<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE YEAR ENDED ________________DECEMBER 31, 1995_______________
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________________ TO _______________
COMMISSION FILE NUMBER 0-23828
LABOR READY, INC.
(Exact name of registrant as specified in its Charter)
<TABLE>
<S> <C>
Washington 91-1287341
- --------------------------------------------- ---------------------------------------------
(State of Incorporation or Organization) (I.R.S. Employer Identification Number)
2156 Pacific Avenue, Tacoma, Washington 98402
- --------------------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip
Code)
(206) 383-9101
- --------------------------------------------------------------------------------------------
(Registrant's Telephone
Number)
Securities Registered Under Section 12(g) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
None None
- --------------------------------------------------------------------------------------------
Securities Registered Under Secton 12(g) of the Act:
Common Stock, No Par Value
- --------------------------------------------------------------------------------------------
(Title of class)
</TABLE>
Indicated by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of Registrant's knowledge, in any definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K / /
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the last ninety days. YES _X_ NO ___
The aggregate market value (based on the average between the bid and ask prices)
of the voting stock held by non-affiliates (4,076,306 shares) of the Registrant
at March 20, 1996 was approximately $79,487,967. As of March 20, 1996 there were
6,029,133 shares of the Registrant's common stock outstanding.
The Index to Exhibits appears on page 13.
No Documents are incorporated herein by reference.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
LABOR READY, INC.
FORM 10-K/A
PART 1.
ITEM 1. BUSINESS
INTRODUCTION
Labor Ready is a leading, national provider of temporary workers for manual
labor jobs. The Company's customers are primarily businesses in the
construction, freight handling, warehousing, landscaping, light manufacturing,
and other light industrial markets. These businesses require workers for
lifting, hauling, cleaning, assembling, digging, painting and other types of
manual work. The Company has rapidly grown from eight dispatch offices in 1991
to 106 dispatch offices at December 31, 1995. Substantially all of the growth in
dispatch offices was achieved by opening Company-owned locations rather than
through acquisitions. The Company's revenues grew from $6.0 million to $94.4
million from 1991 through 1995. This revenue growth has been generated both by
opening new dispatch offices and by continuing to increase sales at existing
dispatch offices. In 1995, the average cost to open a new dispatch office was
approximately $35,000 and dispatch offices opened in 1995 typically generated
revenues sufficient to cover their operating costs in two to six months. In
1995, the average revenue per dispatch office open for more than one full year
was $1.3 million.
INDUSTRY OVERVIEW
The temporary staffing industry has grown rapidly in recent years as
companies have used temporary employees to control personnel costs and to meet
fluctuating personnel needs. According to the NATSS, the United States market
for the industrial segment of the temporary staffing marketplace (which includes
the light industrial market that the Company serves) grew at a compound annual
growth rate of approximately 25% from approximately $5.0 billion in 1991 to
approximately $12.3 billion in 1995. The Company believes the temporary staffing
industry is highly fragmented and presents opportunities for larger, well
capitalized companies to effectively compete through management of workers'
compensation costs and development of information systems which efficiently
process a high volume of transactions and coordinate multi-location activities.
Historically, the demand for temporary workers has been driven primarily by
a need to satisfy peak production needs and to temporarily replace full-time
employees due to illness, vacation or abrupt termination. More recently,
competitive pressures have forced businesses to focus on reducing costs,
including converting fixed, permanent labor costs to variable or flexible costs.
The use of temporary workers typically shifts employment costs and risks, such
as workers' compensation and unemployment insurance and possible adverse effects
of changing employment regulations, to temporary staffing companies, which can
allocate the costs and risks over a larger pool of employees and customers. In
addition, the use of temporary employees avoids the inconvenience, expense and
other effects of hiring and firing regular employees.
COMPANY STRATEGY
The Company's goal is to maintain and enhance its status as a leading,
national provider of temporary workers for manual labor jobs. Key elements of
the Company's strategy to achieve this objective are as follows:
- AGGRESSIVELY OPEN NEW DISPATCH OFFICES. The Company's strategy is to
increase revenues by rapidly expanding its network of dispatch offices.
The Company plans to open approximately 94 additional dispatch offices in
1996 and an additional 100 dispatch offices in 1997.
- INCREASE REVENUES FROM EXISTING DISPATCH OFFICES. As a dispatch office
matures, the Company attempts to increase its revenues by expanding sales
to existing customers and by aggressively expanding the number and mix of
customers served. More experienced area directors and district managers
assist the general manager in this process. The Company is also developing
and implementing at the corporate level coordinated sales and marketing
strategies designed to complement these efforts,
2
<PAGE>
including the development of national accounts, electronic order entry
from the customer's location, centralized dispatch via an 800 number,
dissemination of information on local construction activity, and
implementation of a centralized customer service hotline.
- IMPROVE OPERATING EFFICIENCIES AND REDUCE OPERATING COSTS. Due to the
temporary labor market's extensive fragmentation, the Company believes its
national presence provides it with key operating efficiencies, competitive
advantages (including an ability to target national accounts and to
effectively administer workers' compensation programs) and access to
capital markets to provide needed working capital. The Company has
standardized the operation, general design, staffing and equipment of the
dispatch offices. In addition, the Company has designed and implemented a
proprietary management information system that efficiently manages an
extensive Company-wide employee and payroll database as well as delivering
valuable management reports.
- PROVIDE SUPERIOR SERVICE. The Company emphasizes customer responsiveness
and maintains a commitment to providing a superior quality of service
though policies such as opening offices no later than 5:30 a.m., providing
workers on short notice (often the same day as requested) and offering a
"satisfaction guaranteed" policy. The Company is committed to supplying
motivated workers to its customers. Most workers find the Company's "Work
Today, Paid Today" policy appealing and arrive at the dispatch office
early in the morning motivated to put in a good day's work and receive a
paycheck at the end of the day.
The Company intends to continue to focus on the manual labor, short notice,
light industrial niche of the temporary labor market. The Company believes other
national and international temporary labor businesses have not aggressively
pursued this market. Management believes that it can gain significant advantages
by capturing market share, achieving economies of scale and operating
efficiencies not available to its smaller competitors, and rapidly expanding
through opening new dispatch offices and increasing revenue at existing dispatch
offices.
DISPATCH OFFICE EXPANSION
The Company has rapidly grown from eight dispatch offices in 1991 to 106
dispatch offices at December 31, 1995. The Company's expansion has been achieved
primarily by opening Company-owned dispatch offices. The following table sets
forth the number and location of dispatch offices by geographic region open at
the end of each of the last five years. The information below does not include
four Labor Ready franchised dispatch offices located in the Minneapolis,
Minnesota metropolitan area and one franchised dispatch office located in Fargo,
North Dakota.
LABOR READY DISPATCH OFFICES
BY GEOGRAPHIC REGION
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
West................ 8 9 12 23 38
Southwest/Mountain... 0 0 2 8 15
Upper Midwest....... 0 0 0 8 16
Midwest............. 0 1 3 7 20
South............... 0 0 0 1 12
Eastern............. 0 0 0 0 1
Canada.............. 0 0 0 4 4
-
---- ---- ---- ----
Total........... 8 10 17 51 106
-
-
---- ---- ---- ----
---- ---- ---- ----
</TABLE>
The Company currently anticipates opening 94 dispatch offices in 1996, and
expects to open approximately 100 dispatch offices in 1997. Dispatch office
openings will be primarily in California, midwestern
3
<PAGE>
states, southern states, and, over time, eastern states. The Company analyzes
acquisition opportunities from time to time, may pursue acquisitions in certain
circumstances and may also accelerate expansion based on future developments.
In 1994, the Company licensed one franchisee in Minnesota, who now operates
five locations, four in Minneapolis and one in Fargo, North Dakota. The Company
has not pursued, and does not intend to grant, any additional franchises.
Revenues generated from franchised dispatch offices have not been material
during the periods presented herein.
ECONOMICS OF DISPATCH OFFICES. The Company has standardized the process of
opening dispatch offices. In 1995, the average aggregate cost of opening a new
dispatch office was approximately $35,000, including salaries, training, lease
expenses, computer systems, advertising and other related expenses. These costs
are expected to increase as the Company purchases more sophisticated computer
and other office systems, expands training time and programs, leases larger
dispatch offices and expands into the northeastern United States. New dispatch
offices are expected to generate revenue sufficient to cover their operating
costs within two to six months. On average, the volume necessary for profitable
operations is approximately $12,000 per week. In 1995, dispatch offices open for
at least one full year generated average annual revenue of approximately $1.3
million, or approximately $25,000 per dispatch office per week.
CRITERIA FOR NEW DISPATCH OFFICES. Labor Ready identifies desirable areas
for locating new dispatch offices with an economic model that analyzes the
potential supply of temporary workers and customer demand based on a zip code
resolution of employment figures and the relative distance to the nearest Labor
Ready dispatch office. In addition, the Company locates dispatch offices in
areas convenient for its temporary workers, that are on or near public
transportation, and have parking available. The Company will generally avoid
downtown locations since such areas are usually inconvenient for workers and
dispatch office rental space is often more expensive. After the Company
establishes a dispatch office in a metropolitan area, the Company usually
clusters additional locations within the same area. Multiple locations in a
market reduce both opening costs and operating risk for new dispatch offices
because advertising costs are spread among more dispatch offices and because the
new dispatch office benefits from existing customer relationships with the other
dispatch offices and established Labor Ready name recognition.
DISPATCH OFFICE MANAGEMENT. The Company believes that the key factor
determining the success of a new dispatch office is identifying and retaining an
effective dispatch office general manager. Each general manager has primary
responsibility for managing the operations of the dispatch office, including
recruiting temporary workers, daily dispatch of temporary workders, and
collecting accounts receivable. The Company pays monthly bonuses to its general
managers based on accounts receivable collections during the month.
Each general manager has primary responsibility for customer service and the
dispatch office's sales efforts, including identifying and soliciting local
businesses likely to have a need for temporary manual workers. The Company's
experience is that certain types of individuals are better suited to perform the
critical management functions necessary for the dispatch office to generate the
revenues required to achieve profitability, regardless of the size of the
metropolitan area. The Company has refined its criteria for selecting general
managers and uses The Gallup Organization to screen, test, and qualify
prospective general managers. Prior to joining the Company, the typical general
manager has little or no prior experience in the temporary employment industry.
The Company commits substantial resources to the training, development, and
operational support of its general managers. In 1995, due to turnover,
attrition, or termination, the Company replaced approximately 26% of its general
managers.
OPERATIONS
DISPATCH OFFICES. Dispatch offices are locations where workers (and
prospective workers) report prior to being assigned to jobs, including those
being called back to the same employer. Workers are required to report to the
dispatch office in order to minimize "no-shows" to the customer's job site. If a
worker fails to report to the dispatch office as scheduled, the Company
identifies a replacement so that the customer has the number of workers expected
at the jobsite, on time, and ready to work.
4
<PAGE>
During the early morning hours, the general manager and an assistant
coordinate incoming customer work orders, assign the available workers to the
job openings for the day, and arrange transportation to the job site. Prior to
dispatch, a branch employee checks to make sure workers have the basic safety
equipment required for the job, such as boots, back braces, hard hats, or safety
goggles, all of which are provided at no charge to the worker or the customer.
The customer provides additional safety and other equipment, if required. New
assignments are generally filled from a first come, first served daily sign-in
sheet, except for return requests. Workers who pass on a particular job are
moved to the bottom of the list. Most work assignments have been scheduled in
advance, a majority of which are repeat work orders from customers. However, a
significant portion of the job openings are requested on short notice, often the
same day as requested.
The workers are provided with a work order (which is endorsed by the
customer to confirm work performance) that each worker must present at the
dispatch office in order to receive payment for the hours worked. Workers are
generally paid daily by check. Computer systems at each dispatch office perform
the calculations necessary to determine the wages, less taxes and applicable
withholdings, and print security controlled checks, which are distributed to
each worker.
Dispatch offices generally open early, usually by 5:30 a.m., with some open
24 hours (depending on volume or activity), and generally remain open until the
last temporary laborer is paid. Dispatch offices are generally staffed with at
least two full-time employees, including the general manager and a customer
service representative. General managers manage the daily dispatch of temporary
workers, and are responsible for monitoring and collecting receivables, managing
the credit application process for each customer, inspecting customer job sites
for site safety, as necessary, and managing the sales and marketing efforts of
the dispatch office.
Employment applications are taken throughout the day for potential new
temporary employees. Applications are used to facilitate workers compensation
safeguards and quality control systems by permitting the Company to test for
alcohol or drugs in case of work-related illness or injury, to obtain a signed
"Condition of Employment" statement, and to comply with applicable immigration
requirements.
CUSTOMERS. The Company's customers are primarily businesses and, less
frequently, government agencies, that require workers for lifting, hauling,
cleaning, assembling, digging, painting and other types of manual work. The
Company's customers are typically engaged in construction, landscaping, freight
handling, warehousing, or other light manufacturing. Customers also include
retail and wholesale operations, sanitation, machine shops, printers, hotels and
restaurants.
New dispatch offices initially target the construction industry for
potential customers, except for those new dispatch offices that are located in
metropolitan areas where there is little new construction. In addition, as
dispatch offices mature, the customer base broadens and the mix of work
diversifies. Many of the businesses have elements of seasonality or cyclicality
in their work flow and have a need for one or more workers. The Company
currently derives its business from a large number of customers, and is not
dependent on any large customer for more than 2% of its revenues. During 1995,
the Company's ten largest customers accounted for $6.4 million, or 6.8% of total
sales. While a single dispatch office may derive a substantial percentage of its
revenues from a single customer, the loss of that customer would not have a
significant impact on the Company's revenues. During 1995, the Company provided
temporary workers to in excess of 29,000 customers. Labor Ready filled more than
800,000 work orders in 1995.
Many customers use Labor Ready as a screening device for future hires.
Because Labor Ready does not charge a fee if a customer hires a Company worker,
customers on occasion send prospective employees to the Company with a specific
request for temporary assignment to their business. Customers thereby have the
opportunity to observe the prospective employee in an actual working situation,
and minimize expenses involved in employee turnover and personnel agency fees.
BILLING AND COLLECTIONS. The Company has implemented a credit policy which
allows new customers to establish an account with a $2,500 initial credit limit.
Workers may be dispatched to a new customer's job site when a credit application
is completed and signed. Thereafter, the Company obtains credit reports and bank
5
<PAGE>
references to evaluate whether additional credit is justified. The credit
department processes applications within 24 hours and if information indicates
credit risk, the account will be placed on a "hold" status and no further
business can be conducted until the credit risk is resolved. This policy is
designed to limit the Company's exposure to $2,500 for a new account. When the
credit risk is resolved, the account will be granted a credit line up to $5,000.
If the account requires higher credit limits, the credit department will expand
its credit investigation to justify such increase by completing trade reference
verification, analysis of financial statements and tax returns. Once a customer
has reached 75% of its credit limit, the customer screen on the Company's
information system has a red warning to alert dispatch office personnel to more
closely monitor the activity of the customer.
SALES AND MARKETING. Generally, each dispatch office is responsible for its
own sales and marketing efforts. The general manager is primarily responsible
for customer service and sales, but most branch employees are also involved in
customer sales and marketing. Each dispatch office maintains databases for area
businesses for telemarketing and direct mail. The Company expects each dispatch
office to mail 300 to 500 pieces of direct mail a week with follow-up to be made
by the general manager or the customer service representative. The corporate
office will conduct an initial mailing of 5,000 to 10,000 pieces to the
geographic area to support the new dispatch office opening.
At the corporate level, the Company is developing coordinated marketing
strategies, including the development of national accounts with electronic order
entry from the customer's location, centralized dispatch via an 800 number,
dissemination of information on local construction activity, advertising
campaigns in targeted markets prior to new dispatch office openings, and
implementation of a centralized customer service hotline which promotes prompt
and professional resolution to customer issues as they arise. In late 1995, the
Company hired a national sales manager to develop business with large employers
on a national and regional basis. The Company also employs several salespeople
who facilitate sales and marketing activities to specific dispatch offices or
for specific industries.
When entering new markets, the Company allows for an initial advertising
budget to generate an awareness of the new dispatch office. By opening
additional dispatch offices as warranted based on area demographics, the Company
can expand and coordinate its marketing efforts and benefit all the dispatch
offices in the local area. Marketing is accomplished primarily through personal
contacts, direct mail campaigns, and yellow pages advertising. Word of mouth
also provides a significant source of new business for the Company. General
managers are encouraged to work with other dispatch offices in the same
metropolitan area.
TEMPORARY WORKERS. Most workers find the Company's "Work Today, Paid Today"
policy appealing and arrive at the dispatch office early in the morning
motivated to put in a good day's work and receive a paycheck at the end of the
day. Labor Ready's temporary workers are typically persons who are unemployed or
in between jobs. Nearly all are male and most are between the ages of 18 and 40
and live in low income neighborhoods. Most temporary workers have phone numbers,
but do not own cars. The average temporary worker works for Labor Ready
approximately 90 hours per year.
The Company's daily pool of temporary workers at each dispatch office
generally numbers between 40 and 200, depending upon the time of year. Although
the Company is less dependent on weather than in its early years because of a
wider dispersion of dispatch offices in different geographic areas of the United
States, good weather, nevertheless, brings incrementally more job orders and
workers.
After reviewing work orders for the day, the general manager pre-screens the
qualifications of the temporary workers to assure they can perform the work
required. Additionally, the individual must be at least 18 years old, physically
capable and in apparent good health. The main objective is to dispatch the most
suitable workers for the positions available. Dispatch office employees over
time come to know most workers at the dispatch office and their capabilities.
The Company is an equal opportunity employer.
Under the Company's "satisfaction guaranteed" policy, replacements for all
unsatisfactory workers are promptly provided if the customer notifies the
Company within the first two hours of work. Employees who receive two concurrent
complaints from customers are generally terminated or reprimanded. The Company
will immediately terminate any employee who agrees to take a work order and does
not report at the
6
<PAGE>
customer's job site. Any use of obscene language, alcohol or drugs on the
dispatch office premises or at the job site are grounds for immediate dismissal.
In addition, an employee found to be engaging in dishonest acts or filing a
false workers' compensation claim will be terminated.
The Company is responsible for withholding of FICA, Medicare, and federal,
state, and, where applicable, city and county payroll taxes from its temporary
workers for disbursement to governmental agencies. Additionally, the Company
pays federal and state unemployment insurance premiums, and workers'
compensation expenses for its temporary employees. See "-- Workers'
Compensation."
RECRUITMENT OF TEMPORARY WORKERS. The Company attracts its pool of
temporary workers through flyers, newspaper advertisments, dispatch office
displays, and word of mouth. The Company believes its strategy of locating
dispatch offices in lower income neighborhoods, with ready access to public
transportation, is particularly important in attracting workers.
The Company's "Work Today, Paid Today" policy is prominently displayed at
most dispatch offices and, in the Company's experience, is a highly effective
method of attracting temporary workers. Workers also find other Company policies
attractive, such as the emphasis on worker safety, Company provided safety
equipment, and modest advances for lunch or gas for workers short on cash.
Temporary workers are also aware of the Company's no-fee policy toward temporary
workers who receive regular position offers from the Company's customers. The
possibility of landing a regular position serves as an added incentive to its
workers. Finally, dispatch offices generally remain open to ensure workers get
paid the same day.
Management believes that Labor Ready has earned a good reputation with its
temporary labor pool because the Company consistently has jobs available and
treats these workers with respect, which the Company believes helps attract a
motivated and responsive worker pool. As a result, the Company believes
referrals by current or former employees who have had good experiences with the
Company account for a significant percentage of its temporary workers.
The Company experiences from time to time during peak periods shortages of
available temporary workers. Dispatch offices with a shortage of workers attempt
to fill work orders by asking temporary workers to inform friends, relatives and
neighbors of the job openings and by identifying prospective workers from the
Company's employee data base. On occasion, work orders requiring large numbers
of temporary workers will be filled by general managers coordinating with other
local dispatch offices.
MANAGEMENT, EMPLOYEES AND TRAINING. The Company currently employs a total
of 62 administrative and executive staff in the corporate office, and 431 people
as supervisors, general managers, customer service representatives, district
managers, area directors and support staff. General managers report to district
managers who in turn report to area directors. The Company is hiring additional
supervisory management personnel with experience in managing multilocation
operations.
After extensive interviews and tests, prospective general managers and
customer service representatives generally undergo four weeks of training at an
existing high-volume dispatch office. The employees then attend Labor Ready
University, the Company's training division, located at the dispatch office in
Tacoma, Washington. Labor Ready University, formed in 1995 with the mission of
training managers and customer service representatives on the skills necessary
for operating a dispatch office, is staffed by an experienced training
professional. The Company has developed a curriculum, training manuals, and
instruction modules for the six-day, rigorous sessions, which include sessions
on topics such as marketing, direct mail, credit and collections, workers'
compensation and safety. By operating the training center as part of an ongoing
dispatch office, the managers and customer service representatives receive
training under actual and simulated dispatch conditions. The Company is
currently establishing ten certified field training centers located in current
dispatch offices where all prospective general managers will attend their
initial four weeks training. Department heads from the Company's corporate
offices teach topics based on their area of expertise. The Company usually
arranges to have an experienced manager participate in the classes to share
experiences encountered in operating a dispatch office.
MANAGEMENT INFORMATION SYSTEMS. The Company has internally developed its
own proprietary software system to process all required payroll information and
related payroll tax returns, together with
7
<PAGE>
other information important to managing thousands of workers and staff in
multiple locations. The Company completed the installation in all dispatch
offices of the most recent version of this software in 1995. Labor Ready employs
five full-time professionals that continually upgrade the systems to add
features and enhance operations and reliability. The system will continue to
require additional hardware and software to accommodate the Company's operating
and information needs while the Company conducts its rapid expansion program.
The system maintains all of the Company's key databases, from the tracking
of work orders to payroll processing to maintaining worker records. The system
regularly exchanges key database information between corporate headquarters and
dispatch offices, including customer credit information and the tracking of
workers' compensation safety claims. Dispatch offices can run a variety of
reports on demand, including receivables aging. The Company can also conduct
keyword searches in its employee database for certain types of work experience.
Regional and area directors can also call into the system and monitor their
territories from their laptops. The Company believes its proprietary software
system provides Labor Ready with significant competitive advantages over
competitors that utilize less sophisticated systems.
The Company's information system also provides the Company with its key
internal controls. All work order tickets are entered into the system at the
dispatch office level. No payroll check can be issued at a dispatch office
without a corresponding work ticket on the computer system. When a payroll check
is issued, the customer's weekly bill and the dispatch office receivables are
automatically updated. Printed checks have watermarks and computer-generated
signatures that are extremely difficult to duplicate.
WORKERS' COMPENSATION PROGRAM. The Company maintains workers' compensation
insurance, as required by state laws. The Company operates in three states
(Washington, Nevada and Ohio) in which the state provides and administers the
insurance and the Company is required to pay premiums based on its experience
ratings. Other states permit the Company to obtain insurance coverage through a
private fronting insurance carrier licensed to do business in those states. In
1995, the Company deposited $4.6 million with a foreign off-shore company for
the payment of workers' compensation claims and related claims settlement
expenses on claims originating in these states. Claims are administered by a
third party administrator retained by the Company.
The Company has established a separate department at its corporate
headquarters to manage its insurers, third party administrators, and the medical
service providers. The Company attempts to resolve claims promptly and generally
closes claims within 120 days. To reduce the wage-loss compensation claims, the
Company has established a "light duty" return to work program that requires
minimal physical exertion within the Company (dispatch office work) or outside
assignments (e.g., cafeteria help) to customers. The Company's information
system generates weekly workers' compensation loss minimization reports for both
corporate and branch location use.
GOVERNMENT REGULATIONS.
SAFETY PROGRAMS. As an employer, the Company is subject to applicable state
and/or federal statutes and administrative regulations pertaining to job site
safety. Where states do not have a safety program certified by the federal
Occupational Safety & Health Administration ("OSHA"), the Company is subject to
the standards prescribed by the federal Occupational Safety & Health Act and
rules promulgated by OSHA. However, the temporary employees are generally
considered the customer's employees while on the customer's job site for the
purpose of applicable safety standards compliance liability.
