CREDIT AGREEMENT

 

                                                                    EXHIBIT 10.6

                                CREDIT AGREEMENT

 

     THIS AGREEMENT is entered into as of March 31, 2004, by and between Barrett

Business Services,   Inc., a Maryland corporation   ("Borrower"),   and WELLS FARGO

BANK, NATIONAL ASSOCIATION ("Bank").

 

 

                                    RECITALS

 

     Borrower has requested   that Bank extend or continue   credit to Borrower as

described   below,   and Bank has agreed to provide such credit to Borrower on the

terms and conditions contained herein.

 

     NOW, THEREFORE, for valuable consideration,   the receipt and sufficiency of

which are hereby acknowledged, Bank and Borrower hereby agree as follows:

 

 

                                     ARTICLE I

                                  CREDIT TERMS

 

     SECTION 1.1. LINE OF CREDIT.

 

     (a)     Line   of   Credit.   Subject   to the   terms   and   conditions   of   this

Agreement,   Bank hereby agrees to make advances to Borrower from time to time up

to and including July 1, 2005, not to exceed at any time the aggregate principal

amount of Six Million Dollars   ($6,000,000.00)   ("Line of Credit"), the proceeds

of which   shall be used for   working   capital.   Borrower's   obligation   to repay

advances under the Line of Credit shall be evidenced by a promissory   note dated

as of   March   31,   2004   ("Line   of   Credit   Note"),   all   terms   of   which   are

incorporated herein by this reference.

 

     (b)     Letter   of   Credit   Subfeature.   As a   subfeature   under the Line of

Credit,   Bank agrees from time to time during the term thereof to issue or cause

an   affiliate   to issue   standby   letters of credit for the   account of Borrower

(each,   a "Letter of Credit" and   collectively,   "Letters of Credit");   provided

however,   that the aggregate undrawn amount of all outstanding Letters of Credit

shall not at any time exceed Four Million Dollars ($4,000,000.00).   The form and

substance of each Letter of Credit shall be subject to approval by Bank,   in its

sole discretion.   Each Letter of Credit shall be issued for a term not to exceed

three   hundred   sixty-five   (365) days,   as   designated   by   Borrower;   provided

however,   that no Letter of Credit shall have an expiration   date   subsequent to

the maturity   date of the Line of Credit.   The undrawn   amount of all Letters of

Credit shall be reserved under the Line of Credit and shall not be available for

borrowings thereunder.   Each Letter of Credit shall be subject to the additional

terms and conditions of the Letter of Credit   agreements,   applications   and any

related documents required by Bank in connection with the issuance thereof. Each

drawing paid under a Letter of Credit shall be deemed an advance   under the Line

of   Credit   and shall be repaid by   Borrower   in   accordance   with the terms and

conditions of this Agreement applicable to such advances; provided however, that

if advances under the Line of Credit are not available,   for any reason,   at the

time any drawing is paid,   then Borrower shall   immediately pay to Bank the full

amount drawn,   together with interest thereon from the date such drawing is paid

to the date such   amount is fully   repaid by   Borrower,   at the rate of interest

applicable to advances under the Line of Credit.   In such event Borrower   agrees

that Bank, in its sole discretion,   may debit any account maintained by Borrower

with Bank for the amount of any such drawing.

 

                                      -1-

 

<PAGE>

 

     (c)     Borrowing and   Repayment.   Borrower may from time to time during the

term of the Line of Credit   borrow,   partially or wholly   repay its   outstanding

borrowings,   and   reborrow,   subject   to   all   of   the   limitations,   terms   and

conditions   contained   herein or in the Line of Credit Note;   provided   however,

that the total outstanding   borrowings under the Line of Credit shall not at any

time exceed the maximum   principal   amount   available   thereunder,   as set forth

above.

 

     SECTION 1.2. INTEREST/FEES.

 

     (a)     Interest.   The outstanding   principal   balance of the Line of Credit

shall bear   interest,   and the amount of each   drawing   paid under any Letter of

Credit shall bear   interest   from the date such drawing is paid to the date such

amount is fully   repaid by   Borrower,   at the rate of interest set forth in each

promissory   note   or   other   instrument   or   document    executed   in   connection

therewith.

