Document:

Exhibit 10.3

 

FIRST MODIFICATION TO TERM NOTE

 

This
FIRST modification to TERM NOTE (this “Modification”) is entered into as of December 29, 2014, by
and between BARRETT BUSINESS SERVICES, INC., a Maryland corporation (“Borrower”), and Wells
Fargo Bank, National Association (“Bank”).

 

RECITALS

 

WHEREAS, Borrower is currently indebted
to Bank pursuant to the terms and conditions of that certain Term Note in the maximum principal amount of $5,512,500.00 executed
by Borrower and payable to the order of Bank, dated as of November 1, 2012, as modified from time to time (the "Note"),
which Note is subject to the terms and conditions of a credit agreement between Borrower and Bank dated as of December 29, 2014,
as amended from time to time (the "Credit Agreement").

 

WHEREAS, Bank and Borrower have agreed to
certain changes in the terms and conditions set forth in the Note, and have agreed to modify the Note to reflect said changes.

 

NOW, THEREFORE, for valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that the Note shall be modified as follows:

 

1.The title of the Note is hereby amended to “Term
Note 1,” and the Note shall hereafter be referred to as Term Note 1.

 

2.The preamble to the Note is hereby amended to delete
the address of Bank’s office and to replace it with the following therefor:

 

“Portland RCBO, 1300 SW
Fifth Avenue, MAC P6101-250, Portland, Oregon 97201”

 

3.The Section of the Note entitled “REPAYMENT
AND PREPAYMENT” is hereby amended to delete the first sentence of Subsection (c) therein entitled “Prepayment”
and to replace it with the following therefor:

 

“From and after the date on which all of
Borrower’s obligations under that certain Term Note 2 in the original principal amount of $40,000,000.00 dated December 29,
2014 executed by Borrower in favor of Bank have been satisfied in full and Bank obligations to extend credit to Borrower thereunder
have been terminated, Borrower may prepay principal on this Note 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 this Note is less than said amount, the minimum
prepayment amount shall be the entire outstanding principal balance hereof.”

 

4.Except as expressly set forth herein, all terms and
conditions of the Note remain in full force and effect, without waiver or modification. All terms defined in the Note or the Credit
Agreement shall have the same meaning when used in this Modification. This Modification and the Note shall be read together, as
one document.

 

5.Borrower certifies that as of the date of this Modification
there exists no Event of Default under the Note, nor any condition, act or event which with the giving of notice or the passage
of time or both would constitute any such Event of Default. Borrower further certifies that, notwithstanding the modifications
set forth herein, all of the real property securing the Note shall remain subject to the lien, charge or encumbrance of the deed
of trust, mortgage or other document pursuant to which such lien, charge or encumbrance is created, and nothing contained herein
or done pursuant hereto shall affect or be construed to affect the priority of the lien, charge or encumbrance of any such deed
of trust, mortgage or other document over any other liens, charges or encumbrances.

 

    	-1-

    	 

    

 

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 Modification 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	 

 

    	-2-Exhibit 10.4

 

TERM NOTE 2

 

	$14,000,000.00	Portland, Oregon

December 29, 2014

 

FOR VALUE RECEIVED, the undersigned BARRETT
BUSINESS SERVICES, INC. ("Borrower") promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank")
at its office at Portland RCBO, 1300 SW Fifth Avenue, MAC P6101-250, Portland Oregon, 97201 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
Forty Million Dollars ($40,000,000.00), with interest thereon 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)"Daily One Month LIBOR" means, for any
day, the rate of interest equal to LIBOR then in effect for delivery for a one (1) month period.

 

(b)"LIBOR" means the rate of interest per
annum determined by Bank based on the rate for United States dollar deposits for delivery of funds for one (1) month as reported
on Reuters Screen LIBOR01 page (or any successor page) at approximately 11:00 a.m., London time, or, for any day not a London Business
Day, the immediately preceding London Business Day (or if not so reported, then as determined by Bank from another recognized source
or interbank quotation).

 

(c)"London Business Day" means any day that
is a day for trading by and between banks in Dollar deposits in the London interbank market.

 

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) at a fluctuating rate per
annum determined by Bank to be four percent (4%) above Daily One Month LIBOR in effect from time to time. Bank is hereby authorized
to note the date and interest rate applicable to this Note 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)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) costs, expenses and liabilities arising from or in connection
with reserve percentages 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), 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. 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.

 

    	-1-

    	 

    

 

(c)Payment of Interest. Interest accrued on this
Note shall be payable on the last day of each month, commencing January 31, 2015.

 

(d)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,
or at Bank's option upon the occurrence, and during the continuance of an Event of Default, the outstanding principal balance of
this Note shall bear interest 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.

 

REPAYMENT AND PREPAYMENT:

 

(a)Repayment. Principal shall be payable as follows:
Three Million Dollars ($3,000,000.00) on June 30, 2015; Seven Million Dollars ($7,000,000.00) on September 30, 2015; Fifteen Million
Dollars ($15,000,000.00) on December 31, 2015; Five Million Dollars ($5,000,000.00) on June 30, 2016; Five Million Dollars ($5,000,000.00)
on September 30, 2016; and a final payment consisting of all remaining unpaid principal due and payable in full on December 31,
2016.

 

(b)Mandatory Additional Principal
Payment. Not later than thirty (30) days after filing of Borrower’s 10-K with the U.S. Securities and Exchange Commission
for the fiscal year ended December 31, 2015, a principal payment in the dollar amount equal to sixty-five percent (65%) of Excess
Cash Flow in excess of $15,000,000 shall be payable, with “Excess Cash Flow” defined as EBITDA less cash taxes, less
cash interest, less $4,000,000 in capital expenditures, less loan payments due through December 31, 2015 and extra payments, and
less cash dividends, and with EBITDA defined as net profit before taxes plus interest expense (net of capitalized interest expense),
depreciation expense and amortization expense.

 

(c)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.

 

(d)Prepayment. Borrower may prepay principal
on this Note 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. All prepayments of principal shall be applied on the most remote principal installment
or installments then unpaid.

 

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 December 29, 2014 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.

 

    	-2-

    	 

    

 

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 Borrower. 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 holder's 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 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.

 

(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 Oregon.

 

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 undersigned has
executed this Note effective as of the date first written above.

 

BARRETT BUSINESS SERVICES, INC.

 

	By:   	/s/ James D. Miller	 
	Name:   	James D. Miller	 
	Title:   	Vice President-Finance	 

 

    	-3-

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