In 1995, the Company's accident rate was approximately one incident per
6,000 man hours worked. The Company continues to emphasize safety awareness,
which helps control workers' compensation costs, through training of its
management employees and office staff, safety sessions with employees, issuing
of safety equipment, monitoring of job sites, and communicating with customers
to assure that the job request order is one that can be safely accomplished.
Temporary workers are trained in safety procedures primarily by showing safety
tapes at the beginning of each day. Bulletin boards with safety-related posters
are prominently displayed. "Tailgate" safety training sessions are conducted at
the manager's and regional safety director's discretion.
8
<PAGE>
The Company maintains its own inventory of safety equipment at each dispatch
office. Standard equipment includes hard hats, metal tipped boots, gloves, back
braces, ear plugs, and safety goggles. Equipment is checked out to workers as
appropriate. All construction jobs require steel-toed boots and a hard hat. The
manager ensures that workers take basic safety equipment to job sites.
Office personnel are trained to discuss job safety parameters with customers
on incoming work order calls. Managers conduct job site visits for new customer
job orders and periodic "spot checks" for existing customers to review safety
conditions at job sites. Workers are encouraged to report unsafe working
conditions to the Company.
WAGE AND HOUR REGULATION. Labor Ready is required to comply with applicable
state and federal wage and hour laws. These laws require the Company to pay its
employees minimum wage and to pay overtime at applicable rates of pay when the
employee works more than forty hours in a work week. In some states, overtime
pay may be required after eight or ten hours of work in a day.
COMPETITION
The temporary services industry is highly fragmented and highly competitive,
with limited barriers to entry. A large percentage of temporary staffing
companies are local operations with fewer than five offices. Within local or
regional markets, these firms actively compete with the Company for business.
The primary basis of competition among local firms is price and, to a lesser
extent, service. While entry into the market has limited barriers, lack of
working capital frequently limits growth of smaller competitors.
Although there are several very large full-service and specialized temporary
labor companies competing in national, regional and local markets, to date,
those companies have not aggressively expanded in the Company's targeted market
segment. Many of these competitors have substantially greater financial and
marketing resources than those of the Company. One or more of these competitors
may decide at any time to enter or expand their existing activities in the light
industrial market and provide new and increased competition to the Company. The
Company believes that, among the larger competitors, the primary competitive
factors in obtaining and retaining customers are the cost of the temporary
labor, the quality of the temporary workers provided, the responsiveness of the
temporary labor company, and the number and location of offices. The
availability to the Company's customers of multiple temporary service providers
creates significant pricing pressure as competitors compete for the available
demand, and this pricing pressure adversely impacts operating margins.
TRADEMARKS
The Company's business is not presently dependent on any patents, licenses,
franchises, or concessions. "Labor Ready," the "LR" logo and the service mark
"Work Today, Paid Today" are registered with the U.S. Patent and Trademark
Office.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS.
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
DISPATCH OFFICES. The number of dispatch offices grew to 106 at December
31, 1995 from 51 locations at December 31, 1994, a net increase (after closings
and consolidations) of 55 dispatch offices, or 108%. The Company estimates that
its aggregate costs of opening 57 new dispatch offices in 1995 was $2.0 million
(an average of approximately $35,000 per dispatch office) compared to aggregate
costs of approximately $850,000 (an average of approximately $25,000 per
dispatch office) to open 34 new dispatch offices in 1994. Management believes
that the costs of opening new dispatch offices will continue to increase. The
increases in 1995 were primarily the result of a longer manager training period,
establishment of Labor Ready University, and the added opening costs related to
the use of more sophisticated computer and other office systems. Dispatch office
locations grew to 51 locations at December 31, 1994 from 17 locations at
December 31, 1993, a net increase of 34 dispatch offices, or 200%. The Company
estimates that its aggregate costs of opening 34 new dispatch offices in 1994
was $850,000 compared to $160,000 (an average of $20,000 per
9
<PAGE>
dispatch office) to open eight new dispatch offices in 1993. The increases were
primarily the result of expanded manager training and the installation of more
sophisticated computer and other office systems at the dispatch offices.
REVENUES FROM SERVICES. The Company's revenues from services increased to
$94.4 million for 1995 from $39.0 million for 1994, an increase of $55.4
million, or 142%. This increase in revenues from services resulted from
essentially equal increases in revenues from dispatch offices open for the full
period and revenues generated from dispatch offices opened during the period, as
indicated below. The Company's revenues from services increased to $39.0 million
for 1994 from $15.7 million for 1993, an increase of $23.3 million, or 148%. As
in 1995, this increase resulted from essentially equal increases in revenues
from dispatch offices open for the full period and from revenues generated from
dispatch offices opened during the period, as indicated below.
<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Increase in revenues from dispatch offices open for full year..................... $ 4,536 $ 11,652 $ 27,101
Revenues from new dispatch offices opened during year............................. $ 2,699 11,640 28,310
--------- --------- ---------
Total increase over prior year.................................................... $ 7,235 $ 23,292 $ 55,411
--------- --------- ---------
--------- --------- ---------
</TABLE>
COST OF SERVICES. Cost of services increased to $76.6 million for 1995 from
$30.7 million for 1994, an increase of $45.9 million, or 150%, reflecting the
additional wages and salaries paid to temporary workers and additional
management personnel and related payroll expenses. Cost of services as a
percentage of revenues from services increased to 81.2% for 1995 from 78.9% for
1994, an increase of 2.3%. This increase in costs as a percentage of revenues
reflects salaries of new supervisory personnel hired under new management
organizational structures, the hiring of large numbers of general managers prior
to dispatch office openings, the use of lower introductory rates to attract new
customers at new dispatch offices, and the relatively lower revenues generated
by new dispatch offices prior to reaching maturity. The Company expects to
experience significant fluctuations in such percentage in future periods as the
Company continues its rapid addition of new dispatch offices. Costs of services
increased to $30.7 million for 1994 from $12.4 million for 1993, an increase of
$18.3 million, or 148%. Costs of services as a percentage of revenues from
services were essentially unchanged from 1993 to 1994, decreasing to 78.9% for
1994 from 79.2% for 1993.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES. Selling, general, and
administrative expenses increased to $13.6 million in 1995 from $6.6 million in
1994, an increase of $7.0 million, or 106%. As a percentage of revenues,
selling, general, and administrative expenses decreased to 14.5% for 1995 from
16.9% for 1994. This percentage decrease resulted primarily from selling,
general and administrative expenses increasing at a slower rate than the
increase in revenues. Selling, general, and administrative expenses increased to
$6.6 million in 1994 from $2.7 million in 1993, an increase of $3.9 million, or
144%. As a percentage of revenues, selling, general, and administrative expenses
were 16.9% in both 1994 and 1993. The increases in selling, general, and
administrative expenses are primarily the result of increased overhead,
including management information systems, workers compensation administration,
administrative personnel and other expenses related to the growth of the
Company.
INTEREST AND OTHER EXPENSES. Interest and other expenses increased to
approximately $866,000 in 1995 from approximately $457,000 in 1994, an increase
of 89.5%, reflecting primarily higher borrowing amounts and the additional
interest costs of the $10 million principal amount of subordinated debt issued
in October 1995. As a percentage of revenues, interest expense decreased from
1.2% to 0.9%, reflecting the increased revenues of the Company. In 1994,
interest expense increased to approximately $457,000 from $353,000 in 1993,
reflecting primarily higher borrowed amounts. As a percentage of revenues,
interest expense decreased from 2.3% to 1.2%, reflecting the Company's increased
revenues. The increase in borrowings is mainly the result of the Company
financing its accounts receivable which increased from $1,907,000 in 1993, to
$5,163,000 in 1994 and to $12,183,000 in 1995, corresponding to the significant
increase in revenues each year. The average effective interest rate on the
Company's borrowings was 16.5%, 15.3% and 29.0% for
10
<PAGE>
1995, 1994 and 1993, respectively. In March 1996, the Company activated its new
$10 million revolving line of credit with U.S. Bank of Washington which bears
interest at a rate equal to prime plus 1/4% (currently 8.5%) and replaces the
Company's former credit line with Concord Growth Corporation.
TAXES ON INCOME. The Company's taxes on income increased to $1.2 million in
1995 from approximately $336,000 in 1994, an increase of approximately $816,000,
or 243%. This increase was the direct result of the corresponding increase in
the Company's income before taxes for such period. The Company had a net
deferred tax asset of approximately $715,000 at December 31, 1995, resulting
primarily from workers' compensation deposits, credits and reserves which will
reverse in 1996. The Company has not established a valuation allowance against
this net deferred tax asset as management believes that it is more likely than
not that the tax benefits will be realized in the future based on the historical
levels of pre-tax income and expected future taxable income. See Note 10 to
Consolidated Financial Statements. The Company's taxes on income increased to
$336,000 in 1994 from approximately $32,000 in 1993, an increase of
approximately $304,000, or 950%. This increase was the result of an increase in
the Company's income before taxes for such period and higher overall effective
tax rates as the Company expanded into more states with state income taxes.
NET INCOME. The increase in revenues from services also resulted in an
increase in net income to $2.1 million for 1995 from approximately $852,000 for
1994. This represents an increase of $1.2 million, or 142%. The increase in net
income corresponds to the growth in revenues. In 1994, the increase in revenues
from services also resulted in an increase in net income to approximately
$852,000 from approximately $269,000 for 1993, an increase of approximately
$583,000, or 216%. The increase in net income in 1994 is primarily the result of
increased revenues and lower interest costs.
SEASONAL AND CYCLICAL CUSTOMER DEMAND; ECONOMIC CYCLES. Many of the
Company's customers are construction and landscaping businesses that are
significantly affected by the weather. Construction and landscaping businesses
and, to a lesser degree, other customer businesses typically increase activity
in spring, summer and early fall months and decrease activity in late fall and
winter months. Inclement weather can slow construction and landscaping
activities during such periods. The Company has generally experienced a
significant increase in temporary labor demand in the spring, summer and early
fall months, and lower demand in the late fall and winter months.
Demand for the Company's services may be significantly affected by the
general level of economic activity and unemployment in the United States. As
economic activity increases, such as in recent years, temporary employees are
often added to the work force before regular employees are hired. As economic
activity slows, many companies reduce their use of temporary employees before
laying off regular employees. In addition, the Company may experience heightened
levels of competitive pricing pressure during such periods of economic downturn.
World-wide economic conditions and U.S. trade policies also impact demand for
the Company's services.
Depending upon location, new dispatch offices initially target the
construction industry for potential customers. As dispatch offices mature, the
customer base broadens and the mix of work diversifies. A slow-down in general
economic activity within the construction industry, however, could lengthen the
time period for new dispatch offices to generate sufficient revenues to cover
operating costs and thereby increase the cash necessary to fund the operations
of new dispatch offices until they begin to generate sufficient revenue to cover
their operating costs.
LIQUIDITY AND CAPITAL RESOURCES
During 1995 and 1994, the Company used net cash in operating activities of
$3.7 million and $2.3 million, an increase of 64.8%, reflecting the significant
growth in the Company's revenues and accounts receivable, increased workers'
compensation deposits, and the opening of 57 new dispatch offices in 1995 and 34
new dispatch offices in 1994. The Company incurred capital expenditures of $2.5
million and approximately $550,000 in 1995 and 1994 in connection with openings
of dispatch offices and improvements to the corporate offices. Management
anticipates continuing cash flow deficits from operations while the number of
dispatch offices continues to grow at a rapid rate. Management expects such cash
flow deficits will be financed by the proceeds of this offering and other equity
and debt financings.
11
<PAGE>
The Company financed its operations and growth in 1995 primarily through the
sale of debt and equity securities. In early 1995, warrants to purchase 712,440
shares of the Company's Common Stock were exercised for aggregate consideration
of approximately $1.8 million.
In October 1995, the Company completed a private financing of $10.0 million
principal amount of 13.0% Senior Subordinated Notes (the "Notes"). Under the
terms of the Notes, which require principal payments to begin in 1998 and which
mature in 2002, the Company pledged its remaining assets as collateral and
issued warrants (the "Financing Warrants") to the purchasers of the Notes. The
Financing Warrants entitle the holders thereof to purchase 682,368 shares of
Common Stock of the Company at an exercise price of $11.67 per share, and are
exercisable at any time prior to their expiration on the earlier of the seventh
anniversary of the Notes and six years from the date the Notes are paid in full.
If the Notes are retired by the Company prior to November 1998 and before the
Financing Warrants are exercised, the number of shares subject to purchase under
the Financing Warrants is reduced to 545,894 shares.
In 1995, the Company incurred costs of $2.0 million to open 57 new dispatch
offices (an average of approximately $35,000 per dispatch office). Further, the
Company invested significant amounts of additional cash into the operations of
new dispatch offices until they begin to generate sufficient revenue to cover
their operating costs, generally in two to six months. Further, the Company pays
its temporary personnel on a daily basis, and bills its customers on a weekly
basis. The average collection cycle for 1995 was approximately 37 days. Since
the Company plans to open 94 dispatch offices in 1996 and 100 dispatch offices
in 1997, the Company expects to experience cash flow deficits from operations
and investing activities in 1996 and 1997. The Company intends to finance
opening and operating costs of new dispatch offices with the proceeds from
equity or debt financings. With such funds, and depending on its results of
operations and other factors described herein, the Company expects to have the
financial resources necessary to open at least 154 dispatch offices through
1997. To the extent that the Company's resources are not sufficient to finance
new dispatch offices, or are not sufficient to open all currently targeted
dispatch offices, the Company would either seek additional capital through
equity or debt financings or scale back its expansion plans.
INFLATION
The effects of inflation on the Company's operations were not significant
during the periods presented herein. Generally, throughout the periods discussed
above, the increases in revenues have resulted primarily from increasing sales
at existing dispatch offices and adding new dispatch office locations rather
than price increases. In the event, however, that Congress passes legislation
currently being considered to increase the federal minimum wage, the Company
would attempt to increase the rates it charges customers.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board ("FASB"), issued a
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation," which requires that companies measure the cost of
stock-based employee compensation at the grant date based on the value of the
award and recognize this cost over the service period. The value of the stock
based award is determined using the intrinsic method whereby compensation cost
is the excess of the quoted market price of the stock at the date of grant or
other measurement date over the amount an employee must pay to acquire the
stock. SFAS No. 123 is effective for financial statements issued for fiscal
years beginning after December 15, 1995, and is not expected to have a
significant impact on the Company's financial statements.
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This
statement requires that long-lived assets and certain intangibles to be held and
used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying value of an asset may not be
recoverable. The measurement of an impairment loss for long-lived assets and
identifiable intangibles that an entity expects to hold and use should be based
on the fair value of the asset. SFAS No. 121 is effective for financial
statements for fiscal years beginning after December 15, 1995, and is not
expected to have a significant impact on the Company's financial statements.
12
<PAGE>
EXHIBIT INDEX
FORM 10-K/A
LABOR READY, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------
<C> <S> <C>
3 Articles of Incorporation................................................................... *
3.1 Articles of Amendment to Articles of Incorporation..........................................
3.2 Bylaws......................................................................................
4 Instruments Defining Rights of Security Holders............................................. *
10 Material Contracts
10.1 Note Purchase Agreement..................................................................... **
10.2 Warrant Purchase Agreemetn.................................................................. **
10.3 Form of Warrant............................................................................. **
10.4 Shareholder Agreement....................................................................... **
10.5 Security Agreement (LR,LRN,LRFD)............................................................ **
10.6 Intercreditor and Subordination Agreement................................................... **
10.7 Executive Employment Agreement between LR and Glenn A. Welstad.............................. **
10.8 Independent Contractor Agreement between LR and John R. Coghlan............................. **
10.9 Employment Agreement between LR and Scott Sabo.............................................. **
10.10 Loan documents between LR and US Bank of Washington as executed on February 13, 1996........
10.11 Form of Lease for LR dispatch office........................................................
11 Computation of Earnings Per Share........................................................... **
</TABLE>
- ------------------------
* As previously filed in the Company's Form 10 Registration Statement, SEC File
No. 0-23828.
** As previously filed in the Company's report on Form 10-K for the year ended
December 31, 1995.
COPIES OF EXHIBITS MAY BE OBTAINED UPON REQUEST DIRECTED TO MR. RALPH
PETERSON, LABOR READY, INC., 2156 PACIFIC AVENUE, TACOMA, WASHINGTON 98402.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 12th day of
June, 1996.
LABOR READY, INC.
By: /s/ GLENN A. WELSTAD
-----------------------------------
Glenn A. Welstad,
PRESIDENT
Pursuant to the requirements of the Securities Exhange Act of 1934, this
report has been signed by the following persons on behalf of the registrant in
the capacities set forth below on the 12th day of June, 1996.
<TABLE>
<C> <S> <C>
/s/ GLENN A. WELSTAD
- ------------------------------------------- Chairman, Chief Executive
Glenn A. Welstad Officer and Director
/s/ RALPH E. PETERSON
- ------------------------------------------- Chief Financial Officer and
Ralph E. Peterson Director
/s/ ROBERT J. SULLIVAN
- ------------------------------------------- Director
Robert J. Sullivan
/s/ RONALD L. JUNCK
- ------------------------------------------- Secretary and Director
Ronald L. Junck
/s/ THOMAS E. MCCHESNEY
- ------------------------------------------- Director
Thomas E. McChesney
</TABLE>
14
<PAGE>
EXHIBIT 3.1
ARTICLES OF AMENDMENT TO
ARTICLES OF INCORPORATION
OF
KIRK'S HAMBURGERS, INC.
Articles of Amendment to the Articles of Incorporation of KIRK'S
HAMBURGERS, INC., are herein executed by said Corporation, pursuant to the
provision of RCW 23A.16.040 and 23A.16.050, as follows:
1. The name of the Corporation is Kirk's Hamburgers, Inc.
2. The amendment to the Articles of Incorporation of said Corporation is
as follows:
ARTICLE I shall be amended to read as follows:
"The name of this Corporation shall be 'Dick's Hamburgers,
Inc.'"
Article V shall be amended to read as follows:
"ARTICLE V"
DIRECTORS
1. The number of Directors of the Corporation shall
be fixed as provided by the Bylaws and may be changed from
time to time by amending the Bylaws, as then provided, but
the number of Directors shall be not less than three (3).
Without the unanimous consent of the Board of Directors, no
person who is affiliated as an owner, director, officer, or
employee of a company or business deemed by the Board of
Directors to be competitive with that of the Corporation
shall be eligible to serve on the Board of Directors of the
Corporation.
2. If the office of any Director becomes vacant by
reason of death, resignation, removal, disqualification, or
otherwise, the Directors may, by the affirmative vote of the
majority of the
-1-
<PAGE>
remaining Directors, though less than a quorum, choose a
successor or successors who shall hold office for the
unexpired term. Vacancies in the Board of Directors may be
filled for the unexpired term by the shareholders at a
meeting called for that purpose, unless such vacancies shall
have been filled by the Directors. Vacancies resulting from
an increase in the number of Directors may be filled in the
same manner.
The Board of Directors are authorized to increase
the number of persons to comprise the Board of Directors in
any period between annual shareholders' meetings by the
affirmative vote of a majority of the Directors; provided,
however, that without the unanimous consent of all
Directors, the number of Directors who compromise the Board
of Directors shall not be increased by more than two (2)
persons within any twelve (12) month period.
If the Board of Directors is divided into classes
and in the event of any increase or decrease in the
authorized number of Directors, (1) each Director then
serving as such shall nevertheless continue as a Director of
the class of which he is a member until the expiration of
his term, or upon his earlier resignation, removal from
office, or death, (2) the newly created or eliminated
Directorships resulting from such increase shall be
allocated by the Board of Directors among the three classes
to the extent possible, and (3) in the event such decrease
in the authorized number of Directors makes the total number
of Directors less than nine (9), then the Board of Directors
shall become declassified and the Directors remaining in
office shall continue their terms until the next annual
meeting of shareholders, at which time all of said remaining
Directors shall be re-elected to one year terms or until
their successors are duly elected and qualified.
3. When the Board of Directors shall consist of nine
(9) or more members, in lieu of electing the entire number of
-2-
<PAGE>
Directors annually, the Board of Directors of the
Corporation shall be divided into three classes. The method
of classification shall be to assign the longest terms of
those Directors with the most seniority as Directors. In
the event there are more Directors with identical seniority
than there are class positions to be filled, choices shall
be made by drawing of lots. The classes shall be as
follows: Class 1, Class 2, and Class 3, which
classification shall be effective on the 1st day of the
month following the shareholders' meeting during which the
number of members of the Board of Directors is increased to
nine (9) or more. In such an event, the term of office of
Directors in Class 1 shall expire at the first annual
meeting of shareholders after the election, that of Class 2
shall expire at the second annual meeting after their
election, and that of Class 3 shall expire at the third
annual meeting after their election. At each annual meeting
of shareholders after such classification, the number of
Directors equal to the number of the class whose term
expires at the time of such meeting shall be elected to hold
office until the third succeeding annual meeting. No
classification of Directors shall be effective in the event
the number of members of the Board is reduced to few than
nine (9).
4. In furtherance of and not in limitation of the
powers conferred by the laws of the State of Washington, the
Board of Directors is expressly authorized to make, alter,
and repeal the Bylaws of the Corporation, subject to the
power of the shareholders of the Corporation to change or
repeal such Bylaws.
5. The Corporation may enter into, contract, and
otherwise transact business as vendor, purchaser, or
otherwise with its Directors, officers, and shareholders,
and with the Corporation's association with firms and
entities of which they are or may become interested as
Directors, officers, shareholders, members, or otherwise, as
freely as if those such adverse interest did not exist, even
though the vote, action, or presence of such Directors,
-3-
<PAGE>
officers, or shareholders may be necessary to obligate the
Corporation under such contracts or transactions; and in the
absence of fraud, no such contracts or transactions shall be
avoided and no such Director, officer, or shareholder shall
be held liable to account to the Corporation, by reason of
such adverse interests or by reason of any fiduciary
relationship to the Corporation arising out of such office
or stock ownership, for any profit or benefit realized by
him through any such contract or transaction; provided that
in the case of Directors and officers of the Corporation
(but not in the case of shareholders who are not Directors
or officers), the nature of the interest of such Directors
or officers be disclosed or known to the Board of Directors
of the Corporation at the meeting thereof at which such
contract or transaction was authorized or confirmed. A
general notice that a Director or officer of the Corporation
is interested in any corporation, association, firm, or
entity, shall be sufficient disclosure as to such Director
or officer with respect to all contracts and transactions
with the corporation, association, firm, or entity.
6. Except as otherwise expressly set forth in these
Articles, any contract, transaction, or act of the
Corporation or of the Directors or of any officers of the
Corporation which shall be ratified by a majority of a
quorum of the shareholders of the Corporation at any annual
meeting or at any special meeting called for such purpose,
shall be as valid and binding as though ratified by every
shareholder of the Corporation.
7. The Corporation shall indemnify to the broadest
extent permitted by Washington law and under the procedures
set forth herein, but without limitations permitted by
statue as to the extent thereof, any and all persons for
whom indemnification is permitted by RCW 23A.08.025, or as
said statute may be amended or superseded, and such person
shall have the right to claim such indemnification.
-4-
<PAGE>
8. The current Directors of this Corporation are five
(5) in number and their post office addresses are as
follows:
Name Address
---- -------
Elmer "Abe" D. Miller East 10 3rd Avenue
Spokane, WA 99202
Dorothy Miller East 10 3rd Avenue
Spokane, WA 99202
Linda Peterson East 10 3rd Avenue
Spokane, WA 99202
Gary D. Brajcich North 908 Howard
Spokane, WA 99208
Charles Carpenter West 1005 17th Avenue
Spokane, WA 99203
9. Except as set forth above, the term of Directors
shall be until the next annual meeting of the shareholders
of the Corporation and until their replacements are duly
elected and qualified.
Article VIII will be amend to read as follows:
ARTICLE VIII.
Preemptive rights shall not exist with respect to
shares of stock or securities convertible into shares of
stock of this Corporation. Shareholders of the Corporation
shall not be entitled to cumulate their votes at the
election of the Directors of the Corporation.
3. The date of the adoption of said amendment by the shareholders of the
Corporation is April 4, 1985.
4. The number of shares outstanding of Corporation is 525,000 shares, all
of which are entitled to vote.
