Exhibit 10.8.23

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT, dated as of May 17, 2002, is made by and among Westaff,
Inc., a Delaware corporation (“Parent”), Westaff (USA), Inc., a California
corporation (“Westaff USA”), Westaff (CA), Inc., a California corporation
(“WCA”), Westaff Limited Partnership, a Delaware limited partnership (“WestLP”,
collectively with Westaff USA and WCA, “US Borrowers”), Westaff Support, Inc., a
California corporation (as “Term Borrower”), Westaff (GP), Inc., a California
corporation (“WGP”),  Westaff (LP), Inc., a California corporation (“WLP”),
Western Medical Services, Inc., a California corporation (“WMS”), and Mediaworld
International, a California corporation (“MWI”); (Parent, Westaff USA, Term
Borrower, WGP, WLP, WestLP, WCA, WMS, and MWI are sometimes collectively
referred to herein as “Grantors” and individually as a “Grantor”), and GENERAL
ELECTRIC CAPITAL CORPORATION, a Delaware corporation, individually and in its
capacities as US Agent and UK Agent for Lenders (“Agent”).

 

W I T N E S S E T H:

 

WHEREAS, pursuant to that certain Multicurrency Credit Agreement dated as of the
date hereof by and among US Borrowers, Term Borrower, Westaff (U.K.) Limited, a
limited liability company organized under the laws of England and Wales (“UK
Borrowers and collectively with US Borrowers and Term Borrower the “Borrowers”),
Parent, Agent and Lenders (including all annexes, exhibits and schedules
thereto, as from time to time amended, restated, amended and restated,
supplemented, replaced or otherwise modified, the “Credit Agreement”), Lenders
have agreed to make the Loans to US Borrowers, Term Borrower and UK Borrower,
and US Revolving Lenders have agreed to incur Letter of Credit Obligations on
behalf of Westaff USA upon request by Borrower Representative;

 

WHEREAS, (a) Parent owns all the issued and outstanding shares of Westaff USA,
(b) Westaff USA owns all the issued and outstanding shares of WGP, WLP, WCA,
WMS, MWI and Term Borrower, and (c) WGP and WLP collectively owns all the
membership interests in WestLP;

 

WHEREAS, Parent has pursuant to a Parent Guaranty dated as of the date hereof,
and each of WGP, WLP, WMS, and MWI, has pursuant to a Subsidiary Guaranty dated
as of the date hereof, guarantied the obligations of Borrowers under the Credit
Agreement and the other Loan Documents;

 

WHEREAS, each Grantor is or will be the legal and beneficial owner or both of
the Collateral to be pledged by it hereunder;

 

WHEREAS, each Grantor will receive substantial benefits from the execution,
delivery and performance of the Credit Agreement and Loan Documents;

 

--------------------------------------------------------------------------------

 

WHEREAS, in order to induce Agent and Lenders to enter into the Credit Agreement
and other Loan Documents and to induce Lenders to make the Loans and to incur
Letter of Credit Obligations as provided for in the Credit Agreement, it is a
condition to the obligations of Lenders to make the Loans and to incur Letter of
Credit Obligations that Grantors agree to grant a continuing Lien on the
Collateral to secure the Obligations.

 

NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

 

1.             DEFINED TERMS.

 

(a)           All capitalized terms used but not otherwise defined herein
(including the preamble and recitals) shall have the meanings given to them in
the Credit Agreement or in Annex A thereto.  All other terms contained in this
Security Agreement, unless the context indicates otherwise, shall have the
meanings provided for by the Code to the extent the same are used or defined
therein.

 

(b)           “Uniform Commercial Code jurisdiction” means any jurisdiction that
has adopted all or substantially all of Article 9 as contained in the 2000
Official Text of the Uniform Commercial Code, as recommended by the National
Conference of Commissioners on Uniform State Laws and the American Law
Institute, together with any subsequent amendments or modifications to the
Official Text.

 

2.             GRANT OF LIEN.

 

(a)           To secure the prompt and complete payment, performance and
observance of all of the Obligations (including, without limitation, each of US
Borrower’s and Term Borrower’s Obligations arising under the cross-guaranty
provisions of Section 12 of the Credit Agreement), each Grantor hereby grants,
assigns, conveys, mortgages, pledges, hypothecates and transfers to Agent, for
itself and the benefit of Lenders, a Lien upon all of its right, title and
interest in, to and under all personal property and other assets, whether now
owned by or owing to, or hereafter acquired by or arising in favor of such
Grantor (including under any trade names, styles or derivations thereof), and
whether owned or consigned by or to, or leased from or to, such Grantor, and
regardless of where located (all of which being hereinafter collectively
referred to as the “Collateral”), including:

 

(i)            all Accounts;

 

(ii)           all Chattel Paper;

 

(iii)          all Documents;

 

(iv)          all General Intangibles (including, without limitation, any and
all payment intangibles, Software, and in respect of WGP and WLP, all membership
interests in WestLP);

 

2

--------------------------------------------------------------------------------

 

(v)           all Goods (including, without limitation, Inventory, Equipment and
Fixtures);

 

(vi)          all Instruments;

 

(vii)         all Investment Property;

 

(viii)        all Deposit Accounts, of any Grantor, including all Blocked
Accounts, Concentration Accounts, Disbursement Accounts, and all other bank
accounts and all deposits therein;

 

(ix)           all money, cash or cash equivalents of any Grantor;

 

(x)            all Supporting Obligations and Letter-of-Credit Rights of any
Grantor;

 

(xi)           the Commercial Tort Claims set forth in Schedule 2(a)(i) hereto;
and

 

(xii)          to the extent not otherwise included, all Proceeds, tort claims,
insurance claims and other rights to payments not otherwise included in the
foregoing and products of the foregoing and all accessions to, substitutions and
replacements for, and rents and profits of, each of the foregoing,

