Exhibit 10.1

 

CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT (this “Agreement”) is entered into effective as of
December 29, 2014, by and between BARRETT BUSINESS SERVICES, INC., a Maryland
corporation (“Borrower”), and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”).
This Agreement amends, restates and supersedes in its entirety that certain
Restated Credit Agreement dated November 1, 2012 by and between Borrower and
Bank, as such may have been amended from time to time prior to the date hereof.

 

RECITALS

 

Borrower has requested that Bank extend or continue to extend 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. LINE OF CREDIT.

 

(a) Line of Credit. 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
October 1, 2017, not to exceed at any time the aggregate principal amount of
Fourteen Million Dollars ($14,000,000.00) (“Line of Credit”), the proceeds of
which shall be used to finance working capital for Borrower. Borrower’s
obligation to repay advances under the Line of Credit shall be evidenced by a
promissory note dated as of December 29, 2014 (“Line of Credit Note”), all terms
of which are incorporated herein by this reference.

 

(b) Letter of Credit Subfeature. As a subfeature under the Line of Credit, Bank
agrees from time to time during the term thereof to issue or cause an affiliate
to issue standby letters of credit for the account of Borrower (each, a “Line of
Credit Letter of Credit” and collectively, “Line of Credit Letters of Credit”);
provided however, that the aggregate undrawn amount of all outstanding Line of
Credit Letters of Credit (including without limitation the Existing Line of
Credit Letters of Credit, as that term is defined in Section 1.1(b)(ii) below)
shall not at any time exceed Five Million Dollars ($5,000,000.00).

 

(i) The form and substance of each Line of Credit Letter of Credit shall be
subject to approval by Bank, in its sole discretion. Each Line of Credit Letter
of Credit shall be issued for a term not to exceed three hundred eighty (380)
days, as designated by Borrower; provided however, that no Line of Credit Letter
of Credit shall have an expiration date more than three hundred sixty-five (365)
days beyond the maturity date of the Line of Credit. The undrawn amount of all
Line of Credit Letters of Credit (including the Existing Line of Credit Letters
of Credit) shall be reserved under the Line of Credit and shall not be available
for borrowings thereunder. Each Line of Credit Letter of Credit shall be subject
to the additional terms and conditions of the Letter of Credit Agreement (as
that term is defined in Section 1.1(b)(ii) below), applications and any related
documents required by Bank in connection with the issuance thereof. Each drawing
paid under a Line of Credit Letter of Credit shall be deemed an advance under
the Line of Credit and shall be repaid by Borrower in accordance with the terms
and conditions of this Agreement applicable to such advances; provided however,
that if advances under the Line of Credit are not available, for any reason, at
the time any drawing is paid, then Borrower shall immediately pay to Bank the
full amount drawn, together with interest thereon from the date such drawing is
paid to the date such amount is fully repaid by Borrower, at the rate of
interest applicable to advances under the Line of Credit. In such event,
Borrower agrees that Bank, in its sole discretion, may debit any account
maintained by Borrower with Bank for the amount of any such drawing.

 

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(ii) Bank has issued or caused an affiliate to issue the following standby
letters of credit (each an “Existing Line of Credit Letter of Credit” and
collectively, the “Existing Line of Credit Letters of Credit”), each of which is
subject to the terms of that certain Standby Letter of Credit Agreement (Credit
Agreement/Loan Agreement Version) between Bank and Borrower dated September 18,
2012, as amended (the “Letter of Credit Agreement”), together with applications
and any related documents required by Bank in connection with the issuance (and
any renewal) thereof, and is outstanding as of the date hereof: (A) Standby
Letter of Credit No. NZS504587 in the amount of Two Million Five Hundred
Thousand Dollars ($2,500,000.00) dated December 8, 2003, as amended from time to
time, and (B) Standby Letter of Credit No. NZS401574 in the amount of One
Million Six Hundred Fifty Thousand Dollars ($1,650,000.00) dated June 20, 2001,
as amended from time to time.

 

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

 

SECTION 1.2 TERM LOAN 1.

 

(a) Term Loan 1. Bank has made a loan to Borrower in the original principal
amount of Five Million Five Hundred Twelve Thousand Five Hundred Dollars
($5,512,500.00) (“Term Loan 1”), on which the outstanding principal balance as
of the date hereof is $5,053,125.00. Borrower’s obligation to repay Term Loan 1
is evidenced by a promissory note dated as of November 1, 2012, as amended
(“Term Note 1”), all terms of which are incorporated herein by this reference.
Any reference in Term Note 1 to any prior loan agreement between Bank and
Borrower shall be deemed a reference to this Agreement. Subject to the terms and
conditions of this Agreement, Bank hereby confirms that Term Loan 1 remains in
full force and effect.