5. The number of shares voting for and against said amendment,
respectively, were as follows:
-5-
<PAGE>
For Amendment 525,000 Shares
Against Amendment 0 Shares
6. The amendment does not provide for the exchange, reclassification, or
cancellation of issued shares.
7. The amendment does not effect a change in the amount of the
Corporation's authorized capital stock.
KIRK'S HAMBURGERS, INC.
By /s/ Elmer D. "Abe" Miller
-------------------------
ELMER D. "Abe" MILLER
President
-6-
<PAGE>
EXHIBIT 3.2
RESTATED BYLAWS
OF
LABOR READY, INC.
AS ADOPTED OCTOBER 19, 1995
ARTICLE I
SHAREHOLDERS
Section 1. ANNUAL MEETING. The annual meeting of the shareholders of this
Corporation shall be held during the month of of each year. The
failure to hold an annual meeting at the time stated in these Bylaws does not
affect the validity of any corporate action.
Section 2. SPECIAL MEETINGS. Except as otherwise provided by law, special
meetings of shareholders of this Corporation shall be held whenever called by
any officer or by the Board of Directors or one or more shareholders who hold at
least ten percent (10%) of all shares entitled to vote on any issue proposed to
be considered at the meeting.
Section 3. PLACE OF MEETINGS. Meetings of shareholders shall be held in
Spokane, Washington, or at such place within or without the State of Washington
as determined by the Board of Directors, pursuant to proper notice.
Section 4. NOTICE. Written notice of each shareholders' meeting stating
the date, time, and place and, in case of a special meeting, the purpose(s) for
which such meeting is called, shall be given by the corporation not less than
ten (10) (unless a greater period of notice is required by law in a particular
case) nor more than sixty (60) days prior to the date of the meeting, to each
shareholder of record entitled to vote at such meeting unless required by law to
send notice to all shareholders (regardless of whether or not such shareholders
are entitled to vote), to the shareholder's address as it appears on the current
record of shareholders of this Corporation.
Section 5. WAIVER OF NOTICE. A shareholder may waive any notice required
to be given by these Bylaws, or the Articles of Incorporation of this
Corporation, or any of the corporate laws of the State of Washington, before or
after the meeting that is the subject of such notice. A valid waiver is created
by any of the following three methods: (a) in writing, signed by the
shareholder entitled to the notice and delivered to the Corporation for
inclusion in its corporate records; (b) attendance at the meeting, unless the
shareholder at the beginning of the meeting objects to holding the meeting or
transacting business at the meeting; or (c) failure to object at the time of
presentation of a matter not within the purpose or purposes described in the
meeting notice.
Section 6. QUORUM OF SHAREHOLDERS. At any meeting of the shareholders, a
majority in interest of all the shares entitled to vote on a matter, represented
by shareholders of record in person or by proxy, shall constitute a quorum of
that voting group for action on that matter.
Once a share is represented at a meeting, other than to object to holding
the meeting or transacting business, it is deemed to be present for quorum
purposes for the
<PAGE>
remainder of the meeting and for any adjournment of that meeting unless a new
record date is or must be set for the adjourned meeting. At such reconvened
meeting, any business may be transacted that might have been transacted at the
meeting as originally notified.
If a quorum exists, action on a matter is approved by a voting group if the
votes cast within the voting group favoring the action exceed the votes cast
within the voting group opposing the action, unless the question is one upon
which by express provision of law or of the Articles of Incorporation or of
these Bylaws a different vote is required.
Section 7. PROXIES. Shareholders of record may vote at any meeting either
in person or by proxy executed in writing. A proxy is effective when received
by the person authorized to tabulate votes for the Corporation. A proxy is
valid for eleven (11) months unless a longer period is expressly provided in the
proxy.
Section 8. VOTING. Subject to the provisions of the laws of the State of
Washington, and unless otherwise provided in the Articles of Incorporation, each
outstanding share, regardless of class, is entitled to one (1) vote on each
matter voted on at a shareholders' meeting.
Section 9. ADJOURNMENT. A majority of the shares represented at the
meeting, even if less than a quorum, may adjourn the meeting from time to time.
At such reconvened meeting at which a quorum is present any business may be
transacted at the meeting as originally notified. If a meeting is adjourned to
a different date, time, or place, notice need not be given of the new date,
time, or place if a new date, time, or place is announced at the meeting before
adjournment; however, if a new record date for the adjourned meeting is or must
be fixed in accordance with the corporate laws of the State of Washington,
notice of the adjourned meeting must be given to persons who are shareholders as
of the new record date.
ARTICLE II
BOARD OF DIRECTORS
Section 1. POWERS OF DIRECTORS. All corporate powers shall be exercised
by or under the authority of, and the business and affairs of the Corporation
shall be managed under the direction of, the Board of Directors, except as
otherwise provided by its Articles of Incorporation.
Section 2. NUMBER AND QUALIFICATIONS. The business affairs and property
of this Corporation shall be managed by a Board of not less than three (3)
directors. The number of directors may at any time be increased or decreased by
the shareholders or by the Board of Directors at any regular or special meeting.
Directors need not be shareholders of this Corporation or residents of the State
of Washington, but must have reached the age of majority.
Section 3. ELECTION - TERM OF OFFICE. The terms of the initial directors
expire at the first shareholders' meeting at which directors are elected. The
directors shall be elected by the shareholders at each annual shareholders'
meeting to hold office until the next annual meeting of the shareholders and
until their respective successors are elected and qualified. If, for any
reason, the directors shall not have been elected at any annual meeting, they
may be elected at a special meeting of shareholders called for that purpose in
the manner provided by these Bylaws.
- 2 -
<PAGE>
Section 4. REGULAR MEETINGS. Regular meetings of the Board of Directors
shall be held at such places, and at such times as the Board by vote may
determine, and, if so determined, no notice thereof need be given.
Section 5. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be held at any time or place whenever called by any officer or one (1) or
more directors, notice thereof being given to each director by the officer
calling or by the officer directed to call the meeting.
Section 6. NOTICE. No notice is required for regularly scheduled
meetings of the Board of Directors. Notice of special meetings of the Board of
Directors, stating the date, time, and place thereof, shall be given at least
two (2) days prior to the date of the meeting. The purpose of the meeting need
not be given in the notice. Notice for special meetings must be by facsimile,
personal delivery, overnight delivery or oral.
Section 7. WAIVER OF NOTICE. A director may waive notice of a special
meeting of the Board either before or after the meeting, and such waiver shall
be deemed to be the equivalent of giving notice. The waiver must be in writing,
signed by the director and entitled to the notice and delivered to the
Corporation for inclusion in its corporate records. Attendance of a director at
a meeting shall constitute waiver of notice of that meeting unless said director
attends for the express purpose of objecting to the transaction of business
because the meeting has not been lawfully called or convened.
Section 8. QUORUM OF DIRECTORS. A majority of the members of the Board
of Directors shall constitute a quorum for the transaction of business. When a
quorum is present at any meeting, a majority of the members present thereat
shall decide any question brought before such meeting, except as otherwise
provided by the Articles of Incorporation or by these Bylaws.
Section 9. ADJOURNMENT. A majority of the directors present, even if
less than a quorum, may adjourn a meeting and continue it to a later time.
Notice of the adjourned meeting or of the business to be transacted thereat,
other than by announcement, shall not be necessary. At any adjourned meeting at
which a quorum is present, any business may be transacted which could have been
transacted at the meeting as originally called.
Section 10. RESIGNATION AND REMOVAL. Any director of this Corporation may
resign at any time by giving written notice to the Board of Directors, its
Chairman, the President, or Secretary of this Corporation. Any such resignation
is effective when the notice is delivered, unless the notice specifies a later
effective date. The shareholders, at a special meeting called expressly for
that purpose, may remove from office with or without cause one or more directors
and elect their successors. A director may be removed only if the number of
votes cast for removal exceeds the number of votes cast against removal.
Section 11. VACANCIES. Unless otherwise provided by law, in case of any
vacancy in the Board of Directors, including a vacancy resulting from an
increase in the number of directors, the remaining directors, whether
constituting a quorum or not, or the shareholders, may fill the vacancy.
Section 12. COMPENSATION. By resolution of the Board of Directors, each
director may be paid expenses, if any, of attendance at each meeting of the
Board of Directors, and may be paid a stated salary as director, or a fixed sum
for attendance at each meeting of the Board of Directors, or both. No such
payment shall preclude any director from serving this Corporation in any other
capacity and receiving compensation therefor.
- 3 -
<PAGE>
Section 13. PRESUMPTION OF ASSENT. A director of this Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless:
a. The director objects at the beginning of the meeting, or promptly
upon the director's arrival, to holding it or transacting business at the
meeting;
b. The director's dissent or abstention from the action taken is
entered in the minutes of the meeting; or
c. The director shall file written dissent or abstention with the
presiding officer of the meeting before its adjournment or to the
Corporation within a reasonable time after adjournment of the meeting.
The right of dissent or abstention is not available to a director who votes in
favor of the action taken.
Section 14. COMMITTEES. The Board of Directors, by resolution adopted by
a majority of the full Board of Directors, may designate from among its members
an Executive Committee and one or more other committees, each of which:
a. Must have two (2) or more members;
b. Must be governed by the same rules regarding meetings, action
without meetings, notice, and waiver of notice, and quorum and voting
requirements as applied to the Board of Directors; and
c. To the extent provided in such resolution, shall have and may
exercise all the authority of the Board of Directors, except no such
committee shall have the authority to:
(1) Authorize or approve a distribution except according to a
general formula or method prescribed by the Board of Directors;
(2) Approve or propose to shareholders action which the
Washington Business Corporation Act requires to be approved by
shareholders;
(3) Fill vacancies on the Board of Directors or on any of its
committees;
(4) Amend the Articles of Incorporation;
(5) Adopt, amend, or repeal the Bylaws;
(6) Approve a plan of merger not requiring shareholder approval;
or
(7) Authorize or approve the issuance or sale or contract for
sale of shares, or determine the designation and relative rights,
preferences, and limitations on a class or series of shares, except
that the Board of Directors may authorize a committee, or a senior
executive officer of the Corporation, to do so within limits
specifically prescribed by the Board of Directors.
- 4 -
<PAGE>
ARTICLE III
SPECIAL MEASURES APPLYING TO BOTH
SHAREHOLDERS' MEETINGS AND DIRECTORS' MEETINGS
Section 1. ACTION BY WRITTEN CONSENT. Any action required or permitted
to be taken at a meeting of the shareholders or the Board of Directors may be
accomplished without a meeting if the action is taken by all the shareholders
entitled to vote thereon, or all the members of the Board, as the case may be.
The action must be evidenced by one or more written consents describing the
action to be taken, signed by all the shareholders entitled to vote thereon, or
by all directors, as the case may be, and delivered to the Corporation for
inclusion in the minutes. Directors' consents may be signed either before or
after the action taken.
Action taken by unanimous written consent is effective when the last
director signs the consent, unless the consent specifies a later effective date.
Action taken by unanimous written consent of the shareholders is effective when
all consents are in the possession of the Corporation, unless the consent
specifies a later effective date.
If the corporate laws of the state of Washington require that notice of a
proposed action be given to nonvoting shareholders and the action is to be taken
by unanimous consent of the voting shareholders, the Corporation must give its
nonvoting shareholders written notice of the proposed action at least ten (10)
days before the action is taken. The notice must contain or be accompanied by
the same material that would have been required to be sent to the nonvoting
shareholders in a notice of meeting at which the proposed action would have been
submitted to a vote of the shareholders.
Section 2. CONFERENCE TELEPHONE. Meetings of the shareholders and Board
of Directors may be effectuated by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other during the meeting. Participation by such means
shall constitute presence in person at such meeting.
Section 3. ORAL AND WRITTEN NOTICE. Oral notice may be communicated in
person or by telephone, wire or wireless equipment that does not transmit a
facsimile of the notice. Oral notice is effective when communicated.
Written notice may be transmitted by mail, private carrier, or personal
delivery; telegraph or teletype; or telephone, wire, or wireless equipment that
transmits a facsimile of the notice. Written notice is effective at the earliest
of the following: (a) when received; (b) five (5) days after its deposit in the
U.S. mail if mailed with first-class postage; (c) on the date shown on the
return receipt, if sent by registered or certified mail, return receipt
requested, and the receipt is signed by or on behalf of the addressee.
ARTICLE IV
OFFICERS
Section 1. POSITIONS. The officers of this Corporation may be a
President, one or more Vice Presidents, a Secretary, a Treasurer, a Chief
Financial Officer, a Chief Operating Officer, and a Chief Information Services
Officer as appointed by the Board. Such other officers and assistant officers
as may be necessary may be appointed by the Board of Directors or by a duly
appointed officer to whom such authority has been
- 5 -
<PAGE>
delegated by Board resolution. No officer need be a shareholder or a director
of this Corporation. Any two or more offices may be held by the same person.
The Board of Directors in its discretion may elect a Chairman from amongst
its members to serve as Chairman of the Board of Directors, who, when present
shall preside at all meetings of the Board of Directors, and who shall have such
other powers as the Board may determine.
Section 2. APPOINTMENT AND TERM OF OFFICE. The officers of this
Corporation shall be appointed annually by the Board of Directors at the first
meeting of the Board of Directors held after each annual meeting of the
shareholders. If officers are not appointed at such meeting, such appointment
shall occur as soon as possible thereafter. Each officer shall hold office
until a successor shall have been appointed and qualified or until said
officer's earlier death, resignation, or removal.
Section 3. POWERS AND DUTIES. If the Board appoints persons to fill the
following officer positions, such officer shall have the powers and duties set
forth below:
a. PRESIDENT AND CHIEF EXECUTIVE OFFICER. The President and Chief
Executive Officer shall be the chief executive officer of this Corporation
and, subject to the direction and control of the Board of Directors, shall
have general supervision of the business and officers of this Corporation.
In addition, the President and Chief Executive Officer shall have
responsibility for planning and directing the strategic direction of the
Corporation, subject to approval of the Board of Directors. Unless a
Chairman of the Board of Directors has been elected and is present, the
President shall preside at meetings of the Board of Directors.
The President, or any Vice President or such other person(s) as are
specifically authorized by vote of the Board of Directors, shall sign all
bonds, deeds, mortgages, and any other agreements, and such signature(s)
shall be sufficient to bind this Corporation. The President shall perform
such other duties as the Board of Directors shall designate.
b. VICE PRESIDENT. During the absence or disability of the
President, the Vice President (or in the event that there be more than one
Vice President, the Vice Presidents in the order designated by the Board of
Directors) shall exercise all functions of the President, except as limited
by resolution of the Board of Directors. Each Vice President shall have
such powers and discharge such duties as may be assigned from time to time
to such Vice President by the President or by the Board of Directors.
c. SECRETARY. The Secretary shall:
(1) Prepare minutes of the directors' and shareholders' meetings
and keep them in one or more books provided for that purpose;
(2) Authenticate records of the Corporation;
(3) See that all notices are duly given in accordance with the
provisions of these Bylaws or as required by law;
(4) Be custodian of the corporate records and of the seal of the
Corporation (if any), and affix the seal of the Corporation to all
documents as may be required;
- 6 -
<PAGE>
(5) Keep a register of the post office address of each
shareholder which shall be furnished to the Secretary by such
shareholder;
(6) Sign with the President, or a Vice President, certificates
for shares of the Corporation, the issuance of which shall have been
authorized by resolution of the Board of Directors;
(7) Have general charge of the stock transfer books of the
Corporation; and
(8) In general, perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned
to him by the President or by the Board of Directors. In the
Secretary's absence, an Assistant Secretary shall perform the
Secretary's duties.
d. TREASURER. The Treasurer shall have the care and custody of the
money, funds, and securities of the Corporation, shall account for the
same, and shall have and exercise, under the supervision of the Board of
Directors, all the powers and duties commonly incident to this office.
e. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall
oversee the care and custody of the money, funds, and securities of the
Corporation, shall account for the same, and shall have and exercise, under
the supervision of the Board of Directors, all the powers and duties
commonly incident to this office.
f. CHIEF OPERATING OFFICER. The Chief Operating Officer shall,
under the supervision of the President and Chief Executive Officer, have
responsibility to implement policy directives as adopted by the Board of
Directors, as well as responsibility for day-to-day management of the
activities of the Corporation.
g. CHIEF INFORMATION SERVICES OFFICER. The Chief Information
Services Officer shall have responsibility, under the supervision of the
Chief Executive Officer and Chief Financial Officer, for developing,
maintaining and implementing management information and accounting systems
of the Corporation necessary for the efficient operation of the business,
consistent with policy directives as adopted by the Board of Directors and
as required to enable the Corporation to perform its legal obligations.
Section 4. SALARIES AND CONTRACT RIGHTS. The salaries, if any, of the
officers shall be fixed from time to time by the Board of Directors. The
appointment of an officer shall not of itself create contract rights.
Section 5. RESIGNATION OR REMOVAL. Any officer of this Corporation may
resign at any time by giving written notice to the Board of Directors. Any such
resignation is effective when the notice is delivered, unless the notice
specifies a later date, and shall be without prejudice to the contract rights,
if any, of such officer.
The Board of Directors, by majority vote of the entire Board, may
remove any officer or agent appointed by it, with or without cause. The removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
Section 6. VACANCIES. If any office becomes vacant by any reason, the
directors may appoint a successor or successors who shall hold office for the
unexpired term.
- 7 -
<PAGE>
ARTICLE V
CERTIFICATES OF SHARES AND THEIR TRANSFER
Section 1. ISSUANCE; CERTIFICATES OF SHARES. No shares of this
Corporation shall be issued unless authorized by the Board. Such authorization
shall include the maximum number of shares to be issued, the consideration to be
received, and a statement that the Board considers the consideration to be
adequate. Certificates for shares of the Corporation shall be in such form as
is consistent with the provisions of the Washington Business Corporation Act and
shall state:
a. The name of the Corporation and that the Corporation is organized
under the laws of the State of Washington;
b. The name of the person to whom issued; and
c. The number and class of shares and the designation of the series,
if any, which such certificate represents.
The certificate shall be signed by original or facsimile signature of two
officers of the Corporation, and the seal of the Corporation may be affixed
thereto.
Section 2. TRANSFER OF STOCK. Shares of stock may be transferred by
delivery of the certificate accompanied by either an assignment in writing on
the back of the certificate or by a written power of attorney to assign and
transfer the same on the books of this Corporation, signed by the record holder
of the certificate. The shares shall be transferable on the books of this
Corporation upon surrender thereof so assigned or endorsed.
Section 3. LOSS OR DESTRUCTION OF CERTIFICATES. In case of the loss,
mutilation, or destruction of a certificate of stock, a duplicate certificate
may be issued upon such terms as the Board of Directors shall prescribe.
Section 4. RECORD DATE AND TRANSFER BOOKS. For the purpose of
determining shareholders who are entitled to notice of or to vote at any meeting
of shareholders or any adjournment thereof, or entitled to receive payment of
any dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors may fix in advance a record date for any
such determination of shareholders, such date in any case to be not more than
seventy (70) days and, in case of a meeting of shareholders, not less than ten
(10) days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken.
If no record date is fixed for such purposes, the date on which notice of
the meeting is mailed or the date on which the resolution of the Board of
Directors declaring such dividend is adopted, as the case may be, shall be the
record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof, unless the Board of Directors fixes a new
record date, which it must do if the meeting is adjourned more than one hundred
twenty (120) days after the date is fixed for the original meeting.
- 8 -
<PAGE>
Section 5. VOTING RECORD. The officer or agent having charge of the
stock transfer books for shares of this Corporation shall make at least ten (10)
days before each meeting of shareholders a complete record of the shareholders
entitled to vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares held by each.
Such record shall be produced and kept open at the time and place of the meeting
and shall be subject to the inspection of any shareholder during the whole time
of the meeting for the purposes thereof.
ARTICLE VI
BOOKS AND RECORDS
Section 1. BOOKS OF ACCOUNTS, MINUTES, AND SHARE REGISTER. The
corporation:
a. Shall keep as permanent records minutes of all meetings of its
shareholders and Board of Directors, a record of all actions taken by the
shareholders or Board of Directors without a meeting, and a record of all
actions taken by a committee of the Board of Directors exercising the
authority of the Board of Directors on behalf of the Corporation;
b. Shall maintain appropriate accounting records;
c. Or its agent shall maintain a record of its shareholders, in a
form that permits preparation of a list of the names and addresses of all
shareholders, in alphabetical order by class of shares showing the number
and class of shares held by each; and
d. Shall keep a copy of the following records at its principal
office:
(1) The Articles or Restated Articles of Incorporation and all
amendments to them currently in effect;
(2) The Bylaws or Restated Bylaws and all amendments to them
currently in effect;
(3) The minutes of all shareholders' meetings, and records of
all actions taken by shareholders without a meeting, for the past
three (3) years;
(4) Its financial statements for the past three (3) years,
including balance sheets showing in reasonable detail the financial
condition of the Corporation as of the close of each fiscal year, and
an income statement showing the results of its operations during each
fiscal year prepared on the basis of generally accepted accounting
principles or, if not, prepared on a basis explained therein;
(5) All written communications to shareholders generally within
the past three (3) years;
(6) A list of the names and business addresses of its current
directors and officers; and
(7) Its most recent annual report delivered to the Secretary of
State of Washington.
- 9 -
<PAGE>
Section 2. COPIES OF RESOLUTIONS. Any person dealing with the
Corporation may rely upon a copy of any of the records of the proceedings,
resolutions, or votes of the Board of Directors or shareholders, when certified
by the President or Secretary.
ARTICLE VII
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS
Section 1. DEFINITIONS. As used in this Article:
a. "Act" means the Washington Business Corporation Act, now or
hereafter in force.
b. "Agent" means an individual who is or was an agent of the
Corporation or an individual who, while an agent of the Corporation, is or
was serving at the Corporation's request as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan, or other
enterprise. "Agent" includes, unless the context required otherwise, the
estate or personal representative of an agent.
c. "Corporation" means this Corporation, and any domestic or foreign
predecessor entity which, in a merger or other transaction, ceased to
exist.
d. "Director" means an individual who is or was a director of the
Corporation or an individual who, while a director of the Corporation, is
or was serving Corporation's request as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan, or other
enterprise. "Director" includes, unless the context requires otherwise,
the estate or personal representative of a director.
e. "Employee" means an individual who is or was an employee of the
Corporation or an individual, while an employee of the Corporation, is or
was serving at the Corporation's request as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan, or other
enterprise. "Employee" includes, unless the context requires otherwise,
the estate or personal representative of an employee.
f. "Expenses" include counsel fees.
g. "Indemnitee" means an individual made a party to a proceeding
because the individual is or was a Director, Officer, Employee, or Agent of
the Corporation, and who possesses indemnification rights pursuant to the
Articles, these Bylaws, or other corporate action. "Indemnitee" shall also
include the heirs, executors, and other successors in interest of such
individuals.
h. "Liability" means the obligation to pay a judgment, settlement,
penalty, fine, including an excise tax assessed with respect to an employee
benefit plan, or reasonable expenses incurred with respect to a proceeding.
i. "Officer" means an individual who is or was an officer of the
Corporation or an individual who, while an officer of the Corporation, is
or was serving at the Corporation's request as a director, officer,
partner, trustee,
- 10 -
<PAGE>
employee, or agent of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan, or other enterprise.
"Officer," includes, unless the context requires otherwise, the estate or
personal representative of an officer.
j. "Party" includes an individual who was, is, or is threatened to
be named a defendant or respondent in a proceeding.
k. "Proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or
investigative, and whether formal or informal.
Section 2. INDEMNIFICATION RIGHTS OF DIRECTORS, OFFICERS, EMPLOYEES AND
AGENTS. The Corporation shall indemnify its Directors, Officers, Employees and
Agents to the full extent permitted by applicable law as then in effect against
liability arising out of a proceeding to which such individual was made a party
because the individual is or was a Director, Officer, Employee or Agent of the
Corporation. The Corporation shall advance expenses incurred by such persons who
are parties to a proceeding in advance of final disposition of the proceeding,
as provided herein.
