SECURITY AGREEMENT
This SECURITY AGREEMENT (the "Agreement") is dated October
31, 1995 and is executed by and among LABOR READY, INC., a
Washington corporation, LABOR READY OF NEVADA, INC., a Washington
corporation, and LABOR READY FRANCHISE DEVELOPMENT CORP. INC., a
Washington corporation (individually and collectively, "Debtor"),
SEACOAST CAPITAL PARTNERS LIMITED PARTNERSHIP, a Delaware limited
partnership ("Seacoast"), and ALLIED INVESTMENT CORPORATION, a
Maryland corporation, ALLIED INVESTMENT CORPORATION II, a
Maryland corporation, and ALLIED CAPITAL CORPORATION II, a
Maryland corporation (collectively, "Allied") (Seacoast and
Allied are collectively referred to herein as the "Purchasers").
W I T N E S S E T H:
WHEREAS, Debtor and Purchasers are parties to a Note
Purchase Agreement dated the date hereof (as the same may be
amended and in effect from time to time, the "Note Purchase
Agreement"), providing for the purchase by Purchasers from Debtor
of four senior subordinated notes in the aggregate original
principal amount of $10,000,000;
WHEREAS, it is a condition precedent to the performance by
Purchasers of their obligations under the Note Purchase Agreement
that Debtor shall have granted the security interests
contemplated by this Agreement; and
NOW, THEREFORE, in consideration of the premises and in
order to induce Purchasers to enter into the Note Purchase
Agreement and perform its obligations thereunder, Debtor hereby
agrees with Purchasers as follows:
SECTION 1. Definitions
1.1 Certain Defined Terms. Unless otherwise defined
herein, all capitalized terms shall have the meanings ascribed to
them in the Note Purchase Agreement. The following terms, as
used herein, have the meanings set forth below:
"Accounts" means all "accounts" (as defined in the UCC) now
owned or hereafter created or acquired by Debtor including,
without limitation, all of the following now owned or hereafter
created or acquired by Debtor: (a) accounts receivable, contract
rights, book debts, notes, drafts and other obligations or
indebtedness owing to Debtor arising from the sale, lease or
exchange of goods or other property and/or the performance of
services; (b) Debtor's rights in, to and under all purchase
orders for goods, services or other property; (c) Debtor's rights
to any goods, services or other property represented by any of
the foregoing (including returned or repossessed goods and unpaid
sellers' rights of rescission, replevin, reclamation and rights
to stoppage in transit); (d) monies due to or to become due to
Debtor under all contracts for the sale, lease or exchange of
goods or other property and/or the performance of services
(whether or not earned by performance on the part of Debtor); and
(e) Proceeds of any of the foregoing and all collateral security
and guaranties of any kind given by any Person with respect to
any of the foregoing.
"Collateral" has the meaning assigned to that term in
Section 2.
"Collateral Account" has the meaning assigned to that term
in Section 7.
"Copyright License" means any written agreement now or
hereafter in existence granting to Labor Ready, Inc. any right to
use any Copyright including, without limitation, the agreements
described in Schedule 1 of the Copyright Security Agreement.
"Copyrights" means collectively all of the following: (a)
all copyrights, rights and interests in copyrights, works
protectable by copyright, copyright registrations and copyright
applications now owned or hereafter created or acquired by
Debtor, including, without limitation, those listed on Schedule 1
of the Copyright Security Agreement; (b) all renewals of any of
the foregoing; (c) all income, royalties, damages and payments
now or hereafter due and/or payable under any of the foregoing,
including, without limitation, damages or payments for past or
future infringements of any of the foregoing; (d) the right to
sue for past, present and future infringements of any of the
foregoing; (e) all rights corresponding to any of the foregoing
throughout the world; and (f) all goodwill associated with and
symbolized by any of the foregoing.
"Copyright Security Agreement" means the copyright security
agreement to be executed and delivered by Labor Ready, Inc. to
Purchasers, substantially in the form of Exhibit A, as such
agreement may hereafter be amended, supplemented or otherwise
modified from time to time.
"Documents" means all "documents" (as defined in the UCC) or
other receipts covering, evidencing or representing goods now
owned or hereafter acquired by Debtor.
"Equipment" means all "equipment" (as defined in the UCC)
now owned or hereafter acquired by Debtor including, without
limitation, all machinery, motor vehicles, trucks, trailers,
vessels, aircraft and rolling stock and all parts thereof and all
additions and accessions thereto and replacements therefor.
"Fixtures" means all of the following now owned or hereafter
acquired by Debtor: plant fixtures; business fixtures; other
fixtures and storage office facilities, wherever located; and all
additions and accessions thereto and replacements therefor.
