EXHIBIT 10.54

 

REVOLVING REDUCING NOTE

 

$10,000,000.00

 

Tacoma, Washington

 

 

January 4, 2002

 

FOR VALUE RECEIVED, the undersigned LABOR READY, INC. (“Borrower”) promises to
pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”) at its
office at 1201 Pacific Ave., 3rd Floor Tacoma, Washington 98402, or at such
other place as the holder hereof may designate, in lawful money of the United
States of America and in immediately available funds, the principal sum of Ten
Million Dollars ($10,000,000.00), or so much thereof as may be advanced and be
outstanding, with interest thereon, to be computed on each advance from the date
of its disbursement as set forth herein.

 

DEFINITIONS:

 

As used herein, the following terms shall have the meanings set forth after
each, and any other term defined in this Note shall have the meaning set forth
at the place defined:

 

(a)           “Business Day” means any day except a Saturday, Sunday or any
other day on which commercial banks in Washington are authorized or required by
law to close.

 

(b)           “Fixed Rate Term” means a period commencing on a Business Day and
continuing for 1,2,3 or 6 months as designated by Borrower, during which all or
a portion of the outstanding principal balance of this Note bears interest
determined in relation to LIBOR; provided however, that no Fixed Rate Term may
be selected for a principal amount less than One Hundred Thousand Dollars
($100,000.00); and provided further, that no Fixed Rate Term shall extend beyond
the scheduled maturity date hereof.  If any Fixed Rate Term would end on a day
which is not a Business Day, then such Fixed Rate Term shall be extended to the
next succeeding Business Day.

 

(c)           “LIBOR” means the rate per annum (rounded upward, if necessary, to
the nearest whole 1/8 of 1 %) and determined pursuant to the following formula:

 

LIBOR =

 

Base LIBOR

 

 

100% - LIBOR Reserve Percentage

 

(i)            “Base LIBOR” means the rate per annum for United States dollar
deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the
understanding that such rate is quoted by Bank for the purpose of calculating
effective rates of interest for loans making reference thereto, on the first day
of a Fixed Rate Term for delivery of funds on said date for a period of time
approximately equal to the number of days in such Fixed Rate Term and in an
amount approximately equal to the principal amount to which such Fixed Rate Term
applies.  Borrower understands and agrees that Bank may base its quotation of
the Inter-Bank Market Offered Rate upon such offers or other market indicators
of the Inter-Bank Market as Bank in its discretion deems appropriate including,
but not limited to, the rate offered for U.S. dollar deposits on the London
Inter-Bank Market.

 

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(ii)           “LIBOR Reserve Percentage” means the reserve percentage
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for “Eurocurrency Liabilities” (as defined in Regulation D of the
Federal Reserve Board, as amended), adjusted by Bank for expected changes in
such reserve percentage during the applicable Fixed Rate Term.

 

(d)           “Prime Rate” means at any time the rate of interest most recently
announced within Bank at its principal office as its Prime Rate, with the
understanding that the Prime Rate is one of Bank’s base rates and serves as the
basis upon which effective rates of interest are calculated for those loans
making reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Bank may designate.

 

INTEREST:

 

(a)           Interest.  The outstanding principal balance of this Note shall
bear interest (computed on the basis of a 360-day year, actual days elapsed)
either (i) at a fluctuating rate per annum three quarters of one percent (0.75%)
below the Prime Rate in effect from time to time, or (ii) at a fixed rate per
annum determined by Bank to be one and eighty five hundredths percent (1.85%)
above LIBOR in effect on the first day of the applicable Fixed Rate Term.  When
interest is determined in relation to the Prime Rate, each change in the rate of
interest hereunder shall become effective on the date each Prime Rate change is
announced within Bank.  With respect to each LIBOR selection hereunder, Bank is
hereby authorized to note the date, principal amount, interest rate and Fixed
Rate Term applicable thereto and any payments made thereon on Bank’s books and
records (either manually or by electronic entry) and/or on any schedule attached
to this Note, which notations shall be prima facie evidence of the accuracy of
the information noted.

 

(b)           Selection of Interest Rate Options.  At any time any portion of
this Note bears interest determined in relation to LIBOR, it may be continued by
Borrower at the end of the Fixed Rate Term applicable thereto so that all or a
portion thereof bears interest determined in relation to the Prime Rate or to
LIBOR for a new Fixed Rate Term designated by Borrower.  At any time any portion
of this Note bears interest determined in relation to the Prime Rate, Borrower
may convert all or a portion thereof so that it bears interest determined in
relation to LIBOR for a Fixed Rate Term designated by Borrower.  At such time as
Borrower requests an advance hereunder or wishes to select a LIBOR option for
all or a portion of the outstanding principal balance hereof, and at the end of
each Fixed Rate Term, Borrower shall give Bank notice specifying: (i) the
interest rate option selected by Borrower; (ii) the principal amount subject
thereto; and (iii) for each LIBOR selection, the length of the applicable Fixed
Rate Term.  Any such notice may be given by telephone (or such other electronic
method as Bank may permit) so long as, with respect to each LIBOR selection, (A)
if requested by Bank, Borrower provides to Bank written confirmation thereof not
later than three (3) Business Days after such notice is given, and (B) such
notice is given to Bank prior to 10:00 a.m. on the first day of the Fixed Rate
Term, or at a later time during any Business Day if Bank, at it’s sole option
but without obligation to do so, accepts Borrower’s notice and quotes a fixed
rate to Borrower.  If Borrower does not immediately accept a fixed rate when
quoted by Bank, the quoted rate shall expire and any subsequent LIBOR request
from Borrower shall be subject to a

 

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redetermination by Bank of the applicable fixed rate.  If no specific
designation of interest is made at the time any advance is requested hereunder
or at the end of any Fixed Rate Term, Borrower shall be deemed to have made a
Prime Rate interest selection for such advance or the principal amount to which
such Fixed Rate Term applied.

 

(c)           Taxes and Regulatory Costs.  Borrower shall pay to Bank
immediately upon demand, in addition to any other amounts due or to become due
hereunder, any and all (i) withholdings, interest equalization taxes, stamp
taxes or other taxes (except income and franchise taxes) imposed by any domestic
or foreign governmental authority and related in any manner to LIBOR, and (ii)
future, supplemental, emergency or other changes in the LIBOR Reserve
Percentage, assessment rates imposed by the Federal Deposit Insurance
Corporation, or similar requirements or costs imposed by any domestic or foreign
governmental authority or resulting from compliance by Bank with any request or
directive (whether or not having the force of law) from any central bank or
other governmental authority and related in any manner to LIBOR to the extent
they are not included in the calculation of LIBOR.  In determining which of the
foregoing are attributable to any LIBOR option available to Borrower hereunder,
any reasonable allocation made by Bank among its operations shall be conclusive
and binding upon Borrower.

 

(d)           Payment of Interest.  Interest accrued on this Note shall be
payable on the last day of each month, commencing January 31, 2002.