Section 3. PROCEDURE FOR SEEKING INDEMNIFICATION AND/OR ADVANCEMENT OF
EXPENSES.
a. NOTIFICATION AND DEFENSE OF CLAIM. Indemnitee shall promptly
notify the Corporation in writing of any proceeding for which
indemnification could be sought under this Article. In addition,
Indemnitee shall give the Corporation such information and cooperation as
it may reasonably require and as shall be within Indemnitee's power.
With respect to any such proceeding as to which Indemnitee has
notified the Corporation:
(1) The Corporation will be entitled to participate therein at
its own expense;
(2) Except as otherwise provided below, to the extent that it
may wish, the Corporation, jointly with any other indemnifying party
similarly notified, will be entitled to assume the defense thereof,
with counsel satisfactory to Indemnitee. Indemnitee's consent to such
counsel may not be unreasonably withheld.
After notice from the Corporation to Indemnitee of its election to
assume the defense, the Corporation will not be liable to Indemnitee under
this Article for any legal or other expenses subsequently incurred by
Indemnitee in connection with such defense. However, Indemnitee shall
continue to have the right to employ its counsel in such proceeding, at
Indemnitee's expense; and if:
(a) The employment of counsel by Indemnitee has been authorized
by the Corporation;
(b) Indemnitee shall have reasonably concluded that there may be
a conflict of interest between the Corporation and Indemnitee in the
conduct of such defense; or
- 11 -
<PAGE>
(c) The Corporation shall not in fact have employed counsel to
assume the defense of such proceeding,
the fees and expenses of Indemnitee's counsel shall be at the expense of
the Corporation.
The Corporation shall not be entitled to assume the defense of any
proceeding brought by or on behalf of the Corporation or as to which
Indemnitee shall reasonably have made the conclusion that a conflict of
interest may exist between the Corporation and the Indemnitee in the
conduct of the defense.
b. INFORMATION TO BE SUBMITTED AND METHOD OF DETERMINATION AND
AUTHORIZATION OF INDEMNIFICATION. For the purpose of pursuing rights to
indemnification under this Article, the Indemnitee shall submit to the
Board a sworn statement requesting indemnification and reasonable evidence
of all amounts for which such indemnification is requested (together, the
sworn statement and the evidence constitutes an "Indemnification
Statement").
Submission of an Indemnification Statement to the Board shall create a
presumption that the Indemnitee is entitled to indemnification hereunder,
and the Corporation shall, within sixty (60) calendar days thereafter, make
the payments requested in the Indemnification Statement to or for the
benefit of the Indemnitee, unless: (1) within such sixty (60) calendar day
period it shall be determined by the Corporation that the Indemnitee is not
entitled to indemnification under this Article; (2) such vote shall be
based upon clear and convincing evidence (sufficient to rebut the foregoing
presumption); and (3) the Indemnitee shall receive notice in writing of
such determination, which notice shall disclose with particularity the
evidence upon which the determination is based.
At the election of the President, the foregoing determination may be
made by either: (1) the written consent of the shareholders owning a
majority of the stock in the Corporation; (2) a committee chosen by written
consent of a majority of the directors of the Corporation, and consisting
solely of two (2) or more directors not at the time parties to the
proceeding; or (3) as provided by RCW 23B.08.550, as amended.
Any determination that the Indemnitee is not entitled to
indemnification, and any failure to make the payments requested in the
Indemnification Statement, shall be subject to judicial review by any court
of competent jurisdiction.
c. SPECIAL PROCEDURE REGARDING ADVANCE FOR EXPENSES. An Indemnitee
seeking payment of expenses in advance of a final disposition of the
proceeding must furnish the Corporation, as part of the Indemnification
Statement:
(1) A written affirmation of the Indemnitee's good faith belief
that the Indemnitee has met the standard of conduct required to be
eligible for indemnification; and
(2) A written undertaking, constituting an unlimited general
obligation of the Indemnitee, to repay the advance if it is ultimately
determined that the Indemnitee did not meet the required standard of
conduct.
- 12 -
<PAGE>
If the Corporation determines that indemnification is authorized, the
Indemnitee's request for advance of expenses shall be granted.
d. SETTLEMENT. The Corporation is not liable to indemnify
Indemnitee for any amounts paid in settlement of any proceeding without
Corporation's written consent. The Corporation shall not settle any
proceeding in any manner which would impose any penalty or limitation on
Indemnitee without Indemnitee's written consent. Neither the Corporation
nor Indemnitee may unreasonably withhold its consent to a proposed
settlement.
Section 4. CONTRACT AND RELATED RIGHTS.
a. CONTRACT RIGHTS. The right of an Indemnitee to indemnification
and advancement of expenses is a contract right upon which the Indemnitee
shall be presumed to have relied in determining to serve or to continue to
serve in his or her capacity with the Corporation. Such right shall
continue as long as the Indemnitee shall be subject to any possible
proceeding. Any amendment to or repeal of this Article shall not adversely
affect any right or protection of an Indemnitee with respect to any acts or
omissions of such Indemnitee occurring prior to such amendment or repeal.
b. OPTIONAL INSURANCE, CONTRACTS, AND FUNDING. The Corporation may:
(1) Maintain insurance, at its expense, to protect itself and
any Indemnitee against any liability, whether or not the Corporation
would have power to indemnify the individual against the same
liability under RCW 23B.08.510 or .520, or a successor statute;
(2) Enter into contracts with any Indemnitee in furtherance of
this Article and consistent with the Act; and
(3) Create a trust fund, grant a security interest, or use other
means (including without limitation a letter of credit) to ensure the
payment of such amounts as may be necessary to effect indemnification
as provided in this Article.
c. SEVERABILITY. If any provision or application of this Article
shall be invalid or unenforceable, the remainder of this Article and its
remaining applications shall not be affected thereby, and shall continue in
full force and effect.
d. RIGHT OF INDEMNITEE TO BRING SUIT. If (1) a claim under this
Article for indemnification is not paid in full by the Corporation within
sixty (60) days after a written claim has been received by the Corporation;
or (2) a claim under this Article for advancement of expenses is not paid
in full by the Corporation within twenty (20) days after a written claim
has been received by the Corporation, then the Indemnitee may, but need
not, at any time thereafter bring suit against the Corporation to recover
the unpaid amount of the claim. To the extent successful in whole or in
part, the Indemnitee shall be entitled to also be paid the expense (to be
proportionately prorated if the Indemnitee is only partially successful) of
prosecuting such claim.
Neither: (1) the failure of the Corporation (including its Board of
Directors, its shareholders, or independent legal counsel) to have made a
determination prior to the commencement of such proceeding that
indemnification
- 13 -
<PAGE>
or reimbursement or advancement of expenses to the Indemnitee is proper in
the circumstances; nor (2) an actual determination by the Corporation
(including its Board of Directors, its shareholders, or independent legal
counsel) that the Indemnitee is not entitled to indemnification or to the
reimbursement or advancement of expenses, shall be a defense to the
proceeding or create a presumption that the Indemnitee is not so entitled.
Section 5. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Corporation shall not be obligated pursuant to the terms of
these Bylaws to indemnify or advance expenses to Indemnitee with respect to any
proceeding:
a. CLAIMS INITIATED BY INDEMNITEE. Initiated or brought voluntarily
by Indemnitee and not by way of defense, except with respect to proceedings
brought to establish or enforce a right to indemnification under these
Bylaws or any other statute or law or as otherwise required under the
statute; but such indemnification or advancement of expenses may be
provided by the Corporation in specific cases if the Board of Directors
finds it to be appropriate.
b. LACK OF GOOD FAITH. Instituted by Indemnitee to enforce or
interpret this Agreement, if a court of competent jurisdiction determines
that each of the material assertions made by Indemnitee in such proceeding
was not made in good faith or was frivolous.
c. INSURED CLAIMS. For which any of the expenses or liabilities for
indemnification is being sought have been paid directly to Indemnitee by an
insurance carrier under a policy of officers' and directors' liability
insurance maintained by the Corporation.
d. PROHIBITED BY LAW. If the Corporation is prohibited by the
Washington Business Corporation Act or other applicable law as then in
effect from paying such indemnification and/or advancement of expenses.
For example, the Corporation and Indemnitee acknowledge that the Securities
and Exchange Commission ("SEC") has taken the position that indemnification
is not possible for liabilities arising under certain federal securities
laws, and federal legislation prohibits indemnification for certain ERISA
violations. Indemnitee understands and acknowledges that the Corporation
has undertaken or may be required in the future to undertake with the SEC
to submit the question of indemnification to a court in certain
circumstances for a determination of the Corporation's right to indemnify
Indemnitee.
ARTICLE VIII
LIMITATION OF DIRECTOR LIABILITY
A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for conduct as a director,
except for:
(a) Acts or omissions involving intentional misconduct by the director or
a knowing violation of law by the director;
(b) Conduct violating RCW 23B.08.310 (which involves certain distributions
by the corporation);
- 14 -
<PAGE>
(c) Any transaction from which the director will personally receive a
benefit in money, property, or services to which the director is not
legally entitled.
If the Washington Business Corporation Act is amended to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the corporation shall be
eliminated or limited to the fullest extent permitted by the Washington Business
Corporation Act, as so amended. Any repeal or modification of the foregoing
paragraph by the shareholders of the corporation shall not adversely affect any
right or protection of a director of the corporation with respect to any acts or
omissions of such director occurring prior to such repeal or modification.
ARTICLE IX
AMENDMENT OF BYLAWS
Section 1. BY THE SHAREHOLDERS. These Bylaws may be amended or
repealed at any regular or special meeting of the shareholders if notice of the
proposed amendment is contained in the notice of the meeting.
Section 2. BY THE BOARD OF DIRECTORS. These Bylaws may be amended or
repealed by the affirmative vote of a majority of the whole Board of Directors
of any meeting of the Board, if notice of the proposed amendment is contained in
the notice of the meeting. However, the directors may not modify the Bylaws
fixing their qualifications, classifications, or term of office.
ARTICLE X
RULES OF ORDER
The rules contained in the most recent edition of Robert's Rules of Order,
newly revised, shall govern all meetings of shareholders and directors where
those rules are not inconsistent with the Articles of Incorporation, Bylaws, or
other rules of order of this Corporation.
The undersigned, as President, of Labor Ready, Inc. executes these Bylaws
on October 19, 1995.
/s/ Glenn Welstad
---------------------------------
Glenn Welstad
President
- 15 -
<PAGE>
[LOGO]
LOAN AGREEMENT
[SHADED AREA]
PRINCIPAL $10,000,000
LOAN DATE 02-13-1996
MATURITY 09-30-1996
LOAN NO. 397-67
CALL 36533
COLLATERAL 365
ACCOUNT 4919402202
OFFICER 44306
INITIALS
[END SHADED AREA]
References in the shaded ares are for Lender's use only and do not limit the
applicability of this document to particular loan or term.
Borrower: LABOR READY, INC. Lender: U.S. BANK OF WASHINGTON,
2156 Pacific Avenue NATIONAL ASSOCIATION
Tacoma, WA 98402 Tacoma Corporate Banking
c/o 1420 5th Avenue
WWH 470
Seattle, WA 98101
- --------------------------------------------------------------------------------
THIS LOAN AGREEMENT between LABOR READY, INC. ("Borrower") and U.S. BANK
OF WASHINGTON, NATIONAL ASSOCIATION ("Lender") is made and executed on the
following terms and conditions. Borrower has received prior commercial loans
from Lender or has applied to Lender for a commercial loan or loans and other
financial accommodations, Including those which may be described on any exhibit
or schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations from
Lender to Borrower, are referred to in this Agreement individually as the "Loan"
and collectively as the "Loans." Borrower understands and agrees that: (a) In
granting, renewing, or extending any Loan, Lender Is relying upon Borrower's
representation, warranties, and agreements, as set forth in this Agreement;
(b) the granting, renewing, or extending of any Loan by Lender at all times
shall be subject to Lender's sole Judgment and discretion; and (c) all such
Loans shall be and shall remain subject to the following terms an conditions of
this Agreement.
TERM. This Agreement shall be effective as of February 13, 1996, and shall
continue thereafter until all Indebtedness of Borrower to Lender has bee
performed in full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when
used in this Agreement. Terms not otherwise defined in this Agreement shall
have the meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
AGREEMENT. The word "Agreement" means this Loan Agreement, as this Loan
Agreement may be amended or modified from time to time, together with all
exhibits and schedules attached to this Loan Agreement from time to time.
ACCOUNT. The word "Account" means a trade account, account receivable, or
other right to payment for goods sold or services rendered owing to Borrower (or
to a third party grantor acceptable to Lender).
<PAGE>
ACCOUNT DEBTOR. The words "Account Debtor" mean the person or entity
obligated upon an Account.
ADVANCE. The word "Advance" means a disbursement of Loan funds under this
Agreement.
BORROWER. The word "Borrower" means LABOR READY, INC. The word "Borrower"
also includes, as applicable, all subsidiaries and affiliates of Borrower as
provided below in the paragraph titled "Subsidiaries and Affiliates."
BORROWING BASE. The words "Borrowing Base" mean, as determined by Lender
from time to time, the lesser of (a) $10,000,000.00; or (b) 70.000% of the
aggregate amount of Eligible Accounts.
BUSINESS DAY. The words "Business Day" mean a day on which commercial
banks are open for business in the State of Washington.
CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
CASH FLOW. The words "Cash Flow" mean net income alter taxes, and
exclusive of extraordinary gains and income, plus depreciation and amortization.
COLLATERAL. The word "Collateral" means and includes without limitation
all property and assets granted as collateral security for a Loan, whether real
or personal property, whether granted directly or indirectly, whether granted
now or in the future, and whether granted in the form of a security interest,
mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel trust,
factor's lien, equipment trust, conditional sale, trust receipt, lien, charge,
lien or title retention contract, lease or consignment intended as a security
device, or any other security or lien interest whatsoever, whether created by
law, contract, or otherwise. The word "Collateral" includes without limitation
all collateral described below in the section titled "COLLATERAL."
DEBT. The word "Debt" means all of Borrower's liabilities excluding
Subordinated Debt.
ELIGIBLE ACCOUNTS. The words "Eligible Accounts" mean, at any time, all of
Borrower's Accounts which contain selling terms and conditions acceptable to
Lender. The net amount of any Eligible Account against which Borrower may
borrow shall exclude all returns, discounts, credits, and offsets of any nature.
Unless otherwise agreed to by Lender in writing, Eligible Accounts do not
include:
(a) Accounts with respect to which the Account Debtor is an officer, an
employee or agent of Borrower.
(b) Accounts with respect to which the Account Debtor is a subsidiary of,
or affiliated with or related to Borrower or its shareholders, officers, or
directors.
-2-
<PAGE>
(c) Accounts with respect to which goods are placed on consignment,
guaranteed sale, or other terms by reason of which the payment by the Account
Debtor may be conditional.
(d) Accounts with respect to which the Account Debtor is not a resident of
the United States, except to the extent such Accounts are supported by
insurance, bonds or other assurances satisfactory to Lender.
(e) Accounts with respect to which Borrower is or may become liable to the
Account Debtor for goods sold or services rendered by the Account Debtor to
Borrower.
(f) Accounts which are subject to dispute, counterclaim, or setoff.
(g) Accounts with respect to which the goods have not been shipped or
delivered, or the services have not been rendered, to the Account Debtor.
(h) Accounts with respect to which Lender, in its sole discretion, deems
the creditworthiness or financial condition of the Account Debtor to be
unsatisfactory.
(i) Accounts of any Account Debtor who has filed or has filed against it a
petition in bankruptcy or an application for relief under any provision of any
state or federal bankruptcy, insolvency, or debtor-in-relief acts; or who has
had appointed a trustee, custodian, or receiver for the assets of such Account
Debtor; or who has made an assignment for the benefit of creditors or has become
insolvent or fails generally to pay its debts (including its payrolls) as such
debts become due.
(j) Accounts with respect to which the Account Debtor is the United States
government or any department or agency of the United States.
(k) Accounts which have not been paid in full within 90 days from the
invoice date.
ERISA. The word "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
EVENT OF DEFAULT. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section titled
"EVENTS OF DEFAULT."
EXPIRATION DATE. The words "Expiration Date" mean the date of termination
of Lender's commitment to lend under this Agreement.
GRANTOR. The word "Grantor" means and includes without limitation each and
all of the persons of entities granting a Security Interest in any Collateral
for the Indebtedness, including without limitation all Borrowers granting such a
Security Interest.
-3-
<PAGE>
GUARANTOR. The word "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties in connection
with any Indebtedness.
INDEBTEDNESS. The word "Indebtedness" means and includes without
limitation all Loans, together with all other obligations, debts and liabilities
of Borrower to Lender, or any one or more of them, as well as all claims by
Lender against Borrower, or anyone or more of them; whether now or hereafter
existing, voluntary or involuntary, due or not due, absolute or contingent,
liquidated or unliquidated; whether Borrower may be liable individually or
jointly with others; whether Borrower may be obligated as a guarantor, surety,
or otherwise; whether recovery upon such [TEXT MISSING FROM BOTTOM OF PAGE
________________________________________] become otherwise unenforceable.
LENDER. The word "Lender" means U.S. BANK OF WASHINGTON, NATIONAL
ASSOCIATION, its successors and assigns.
LINE OF CREDIT. The words "Line of Credit" mean the credit facility
described in the Section titled "LINE OF CREDIT" below.
LIQUID ASSETS. The words "Liquid Assets" mean Borrower's cash on plan plus
Borrower's receivables.
LOAN. The word "Loan" or "Loans" means and includes without limitation any
and all commercial loans and financial accommodations from Lender to Borrower,
whether now or hereafter existing, and however evidenced, including without
limitation those loans and financial accommodations described herein or
described on any exhibit or schedule attached to this Agreement from time to
time.
NOTE. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan obligations in
favor of Lender, as well as any substitute, replacement or refinancing note or
notes therefor.
PERMITTED LIENS. The words "Permitted Liens" mean: (a) liens and security
interests securing Indebtedness owed by Borrower to Lender; (b) liens for taxes,
assessments, or similar charges either not yet due or being contested in good
faith; (c) liens of materialmen, mechanics, warehousemen, or carriers, or other
like liens arising in the ordinary course of business and securing obligations
which are not yet delinquent; (d) purchase money liens or purchase money
security interests upon or in any property acquired or held by Borrower in the
ordinary course of business to secure indebtedness outstanding on the date of
this Agreement or permitted to be incurred under the paragraph of this Agreement
titled "Indebtedness and Liens"; (e) liens and security interests which, as of
the date of this Agreement, have been disclosed to and approved by the Lender in
writing; and (f) those liens and security interests which in the aggregate
constitute an immaterial and insignificant monetary amount with respect to the
net value of Borrower's assets.
-4-
<PAGE>
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds of
trust, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.
SECURITY AGREEMENT. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract, or
otherwise, evidencing, governing, representing, or creating a Security Interest.
SECURITY INTEREST. The words "Security Interest" mean and include without
limitation any type of collateral security, whether in the form of a lien,
charge, mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel
trust, factor's lien, equipment trust, conditional sale, trust receipt, lien or
title retention contract, lease or consignment intended as a security device, or
any other security or lien interest whatsoever, whether created by law,
contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and Reauthorization
Act of 1986 as now or hereafter amended.
SUBORDINATED DEBT. The words "Subordinated Debt" mean indebtedness and
liabilities of Borrower which have been subordinated by written agreement to
indebtedness owed by Borrower to Lender in form and substance acceptable to
Lender.
TANGIBLE NET WORTH. The words "Tangible Net Worth" mean Borrower's total
assets excluding all intangible assets (i.e., goodwill, trademarks, patents,
copyrights, organizational expenses, and similar intangible items, but including
leaseholds and leasehold improvements) less total Debt.
WORKING CAPITAL. The words "Working Capital" mean Borrower's current
assets, excluding prepaid expenses, less Borrower's current liabilities.
LINE OF CREDIT. Lender agrees to make Advances to Borrower from time to
time from the date of this Agreement to the Expiration Date, provided the
aggregate amount of such Advances outstanding at any time does not exceed the
Borrowing Base. Within the foregoing limits, Borrower may borrow, partially or
wholly prepay, and reborrow under this Agreement as follows.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make any
Advance to or for the account of Borrower under this Agreement is subject to the
following conditions precedent, with all documents, instruments, opinions,
reports, and other items required under this Agreement to be in form and
substance satisfactory to Lender:
(a) Lender shall have received evidence that this Agreement and all
Related Documents have been duly authorized, executed, and delivered by Borrower
to Lender.
-5-
<PAGE>
(b) Lender shall have received such opinions of counsel, supplemental
opinions, and documents as Lender may request.
(c) The security interests in the Collateral shall have been duly
authorized, created, and perfected with first lien priority and shall be in full
force and effect.
(d) All guaranties required by Lender for the Line of Credit shall have
been executed by each Guarantor, delivered to Lender, and be in full force and
effect.
(e) Lender, at its option and for its sole benefit, shall have conducted
an audit of Borrower's Accounts, books, records, and operations, and Lender
shall be satisfied as to their condition.
(f) Borrower shall have paid to Lender all fees, costs, and expenses
specified in this Agreement and the Related Documents as are then due and
payable.
(g) There shall not exist at the time of any Advance a condition which
would constitute an Event of Default under this Agreement, and Borrower shall
have delivered to Lender the compliance certificate called for in the paragraph
below titled "Compliance Certificate."
MAKING LOAN ADVANCES. Advances under the Line of Credit may be requested
either orally or in writing by authorized persons. Lender may, but need not,
require that all oral requests be confirmed in writing. Each Advance shall be
conclusively deemed to have been made at the request of and for the benefit of
Borrower (a) when credited to any deposit account of Borrower maintained with
Lender or (b) when advanced in accordance with the instructions of an authorized
person. Lender, at its option, may set a cutoff time, after which all requests
for Advances will be treated as having been requested on the next succeeding
Business Day.
MANDATORY LOAN REPAYMENTS. If at any time the aggregate principal amount
of the outstanding Advances shall exceed the applicable Borrowing Base,
Borrower, immediately upon written or oral notice from Lender, shall pay to
Lender an amount equal to the difference between the outstanding principal
balance of the Advances and the Borrowing Base. On the Expiration Date,
Borrower shall pay to Lender in full the aggregate unpaid principal amount of
all Advances then outstanding and all accrued unpaid interest, together with all
other applicable fees, costs and charges, if any, not yet paid.
LOAN ACCOUNT. Lender shall maintain on its books a record of account in
which Lender shall make entries for each Advance and such other debits and
credits as shall be appropriate in connection with the credit facility. Lender
shall provide Borrower with periodic statements of Borrower's account, which
statements shall be considered to be correct and conclusively binding on
Borrower unless Borrower notifies Lender to the contrary within thirty (30) days
after Borrower's receipt of any such statement which Borrower deems to be
incorrect.
COLLATERAL. To secure payment of the Line of Credit and performance of all
other Loans, obligations and duties owed by Borrower to Lender, Borrower (and
others, if required)
-6-
<PAGE>
shall grant to Lender Security Interests in such property and assets as Lender
may require (the "Collateral"), including without limitation Borrower's present
and future Accounts, contract rights, and general intangibles. Lender's
Security Interests in the Collateral shall be continuing liens and shall include
the proceeds and products of the Collateral, including without limitation the
proceeds of any insurance. With respect to the Collateral, Borrower agrees and
represents and warrants to Lender:
PERFECTION OF SECURITY INTERESTS. Borrower agrees to execute such
financing statements and to take whatever other actions are requested by Lender
to perfect and continue Lender's Security Interests in the Collateral. Upon
request of Lender, Borrower will deliver to Lender any and all of the documents
evidencing or constituting the Collateral, and Borrower will note Lender's
interest upon any and all chattel paper if not delivered to Lender for
possession by Lender. Contemporaneous with the execution of this Agreement,
Borrower will execute one or more UCC financing statements and any similar
statements as may be required by applicable law, and will file such financing
statements and all such similar statements in the appropriate location or
locations. Borrower hereby appoints Lender as its irrevocable attorney-in-fact
for the purpose of executing any documents necessary to perfect or to continue
any Security Interest. Lender may at any time, and without further
authorization from Borrower, file a carbon, photograph, facsimile, or other
reproduction of any financing statement for use as a financing statement.