"General Intangibles" means all "general intangibles" (as
defined in the UCC) now owned or hereafter acquired by Debtor
including, without limitation, all right, title and interest of
Debtor in and to: (a) all agreements, leases, licenses and
contracts to which Debtor is or may become a party; (b) all
obligations or indebtedness owing to Debtor (other than Accounts)
from whatever source arising; (c) all tax refunds; (d)
Intellectual Property; and (e) all trade secrets and other
confidential information relating to the business of Debtor
including by way of illustration and not limitation: the names
and addresses of, and credit and other business information
concerning, Debtor's past, present or future customers; the
prices which Debtor obtains for its services or at which it sells
merchandise; estimating and cost procedures; profit margins;
policies and procedures pertaining to the sale and design of
equipment, components, devices and services furnished by Debtor;
information concerning suppliers of Debtor; and information
concerning the manner of operation, business plans, pledges,
projections and all other information of any kind or character,
whether or not reduced in writing, with respect to the conduct by
Debtor of its business not generally known by the public.
"Instruments" means all "instruments", "chattel paper" or
"letters of credit" (each as defined in the UCC) including, but
not limited to, promissory notes, drafts, bills of exchange and
trade acceptances, now owned or hereafter acquired by Debtor.
"Intellectual Property" shall mean collectively all of the
following: Copyrights, Copyright Licenses, Patents, Patent
Licenses, Trademarks and Trademark Licenses.
"Inventory" means all "inventory" (as defined in the UCC),
now owned or hereafter acquired by Debtor, wherever located
including, without limitation, finished goods, raw materials,
work in process and other materials and supplies (including
packaging and shipping materials) used or consumed in the
manufacture or production thereof and goods which are returned to
or repossessed by Debtor.
"Patent License" means any written agreement now or
hereafter in existence granting to Debtor any right to use any
invention on which a Patent is in existence.
"Patents" means collectively all of the following: (a) all
patents, patentable inventions and patent applications now owned
or hereafter created or acquired by Debtor; (b) the reissues,
divisions, continuations, renewals, extensions and continuations-
in-part of any of the foregoing; (c) all income, royalties,
damages or payments now and hereafter due and/or payable under
any of the foregoing with respect to any of the foregoing,
including, without limitation, damages of payments for past or
future infringements of any of the foregoing; (d) the right to
sue for past, present and future infringements of any of the
foregoing; (e) all rights corresponding to any of the foregoing
throughout the world; and (f) all goodwill associated with any of
the foregoing.
"Proceeds" means all proceeds of, and all other profits,
rentals or receipts, in whatever form, arising from the
collection, sale, lease, exchange, assignment, licensing or other
disposition of, or realization upon, any Collateral, including,
without limitation, all claims of Debtor against third parties
for loss of, damage to or destruction of, or for proceeds payable
under, or unearned premiums with respect to, policies of
insurance with respect to any Collateral, and any condemnation or
requisition payments with respect to any Collateral, in each case
whether now existing or hereafter arising.
"Secured Obligations" has the meaning assigned to that term
in Section 3.
"Security Interests" means the security interests granted
pursuant to Section 2, as well as all other security interests
created or assigned by Debtor as additional security for the
Secured Obligations pursuant to the provisions of this Agreement.
"Senior Debt Payout Date" means that day on which (i) the
Senior Loans are paid in full and (ii) the Senior Loan Documents
are terminated.
"Trademark License" means any written agreement now or
hereafter in existence granting to Debtor any right to use any
Trademark, including, without limitation, the agreements
described in Schedule 1 to the Trademark Security Agreement.
"Trademarks" means collectively all of the following now
owned or hereafter created or acquired by Debtor: (a) all
trademarks, trade names, corporate names, company names, business
names, fictitious business names, trade styles, service marks,
logos, other business identifiers, prints and labels on which any
of the foregoing have appeared or appear, all registrations and
recordings thereof, and all applications in connection therewith
including registrations, recordings and applications in the
United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof or any
other country or any political subdivision thereof, including,
without limitation, those described in Schedule 1 of the
Trademark Security Agreement; (b) all reissues, extensions or
renewals thereof; (c) all income, royalties, damages and payments
now or hereafter due and/or payable under any of the foregoing or
with respect to any of the foregoing including damages or
payments for past or future infringements of any of the
foregoing; (d) the right to sue for past, present and future
infringements of any of the foregoing; (e) all rights
corresponding to any of the foregoing throughout the world; and
(f) all goodwill associated with and symbolized by any of the
foregoing.