 

     (b)     Computation and Payment.   Interest shall be computed on the basis of

a 360-day year, actual days elapsed.   Interest shall be payable at the times and

place set forth in each promissory note or other instrument or document required

hereby.

 

     (c)     Commitment   Fee.    Borrower   shall   pay   to   Bank   a   non-refundable

commitment   fee for the Line of Credit equal to   $15,000.00,   which fee shall be

due and payable in full on March 31, 2004.

 

     (d)     Letter   of   Credit   Fees.   Borrower   shall pay to Bank fees upon the

issuance   of each   Letter of Credit,   upon the   payment or   negotiation   of each

drawing under any Letter of Credit and upon the occurrence of any other activity

with   respect   to any   Letter   of   Credit   (including   without   limitation,   the

transfer,   amendment   or   cancellation   of any Letter of Credit)   determined   in

accordance   with   Bank's   standard   fees and   charges   then in   effect   for such

activity but in any event not more than 0.90% per annum for any Letter of Credit

issued or renewed, without prior notice.

 

     SECTION 1.3.   COLLECTION OF PAYMENTS.   Borrower   authorizes Bank to collect

all   principal,   interest   and fees due   under   each   credit   subject   hereto by

charging   Borrower's   deposit account number   4159583848 with Bank, or any other

deposit   account   maintained by Borrower with Bank, for the full amount thereof.

Should there be   insufficient   funds in any such deposit account to pay all such

sums when due, the full amount of such   deficiency   shall be immediately due and

payable by Borrower.

 

     SECTION 1.4. COLLATERAL.

 

     As   security   for all   indebtedness   of Borrower   to Bank   subject   hereto,

Borrower   hereby   grants to Bank   security   interests   of first   priority in all

Borrower's rights to payment from customers and accounts receivable arising from

services rendered or to be rendered,   whether or not the same has been earned by

performance,   and all   rights   under any   contracts   it has or may have with its

customers,   and   proceeds   of all   of the   foregoing,   general   intangibles   and

equipment.

 

All of the   foregoing   shall be   evidenced   by and   subject to the terms of such

security agreements, financing statements, deeds of trust and other documents as

Bank shall reasonably require,   all in form and substance   satisfactory to Bank.

Borrower shall reimburse Bank immediately upon demand for all costs and expenses

incurred by Bank in   connection   with any of the foregoing

 

                                      -2-

 

<PAGE>

 

security,   including without limitation,   filing and recording fees and costs of

appraisals, audits and title insurance.

 

 

                                   ARTICLE II

                         REPRESENTATIONS AND WARRANTIES

 

     Borrower makes the following   representations and warranties to Bank, which

representations and warranties shall survive the execution of this Agreement and

shall   continue in full force and effect until the full and final   payment,   and

satisfaction   and discharge,   of all   obligations of Borrower to Bank subject to

this Agreement.

 

     SECTION 2.1. LEGAL STATUS.   Borrower is a   corporation,   duly organized and

existing and in good   standing   under the laws of the State of Maryland,   and is

qualified   or   licensed   to do   business   (and is in good   standing as a foreign

corporation,   if applicable) in all jurisdictions in which such qualification or

licensing is required or in which the failure to so qualify or to be so licensed

could have a material adverse effect on Borrower.

 

     SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement and each promissory

note,   contract,   instrument and other document   required   hereby or at any time

hereafter   delivered to Bank in   connection   herewith   (collectively,   the "Loan

Documents") have been duly authorized,   and upon their execution and delivery in

accordance with the provisions hereof will constitute   legal,   valid and binding

agreements   and   obligations   of Borrower or the party which   executes the same,

enforceable in accordance with their respective terms.

 

     SECTION 2.3. NO   VIOLATION.   The   execution,   delivery and   performance   by

Borrower of each of the Loan   Documents do not violate any   provision of any law

or regulation,   or contravene any provision of the Articles of   Incorporation or

By-Laws of Borrower,   or result in any breach of or default   under any contract,

obligation,   indenture or other   instrument   to which   Borrower is a party or by

which Borrower may be bound.