 

(e)           Default Interest.  From and after the maturity date of this Note,
or such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed) equal to four percent (4%) above
the rate of interest from time to time applicable to this Note.

 

BORROWING AND REPAYMENT:

 

(a)           Borrowing and Repayment.  Borrower may from time to time during
the term of this Note borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions of this Note and of any document executed in connection with or
governing this Note; provided however, that the total outstanding borrowings
under this Note shall not at any time exceed the principal amount set forth
above or such lesser amount as shall at any time be available hereunder.  The
unpaid principal balance of this obligation at any time shall be the total
amounts advanced hereunder by the holder hereof less the amount of principal
payments made hereon by or for any Borrower, which balance may be endorsed
hereon from time to time by the holder.  The outstanding principal balance of
this Note shall be due and payable in full on January 31, 2006.

 

(b)           Reductions in Availability.  Notwithstanding the principal amount
set forth above, the maximum principal amount available under this Note shall be
reduced automatically and without further notice on the last day of each
October, January, April and July, commencing April 30, 2002, by the amount of
One Hundred Twenty Five Thousand Dollars ($125,000.00).  If the outstanding
principal balance of this Note on any such date is greater than

 

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the new maximum principal amount then available hereunder, Borrower shall make a
principal reduction on this Note on such date in an amount sufficient to reduce
the then outstanding principal balance hereof to an amount not greater than said
new maximum principal amount.

 

(c)           Advances.  Advances hereunder, to the total amount of the
principal sum stated above, may be made by the holder at the oral or written
request of (i) Joseph P. Sambataro, Jr., Steven C. Cooper, Bruce H. Marley, Kay
Ward or Timothy Adams, any one acting alone, who are authorized to request
advances and direct the disposition of any advances until written notice of the
revocation of such authority is received by the holder at the office designated
above, or (ii) any person, with respect to advances deposited to the credit of
any deposit account of any Borrower, which advances, when so deposited, shall be
conclusively presumed to have been made to or for the benefit of each Borrower
regardless of the fact that persons other than those authorized to request
advances may have authority to draw against such account.  The holder shall have
no obligation to determine whether any person requesting an advance is or has
been authorized by any Borrower.

 

(d)           Application of Payments.  Each payment made on this Note shall be
credited first, to any interest then due and second, to the outstanding
principal balance hereof.  All payments credited to principal shall be applied
first, to the outstanding principal balance of this Note which bears interest
determined in relation to the Prime Rate, if any, and second, to the outstanding
principal balance of this Note which bears interest determined in relation to
LIBOR, with such payments applied to the oldest Fixed Rate Term first.

 

PREPAYMENT:

 

(a)           Prime Rate.  Borrower may prepay principal on any portion of this
Note which bears interest determined in relation to the Prime Rate at any time,
in any amount and without penalty.

 

(b)           LIBOR.  Borrower may prepay principal on any portion of this Note
which bears interest determined in relation to LIBOR at any time and in the
minimum amount of One Hundred Thousand Dollars ($100,000.00); provided however,
that if the outstanding principal balance of such portion of this Note is less
than said amount, the minimum prepayment amount shall be the entire outstanding
principal balance thereof.  In consideration of Bank providing this prepayment
option to Borrower, or if any such portion of this Note shall become due and
payable at any time prior to the last day of the Fixed Rate Term applicable
thereto by acceleration or otherwise, Borrower shall pay to Bank immediately
upon demand a fee which is the sum of the discounted monthly differences for
each month from the month of prepayment through the month in which such Fixed
Rate Term matures, calculated as follows for each such month:

 

(i)                                     Determine the amount of interest which
would have accrued each month on the amount prepaid at the interest rate
applicable to such amount had it remained outstanding until the last day of the
Fixed Rate Term applicable thereto.

 

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(ii)                                  Subtract from the amount determined in (i)
above the amount of interest which would have accrued for the same month on the
amount prepaid for the remaining term of such Fixed Rate Term at LIBOR in effect
on the date of prepayment for new loans made for such term and in a principal
amount equal to the amount prepaid.

 

(iii)                               If the result obtained in (ii) for any month
is greater than zero, discount that difference by LIBOR used in (ii) above.

 

Each Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities.  Each Borrower, therefore, agrees to pay the above-described
prepayment fee and agrees that said amount represents a reasonable estimate of
the prepayment costs, expenses and/or liabilities of Bank.  If Borrower fails to
pay any prepayment fee when due, the amount of such prepayment fee shall
thereafter bear interest until paid at a rate per annum two percent (2.0%) above
the Prime Rate in effect from time to time (computed on the basis of a 360-day
year, actual days elapsed).  Each change in the rate of interest on any such
past due prepayment fee shall become effective on the date each Prime Rate
change is announced within Bank.

 

EVENTS OF DEFAULT:

 

This Note is made pursuant to and is subject to the terms and conditions of that
certain Credit Agreement between Borrower and Bank dated as of January 4, 2002,
as amended from time to time (the “Credit Agreement”).  Any default in the
payment or performance of any obligation under this Note, or any defined event
of default under the Credit Agreement, shall constitute an “Event of Default”
under this Note.

 

MISCELLANEOUS:

 

(a)           Remedies.  Upon the sale, transfer, hypothecation, assignment or
other encumbrance, whether voluntary, involuntary or by operation of law, of all
or any interest in any real property securing this Note, or upon the occurrence
of any Event of Default, the holder of this Note, at the holder’s option, may
declare all sums of principal and interest outstanding hereunder to be
immediately due and payable without presentment, demand, notice of
nonperformance, notice of protest, protest or notice of dishonor, all of which
are expressly waived by each Borrower, and the obligation, if any, of the holder
to extend any further credit hereunder shall immediately cease and terminate. 
Each Borrower shall pay to the holder immediately upon demand the full amount of
all payments, advances, charges, costs and expenses, including reasonable
attorneys’ fees (to include outside counsel fees and all allocated costs of the
holders in-house counsel), expended or incurred by the holder in connection with
the enforcement of the holder’s rights and/or the collection of any amounts
which become due to the holder under this Note, and the prosecution or defense
of any action in any way related to this Note, including without limitation, any
action for declaratory relief, whether incurred at the trial or appellate level,
in an arbitration proceeding or otherwise, and including any of the foregoing
incurred in connection with any bankruptcy proceeding (including

 

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without limitation, any adversary proceeding, contested matter or motion brought
by Bank or any other person) relating to any Borrower or any other person or
entity.

 

(b)           Obligations Joint and Several.  Should more than one person or
entity sign this Note as a Borrower, the obligations of each such Borrower shall
be joint and several.

 

(c)           Governing Law.  This Note shall be governed by and construed in
accordance with the laws of the State of Washington.

 

ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR
ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

 

This Note is secured by, among other collateral, a Deed of Trust dated January
4, 2002.

 

IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first
written above.

 

LABOR READY, INC.