 

provided, however, that the Collateral shall not include any Excluded Property. 
“Excluded Property” means collectively, (a) any property or asset of such
Grantor which is subject to a Permitted Encumbrance, but solely to the extent
that the documents evidencing such Permitted Encumbrance explicitly prohibit the
grant of a security interest in or Lien on such property or asset; provided,
however, that at such time as such property or asset is no longer subject to
such Lien or such prohibition, such property or asset shall (without any act or
delivery by any Person) constitute Collateral hereunder; (b) any rights of such
Grantor under any General Intangible existing prior to the Closing Date (other
than with respect to any Account, payment intangible, Chattel Paper or
promissory note related thereto or as may otherwise be provided under applicable
law) (the “Affected Collateral”) if, and to the extent, the granting of a
security interest therein in favor of Agent would cause a default under the
provisions of, or be prohibited by the express terms of, such Affected
Collateral; provided, however, that at such time as such Affected Collateral is
no longer subject to such prohibition, such Affected Collateral shall (without
any act or delivery by any Person) constitute Collateral hereunder; (c) Stock in
any foreign Subsidiary owned by any Grantor, if and solely to the extent that
the grant of a Lien herein would constitute an investment of earnings in United
States property under Section 956 (or a successor provision) of the IRC, which
investment would trigger any increase in the gross income of a United States
shareholder of  such Grantor pursuant to  Section 951 (or a successor provision)
of the IRC, or if such grant of a Lien would result in a material stamp tax,
duty or other tax imposed upon any Grantor or such foreign Subsidiary; and
(d) any Permit now or hereafter acquired or held, together with all amendments,
modifications, extensions, renewals and replacements of any thereof) solely to
the extent the granting of a security interest therein in favor of Agent would
be prohibited by law; provided, however, that at such time as such Permit

3

--------------------------------------------------------------------------------

 

is no longer subject to such prohibition, such Permit shall (without any act or
delivery by any Person) constitute Collateral hereunder.  “Permit” means any and
all permits, certificates, approvals, authorizations, consents, licenses,
variances, franchises or other instruments, however characterized, of any
Governmental Authority (or any Person acting on behalf of a Government
Authority).

 

(b)           In addition to, and without limiting any of the foregoing, in
order to support the payment and performance of the Obligations, and until the
Termination Date, US Borrower hereby absolutely assigns, sells and transfers to
Agent, for itself and for the benefit of Lenders, all claims and moneys due or
to become due under the Government Contracts, and agrees that all payments due
or to become due under the Government Contracts shall be made to and at the
direction of Agent.  “Government Contracts” means each of the contracts
identified on Schedule 2(b) hereto entered into by US Borrower with the
Department of the Treasury, Bureau of the Public Debt, 200 3rd St. UNB 4th
Floor, Parkersburg, WV 26101-5312, as such contracts may be amended, restated,
replaced, extended or reaffirmed from time to time.

 

(c)           In addition, to secure the prompt and complete payment,
performance and observance of the Obligations and in order to induce Agent and
Lenders as aforesaid, each Grantor hereby grants to Agent, for itself and the
benefit of Lenders, a right of setoff against the property of such Grantor held
by Agent or any Lender, consisting of property described above in Section 2(a)
now or hereafter in the possession or custody of or in transit to Agent or any
Lender, for any purpose, including safekeeping, collection or pledge, for the
account of such Grantor, or as to which such Grantor may have any right or
power.

 

3.             AGENT’S AND LENDERS’ RIGHTS: LIMITATIONS ON AGENT’S AND LENDERS’
OBLIGATIONS.

 

(a)           It is expressly agreed by Grantors that, anything herein to the
contrary notwithstanding, each Grantor shall remain liable under each of its
Contracts and each of its Licenses to observe and perform all the conditions and
obligations to be observed and performed by it thereunder.  Neither Agent nor
any Lender shall have any obligation or liability under any Contract or License
by reason of or arising out of this Security Agreement or the granting herein of
a Lien thereon or the receipt by Agent or any Lender of any payment relating to
any Contract or License pursuant hereto.  Neither Agent nor any Lender shall be
required or obligated in any manner to perform or fulfill any of the obligations
of any Grantor under or pursuant to any Contract or License, or to make any
payment, or to make any inquiry as to the nature or the sufficiency of any
payment received by it or the sufficiency of any performance by any party under
any Contract or License, or to present or file any claims, or to take any action
to collect or enforce any performance or the payment of any amounts which may
have been assigned to it or to which it may be entitled at any time or times.

 

(b)           Agent may at any time after an Event of Default has occurred and
is continuing without prior notice to any Grantor, notify Account Debtors and
other Persons obligated on the Collateral that Agent has a security interest
therein, and that payments shall be made directly to Agent.  Furthermore, if
Agent determines that Account Debtors’ contra-accounts or set-off rights may
cause the applicable Borrowing Availability to be less than zero, Agent may
notify Account Debtors that Agent has a security interest therein, and that
payments

 

4

--------------------------------------------------------------------------------

 

shall be made directly to Agent.  Upon the request of Agent after the occurrence
and during the continuance of an Event of Default, each Grantor shall so notify
Account Debtors and other Persons obligated on the Collateral.  Once any such
notice has been given to any Account Debtor or other Person obligated on the
Collateral in accordance with this Section 3(b), the affected Grantor shall not
give any contrary instructions to such Account Debtor or other Person without
Agent’s prior written consent.

 

(c)           Agent may at any time in Agent’s own name, in the name of a
nominee of Agent or in the name of any Grantor communicate (by mail, telephone,
facsimile or otherwise) with Account Debtors, parties to Contracts and obligors
in respect of Instruments to verify with such Persons, to Agent’s satisfaction,
the existence, amount and terms of, and any other matter relating to, Accounts,
Instruments, Chattel Paper and/or payment intangibles in respect of such
Grantor, provided that Agent shall use reasonable efforts to notify the
applicable Grantor subsequent to any such communication.  If an Event of Default
shall have occurred and be continuing, each Grantor, at its own expense, shall
cause the independent certified public accountants then engaged by such Grantor
to prepare and deliver to Agent and each Lender at any time and from time to
time promptly upon Agent’s request the following reports with respect to each
Grantor: (i) a reconciliation of all Accounts; (ii) an aging of all Accounts;
(iii) trial balances; and (iv) a test verification of such Accounts as Agent may
reasonably request. 

 

4.             REPRESENTATIONS AND WARRANTIES.  Each Grantor represents and
warrants that:

 

(a)           Each Grantor has rights in and the power to transfer each item of
the Collateral upon which it purports to grant a Lien hereunder free and clear
of any and all Liens other than Permitted Encumbrances.

 

(b)           No effective security agreement, financing statement, equivalent
security or Lien instrument or continuation statement covering all or any part
of the Collateral is on file or of record in any public office, except such as
may have been filed (i) by any Grantor in favor of Agent pursuant to this
Security Agreement or the other Loan Documents, and (ii) in connection with any
other Permitted Encumbrances.

 

(c)           This Security Agreement is effective to create a valid and
continuing Lien on and, upon the filing of the appropriate financing statements
listed on Schedule I hereto, a perfected Lien in favor of Agent, for itself and
the benefit of Lenders, on the Collateral with respect to which a Lien may be
perfected by filing pursuant to the Code.  Such Lien is prior to all other
Liens, except Permitted Encumbrances that would be prior to Liens in favor of
Agent for the benefit of the Lenders as a matter of law, and is enforceable as
such as against any and all creditors of and purchasers from any Grantor (other
than purchasers and lessees of Inventory in the ordinary course of business and
non-exclusive licensees of General Intangibles in the ordinary course of
business, and holders of Permitted Encumbrances).  All action by any Grantor
necessary or desirable to protect and perfect such Lien on each item of the
Collateral has been duly taken.