"Trademark Security Agreement" means the trademark security
agreement executed and delivered by Labor Ready, Inc. to
Purchasers substantially in the form of Exhibit B, as such
agreement may hereafter be amended, supplemented or otherwise
modified from time to time.
"UCC" means the Uniform Commercial Code as in effect on the
date hereof in the Commonwealth of Massachusetts, as amended from
time to time, and any successor statute; provided that if by
reason of mandatory provisions of law, the perfection or the
effect of perfection or non-perfection of the Security Interest
in any Collateral is governed by the Uniform Commercial Code as
in effect on or after the date hereof in any other jurisdiction,
"UCC" means the Uniform Commercial Code as in effect in such
other jurisdiction for purposes of the provision hereof relating
to such perfection or effect of perfection or non-perfection.
1.2 Other Definition Provisions. References to
"Sections", "subsections", "Exhibits" and "Schedules" shall be to
Sections, subsections, Exhibits and Schedules, respectively, of
this Agreement unless otherwise specifically provided. Any of
the terms defined in Section 1.1 may, unless the context
otherwise requires, be used in the singular or the plural
depending on the reference. All references to statutes and
related regulations shall include any amendments to the same and
any successor statutes and regulations.
SECTION 2. Grant of Security Interests
In order to secure the payment and performance of the
Secured Obligations in accordance with the terms thereof, Debtor
hereby grants to Purchasers a continuing security interest in and
to all right, title and interest of Debtor in the following
property, whether now owned or existing or hereafter acquired or
arising and regardless of where located (all being collectively
referred to as the "Collateral"):
(a) Accounts;
(b) Inventory;
(c) General Intangibles;
(d) Documents;
(e) Instruments;
(f) Equipment;
(g) Fixtures;
(h) All deposit accounts of Debtor maintained with
any bank or financial institution;
(i) The Collateral Account, all cash deposited
therein from time to time and other monies and property of Debtor
in the possession or under the control of Purchasers;
(j) All books, records, ledger cards, files,
correspondence, computer programs, tapes, disks and related data
processing software that at any time evidence or contain
information relating to any of the property described in subparts
(a) - (i) above or are otherwise necessary or helpful in the
collection thereof or realization thereon; and
(k) Proceeds of all or any of the property
described in subparts (a) - (j) above.
Notwithstanding the foregoing, so long as no Event of Default has
occurred and is continuing, Debtor shall have the exclusive, non-
transferable right and license to use the Intellectual Property
and the exclusive right to grant to other Persons licenses and
sublicenses with respect to Intellectual Property.
SECTION 3. Security for Obligations
The Security Interests secure the payment and performance of
(a) the Senior Subordinated Obligations, (b) all obligations of
Debtor now or hereafter existing under this Agreement and (c) all
renewals, extensions, restructurings and refinancings of any of
the above (all such debts, obligations and liabilities of Debtor
being collectively called the "Secured Obligations").
SECTION 4. Debtor Remains Liable
Anything herein to the contrary notwithstanding: (a) Debtor
shall remain liable under the contracts and agreements included
in the Collateral to the extent set forth therein to perform all
of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed; (b) the exercise by
Purchasers of any of the rights hereunder shall not release
Debtor from any of its duties or obligations under the contracts
and agreements included in the Collateral; and (c) Purchasers
shall not have any obligation or liability under the contracts
and agreements included in the Collateral by reason of this
Agreement, nor shall Purchasers be obligated to perform any of
the obligations or duties of Debtor thereunder or to take any
action to collect or enforce any claim for payment assigned
hereunder.
SECTION 5. Representations and Warranties
Debtor represents and warrants as follows:
5.1 Binding Obligation. This Agreement is the legally
valid and binding obligation of Debtor, enforceable against it in
accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar
laws or equitable principles relating to or limiting creditors'
rights generally.
5.2 Location of Equipment and Inventory. Except for
Inventory and Equipment in transit, all of the Equipment and
Inventory is located at the places specified on Schedule I.
5.3 Ownership of Collateral. Except for matters
disclosed on Schedule II, other Permitted Liens and the Security
Interests, Debtor owns the Collateral free and clear of any Lien.
No effective financing statement or other form of lien notice
covering all or any part of the Collateral is on file in any
recording office, except for Permitted Liens, those in favor of
Purchasers and as disclosed on Schedule II.
5.4 Office Locations; Fictitious Names. The chief place
of business, the chief executive office and the office where
Debtor keeps its books and records are located at the places
specified on Schedule I. Debtor does not do business and has not
done business during the past five years under any trade-name or
fictitious business name except as disclosed on Schedule III.