 

By:

/s/ Steve C. Cooper

 

 

Steve C. Cooper, CFO

 

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CREDIT AGREEMENT

 

THIS AGREEMENT is entered into as of January 4, 2002, by and between LABOR
READY, INC., a Washington corporation (“Borrower”), and WELLS FARGO BANK,
NATIONAL ASSOCIATION (“Bank”).

 

RECITALS

 

Borrower has requested that Bank extend or continue credit to Borrower as
described below, and Bank has agreed to provide such credit to Borrower on the
terms and conditions contained herein.

 

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Bank and Borrower hereby agree as follows:

 

ARTICLE I

CREDIT TERMS

 

SECTION 1.1. REVOLVING REDUCING LOAN.

 

(a)           Revolving Reducing Loan.  Subject to the terms and conditions of
this Agreement, Bank hereby agrees to make advances to Borrower from time to
time up to and including January 31, 2006, not to exceed at any time the
aggregate principal amount of Ten Million Dollars ($10,000,000.00) or such
lesser amount as shall from time to time be available (“Revolving Reducing
Loan”), the proceeds of which shall be used for working capital and general
corporate purposes.  Borrower’s obligation to repay advances under the Revolving
Reducing Loan shall be evidenced by a promissory note substantially in the form
of Exhibit A attached hereto (“Revolving Reducing Note”), all terms of which are
incorporated herein by this reference.

 

(b)           Borrowing and Repayment.  Borrower may from time to time during
the term of the Revolving Reducing Loan borrow, partially or wholly repay its
outstanding borrowings, and reborrow, subject to all of the limitations, terms
and conditions contained herein or in the Revolving Reducing Note; provided
however, that the total outstanding borrowings under the Revolving Reducing Loan
shall not at any time exceed the maximum principal amount available thereunder,
as set forth above and as reduced from time to time in accordance with the terms
of the Revolving Reducing Note.

 

SECTION 1.2. INTEREST/FEES.

 

(a)           Interest.  The outstanding principal balance of the Revolving
Reducing Loan shall bear interest at the rate of interest set forth in the
Revolving Reducing Note.

 

(b)           Computation and Payment.  Interest shall be computed on the basis
of a 360-day year, actual days elapsed.  Interest shall be payable at the times
and place set forth in each promissory note or other instrument required hereby.

 

(c)           Unused Commitment Fee.  Borrower shall pay to Bank a fee equal to
three hundred fifty thousandths percent (0.350%) per annum (computed on the
basis of a 360-day year, actual days elapsed) on the average daily unused amount
of the Revolving Reducing Loan, which fee shall be calculated on a quarterly
basis by Bank and shall be due and payable by Borrower in arrears within thirty
(30) days after each billing is sent by Bank.

 

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SECTION 1.3. COLLATERAL.

 

As security for all indebtedness of Borrower to Bank under the Revolving
Reducing Loan, Borrower hereby grants to Bank a lien of not less than first
priority on that certain real property located at 1015 A Street, Tacoma, WA
98402.

 

All of the foregoing shall be evidenced by and subject to the terms of such
security agreements, financing statements, deeds of trust and other documents as
Bank shall reasonably require, all in form and substance satisfactory to Bank. 
Borrower shall reimburse Bank immediately upon demand for all costs and expenses
incurred by Bank in connection with any of the foregoing security, including
without limitation, filing and recording fees and costs of appraisals, audits
and title insurance.

 

ARTICLE II

REPRESENTATIONS AND WARRANTIES

 

Borrower makes the following representations and warranties to Bank, which
representations and warranties shall survive the execution of this Agreement and
shall continue in full force and effect until the full and final payment, and
satisfaction and discharge, of all obligations of Borrower to Bank subject to
this Agreement.

 

SECTION 2.l. LEGAL STATUS.  Borrower is a corporation, duly organized and
existing and in good standing under the laws of the State of Washington, and is
qualified or licensed to do business (and is in good standing as a foreign
corporation, if applicable) in all jurisdictions in which such qualification or
licensing is required or in which the failure to so qualify or to be so licensed
could have a material adverse effect on Borrower.

 

SECTION 2.2. AUTHORIZATION AND VALIDITY.  This Agreement and each promissory
note, contract, instrument and other document required hereby or at any time
hereafter delivered to Bank in connection herewith (collectively, the “Loan
Documents”) have been duly authorized, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal, valid and binding
agreements and obligations of Borrower or the party which executes the same,
enforceable in accordance with their respective terms.

 

SECTION 2.3. NO VIOLATION.  The execution, delivery and performance by Borrower
of each of the Loan Documents do not violate any provision of any law or
regulation, or contravene any provision of the Articles of Incorporation or
By-Laws of Borrower, or result in any breach of or default under any contract,
obligation, indenture or other instrument to which Borrower is a party or by
which Borrower may be bound.

 

SECTION 2.4. LITIGATION.  There are no pending, or to the best of Borrower’s
knowledge threatened, actions, claims, investigations, suits or proceedings by
or before any governmental authority, arbitrator, court or administrative agency
which could have a material adverse effect on the financial condition or
operation of Borrower other than those disclosed by Borrower to Bank in writing
prior to the date hereof.

 

SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT.  The financial statement of
Borrower dated June 30, 2001, a true copy of which has been delivered by

 

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Borrower to Bank prior to the date hereof, (a) is complete and correct in all
material respects and presents fairly the financial condition of Borrower, (b)
discloses all liabilities of Borrower that are required to be reflected or
reserved against under generally accepted accounting principles, whether
liquidated or unliquidated, fixed or contingent, and (c) has been prepared in
accordance with generally accepted accounting principles consistently applied. 
Since the date of such financial statement there has been no material adverse
change in the financial condition of Borrower, nor has Borrower mortgaged,
pledged, granted a security interest in or otherwise encumbered any of its
assets or properties except in favor of Bank or as otherwise permitted by Bank
in writing.

 

SECTION 2.6. INCOME TAX RETURNS.  Borrower has no knowledge of any pending
assessments or adjustments of its income tax payable with respect to any year.

 

SECTION 2.7. NO SUBORDINATION.  There is no agreement, indenture, contract or
instrument to which Borrower is a party or by which Borrower may be bound that
requires the subordination in right of payment of any of Borrower’s obligations
subject to this Agreement to any other obligation of Borrower.

 

SECTION 2.8. PERMITS, FRANCHISES.  Borrower possesses, and will hereafter
possess, all permits, consents, approvals, franchises and licenses required and
rights to all trademarks, trade names, patents, and fictitious names, if any,
necessary to enable it to conduct the business in which it is now engaged in
compliance with applicable law.

 

SECTION 2.9. ERISA.  Borrower is in compliance in all material respects with all
applicable provisions of the Employee Retirement Income Security Act of 1974, as
amended or recodified from time to time (“ERISA”); Borrower has not violated any
provision of any defined employee pension benefit plan (as defined in ERISA)
maintained or contributed to by Borrower (each, a “Plan”); no Reportable Event
as defined in ERISA has occurred and is continuing with respect to any Plan
initiated by Borrower; Borrower has met its minimum funding requirements under
ERISA with respect to each Plan; and each Plan will be able to fulfill its
benefit obligations as they come due in accordance with the Plan documents and
under generally accepted accounting principles.