 

(d)           Schedule II hereto lists all Instruments, Letter of Credit Rights
and Chattel Paper of each Grantor.  All action by any Grantor necessary or
desirable to protect and perfect

 

5

--------------------------------------------------------------------------------

 

the Lien of Agent on each item set forth on Schedule II (including the delivery
of all originals thereof to Agent and the legending of all Chattel Paper as
required by Section 5(b) hereof) has been duly taken.  The Lien of Agent, for
the benefit of Agent and Lenders, on the Collateral listed on Schedule II hereto
is prior to all other Liens, except Permitted Encumbrances that would be prior
to the Liens in favor of Agent as a matter of law, and is enforceable as such
against any and all creditors of and purchasers from any Grantor.

 

(e)           Each Grantor’s name as it appears in official filings in the state
of its incorporation or other organization, the type of entity of each Grantor
(including corporation, partnership, limited partnership or limited liability
company), organizational identification number issued by each Grantor’s state of
incorporation or organization or a statement that no such number has been
issued, each Grantor’s state of organization or incorporation, the location of
each Grantor’s chief executive office, principal place of business, offices, all
warehouses and premises where Collateral is stored or located, and the locations
of its books and records concerning the Collateral are set forth on Schedule
III-A, Schedule III–B and Schedule III–C,  Schedule III–D, Schedule III–E,
Schedule III–F,  Schedule III–G, Schedule III–H, and Schedule III–I,
respectively, hereto.  Each Grantor has only one state of incorporation or
organization.

 

(f)            With respect to the Accounts, except as specifically disclosed in
the most recent Collateral Report delivered to Agent (i) they represent bona
fide sales of Inventory or rendering of services to Account Debtors in the
ordinary course of each Grantor’s business and are not evidenced by a judgment,
Instrument or Chattel Paper; (ii) there are no setoffs, claims or disputes
existing or, to each Grantor’s knowledge, asserted with respect thereto and no
Grantor has made any agreement with any Account Debtor for any extension of time
for the payment thereof, any compromise or settlement for less than the full
amount thereof, any release of any Account Debtor from liability therefor, or
any deduction therefrom except a discount or allowance allowed by such Grantor
in the ordinary course of its business for prompt payment and disclosed to
Agent; (iii) to each Grantor’s knowledge, there are no facts, events or
occurrences which in any way impair the validity or enforceability thereof or
could reasonably be expected to reduce the amount payable thereunder as shown on
any Grantor’s books and records and any invoices, statements and Collateral
Reports delivered to Agent and Lenders with respect thereto; (iv) no Grantor has
received any notice of proceedings or actions which are threatened or pending
against any Account Debtor which might result in any adverse change in such
Account Debtor’s financial condition; and (v) no Grantor has knowledge that any
Account Debtor is unable generally to pay its debts as they become due.  Further
with respect to the Accounts (x) the amounts shown on all invoices, statements
and Collateral Reports which may be delivered to the Agent with respect thereto
are actually and absolutely owing to such Grantor as indicated thereon and are
not in any way contingent; (y) no payments have been or shall be made thereon
except payments immediately delivered to the applicable Blocked Accounts or the
Agent as required pursuant to the terms of Annex C to the Credit Agreement; and
(z) to each Grantor’s knowledge, all Account Debtors have the capacity to
contract.

 

(g)           No Grantor has any interest in, or title to, any Patent, Trademark
or Registered Copyright except as set forth in Schedule IV hereto.  This
Security Agreement is effective to create a valid and continuing Lien on and,
upon filing of the Copyright Security Agreements with the United States
Copyright Office and filing of the Patent Security Agreements and the Trademark
Security Agreements with the United States Patent

 

6

--------------------------------------------------------------------------------

 

and Trademark Office, perfected Liens in favor of Agent on each Grantor’s
Patents, Trademarks and Registered Copyrights in the United States and such
perfected Liens are enforceable as such as against any and all creditors of and
purchasers from any Grantor.  Upon filing of the Copyright Security Agreements
with the United States Copyright Office and filing of the Patent Security
Agreements and the Trademark Security Agreements with the United State Patent
and Trademark Office and the filing of appropriate financing statements listed
on Schedule I hereto, all action necessary or desirable to protect and perfect
Agent’s Lien on each Grantor’s Patents, Trademarks or Registered Copyrights in
the United States shall have been duly taken. “Registered Copyright” means any
such Copyright as filed and registered with the United States Copyright Office.

 

(h)           No Grantor owns any motor vehicle.

 

5.             COVENANTS.  Each Grantor covenants and agrees with Agent, for the
benefit of Agent and Lenders, that from and after the date of this Security
Agreement and until the Termination Date:

 

(a)           Further Assurances: Pledge of Instruments; Chattel Paper. 

 

(i)            At any time and from time to time, upon the reasonable written
request of Agent and at the sole expense of Grantors, each Grantor shall
promptly and duly execute and deliver any and all such further instruments and
documents (all in form and substance reasonably acceptable to Agent) and take
such further actions as is necessary for the Agent to obtain the full benefits
of this Security Agreement and of the rights and powers herein granted,
including, without limitation (A) using commercially reasonable efforts to
secure all consents and approvals necessary or appropriate for the assignment to
or for the benefit of Agent of any License or Contract held by such Grantor and
to enforce the security interests granted hereunder; (B) executing and
delivering appropriate Trademark Security Agreements, Copyright Security
Agreements, Patent Security Agreement and other Control Agreements; and
(C) filing any financing or continuation statements under the Code with respect
to the Liens granted hereunder or under any other Loan Document as to those
jurisdictions that are not Uniform Commercial Code jurisdictions.

 

(ii)           Unless Agent shall otherwise consent in writing (which consent
may be revoked), each Grantor shall deliver to Agent all Collateral consisting
of negotiable Documents, certificated securities, Chattel Paper and Instruments
(in each case, accompanied by stock powers, allonges or other instruments of
transfer executed in blank, as applicable) promptly after such Credit Party
receives the same; provided that any negotiable Documents, certificated
securities, Chattel Paper and Instruments not delivered to the Agent (at the
discretion of Agent) may not otherwise be pledged by Grantor to any other Person
or otherwise used as security for any obligations other than the Obligations
secured hereby and under the Pledge Agreement.

