Exhibit 10.8.20.11

 

FORBEARANCE AGREEMENT, LIMITED WAIVER

AND CONSENT OF GUARANTORS

 

 

 

                This FORBEARANCE AGREEMENT, LIMITED WAIVER AND CONSENT OF
GUARANTORS (this “Forbearance”) is dated as of October 18, 2007 and entered into
by and among WESTAFF, INC., a Delaware corporation (“Parent”), WESTAFF (USA),
INC., a California corporation (“US Borrower”), WESTAFF (U.K.) LIMITED, a
limited liability company incorporated under the laws of England and Wales (“UK
Borrower”) WESTAFF SUPPORT, INC., a California corporation (“Term Borrower”, and
together with US Borrower and UK Borrower, the “Borrowers”), the financial
institutions signatory hereto that are parties as Lenders to the Credit
Agreement referred to below (the “Lenders”), and GENERAL ELECTRIC CAPITAL
CORPORATION, as agent (in such capacity, the “Agent”) for the US Revolving
Lenders, the Term Lenders and the UK Revolving Lenders (as defined in the Credit
Agreement referred to below) and as a US Revolving Lender, a UK Revolving Lender
and a Term Lender, and BANK OF AMERICA, N.A., as a US Revolving Lender, a UK
Revolving Lender and a Term Lender, is made with respect to the subject matter
contained herein.

 

Recitals

 

                Whereas, the Parent, the Borrowers, the Lenders and Agent have
entered into that certain Multicurrency Credit Agreement dated as of May 17,
2002 as amended by that certain First Amendment to Multicurrency Credit
Agreement, Limited Waivers and Consent of Guarantors, dated as of October 31,
2002, as further amended by that certain Second Amendment to Multicurrency
Credit Agreement, Limited Waivers and Consent of Guarantors, dated as of June
13, 2003, that certain Third Amendment to Multicurrency Credit Agreement,
Limited Waivers and Consent of Guarantors, dated as of September 25, 2003, that
certain Fourth Amendment to Multicurrency Credit Agreement, Limited Waivers and
Consent of Guarantors, dated as of February 20, 2004, that certain Fifth
Amendment to Multicurrency Credit Agreement and Consent of Guarantors, dated as
of July 31, 2004, that certain Sixth Amendment to Multicurrency Credit Agreement
and Consent of Guarantors, dated as of January 5, 2004, that certain Seventh
Amendment to Multicurrency Credit Agreement, Limited Waiver and Consent of
Guarantors, dated as of August 19, 2005, that certain Eighth Amendment to
Multicurrency Credit Agreement, Limited Waiver and Consent of Guarantors dated
as of March 1, 2006, that certain Ninth Amendment To Multicurrency Credit
Agreement And Consent Of Guarantors. dated as of July 25, 2006, that certain
Tenth Amendment To Multicurrency Credit Agreement and Consent of Guarantors
dated as of January 2, 2007, and that certain Eleventh Amendment To
Multicurrency Credit Agreement and Consent of Guarantors dated as of May 24,
2007  and as further modified by certain consents and waivers of the Lenders
prior to the date hereof (as so amended and modified, the “Credit Agreement”;
capitalized terms used in this Forbearance without definition shall have the
meanings given such terms in the Credit Agreement); and

                Whereas, certain Events of Default described in Annex I attached
hereto (the “Specified Events of Default” have occurred and are continuing and
the Agent and Lenders have

 

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the right to enforce their rights and remedies with respect to the Obligations
under the Loan Documents; and

                Whereas, Borrowers have asked that the Agent and the Lenders
waive the Waived Event of Default (as defined herein) described in Section 6.1
hereof, and the Agent and the Lenders have agreed to waive the Waived Event of
Default; and

                Whereas, the Borrowers have requested that the Agent and each
Lender agree to forbear, and Agent and each Lender are willing to forbear to the
extent provided herein and subject to the terms and conditions contained herein,
from enforcing any remedies available to them under the Loan Documents that
arise as a result of the Specified Events of Default for a limited period of
time, and to continue advancing Loans under the Credit Agreement, provided that
the Credit Parties meet the conditions set forth here in and otherwise comply
with this Forbearance.

                Now, therefore, in consideration of the premises and the mutual
agreements set forth herein and for other consideration the receipt of and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:

1.             RECITALS.  THE RECITALS SET FORTH ABOVE ARE TRUE AND CORRECT AND
ARE HEREBY INCORPORATED INTO THE BODY OF THIS FORBEARANCE BY REFERENCE.

2.             DEFINED TERMS.  THE FOLLOWING TERMS SHALL HAVE THE MEANINGS SET
FORTH BELOW:

2.1        “EFFECTIVE DATE” MEANS THE DATE ON WHICH ALL CONDITIONS TO THE
EFFECTIVENESS OF THIS FORBEARANCE SET FORTH IN SECTION 8 SHALL HAVE BEEN
SATISFIED.