 

SECTION 2.10. OTHER OBLIGATIONS.  Borrower is not in default on any obligation
for borrowed money, any purchase money obligation or any other material lease,
commitment, contract, instrument or obligation.

 

SECTION 2.11.  ENVIRONMENTAL MATTERS.  Except as disclosed by Borrower to Bank
in writing prior to the date hereof, Borrower, to the best of its knowledge, is
in compliance in all material respects with all applicable federal or state
environmental, hazardous waste, health and safety statutes, and any rules or
regulations adopted pursuant thereto, which govern or affect any of Borrower’s
operations and/or properties, including without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Superfund
Amendments and Reauthorization Act of 1986, the Federal Resource Conservation
and Recovery Act of 1976, and the Federal Toxic Substances Control Act, as any
of the same

 

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may be amended, modified or supplemented from time to time.  None of the
operations of Borrower is the subject of any federal or state investigation
evaluating whether any remedial action involving a material expenditure is
needed to respond to a release of any toxic or hazardous waste or substance into
the environment.  Borrower has no material contingent liability in connection
with any release of any toxic or hazardous waste or substance into the
environment.

 

SECTION 2.12. REAL PROPERTY COLLATERAL.  Except as disclosed by Borrower to Bank
in writing prior to the date hereof, with respect to any real property
collateral required hereby:

 

(a)           All taxes, governmental assessments, insurance premiums, and
water, sewer and municipal charges, and rents (if any) which previously became
due and owing in respect thereof have been paid as of the date hereof.

 

(b)           There are no mechanics’ or similar liens or claims which have been
filed for work, labor or material (and no rights are outstanding that under law
could give rise to any such lien except for the rights of workers and suppliers
in connection with the improvements to the first floor, the work on which
commenced on or about April 1, 2001 and is expected to be completed by December
31, 2001) which affect all or any interest in any such real property and which
are or may be prior to or equal to the lien thereon in favor of Bank.

 

(c)           None of the improvements which were included for purpose of
determining the appraised value of any such real property lies outside of the
boundaries and/or building restriction lines thereof, and no improvements on
adjoining properties materially encroach upon any such real property.

 

(d)           There is no pending, or to the best of Borrower’s knowledge
threatened, proceeding for the total or partial condemnation of all or any
portion of any such real property, and all such real property is in good repair
and free and clear of any damage that would materially and adversely affect the
value thereof as security and/or the intended use thereof.

 

SECTION 2.13. GECC LETTER OF CREDIT DOCUMENTATION.  Borrower has heretofore
delivered to Bank, or will deliver to Bank upon Bank’s written request, true and
correct copies of: (a) the Letter of Credit Agreement dated as of March 1, 2001,
between Borrower, as “Debtor,” and General Electric Capital Corporation, as
“Creditor” (“GECC”), and any amendments thereto, which are in effect as of the
date of this Agreement (the “GECC Letter of Credit Agreement”), and (b) all
material documents related to the GECC Letter of Credit Agreement which are in
effect as of the date of this Agreement (the “Related GECC Letter of Credit
Documents”) (with the GECC Letter of Credit Agreement and the Related GECC
Letter of Credit Documents which are in effect as of the date of this Agreement
referred to herein collectively as the “GECC Letter of Credit Documents”).

 

SECTION 2.14. GECC RECEIVABLES FUNDING DOCUMENTATION.  Borrower has heretofore
delivered to Bank, or will deliver to Bank upon Bank’s written request, true and
correct copies of: (a) the Receivables Funding Agreement dated as of March 1,
2001, by and among Labor Ready Funding Corporation, as “Borrower,” Redwood
Receivables Corporation as “Conduit Lender,” Borrower as “Servicer,” and GECC as
“Committed Lender and as Administrative Agent, which is in effect as of the date
of this Agreement (the “GECC Receivables Agreement”), and (b) all material
documents related to the GECC Receivables Agreement which are in effect as of
the date of this Agreement (the “Related GECC Receivables Documents”) (with the
GECC Receivables Agreement and

 

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the Related GECC Receivables Documents” which are in effect as of the date of
this Agreement referred to collectively as the “GECC Receivables Documents”).

 

ARTICLE III

CONDITIONS

 

SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT.  The obligation of Bank
to extend any credit contemplated by this Agreement is subject to the
fulfillment to Bank’s satisfaction of all of the following conditions:

 

(a)           Approval of Bank Counsel.  All legal matters incidental to the
extension of credit by Bank shall be satisfactory to Bank’s counsel.

 

(b)           Documentation.  Bank shall have received, in form and substance
satisfactory to Bank, each of the following, duly executed:

 

(i)                           This Agreement and each promissory note or other
instrument required hereby.

(ii)                        Corporate Borrowing Resolution.

(iii)                     Certificate of Incumbency.

(iv)                    Deed of Trust.

(v)                       Such other documents as Bank may require under any
other Section of this Agreement.

 

(c)           Financial Condition.  There shall have been no material adverse
change, as determined by Bank, in the financial condition or business of
Borrower, nor any material decline, as determined by Bank, in the market value
of any collateral required hereunder or a substantial or material portion of the
assets of Borrower.

 

(d)           Insurance.  Borrower shall have delivered to Bank evidence of
insurance coverage on all real property collateral required hereby, in form,
substance, amounts, covering risks and issued by companies satisfactory to Bank,
and where required by Bank, with loss payable endorsements in favor of Bank,
including without limitation, policies of fire and extended coverage insurance
covering all real property collateral required hereby, with replacement cost and
mortgagee loss payable endorsements, and such policies of insurance against
specific hazards affecting any such real property as may be required by
governmental regulation or Bank.

 

(e)           Appraisals.  Bank shall have obtained, at Borrower’s cost, an
appraisal of all real property collateral required hereby, and all improvements
thereon, issued by an appraiser acceptable to Bank and in form, substance and
reflecting values satisfactory to Bank, in its discretion.

 

(f)            Title Insurance.  Bank shall have received an ALTA Policy of
Title Insurance, with such endorsements as Bank may require, issued by a company
and in form and substance satisfactory to Bank, in an amount equal to the
principal amount of Ten Million Dollars ($10,000,000.00) for the Revolving
Reducing Loan, insuring Bank’s lien on the real property collateral required
hereby to be of first priority, subject only to such exceptions as Bank shall
approve in its discretion, with all costs thereof to be paid by Borrower.

 

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SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT.  The obligation of Bank to
make each extension of credit requested by Borrower hereunder shall be subject
to the fulfillment to Bank’s satisfaction of each of the following conditions:

 

(a)           Compliance.  The representations and warranties contained herein
and in each of the other Loan Documents shall be true on and as of the date of
the signing of this Agreement and on the date of each extension of credit by
Bank pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist.

