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1 • NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued ADJUSTERS INTERNATIONAL, INC. AND SUBSIDIARIES December 31, 2016 and 2015 NOTE D--CREDIT FACILITIES AND SUBSEQUENT EVENT AI has a line of credit facility (the "facility") with a bank consisting of two components: 1) $1,000,000 borrowing limit to be used for short-term working capital needs and 2) a formula driven asset based revolving credit line. The facility is collateralized by .,-security interest in the Company's assets. Borrowings against the asset-based revolving creditalne are limited to 80 percent of eligible trade accounts receivable balances, as defined iThAhe Loan Agreement (the "Agreement"). Borrowings under each credit facility bear interaseual to the London Interbank Offered Rate (LIBOR) plus•2.00% (2.62% at December 341,6(�0�l 6), not to be less than 3.25% (floor) or exceed 15% (ceiling) for the term of the Agreement�Interest is payable monthly. During 2016, the asset based revolving credit,--lin'e has a maximum borrowing base of $16,000,000. The borrowing base will remain at $16000,000 through the facility's expiration in September 2017. A similar asset based revolving credit line existed in 2015. The borrowing base is established to meet the needs of AI and Tidal Basin based upon the level of activity with their primary customers. .6 In February 2017, the facility was amended to allow for advances not to exceed $2,000,000 for purposes of contributing working capital to the Vanguard Joint Venture (See Note C). Interest charged on the related advancesbis consistent .with that of the initial two components of the facility. Repayment of outstanding advances is due sixty days from the initial advance date. Advances may not cause the\outstanding principal amount of the asset based line of credit to exceed the maximum borrowing base of$16,000,000. The agreement includes a fee that is charged to AI based on the unused line of credit. The fee is .10% of the average monthly unused asset based revolving line of credit. The fee is $11,308 in 2016 and $13,116 in 2015 and is included in interest expense in the accompanying consolidated statements of.operations. AI has outstanding borrowings on the short-term working capital line of credit totaling $500,000 at December 31, 2016. The borrowing bears interest at 3.75% and was repaid in February 2017. There were no outstanding borrowings at December 31, 2015. AI is subject to certain restrictive covenants under the facility. The covenants include maintenance of a minimum debt service coverage ratio and a maximum debt-to-tangible net worth ratio. AI was in compliance with all required covenants at December 31, 2016. H -16- ' i