 

     SECTION 2.4. LITIGATION. There are no pending, or to the best of Borrower's

knowledge threatened,   actions, claims, investigations,   suits or proceedings by

or before any governmental authority, arbitrator, court or administrative agency

which   could   have a   material   adverse   effect on the   financial   condition   or

operation of Borrower other than those   disclosed by Borrower to Bank in writing

prior to the date hereof.

 

     SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial statement of

Borrower   dated   January 31,   2004,   a true copy of which has been   delivered by

Borrower   to Bank prior to the date   hereof,   (a) is   complete   and   correct and

presents   fairly   the   financial   condition   of   Borrower,    (b)   discloses   all

liabilities   of Borrower   that are required to be reflected or reserved   against

under   generally    accepted    accounting    principles,    whether   liquidated   or

unliquidated,   fixed or contingent, and (c) has been prepared in accordance with

generally accepted accounting principles consistently applied. Since the date of

such   financial   statement   there   has been no   material   adverse   change in the

financial condition of Borrower, nor has Borrower mortgaged,   pledged, granted a

security   interest in or otherwise   encumbered   any of its assets or   properties

except in favor of Bank or as otherwise permitted by Bank in writing.

 

     SECTION 2.6.   INCOME TAX RETURNS.   Borrower has no knowledge of any pending

assessments or adjustments of its income tax payable with respect to any year.

 

                                      -3-

<PAGE>

 

     SECTION 2.7. NO SUBORDINATION.   There is no agreement,   indenture, contract

or   instrument   to which   Borrower is a party or by which   Borrower may be bound

that   requires   the   subordination   in right   of   payment   of any of   Borrower's

obligations subject to this Agreement to any other obligation of Borrower.

 

     SECTION 2.8. PERMITS,   FRANCHISES.   Borrower possesses,   and will hereafter

possess, all permits, consents, approvals,   franchises and licenses required and

rights to all trademarks,   trade names,   patents,   and fictitious names, if any,

necessary   to enable it to conduct   the   business   in which it is now engaged in

compliance with applicable law.

 

     SECTION 2.9. ERISA. Borrower is in compliance in all material respects with

all   applicable   provisions of the Employee   Retirement   Income   Security Act of

1974, as amended or   recodified   from time to time   ("ERISA");   Borrower has not

violated any provision of any defined   employee pension benefit plan (as defined

in ERISA)   maintained   or   contributed   to by   Borrower   (each,   a   "Plan");   no

Reportable Event as defined in ERISA has occurred and is continuing with respect

to any   Plan   initiated   by   Borrower;   Borrower   has   met its   minimum   funding

requirements   under ERISA with respect to each Plan;   and each Plan will be able

to fulfill its benefit   obligations as they come due in accordance with the Plan

documents and under generally accepted accounting principles.

 

     SECTION   2.10. OTHER OBLIGATIONS.    Borrower   is   not   in   default   on   any

obligation   for borrowed   money,   any   purchase   money   obligation   or any other

material lease, commitment, contract, instrument or obligation.

 

     SECTION   2.11.   ENVIRONMENTAL   MATTERS.   Except as disclosed by Borrower to

Bank in writing   prior to the date   hereof,   Borrower   is in   compliance   in all

material respects with all applicable federal or state environmental,   hazardous

waste, health and safety statutes, and any rules or regulations adopted pursuant

thereto,   which govern or affect any of Borrower's operations and/or properties,

including   without   limitation,    the   Comprehensive    Environmental    Response,

Compensation     and   Liability   Act   of   1980,    the   Superfund    Amendments   and

Reauthorization Act of 1986, the Federal Resource   Conservation and Recovery Act

of 1976, and the Federal Toxic Substances Control Act, as any of the same may be

amended,   modified or supplemented   from time to time. None of the operations of

Borrower is the subject of any federal or state investigation evaluating whether

any remedial action   involving a material   expenditure is needed to respond to a

release   of any toxic or   hazardous   waste or   substance   into the   environment.