 

(b)           Documentation.  Bank shall have received all additional documents
which may be required in connection with such extension of credit.

 

ARTICLE IV

AFFIRMATIVE COVENANTS

 

Borrower covenants that so long as Bank remains committed to extend credit to
Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents
remain outstanding, and until payment in full of all obligations of Borrower
subject hereto, Borrower shall, unless Bank otherwise consents in writing:

 

SECTION 4.1. PUNCTUAL PAYMENTS.  Punctually pay all principal, interest, fees or
other liabilities due under any of the Loan Documents at the times and place and
in the manner specified therein.

 

SECTION 4.2. ACCOUNTING RECORDS.  Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Bank, at any reasonable time, to inspect, audit
and examine such books and records, to make copies of the same, and to inspect
the properties of Borrower.

 

SECTION 4.3. FINANCIAL STATEMENTS.  Provide to Bank all of the following, in
form and detail satisfactory to Bank:

 

(a)           not later than 90 days after and as of the end of each fiscal
year, a copy of 10K report filed with the Securities Exchange Commission of
Borrower, prepared by Certified Public Accountant, to include balance sheet,
income statement, statement of cash flows, management report, auditor’s report
with unqualified opinion, all supporting schedules and footnotes;

 

(b)           not later than 45 days after and as of the end of each quarter
end, a copy of 10Q report filed with Securities Exchange Commission of Borrower,
prepared by Certified Public Accountant, to include balance sheet, income
statement and statement of cash flows;

 

(c)           not later than each December 31, Borrower’s company prepared
annual and monthly projections for the following year (Bank acknowledges that
said projections may contain non-public information, the confidentiality of
which will be maintained by Bank in accordance with Section 7.13 below);

 

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(d)           contemporaneously with each annual and quarterly financial
statement of Borrower required hereby, a certificate of the president or chief
financial officer of Borrower that said financial statements are accurate and
that there exists no Event of Default nor any condition, act or event which with
the giving of notice or the passage of time or both would constitute an Event of
Default;

 

(e)           upon written request by Bank, a certificate of the president or
chief financial officer of Borrower that any property taxes due in connection
with the real property collateral required hereby have been paid;

 

(f)            from time to time such other information as Bank may reasonably
request.

 

SECTION 4.4. COMPLIANCE.  Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower is organized and/or which govern Borrower’s continued
existence and with the requirements of all laws, rules, regulations and orders
of any governmental authority applicable to Borrower and/or its business.

 

SECTION 4.5. INSURANCE.  Maintain and keep in force insurance of the types, and
in amounts reasonably similar to the amounts, currently carried by Borrower,
including but not limited to fire, extended coverage, public liability, property
damage and workers’ compensation, and deliver to Bank from time to time at
Bank’s request schedules setting forth all insurance then in effect.

 

SECTION 4.6. FACILITIES.  Keep all properties useful or necessary to Borrower’s
business in good repair and condition, and from time to time make necessary
repairs, renewals and replacements thereto so that such properties shall be
fully and efficiently preserved and maintained.

 

SECTION 4.7. TAXES AND OTHER LIABILITIES.  Pay and discharge when due any and
all indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, except such (a) as Borrower may in good faith
contest or as to which a bona fide dispute may arise, and (b) for which Borrower
has made provision, to Bank’s satisfaction, for eventual payment thereof in the
event Borrower is obligated to make such payment.

 

SECTION 4.8. LITIGATION.  Promptly give notice in writing to Bank of any
litigation pending or threatened against Borrower with a claim in excess of
$1,000,000.00.

 

SECTION 4.9. FINANCIAL CONDITION.  Maintain Borrower’s financial condition as
follows using generally accepted accounting principles consistently applied and
used consistently with prior practices (except to the extent modified by the
definitions herein), with compliance determined commencing with Borrower’s
financial statements for the period ending September 30, 2001:

 

(a)           Tangible Net Worth not at any time less than the Minimum Amount,
with “Tangible Net Worth” defined as the aggregate of total stockholders’ equity
plus subordinated debt less any intangible assets, and with “Minimum Amount”
defined as follows: As of September 30, 2001, the “Minimum Amount” shall be
$85,000,000.00. After September 30, 2001 the “Minimum Amount shall be adjusted
upward on a cumulative basis as follows: Commencing as of the December 31, 2001
fiscal year end and continuing on each fiscal year end thereafter, the Minimum
Amount shall be increased by the sum of fifty percent (50%) of Borrower’s net
income after taxes for the fiscal year ending on such date (with no reduction in
the event of a loss for any such year) plus one hundred percent (100%) of the

 

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proceeds of any stock of Borrower issued during such year (with no reduction for
any repurchase or redemption of such stock).

 

(b)           Net income after taxes not less than $1.00 on an annual basis
determined as of each fiscal year end, commencing with the December 31, 2001
fiscal year end.

 

(c)           Net income before taxes not less than $1.00 for any two
consecutive fiscal quarters, determined as of each fiscal quarter end commencing
with the fiscal quarter ending September 30, 2001.

 

(d)           EBITDA Coverage Ratio not less than 2.00 to 1.0 determined on a
rolling four fiscal quarter basis as of each fiscal quarter end, commencing with
the four fiscal quarter period ending on September 30, 2001, with “EBITDA”
defined as net profit before tax plus interest expense (net of capitalized
interest expense), depreciation expense and amortization expense, less
unfinanced capital expenditures made during said period and cash taxes paid
during said period, and with “EBITDA Coverage Ratio” defined as EBITDA divided
by the aggregate of total interest expense, plus letter of credit fees paid
during said period, plus said period’s current maturity of long-term debt, plus
said period’s current maturity of capital leases, plus scheduled principal
reductions in the Revolving Reducing Loan during said period; provided, however,
that when calculating the EBITDA Coverage Ratio for the four fiscal quarter
period ending as of September 30, 2001, only unfinanced capital expenditures
made during such period in excess of $4,400,000.00 shall be subtracted from the
numerator, and when calculating the EBITDA Coverage Ratio for the four fiscal
quarter period ending as of December 31, 2001, only unfinanced expenditures made
during such period in excess of $2,200,000.00 shall be subtracted from the
numerator.

 

SECTION 4.10. NOTICE TO BANK.  Promptly (but in no event more than five (5) days
after the occurrence of each such event or matter) give written notice to Bank
in reasonable detail of: (a) the occurrence of any Event of Default, or any
condition, event or act which with the giving of notice or the passage of time
or both would constitute an Event of Default; (b) any change in the name or the
organizational structure of Borrower; (c) the occurrence and nature of any
Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any uninsured or partially uninsured loss through liability or property damage,
or through fire, theft or any other cause affecting Borrower’s property in
excess of an aggregate of $1,000,000.00.

 

ARTICLE V

NEGATIVE COVENANTS

 

Borrower further covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank’s prior written
consent:

 

SECTION 5.1. USE OF FUNDS.  Use any of the proceeds of any credit extended
hereunder except for the purposes stated in Article I hereof.