 

(b) Repayment. Principal and interest on Term Loan 1 shall be repaid in
accordance with the provisions of Term Note 1.

 

(c) Prepayment. Borrower may prepay principal on Term Loan 1 solely in
accordance with the provisions of Term Note 1.

 

SECTION 1.3. TERM LOAN 2.

 

(a) Term Loan 2. Subject to the terms and conditions of this Agreement, Bank
hereby agrees to make a loan to Borrower in the principal amount of Forty
Million Dollars ($40,000,000.00) (“Term Loan 2”), the proceeds of which shall be
used to fund insurance reserves of Borrower and its wholly-owned subsidiaries.
Borrower’s obligation to repay Term Loan 2 shall be evidenced by a promissory
note dated as of December 29, 2014 (“Term Note 2”), all terms of which are
incorporated herein by this reference. Bank’s commitment to grant the Term Loan
2 shall terminate on January 31, 2015.

 

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(b) Repayment. Principal and interest on Term Loan 2 shall be repaid in
accordance with the provisions of Term Note 2.

 

(c) Prepayment. Borrower may prepay principal on Term Loan 2 solely in
accordance with the provisions of Term Note 2.

 

SECTION 1.4. INSURANCE LETTERS OF CREDIT.

 

(a) Insurance Letters of Credit.

 

(i) Existing Insurance Letters of Credit. In addition to the Existing Line of
Credit Letters of Credit, Bank has issued or caused an affiliate to issue the
following standby letters of credit for the account of Borrower, each of which
is subject to the terms of the Letter of Credit Agreement and is outstanding as
of the date hereof (each an “Existing Insurance Letter of Credit” and
collectively, the “Existing Insurance Letters of Credit”): (A) Standby Letter of
Credit No. IS0133585U in the amount of Five Million Dollars ($5,000,000.00), for
the benefit of Atlantic Specialty Insurance Company dated December 19, 2013, as
amended from time to time (the “Existing Atlantic SLC”); (B) Standby Letter of
Credit No. IS0133605U in the amount of Five Million Dollars ($5,000,000.00), for
the benefit of Argonaut Insurance Co. dated December 19, 2013, as amended from
time to time (the “Existing Argonaut SLC”); and (C) Standby Letter of Credit No.
IS0133565U in the amount of Ten Million Nine Hundred Forty-Three Thousand Four
Hundred Sixty-Six and 20/100 Dollars ($10,943,466.20) for the benefit of
Westchester Fire Insurance Company dated December 19, 2013, as amended from time
to time (the “Existing Westchester SLC”).

 

(ii) Amended Insurance Letters of Credit. Subject to the terms of this
Agreement, Bank hereby agrees, for the benefit of Borrower to secure a portion
of Borrower’s obligations to issuers of surety bonds issued to the Self
Insurance Plans of the State of California, to amend or cause an affiliate to
amend: (A) the Existing Atlantic SLC to increase the amount thereof from Five
Million Dollars ($5,000,000.00) to Fifteen Million Dollars ($15,000,000.00); (B)
the Existing Argonaut SLC to increase the amount thereof from Five Million
Dollars ($5,000,000.00) to Fifteen Million Dollars ($15,000,000.00); and (C) the
Existing Westchester SLC to increase the amount thereof from Ten Million Nine
Hundred Forty-Three Thousand Four Hundred Sixty-Six and 20/100 Dollars
($10,943,466.20) to Eighty-Four Million Three Hundred Thirty-Four Thousand Six
Hundred Sixty and 20/100 Dollars ($84,334,660.20). The form and substance of
each such amended Existing Insurance Letter of Credit shall be subject to
approval by Bank, in its sole discretion. For purposes of this Agreement,
“Insurance Letters of Credit” means, collectively, the Existing Insurance
Letters of Credit, amended as contemplated in this Section 1.4(a)(ii).

 

(iii) Additional Terms. Each of the Insurance Letters of Credit shall remain
subject to the additional terms of the Letter of Credit Agreement, applications
and any related documents required by Bank in connection with the issuance (and
any renewal) thereof. Notwithstanding the provisions of any Insurance Letter of
Credit regarding automatic extension of its expiration date, Bank may, at its
sole option, give notice to the beneficiary thereof in accordance with the terms
of such Insurance Letter of Credit that Bank has elected not to renew such
Insurance Letter of Credit beyond its current expiration date (or any other
subsequent expiration date that may be agreed to by Bank at Bank’s sole
discretion). If Borrower does not at any time want any Insurance Letter of
Credit to be renewed, Borrower will so notify Bank at least fifteen (15)
calendar days before Bank is to notify the beneficiary thereof of such
nonrenewal pursuant to the terms of such Insurance Letter of Credit.