5.5 Perfection. Purchasers shall have a valid,
perfected security interest in the Collateral (subject only to
the prior security interest in favor of the Senior Lender)
securing the payment of the Secured Obligations. All filings and
other actions necessary or desirable to perfect and protect such
security interest have been duly taken.
5.6 Governmental Authorizations. No authorization,
approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required either (a)
for the grant by Debtor of the security interest granted hereby
or for the execution, delivery or performance of this Agreement
by Debtor or (b) for the perfection of or the exercise by
Purchasers of their rights and remedies hereunder (except as may
have been taken by or at the direction of Debtor or Purchasers).
5.7 Accounts. Each Account constitutes the legally
valid and binding obligation of the customer obligated to pay the
same. The amount represented by Debtor to Purchasers as owing by
each customer is the correct amount actually and unconditionally
owing, except for normal cash discounts and allowances where
applicable. No customer has any defense, set-off, claim or
counterclaim against Debtor that can be asserted against
Purchasers, whether in any proceeding to enforce Purchasers'
rights in the Collateral or otherwise except defenses, set-offs,
claims or counterclaims that are not, in the aggregate, material
to the value of the Accounts. None of the Accounts is evidenced
by a promissory note or other instrument other than a check that
has not been delivered to Purchasers.
5.8 Intellectual Property. The Copyrights, Copyright
Licenses, Trademarks and Trademark Licenses listed on the
respective schedules to each of the Copyright Security Agreement
and the Trademark Security Agreement constitute all of the
Intellectual Property owned by Debtor.
5.9 Accurate Information. All information heretofore,
herein or hereafter supplied to Purchasers by or on behalf of
Debtor with respect to the Collateral is and will be accurate and
complete in all material respects.
5.10 Credit Agreement Warranties. Each representation
and warranty set forth in Article IV of the Note Purchase
Agreement is true and correct in all material respects and such
representations and warranties are hereby incorporated herein by
this reference with the same effect as though set forth in their
entirety herein.
SECTION 6. Further Assurances; Covenants
6.1 Other Documents and Actions. Debtor will, from time
to time, at its expense, promptly execute and deliver all further
instruments and documents and take all further action that may be
necessary or desirable, or that Purchasers may request, in order
to perfect and protect any security interest granted or purported
to be granted hereby or to enable Purchasers to exercise and
enforce their rights and remedies hereunder with respect to any
Collateral. Without limiting the generality of the foregoing,
Debtor will: (a) execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as Purchasers may
request, in order to perfect and preserve the security interests
granted or purported to be granted hereby; (b) at any reasonable
time, upon demand by Purchasers exhibit the Collateral to allow
inspection of the Collateral by Purchasers or persons designated
by Purchasers; and (c) upon Purchasers' request, appear in and
defend any action or proceeding that may affect Debtor's title to
or Purchasers' security interest in the Collateral.
6.2 Purchasers Authorized. Debtor hereby authorizes
Purchasers to file one or more financing or continuation
statements, and amendments thereto, relating to all or any part
of the Collateral without the signature of Debtor where permitted
by law.
6.3 Corporate or Name Change. Debtor will notify
Purchasers prior to any change in Debtor's name, identity or
corporate structure.
6.4 Business Locations. Except as provided in Section
5.2, Debtor will keep the Collateral at the locations specified
on Schedule I. Debtor will give Purchasers 30 days prior notice
of any change in Debtor's chief place of business or of any new
location of business or any new location for any of the
Collateral. With respect to any new location, Debtor will
execute such documents and take such actions as Purchasers deem
necessary to perfect and protect the Security Interests.
6.5 Bailees. If any Collateral is at any time in the
possession or control of any warehouseman, bailee or any of
Debtor's agents or processors, Debtor shall, upon the request of
Purchasers, notify such warehouseman, bailee, agent or processor
of the Security Interests created hereby and shall instruct such
Person to hold all such Collateral for Purchasers' account
subject to Purchasers' instructions.
6.6 Instruments. Debtor will deliver and pledge to
Purchasers all Instruments duly endorsed and accompanied by duly
executed instruments of transfer or assignment, all in form and
substance satisfactory to Purchasers. Debtor will mark
conspicuously all chattel paper with a legend, in form and
substance satisfactory to Purchasers, indicating that such
chattel paper is subject to the Security Interests.
6.7 Certificates of Title. Debtor shall, upon
Purchasers' request, promptly deliver to Purchasers any and all
certificates of title, applications for title or similar evidence
of ownership of all Equipment and shall cause Purchasers to be
named as lienholder on any such certificate of title or other
evidence or ownership. Debtor shall promptly inform Purchasers
of any additions to or deletions from the Equipment and shall not
permit any such items to become fixtures to real estate unless
Purchasers have perfected security interest thereon (subject only
to the lien of the Senior Lender) superior to any rights held by
the owner, or any other person with an interest in, such real
estate.