 

SECTION 5.2. OTHER INDEBTEDNESS.  Create, incur, assume or permit to exist any
indebtedness or liabilities resulting from borrowings, loans or advances,
whether secured or unsecured, matured or unmatured, liquidated or unliquidated,
joint or several, except (a) the liabilities of Borrower

 

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to Bank, (b) any other liabilities of Borrower existing as of, and disclosed to
Bank prior to, the date hereof, and (c) any liabilities of Borrower incurred
hereafter which are permitted under the terms and provisions of the GECC Letter
of Credit Documents, as same may be amended by any amendment consented to by
Bank.

 

SECTION 5.3. MERGER, CONSOLIDATION, TRANSFER OF ASSETS.  Merge into or
consolidate with any other entity, except for the merger of a subsidiary of
Borrower into Borrower that is permitted under the terms and provisions of the
GECC Letter of Credit Documents, as same may be amended by any amendment
consented to by Bank; make any substantial change in the nature of Borrower’s
business as conducted as of the date hereof; acquire all or substantially all of
the assets of any other entity, except for acquisitions permitted under the
terms and provisions of the GECC Letter of Credit Documents, as same may be
amended by any amendment consented to by Bank; nor sell, lease, transfer or
otherwise dispose of all or a substantial or material portion of Borrowers
assets except in the ordinary course of its business and except for other
dispositions permitted under the terms and provisions of the GECC Letter of
Credit Documents, as same may be amended by any amendment consented to by Bank,
provided, however, that in no event shall any of Bank’s collateral hereunder be
sold, leased, transferred or otherwise disposed of without the prior written
consent of Bank and in the event of any conflict between the provisions of the
GECC Letter of Credit Documents regarding the disposition of assets and the
provisions of this Agreement or any other Loan Document regarding the
disposition of any of Bank’s collateral, the provisions of this Agreement and
the other Loan Documents shall prevail.

 

SECTION 5.4. GUARANTIES.  Guarantee or become liable in any way as surety,
endorser (other than as endorser of negotiable instruments for deposit or
collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower as security for,
any liabilities or obligations of any other person or entity, except (a) any of
the foregoing in favor of Bank, (b) any of the foregoing existing as of, and
disclosed to Bank prior to, the date hereof, (c) any of the foregoing done
hereafter which are permitted under the terms and provisions of the GECC Letter
of Credit Documents, as same may be amended by any amendment consented to by
Bank, and (d) other unsecured guarantees by Borrower granted hereafter in the
ordinary course of business to guarantee obligations of subsidiaries of Borrower
which are controlled by Borrower and organized under the laws of, and operating
in, Canada or the United Kingdom, provided that Borrower’s liabilities under
such guarantees which are permitted under this paragraph (d) at no time exceed
$2,500,000 in the aggregate.

 

SECTION 5.5. LOANS, ADVANCES, INVESTMENTS.  Make any loans or advances to or
investments in any person or entity, except for (a) any of the foregoing
existing as of, and disclosed to Bank prior to, the date hereof, and (b) any of
the foregoing made hereafter which are permitted under the terms and provisions
of the GECC Letter of Credit Documents, as same may be amended by any amendment
consented to by Bank.

 

SECTION 5.6. PLEDGE OF ASSETS.  Mortgage, pledge, grant or permit to exist a
security interest in, or lien upon, all or any portion of Borrower’s assets now
owned or hereafter acquired, except (a) any of the foregoing in favor of Bank or
which is existing as of, and disclosed to Bank in writing prior to, the date
hereof, and (b) any of the foregoing done or incurred hereafter which are
permitted under the terms and provisions of the GECC Letter of Credit Documents,
as same may be amended by any amendment consented to by Bank.

 

SECTION 5.7.  DIVIDENDS, DISTRIBUTIONS.  Declare or pay any dividend or
distribution either in cash, stock or any other property on Borrowers stock now
or hereafter outstanding, nor

 

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redeem, retire, repurchase or otherwise acquire any shares of any class of
Borrower’s stock now or hereafter outstanding, except for any of the foregoing
which are permitted under the terms of the GECC Letter of Credit Documents, as
same may be amended by any amendment consented to by Bank.

 

ARTICLE VI

EVENTS OF DEFAULT

 

SECTION 6.l.  The occurrence of any of the following shall constitute an “Event
of Default” under this Agreement (as used herein, “Business Day” means any day
except a Saturday, Sunday or   any other day on which commercial banks in
Washington are authorized or required by law to close):

 

(a)           Borrower shall fail to pay within five (5) Business Days of the
date when due, any principal, interest or fees payable under any of the Loan
Documents.

 

(b)           Borrower shall fail to pay within five (5) Business Days after
demand by Bank, any expense reimbursement or other amount (other than an amount
covered in (a) above) payable under any of the Loan Documents.

 

(c)           Any financial statement or certificate furnished to Bank in
connection with, or any representation or warranty made by Borrower or any other
party under this Agreement or any other Loan Document shall prove to be
incorrect, false or misleading in any material respect when furnished or made.

 

(d)           Any default in the performance of or compliance with any
obligation, agreement or other provision contained herein or in any other Loan
Document (other than those referred to in subsections (a), (b) and (c) above),
and with respect to any such default which by its nature can be cured, such
default shall continue for a period of thirty (30) days from its occurrence.

 

(e)           Any default in the payment or performance of any obligation, or
any defined event of default, under the terms of any contract or instrument
(other than any of the Loan Documents) pursuant to which Borrower has incurred
any debt or other liability to any person or entity, including Bank; provided,
however, that any cure period applicable thereto has expired and in the case of
a default or defined event of default to a person or entity other than Bank,
such indebtedness is in excess of $1,000,000.00, individually or in the
aggregate for all such defaults combined.

 

(f)            The filing of a notice of judgment lien against Borrower; or the
recording of any abstract of judgment against Borrower in any county in which
Borrower has an interest in real property; or the service of a notice of levy
and/or of a writ of attachment or execution, or other like process, against the
assets of Borrower; or the entry of a judgment against Borrower; provided,
however, that such judgments, liens, levies, executions and other process
involve debts of or claims against Borrower in excess of $1,000,000.00,
individually or in the aggregate for all such matters combined, and within
thirty (30) days after the creation thereof, or at least ten (10) days prior to
the date on which any assets could be lawfully sold in satisfaction thereof,
such debt or claim is not satisfied or stayed pending appeal and insured against
in a manner satisfactory to Bank.