 

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(b) Repayment of Drafts. Each drawing paid under the Insurance Letters of Credit
shall be repaid by Borrower in accordance with the provisions of the Letter of
Credit Agreement.

 

SECTION 1.5. INTEREST/FEES.

 

(a) Interest. The outstanding principal balance of the Line of Credit, Term Loan
1 and Term Loan 2 shall bear interest, and the amount of each drawing paid under
any Line of Credit Letter of Credit and any Insurance Letter of Credit shall
bear interest from the date such drawing is paid to the date such amount is
fully repaid by Borrower, at the rate of interest set forth in each promissory
note or other instrument or document executed in connection therewith.

 

(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 or document required
hereby.

 

(c) Commitment Fee. Borrower shall pay to Bank a non-refundable commitment fee
for Term Loan 2 equal to Four Hundred Thousand Dollars ($400,000.00), which fee
shall be due and payable in full on the earlier of (i) the date of funding of
Term Loan 2, or (ii) January 15, 2015.

 

(d) Unused Commitment Fee. Borrower shall pay to Bank a fee equal to thirty-five
one hundredths of one percent (0.35%) per annum (computed on the basis of a
360-day year, actual days elapsed) on the daily unused amount of the Line of
Credit, which fee shall be calculated on a quarterly basis by Bank and shall be
due and payable by Borrower in arrears on the first day of each quarter,
commencing on April 1, 2015.

 

(e) Line of Credit Letter of Credit Fees. Borrower shall pay to Bank (i) fees
upon the issuance of each Line of Credit Letter of Credit equal to one and
three-quarters percent (1.75%) per annum (computed on the basis of a 360-day
year, actual days elapsed) of the face amount thereof, and (ii) fees upon the
payment or negotiation of each drawing under any Line of Credit Letter of Credit
and fees upon the occurrence of any other activity with respect to any Line of
Credit Letter of Credit (including without limitation, the transfer, amendment
or cancellation of any Line of Credit Letter of Credit) determined in accordance
with Bank's standard fees and charges then in effect for such activity.

 

(f) Insurance Letter of Credit Fees. Borrower shall pay to Bank (i) fees upon
the issuance of each Insurance Letter of Credit equal to ninety-five one
hundredths of one percent (0.95%) per annum (computed on the basis of a 360-day
year, actual days elapsed) of the face amount thereof, and (ii) fees upon the
payment or negotiation of each drawing under any Insurance Letter of Credit and
fees upon the occurrence of any other activity with respect to any Insurance
Letter of Credit (including without limitation, the transfer, amendment or
cancellation of any Insurance Letter of Credit) determined in accordance with
Bank’s standard fees and charges then in effect for such activity.

 

SECTION 1.6. COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect all
principal, interest and fees due under each credit subject hereto by debiting
Borrower’s deposit account number 4159583848 with Bank, or any other deposit
account maintained by Borrower with Bank, for the full amount thereof. Should
there be insufficient funds in any such deposit account to pay all such sums
when due, the full amount of such deficiency shall be immediately due and
payable by Borrower.

 

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SECTION 1.7. COLLATERAL.

 

As security for all indebtedness and other obligations of Borrower to Bank,
Borrower shall grant, and hereby confirms its prior grant, to Bank security
interests of first priority in all Borrower’s accounts receivable and other
rights to payment, general intangibles, inventory and equipment.

 

As security for all indebtedness and other obligations of Borrower to Bank under
Term Loan 1, Borrower shall grant, and hereby confirms its prior grant, to Bank
a lien of not less than first priority on that certain real property located at
8100 NE Parkway Drive, Vancouver, Washington 98662.

 

As security for all indebtedness and other obligations of Borrower to Bank under
the Insurance Letters of Credit, Borrower shall cause Associated Insurance
Company for Excess, an Arizona corporation (“AICE”), to grant, and confirm its
prior grant, to Bank security interests of first priority in (i) deposit account
number xxxxxxxxxx with Bank (“AICE Deposit Account No. 1”), (ii) deposit account
number xxxxxxxxx with Bank (“AICE Deposit Account No. 2”), and (iii) deposit
account number xxxxxxxxx with Bank (“AICE Deposit Account No. 3”) (the deposit
accounts described in clauses (i) through (iii) in this sentence, collectively,
the “AICE Deposit Accounts”).