6.8 Account Covenants. Except as otherwise provided in
this Section 6.8, Debtor shall continue to collect, at its own
expense, all amounts due or to become due Debtor under the
Accounts. In connection with such collections, Debtor may take
(and, after the occurrence of an Event of Default, at Purchasers'
direction, shall take such actions as reasonably directed by
Purchasers) such action as Debtor or Purchasers may deem
necessary or advisable to enforce collection of the Accounts;
provided, that Purchasers shall have the right at any time after
the occurrence of an Event of Default to: (a) notify the
customers or obligors under any Accounts of the assignment of
such Accounts to Purchasers and to direct such customers or
obligors to make payment of all amounts due or to become due
directly to Purchasers; (b) enforce collection of any such
Accounts; and (c) adjust, settle or compromise the amount or
payment of such Accounts. After the occurrence of an Event of
Default, all amounts and proceeds (including instruments)
received by Debtor with respect to the Accounts shall be received
in trust for the benefit of Purchasers, shall be segregated from
other funds of Debtor, and shall be forthwith paid over to
Purchasers in the same form as so received (with any necessary
endorsement) to be held in the Collateral Account pursuant to
Section 7. After the occurrence of an Event of Default, Debtor
shall not adjust, settle or compromise the amount or payment of
any Account, or release wholly or partly any customer or obligor
thereof, or allow any credit or discount thereon without the
prior consent of Purchasers.
6.9 Intellectual Property Covenants. Labor Ready, Inc.
shall concurrently herewith deliver to Purchasers the Copyright
Security Agreement and the Trademark Security Agreement and all
other documents, instruments and other items as may be necessary
for Purchasers to file such agreements with the United States
Copyright Office, United States Patent and Trademark Office and
any similar domestic or foreign office, department or agency.
If, before the Secured Obligations are paid in full, any Debtor
obtains any new Intellectual Property or rights thereto or
becomes entitled to the benefit of any Intellectual Property not
listed on the respective schedules to each security agreement,
such Debtor shall give to Purchasers prompt written notice
thereof, and shall amend the respective security agreement to
include any such new Intellectual Property. Debtor shall: (a)
prosecute diligently any copyright, patent, trademark or license
application at any time pending; (b) make application on all new
copyrights, patents and trademarks as reasonably deemed
appropriate by Debtor; (c) preserve and maintain all rights in
the Intellectual Property; and (d) use its best efforts to obtain
any consents, waivers or agreements necessary to enable
Purchasers to exercise its remedies with respect to the
Intellectual Property. Debtor shall not abandon any right to
file a copyright, patent or trademark application nor shall
Debtor abandon any pending copyright, patent or trademark
application, or Copyright, Copyright License, Patent, Patent
License, Trademark or Trademark License without the prior written
consent of Purchasers. Debtor represents and warrants to
Purchasers that the execution, delivery and performance of this
Agreement by Debtor will not violate or cause a default under any
of the Intellectual Property or any agreement in connection
therewith.
6.10 Equipment Covenants. Debtor shall cause the
equipment to be maintained and preserved in the same condition,
repair and working order as when new, ordinary wear and tear
excepted, and in accordance with any manufacturer's manual, and
shall promptly make or cause to be made all repairs, replacements
and other improvements in connection therewith that are
reasonably necessary or desirable to such end.
6.11 Insurance. Debtor shall maintain insurance with
respect to the Collateral in accordance with the terms of the
Note Purchase Agreement.
6.12 Taxes and Claims. Debtor will pay promptly when
due all property and other taxes, assessments and governmental
charges or levies imposed upon, and all claims against, the
Collateral (including claims for labor, materials and supplies),
except to the extent the validity thereof is being contested in
good faith.
6.13 Collateral Description. Debtor will furnish to
Purchasers, from time to time, statements and schedules further
identifying and describing the Collateral and such other reports
in connection with the Collateral as Purchasers may reasonably
request, all in reasonable detail.
6.14 Use of Collateral. Debtor will not use or permit
any Collateral to be used unlawfully or in violation of any
provision of this Agreement or any applicable statue, regulation
or ordinance or any policy of insurance covering any of the
Collateral.
6.15 Records of Collateral. Debtor shall keep full and
accurate books and records relating to the Collateral and shall
stamp or otherwise mark such books and records in such manner as
Purchasers may reasonable request indicating that the Collateral
is subject to the Security Interests.