 

(iii)          Each Grantor shall, in accordance with the terms of the Credit
Agreement, use commercially reasonable efforts to obtain waivers or
subordinations of Liens from landlords and mortgagees at locations leased by
Grantor where material

 

7

--------------------------------------------------------------------------------

 

Collateral is located, and each Grantor shall in all instances use commercially
reasonable efforts to obtain signed acknowledgements of Agent’s Liens from
bailees having possession of any Grantor’s Goods that they hold for the benefit
of Agent.

 

(iv)          If not waived by Agent in writing (which waiver may be revoked),
each Grantor shall obtain authenticated Control Letters from each issuer of
uncertificated securities, securities intermediary, or commodities intermediary
issuing or holding any financial assets or commodities to or for any Grantor
other than for such securities accounts, commodities accounts or similar
accounts that do not exceed $25,000 individually (or $40,000 with respect to the
accounts of Westaff USA existing on the Closing Date at Sovereign Bank and
Stillwater National Bank, and the Surety Certificate of Deposit held at Bank of
America Account  #CD-21228977 (the “Surety Account”) (provided that amounts
deposited in the Surety Account shall not exceed $750,000)); provided, however,
at no time shall the aggregate balances (other than amounts deposited in the
Surety Account up to $750,000) for all Credit Parties in such securities
accounts, commodities accounts or similar accounts which are not subject to
Control Letters and in Deposit Accounts which are not subject to applicable
tri-party account control agreements (as set forth in clause (v) below), exceed
$250,000 in the aggregate.

 

(v)           In accordance with Annex C to the Credit Agreement, each Grantor
shall obtain a pledged account, concentration account, blocked account, lockbox
or similar control agreement with each bank or financial institution holding any
Deposit Account(s), other than those Deposit Accounts located at such
institution that do not exceed $25,000 individually (or $40,000 with respect to
the accounts of Westaff USA existing on the Closing Date at Sovereign Bank and
Stillwater National Bank, and the Surety Account (provided that amounts
deposited in the Surety Account shall not exceed $750,000)), provided, however,
at no time shall the aggregate balances (other than amounts deposited in the
Surety Account up to $750,000) for all Credit Parties in Deposit Accounts not
subject to the above referenced tri-party account control agreements and in
securities accounts, commodities accounts or similar accounts not subject to
Control Letters (as set forth in clause (vi) above), exceed $250,000 in the
aggregate.

 

(vi)          Each Grantor that is or becomes the beneficiary of a letter of
credit shall promptly, and in any event within five (5) Business Days after
becoming a beneficiary, notify Agent thereof and thereafter enter into a
tri–party agreement with Agent and the issuer and/or confirmation bank with
respect to Letter-of-Credit Rights assigning such Letter-of-Credit Rights to
Agent and directing all payments thereunder to the Collection Account, all in
form and substance reasonably satisfactory to Agent.

 

(vii)         Each Grantor shall take all steps necessary to grant the Agent
control of all electronic chattel paper in accordance with the Code and all
“transferable records” as defined in each of the Uniform Electronic Transactions
Act and the Electronic Signatures in Global and National Commerce Act.

 

(viii)        Each Grantor hereby irrevocably authorizes the Agent at any time
and from time to time to file in any filing office in any Uniform Commercial
Code

 

8

--------------------------------------------------------------------------------

 

jurisdiction any initial financing statements and amendments thereto that (a)
indicate the Collateral (i) as all assets of such Grantor or words of similar
effect, regardless of whether any particular asset comprised in the Collateral
falls within the scope of Article 9 of the Code or such jurisdiction, or (ii) as
being of an equal or lesser scope or with greater detail, and (b) contain any
other information required by part 5 of Article 9 of the Code for the
sufficiency or filing office acceptance of any financing statement or amendment,
including (i) whether such Grantor is an organization, the type of organization
and any organization identification number issued to such Grantor, and (ii) in
the case of a financing statement filed as a fixture filing, a sufficient
description of real property to which the Collateral relates.  Each Grantor
agrees to furnish any such information to the Agent promptly upon request.  Each
Grantor also ratifies its authorization for the Agent to have filed in any
Uniform Commercial Code jurisdiction any initial financing statements or
amendments thereto if filed prior to the date hereof.

 

(ix)           Each Grantor shall promptly, and in any event within five (5)
Business Days after the same is acquired by it, notify Agent of any commercial
tort claim (as defined in the Code) acquired by it and unless otherwise
consented by Agent, such Grantor shall enter into a supplement to this Security
Agreement, granting to Agent a Lien in such commercial tort claim.

 

(b)           Maintenance of Records.  Grantors shall keep and maintain, at
their own cost and expense, satisfactory and complete records of the Collateral,
including a record of any and all payments received and any and all credits
granted with respect to the Collateral and all other dealings with the
Collateral.  Grantors shall mark their books and records pertaining to the
Collateral to evidence this Security Agreement and the Liens granted hereby.  If
any Grantor retains possession of any Chattel Paper or Instruments with Agent’s
consent, such Chattel Paper and Instruments shall either be delivered to the
Agent or be marked with the following legend: “This writing and the obligations
evidenced or secured hereby are subject to the security interest of General
Electric Capital Corporation, as Agent, for the benefit of Agent and certain
Lenders.”

 

(c)           Covenants Regarding Patent, Trademark and Copyright Collateral.

 

(i)            Each Grantor shall notify Agent promptly if it knows or has
reason to know that any application or registration relating to any Patent,
Trademark or Copyright (now or hereafter existing) may become abandoned or
dedicated, or of any adverse determination or development (including the
institution of, or any such determination or development in, any proceeding in
the United States Patent and Trademark Office, the United States Copyright
Office or any court) regarding any Grantor’s ownership of any Patent, Trademark
or Copyright, its right to register the same, or to keep and maintain the same,
provided that no notification is required if such Patent, Trademark or Copyright
is no longer useful to such Grantor’s business and, in the reasonable business
judgment of such Grantor, has an insignificant economic value.

 

(ii)           In no event shall any Grantor, either itself or through any
agent, employee, licensee or designee, file an application for the registration
of any Patent, Trademark or Copyright with the United States Patent and
Trademark Office, the United States Copyright Office or any similar office or
agency without giving Agent prior

 

9

--------------------------------------------------------------------------------

 

written notice thereof, and, upon request of Agent, Grantor shall execute and
deliver any and all Patent Security Agreements, Copyright Security Agreements or
Trademark Security Agreements as Agent may reasonably request to evidence
Agent’s Lien on such Patent, Trademark or Copyright, and the General Intangibles
of such Grantor relating thereto or represented thereby.