 

All of the foregoing shall be evidenced by and subject to the terms of such
security agreements, financing statements, deeds or mortgages, and other
documents as Bank shall reasonably require, all in form and substance
satisfactory to Bank. Borrower shall pay to Bank immediately upon demand the
full amount of all charges, costs and expenses (to include fees paid to third
parties and all allocated costs of Bank personnel), expended or 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 2.1. LEGAL STATUS. Borrower is a corporation, duly organized and
existing and in good standing under the laws of Maryland, 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. Each of the Affiliates (as that term is
defined in Section 4.3(b) below) is a corporation, duly organized and existing
and in good standing under the laws of the state of its incorporation, 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, individually or in the aggregate, on each
of the Affiliates.

 

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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
Bylaws of Borrower or any of its Affiliates, or result in any breach of or
default under any contract, obligation, indenture or other instrument to which
Borrower or any of the Affiliates is a party or by which Borrower or any of the
Affiliates 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 or any of the Affiliates other than those disclosed by
Borrower to Bank in writing prior to the date hereof.

 

SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The annual financial statement
of Borrower dated December 31, 2013, and all interim financial statements
delivered to Bank since said date, true copies of which have been delivered by
Borrower to Bank prior to the date hereof, (a) are complete and correct and
present fairly the financial condition of Borrower, (b) disclose 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) have been prepared in accordance with generally
accepted accounting principles consistently applied. Since the dates of such
financial statements there has been no material adverse change in the financial
condition of Borrower or any of its Affiliates, nor has Borrower or any of its
Affiliates 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. As of the date hereof, Borrower is
solvent and, following the consummation of the transactions contemplated herein,
will continue to be solvent.

 

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 and each of the Affiliates 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.

 

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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. Neither Borrower nor any of the Affiliates is
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 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 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 construction 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) 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.

 

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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 or document
required hereby;

(ii) Second Amended and Restated Third Party Security Agreement: Specific Rights
to Payment;

(iii) First Modification to Term Note;

(iv) Corporate Resolution: Borrowing;

(v) Incumbency Certificate;

(vi) Corporate Resolution: Third Party Collateral [AICE];

(vii) Incumbency Certificate [AICE]; and

(viii) 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, any of
the Affiliates or any Third Party Obligor hereunder, if any, 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, any of
the Affiliates, or any such Third Party Obligor, if any.

 

(d) Insurance. Borrower shall have delivered to Bank evidence of insurance
coverage, in form, substance, amounts, covering risks and issued by companies
satisfactory to Bank, and where required by Bank, with lender 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,
including terrorism, as may be required by governmental regulation or Bank.

 

(e) Deposit Account Funds. Borrower shall have deposited, or caused AICE to
deposit, into AICE Deposit Account No. 3, in immediately available funds, cash
in an amount equal to $93,391,194.00 as a time deposit for a period not less
than three (3) months following the date hereof.

 

(f) Issuance of Surety Bonds. Each issuer of the surety bonds who are
beneficiaries of the Insurance Letters of Credit shall be irrevocably obligated
to issue, subject only to such issuer’s receipt of the respective Insurance
Letters of Credit, surety bonds to the State of California Department of
Industrial Relations Office of Self Insurance Plans (“OSIP”) in satisfaction of
Borrower’s security deposit required by OSIP with respect to worker’s
compensation obligations in the State of California in the aggregate dollar
amount of $190,557,767.00 comprised of: (i) a surety bond in the amount of
$25,000,000.00 issued by Atlantic Specialty Insurance Company; (ii) a surety
bond in the amount of $25,000,000.00 issued by Argonaut Insurance Co.; and (iii)
a surety bond or surety bonds in the amount of $140,557,767.00 issued by
Westchester Fire Insurance Company. Borrower shall have provided, or caused the
surety bond issuers to provide, to Bank true and correct copies of each of the
above described surety bonds.

 

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(g) Confirmation of Regulatory Authority. Bank shall have received written
confirmation, in form and substance satisfactory to Bank in its sole discretion,
that the transactions contemplated in this Agreement (including AICE’s pledge of
additional collateral securing the Insurance Letters of Credit) (i) satisfy the
obligations of Borrower to OSIP, and (ii) have been approved by the Department
of Insurance of the State of Arizona.

 

(h) Capitalization of AICE. Bank shall have received confirmation, in form and
substance satisfactory to Bank in its sole discretion, that (i) Borrower has
provided to AICE additional capital from Borrower’s cash on hand in an amount
not less than Thirty-Five Million Dollars ($35,000,000.00), which amount,
together with the proceeds of Term Loan 2, shall be sufficient to satisfy
Borrower’s obligations to the Department of Insurance of the State of Arizona
with respect to the required capital and surplus of AICE; and (ii) true and
correct copies of all corporate consents, approval and authorizations of
Borrower evidencing the capital contributions to AICE required by the Department
of Insurance of the State of Arizona.

 

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, and immediately upon demand by Bank, the amount
by which the outstanding principal balance of any credit subject hereto at any
time exceeds any limitation on borrowings applicable thereto.