6.16 Other Information. Debtor will, promptly upon
request, provide to Purchasers all information and evidence it
may reasonably request concerning the Collateral, and in
particular the Accounts, to enable Purchasers to enforce the
provisions of this Agreement.
SECTION 7. Collateral Account
7.1 Cash Account. After the occurrence of an Event of
Default at any time after the Senior Debt Payout Date and upon
notice by Purchasers, Debtor shall establish with Purchasers a
cash collateral account (the "Collateral Account") in the name
and under the control of Purchasers into which there shall be
deposited from time to time the cash proceeds of the Collateral
required to be delivered to Purchasers pursuant to Section 7.2 or
any other provision of this Agreement. Any income received by
Purchasers with respect to the balance from time to time standing
to the credit of the Collateral Account shall remain, or be
deposited, in the Collateral Account. All right, title and
interest in and to the cash amounts on deposit from time to time
in the Collateral Account shall vest in Purchasers and shall
constitute part of the Collateral.
7.2 Customer Payments. After the occurrence of an Event
of Default at any time after the Senior Debt Payout Date and upon
notice by Purchasers, Debtor shall instruct all customers and
other Persons obligated with respect to all Accounts to make all
payments directly to Purchasers (by instructing that such
payments be remitted to a post office box which shall be in the
name and under the control of Purchasers). All such payments
made to Purchasers shall be deposited in the Collateral Account.
In addition to the foregoing, Debtor agrees that if the proceeds
of any Collateral hereunder (including the payments made in
respect of Accounts) shall be received by it, Debtor shall as
promptly as possible deposit such proceeds into the Collateral
Account. Until so deposited, all such proceeds shall be held in
trust by Debtor for the benefit of Purchasers and shall be
segregated from any other funds or property of Debtor.
7.3 Direction to Pay. Debtor hereby authorizes and
directs Purchasers to apply the balance from time to time
outstanding in the Collateral Account to the Secured Obligations
on a daily basis.
SECTION 8. Purchasers Appointed Attorney-in-Fact
Debtor hereby irrevocable appoints Purchasers as Debtor's
attorney-in-fact, with full authority in the place and stead of
Debtor and in the name of Debtor, Purchasers or otherwise, from
time to time in Purchasers' discretion to take any action and to
execute any instrument that Purchasers may deem necessary or
advisable to accomplish the purposes of this Agreement,
including, without limitation:
(a) to obtain and adjust insurance required to be
paid to Purchasers;
(b) to ask, demand, collect, sue for, recover,
compound, receive and give acquittance and receipts for moneys
due and to become due under or in respect of any of the
Collateral;
(c) to receive, endorse, and collect any drafts or
other instruments, documents and chattel paper, in connection
with clauses (a) and (b) above;
(d) to file any claims or take any action or
institute any proceedings that Purchasers may deem reasonably
necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of Purchasers with
respect to any of the Collateral;
(e) to pay or discharge taxes or Liens, levied or
placed upon or threatened against the Collateral, the legality or
validity thereof and the amounts necessary to discharge the same
to be determined by Purchasers in its reasonable discretion, and
such payments made by Purchasers to become obligations of Debtor
to Purchasers, due and payable immediately without demand;
(f) to sign and endorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts,
assignments, verifications and notices in connection with
Accounts and other documents relating to the Collateral; and
(g) generally to sell, transfer, pledge, make any
agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though Purchasers were the
absolute owner thereof for all purposes, and to do, at
Purchaser's option and Debtor's expense, at any time or from time
to time, all acts and things that Purchasers deems reasonably
necessary to protect, preserve or realize upon the Collateral.
Debtor hereby ratifies and approves all acts of Purchasers
made or taken pursuant to this Section 8. Neither Purchasers nor
any person designated by Purchasers shall be liable for any acts
or omissions or for any error of judgment or mistake of fact or
law, except any of same resulting from its or their gross
negligence or willful misconduct. This power, being coupled with
an interest, is irrevocable so long as this Agreement shall
remain in force.
SECTION 9. Transfers and Other Liens
Except as otherwise permitted by the Note Purchase
Agreement, Debtor shall not:
(a) Sell, assign (by operation of law or otherwise)
or otherwise dispose of, or grant any option with respect to, any
of the Collateral, except that Debtor may sell Inventory in the
ordinary course of business.
(b) Create of suffer to exist any lien, security
interest or other charge or encumbrance upon with respect to any
of the Collateral to secure indebtedness of any Person except for
the security interest created by this Agreement or permitted
under the Note Purchase Agreement.