 

(g)           Borrower shall become insolvent, or shall suffer or consent to or
apply for the appointment of a receiver, trustee, custodian or liquidator of
itself or any of its property, or shall generally fail to pay its debts as they
become due, or shall make a general assignment for the benefit of

 

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creditors; Borrower shall file a voluntary petition in bankruptcy, or seeking
reorganization, in order to effect a plan or other arrangement with creditors or
any other relief under the Bankruptcy Reform Act, Title 11 of the United States
Code, as amended or recodified from time to time (“Bankruptcy Code”), or under
any state or federal law granting relief to debtors, whether now or hereafter in
effect; or any involuntary petition or proceeding pursuant to the Bankruptcy
Code or any other applicable state or federal law relating to bankruptcy,
reorganization or other relief for debtors is filed or commenced against
Borrower, and such involuntary petition or proceeding is unopposed or is not
dismissed within sixty (60) days of its commencement; or Borrower shall file an
answer admitting the jurisdiction of the court and the material allegations of
any involuntary petition; or Borrower shall be adjudicated a bankrupt, or an
order for relief shall be entered against Borrower by any court of competent
jurisdiction under the Bankruptcy Code or any other applicable state or federal
law relating to bankruptcy, reorganization or other relief for debtors.

 

(h)           The dissolution or liquidation of Borrower; or Borrower, or any of
its directors, stockholders or members, shall take action seeking to effect the
dissolution or liquidation of Borrower.

 

SECTION 6.2. REMEDIES.  Upon the occurrence of any Event of Default: (a) all
indebtedness of Borrower under each of the Loan Documents, any term thereof to
the contrary notwithstanding, shall at Bank’s option and without notice become
immediately due and payable without presentment, demand, protest or notice of
dishonor, all of which are hereby expressly waived by each Borrower; (b) the
obligation, if any, of Bank to extend any further credit under any of the Loan
Documents shall immediately cease and terminate; and (c) Bank shall have all
rights, powers and remedies available under each of the Loan Documents, or
accorded by law, including without limitation the right to resort to any or all
security for any credit subject hereto and to exercise any or all of the rights
of a beneficiary or secured party pursuant to applicable law.  All rights,
powers and remedies of Bank may be exercised at any time by Bank and from time
to time after the occurrence of an Event of Default, are cumulative and not
exclusive, and shall be in addition to any other rights, powers or remedies
provided by law or equity.

 

ARTICLE VII

MISCELLANEOUS

 

SECTION 7.1. RELATIONSHIP WITH GECC DOCUMENTS.  In each case in Sections 5.2,
5.3, 5.4, 5.5, 5.6 and 5.7 of this Agreement where it is indicated that
something may be done by Borrower if such action is permitted under the terms
and provisions of the GECC Letter of Credit Documents, it is acknowledged that
(a) to the extent the consent of the “Creditor” under the GECC Letter of Credit
Documents is required as a condition to taking such action thereunder, then the
consent of Bank shall be required for such action to be permitted hereunder, and
(b) to the extent Borrower would be required to give the “Creditor” under the
GECC Letter of Credit Documents certain notices or information as a condition to
taking such action thereunder, then Borrower shall be required to give Bank such
notices and information for such action to be permitted hereunder.

 

SECTION 7.2. NO WAIVER.  No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy.  Any waiver, permit, consent or approval of any
kind by Bank of any breach of

 

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or default under any of the Loan Documents must be in writing and shall be
effective only to the extent set forth in such writing.

 

SECTION 7.3. NOTICES.  All notices, requests and demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:

 

BORROWER:

LABOR READY, INC.

 

ATTN:  General Counsel

 

P.O. Box 2910

 

Tacoma, WA 98402-2910

 

BANK:

WELLS FARGO BANK, NATIONAL ASSOCIATION

 

1201 Pacific Avenue, 3rd Floor

 

Tacoma, WA 98402

 

or to such other address as any party may designate by written notice to all
other parties; provided, however, that Bank may also deliver notices, requests
and demands to Borrower under this Agreement by hand delivery to Borrower at the
following street address or to such other street address as Borrower may
designate by written notice to Bank:

 

 

LABOR READY, INC.

 

ATTN: General Counsel

 

1015 A Street

 

Tacoma, Washington 98402

 

Each such notice, request and demand shall be deemed given or made as follows:
(a) if sent by hand delivery, upon delivery; (b) if sent by mail, upon the
earlier of the date of receipt or three (3) days after deposit in the U.S. mail,
first class and postage prepaid; and (c) if sent by telecopy, upon receipt.

 

SECTION 7.4. COSTS, EXPENSES AND ATTORNEYS’ FEES.  Borrower shall pay to Bank
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys’ fees (to include outside
counsel fees and all allocated costs of Bank’s in-house counsel), expended or
incurred by Bank in connection with (a) the negotiation and preparation of this
Agreement and the other Loan Documents, Bank’s continued administration hereof
and thereof, and the preparation of any amendments and waivers hereto and
thereto, (b) the enforcement of Bank’s rights and/or the collection of any
amounts which become due to Bank under any of the Loan Documents, and (c) the
prosecution or defense of any action in any way related to any of the Loan
Documents, including without limitation, any action for declaratory relief,
whether incurred at the trial or appellate level, in an arbitration proceeding
or otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to any
Borrower or any other person or entity.

 

SECTION 7.5.  SUCCESSORS, ASSIGNMENT.  This Agreement shall be binding upon and
inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interest hereunder without Bank’s prior
written consent.  Bank reserves the right to sell, assign, transfer, negotiate
or grant participations in all or any part of, or any interest in, Bank’s rights
and benefits under each of the Loan Documents.  In connection therewith, Bank
may disclose all documents and information which Bank

 

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now has or may hereafter acquire relating to any credit subject hereto, Borrower
or its business, or any collateral required hereunder.

 

SECTION 7.6. ENTIRE AGREEMENT; AMENDMENT.  This Agreement and the other Loan
Documents constitute the entire agreement between Borrower and Bank with respect
to each credit subject hereto and supersede all prior negotiations,
communications, discussions and correspondence concerning the subject matter
hereof.  This Agreement may be amended or modified only in writing signed by
each party hereto.

 

SECTION 7.7. NO THIRD PARTY BENEFICIARIES.  This Agreement is made and entered
into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.

 

SECTION 7.8. TIME.  Time is of the essence of each and every provision of this
Agreement and each other of the Loan Documents.

 

SECTION 7.9. SEVERABILITY OF PROVISIONS.  If any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.

 

SECTION 7.10. COUNTERPARTS.  This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be an
original, and all of which when taken together shall constitute one and the same
Agreement.

 

SECTION 7.11. GOVERNING LAW.  This Agreement shall be governed by and construed
in accordance with the laws of the State of Washington.

 

SECTION 7.12. ARBITRATION.

 

(a)           Arbitration.  The parties hereto agree, upon demand by any party,
to submit to binding arbitration all claims, disputes and controversies between
or among them (and their respective employees, officers, directors, attorneys,
and other agents), whether in tort, contract or otherwise arising out of or
relating to in any way (i) the loan and related Loan Documents which are the
subject of this Agreement and its negotiation, execution, collateralization,
administration, repayment, modification, extension, substitution, formation,
inducement, enforcement, default or termination; or (ii) requests for additional
credit.