Borrower will reimburse Lender for all expenses for the perfection, termination,
and the continuation of the perfection of Lender's security interest in the
Collateral. Borrower promptly will notify Lender of any change in Borrower's
Social Security Number or Employer Indentification Number. Borrower further
agrees to notify Lender in writing prior to any change in address or location of
Borrower's principal governance office or should Borrower merge or consolidate
with any other entity.
COLLATERAL RECORDS. Borrower does now, and at all times hereafter shall,
keep, correct any accurate records of the Collateral, all of which records shall
be available to Lender or Lender's representative upon demand for inspection and
copying at any reasonable time. With respect to the Accounts, Borrower agrees
to keep and maintain such records as Lender may require, including without
limitation information concerning Eligible Accounts and Account balances and
agings.
COLLATERAL SCHEDULES. Concurrently with the execution and delivery of this
Agreement, Borrower shall execute and deliver to Lender a schedule of accounts
and Eligible Accounts, in form and substance satisfactory to the Lender.
Thereafter and at such frequency as Lender shall require, Borrower shall execute
and deliver to Lender such supplemental schedules of Eligible Accounts and such
other matters and information relating to Borrower's Accounts as Lender may
request.
REPRESENTATIONS AND WARRANTIES CONCERNING ACCOUNTS. With respect to the
Accounts, Borrower represents and warrants to Lender: (a) Each Account
represented by Borrower to be an Eligible Account for purposes of this Agreement
conforms to the requirements of the definition of an Eligible Account; (b) All
Account information listed on schedules delivered to Lender will be true and
correct, subject to immaterial variance; and (c) Lender, its assigns, or agents
shall have
-7-
<PAGE>
the right at any time and at Borrower's expense to inspect, examine, and audit
Borrower's records and to confirm with Account Debtors the accuracy of such
Accounts.
ADDITIONAL CREDIT FACILITIES. In addition to the Line of Credit facility,
the following credit accommodations are either in place or will be made
available to Borrower:
TERM LOAN. Subject to the terms and conditions of this Agreement and the
exhibit, a term loan is either in place or will be made available to Borrower as
set forth in an exhibit, which is attached hereto and made a part hereof.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender
as of the date of this Agreement and as of the date of each disbursement of Loan
proceeds:
ORGANIZATION. Borrower is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of Washington.
Borrower has the full power and authority to own its properties and to transact
the businesses in which it is presently engaged or presently proposes to engage.
Borrower also is duly qualified as a foreign corporation and is in good standing
in all states in which the failure to so qualify would have a material adverse
effect on its businesses or financial condition.
AUTHORIZATION. The execution, delivery, and performance of this Agreement
and all Related Documents by Borrower, to the extent to be executed, delivered
or performed by Borrower, have been duly authorized by all necessary action by
Borrower; do not require the consent or approval of any other person, regulatory
authority or governmental body; and do not conflict with, result in a violation
of, or constitute a default under (a) any provision of its articles of
incorporation or organization, or bylaws, or any agreement or other instrument
binding upon Borrower or (b) any law, governmental regulation, court decree, or
order applicable to Borrower.
FINANCIAL INFORMATION. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as of the
date of the statement, and there has been no material adverse change in
Borrower's financial condition subsequent to the date of the most recent
financial statement supplied to Lender. Borrower has no material contingent
obligations except as disclosed in such financial statements.
LEGAL EFFECT. This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will constitute,
legal, valid and binding obligations of Borrower enforceable against Borrower in
accordance with their respective terms.
PROPERTIES. Except for Permitted Liens, Borrower owns and has good title
to all of Borrower's properties free and clear of all Security Interests, and
has not executed any security documents or financing statements relating to such
properties. All of Borrower's properties are titled in Borrower's legal name,
and Borrower has not used, or filed a financing statement under, any other name
for at least the last five (5) years.
-8-
<PAGE>
HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous substance,"
"disposal," "release," and "threatened release," as used in this Agreement,
shall have the same meanings as set forth in the "CERCLA," "SARA," the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 49 U.S.C. Section 6901, et seq., or other
applicable state or Federal laws, rules, or regulations adopted pursuant to any
of the foregoing. Except as disclosed to and acknowledged by Lender in writing,
Borrower represents and warrants that: (a) During the period of Borrower's
ownership of the properties, there has been no use, generation, manufacture,
storage, treatment, disposal, release or threatened release of any hazardous
waste or substance by any person on, under, or about any of the properties,
(b) Borrower has no knowledge of, or reason to believe that there has been (i)
any use, generation, manufacture, storage, treatment, disposal, release, or
threatened release of any hazardous waste or substance by any prior owners or
occupants of any of the properties, or (ii) any actual or threatened litigation
or claims of any kind by any person relating to such matters, (c) Neither
Borrower nor any tenant, contractor, agent or other authorized user of any of
the properties shall use, generate, manufacture, store, treat, dispose of, or
release any hazardous waste or substance on, under, or about any of the
properties; and any such activity shall be conducted in compliance with all
applicable federal, state, and local laws, regulations, and ordinances,
including without limitation those laws, regulations and ordinances described
above. Borrower authorizes Lender and its agents to enter upon the properties
to make such inspections and tests as Lender may deem appropriate to determine
compliance of the properties with this section of the Agreement. Any
inspections or tests made by Lender shall be at Borrower's expense and for
Lender's purposes only and shall not be construed to create any responsibility
or liability on the part of Lender to Borrower or to any other person. The
representations and warranties contained herein are based on Borrower's due
diligence In investigating the properties for hazardous waste. Borrower hereby
(a) releases and waives any future claims against Lender for indemnity or
contribution in the event Borrower becomes liable for cleanup or other costs
under any such laws, and (b) agrees to indemnity and hold harmless Lender
against any and all claims, losses, liabilities, damages, penalties, and
expenses which Lender may directly or indirectly sustain or suffer resulting
from a breach of this section of the Agreement or as a consequence of any use,
generation, manufacture, storage, disposal, release or threatened release
occurring prior to Borrower's ownership or interest in the properties, whether
or not the same was or should have been known to Borrower. The provisions of
this section of the Agreement, including the obligation to indemnify, shall
survive the payment of the Indebtedness and the termination or expiration of
this Agreement and shall not be affected by Lender's acquisition of any interest
in any of the properties, whether by foreclosure or otherwise.
LITIGATION AND CLAIMS. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against Borrower
is pending or threatened, and no other event has occurred which may materially
adversely affect Borrower's financial condition or properties, other than
litigation, claims, or other events, if any, that have been disclosed to and
acknowledged by Lender in writing.
TAXES. To the best of Borrower's knowledge, all tax returns and reports of
Borrower that are or were required to be filed, have been filed, and all taxes,
assessments and other governmental charges have been paid in full, except those
presently being or to be contested by
-9-
<PAGE>
Borrower in good faith in the ordinary course of business and for which adequate
reserves have been provided.
LIEN PRIORITY. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or permitted
the filing or attachment of any Security Interests on or affecting any of the
Collateral directly or indirectly securing repayment of Borrower's Loan and
Note, that would be prior or that may in any way be superior to Lender's
Security Interests and rights in and to such Collateral.
BINDING EFFECT. This Agreement, the Note and all Security Agreements
directly or indirectly securing repayment of Borrower's Loan and Note are
binding upon Borrower as well as upon Borrower's successors, representatives and
assigns, and are legally enforceable in accordance with their respective terms.
COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes.
EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which Borrower
may have any liability complies in all material respects with all applicable
requirements of law and regulations, and (i) no Reportable Event nor Prohibited
Transaction (as defined in ERISA) has occurred with respect to any such plan,
(ii) Borrower has not withdrawn from any such plan or initiated steps to do so,
and (iii) no steps have been taken to terminate any such plan.
LOCATION OF BORROWER'S OFFICES AND RECORDS. The chief place of business of
Borrower and the office or offices where Borrower keeps its records concerning
the Collateral is located at 2156 PACIFIC AVENUE, TACOMA, WA 98402.
INFORMATION. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection with this
Agreement or any transaction contemplated hereby is, and all information
hereafter furnished by or on behalf of Borrower to Lender will be, true and
accurate in every material respect on the date as of which such information is
dated or certified; and none of such information is or will be incomplete by
omitting to state any material fact necessary to make such information not
misleading.
SURVIVAL OF REPRESENTATION AND WARRANTIES. Borrower understands and agrees
that Lender is relying upon the above representations and warranties in
extending Loan Advances to Borrower. Borrower further agrees that the foregoing
representations and warranties shall be continuing in nature and shall remain in
full force and effect until such time as Borrower's Loan and Note shall be paid
in full, or until this Agreement shall be terminated in the manner provided
above, whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that,
while this Agreement is in effect, Borrower will:
-10-
<PAGE>
LITIGATION. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's condition, and (b) all litigation and claims and all
threatened litigation and claims affecting Borrower or any Guarantor which could
materially affect the financial condition of Borrower or the financial condition
of any Guarantor.
FINANCIAL RECORDS. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent basis, and
permit Lender to examine and audit Borrower's books and records at all
reasonable times.
FINANCIAL STATEMENTS. Furnish Lender with, as soon as available, but in no
event later than one hundred twenty (120) days after the end of each fiscal
year, Borrower's balance sheet and income statement for the year ended, audited
by a certified public accountant satisfactory to Lender, and, as soon as
available, but in no event later than forty five (45) days after the end of each
month, Borrower's balance sheet and profit and loss statement for the period
ended, prepared and certified as correct to the best knowledge and belief by
Borrower's chief financial officer or other officer or person acceptable to
Lender. All financial reports required to be provided under this Agreement
shall be prepared in accordance with generally accepted accounting principles,
applied on a consistent basis, and certified by Borrower as being true and
correct.
ADDITIONAL INFORMATION. Furnish such additional information and
statements, lists of assets and liabilities, agings of receivables and payables,
inventory schedules, budgets, forecasts, tax returns, and other reports with
respect to Borrower's financial condition and business operations as Lender may
request from time to time.
FINANCIAL COVENANTS AND RATIOS. Comply with the following covenants and
ratios:
TANGIBLE NET WORTH. Maintain a minimum Tangible Net Worth of not less than
$15,000,000.00.
NET WORTH RATIO. Maintain a ratio of Total Liabilities to Tangible Net
Worth of less than 2.00 to 1.00.
WORKING CAPITAL. Maintain Working Capital in excess of $7,000,000.00.
CASH FLOW REQUIREMENTS. Maintain Cash Flow at not less than the following
level: 1.50 TO 1.00 MEASURED ANNUALLY AS FOLLOWS: (NET PROFIT AFTER TAX PLUS
INTEREST EXPENSES PLUS NON-CASH EXPENSES MINUS DIVIDENDS MINUS UNFUNDED CAPITAL
EXPENDITURES) DIVIDED BY (INTEREST EXPENSES PLUS CURRENT PORTION OF LONG TERM
DEBT). THIS DEFINITION SHALL SUPERSEDE ANY INCONSISTENT DEFINITION IN THIS
AGREEMENT.
For purposes of this Agreement and to the extent the following terms are
utilized in this Agreement, the term "Tangible Net Worth" shall mean Borrower's
total assets excluding all intangible assets (i.e., goodwill, trademarks,
patents, copyrights, organizational expenses, and
-11-
<PAGE>
similar intangible items, but including leaseholds and leasehold improvements)
less total Debt. The term "Debt" shall mean all of Borrower's liabilities
excluding Subordinated Debt. The term "Subordinated Debt" shall mean
indebtedness and liabilities of Borrower which have been subordinated by written
agreement to indebtedness owed by Borrower to Lender in form and substance
acceptable to Lender. The term "Working Capital" shall mean Borrower's current
assets, excluding prepaid expenses, less Borrower's current liabilities. The
term "Liquid Assets" shall mean Borrower's cash on hand plus Borrower's
receivables. The term "Cash Flow" shall mean net income after taxes, and
exclusive of extraordinary gains and income, plus depreciation and amortization.
Except as provided above, all computations made to determine compliance with the
requirements contained in this paragraph shall be made in accordance with
generally accepted accounting principles, applied on a consistent basis, and
certified by Borrower as being true and correct.
INSURANCE. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect to
Borrower's properties and operations, in form, amounts, coverages and with
insurance companies reasonably acceptable to Lender. Borrower, upon request of
Lender, will deliver to Lender from time to time the policies or certificates of
insurance in form satisfactory to Lender, including stipulations that coverages
will not be cancelled or diminished without at least ten (10) days' prior
written notice to Lender. Each insurance policy also shall include an
endorsement providing that coverage in favor of Lender will not be impaired in
any way by any act, omission or default of Borrower or any other person. In
connection with all policies covering assets in which Lender holds or is offered
a security interest for the Loans, Borrower will provide Lender with such loss
payable or other endorsements as Lender may require.
INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports on
each existing insurance policy showing such information as Lender may reasonably
request, including without limitation the following: (a) the name of the
insurer; (b) the risks insured; (c) the amount of the policy; (d) the properties
insured; (e) the then current properly values on the basis of which insurance
has been obtained, and the manner of determining those values; and (t) the
expiration date of the policy. In addition, upon request of Lender (however not
more often than annually), Borrower will have an independent appraiser
satisfactory to Lender determine, as applicable, the actual cash value or
replacement cost of any Collateral.
SUBORDINATION. Prior to disbursement of any Loan proceeds, deliver to
Lender subordination agreements on Lender's forms, executed by Borrower's
creditors named below, subordinating all of Borrower's indebtedness to such
creditors, or such lesser amounts as may be agreed to by Lender in writing, and
any security interests in collateral securing that indebtedness to the Loans and
security interests of Lender.
NAMES OF CREDITORS AMOUNTS
- --------------------------------------------- -------------
Seacoast Capital Partners Limited Partnership $5,000,000.00
Allied Investment Corporation $2,650,000.00
Allied Investment Corporation II $1,300,000.00
Allied Capital Corporation II $1,050,000.00
-12-
<PAGE>
OTHER AGREEMENTS. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any other
party and notify Lender immediately in writing of any default in connection with
any other such agreements.
LOAN PROCEEDS. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in writing.
TAXES, CHARGES AND LIENS. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all assessments,
taxes, governmental charges, levies and liens, of every kind and nature, imposed
upon Borrower or its properties, income, or profits, prior to the date on which
penalties would attach, and all lawful claims that, if unpaid, might become a
lien or charge upon any of Borrower's properties, income, or profits. Provided
however, Borrower will not be required to pay and discharge any such assessment,
tax, charge, levy, lien or claim so long as (a) the legality of the same shall
be contested in good faith by appropriate proceedings, and (b) Borrower shall
have established on its books adequate reserves with respect to such contested
assessment, tax, charge, levy, lien, or claim in accordance with generally
accepted accounting practices. Borrower, upon demand of Lender, will furnish to
Lender evidence of payment of the assessments, taxes, charges, levies, liens and
claims and will authorize the appropriate governmental official to deliver to
Lender at any time a written statement of any assessments, taxes, charges,
levies, liens and claims against Borrower's properties, income, or profits.
PERFORMANCE. Perform and comply with all terms, conditions, and provisions
set forth in this Agreement and in all other instruments and agreements between
Borrower and Lender in a timely manner, and promptly notify Lender if Borrower
learns of the occurrence of any event which constitutes an Event of Default
under this Agreement.
OPERATIONS. Substantially maintain its present executive and management
personnel; conduct its business affairs in a reasonable and prudent manner and
in compliance with all applicable federal, state and municipal laws, ordinances,
rules and regulations respecting its properties, charters, businesses and
operations, including without limitation, compliance with the Americans With
Disabilities Act and with all minimum funding standards and other requirements
of ERISA and other laws applicable to Borrower's employee benefit plans.
INSPECTION. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records and
to make copies and memoranda of Borrower's books, accounts, and records. If
Borrower now or at any time hereafter maintains any records (including without
limitation computer generated records and computer software programs for the
generation of such records) in the possession of a third party, Borrower, upon
request of Lender, shall notify such party to permit Lender free access to such
records at all reasonable times and to provide Lender with copies of any records
it may request, all at Borrower's expense.
-13-
<PAGE>
COMPLIANCE CERTIFICATE. Unless waived in writing by Lender, provide Lender
NOT REQUIRED and at the time of each disbursement of Loan proceeds with a
certificate executed by Borrower's chief financial officer, or other officer or
person acceptable to Lender, certifying that the representations and warranties
set forth in this Agreement are true and correct as of the date of the
certificate and further certifying that, as of the date of the certificate, no
Event of Default exists under this Agreement.
ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in all
respects with all environmental protection federal, state and local laws,
statutes, regulations and ordinances; not cause or permit to exist, as a result
of an intentional or unintentional action or omission on its part or on the part
of any third party, on property owned and/or occupied by Borrower, any
environmental activity where damage may result to the environment, unless such
environmental activity is pursuant to and in compliance with the conditions of a
permit issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event within thirty
(30) days after receipt thereof a copy of any notice, summons, lien, citation,
directive, letter or other communication from any governmental agency or
instrumentality concerning any intentional or unintentional action or omission
on Borrower's part in connection with any environmental activity whether or not
there is damage to the environment and/or other natural resources.
ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, financial statements,
instruments, documents and other agreements as Lender or its attorneys may
reasonably request to evidence and secure the Loan and to perfect all Security
Interests.
RECOVERY OF ADDITIONAL COSTS. If the imposition of or any change in any
law, rule, regulation or guideline, or the interpretation or application of any
thereof by any court or administrative or governmental authority (including any
request or policy not having the force of law) shall impose, modify make
applicable any taxes (except U.S. federal, state or local income or franchise
taxes imposed on Lender), reserve requirements, capital adequacy requirements or
other obligations which would (a) increase the cost to Lender for extending or
maintaining the credit facilities to which this Agreement relates, (b) reduce
the amounts payable to Lender under this Agreement or the Related Documents, or
(c) reduce the rate of return on Lender's capital as a consequence of Lender's
obligations with respect to the credit facilities to which this Agreement
relates, then Borrower agrees to pay Lender such additional amounts as will
compensate Lender therefor, within five (5) days after Lender's written demand
for such payment, which demand shall be accompanied by an explanation of such
imposition or charge and a calculation in reasonable detail of the additional
amounts payable by Borrower which explanation and calculations shall be
conclusive in the absence of manifest error.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while
this Agreement is in effect, Borrower shall not, without the prior written
consent of Lender:
INDEBTEDNESS AND LIENS. (a) Except for trade debt incurred in the normal
course of business and indebtedness to Lender contemplated by this Agreement,
create, incur or assume
-14-
<PAGE>
indebtedness for borrowed money, including capital leases, (b) except as allowed
as a Permitted Lien, sell, transfer, mortgage, assign, pledge, lease, grant a
security interest in, or encumber any of Borrower's assets, or (c) sell with
recourse any of Borrower's accounts, except to Lender.
CONTINUITY OF OPERATIONS. (a) Engage in any business activities
substantially different than those in which Borrower is presently engaged,
(b) cease operations, liquidate, merge, transfer, acquire or consolidate with
any other entity, change ownership, dissolve or transfer or sell Collateral out
of the ordinary course of business, (c) pay any dividends on Borrower's stock
(other than dividends payable in its stock), provided, however, that
notwithstanding the foregoing, but only so long as no Event of Default has
occurred and is continuing or would result from the payment of dividends, if
Borrower is a "Subchapter S Corporation" (as defined in the Internal Revenue
Code of 1986, as amended), Borrower may pay cash dividends on its stock to its
shareholders from time to time in amounts necessary to enable the shareholders
to pay income taxes and make estimated income tax payments to satisfy their
liabilities under federal and state law which arise solely from their status as
Shareholders of a Subchapter S Corporation because of their ownership of shares
of stock of Borrower, or (d) purchase or retire any of Borrower's outstanding
shares or alter or amend Borrower's capital structure.
LOANS, ACQUISITIONS AND GUARANTIES. (a) Loan, invest in or advance money
or assets, (b) purchase, create or acquire any interest in any other enterprise
or entity, or (c) incur any obligation as surety or guarantor other than in the
ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan
to Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrow becomes insolvent, files a petition in
bankruptcy or similar proceedings, or is adjudged a bankrupt; (c) there occurs a
material adverse change in Borrower's financial condition, in the financial
condition of any Guarantor, or in the value of any Collateral securing any Loan,
or (d) any Guarantor seeks, claims or otherwise attempts to limit, modify or
revoke such Guarantor's guaranty of the Loan or any other loan with Lender.
ACCESS LAWS. Without limiting the generality of any provision of this
agreement requiring Borrower to comply with applicable laws, rules, and
regulations, Borrower agrees that it will at all times comply with applicable
laws relating to disabled access including, but not limited to, all applicable
titles of the Americans with Disabilities Act of 1990.
STATUTE OF FRAUDS DISCLOSURE. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN
MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW
-15-
<PAGE>
ADDITIONAL PROVISIONS.
NET WORTH CALCULATIONS SHALL INCLUDE SUBORDINATED DEBT AS EQUITY.
BORROWER WILL SUBMIT WITHIN 45 DAYS OF EACH QUARTER END A 10-Q REPORT.
BORROWER WILL SUBMIT BORROWER'S CERTIFICATE WEEKLY AND AT MONTH END.
BORROWER WILL PROVIDE LENDER WITH ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE
AGING MONTHLY.
COMPLIANCE IS TO BE TESTED MONTHLY.
ELIGIBLE ACCOUNTS RECEIVABLE DEFINED AS TOTAL ACCOUNTS RECEIVABLE LESS
INELIGIBLE ACCOUNTS LESS ALL ACCRUED WORKMAN'S COMPENSATION PREMIUMS.
INELIGIBLE ACCOUNTS RECEIVABLE.
ACCOUNTS WITH 25% OF OUTSTANDING AMOUNT OVER 90 DAYS PAST DUE INVOICE.
AMOUNTS RESULTING FROM COD's, FINANCE CHARGES AND CONSIGNMENT.
RETAINAGES.
DATED BILLINGS.
PROGRESS BILLINGS ON CONTRACT RECEIVABLES.
ACCOUNTS SUBJECT TO OTHER SECURITY INTEREST.
ADVANCE BASE WILL ALSO BE REDUCED BY ALL CURRENT LIABILITIES ASSOCIATED
WITH WORKMEN'S COMPENSATION.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory
security interest in, and hereby assigns, conveys, delivers, pledges, an(
transfers to Lender all Borrower's right, title and interest in and to,
Borrower's accounts with Lender (whether checking, savings, or some other
account), including without limitation all accounts held jointly with someone
else and all accounts Borrower may open in the future, excluding however, all
IRA, Keogh, and trust
-16-
<PAGE>
accounts. Borrower authorizes Lender, to the extent permitted by applicable
law, to charge or setoff all sums owing on the Indebtedness against any and all
such accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of
Default under this Agreement: Default on Indebtedness. Failure of Borrower to
make any payment when due on the Loans.
OTHER DEFAULTS. Failure of Borrower or any Grantor to comply with or to
perform when due any other term, obligation, covenant or condition contained in
this Agreement or in any of the Related Documents, or failure of Borrower to
comply with or to perform any other term, obligation, covenant or condition
contained in any other agreement between Lender and Borrower.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under this
Agreement or the Related Documents is false or misleading in any material
respect, either now or at the time made or furnished.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
Security Agreement to create a valid and perfected Security Interest) at any
time and for any reason.
INSOLVENCY. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a receiver for
any part of Borrower's property, any assignment for the benefit of creditors,
any type of creditor workout, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help, repossession
or any other method, by any creditor of Borrower, any creditor of any Grantor
against any collateral securing the Indebtedness, or by any governmental agency.
This includes a garnishment, attachment, or levy on or of any of Borrower's
deposit accounts with Lender. However, this Event of Default shall not apply if
there is a good faith dispute by Borrower or Grantor, as the case may be, as to
the validity or reasonableness of the claim which is the basis of the creditor
or forfeiture proceeding, and if Borrower or Grantor gives Lender written notice
of the creditor or forfeiture proceeding and furnishes reserves or a surety bond
for the creditor or forfeiture proceeding satisfactory to Lender.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or such Guarantor dies or
becomes incompetent or any Guarantor revokes any guaranty of the Indebtedness.
Lender, as its option, may, but shall not be required to, permit the Guarantor's
estate to assume unconditionally the obligations arising under the guaranty in a
manner satisfactory to Lender, and, in doing so, cure the Event of Default.
-17-
<PAGE>
CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent (25%)
or more of the common stock of Borrower.
