending

June 30, 2019.

The Second Amendment also reduces the applicable margin for purposes of determining the interest rate applicable to the Term Loan. Previously, the applicable margin was

3.00%,

which was added to the Monthly Reset LIBOR Rate or the Adjusted LIBOR, as applicable. Under the Second Amendment, the applicable margin is between

1.375%

and

2.375%,

depending on the Company’s total funded debt to EBITDA ratio.

The Second Amendment also adjusts certain financial covenants made by the Company under the Credit Agreement. Specifically, the Company has covenanted (i)

not

to allow its total funded debt to EBITDA ratio to be greater than

3.00

1.00

(the cap had previously been

3.50

1.00

for quarters ending on or before

September 30, 2019

and

3.25

1.00

for quarters ending on or about

December 31, 2019

through

September 30, 2020),

and (ii) that its tangible net worth will

not

be less than

$100,000

plus

50%

of net income for each fiscal year ending on and after

June 30, 2019

for which net income is a positive number (the

$100,000

figure had previously been

$70,000

Borrowings under the Credit Agreement are secured by substantially all of the Company’s personal property, including accounts receivable, inventory, machinery and equipment, and intellectual property. The Company has also pledged

100%

of its equity interests in certain domestic subsidiaries and

65%

of its equity interests in certain foreign subsidiaries. The Company also entered into a Collateral Assignment of Rights under Purchase Agreement for its acquisition of Veth Propulsion described in Note B, Acquisition of Veth Propulsion Holding B.V..

Upon the occurrence of an event of default, BMO

may

take the following actions upon written notice to the Company: (

) terminate its remaining obligations under the Credit Agreement; (

) declare all amounts outstanding under the Credit Agreement to be immediately due and payable; and (

) demand the Company to immediately cash collateralize letter of credit obligations in an amount equal to

105%

of the aggregate letter of credit obligations or a greater amount if BMO determines a greater amount is necessary. If such event of default is due to the Company’s bankruptcy, BMO

may

take the

three

actions listed above without notice to the Company.

In addition to the monthly interest payments and any mandatory principal payments required by the Credit Agreement (if applicable), the Company is responsible for paying a quarterly Revolving Credit Commitment Fee and quarterly Letter of Credit Fees. The Revolving Credit Commitment Fee is paid at an annual rate equal to the Applicable Margin on the average daily unused portion of the Revolving Credit Commitment. The Letter of Credit Fee is paid at the Applicable Margin for Revolving Loans that are Eurodollar Loans on the daily average face amount of Letters of Credit outstanding during the preceding calendar quarter. The Company

may

prepay the Loans (or any

one

of the Loans), subject to certain limitations.

Long-term debt consisted of the following at

June 30:

	2019			2018
Revolving loan agreement	$	22,666		$	4,787
Term loan (due March 2026)		19,500			-
Other		325			37
Subtotal		42,491			4,824
Less: current maturities		(2,000	)		-
Total long-term debt	$	40,491		$	4,824

Other long-term debt pertains mainly to a financing arrangement in Europe. During fiscal

2019,

the Company entered into sale leaseback agreements with a leasing company covering various Company vehicles. Under the terms of the agreements, the Company received

$329

in cash proceeds and agreed to lease back those same vehicles under various terms, ranging from

years. Under ASC

842,

Leases, these agreements are required to be accounted for as financing transactions. Consequently, the Company recorded long-term liabilities for the proceeds received, and they are reduced as lease payments are made. These liabilities carry implied interest rates ranging from

25%.

A total amount of

$28

in principal was paid on these liabilities during the current fiscal year.

During fiscal year

2019,

the average interest rate was

4.71%

on the Term Loan, and

2.99%

on the Revolving Loans.

As of

June 30, 2019,

the Company’s borrowing capacity under the terms of the Credit Agreement was approximately

$47,324

and the Company had approximately

$24,658

of available borrowings.

The Company’s borrowings described above approximates fair value at

June 30, 2019

and

June 30, 2018.

If measured at fair value in the financial statements, long-term debt (including the current portion) would be classified as Level

in the fair value hierarchy.

April 22, 2019,

the Company entered into an interest rate swap arrangement with Bank of Montreal, with a notional amount of

$20,000

and a maturity date of

March 4, 2026

to hedge the Term Loan. This swap has been designated as a cash flow hedge under ASC

815,

Derivatives and Hedging. This swap is included in the disclosures in Note T, Derivative Financial Instruments.

The aggregate scheduled maturities of outstanding long-term debt obligations in subsequent years are as follows:

Fiscal Year
2020	$	2,000
2021		2,161
2022		2,081
2023		24,709
2024		2,016
Thereafter		9,524
	$	42,491

Other lines of credit

The Company has established unsecured lines of credit, which

may

be withdrawn at the option of the banks. Under these arrangements, the Company has unused and available credit lines of

$952

with a weighted average interest rate of

5.0%

as of

June 30, 2019,

and

$1,477

with a weighted average interest rate of

5.0%

as of

June 30, 2018.