 

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SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books and records of Borrower
and each of the Affiliates 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 and each of the
Affiliates.

 

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

 

(a) not later than 120 days after and as of the end of each fiscal year, an
audited consolidated financial statement of Borrower, prepared by a certified
public accountant acceptable to Bank, to include balance sheet, income
statement, and statement of cash flows and sources, and shall be accompanied by
the unqualified opinion of such accountant addressed to Bank;

 

(b) not later than 180 days after and as of the end of each fiscal year, an
audited financial statement for each of AICE, and Ecole Insurance Company, an
Arizona corporation wholly owned by Borrower (“Ecole”) (AICE and Ecole, each an
“Affiliate” and collectively, the “Affiliates”), prepared by a certified public
accountant acceptable to Bank, to include balance sheet, income statement and
statement of cash flows and sources, and shall be accompanied by the unqualified
opinion of such accountant addressed to Bank;

 

(c) promptly upon their becoming available, copies of (i) all financial
statements, reports, notices and proxy statements made publicly available by
Borrower to its security holders; (ii) all regular and periodic reports and all
registration statements and prospectuses, if any, filed by Borrower with any
securities exchange or with the U.S. Securities and Exchange Commission (“SEC”)
or any governmental or private regulatory authority, including, but not limited
to (A) not later than 95 calendar days after the end of each fiscal year,
Borrower’s 10-K filing with the SEC (including all exhibits and certifications)
for the fiscal year just ended, and (B) not later than 50 calendar days after
the end of each fiscal quarter, Borrower’s 10-Q filing with the SEC (including
all exhibits and certifications) for the fiscal quarter just ended; and (iii)
all press releases and other statements made available by Borrower to the public
concerning material changes or developments in the business of Borrower;

 

(d) not later than 30 days after and as of the end of each month, a borrowing
base certificate, and immediately upon each request from Bank, any supporting
information relating thereto requested by Bank;

 

(e) contemporaneously with each annual and quarterly financial statement of
Borrower and the Affiliates required hereby, a certificate of the president or
chief financial officer of Borrower that said financial statements are accurate,
that Borrower is in compliance with all financial covenants in this Agreement
(as evidenced by detailed calculations attached to such certificate), 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;

 

(f) annually, but in all events not later than October 15 of each year
(commencing October 15, 2015), true and correct copies of a Uniform Certificate
of Authority Application-Certificate of Compliance issued by the State of
Arizona Director of Insurance for each of the Affiliates indicating that, as of
a date no earlier than thirty (30) days prior to the date each such certificate
is delivered to Bank, each of the Affiliates is duly organized under the laws of
the State of Arizona and authorized to transact the relevant insurance business
of each of the Affiliates in the State of Arizona;

 

-10-

 

 

(g) annually, but in all events not later than April 30 of each year (commencing
April 30, 2015), true and correct copies of all third party actuarial reviews of
the workers’ compensation obligations of Borrower and the Affiliates, including
such actuarial reviews of Borrower and the Affiliates provided to OSIP.

 

(h) promptly upon Borrower’s receipt thereof each month, a true and correct copy
of the monthly actuarial consultant’s report provided to Borrower; and

 

(i) from time to time such other information as Bank may reasonably request,
including without limitation, copies of rent rolls and other information with
respect to any real property collateral required hereby.

 

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 or any of the Affiliates is organized and/or which
govern Borrower's or any of the Affiliates’ continued existence and with the
requirements of all laws, rules, regulations and orders of any governmental
authority applicable to Borrower and/or its business and to each of the
Affiliates and/or its business.

 

SECTION 4.5. INSURANCE. Maintain and keep in force, for each business in which
Borrower and each of the Affiliates is engaged, insurance of the types and in
amounts customarily carried in similar lines of business, including but not
limited to fire, extended coverage, public liability, flood, and, if required,
seismic property damage and workers’ compensation, with all such insurance
carried with companies and in amounts satisfactory to Bank, and deliver to Bank
from time to time at Bank’s request schedules setting forth all insurance then
in effect, together with a lender’s loss payee endorsement for all such
insurance naming Bank as a lender loss payee.

 

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 (a) such 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 or any of the Affiliates with
a claim in excess of $1,000,000.00.