2.2        “FORBEARANCE DEFAULT” MEANS:

(A)                   AFTER GIVING EFFECT TO THE AGREEMENTS OF THE PARTIES SET
FORTH HEREIN, THE OCCURRENCE OF ANY DEFAULT OR EVENT OF DEFAULT OTHER THAN THE
SPECIFIED EVENTS OF DEFAULT; OR

(B)                   THE FAILURE OF ANY REPRESENTATION OR WARRANTY MADE BY ANY
BORROWER OR ANY OTHER CREDIT PARTY UNDER OR IN CONNECTION WITH THIS FORBEARANCE
(INCLUDING ANY REPRESENTATION OR WARRANTY REQUIRED TO BE MADE FROM TIME TO TIME
PURSUANT TO SECTION 5.5 OF THIS FORBEARANCE) TO BE TRUE AND COMPLETE IN ALL
MATERIAL RESPECTS AS OF THE DATE WHEN MADE; OR

(C)                   AT ANY TIME DURING THE FIRST SIXTY (60) DAYS OF THE
FORBEARANCE PERIOD (SUCH PERIOD, THE “INITIAL FORBEARANCE PERIOD”), THE US
BORROWER SHALL HAVE BORROWING AVAILABILITY OF LESS THAN U.S. $1,000,000 FOR MORE
THAN ANY TWO (2) CONSECUTIVE BUSINESS DAYS; OR

(D)                   THE FAILURE, AS OF THE TENTH (10TH) BUSINESS DAY AFTER THE
EXPIRATION OF THE INITIAL FORBEARANCE PERIOD AND AS OF THE END OF EACH SEVEN (7)
DAY PERIOD THEREAFTER, OF THE US BORROWER TO HAVE AN AVERAGE DAILY BORROWING
AVAILABILITY FOR THE IMMEDIATELY PRECEDING TEN (10) BUSINESS DAYS OF AT LEAST
U.S. $8,000,000; OR

 

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(E)                   ANY DEFAULT (OTHER THAN ANY OTHER FORBEARANCE DEFAULT) BY
BORROWERS OR ANY OTHER CREDIT PARTY UNDER THIS FORBEARANCE, INCLUDING, WITHOUT
LIMITATION, A BREACH BY SUCH BORROWER OR CREDIT PARTY OF ANY COVENANT OR
OBLIGATION SPECIFIED BELOW OR THE FAILURE OF ANY BORROWER OR ANY OTHER CREDIT
PARTY TO PERFORM ANY OF ITS OBLIGATIONS HEREUNDER, AND, EXCEPT WITH RESPECT TO A
BREACH OF THIS FORBEARANCE THAT CANNOT BE CURED (INCLUDING, WITHOUT LIMITATION,
A BREACH OF SECTION 5.2), SUCH DEFAULT CONTINUES FOR FIVE (5) BUSINESS DAYS; OR

(F)                    THE COMMENCEMENT OF A RECEIVERSHIP, INSOLVENCY PROCEEDING
UNDER ANY OF THE INSOLVENCY LAWS, ASSIGNMENT FOR THE BENEFIT OF CREDITORS OR
OTHER ACTION WITH RESPECT TO ANY BORROWER OR ANY OTHER CREDIT PARTY SEEKING THE
ISSUANCE OF A WARRANT OF ATTACHMENT, EXECUTION, DISTRAINT OR SIMILAR PROCESS
RESULTING IN CONTROL OR POSSESSION AGAINST ANY MATERIAL PART OF SUCH BORROWER’S
OR CREDIT PARTY’S ASSETS.

2.3        “FORBEARANCE PERIOD” MEANS THE PERIOD OF TIME FROM THE EFFECTIVE DATE
TO AND INCLUDING THE FORBEARANCE TERMINATION DATE

2.4        “SPECIFIED EVENTS OF DEFAULT” MEANS THOSE EVENTS OF DEFAULT DESCRIBED
ON ANNEX I TO THIS FORBEARANCE.

2.5        “FORBEARANCE TERMINATION DATE” MEANS THE EARLIER TO OCCUR OF (A) 5:00
P.M., LOS ANGELES TIME, ON FEBRUARY 15, 2008, OR (B) THE DATE UPON WHICH A
FORBEARANCE DEFAULT OCCURS.

2.6        “WAIVED EVENT OF DEFAULT” MEANS THAT EVENT OF DEFAULT DESCRIBED IN
SECTION 6.1 OF THIS FORBEARANCE.