 

(iii)          Each Grantor shall take all actions necessary or reasonably
requested by Agent to maintain and pursue each application, to obtain the
relevant registration and to maintain the registration of each of the Patents,
Trademarks and Copyrights (now or hereafter existing), including the filing of
applications for renewal, affidavits of use, affidavits of noncontestability and
opposition and interference and cancellation proceedings, except where failure
to comply could not be reasonably expected to adversely affect in a material
manner such Grantor’s ability to carry on its business as conducted as of the
Closing Date or perform its obligations under any Loan Document to which it is a
party, or such Patent, Trademark or Copyright is no longer useful to such
Grantor’s business and, in the reasonable business judgment of such Grantor, has
an insignificant economic value.

 

(iv)          In the event that any of the Patent, Trademark or Copyright
Collateral is infringed upon, or misappropriated or diluted by a third party,
such Grantor shall comply with Section 5(a)(ix) of this Security Agreement. 
Such Grantor shall, unless such Grantor shall reasonably determine that such
Patent, Trademark or Copyright Collateral is in no way material to the conduct
of its business or operations, promptly sue for infringement, misappropriation
or dilution and to recover any and all damages for such infringement,
misappropriation or dilution and shall take such other actions as Agent shall
deem appropriate under the circumstances to protect such Patent, Trademark or
Copyright Collateral.

 

(d)           Indemnification.  In any suit, proceeding or action brought by
Agent or any Lender relating to any Collateral for any sum owing with respect
thereto or to enforce any rights or claims with respect thereto, each Grantor
will save, indemnify and keep Agent and Lenders harmless from and against all
expense (including reasonable attorneys’ fees and expenses), loss or damage
suffered by reason of any defense, setoff, counterclaim, recoupment or reduction
of liability whatsoever of the Account Debtor or other Person obligated on the
Collateral, arising out of a breach by any Grantor of any obligation thereunder
or arising out of any other agreement, indebtedness or liability at any time
owing to, or in favor of, such obligor or its successors from such Grantor,
except in the case of Agent or any Lender, to the extent such expense, loss, or
damage is results from the gross negligence or willful misconduct of Agent or
such Lender as finally determined by a court of competent jurisdiction.  All
such obligations of Grantors shall be and remain enforceable against and only
against Grantors and shall not be enforceable against Agent or any Lender.

 

(e)           Compliance with Terms of Accounts, etc. Each Grantor will perform
and comply with all material obligations in respect of the Collateral and all
other material agreements to which it is a party or by which it is bound
relating to the Collateral.

 

 

10

--------------------------------------------------------------------------------

 

(f)            Limitation on Liens on Collateral.  No Grantor will create,
permit or suffer to exist, and each Grantor will defend the Collateral against,
and take such other action as is necessary to remove, any Lien on the Collateral
except Permitted Encumbrances, and will defend the right, title and interest of
Agent and Lenders in and to any of such Grantor’s rights under the Collateral
against the claims and demands of all Persons whomsoever.  

 

(g)           Limitations on Disposition.  No Grantor will sell, license, lease,
transfer or otherwise dispose of any of the Collateral, or attempt or contract
to do so except as permitted by the Credit Agreement.

 

(h)           Further Identification of Collateral.  Each Grantor will, if so
requested by Agent, furnish to Agent, as often as Agent requests, statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Agent may reasonably request, all
in such detail as Agent may specify.

 

(i)            Notices.  Each Grantor will advise Agent promptly, in reasonable
detail, (i) of any Lien (other than Permitted Encumbrances) or claim made or
asserted against any of the Collateral that is known to such Grantor, and (ii)
of the occurrence of any other event which would have a material adverse effect
on the aggregate value of the Collateral or on the Liens created hereunder or
under any other Loan Document.

 

(j)            Good Standing Certificates.  Upon Agent’s request (but not more
frequently than once during each Fiscal Year), each Grantor shall provide to
Agent a certificate of good standing from its state of incorporation or
organization.

 

(k)           No Reincorporation.  Without limiting the prohibitions on mergers
involving the Grantors contained in the Credit Agreement, no Grantor shall
reincorporate or reorganize itself under the laws of any jurisdiction other than
the jurisdiction in which it is incorporated or organized as of the date hereof
without the prior written consent of Agent, which consent shall not be
unreasonably withheld.

 

(l)            WMSNY, Westaff Mexico, Western NZ, Western Staff Services,
Westaff  Singapore.  Except as may otherwise be provided in the Credit
Agreement, Parent, Term Borrower or WMS shall cause directly or indirectly
WMSNY, Westaff Mexico, Western NZ, Western Staff Services or Westaff Singapore
(collectively, the "Foreign Entities"), as applicable, to not incur any
liabilities or conduct any business or operations, but may cause directly or
indirectly such Foreign Entities to be dissolved, provided that any assets from
such dissolution be distributed in accordance with the Credit Agreement.
Notwithstanding anything to the contrary contained in this Security Agreement,
Agent agrees that the shares of the foreign entities need not be delivered to
Agent until such time as Agent may request in writing.

 

(m)          Terminations; Amendments Not Authorized.  Each Grantor acknowledges
that it is not authorized to file any financing statement or amendment or
termination statement with respect to any financing statement filed in favor of
the Agent without the prior written consent of Agent and agrees that it will not
do so without the prior written consent of Agent, subject to such Grantor's
rights under Section 9-509(d)(2) of the Code.

 

11

--------------------------------------------------------------------------------

 

(n)           Authorized Terminations.  Agent will promptly deliver to each
Grantor for filing or authorize each Grantor to prepare and file termination
statements and releases in accordance with Section 11.2(e) of the Credit
Agreement.

 

6.             AGENT’S APPOINTMENT AS ATTORNEY-IN-FACT.

 

On the Closing Date each Grantor shall execute and deliver to Agent a power of
attorney (the “Power of Attorney”) substantially in the form attached hereto as
Exhibit A.  The power of attorney granted pursuant to the Power of Attorney is a
power coupled with an interest and shall be irrevocable until the Termination
Date.  The powers conferred on Agent, for the benefit of Agent and Lenders,
under the Power of Attorney are solely to protect Agent’s interests (for the
benefit of Agent and Lenders) in the Collateral and shall not impose any duty
upon Agent or any Lender to exercise any such powers.  Agent agrees that (a)
except for the powers granted in clause (h) of the Power of Attorney, it shall
not exercise any power or authority granted under the Power of Attorney unless
an Event of Default has occurred and is continuing, and (b) Agent shall account
for any moneys received by Agent in respect of any foreclosure on or disposition
of Collateral pursuant to the Power of Attorney provided that none of Agent or
any Lender shall have any duty as to any Collateral, except as provided by the
Code, and Agent and Lenders shall be accountable only for amounts that they
actually receive as a result of the exercise of such powers.  NONE OF AGENT,
LENDERS OR THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS
OR REPRESENTATIVES SHALL BE RESPONSIBLE TO ANY GRANTOR FOR ANY ACT OR FAILURE TO
ACT UNDER ANY POWER OF ATTORNEY OR OTHERWISE, EXCEPT IN RESPECT OF AND TO THE
EXTENT OF DAMAGES RESULTING FROM THEIR OWN GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION, NOR FOR
ANY PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.