INSECURITY. Lender, in good faith, deems itself insecure.
RIGHT TO CURE. If any default, other than a Default on Indebtedness, is
curable and if Borrower or Grantor, as the case may be, has not been given a
notice of a similar default within the preceding twelve (12) months, it may be
cured (and no Event of Default will have occurred) if Borrower or Grantor, as
the case may be, after receiving written notice from Lender demanding cure of
such default: (a) cures the default within fifteen (15) days; or (b) if the cure
requires more than fifteen (15) days, immediately initiates steps which Lender
deems in Lender's sole discretion to be sufficient to cure the default and
thereafter continues and completes all reasonable and necessary steps sufficient
to produce compliance as soon as reasonably practical.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, all
commitments and obligations of Lender under this Agreement or the Related
Documents or any other agreement immediately will terminate (including any
obligation to make Loan Advances or disbursements), and, at Lender's option, all
Loans immediately will become due and payable, all without notice of any kind to
Borrower, except that in the case of an Event of Default of the type described
in the "Insolvency" subsection above, such acceleration shall be automatic and
not optional. In addition, Lender shall have all the rights and remedies
provided in the Related Documents or available at law, in equity, or otherwise.
Except as may be prohibited by applicable law, all of Lender's rights and
remedies shall be cumulative and may be exercised singularly or concurrently.
Election by Lender to pursue any remedy shall not exclude pursuit of any other
remedy, and an election to make expenditures or to take action to perform an
obligation of Borrower or of any Grantor shall not affect Lender's right to
declare a default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a
part of this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Agreement. No alteration of or amendment to this
Agreement shall be effective unless given in writing and signed by the party or
parties sought to be charged or bound by the alteration or amendment.
APPLICABLE LAW. This Agreement has been delivered to Lender and accepted
by Lender in the State of Washington. If there is a lawsuit, Borrower agrees
upon Lender's request to submit to the jurisdiction of the courts of King
County, the State of Washington. Subject to the provisions on arbitration, this
Agreement shall be governed by and construed in accordance with the laws of the
State of Washington.
ARBITRATION. Lender and Borrower agree that all disputes, claims and
controversies between them, whether individual, joint, or class in nature,
arising from this Agreement or otherwise, including without limitation contract
and tort disputes, shall be arbitrated pursuant to
-18-
<PAGE>
the Rules of the American Arbitration Association, upon request of either party.
No act to take or dispose of any Collateral shall constitute a waiver of this
arbitration agreement or be prohibited by this arbitration agreement. This
includes, without limitation, obtaining injunctive relief or a temporary
restraining order; invoking a power of sale under any deed of trust or mortgage;
obtaining a writ of attachment or imposition of a receiver; or exercising any
rights relating to personal property, including taking or disposing of such
property with or without judicial process pursuant to Article 9 of the Uniform
Commercial Code. Any disputes, claims, or controversies concerning the
lawfulness or reasonableness of any act, or exercise of any right, concerning
any Collateral, including any claim to rescind, reform, or otherwise modify any
agreement relating to the Collateral, shall also be arbitrated, provided however
that no arbitrator shall have the right or the power to enjoin or restrain any
act of any party. Judgment upon any award rendered by any arbitrator may be
entered in any court having jurisdiction. Nothing in this Agreement shall
preclude any party from seeking equitable relief from a court of competent
jurisdiction. The statute of limitations, estoppel, waiver, laches, and similar
doctrines which would otherwise be applicable in an action brought by a party
shall be applicable in any arbitration proceeding, and the commencement of an
arbitration proceeding shall be deemed the commencement of an action for these
purposes. The Federal Arbitration Act shall apply to the construction,
interpretation, and enforcement of this arbitration provision.
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to Lender's
sale or transfer, whether now or later, of one or more participation interests
in the Loans to one or more purchasers, whether related or unrelated to Lender.
Lender may provide, without any limitation whatsoever, to any one or more
purchasers, or potential purchasers, any information or knowledge Lender may
have about Borrower or about any other matter relating to the Loan, and Borrower
hereby waives any rights to privacy it may have with respect to such matters.
Borrower additionally waives any and all notices of sale of participation
interests, as well as all notices of any repurchase of such participation
interests. Borrower also agrees that the purchasers of any such participation
interests will be considered as the absolute owners of such interests in the
Loans and will have all the rights granted under the participation agreement or
agreements governing the sale of such participation interests. Borrower further
waives all rights of offset or counterclaim that it may have now or later
against Lender or against any purchaser of such a participation interest and
unconditionally agrees that either Lender or such purchaser may enforce
Borrower's obligation under the Loans irrespective of the failure or insolvency
of any holder of any interest in the Loans. Borrower further agrees that the
purchaser of any such participation interests may enforce its interests
irrespective of any personal claims or defenses that Borrower may have against
Lender.
COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's
out-of-pocket expenses, including without limitation attorneys' fees, incurred
in connection with the preparation, execution, enforcement and collection of
this Agreement or in connection with the Loans made pursuant to this Agreement.
Lender may pay someone else to help collect the Loans and to enforce this
Agreement, and Borrower will pay that amount. This includes, subject to any
limits
-19-
<PAGE>
under applicable law, Lender's attorneys' fees and Lender's legal expenses,
whether or not there is a lawsuit, including attorneys' fees for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection services.
Borrower also will pay any court costs, in addition to all other sums provided
by law.
NOTICES. All notices required to be given under this Agreement shall be
given in writing and shall be effective when actually delivered or when
deposited with a nationally recognized overnight courier or deposited in the
United States mail, first class, postage prepaid, addressed to the party to whom
the notice is to be given at the address shown above. Any party may change its
address for notices under this Agreement by giving formal written notice to the
other parties, specifying that the purpose of the notice is to change the
party's address. To the extent permitted by applicable law, if there is more
than one Borrower, notice to any Borrower will constitute notice to all
Borrowers. For notice purposes, Borrower agrees to keep Lender informed at all
times of Borrower's current address(es).
SEVERABILITY. If a court of competent jurisdiction finds any provision of
this Agreement to be invalid or unenforceable as to any person or circumstance,
such finding shall not render that provision invalid or unenforceable as to any
other persons or circumstances. If feasible, any such offending provision shall
be deemed to be modified to be within the limits of enforceability or validity;
however, if the offending provision cannot be so modified, it shall be stricken
and all other provisions of this Agreement in all other respects shall remain
valid and enforceable.
SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of any
provisions of this Agreement makes it appropriate, including without limitation
any representation, warranty or covenant, the word "Borrower" as used herein
shall include all subsidiaries and affiliates of Borrower. Notwithstanding the
foregoing however, under no circumstances shall this Agreement be construed to
require Lender to make any Loan or other financial accommodation to any
subsidiary or affiliate of Borrower.
SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or on
behalf of Borrower shall bind its successors and assigns and shall inure to the
benefit of Lender, its successors and assigns. Borrower shall not, however,
have the right to assign its rights under this Agreement or any interest
therein, without the prior written consent of Lender.
SURVIVAL. All warranties, representations, and covenants made by Borrower
in this Agreement or in any certificate or other instrument delivered by
Borrower to Lender under this Agreement shall be considered to have been relied
upon by Lender and will survive the making of the Loan and delivery to Lender of
the Related Documents, regardless of any investigation made by Lender or on
Lender's behalf
WAIVER. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No delay
or omission on the part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other provision
of this
-20-
<PAGE>
Agreement. No prior waiver by Lender, nor any course of dealing between Lender
and Borrower, or between Lender and any Grantor, shall constitute a waiver of
any of Lender's rights or of any obligations of Borrower or of any Grantor as to
any future transactions. Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any instance shall not
constitute continuing consent in subsequent instances where such consent is
required, and in all cases such consent may be granted or withheld in the sole
discretion of Lender.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
FEBRUARY 13, 1996.
BORROWER:
LABOR READY, INC.
By
------------------------------
Glenn A. Welstad, President
LENDER:
U.S. BANK OF WASHINGTON, NATIONAL ASSOCIATION
By
------------------------------
Authorized Officer
-21-
<PAGE>
ALTERNATIVE RATE OPTIONS
PROMISSORY NOTE
(PRIME RATE, IBOR)
$10,000,000.00 DATE: FEBRUARY 13, 1996
LABOR READY, INC. ("BORROWER")
U.S. BANK OF WASHINGTON, NATIONAL ASSOCIATION ("LENDER")
1. TYPE OF CREDIT. This note is given to evidence Borrower's obligation to
repay all sums which Lender may from time to time advance to Borrower
("Advances") under a:
/ / single disbursement loan. Amounts loaned to Borrower hereunder will be
disbursed in a single Advance in the amount shown in Section 2.
/X/ revolving line of credit. No Advances shall be made which create a maximum
amount outstanding at any one time which exceeds the maximum amount shown
in Section 2. However, Advances hereunder may be borrowed, repaid and
reborrowed, and the aggregate Advances loaned hereunder from time to time
may exceed such maximum amount.
/ / non-revolving line of credit. Each Advance made from time to time
hereunder shall reduce the maximum amount available shown in Section 2.
Advances loaned hereunder which are repaid may not be reborrowed.
2. PRINCIPAL BALANCE. The unpaid principal balance of all Advances
outstanding under this note ("Principal Balance") at one time shall not exceed
10,000,000.00.
3. PROMISE TO PAY. For value received Borrower promises to pay to Lender or
order at TACOMA CORPORATE BANKING , the Principal Balance of this note, with
interest thereon at the rate(s) specified in Sections 4 and 11 below.
4. INTEREST RATE. The interest rate on the Principal Balance outstanding may
vary from time to time pursuant to the provisions of this note. Subject to the
provisions of this note, Borrower shall have the option from time to time of
choosing to pay interest at the rate or rates and for the applicable periods of
time based on the rate options provided herein; PROVIDED, however, that once
Borrower notifies Lender of the rate option chosen in accordance with the
provisions of this note, such notice shall constitute Borrower's irrevocable
request for an Advance hereunder at the rate option specified in such notice.
The rate options are the Prime Borrowing Rate and the IBOR Borrowing Rate, each
as defined herein.
(a) The Prime Borrowing Rate.
-1-
<PAGE>
(i) The Prime Borrowing Rate is a per annum rate equal to Lenders prime
rate plus .25% per annum.
(ii) Whenever Borrower desires to use the Prime Borrowing Rate option,
Borrower shall give Lender notice orally or in writing in accordance with
Section 15 of this note, which notice shall specify the requested disbursement
date and principal amount of the Advance, and that Borrower has chosen the Prime
Borrowing Rate option.
(iii) Prepayments of all or any part of the Principal Balance bearing
interest at the Prime Borrowing Rate may be made at any time without penalty.
Upon prepayment of any such principal amount, Borrower also must pay all accrued
interest thereon to the date of prepayment.
(iv) Subject to Section 11 of this note, interest shall accrue on the
unpaid Principal Balance at the Prime Borrowing Rate unless and except to the
extent that the IBOR Borrowing Rate is in effect.
(b) The IBOR Borrowing Rate.
(i) The following terms shall have the following meanings:
"Business Day'' means any day other than a Saturday, Sunday, or other day
that commercial banks in Portland, Oregon or New York City are authorized or
required by law to close.
"IBOR Amount" means each principal amount for which Borrower chooses to
have the IBOR Borrowing Rate apply for any specified IBOR Interest Period.
"IBOR Interest Period" means as to any IBOR Amount, a period of 1,2,3 OR 6
months commencing on the date the IBOR Borrowing Rate becomes applicable
thereto; PROVIDED, however, that: (A) no IBOR Interest Period shall be selected
which would extend beyond SEPTEMBER 30, 1996; (B) no IBOR Interest Period shall
extend beyond the date of any principal payment required under Section 6 of this
note, unless the sum of the principal amounts bearing interest at the Prime
Borrowing Rate, plus IBOR Amounts with IBOR Interest Periods ending on or before
the scheduled date of such principal payment, plus principal amounts remaining
unborrowed under a line of credit, equals or exceeds the amount of such
principal payment; (C) any IBOR Interest Period which would otherwise expire on
a day which is not a Business Day, shall be extended to the next succeeding
Business Day, unless the result of such extension would be to extend such IBOR
Interest Period into another calendar month, in which event the IBOR Interest
Period shall end on the immediately preceding Business Day; and (D) any IBOR
Interest Period that begins on the last Business Day of a calendar month (or on
a day for which there is no numerically corresponding day in the calendar month
at the end of such IBOR Interest Period) shall end on the last Business Day of a
calendar month.
(ii) The IBOR Borrowing Rate is Lender's IBOR Rate plus 2.75% per annum.
Lender's IBOR Rate for any IBOR Interest Period is the rate per annum (computed
on the basis
-2-
<PAGE>
of a 360-day year and the actual number of days elapsed) equal to the arithmetic
average (rounded upward to the nearest 1/16 of 1%) of the rates per annum
determined by Lender as of the times specified in Section 4(b)(iii) on the date
two (2) Business Days prior to the first day of such IBOR Interest Period as the
rates offered to Lender by three Eurodollar money market dealers in such
Eurodollar market as may be selected by Lender for U.S. dollar deposits to be
delivered on the first day of such IBOR Interest Period for the number of months
therein; PROVIDED, however, that Lender's IBOR Rate shall be adjusted to take
into account the maximum reserves required to be maintained for Eurocurrency
liabilities by banks during each such IBOR Interest Period as specified in
Regulation D of the Board of Governors of the Federal Reserve System or any
successor regulation.
(iii) Borrower may obtain IBOR Borrowing Rate quotes from Lender between
8:00 a.m. and 12:00 noon (Portland, Oregon time) on any Business Day. Any IBOR
Borrowing Rate quoted (A) before 10:00 a.m. shall be based on Lender's IBOR Rate
determined as of approximately 8:00 a.m. on such day, and Borrower may request
an Advance at such rate only by giving Lender notice in accordance with Section
4(b)(iv) before 10:00 a.m. on such day; and (B) between 10:00 a.m. and 12:00
noon shall be based on Lender's IBOR Rate determined as of approximately 10:00
a.m. on such day, and Borrower may request an Advance at such rate only by
giving Lender notice in accordance with Section 4(b)(iv) not later than 12:00
noon on such day.
(iv) Whenever Borrower desires to use the IBOR Borrowing Rate option,
Borrower shall give Lender irrevocable notice (either in writing or orally and
promptly confirmed in writing) between 8:00 a.m. and 12:00 noon (Portland,
Oregon time) two (2) Business Days in advance of the desired effective date of
such rate. Any oral notice shall be given by, and any written notice or
confirmation of an oral notice shall be signed by, the person(s) authorized in
Section 15 of this note, and shall specify the requested effective date of the
rate, IBOR Interest Period and IBOR Amount, and whether Borrower is requesting a
new Advance at the IBOR Borrowing Rate under a line of credit, conversion of any
portion of the Principal Balance bearing interest at the Prime Borrowing Rate to
an IBOR Amount, or a new IBOR Interest Period for an outstanding IBOR Amount.
Notwithstanding any other term of this note, Borrower may elect the IBOR
Borrowing Rate in the minimum principal amount of $1,000,000.00 and in integral
multiples of $ N/A; PROVIDED, however, that no more than N/A separate IBOR
Interest Periods may be in effect at any one time.
(v) Borrower may not prepay all or any part of any IBOR Amount(s).
(vi) If at any time Lender's IBOR Rate is unascertainable or unavailable
to Lender or if IBOR Rate loans become unlawful, the option to select the IBOR
Borrowing Rate shall terminate immediately. If the IBOR Borrowing Rate is then
in effect, (A) it shall terminate automatically with respect to all IBOR Amounts
(i) on the last day of each then applicable IBOR Interest Period, if Lender may
lawfully continue to maintain such loans, or (ii) immediately if Lender may not
lawfully continue to maintain such loans through such day, and (B) subject to
Section 11, the Prime Borrowing Rate automatically shall become effective as to
such amounts upon such termination.
-3-
<PAGE>
(vii) If at any time after the date hereof (A) any revision in or adoption
of any applicable law, rule, or regulation or in the interpretation or
administration thereof (i) shall subject Lender or its Eurodollar lending office
to any tax, duty, or other charge, or change the basis of taxation of payments
to Lender with respect to any loans bearing interest based on Lender's IBOR
Rate, or (ii) shall impose or modify any reserve, insurance, special deposit, or
similar requirements against assets of, deposits with or for the account of, or
credit extended by Lender or its Eurodollar lending office, or impose on Lender
or its Eurodollar lending office any other condition affecting any such loans,
and (B) the result of any of the foregoing is (i) to increase the cost to Lender
of making or maintaining any such loans or (ii) to reduce the amount of any sum
receivable under this note by Lender or its Eurodollar lending office, Borrower
shall pay Lender within 15 days after demand by Lender such additional amount as
will compensate Lender for such increased cost or reduction. The determination
hereunder by Lender of such additional amount shall be conclusive in the absence
of manifest error. If Lender demands compensation under this Section 4(b)(vii),
Borrower may upon three (3) Business Days' notice to Lender pay the accrued
interest on all IBOR Amounts, together with any additional amounts payable under
Section 4(b)(viii). Subject to Section 11, upon Borrower's paying such accrued
interest and additional costs, the Prime Borrowing Rate immediately shall be
effective with respect to the unpaid principal balance of such IBOR Amounts.
(viii) Upon any termination of any IBOR Borrowing Rate (including but not
limited to conversion to another rate) or payment of all or any portion of any
IBOR Amount on a date other than the last day of the then applicable IBOR
Interest Period, including without limitation (A) acceleration under Section 11
or (B) repayment in response to a notice under Section 4(b)(vii), Borrower shall
pay to Lender on demand such amount as Lender reasonably determines (determined
as though 100% of the applicable IBOR Amount had been funded in the applicable
Eurodollar market) is equivalent to all direct or indirect losses, expenses,
liabilities, or reductions in yield to Lender resulting therefrom, whether
incurred in connection with liquidation or reemployment of funds or otherwise.
(ix) If Borrower chooses the IBOR Borrowing Rate, Borrower shall pay
Interest based on such rate, plus any other applicable taxes or charges
hereunder, even though Lender may have obtained the funds loaned to Borrower
from sources other than the applicable Eurodollar market. Lender's
determination of the IBOR Borrowing Rate and any such taxes or charges shall be
conclusive in the absence of manifest error.
(x) Notwithstanding any other term of this note, Borrower may not select
the IBOR Borrowing Rate if an event of default hereunder has occurred and is
continuing.
(xi) Nothing contained in this note, including without limitation the
determination of any IBOR Interest Period or Lender's quotation of any IBOR
Borrowing Rate, shall be construed to prejudice Lender's right, if any, to
decline to make any requested Advance or to require payment on demand.
-4-
<PAGE>
5. COMPUTATION OF INTEREST. All interest under Section 4 and Section 11 will
be computed at the applicable rate based on a 360-day year and applied to the
actual number of days elapsed.
6. PAYMENT SCHEDULE.
(a) Principal. Principal shall be paid:
/ / on demand.
/ / on demand, or if no demand, on
/X/ on September 30,1996
/ / subject to Section 7, in installments of
/ / each, plus accrued interest
/ / each including accrued interest
beginning on _______ and on the same day of each ______ thereafter until
_______ when the entire Principal Balance plus interest thereon shall be
due and payable.
/ /
(b) Interest.
(i) Interest on all amounts bearing interest at the Prime Borrowing Rate
shall be paid:
/X/ on the 1ST day of MARCH, 1996 and on the same day of each MONTH
thereafter prior to maturity and at maturity.
/ / at maturity.
/ / at the time each principal installment is due and at maturity.
/ /
(ii) Interest on all IBOR Borrowing Rate Amounts shall be paid:
/ / on the last day of the applicable IBOR Interest Period, and if
such IBOR Interest Period is longer than three months, on the last
day of each three month period occurring during such IBOR Interest
Period, and at maturity.
/X/ on the 1ST day of MARCH, 1996 and on the same day of each MONTH
thereafter prior to maturity and at maturity.
/ / at maturity.
/ / at the time each principal installment is due and at maturity.
7. CHANGE IN PAYMENT AMOUNT. If the interest rate on this note is subject to
change in accordance with Section 4, the holder of this note may, from time to
time, in holder's sole discretion, increase or decrease the amount of each of
the installments remaining unpaid at the time of each change in rate to an
amount holder in its sole discretion deems necessary to continue amortizing the
Principal Balance at the same rate established by the installment amounts
specified in Section 6(a), whether or not a "balloon" payment may also be due
upon maturity of this note. Holder shall notify the undersigned of each such
change in writing. Whether or not the
-5-
<PAGE>
installment amount is increased under this Section 7, Borrower understands that,
as a result of increases in the rate of interest in accordance with Section 4,
the final payment due, whether or not a "balloon" payment, shall include the
entire Principal Balance and interest thereon then outstanding, and may be
substantially more than the installment specified in Section 6.
8. ALTERNATE PAYMENT DATE. Notwithstanding any other term of this note, if in
any month there is no day on which a scheduled payment would otherwise be due
(e.g., February 31), such payment shall be paid on the last banking day of that
month.
9. PAYMENT BY AUTOMATIC CHARGE.
/X/ Please automatically deduct the amount of all principal and interest
payments from account number 0547-517821. If there are insufficient funds in
the account to pay the automatic deduction in full, Lender may allow the account
to become overdrawn, or Lender may reverse the automatic deduction. Borrower
will pay all the fees on the account which result from the automatic deductions,
including any overdraft/NSF charges. If for any reason Lender does not charge
the account for a payment, or if an automatic payment is reversed, the payment
is still due according to this note. If the account is a Money Market Account,
the number of withdrawals from that account is limited as set out in the
agreement. Lender may cancel the automatic deduction at any time in its
discretion.
Provided, however, if no account number is entered above, Borrower does not want
to make payments by automatic charge.
10. LENDER'S PRIME RATE. Lender's prime rate is the rate of interest which
Lender from time to time establishes as its prime rate and is not, for example,
the lowest rate of interest which Lender collects from any borrower or class of
borrowers. When Lender's prime rate is applicable under Section 4(a) or 1l(b),
the interest rate hereunder shall be adjusted without notice effective on the
day Lender's prime rate changes, but in no event shall the rate of interest be
higher than allowed by law.
11. DEFAULT.
(a) Without prejudice to any right of Lender to require payment on
demand or to decline to make any requested Advance, each of the following shall
be an event of default: (i) Borrower fails to make any payment when due. (ii)
Borrower fails to perform or comply with any term, covenant or obligation in
this note or any agreement related to this note, or in any other agreement or
loan Borrower has with Lender. (iii) Borrower defaults under any loan,
extension of credit, security agreement, purchase or sales agreement, or any
other agreement, in favor of any other creditor or person that may materially
affect any of Borrower's property or Borrower's ability to repay this note or
perform Borrower's obligations under this note or any related documents. (iv)
Any representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect. (v) Borrower
becomes insolvent, a receiver is appointed for any part of Borrower's property,
Borrower makes an assignment for the benefit of creditors, or any proceeding is
commenced either by Borrower or against borrower
-6-
<PAGE>
under any bankruptcy or insolvency laws. (vi) Any creditor tries to take any of
Borrower's property on or in which Lender has a lien or security interest. This
includes a garnishment of any of Borrower's accounts with Lender. (vii) Any of
the events described in this default section occurs with respect to any
guarantor of this note or any guaranty of Borrower's indebtedness to Lender
ceases to be, or is asserted not to be, in full force and effect. If this note
is payable on demand, the inclusion of specific events of default shall not
prejudice Lender's right to require payment on demand or to decline to make any
requested Advance.
(b) Without prejudice to any right of Lender to require payment on
demand, upon the occurrence of an event of default, Lender may declare the
entire unpaid Principal Balance on this note and all accrued unpaid interest
immediately due and payable, without notice. Upon default, including failure to
pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, increase the interest rate on this note to a rate equal to the
Prime Borrowing Rate plus 5%. The interest rate will not exceed the maximum
rate permitted by applicable law. In addition, if any payment of principal or
interest is 15 or more days past due, Borrower will be charged a late charge of
5% of the delinquent payment.