 

SECTION 4.9. FINANCIAL CONDITION. Maintain Borrower’s consolidated 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 consolidated financial statements for the period ending December 31,
2014:

 

-11-

 

 

(a) Fixed Charge Coverage Ratio not less than 1.50 to 1.0 as of each fiscal
quarter end, determined on a rolling 4-quarter basis, with “Fixed Charge
Coverage Ratio” defined as (i) EBITDA minus distributions and dividends, plus
cash tax refunds less cash taxes paid, divided by (ii) prior period scheduled
principal payments plus interest plus current portion of capital lease payments,
with “EBITDA” defined as net profit before taxes plus interest expense (net of
capitalized interest expense), depreciation expense and amortization expense;
provided, however, that for purposes of calculating the Fixed Charge Coverage
Ratio: (i) $66,500,000 will be added to the numerator, and $5,000,000 will be
added to the denominator, for each of the periods ending December 31, 2014,
March 31, 2015 and June 30, 2015, and (ii) $5,000,000 will be added to the
denominator for the period ending September 30, 2015.

 

(b) Liquid Assets to Worker’s Compensation Claims & Safety Incentive Liabilities
not less than 1.0 to 1.0 as of each fiscal quarter end, with “Liquid Assets”
defined as the sum of (i) restricted and unrestricted cash and cash equivalents,
plus (ii) restricted and unrestricted marketable securities acceptable to Bank
in its sole discretion, and with “Worker’s Compensation Claims & Safety
Incentive Liabilities” defined as the aggregate of Borrower’s obligations with
respect to (i) workers’ compensation claims liabilities, and (ii) safety
incentive liabilities, in each case as the assets described in clauses (i) and
(ii) of the foregoing definition of “Liquid Assets” and as the liabilities
described in clauses (i) and (ii) of the foregoing definition of “Worker’s
Compensation Claims & Safety Incentive Liabilities” are required to be reflected
in Borrower’s annual audited consolidated financial statements and quarterly
unaudited consolidated financial statements, consistent with past practices.

 

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.

 

SECTION 4.11. MAINTENANCE OF AICE POLICIES. For so long as any one or more of
the Insurance Letters of Credit remains outstanding: (a) Borrower shall maintain
in full force and effect, and pay all premiums with respect to, all policies of
insurance with AICE outstanding as of the date hereof with respect to the
satisfaction of Borrower’s worker’s compensation obligations under the laws of
the State of California (the “AICE Policies”); and (b)  in the event any of the
AICE Policies are terminated or cancelled for any reason, Borrower shall
promptly cause all premiums refunded therefrom to be deposited into a deposit
account with Bank, in which Borrower shall (i) grant to Bank a security interest
of first priority and Bank shall have perfected its security interest therein,
and (ii) maintain in such deposit account funds in an amount sufficient to
satisfy all obligations of Borrower to Bank with respect to the Insurance
Letters of Credit.

 

SECTION 4.12. FUNDING OF AICE DEPOSIT ACCOUNTS. For so long as any one or more
of the Insurance Letters of Credit remain outstanding, Borrower shall provide
such financial support to AICE as is necessary to ensure that the principal
balance of time deposits in the AICE Deposit Accounts is no less than the then
outstanding aggregate dollar amount of the Insurance Letters of Credit (the
“Minimum Collateral Value”). In the event that the time deposit funds in the
AICE Deposit Accounts is, for any reason and at any time, less than the Minimum
Collateral Value, Borrower shall promptly provide to AICE funds, and shall cause
AICE to use such funds to increase the principal amount of the time deposit(s)
in the AICE Deposit Accounts, in an amount sufficient to achieve the Minimum
Collateral Value.

 

-12-

 

 

SECTION 4.13. DEPOSIT ACCOUNTS. Maintain Borrower’s principal deposit account
and other traditional banking relationships with Bank for the duration of this
Agreement.

 

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. CAPITAL EXPENDITURES. Make any additional investment in fixed
assets in (a) fiscal year 2015 in excess of an aggregate of $5,000,000.00, or
(b) fiscal year 2016 in excess of an aggregate of $4,000,000.00.

 

SECTION 5.3. 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 to Bank, and
(b) purchase money indebtedness (including capitalized leases) for the
acquisition of assets, provided that (i) the total new purchase money
indebtedness does not exceed $200,000.00 in any fiscal year, and (ii) the
aggregate of all purchase money indebtedness does not exceed $400,000.00 at any
time, and (c) any other liabilities of Borrower or any of the Affiliates
existing as of, and disclosed to the Bank prior to, the date hereof; provided,
however, that if Borrower or any of the Affiliates incurs indebtedness or
becomes liable to any third party to the extent permitted hereunder, neither
Borrower nor any of the Affiliates shall enter into any agreement with such
other party that prohibits Borrower or any of the Affiliates, as the case may
be, from incurring indebtedness with Bank or any affiliate of Bank or that
prohibits Borrower or any of the Affiliates from granting Bank or any affiliate
of Bank a lien on any real or personal property owned by Borrower or any of the
Affiliates, as the case may be.