 

7.             REMEDIES:  RIGHTS UPON DEFAULT.

 

(a)           In addition to all other rights and remedies granted to it under
this Security Agreement, the Credit Agreement, the other Loan Documents and
under any other instrument or agreement securing, evidencing or relating to any
of the Obligations, if any Event of Default shall have occurred and be
continuing, Agent may exercise all rights and remedies of a secured party under
the Code.  Without limiting the generality of the foregoing, each Grantor
expressly agrees that in any such event Agent, without demand of performance or
other demand, advertisement or notice of any kind (except the notice specified
below of time and place of public or private sale) to or upon such Grantor or
any other Person (all and each of which demands, advertisements and notices are
hereby expressly waived to the maximum extent permitted by the Code and other
applicable law), may forthwith enter upon the premises of such Grantor where any
Collateral is located through self-help, without judicial process, without first
obtaining a final judgment or giving such Grantor or any other Person notice and
opportunity for a hearing on Agent’s claim or action and may collect, receive,
assemble, process, appropriate and realize upon the Collateral, or any part
thereof, and may forthwith sell, lease, license, assign, give an option or
options to purchase, or sell or otherwise dispose of and deliver said Collateral
(or contract to do so), or any part thereof, in one or more parcels at a public
or private sale or sales, at any exchange at such prices as it may deem
acceptable, for cash or on credit or for

 

12

--------------------------------------------------------------------------------

 

future delivery without assumption of any credit risk.  Agent or any Lender
shall have the right upon any such public sale or sales and, to the extent
permitted by law, upon any such private sale or sales, to purchase for the
benefit of Agent and Lenders, the whole or any part of said Collateral so sold,
free of any right or equity of redemption, which equity of redemption each
Grantor hereby releases.  Such sales may be adjourned and continued from time to
time with or without notice.  Agent shall have the right to conduct such sales
on any Grantor’s premises or elsewhere and shall have the right to use any
Grantor’s premises without charge for such time or times as Agent deems
necessary or advisable.

 

(b)           If any Event of Default shall have occurred and be continuing,
each Grantor further agrees, at Agent’s request, to assemble the Collateral and
make it available to Agent at a place or places designated by Agent which are
reasonably convenient to Agent and such Grantor, whether at such Grantor’s
premises or elsewhere.  Until Agent is able to effect a sale, lease, or other
disposition of Collateral, Agent shall have the right to hold or use Collateral,
or any part thereof, to the extent that it deems appropriate for the purpose of
preserving Collateral or its value or for any other purpose deemed appropriate
by Agent.  Agent shall have no obligation to any Grantor to maintain or preserve
the rights of such Grantor as against third parties with respect to Collateral
while Collateral is in the possession of Agent.  Agent may, if it so elects,
seek the appointment of a receiver or keeper to take possession of Collateral
and to enforce any of Agent’s remedies (for the benefit of Agent and Lenders),
with respect to such appointment without prior notice or hearing as to such
appointment.  Agent shall apply the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale to the Obligations as
provided in the Credit Agreement, and only after so paying over such net
proceeds, and after the payment by Agent of any other amount required by any
provision of law, need Agent account for the surplus, if any, to any Grantor. 
To the maximum extent permitted by applicable law, each Grantor waives all
claims, damages, and demands against Agent or any Lender arising out of the
repossession, retention or sale of the Collateral except to the extent such
claims, damages and demands result from the gross negligence or willful
misconduct of Agent or such Lender as finally determined by a court of competent
jurisdiction.  Each Grantor agrees that ten (10) days prior notice by Agent of
the time and place of any public sale or of the time after which a private sale
may take place is reasonable notification of such matters.  Grantors shall
remain liable for any deficiency if the proceeds of any sale or disposition of
the Collateral are insufficient to pay all Obligations, including any reasonable
attorneys’ fees and other reasonable out-of-pocket expenses incurred by Agent or
any Lender to collect such deficiency.

 

(c)           Except as otherwise specifically provided herein, each Grantor
hereby waives presentment, demand, protest or any notice (to the maximum extent
permitted by applicable law) of any kind in connection with this Security
Agreement or any Collateral. 

 

(d)           To the extent that applicable law imposes duties on the Agent to
exercise remedies in a commercially reasonable manner, each Grantor acknowledges
and agrees that it is not commercially unreasonable for the Agent (i) to fail to
incur expenses reasonably deemed significant by the Agent to prepare Collateral
for disposition or otherwise to complete raw material or work in process into
finished goods or other finished products for disposition, (ii) to fail to
obtain third party consents for access to Collateral to be disposed of, or to
obtain or, if not required by other law, to fail to obtain governmental or third
party consents for the collection or

 

13

--------------------------------------------------------------------------------

 

disposition of Collateral to be collected or disposed of, (iii) to fail to
exercise collection remedies against Account Debtors or other Persons obligated
on Collateral or to remove Liens on or any adverse claims against Collateral,
(iv) to exercise collection remedies against Account Debtors and other Persons
obligated on Collateral directly or through the use of collection agencies and
other collection specialists, (v) to advertise dispositions of Collateral
through publications or media of general circulation, whether or not the
Collateral is of a specialized nature, (vi) to contact other Persons, whether or
not in the same business as the Grantor, for expressions of interest in
acquiring all or any portion of such Collateral, (vii) to hire one or more
professional auctioneers to assist in the disposition of Collateral, whether or
not the Collateral is of a specialized nature, (viii) to dispose of Collateral
by utilizing internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capacity of doing so, or
that match buyers and sellers of assets, (ix) to dispose of assets in wholesale
rather than retail markets, (x) to disclaim disposition warranties, such as
title, possession or quiet enjoyment, (xi) to purchase insurance or credit
enhancements to insure Agent against risks of loss, collection or disposition of
Collateral or to provide to Agent a guaranteed return from the collection or
disposition of Collateral, or (xii) to the extent deemed appropriate by the
Agent, to obtain the services of other brokers, investment bankers, consultants
and other professionals to assist Agent in the collection or disposition of any
of the Collateral.  Each Grantor acknowledges that the purpose of this Section
7(c) is to provide non-exhaustive indications of what actions or omissions by
Agent would not be commercially unreasonable in Agent's exercise of remedies
against the Collateral and that other actions or omissions by Agent shall not be
deemed commercially unreasonable solely on account of not being indicated in
this Section 7(c).  Without limitation upon the foregoing, nothing contained in
this Section 7(c) shall be construed to grant any rights to any Grantor or to
impose any duties on Agent that would not have been granted or imposed by this
Security Agreement or by applicable law in the absence of this Section 7(c).