SECTION 10. Remedies
If any Event of Default shall have occurred and be
continuing, Purchasers may exercise in respect of the Collateral,
in addition to all other rights and remedies provided for herein
or otherwise available to it, all the rights and remedies of a
secured party on default under the UCC (whether or not the UCC
applies to the affected Collateral) and also may: (a) require
Debtor to, and Debtor hereby agrees that it will, at its expense
and upon request of Purchasers forthwith, assemble all or part of
the Collateral as directed by Purchasers and make it available to
Purchasers at a place to be designated by Purchasers which is
reasonably convenient to both parties; (b) withdraw all cash in
the Collateral Account and apply such monies in payment of the
Secured Obligations in the manner provided in Section 13; (c)
without notice or demand or legal process, enter upon any
premises of Debtor and take possession of the Collateral; and (d)
without notice except as specified below, sell the Collateral or
any part thereof in one or more parcels at public or private
sale, at any of the Purchasers' offices or elsewhere, at such
time or times, for cash, on credit or for future delivery, and at
such price or prices and upon such other terms as Purchasers may
deem commercially reasonable. Debtor agrees that, to the extent
notice of sale shall be required by law, at least twenty days
notice to Debtor of the time and place of any public sale or the
time after which any private sale is to be made shall constitute
reasonable notification. At any sale of the Collateral, if
permitted by law, Purchasers may bid (which bid may be, in whole
or in part, in the form of cancellation of indebtedness) for the
purchase of the Collateral or any portion thereof for the account
of Purchasers. Purchasers shall not be obligated to make any
sale of Collateral regardless of notice of sale having been
given. Purchasers may adjourn any public or private sale from
time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. To the extent
permitted by law, Debtor hereby specifically waives all rights of
redemption, stay or appraisal which it has or may have under any
law now existing or hereafter enacted.
SECTION 11. License of Intellectual Property
Debtor hereby assigns, transfers and conveys to Purchasers,
effective upon the occurrence of an Event of Default hereunder,
the nonexclusive right and license to use all Intellectual
Property owned or used by Debtor together with any goodwill
associated therewith, all to the extent necessary to enable
Purchasers to realize on the Collateral and any successor or
assign to enjoy the benefits of the Collateral. This right and
license shall inure to the benefit of all successors, assigns and
transferees of Purchasers and its successors, assigns and
transferees, whether by voluntary conveyance, operation of law,
assignment, transfer, foreclosure, deed in lieu of foreclosure or
otherwise. Such right and license is granted free of charge,
without requirement that any monetary payment whatsoever be made
to Debtor by Purchasers.
SECTION 12. Limitation on Duty of Purchasers with Respect to
Collateral
Beyond the safe custody thereof, Purchasers shall have no
duty with respect to any Collateral in its possession or control
(or in the possession or control of any agent or bailee) or with
respect to any income thereon or the preservation of rights
against prior parties or any other rights pertaining thereto.
Purchasers shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral in its possession
if the Collateral is accorded treatment substantially equal to
that which it accords its own property. Purchasers shall not be
liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason
of the act or omission of any warehouseman, carrier, forwarding
agency, consignee or other agent or bailee selected by Purchasers
in good faith.
SECTION 13. Application of Proceeds
Upon the occurrence and during the continuance of an Event
of Default, the proceeds of any sale of, or other realization
upon, all or any part of the Collateral and any cash held in the
Collateral Account shall be applied: first, to all reasonable
fees, costs and expenses incurred by Purchasers with respect to
the Note Purchase Agreement, the Other Agreements or the
Collateral including, without limitation, those described in
Section 12.1 of the Note Purchase Agreement and in Section 14
hereof; second, to accrued and unpaid interest on the Secured
Obligations (including any interest which, but for the provisions
of any bankruptcy law, would have accrued on such amounts);
third, to the principal amounts of the Secured Obligations
outstanding; fourth, to any other indebtedness or obligations of
Debtor owing to Purchasers; and fifth, to Debtor or such other
persons as a court of competent jurisdiction may direct.
SECTION 14. Expenses
Debtor shall pay all insurance expenses and all expenses of
protecting, storing, warehousing, appraising, insuring, handling,
maintaining and shipping the Collateral, all costs, fees and
expenses of perfecting and maintaining the Security Interests,
any and all excise, property, sales and use taxes imposed by any
state, federal or local authority on any of the Collateral, or
with respect to periodic appraisals and inspections of the
Collateral, or with respect to the sale or other disposition
thereof. If Debtor fails to promptly pay any portion of the
above expenses when due or to perform any other obligation of
Debtor under this Agreement, Purchasers may, at their option, but
shall not be required to, pay or perform the same and charge
Debtor's account for all costs and expenses incurred therefor,
and Debtor agrees to reimburse Purchasers therefor on demand.
