Note 3 - Revolving Credit Facility and Long-Term Debt

The Company maintains a credit agreement (the “Agreement”) with its principal bank, Wells Fargo Bank, National Association (the “Bank”). The Agreement includes a $40.0 million term loan maturing December 31, 2016, as well as a $14.0 million revolving credit line, with a $5.0 million sublimit for unsecured standby letters of credit. The outstanding balance on the term loan was $40.0 million at March 31, 2015 and at December 31, 2014. The Company had an outstanding balance of $5.8 million on its revolving credit line at March 31, 2015. The Agreement also includes $114.3 million in cash-secured letters of credit to satisfy collateral requirements associated with various surety deposit requirements for workers’ compensation purposes in the state of California. In conjunction with these letters of credit, the Company posted $114.3 million of certificates of deposit with the Bank as collateral, which is included in long-term assets on the consolidated balance sheet.

The term loan with the Bank requires payments of $3.0 million on June 30, 2015, $7.0 million on September 30, 2015, $15.0 million on December 31, 2015, $5.0 million on June 30, 2016 and $5.0 million on September 30, 2016, with the balance due at maturity. The term loan bears interest at the one month LIBOR plus 4.0%.

Advances under the revolving credit facility bear interest, as selected by the Company, of either (a) a daily floating rate of one month LIBOR plus 2.0% or (b) a fixed rate of LIBOR plus 2.0% The Agreement also provides for an unused commitment fee of 0.35% per year on the average daily unused amount of the revolving credit facility, and a fee of 1.75% of the face amount of each letter of credit.

The credit facility is collateralized by the Company’s accounts receivable and other rights to receive payment, general intangibles, inventory and equipment.

The Agreement requires the satisfaction of certain financial covenants as follows:

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minimum Fixed Charge Coverage ratio of no less than 1.5:1.0, measured quarterly on a rolling four-quarter basis; and

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ratio of restricted and unrestricted cash and marketable securities to workers’ compensation and safety incentive liabilities of at least 1.0:1.0, measured quarterly.

The Agreement includes certain additional covenants as follows:

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capital expenditures may not exceed a total of $5.0 million in 2015 and a total of $4.0 million in 2016 without the Bank’s prior approval;

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incurring additional indebtedness is prohibited without the prior approval of the Bank, other than up to $200,000 per year in purchase money financing so long as total purchase money indebtedness does not exceed $400,000 at any time;

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repurchases of the Company’s common stock are prohibited; and

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quarterly cash dividends up to $0.22 per share may be paid so long as there is no default by the Company and payment would not cause a default.

The Agreement also contains customary events of default. If an event of default under the Agreement occurs and is continuing, the Bank may declare any outstanding obligations under the Agreement to be immediately due and payable. The Company was in compliance with all applicable financial covenants at March 31, 2015.

Additionally, the Company maintains a term loan with the Bank with a balance of approximately $5.0 million and $5.1 million at March 31, 2015 and December 31, 2014, respectively, secured by the Company’s corporate office building in Vancouver, Washington. The term loan requires payment of monthly installments of $18,375, bearing interest at the one month LIBOR plus 2.25%, with the unpaid principal balance due November 1, 2017.