 

(e)           Neither Agent nor the Lenders shall be required to make any demand
upon, or pursue or exhaust any of their rights or remedies against, any Grantor,
any other obligor, guarantor, pledgor or any other Person with respect to the
payment of the Obligations or to pursue or exhaust any of their rights or
remedies with respect to any Collateral therefor or any direct or indirect
guarantee thereof.  Neither Agent nor the Lenders shall be required to marshal
the Collateral or any guarantee of the Obligations or to resort to the
Collateral or any such guarantee in any particular order, and all of its and
their rights hereunder or under any other Loan Document shall be cumulative.  To
the extent it may lawfully do so, each Grantor absolutely and irrevocably waives
and relinquishes the benefit and advantage of, and covenants not to assert
against Agent or any Lender, any valuation, stay, appraisement, extension,
redemption or similar laws and any and all rights or defenses it may have as a
surety now or hereafter existing which, but for this provision, might be
applicable to the sale of any Collateral made under the judgment, order or
decree of any court, or privately under the power of sale conferred by this
Security Agreement, or otherwise. 

 

8.             GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY COLLATERAL.  For
the purpose of enabling Agent to exercise rights and remedies under Section 7
hereof (including, without limiting the terms of Section 7 hereof, in order to
take possession of, hold, preserve, process, assemble, prepare for sale, market
for sale, sell or otherwise dispose of Collateral) at such time as Agent shall
be lawfully entitled to exercise such

 

14

--------------------------------------------------------------------------------

 

rights and remedies, each Grantor hereby grants to Agent, for the benefit of
Agent and Lenders, an irrevocable, nonexclusive license (exercisable without
payment of royalty or other compensation to such Grantor) to use, license or
sublicense any Intellectual Property now owned or hereafter acquired by such
Grantor, and wherever the same may be located, and including in such license
access to all media in which any of the licensed items may be recorded or stored
and to all computer software and programs used for the compilation or printout
thereof.

 

9.             LIMITATION ON AGENT’S AND LENDERS’ DUTY IN RESPECT OF COLLATERAL.
 Agent and each Lender shall use reasonable care with respect to the Collateral
in its possession or under its control.  Neither Agent nor any Lender shall have
any other duty as to any Collateral in its possession or control or in the
possession or control of any agent or nominee of Agent or such Lender, or any
income thereon or as to the preservation of rights against prior parties or any
other rights pertaining thereto.

 

10.           REINSTATEMENT.  This Security Agreement shall remain in full force
and effect and continue to be effective should any petition be filed by or
against any Grantor for liquidation or reorganization, should any Grantor become
insolvent or make an assignment for the benefit of any creditor or creditors or
should a receiver or trustee be appointed for all or any significant part of any
Grantor’s assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Obligations, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by any obligee of the Obligations,
whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all
as though such payment or performance had not been made.  In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Obligations shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.

 

11.           NOTICES.  Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other party, or whenever any of the parties desires to give and
serve upon any other party any communication with respect to this Security
Agreement, each such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and shall be given in the manner, and
deemed received, as provided for in Section 11.10 and Annex I of the Credit
Agreement, and in respect of WGP, WLP, WMS, and MWI, to the address and
facsimile number as follows:

 

If to WGP, WLP, WMS and MWI, at:

 

c/o Westaff (USA), Inc.

P.O. Box 9280

Walnut Creek, CA  94598

Attention:  Treasurer

Telecopier No.: 925-930-5361

Telephone No.: 925-952-2502

 

with copies to:

 

 

15

--------------------------------------------------------------------------------

 

Westaff (USA), Inc.

P.O. Box 9280

Walnut Creek, CA  94598

Attention:  Chief Financial Officer

Telecopier No.: 925-934-5489

Telephone No.: 925-256-1518

 

Westaff (USA), Inc.

P.O. Box 9280

Walnut Creek, CA  94598

Attention:  Legal Department

Telecopier No.: 925-937-0593

Telephone No.: 925-930-5349

 

12.           SEVERABILITY.  Whenever possible, each provision of this Security
Agreement shall be interpreted in a manner as to be effective and valid under
applicable law, but if any provision of this Security Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity without invalidating
the remainder of such provision or the remaining provisions of this Security
Agreement.  This Security Agreement is to be read, construed and applied
together with the Credit Agreement and the other Loan Documents which, taken
together, set forth the complete understanding and agreement of Agent, Lenders
and Grantors with respect to the matters referred to herein and therein.

 

13.           NO WAIVER; CUMULATIVE REMEDIES.  Neither Agent nor any Lender
shall by any act, delay, omission or otherwise be deemed to have waived any of
its rights or remedies hereunder, and no waiver shall be valid unless in
writing, signed by Agent and then only to the extent therein set forth.  A
waiver by Agent of any right or remedy hereunder on any one occasion shall not
be construed as a bar to any right or remedy which Agent would otherwise have
had on any future occasion.  No failure to exercise nor any delay in exercising
on the part of Agent or any Lender, any right, power or privilege hereunder,
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege hereunder preclude any other or future exercise
thereof or the exercise of any other right, power or privilege.  The rights and
remedies hereunder provided are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights and remedies provided by law. 
None of the terms or provisions of this Security Agreement may be waived,
altered, modified or amended except by an instrument in writing, duly executed
by Agent and Grantors.

 

14.           LIMITATION BY LAW.  All rights, remedies and powers provided in
this Security Agreement may be exercised only to the extent that the exercise
thereof does not violate any applicable provision of law, and all the provisions
of this Security Agreement are intended to be subject to all applicable
mandatory provisions of law that may be controlling and to be limited to the
extent necessary so that they shall not render this Security Agreement invalid,
unenforceable, in whole or in part, or not entitled to be recorded, registered
or filed under the provisions of any applicable law.

 

 

16

--------------------------------------------------------------------------------

 

15.           TERMINATION OF THIS SECURITY AGREEMENT.  Subject to Section 10
hereof, this Security Agreement shall terminate upon the Termination Date.  The
Collateral shall be released immediately, upon the request and at the expense of
the Grantors, from the Lien of this Security Agreement upon termination hereof
or any permitted release of the Collateral in accordance with the provisions of
any Loan Document, and Agent shall, upon the request of any Grantor, assign,
transfer and deliver to such Grantor such of the Collateral to be released (in
the case of a release) as may be in possession of Agent, and, with respect to
any other Collateral, proper documents and instruments (including UCC-3
termination statements or releases) acknowledging the termination hereof or the
release of such Collateral, as the case may be.