Borrower has no material contingent   liability in connection with any release of

any toxic or hazardous waste or substance into the environment.

 

 

                                   ARTICLE III

                                    CONDITIONS

 

     SECTION 3.1.   CONDITIONS OF INITIAL EXTENSION OF CREDIT.   The obligation of

Bank to extend   any   credit   contemplated   by this   Agreement   is subject to the

fulfillment to Bank's satisfaction of all of the following conditions:

 

     (a)     Approval   of Bank   Counsel.   All   legal   matters   incidental   to the

extension of credit by Bank shall be satisfactory to Bank's counsel.

 

     (b)     Documentation.   Bank   shall   have   received,   in form and   substance

satisfactory to Bank, each of the following, duly executed:

 

                                      -4-

 

<PAGE>

 

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

              document   required   hereby.

 

         (ii) Such other   documents as Bank may require   under any other Section

              of this Agreement.

 

     (c)     Financial   Condition.   There   shall   have been no   material   adverse

change,   as   determined   by Bank,   in the   financial   condition   or   business of

Borrower,   nor any material decline,   as determined by Bank, in the market value

of any collateral required hereunder or a substantial or material portion of the

assets of Borrower.

 

     (d)     Insurance.   Borrower   shall   have   delivered   to   Bank   evidence   of

insurance   coverage on all Borrower's   property,   in form,   substance,   amounts,

covering risks and issued by companies   satisfactory to Bank, and where required

by Bank, with loss payable endorsements in favor of Bank.

 

     SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of Bank

to make each   extension   of credit   requested   by   Borrower   hereunder   shall be

subject   to the   fulfillment   to Bank's   satisfaction   of each of the   following

conditions:

 

     (a)    Compliance.   The representations and warranties contained herein and

in each of the other Loan   Documents   shall be true on and as of the date of the

signing of this   Agreement   and on the date of each   extension of credit by Bank

pursuant   hereto,   with the same   effect   as   though   such   representations   and

warranties   had been made on and as of each such date, and on each such date, no

Event of Default as defined   herein,   and no condition,   event or act which with

the giving of notice or the   passage of time or both   would   constitute   such an

Event of Default, shall have occurred and be continuing or shall exist.

 

     (b)     Documentation.   Bank shall have   received all   additional   documents

which may be required in connection with such extension of credit.

 

 

                                    ARTICLE IV

                              AFFIRMATIVE COVENANTS

 

     Borrower   covenants that so long as Bank remains committed to extend credit

to Borrower pursuant hereto,   or any liabilities   (whether direct or contingent,

liquidated or   unliquidated) of Borrower to Bank under any of the Loan Documents

remain   outstanding,   and until payment in full of all   obligations   of Borrower

subject hereto, Borrower shall, unless Bank otherwise consents in writing:

 

     SECTION 4.1.   PUNCTUAL   PAYMENTS.   Punctually pay all principal,   interest,

fees or other   liabilities   due under any of the Loan Documents at the times and

place and in the manner specified therein.

 

     SECTION 4.2.   ACCOUNTING   RECORDS.   Maintain   adequate books and records in

accordance with generally accepted accounting   principles   consistently applied,

and permit any representative of Bank, at any reasonable time, to inspect, audit

and examine such books and records,   to make copies of the same,   and to inspect

the properties of Borrower.

 

                                      -5-

 

<PAGE>

 

     SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the following, in

form and detail satisfactory to Bank:

 

     (a)     not later than 95 days after and as of the end of each fiscal   year,

an audited   financial   statement   of   Borrower,   prepared by a certified   public

accountant   acceptable to Bank, to include a balance   sheet,   income   statement,

statement of cash flows,   and a copy of   Borrower's   Form 10-K report filed with

the Securities and Exchange Commission;

 

     (b)     not   later   than 50   days   after   and as of the   end of each   fiscal

quarter, a financial statement of Borrower,   prepared by Borrower,   to include a

copy of   Borrower's   Form 10-Q report   filed with the   Securities   and   Exchange

Commission;

 

     (c)     from   time to time such   other   i