12. EVIDENCE OF PRINCIPAL BALANCE; PAYMENT ON DEMAND. Holder's records shall,
at any time, be conclusive evidence of the unpaid Principal Balance and interest
owing on this note. Notwithstanding any other provisions of this note, in the
event holder makes Advances hereunder which result in an unpaid Principal
Balance on this note which at any time exceeds the maximum amount specified in
Section 2, Borrower agrees that all such Advances, with interest, shall be
payable on demand.
13. DEMAND NOTE. If this note is payable on demand, Borrower acknowledges and
agrees that (a) Lender is entitled to demand Borrower's immediate payment in
full of all amounts owing hereunder and (b) neither anything to the contrary
contained herein or in any other loan documents (including but not limited to,
provisions relating to defaults, rights of cure, default rate of interest,
installment payments, late charges, periodic review of Borrower's financial
condition, and covenants) nor any act of Lender pursuant to any such provisions
shall limit or impair Lender's right or ability to require Borrower's payment in
full of all amounts owing hereunder immediately upon Lender's demand.
14. REQUESTS FOR ADVANCES.
(a) Any Advance may be made or interest rate option selected upon the
request of Borrower (if an individual), any of the undersigned (if Borrower
consists of more than one individual), any person or persons authorized in
subsection (b) of this Section 15, and any person or persons otherwise
authorized to execute and deliver promissory notes to Lender on behalf of
Borrower.
(b) Borrower hereby authorizes any ONE of the following individuals to
request Advances and to select interest rate options: GLENN A. WELSTAD, BRAD
HOISINGTON, MISTY CLEVELAND OR RALPH E. PETERSEN unless Lender is otherwise
instructed in writing.
-7-
<PAGE>
(c) All Advances made pursuant to this Section 15 shall be disbursed by
deposit directly to Borrower's account number 0547-517821 at PACIFIC AVENUE
(TACOMA) branch of Lender, or by cashier's check issued to Borrower.
(d) Borrower agrees that Lender shall have no obligation to verity the
identity of any person making any request pursuant to Section 15, and Borrower
assumes all risks of the validity and authorization of such requests. In
consideration of Lender agreeing, at its sole discretion, to make Advances upon
such requests, Borrower promises to pay holder, in accordance with the
provisions of this note, the Principal Balance together with interest thereon
and other sums due hereunder, although any Advances may have been requested by a
person or persons not authorized to do so.
15. PERIODIC REVIEW. Lender will review Borrower's credit accommodations
periodically. At the time of the review, Borrower will furnish Lender with any
additional information regarding Borrower's financial condition and business
operations that Lender requests. This information may include but is not
limited to, financial statements, tax returns, lists of assets and liabilities,
agings of receivables and payable, inventory schedules, budgets and forecasts.
If upon review, Lender, in its sole discretion, determines that there has been a
material adverse change in Borrower's financial condition, Borrower will be in
default. Upon default, Lender shall have all rights specified herein.
16. NOTICES. Any notice hereunder may be given by ordinary mail, postage paid
and addressed to Borrower at the last known address of Borrower as shown on
holder's records. If Borrower consists of more than one person, notification of
any of said persons shall be complete notification of all. Notice may be given
either before or reasonably soon after the effective date of the change.
17. ATTORNEY FEES. Whether or not litigation or arbitration is commenced,
Borrower promises to pay all costs of collecting overdue amounts. Without
limiting the foregoing, in the event that holder consults an attorney regarding
the enforcement of any of its rights under this note or any document securing
the same, or if this note is placed in the hands of an attorney for collection
or if suit or litigation is brought to enforce this note or any document
securing the same, Borrower promises to pay all costs thereof including such
additional sums as the court or arbitrator(s) may adjudge reasonable as attorney
fees, including without limitation, costs and attorney fees incurred in any
appellate court, in any proceeding under the bankruptcy code, or in any
receivership and post-judgment attorney fees incurred in enforcing any judgment.
18. WAIVERS; CONSENT. Each party hereto, whether maker, co-maker, guarantor or
otherwise, waives diligence, demand, presentment for payment, notice of non-
payment, protest and notice of protest and waives all defenses based on
suretyship or impairment of collateral. Without notice to Borrower and without
diminishing or affecting Lender's rights or Borrower's obligations hereunder,
Lender may deal in any manner with any person who at any time is liable for, or
provides any real or personal property collateral for, any indebtedness of
Borrower to Lender, including the indebtedness evidenced by this note. Without
limiting the foregoing, Lender
-8-
<PAGE>
may, in its sole discretion: (a) make secured or unsecured loans to Borrower
and agree to any number of waivers, modifications, extensions and renewals of
any length of such loans, including the loan evidenced by this note; (b) impair,
release (with or without substitution of new collateral), fail to perfect a
security interest in, fail to preserve the value of, fail to dispose of in
accordance with applicable law, any collateral provided by any person; (c) sue,
fail to sue, agree not to sue, release, and settle or compromise with, any
person.
19. JOINT AND SEVERAL LIABILITY. All undertakings of the undersigned Borrowers
are joint and several and are binding upon any marital community of which any of
the undersigned are members. Holder's rights and remedies under this note shall
be cumulative.
-9-
<PAGE>
LOAN AGREEMENT
[SHADED AREA]
PRINCIPAL $10,000,000
LOAN DATE 02-13-1996
MATURITY 09-30-1996
LOAN NO. 397-67
CALL 36533
COLLATERAL 365
ACCOUNT 4919402202
OFFICER 44306
INITIALS
[END SHADED AREA]
References in the shaded ares are for Lender's use only and do not limit the
applicability of this document to particular loan or term.
Borrower: LABOR READY, INC. Lender: U.S. BANK OF WASHINGTON, NATIONAL
2156 Pacific Avenue ASSOCIATION
Tacoma, WA 98402 Tacoma Corporate Banking
c/o 1420 5th Avenue
WWH 470
Seattle, WA 98101
- --------------------------------------------------------------------------------
THIS COMMERCIAL SECURITY AGREEMENT IS ENTERED INTO BETWEEN LABOR READY, INC.
(REFERRED TO BELOW AS "GRANTOR"); AND U.S. BANK OF WASHINGTON, NATIONAL
ASSOCIATION (REFERRED TO BELOW AS "LENDER"). FOR VALUABLE CONSIDERATION,
GRANTOR GRANTS TO LENDER A SECURITY INTEREST IN THE COLLATERAL TO SECURE THE
INDEBTEDNESS AND AGREES THAT LENDER SHALL HAVE THE RIGHTS STATED IN THIS
AGREEMENT WITH RESPECT TO THE COLLATERAL, IN ADDITION TO ALL OTHER RIGHTS WHICH
LENDER MAY HAVE BY LAW.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
AGREEMENT. The word "'Agreement" means this Commercial Security Agreement,
as this Commercial Security Agreement may be amended or modified from time
to time, together with all exhibits and schedules attached to this
Commercial Security Agreement from time to time.
COLLATERAL. The word "Collateral" means the following described properly
of Grantor, whether now owned or hereafter acquired, whether now existing
or hereafter arising, and wherever located:
ALL CHATTEL PAPER, ACCOUNTS, CONTRACT RIGHTS AND GENERAL INTANGIBLES
In addition, the word "Collateral" includes all the following, whether now
owned or. hereafter acquired, whether now existing or hereafter arising,
and wherever located:
(a) All accessions, accessories, increases, and additions to and all
replacements of and substitutions for any property described above.
(b) All products and produce of any of the property described in this
Collateral section.
(c) All accounts, contract rights, general intangibles, instruments,
rents, monies, payments, and all other rights, arising out of a sale,
lease, or other disposition of any of the property described in this
Collateral section.
(d) All proceeds (including insurance proceeds) from the sale,
destruction, loss, or other disposition of any of the property
described in this Collateral section.
(e) All records and data relating to any of the property described in
this Collateral section, whether in the form of a writing, photograph,
microfilm, microfiche, or electronic media, together with all of
Grantor's right, title, and interest in and to all computer software
required to utilize, create, maintain, and process any such records or
data on electronic media.
<PAGE>
EVENT OF DEFAULT. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "Events of Default."
GRANTOR. The word "Grantor" means LABOR READY, INC., its successors and
assigns
GUARANTOR. The word "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties in
connection with the Indebtedness.
INDEBTEDNESS. The word "Indebtedness" means the indebtedness evidenced by
the Note, including all principal and interest, together with all other
indebtedness and costs and expenses for which Grantor is responsible under
this Agreement or under any of the Related Documents. In addition, the
word "Indebtedness" includes all other obligations, debts and liabilities,
plus interest thereon, of Grantor, or any one or more of them, to Lender,
as well as all claims by Lender against Grantor, or any one or more of
them, whether existing now or later; whether they are voluntary or
involuntary, due or not due, direct or indirect, absolute or contingent,
liquidated or unliquidated; whether Grantor may be liable individually or
jointly with others; whether Grantor may be obligated as guarantor, surety,
accommodation party or otherwise; whether recovery upon such indebtedness
may be or hereafter may become barred by any statute of limitations; and
whether such indebtedness may be or hereafter may become otherwise
unenforceable.
LENDER. The word "Lender" means U.S. BANK OF WASHINGTON, NATIONAL
ASSOCIATION, its successors and assigns.
NOTE. The word "Note" means the note or credit agreement dated February
13, 1996, in the principal amount of $10,000,000.00 from Grantor to Lender,
together with all renewals of, extensions of, modifications of,
refinancings of, consolidations of and substitutions for the note or credit
agreement.
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds
of trust, and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the indebtedness.
RIGHT OF SETOFF. Grantor hereby grants Lender a contractual possessory security
interest in and hereby assigns, conveys, delivers, pledges, and transfers all of
Grantor's right, title and interest in and to Grantor's accounts with Lender
(whether checking, savings, or some other account), including all accounts held
jointly with someone else and all accounts Grantor may open in the future,
excluding however all IRA, Keogh, and trust accounts. Grantor authorizes
Lender, to the extent permitted by applicable law, to charge or setoff all
Indebtedness against any and all such accounts.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:
PERFECTION OF SECURITY INTEREST. Grantor agrees to execute such financing
statements and to take whatever other actions are requested by Lender to
perfect and continue Lender's security interest in the Collateral. Upon
request of Lender, Grantor will deliver to Lender any and all of the
documents evidencing or constituting the Collateral, and Grantor will note
Lenders interest upon any and all chattel paper if not delivered to Lender
for possession by Lender. Grantor hereby appoints Lender as its
irrevocable attorney-in-fact for the purpose of executing any documents
necessary to perfect or to continue the security interest granted in this
Agreement. Lender may at any time, and without further authorization from
Grantor, file a carbon, photographic or other reproduction of any financing
statement or of this Agreement for use as a financing statement. Grantor
will reimburse Lender for all expenses for
-2-
<PAGE>
the perfection and the continuation of the perfection of Lender's security
interest in the Collateral. Grantor promptly will notify Lender before any
change in Grantor's name including any change to the assumed business names
of Grantor. THIS IS A CONTINUING SECURITY AGREEMENT AND WILL CONTINUE IN
EFFECT EVEN THOUGH ALL OR ANY PART OF THE INDEBTEDNESS IS PAID IN FULL AND
EVEN THOUGH FOR A PERIOD OF TIME GRANTOR MAY NOT BE INDEBTED TO LENDER.
NO VIOLATION. The execution and delivery of this Agreement will not
violate any law or agreement governing Grantor or to which Grantor is a
party, and its certificate or articles of incorporation and bylaws do not
prohibit any term or condition of this Agreement.
ENFORCEABILITY OF COLLATERAL. To the extent the Collateral consists of
accounts, contract rights, chattel paper, or general intangibles, the
Collateral is enforceable in accordance with its terms, is genuine, and
complies with applicable laws concerning form, content and manner of
preparation and execution, and all persons appearing to be obligated on the
Collateral have authority and capacity to contract and are in fact
obligated as they appear to be on the Collateral. At the time any account
becomes subject to a security interest in favor of Lender, the account
shall be a good and valid account representing an undisputed, bona fide
indebtedness incurred by the account debtor, for merchandise held subject
to delivery instructions or theretofore shipped or delivered pursuant to a
contract of sale, or for services theretofore performed by Grantor with or
for the account debtor; there shall be no setoffs or counterclaims against
any such account; and no agreement under which any deductions or discounts
may be claimed shall have been made with the account debtor except those
disclosed to Lender in writing.
REMOVAL OF COLLATERAL. Grantor shall keep the Collateral (or to the extent
the Collateral consists of intangible property such as accounts, the
records concerning the Collateral) at Grantor's address shown above, or at
such other locations as are acceptable to Lender. Except in the ordinary
course of its business, including the sales of inventory, Grantor shall not
remove the Collateral from its existing locations without the prior written
consent of Lender. To the extent that the Collateral consists of vehicles,
or other titled property, Grantor shall not take or permit any action which
would require application for certificates of title for the vehicles
outside the State of Washington, without the prior written consent of
Lender.
TRANSACTIONS INVOLVING COLLATERAL. Except for inventory sold or accounts
collected in the ordinary course of Grantor's business, Grantor shall not
sell, offer to sell, or otherwise transfer or dispose of the Collateral.
Grantor shall not pledge, mortgage, encumber or otherwise permit the
Collateral to be subject to any lien, security interest, encumbrance, or
charge, other than the security interest provided for in this Agreement,
without the prior written consent of Lender. This includes security
interests even if junior in right to the security interests granted under
this Agreement. Unless waived by Lender, all proceeds from any disposition
of the Collateral (for whatever reason) shall be held in trust for Lender
and shall not be commingled with any other funds; provided however, this
requirement shall not constitute consent by Lender to any sale or other
disposition. Upon receipt, Grantor shall immediately deliver any such
proceeds to Lender.
TITLE. Grantor represents and warrants to Lender that it holds good and
marketable title to the Collateral, free and clear of all liens and
encumbrances except for the lien of this Agreement and such other liens as
Lender has agreed to in writing. No financing statement covering any of
the Collateral is on file in any public office other than those which
reflect the security interest created by this Agreement or to which Lender
has specifically consented. Grantor shall defend Lender's rights in the
Collateral against the claims and demands of all other persons.
-3-
<PAGE>
COLLATERAL SCHEDULES AND LOCATIONS. As often as Lender shall require, and
insofar as the Collateral consists of accounts and general intangibles,
Grantor shall deliver to Lender schedules of such Collateral, including
such information as Lender may require, including without limitation names
and addresses of account debtors and agings of accounts and general
intangibles. Such information shall be submitted for Grantor and each of
its subsidiaries or related companies.
MAINTENANCE AND INSPECTION OF COLLATERAL. Grantor shall maintain all
tangible Collateral in good condition and repair. Granter will not commit
or permit damage to or destruction of the Collateral or any part of the
Collateral. Lender and its designated representatives and agents shall
have the right at all reasonable times to examine, inspect, and audit the
Collateral wherever located. Grantor shall immediately notify Lender of
all cases involving the return, rejection, repossession, loss or damage of
or to any Collateral; of any request for credit or adjustment or of any
other dispute arising with respect to the Collateral; and generally of all
happenings and events affecting the Collateral or the value or the amount
of the Collateral.
TAXES, ASSESSMENTS AND LIENS. Grantor will pay when due all taxes,
assessments and liens upon the Collateral, its use or operation, upon this
Agreement, upon any promissory note or notes evidencing the Indebtedness,
or upon any of the other Related Documents. Grantor may withhold any such
payment or may elect to contest any lien if Grantor is in good faith
conducting an appropriate proceeding to contest the obligation to pay and
so long as Lender's interest in the Collateral is not jeopardized in
Lender's sole opinion. If the Collateral is subjected to a lien other than
a lien permitted hereunder which is not discharged within fifteen (15)
days, Grantor shall deposit with Lender cash, a sufficient corporate surety
bond or other security satisfactory to Lender in an amount adequate to
provide for the discharge of the lien plus any interest, costs, attorneys'
fees or other charges that could accrue as a result of foreclosure or sale
of the Collateral. In any contest Grantor shall defend itself and Lender
and shall satisfy any final adverse judgment before enforcement against the
Collateral. Grantor shall name Lender as an additional obligee under any
surety bond furnished in the contest proceedings.
COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Grantor shall comply promptly
with all laws, ordinances, rules and regulations of all governmental
authorities, now or hereafter in effect, applicable to the ownership,
production, disposition, or use of the Collateral. Grantor may contest in
good faith any such law, ordinance or regulation and withhold compliance
during any proceeding, including appropriate appeals, so long as Lender's
interest in the Collateral, in Lender's opinion, is not jeopardized.
HAZARDOUS SUBSTANCES. Grantor represents and warrants that the Collateral
never has been, and never will be so long as this Agreement remains a lien
on the Collateral, used for the generation, manufacture, storage,
transportation, treatment, disposal, release or threatened release of any
hazardous waste or substance, as those terms are defined in the
Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the
Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499
("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. Section
1801, et seq., the Resource Conservation and Recovery Act, 49
U.S.C. Section 6901, et seq., or other applicable state or Federal laws,
rules, or regulations adopted pursuant to any of the foregoing. The terms
"hazardous waste" and "hazardous substance" shall also include, without
limitation, petroleum and petroleum by-products or any fraction thereof and
asbestos. The representations and warranties contained herein are based on
Grantor's due diligence in investigating the Collateral for hazardous
wastes and substances. Grantor hereby (a) releases and waives any future
claims against Lender for indemnity or contribution in the event Grantor
becomes liable for cleanup or other costs under any such laws, and (b)
agrees to indemnify and hold harmless Lender against any and
-4-
<PAGE>
all claims and losses resulting from a breach of this provision of this
Agreement. This obligation to indemnify shall survive the payment of the
Indebtedness and the satisfaction of this Agreement.
MAINTENANCE OF CASUALTY INSURANCE. Grantor shall procure and maintain all
risks insurance, including without limitation fire, theft and liability
coverage together with such other insurance as Lender may require with
respect to the Collateral, in form, amounts, coverages and basis reasonably
acceptable to Lender and issued by a company or companies reasonably
acceptable to Lender. Grantor, upon request of Lender, will deliver to
Lender from time to time the policies or certificates of insurance in form
satisfactory to Lender, including stipulations that coverages will not be
canceled or diminished without at least ten (10) days' prior written notice
to Lender and not including any disclaimer of the Insurer's liability for
failure to give such a notice. Each insurance policy also shall include an
endorsement providing that coverage in favor of Lender will not be impaired
in any way by any act, omission or default of Grantor or any other person.
In connection with all policies covering assets in which Lender holds or is
offered a security interest, Grantor will provide Lender with such loss
payable or other endorsements as Lender may require. If Grantor at any
time fails to obtain or maintain any insurance as required under this
Agreement, Lender may (but shall not be obligated to) obtain such insurance
as Lender deems appropriate, including if it so chooses "single interest
insurance," which will cover only Lender's interest in the Collateral.
APPLICATION OF INSURANCE PROCEEDS. Grantor shall promptly notify Lender of
any loss or damage to the Collateral. Lender may make proof of loss if
Grantor fails to do so within fifteen (15) days of the casualty. All
proceeds of any insurance on the Collateral, including accrued proceeds
thereon, shall be held by Lender as part of the Collateral. If Lender
consents to repair or replacement of the damaged or destroyed Collateral.
Lender shall, upon satisfactory proof of expenditure, pay or reimburse
Grantor from the proceeds for the reasonable cost of repair or restoration.
If Lender does not consent to repair or replacement of the Collateral,
Lender shall retain a sufficient amount of the proceeds to pay all of the
Indebtedness, and shall pay the balance to Grantor. Any proceeds which
have not been disbursed within six (6) months after their receipt and which
Grantor has not committed to the repair or restoration of the Collateral
shall be used to prepay the Indebtedness.
INSURANCE RESERVES. Lender may require Grantor to maintain with Lender
reserves for payment of insurance premiums, which reserves shall be created
by monthly payments from Grantor of a sum estimated by Lender to be
sufficient to produce, at least fifteen (15) days before the premium due
date, amounts at least equal to the insurance premiums to be paid. If
fifteen (15) days before payment is due, the reserve funds are
insufficient, Grantor shall upon demand pay any deficiency to Lender. The
reserve funds shall be held by Lender as a general deposit and shall
constitute a non-interest-bearing account which Lender may satisfy by
payment of the insurance premiums required to be paid by Grantor as they
become due. Lender does not hold the reserve funds in trust for Grantor,
and Lender is not the agent of Grantor for payment of the insurance
premiums required to be paid by Grantor. The responsibility for the
payment of premiums shall remain Grantor's sole responsibility.
INSURANCE REPORTS. Grantor, upon request of Lender, shall furnish to
Lender reports on each existing policy of insurance showing such
information as Lender may reasonably request including the following: (a)
the name of the insurer; (b) the risks insured; (c) the amount of the
policy; (d) the property insured; (e) the then current value on the basis
of which insurance has been obtained and the manner of determining that
value; and (f) the expiration date of the policy. In addition, Grantor
shall upon request by Lender (however not more often than annually) have an
independent appraiser satisfactory to Lender determine, as applicable, the
cash value or replacement cost of the Collateral.
-5-
<PAGE>
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and except
as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender's security interest in
such Collateral. Until otherwise notified by Lender, Grantor may collect any of
the Collateral consisting of accounts. At any time and even though no Event of
Default exists, Lender may exercise its rights to collect the accounts and to
notify account debtors to make payments directly to Lender for application to
the indebtedness. If Lender at any time has possession of any Collateral,
whether before or after an Event of Default, Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral if
Lender takes such action for that purpose as Grantor shall request or as Lender,
in Lender's sole discretion, shall deem appropriate under the circumstances, but
failure to honor any request by Grantor shall not of itself be deemed to be a
failure to exercise reasonable care. Lender shall not be required to take any
steps necessary to preserve any rights in the Collateral against prior parties,
nor to protect, preserve or maintain any security interest given to secure the
indebtedness.
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without limitation
all taxes, liens, security interests, encumbrances, and other claims, at any
time levied or placed on the Collateral. Lender also may (but shall not be
obligated to) pay all costs for insuring, maintaining and preserving the
Collateral. All such expenditures incurred or paid by Lender for such purposes
will then bear interest at the rate charged under the Note from the date
incurred or paid by Lender to the date of repayment by Grantor. All such
expenses shall become a part of the indebtedness and, at Lender's option, will
(a) be payable on demand, (b) be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due
during either (i) the term of any applicable insurance policy or (ii) the
remaining term of the Note, or (c) be treated as a balloon payment which will be
due and payable at the Note's maturity. This Agreement also will secure payment
of these amounts. Such right shall be in addition to all other rights and
remedies to which Lender may be entitled upon the occurrence of an Event of
Default.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Grantor to make any payment when due
on the indebtedness.
OTHER DEFAULTS. Failure of Grantor to comply with or to perform any other
term, obligation, covenant or condition contained in this Agreement or in
any of the Related Documents or in any other note, security agreement,
lease agreement or lease schedule, loan agreement or other agreement,
whether now existing or hereafter made, between Grantor and U.S. Bancorp or
any direct or indirect subsidiary of U.S. Bancorp.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Grantor under this Agreement, the
Note or the Related Documents is false or misleading in any material
respect, either now or at the time made or furnished.
DEFECTIVE COLLATERALLIZATION. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
collateral documents to create a valid and perfected security interest or
lien) at any time and for any reason.
INSOLVENCY. The dissolution or termination of Grantor's existence as a
going business, the insolvency of Grantor, the appointment of a receiver
for any part of Grantor's property, any assignment for the benefit of
-6-
<PAGE>
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Grantor.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Grantor or by any
governmental agency against the Collateral or any other collateral securing
the Indebtedness. This includes a garnishment of any of Grantor's deposit
accounts with Lender. However, this Event of Default shall not apply if
there is a good faith dispute by Grantor as to the validity or
reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding and if Grantor gives Lender written notice of the
creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount
determined by Lender, in its sole discretion, as being an adequate reserve
or bond for the dispute.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or such Guarantor dies
or becomes incompetent. Lender, at its option, may, but shall not be
required to, permit the Guarantor's estate to assume unconditionally the
obligations arising under the guaranty in a manner satisfactory to Lender,
and, in doing so, cure the Event of Default.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the Washington Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:
ACCELERATE INDEBTEDNESS. Lender may declare the entire Indebtedness,
including any prepayment penalty which Grantor would be required to pay,
immediately due and payable, without notice.