 

16.           SUCCESSORS AND ASSIGNS.  This Security Agreement and all
obligations of Grantors hereunder shall be binding upon the successors and
assigns of each Grantor (including any debtor-in-possession on behalf of such
Grantor) and shall, together with the rights and remedies of Agent, for the
benefit of Agent and Lenders, hereunder, inure to the benefit of Agent and
Lenders, all future holders of any instrument evidencing any of the Obligations
and their respective successors and assigns as permitted under the Credit
Agreement.  No sales of participations, other sales, assignments, transfers or
other dispositions of any agreement governing or instrument evidencing the
Obligations or any portion thereof or interest therein shall in any manner
impair the Lien granted to Agent, for the benefit of Agent and Lenders,
hereunder.  No Grantor may assign, sell, hypothecate or otherwise transfer any
interest in or obligation under this Security Agreement.

 

17.           COUNTERPARTS.  This Security Agreement may be authenticated in any
number of separate counterparts, each of which shall collectively and separately
constitute one agreement.  This Security Agreement may be authenticated by
manual signature, facsimile or, if approved in writing by Agent, electronic
means, all of which shall be equally valid.

 

18.           GOVERNING LAW.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF
THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS SECURITY AGREEMENT AND THE OBLIGATIONS ARISING
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED
IN THAT STATE, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.  EACH
GRANTOR HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN
SAN FRANCISCO COUNTY, CITY OF SAN FRANCISCO, CALIFORNIA, SHALL HAVE EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN GRANTORS,
AGENT AND LENDERS PERTAINING TO THIS SECURITY AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT
OR ANY OF THE OTHER LOAN DOCUMENTS, PROVIDED, THAT AGENT, LENDERS AND GRANTORS
ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT
LOCATED OUTSIDE OF SAN FRANCISCO COUNTY, AND, PROVIDED, FURTHER, NOTHING IN THIS
AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR
TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION

 

17

--------------------------------------------------------------------------------

 

TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT.  EACH GRANTOR
EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR
SUIT COMMENCED IN ANY SUCH COURT, AND EACH GRANTOR HEREBY WAIVES ANY OBJECTION
WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR
FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.  EACH GRANTOR HEREBY
WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN
ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND
OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH
GRANTOR AT THE ADDRESS SET FORTH ON ANNEX I TO THE CREDIT AGREEMENT AND THAT
SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT
THEREOF AND FIVE (5) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE
PREPAID.

 

19.           WAIVER OF JURY TRIAL.  BECAUSE DISPUTES ARISING IN CONNECTION WITH
COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT DISPUTES
ARISING HEREUNDER OR RELATING HERETO BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS.  THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF
THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, AMONG AGENT, LENDERS, AND
GRANTORS ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED IN CONNECTION WITH, THIS SECURITY AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO.

 

20.           SECTION TITLES.  The Section titles contained in this Security
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.

 

21.           NO STRICT CONSTRUCTION.  The parties hereto have participated
jointly in the negotiation and drafting of this Security Agreement.  In the
event an ambiguity or question of intent or interpretation arises, this Security
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Security Agreement.

 

22.           ADVICE OF COUNSEL.  Each of the parties represents to each other
party hereto that it has discussed this Security Agreement and, specifically,
the provisions of Section 18 and Section 19, with its counsel.

 

 

18

--------------------------------------------------------------------------------

 

23.           BENEFIT OF LENDERS.  All Liens granted or contemplated hereby
shall be for the benefit of Agent, individually, and Lenders, and all proceeds
or payments realized from Collateral in accordance herewith shall be applied to
the Obligations in accordance with the terms of the Credit Agreement.

 

 

 

[Signature Pages to Follow]

 

 

19

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be executed and delivered by its duly authorized officer as of the
date first set forth above.

 

 

WESTAFF, INC.,

 

a Delaware corporation

 

 

 

By:

/s/ Dirk A. Sodestrom

 

 

 

 

Name:

Dirk A. Sodestrom

 

 

 

 

Title:

Senior Vice President and Chief Financial Officer

 

 

 

WESTAFF (USA), INC.,

 

a California corporation

 

 

 

By:

/s/ Dirk A. Sodestrom

 

 

 

 

Name:

Dirk A. Sodestrom

 

 

 

 

Title:

Senior Vice President and Chief Financial Officer

 

 

 

WESTAFF SUPPORT, INC.,

 

a California corporation

 

 

 

By:

/s/ Dirk A. Sodestrom

 

 

 

 

Name:

Dirk A. Sodestrom

 

 

 

 

Title:

Senior Vice President and Chief Financial Officer

 

 

 

WESTAFF (GP), INC.,

 

a California corporation

 

 

 

By:

/s/ Dirk A. Sodestrom

 

 

 

 

Name:

Dirk A. Sodestrom

 

 

 

 

Title:

Senior Vice President and Chief Financial Officer

 

20

--------------------------------------------------------------------------------

 

 

WESTAFF (LP), INC.,

 

a California corporation

 

 

 

By:

/s/ Dirk A. Sodestrom

 

 

 

 

Name:

Dirk A. Sodestrom

 

 

 

 

Title:

Senior Vice President and Chief Financial Officer

 

 

 

WESTAFF LIMITED PARTNERSHIP,

 

a Delaware limited partnership

 

 

 

By:

/s/ Dirk A. Sodestrom

 

 

 

 

Name:

Dirk A. Sodestrom

 

 

 

 

Title:

Senior Vice President and Chief Financial Officer

 

 

 

WESTAFF (CA), INC.,

 

a California corporation

 

 

 

By:

/s/ Dirk A. Sodestrom

 

 

 

 

Name:

Dirk A. Sodestrom

 

 

 

 

Title:

Senior Vice President and Chief Financial Officer

 

21

--------------------------------------------------------------------------------

 

 

WESTERN MEDICAL SERVICES, INC.,

 

a California corporation

 

 

 

By:

/s/ Gary A. Kittleson

 

 

 

 

Name:

Gary A. Kittleson

 

 

 

 

Title:

Executive Vice President and Chief Financial Officer

 

 

 

MEDIAWORLD INTERNATIONAL,

 

a California corporation

 

 

 

By:

/s/ Dirk A. Sodestrom

 

 

 

 

Name:

Dirk A. Sodestrom

 

 

 

 

Title:

Senior Vice President and Chief Financial Officer

 

 

 

GENERAL ELECTRIC CAPITAL CORPORATION, as Agent

 

 

 

By:

/s/ Lawrence E. Ridgway

 

 

 

 

Name:

Lawrence Ridgway

 

 

 

 

Title:

Duly Authorized Signatory

 

22

--------------------------------------------------------------------------------