 

SECTION 5.4. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or
consolidate with any other entity; make any substantial change in the nature of
Borrower's or any of the Affiliates’ business as conducted as of the date
hereof; acquire all or substantially all of the assets of any other entity; or
sell, lease, transfer or otherwise dispose of all or a substantial or material
portion of Borrower's or any of the Affiliates’ assets except in the ordinary
course of its business.

 

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SECTION 5.5. 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 any of the
foregoing in favor of Bank.

 

SECTION 5.6. LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to or
investments in, or permit any of the Affiliates to make any loans or advances to
or investments in, any person or entity, except any of the foregoing existing as
of, and disclosed to Bank prior to, the date hereof and except, in the case of
AICE, investments of insurance reserves in the ordinary course of business and
consistent with past practices.

 

SECTION 5.7. DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or
distribution either in cash, stock or any other property on Borrower’s stock now
or hereafter outstanding, nor redeem, retire, repurchase or otherwise acquire
any shares of any class of Borrower’s stock now or hereafter outstanding.
Notwithstanding the foregoing, so long as, after giving effect to such dividend
or distribution, no Event of Default would exist, Borrower may pay quarterly
cash dividends or distributions to its holders of its common stock in an amount
not to exceed $0.22 per share in the aggregate in any fiscal quarter (the
“Permitted Dividend Amount”); provided, however, that in the event Borrower,
after the date hereof, issues additional shares of its common stock, subdivides
its common stock, by split-up or otherwise, or combines its common stock, or
issues additional common stock as a dividend, then the Permitted Dividend Amount
shall be subject to adjustment as determined by Bank, in its sole discretion, to
give proportional effect to such event.

 

SECTION 5.8. 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) security interests or liens in favor of
Bank; (b) security interests or liens existing as of, and disclosed to Bank in
writing prior to, the date hereof; and (c) liens to secure purchase money
indebtedness permitted under Section 5.3 hereof.

 

SECTION 5.9. LINE OF CREDIT BORROWING LIMITATION. The principal amount
outstanding under the Line of Credit shall not, as of any fiscal month end,
exceed the sum of eighty percent (80%) of Borrower’s eligible accounts
receivable, with “eligible accounts receivable” defined as fifteen and seven
tenths of one percent (15.7%) of the aggregate dollar amount of Borrower’s then
outstanding accounts receivable; provided, however, that in the event the
principal amount outstanding under the Line of Credit exceeds the foregoing
limitation, Borrower shall be deemed in compliance with this Section 5.9 so long
as Borrower pays to Bank, within three (3) days after Borrower becomes aware of
any such excess, the amount such excess.

 

SECTION 5.10. NO CANCELLATION OF AICE POLICIES. Terminate or cancel any of the
AICE Policies without Bank’s prior written consent.

 

ARTICLE VI

EVENTS OF DEFAULT

 

SECTION 6.1. The occurrence of any of the following shall constitute an “Event
of Default” under this Agreement:

 

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(a) Borrower shall fail to pay when due any principal, interest, fees or other
amounts payable under any of the Loan Documents.

 

(b) 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.

 

(c) 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 specifically described as an “Event of Default” in this
section 6.1), and with respect to any such default that by its nature can be
cured, such default shall continue for a period of twenty (20) days from (i) its
occurrence, or (ii) solely with respect to Borrower’s information reporting
obligations under Section 4.3(d), Section 4.3 (g) or Section 4.3(h), Bank’s
giving of notice to Borrower of the occurrence thereof.

 

(d) Any default in the payment or performance of any obligation, or any defined
event of default, under the terms of any contract, instrument or document (other
than any of the Loan Documents) pursuant to which Borrower, any of the
Affiliates, any guarantor hereunder or any general partner or joint venturer in
Borrower if a partnership or joint venture (with each such guarantor, general
partner and/or joint venturer referred to herein as a “Third Party Obligor”) has
incurred any debt or other liability to any person or entity, including Bank.

 

(e) Borrower, any of the Affiliates, or any Third Party Obligor 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 creditors; Borrower, any of the Affiliates
or any Third Party Obligor 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 Borrower, any of the Affiliates or any Third
Party Obligor shall file an answer admitting the jurisdiction of the court and
the material allegations of any involuntary petition; or Borrower, any of the
Affiliates or any Third Party Obligor shall be adjudicated a bankrupt, or an
order for relief shall be entered against Borrower, any of the Affiliates or any
Third Party Obligor 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.

 

(f) The filing of a notice of judgment lien against Borrower, any of the
Affiliates or any Third Party Obligor; or the recording of any abstract of
judgment against Borrower, any of the Affiliates or any Third Party Obligor in
any county in which Borrower, any of the Affiliates or such Third Party Obligor
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, any of the Affiliates or any Third Party Obligor; or the entry of a
judgment against Borrower, any of the Affiliates or any Third Party Obligor; 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, any of the
Affiliates or any Third Party Obligor.