ASSEMBLE COLLATERAL. Lender may require Grantor to deliver to Lender all
or any portion of the Collateral and any and all certificates of title and
other documents relating to the Collateral. Lender may require Grantor to
assemble the Collateral and make it available to Lender at a place to be
designated by Lender. Lender also shall have full power to enter upon the
property of Grantor to take possession of and remove the Collateral. If
the Collateral contains other goods not covered by this Agreement at the
time of repossession, Grantor agrees Lender may take such other goods,
provided that Lender makes reasonable efforts to return them to Grantor
after repossession.
SELL THE COLLATERAL. Lender shall have full power to sell, lease,
transfer, or otherwise deal with the Collateral or proceeds thereof in its
own name or that of Grantor. Lender may sell the Collateral at public
auction or private sale. Unless the Collateral threatens to decline
speedily in value or is of a type customarily sold on a recognized market,
Lender will give Grantor reasonable notice of the time after which any
private sale or any other intended disposition of the Collateral is to be
made. The requirements of reasonable notice shall be met if such notice is
given at least ten (10) days before the time of the sale or disposition.
All expenses relating to the disposition of the Collateral, including
without limitation the expenses of retaking, holding, insuring, preparing
for sale and selling the Collateral, shall become a part of the
Indebtedness secured by this Agreement and shall be payable on demand, with
interest at the Note rate from date of expenditure until repaid.
APPOINT RECEIVER. To the extent permitted by applicable law, Lender shall
have the following rights and remedies regarding the appointment of a
receiver: (a) Lender may have a receiver appointed as a matter of right,
(b) the receiver may be an employee of Lender and may serve without bond,
and (c) all fees of the receiver and his or her attorney shall become part
of the indebtedness secured by this Agreement and shall be payable on
demand, with interest at the Note rate from date of expenditure until
repaid.
-7-
<PAGE>
COLLECT REVENUES, APPLY ACCOUNTS. Lender, either itself or through a
receiver, may collect the payments, rents, income, and revenues from the
Collateral. Lender may at any time in its discretion transfer any
Collateral into its own name or that of its nominee and receive the
payments, rents, income, and revenues therefrom and hold the same as
security for the indebtedness or apply it to payment of the indebtedness in
such order of preference as Lender may determine. Insofar as the
Collateral consists of accounts, general intangibles, insurance policies,
instruments, chattel paper, choses in action, or similar property, Lender
may demand, collect, receipt for, settle, compromise, adjust, sue for,
foreclose, or realize on the Collateral as Lender may determine, whether or
not indebtedness or Collateral is then due. For these purposes, Lender
may, on behalf of and in the name of Grantor, receive, open and dispose of
mail addressed to Grantor; change any address to which mail and payments
are to be sent; and endorse notes, checks, drafts, money orders, documents
of title, instruments and items pertaining to payment, shipment, or storage
of any Collateral. To facilitate collection, Lender may notify account
debtors and obligors on any Collateral to make payments directly to Lender.
OBTAIN DEFICIENCY. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining
on the Indebtedness due to Lender after application of all amounts received
from the exercise of the rights provided in this Agreement. Grantor shall
be liable for a deficiency even if the transaction described in this
subsection is a sale of accounts or chattel paper.
OTHER RIGHTS AND REMEDIES. Lender shall have all the rights and remedies
of a secured creditor under the provisions of the Uniform Commercial Code,
as may be amended from time to time. In addition, Lender shall have and
may exercise any or all other rights and remedies it may have available at
law, in equity, or otherwise.
CUMULATIVE REMEDIES. All of Lender's rights and remedies, whether
evidenced by this Agreement or the Related Documents or by any other
writing, shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude
pursuit of any other remedy, and an election to make expenditures or to
take action to perform an obligation of Grantor under this Agreement, after
Grantor's failure to perform, shall not affect Lender's right to declare a
default and to exercise its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Agreement. No alteration of or amendment to this
Agreement shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound by the alteration or
amendment.
APPLICABLE LAW. This Agreement has been delivered to Lender and accepted
by Lender in the State of Washington. If there is a lawsuit, Grantor
agrees upon Lender's request to submit to the jurisdiction of the courts of
King County, State of Washington. Subject to the provisions on
arbitration, this Agreement shall be governed by and construed in
accordance with the laws of the State of Washington.
ATTORNEYS' FEES; EXPENSES. Grantor agrees to pay upon demand all of
Lender's costs and expenses, including attorneys' fees and Lender's legal
expenses, incurred in connection with the enforcement of this Agreement.
Lender may pay someone else to help enforce this Agreement, and Grantor
shall pay the costs and expenses of such enforcement. Costs and expenses
include Lender's attorneys' fees and legal expenses whether or not there is
a lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (and including efforts to modify or vacate any automatic stay
or injunction), appeals, and any
-8-
<PAGE>
anticipated post-judgment collection services. Grantor also shall pay all
court costs and such additional fees as may be directed by the court.
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement.
NOTICES. All notices required to be given under this Agreement shall be
given in writing and shall be effective when actually delivered or when
deposited with a nationally recognized overnight courier or deposited in
the United States mail, first class, postage prepaid, addressed to the
party to whom the notice is to be given at the address shown above. Any
party may change its address for notices under this Agreement by giving
formal written notice to the other parties, specifying that the purpose of
the notice is to change the party's address. To the extent permitted by
applicable law, if there is more than one Grantor, notice to any Grantor
will constitute notice to all Grantors. For notice purposes, Grantor
agrees to keep Lender informed at all times of Grantor's current
address(es).
POWER OF ATTORNEY: Grantor hereby appoints Lender as its true and lawful
attorney-in-fact, irrevocably, with full power of substitution to do the
following: (a) to demand, collect, receive, receipt for, sue and recover
all sums of money or other property which may now or hereafter become due,
owing or payable from the Collateral; (b) to execute, sign and endorse any
and all claims, instruments, receipts, checks, drafts or warrants issued in
payment for the Collateral; (c) to settle or compromise any and all claims
arising under the Collateral, and, in the place and stead of Grantor, to
execute and deliver its release and settlement for the claim; and (d) to
file any claim or claims or to take any action or institute or take part in
any proceedings, either in its own name or in the name of Grantor, or
otherwise, which in the discretion of Lender may seem to be necessary or
advisable. This power is given as security for the Indebtedness, and the
authority hereby conferred is and shall be irrevocable and shall remain in
full force and effect until renounced by Lender.
PREFERENCE PAYMENTS. Any monies Lender pays because of an asserted
preference claim in Borrower's bankruptcy will become a part of the
Indebtedness and, at Lender's option, shall be payable by Borrower as
provided above in the "EXPENDITURES BY LENDER" paragraph.
SEVERABILITY. If a court of competent jurisdiction finds any provision of
this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the offending provision
cannot be so modified, it shall be stricken and all other provisions of
this Agreement in all other respects shall remain valid and enforceable.
SUCCESSOR INTERESTS. Subject to the limitations set forth above on
transfer of the Collateral, this Agreement shall be binding upon and inure
to the benefit of the parties, their successors and assigns.
WAIVER. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender
of a provision of this Agreement shall not prejudice or constitute a waiver
of Lender's right otherwise to demand strict compliance with that provision
or any other provision of this Agreement. No prior waiver by Lender, nor
any course of dealing between Lender and Grantor, shall constitute a waiver
of any of Lender's fights or of any of Grantor's obligations as to any
future transactions. Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any instance shall not
constitute
-9-
<PAGE>
continuing consent to subsequent instances where such consent is required
and in all cases such consent may be granted or withheld in the sole
discretion of Lender.
WAIVER OF CO-OBLIGOR'S RIGHTS. If more than one person is obligated for
the Indebtedness, Borrower irrevocably waives, disclaims and relinquishes
all claims against such other person which Borrower has or would otherwise
have by virtue of payment of the Indebtedness or any part thereof,
specifically including but not limited to all rights of indemnity,
contribution or exoneration.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED FEBRUARY
13, 1996.
GRANTOR:
LABOR READY, INC.
BY
------------------------------
GLENN A. WELSTAD, PRESIDENT
-10-
<PAGE>
EXHIBIT 10.11
LABOR READY GENERAL LEASE
Lessor and Labor Ready agree:
BASIC LEASE INFORMATION
In addition to the terms which are defined elsewhere in this Lease, the
following defined terms are used in this Lease:
(a) DATE:
------------------------
(b) TENANT: Labor Ready, Inc.
(c) TENANT'S ADDRESS: Labor Ready, Inc.
2156 Pacific Avenue South
Tacoma, Washington 98402
(d) LESSOR:
------------------------------------------
(e) LESSOR'S ADDRESS:
--------------------------------
--------------------------------
(f) PREMISES ADDRESS:
--------------------------------
--------------------------------
--------------------------------
(g) SQUARE FOOTAGE:
----------------------------------
(h) COUNTY, CITY:
------------------------------------
(i) COMMENCEMENT DATE:
-------------------------------
(j) TERM:
--------------------------------------------
(k) SECURITY DEPOSIT:
--------------------------------
(l) MONTHLY BASE RENT:
-------------------------------
THIS LEASE is made and entered into as of the date listed above, by and
between Lessor and Labor Ready, Inc., a Washington corporation, as Tenant.
Initials:
--------- ---------
Landlord Tenant
-1-
<PAGE>
WITNESSETH: That the Lessor, in consideration of the covenants of said
Lease hereinafter set forth, does lease the Premises to Labor Ready under the
terms and conditions set forth and grants to Labor Ready the full and quiet
enjoyment of the Premises throughout the term of the Lease.
1. TERM.
The term of said Lease is for the period specified above, commencing on the
Commencement Date and ending on the Expiration Date. Labor Ready shall be
entitled to possession of the Premises when this Lease has been signed.
2. MONTHLY RENTAL.
The monthly rental on the premises shall be the Monthly Base Rent specified
above, plus any excise, privilege or sales tax levied by a political
subdivision.
Rental shall commence on the Commencement Date and no rental shall be due
for occupancy by Labor Ready prior to that date. The rental payment due for the
first month shall be paid upon execution of this Lease. If the Commencement
Date is not the first day of the month, then the rental payment for the first
month shall be prorated and the prorated rental payment for the first month
shall be paid upon execution of this Lease. All other payments are due on or
before the first day of each calendar month during the term herein without any
prior demand. Payment herein provided will be subject to a five percent (5%)
late charge if made after the fifth (5th) day of any month.
3. SECURITY DEPOSIT.
Labor Ready shall pay, upon the execution hereof, the Security Deposit
specified above, as security for the performance of the terms and conditions of
this Lease. The security shall be returned to Labor Ready at the termination of
this Lease if the obligations of this Lease have been fully discharged.
4. USE OF PREMISES.
The Premises described above are leased to Labor Ready for the purpose of
operating an office for the placement of temporary workers and for the
dispatching of temporary workers.
5. COMPLIANCE WITH LAWS.
Lessor represents that as of the Commencement Date the Premises complies
with all applicable laws, statutes, ordinances and governmental rules and
regulations (hereinafter
Initials:
--------- ---------
Landlord Tenant
-2-
<PAGE>
collectively "Laws"). Notwithstanding anything to the contrary contained in
this Lease, Lessor shall, throughout the term of this Lease, at its own expense
be responsible for any modifications, repairs, additions or improvements
(collectively "Changes") which are required by any governmental authority to
cause the Premises to comply with any laws relating to building safety, fire
protection, disabled and handicapped persons, including access to or use of the
Premises by persons with disabilities or handicaps, and all other matters
relating to or affecting the condition and use of the Premises. If any such
Changes are required by any Laws and Lessor, in the reasonable exercise of its
judgment deems it economically infeasible to make such Changes, then Lessor may
terminate this Lease without further liability by giving sixty (60) days advance
written notice to Lessee.
6. APPROVAL BY CITY.
This Lease is contingent upon approval, if required, by the City in which
the premises is located and any other governmental authority having jurisdiction
of Labor Ready's proposed use and occupancy of the Premises and the conformance
of that use and occupancy with all zoning and other municipal requirements.
Such approval shall be a condition precedent to the effectiveness of this Lease.
If Labor Ready occupies the Premises prior to such approval, and approval is
later denied, either party may terminate the Lease and the parties shall
thereupon have no further obligations to each other.
7. INSURANCE.
(a) Labor Ready shall obtain and continue in force during the term of
this Lease combined liability insurance providing protection of at least
$1,000,000.00 single limit with no deductible covering injury or death to any
person or persons. Labor Ready shall also insure or self-insure its own
contents, fixtures, furniture and equipment from loss or damage by fire or other
perils.
(b) Lessor shall obtain and continue in force during the term of this
Lease, a policy or policies of insurance covering loss or damage to the Premises
by fire or other perils in the amount of full replacement value thereof.
(c) Labor Ready shall maintain workers' compensation coverage as
required by the laws of the state in which the premises are located or the laws
of the United States.
(d) Upon request of Lessor, Labor Ready agrees to provide Lessor with
a memorandum copy of all Insurance Policies so obtained under this Lease, and
additionally name Lessor as an additional assured party.
Initials:
--------- ---------
Landlord Tenant
-3-
<PAGE>
8. WAIVER OF SUBROGATION.
Labor Ready and Lessor each hereby release and relieve the other, and waive
their entire right of recovery against the other for loss or damage that may
occur to the Premises, improvements therein, or to personal property of Labor
Ready within the Premises, by reason of fire, the elements or other casualty
regardless of the cause or origin, including the negligence of Lessor or Labor
Ready or their agents, employees, contractors and/or invitees. Labor Ready and
Lessor shall give notice to their respective insurance carriers, if required,
that the foregoing mutual waiver of subrogation is contained in this Lease.
9. REPAIRS.
(a) Except as otherwise provided herein, Labor Ready agrees to
perform all necessary maintenance work to the interior portions of the Premises.
Lessor shall make all necessary repairs to the exterior walls, doors and other
exterior features of the premises, including any extraordinary repairs to and
replacement of the electrical, plumbing or heating and cooling facilities.
(b) Lessor warrants that on the Commencement Date the heating,
cooling, electrical and plumbing systems shall all be in good and operable
condition, the premises shall be structurally sound and the roof shall be water-
tight.
(c) Except as otherwise provided, Labor Ready accepts the Premises in
its present condition.
10. MODIFICATIONS.
Lessor shall perform all clean-up work on the Premises and shall make minor
modifications necessary for occupancy.
11. ALTERATIONS OR IMPROVEMENTS.
Labor Ready may make improvements or other alterations in the interior of
the leased Premises at its own expense, provided, however, that prior to
commencing any such work, Labor Ready shall first obtain written consent from
Lessor. Lessor shall have the right to post a notice of non-responsibility.
Such improvements or alterations shall remain the property of the Lessor at the
termination of this Lease, unless Lessor requests that the improvements or
alterations be removed by Labor Ready, in which event the improvements or
alterations shall be removed without material damage to the Premises.
Initials:
--------- ---------
Landlord Tenant
-4-
<PAGE>
12. SERVICES/UTILITIES.
Labor Ready shall pay for all water, gas, heat, light, power, sewer
charges, garbage collection and all other services and utilities supplied to the
Premises, together with any sales taxes thereon.
13. ASSIGNMENT/SUBLETTING.
Labor Ready agrees that it will not assign or sublet in whole or part any
portion of the leased Premises without the prior written consent of Lessor,
which said consent will not be unreasonably withheld. Lessor may sell,
transfer, or assign all or any part of its interest in the Premises without the
consent of Labor Ready.
14. INJURY OR LOSS.
Lessor shall not be responsible or liable for any loss, theft, or damage to
property or injury to, or death of, any person on or about the leased Premises,
resulting from any negligent act or omission of Labor Ready and Labor Ready
agrees to indemnify, defend and hold Lessor harmless therefrom.
15. ENTRY OF LANDLORD.
Lessor reserves the right to enter upon the leased Premises at reasonable
times for the purpose of inspecting the Premises, and reserves the right, during
the last two months of the term of the Lease, to show the Premises at reasonable
times to prospective tenants, providing Labor Ready has not tendered a written
intent to Lessor to renew this Lease or to negotiate a new Lease for the
Premises.
16. RENEWAL OF LEASE.
Lessors agree to negotiate in good faith a renewal of this Lease if
requested by Labor Ready at least ninety (90) days prior to the Expiration Date.
The renewal lease, if any, shall be upon such terms and at such rental as the
parties may agree.
17. EARLY TERMINATION.
Either party may terminate this Lease at any time by providing to the other
party written notice thirty (30) days in advance of the proposed early
termination date, along with payment in an amount equal to three (3) months
rental. Upon such notice and payment, neither party shall have any further
obligations or duties to the other party as of the early termination date.
Initials:
--------- ---------
Landlord Tenant
-5-
<PAGE>
18. BREACH.
(a) The failure of either party to fully perform under any or all of
the terms and conditions of this Lease shall constitute a breach of this Lease,
entitling the offended party to take any and all such action provided by law,
including, but not limited to one or more of the following: (1) Retain or take
possession of any property on the Premises pursuant to Lessor's Landlord Lien;
(2) Enter the Premises and remove all persons and property therefrom;
(3) Declare the Lease at an end and terminated; and (4) Sue for the full balance
due under the lease, and any damages sustained by Lessor.
(b) Written notice of any breach alleged under this Lease shall be
given to the defaulting party. If the defaulting party has not cured the
default at the end of five (5) days or for breaches which cannot be cured in
five (5) days, has not commenced action to cure the breach and completed such
action with reasonable promptness, then the other party may take any and all
such action provided by law, and shall be entitled to recover all of its damages
including an additional amount for attorneys' fees and costs.
19. SURRENDER OF PREMISES.
Labor Ready shall, upon the expiration of the term of the Lease, or upon an
earlier termination hereof, quit and surrender the Premises in good order or
condition and repair, reasonable wear and tear and acts of God excepted.
20. INSTALLATION OF SIGNS.
Lessor hereby gives its consent to Labor Ready to install such sign or
signs as may be useful in connection with their business so long as all such
signs comply with all requirements of the City in which the premises is located.
Lessor agrees that Labor Ready may use all of the existing signs, posts,
facilities and equipment currently located on the Premises. Labor Ready shall
remove all signage at the termination of this Lease.
21. SAVINGS CLAUSE.
If any term or provision of this Lease or any application thereof shall be
declared or held to be invalid or unenforceable, then the remaining terms and
provisions of this Lease shall not be affected thereby.
22. LIEN PROTECTION.
Labor Ready agrees that at no time during the term of this Lease will it
permit a lien or encumbrance arising from any act or omission on its part of any
kind or nature to come into
Initials:
--------- ---------
Landlord Tenant
-6-
<PAGE>
existence against the Premises. If at any time a lien or encumbrance arising
from an act or omission of Labor Ready is filed against the Premises, labor
Ready shall promptly discharge said lien or encumbrances, and if said lien or
encumbrance has not been removed within thirty (30) days from the date it is
filed or recorded against the Premises, Labor Ready agrees that it will deposit
with Lessor in cash or a satisfactory bond in an amount sufficient to satisfy
the claim of the person or concern filing the lien or encumbrance and shall
leave the same on deposit with Lessor until said lien is discharged.
23. NOTICES.
Any notices or demands to be given hereunder shall be given to Lessor or to
Labor Ready at the addresses set forth in Basic Lease Information or at such
other address as may later be provided. A copy of any notice to Labor Ready
shall also be sent to its counsel:
Ronald L. Junck
Ronald L. Junck. P.C.
Post Office Box 10569
Phoenix, Arizona 85064
24. CONDEMNATION.
In the event all or any part of the Premises shall be taken by right of
eminent domain, or in the event the Lessor makes a conveyance of all or any part
of the Premises in lieu of taking by right of eminent domain, then this Lease
shall, at the option of either party cease and terminate. In such event, Labor
Ready shall not be required to make any further rental payments to the Lessor.
(a) In the event that an award is made for the taking of such
property and parcels of the Premises in condemnation proceedings, or by the
right of eminent domain, or conveyance under threat of condemnation proceedings,
Lessor shall be entitled to receive and retain the amounts awarded or paid for
such taking or conveyance, provided, however, that Labor Ready shall be entitled
to receive and retain such amounts as are specifically awarded to it in such
proceedings because of the taking of its furniture, or fixtures, and its
leasehold improvements which have not become a part of the realty. It is
understood and agreed that any amounts specifically awarded in any such taking
for the damage to the business of Labor Ready done at the Premises or awarded to
it as a result of the interference with the access to the Premises or for any
other damage to said business and trade done at the Premises shall be the
property of Labor Ready.
(b) It is understood and agreed that in the event of termination of
this Lease as provided under this Paragraph, Labor Ready shall have no claim
against Lessor for the value of
Initials:
--------- ---------
Landlord Tenant
-7-
<PAGE>
any unexpired term of this Lease and no right or claim to any part of the award
on account thereof.
25. DESTRUCTION OF PREMISES.
If the Premises are materially damaged as a result of fire or other
casualty, then either party may terminate this Lease as of the date the damage
occurred and both parties shall be relieved from all obligations hereunder. If
neither party terminates the Lease, then Lessor shall promptly repair, replace
and rebuild the Premises. Labor Ready shall be responsible for replacement of
its own fixtures, furnishing and equipment damaged as a result of the fire or
other casualty. Until the repair work has been completed, the rental payments
to be made by Labor Ready shall abate. The rental shall abate completely if the
Premises are entirely unusable during the period of repair and shall abate
partially in proportion to the extent to which the damage interferes with use of
the Premises if the Premises are usable.
26. WAIVER.
No waiver of any breach of any one of the agreements, terms, conditions or
covenants of this Lease by Lessor or Labor Ready shall be deemed to imply or
constitute a waiver of any other agreement, term, condition or covenant of this
Lease. The failure of either party to insist on strict performance of any
agreement, term, condition or covenant, herein set forth, shall not constitute
or be construed as a waiver of the rights of either or the other thereafter to
enforce any other default of such agreement, term, condition or convenant;
neither shall such failure to insist upon strict performance be deemed
sufficient ground to enable either party hereto to forego or subvert or
otherwise disregard any other agreement term, condition or covenant of this
Lease.
27. BROKER.
In the event any of the parties herein utilizes a real estate agent or real
estate brokerage firm in connection with this Lease, Lessor shall be responsible
for the payment of any and all commissions resulting therefrom.
28. ESTOPPEL CERTIFICATE.
Whenever requested to do so by either party, the other party to this Lease
shall execute and deliver to the requesting entity within ten (10) days after
receipt of a written request, a written statement which shall recite all of the
following, if true, or which shall recite in detail, in what particular respect
any of these items are not true:
(a) That this Lease is in full force and effect;
Initials:
--------- ---------
Landlord Tenant
-8-
<PAGE>
(b) That this Lease is in good standing;
(c) That all rent payments required to be paid by Labor Ready up to
the date of the statement, have been paid;
(d) That no advance rent payments have been made, or if any were
paid, the specific period of time for which they were paid;
(e) That this Lease has not been amended or changed;
(f) That the party providing the statement has no outstanding claims
or demands against the other party under the terms and provisions of this Lease;
(g) Such other information about the then status of this Lease as
might be reasonably requested.
29. SUCCESSORS.
All of the agreements, terms, conditions, and covenants set forth in this
Lease shall inure to the benefit of and be binding upon the heirs, legal
representatives, successors, executors and assigns of the parties, except that
no assignment of Lease in violation of the provisions of this Lease shall vest
any right in the assignee.
30. ENTIRE AGREEMENT.
This Lease constitutes the entire agreement of the parties hereto. No
representations, promises, terms, conditions, obligations or warranties
whatsoever referring to the subject matters hereof, other than those expressly
set forth herein, shall be of any binding legal force or effect whatsoever. No
modification, change or alteration of this Lease shall be of any legal force or
effect whatsoever unless in writing, signed by all the parties hereto. Wherever
used herein, the singular shall include the plural, and the use of any gender
shall be applicable to all genders.
IN WITNESS WHEREOF, the parties have hereunto set their hands, or caused
this Lease to be executed by their authorized agent this ____ day of __________,
19___.
Initials:
--------- ---------
Landlord Tenant
-9-
<PAGE>
LESSOR: TENANT:
LABOR READY, INC.
By By
-------------------------------- ------------------------------------
Its Glenn Welstad, President
-------------------------------
Initials:
--------- ---------
Landlord Tenant
-10-