 

(b)           Governing Rules.  Any arbitration proceeding will (i) proceed in a
location in WashingtoVn selected by the American Arbitration Association
(“AAA”); (ii) be governed by the Federal Arbitration Act (Title 9 of the United
States Code), notwithstanding any conflicting choice of law provision in any of
the documents between the parties; and (iii) be conducted by the AAA, or such
other administrator as the parties shall mutually agree upon, in accordance with
the AAA’s commercial dispute resolution procedures, unless the claim or
counterclaim is at least $1,000,000.00 exclusive of claimed interest,
arbitration fees and costs in which case the arbitration shall be conducted in
accordance with the AAA’s optional procedures for large, complex commercial
disputes (the commercial dispute resolution procedures or the optional

 

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procedures for large, complex commercial disputes to be referred to, as
applicable, as the “Rules”).  If there is any inconsistency between the terms
hereof and the Rules, the terms and procedures set forth herein shall control. 
Any party who fails or refuses to submit to arbitration following a demand by
any other party shall bear all costs and expenses incurred by such other party
in compelling arbitration of any dispute.  Nothing contained herein shall be
deemed to be a waiver by any party that is a bank of the protections afforded to
it under 12 U.S.C. §91 or any similar applicable state law.

 

(c)           No Waiver of Provisional Remedies, Self-Help and Foreclosure.  The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding.  This exclusion does not constitute a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise of
the actions detailed in sections (i), (ii) and (iii) of this paragraph.

 

(d)           Arbitrator Qualifications and Powers.  Any arbitration proceeding
in which the amount in controversy is $5,000,000.00 or less will be decided by a
single arbitrator selected according to the Rules, and who shall not render an
award of greater than $5,000,000.00. Any dispute in which the amount in
controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel
of three arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations.  The arbitrator will be a neutral
attorney licensed in the State of Washington or a neutral retired judge of the
state or federal judiciary of Washington, in either case with a minimum of ten
years experience in the substantive law applicable to the subject matter of the
dispute to be arbitrated.  The arbitrator will determine whether or not an issue
is arbitratable and will give effect to the statutes of limitation in
determining any claim.  In any arbitration proceeding the arbitrator will decide
(by documents only or with a hearing at the arbitrator’s discretion) any
pre-hearing motions which are similar to motions to dismiss for failure to state
a claim or motions for summary adjudication.  The arbitrator shall resolve all
disputes in accordance with the substantive law of Washington and may grant any
remedy or relief that a court of such state could order or grant within the
scope hereof and such ancillary relief as is necessary to make effective any
award.  The arbitrator shall also have the power to award recovery of all costs
and fees, to impose sanctions and to take such other action as the arbitrator
deems necessary to the same extent a judge could pursuant to the Federal Rules
of Civil Procedure, the Washington Rules of Civil Procedure or other applicable
law.  Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction.  The institution and maintenance of an action for
judicial relief or pursuit of a provisional or ancillary remedy shall not
constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration if any other party contests such
action for judicial relief.

 

(e)           Discovery.  In any arbitration proceeding discovery will be
permitted in accordance with the Rules.  All discovery shall be expressly
limited to matters directly relevant

 

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to the dispute being arbitrated and must be completed no later than 20 days
before the hearing date and within 180 days of the filing of the dispute with
the AAA.  Any requests for an extension of the discovery periods, or any
discovery disputes, will be subject to final determination by the arbitrator
upon a showing that the request for discovery is essential for the party’s
presentation and that no alternative means for obtaining information is
available.

 

(f)            Class Proceedings and Consolidations.  The resolution of any
dispute arising pursuant to the terms of this Agreement shall be determined by a
separate arbitration proceeding and such dispute shall not be consolidated with
other disputes or included in any class proceeding.

 

(g)           Payment of Arbitration Costs And Fees.  The arbitrator shall award
all costs and expenses of the arbitration proceeding.

 

(h)           Miscellaneous.  To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the dispute with the
AAA.  No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business or by applicable law or
regulation.  If more than one agreement for arbitration by or between the
parties potentially applies to a dispute, the arbitration provision most
directly related to the Loan Documents or the subject matter of the dispute
shall control.  This arbitration provision shall survive termination, amendment
or expiration of any of the Loan Documents or any relationship between the
parties.

 

SECTION 7.13. CONFIDENTIALITY.

 

(a)           Confidential Information.  As used herein, the term “Confidential
Information” shall mean all non-public, confidential and/or proprietary
information of Borrower, now or at any time hereafter provided to Bank by
Borrower, or any of Borrower’s officers, employees, agents or representatives,
in connection with this Agreement.

 

(b)           Use of Information.  The Confidential Information will be used by
Bank solely for the purpose of evaluating Borrower’s credit requests and/or
Bank’s ongoing credit accommodations to Borrower.

 

(c)           Confidentiality.  Bank will keep all the Confidential Information
confidential, and will not disclose any of the Confidential Information to any
person or entity, except disclosures: (i) to federal and state bank examiners,
and other regulatory officials having jurisdiction over Bank, (ii) to Bank’s
legal counsel and auditors, (iii) to other professional advisors to Bank, (iv)
to Bank’s representatives (which shall include, without limitation, all other
banks and companies affiliated with Wells Fargo & Company) who need to know the
Confidential Information for the purpose of evaluating Borrower’s credit
requests and/or Bank’s ongoing credit accommodations to Borrower, it being
expressly understood and agreed that such representatives shall be informed of
the confidential nature of the Confidential Information, and shall be required
by Bank to treat the Confidential Information as confidential in accordance with
the terms and conditions hereof; (v) as otherwise required by law or legal
process, (vi) to any actual or potential assignee of or participant in Bank’s
rights and interests under the Loan Documents, so long as such person or entity
agrees in writing to be bound by the provisions of this Section 7.13, (vii) to
the extent reasonably required in connection with the exercise of any remedy
hereunder, or (viii) as otherwise authorized by Borrower in writing.

 

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(d)           Legal Process.  In the event that Bank or any of its
representatives becomes legally compelled to disclose any of the Confidential
Information pursuant to Section 7.13(c)(v) above, hereof, then Bank, except as
otherwise required by law, will provide notice thereof to Borrower so that
Borrower, at its sole option (but without obligation to do so), may attempt to
seek a protective order or other appropriate remedy and/or waive compliance with
the provisions of this Agreement.

 

(e)           Public Information.  The confidentiality requirement set forth
herein shall not extend to any portion of the Confidential Information that: (a)
is or becomes generally available to the public other than as a result of a
disclosure by Bank or its representatives; (b) is or becomes available to Bank
on a non-confidential basis by Borrower or any officer, employee, agent or
representative of Borrower prior to its disclosure by Bank; or (c) is or becomes
available to Bank on a non-confidential basis from a source other than Borrower.

 

ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR
ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day and year first written above.

 

 

 

WELLS FARGO BANK,

LABOR READY, INC.

 

NATIONAL ASSOCIATION

 

/s/ Steve C. Cooper

 

By:

/s/ Edward Forman

 

 

Title:  Vice President

 

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