 

-15-

 

 

(g) There shall exist or occur any event or condition that Bank in good faith
believes impairs, or is substantially likely to impair, the prospect of payment
or performance by Borrower, any of the Affiliates, any Third Party Obligor, or
the general partner of either if such entity is a partnership, of its
obligations under any of the Loan Documents.

 

(h) The death or incapacity of Borrower or any Third Party Obligor if an
individual. The dissolution or liquidation of Borrower, any of the Affiliates or
any Third Party Obligor if a corporation, partnership, joint venture or other
type of entity; or Borrower, any of the Affiliates or any such Third Party
Obligor, or any of its directors, stockholders or members, shall take action
seeking to effect the dissolution or liquidation of Borrower, any of the
Affiliates or such Third Party Obligor.

 

(i) Any change in control of Borrower, any of the Affiliates or any entity or
combination of entities that directly or indirectly control Borrower or any of
the Affiliates, with “control” defined as ownership of an aggregate of
twenty-five percent (25%) or more of the common stock, members' equity or other
ownership interest (other than a limited partnership interest).

 

(j) The sale, transfer, hypothecation, assignment or encumbrance, whether
voluntary, involuntary or by operation of law, without Bank’s prior written
consent, of all or any part of or interest in any real property collateral
required hereby.

 

(k) Any amount is drawn on any of the Insurance Letters of Credit.

 

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 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. 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 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 7.2. 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:

 

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BORROWER:     BARRETT BUSINESS SERVICES, INC.   8100 NE Parkway Drive, Suite 200
  Vancouver, Washington 98662   Attn.: James D. Miller, Vice President-Finance  
    BANK: WELLS FARGO BANK, NATIONAL ASSOCIATION   Portland RCBO   MAC P6101-250
  1300 SW Fifth Avenue   Portland, Oregon 97201   Attn: Julie R. Wilson, Vice
President

 

or to such other address as any party may designate by written notice to all
other parties. 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 7.3. 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
Borrower or any other person or entity.

 

SECTION 7.4. 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 interests or rights 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 now has or
may hereafter acquire relating to any credit subject hereto, Borrower or its
business, any guarantor hereunder or the business of such guarantor, if any, or
any collateral required hereunder.

 

SECTION 7.5. 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 7.6. 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.

 

-17-

 

 

SECTION 7.7. TIME. Time is of the essence of each and every provision of this
Agreement and each other of the Loan Documents.

 

SECTION 7.8. 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 7.9. 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 7.10. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Oregon.

 

SECTION 7.11. 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 in any way arising out of or
relating to (i) any credit subject hereto, or any of the Loan Documents, and
their negotiation, execution, collateralization, administration, repayment,
modification, extension, substitution, formation, inducement, enforcement,
default or termination; or (ii) requests for additional credit. In the event of
a court ordered arbitration, the party requesting arbitration shall be
responsible for timely filing the demand for arbitration and paying the
appropriate filing fee within 30 days of the abatement order or the time
specified by the court. Failure to timely file the demand for arbitration as
ordered by the court will result in that party’s right to demand arbitration
being automatically terminated.

 

(b) Governing Rules. Any arbitration proceeding will (i) proceed in a location
in Oregon 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 procedures for large, complex
commercial disputes to be referred to herein, 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.

 

-18-

 

 

(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 Oregon or a neutral retired judge of the state
or federal judiciary of Oregon, 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 Oregon 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 Oregon 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 to the dispute being arbitrated and must be completed no later
than 20 days before the hearing date. 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. No party hereto shall be entitled to
join or consolidate disputes by or against others in any arbitration, except
parties who have executed any Loan Document, or to include in any arbitration
any dispute as a representative or member of a class, or to act in any
arbitration in the interest of the general public or in a private attorney
general capacity.

 

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

 

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(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.

 

(i) Small Claims Court. Notwithstanding anything herein to the contrary, each
party retains the right to pursue in Small Claims Court any dispute within that
court’s jurisdiction. Further, this arbitration provision shall apply only to
disputes in which either party seeks to recover an amount of money (excluding
attorneys’ fees and costs) that exceeds the jurisdictional limit of the Small
Claims Court.

 

UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY BANK
CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY
OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN
WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY BANK TO BE ENFORCEABLE.

 

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

 

BARRETT BUSINESS SERVICES, INC.   WELLS FARGO BANK, NATIONAL ASSOCIATION        
      By: /s/ James D. Miller   By: /s/ Julie R. Wilson   Name:   James D.
Miller   Name:   Julie R. Wilson   Title:   Vice President-Finance   Title:  
Vice President  

 

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