All sums so paid or incurred by Purchasers for any of the
foregoing, any and all other sums for which Debtor may become
liable hereunder and all costs and expenses (including attorneys'
fees, legal expenses and court costs) incurred by Purchasers or
any other Lender in enforcing or protecting the Security
Interests or any of their rights or remedies under this Agreement
shall be payable on demand, shall constitute Secured Obligations,
shall bear interest until paid at the highest rate provided in
the Note Purchase Agreement and shall be secured by the
Collateral.
SECTION 15. Termination of Security Interests; Release of
Collateral
Upon indefeasible payment in full of the Senior Subordinated
Notes and all other monetary obligations owing by Debtor to
Purchasers under the Note Purchase Agreement and the Other
Agreements (other than the Warrant Documents), the Security
Interests shall terminate and all rights to the Collateral shall
revert to Debtor. Upon such termination of the Security
Interests or release of any Collateral, Purchasers will, at the
expense of Debtor, execute and deliver to Debtor such documents
as Debtor shall reasonably request to evidence the termination of
the Security Interests and the release of such Collateral, as the
case may be.
SECTION 16. Notices
All notices, approvals, requests, demands and other
communications hereunder shall be given in accordance with the
notice provision of the Note Purchase Agreement.
SECTION 17. Successors and Assigns
This Agreement is for the benefit of Purchasers and their
successors and assigns, and in the event of an assignment of all
or any of the Secured Obligations, the rights hereunder, to the
extent applicable to the Secured Obligations so assigned, may be
transferred with such Secured Obligations. This Agreement shall
be binding on Debtor and its successors and assigns.
SECTION 18. Changes in Writing
No amendment, modification, termination or waiver of any
provision of this Agreement or consent to any departure by Debtor
therefrom, shall in any event be effective without the written
concurrence of Purchasers and Debtor.
SECTION 19. Applicable Law
THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS, WITHOUT REGARD TO CONFLICTS OF
LAWS PRINCIPLES.
SECTION 20. Failure or Indulgence Not Waiver; Remedies
Cumulative
No failure or delay on the part of Purchasers in the
exercise of any power, right or privilege hereunder shall impair
such power, right or privilege or be construed to be a waiver of
any default or acquiescence therein, nor shall any single or
partial exercise of any such power, right or privilege preclude
other or further exercise thereof or any other right, power or
privilege. All rights and remedies existing under this Agreement
are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
SECTION 21. Headings
Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be
given any substantive effect.
SECTION 22. Counterparts
This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one
and the same instrument and any of the parties hereto may execute
this Agreement by signing any such counterpart.
SECTION 23. Subordination
Notwithstanding any provision in this Agreement to the
contrary, the Secured Obligations shall be subordinate in right
of payment to the Senior Debt, and Purchasers' rights and
remedies hereunder shall be subordinate to the rights and
remedies of the Senior Lender, all in accordance with the terms
of the Senior Subordination Agreement. Nothing contained in this
Section 23 or elsewhere in this Agreement, in the Senior
Subordinated Notes or the Senior Subordination Agreement is
intended to or shall impair, as between Debtor and Purchasers,
the obligations of Debtor, which are absolute and unconditional,
to pay to Purchasers the principal of and interest on the Senior
Subordinated Notes and all other Secured Obligations as and when
the same shall become due and payable in accordance with their
terms, or is intended to or shall affect the relative rights of
Purchasers and creditors of Debtor other than the holders of the
Senior Debt, nor, as between Purchasers and Debtor, shall
anything herein or therein prevent Purchasers from exercising all
remedies otherwise permitted by applicable law upon an Event of
Default under the Note Purchase Agreement.
Witness the due execution hereof by the respective duly
authorized officers of the undersigned as of the day first above
written.
LABOR READY, INC.
By:
Glenn A. Welstad,
Chief Executive Officer
LABOR READY OF NEVADA, INC.
By:
Glenn A. Welstad,
Chief Executive Officer
LABOR READY FRANCHISE DEVELOPMENT CORP. INC.
By:
Glenn A. Welstad,
Chief Executive Officer
SEACOAST CAPITAL PARTNERS
LIMITED PARTNERSHIP
By:
Seacoast Capital Corporation, its general partner
By:
Thomas W. Gorman,
Vice President
ALLIED INVESTMENT CORPORATION
By:
George Stelljes III,
Senior Vice President
ALLIED INVESTMENT CORPORATION II
By:
George Stelljes III,
Senior Vice President
ALLIED CAPITAL CORPORATION II
By:
George Stelljes III,
Senior Vice President