3.             FORBEARANCE.  SUBJECT TO THE CONDITIONS AND UPON THE TERMS SET
FORTH IN THIS FORBEARANCE:

3.1        EACH OF THE BORROWERS AND THE OTHER CREDIT PARTIES AGREES AND
ACKNOWLEDGES THAT (I) EACH OF THE SPECIFIED EVENTS OF DEFAULT HAS OCCURRED AND
IS CONTINUING, (II) EACH OF THE SPECIFIED EVENTS OF DEFAULTS IS INCURABLE AND IS
NOT SUBJECT TO ANY GRACE OR CURE PERIOD, (III) EXCEPT FOR THE SPECIFIED EVENTS
OF DEFAULT AND THE WAIVED EVENT OF DEFAULT, NO OTHER DEFAULTS OR EVENTS OF
DEFAULT HAVE OCCURRED AND ARE CONTINUING AS OF THE DATE HEREOF, AND (IV) BUT FOR
THIS FORBEARANCE AGREEMENT, EACH SPECIFIED EVENT OF DEFAULT WOULD RELIEVE AGENT
AND LENDERS FROM ANY OBLIGATION TO MAKE ANY LOANS OR PROVIDE OTHER FINANCIAL
ACCOMMODATIONS UNDER THE CREDIT AGREEMENT AND OTHER LOAN DOCUMENTS, AND IN
ACCORDANCE WITH THE TERMS OF THE LOAN DOCUMENTS WOULD ENTITLE AGENT, LENDERS
AND/OR THE REQUISITE LENDERS, AS APPLICABLE, TO, AMONG OTHER THINGS, (A) SUSPEND
OR TERMINATE ANY COMMITMENT TO PROVIDE SWING LINE LOANS, REVOLVING LOANS, TERM
LOANS OR UK REVOLVING LOANS OR PROVIDE OTHER FINANCIAL ACCOMMODATIONS, INCLUDING
LETTERS OF CREDIT,  UNDER ANY OR ALL OF THE CREDIT AGREEMENT AND THE OTHER LOAN
DOCUMENTS, (B) DECLARE ALL OBLIGATIONS TO BE IMMEDIATELY DUE AND PAYABLE AND
WITHOUT NOTICE OR DEMAND, AND/OR (C) TAKE ANY AND ALL ENFORCEMENT ACTIONS
(INCLUDING, WITHOUT LIMITATION, THE ENFORCEMENT OF LIENS AND SECURITY INTERESTS
IN THE COLLATERAL) OR OTHERWISE EXERCISE ANY OR ALL RIGHTS AND REMEDIES PROVIDED
FOR BY ANY OR ALL OF THE CREDIT AGREEMENT OR OTHER LOAN DOCUMENTS OR APPLICABLE
LAW.

 

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3.2        PROVIDED THAT NO FORBEARANCE DEFAULT OCCURS, EACH OF THE AGENT AND
THE LENDERS AGREES THAT, (A) UNTIL THE EXPIRATION OF THE FORBEARANCE PERIOD AND
EXCEPT AS SET FORTH IN THIS FORBEARANCE, IT WILL FORBEAR FROM THE EXERCISE OF
DEFAULT-RELATED REMEDIES WITH RESPECT TO THE OBLIGATIONS AGAINST BORROWERS OR
ANY OTHER CREDIT PARTY UNDER THE CREDIT AGREEMENT OR ANY OTHER LOAN DOCUMENT
(“DEFAULT-RELATED REMEDIES”) SOLELY WITH RESPECT TO THE SPECIFIED EVENTS OF
DEFAULT; AND (B) DURING THE FORBEARANCE PERIOD, THE LENDERS AGREE TO CONTINUE TO
ADVANCE LOANS SUBJECT TO THE TERMS AND CONDITIONS SET FORTH HEREIN AND THE TERMS
AND CONDITIONS OF THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS; PROVIDED,
HOWEVER, FROM AND AFTER THE DATE OF THIS FORBEARANCE, THE LENDERS SHALL HAVE NO
OBLIGATION TO MAKE LIBOR LOANS OR CONVERT ANY US INDEX RATE LOANS INTO LIBOR
LOANS.

3.3        ON THE FORBEARANCE TERMINATION DATE, AGENT’S AND ANY LENDERS’
AGREEMENT HEREUNDER TO FORBEAR FROM EXERCISING THEIR DEFAULT-RELATED REMEDIES
WITH RESPECT TO THE SPECIFIED EVENTS OF DEFAULT SHALL IMMEDIATELY AND
AUTOMATICALLY TERMINATE WITHOUT THE REQUIREMENT OF ANY DEMAND, PRESENTMENT,
PROTEST, OR NOTICE OF ANY KIND, ALL OF WHICH EACH OF THE BORROWERS AND THE OTHER
CREDIT PARTIES WAIVES.  EACH OF THE BORROWERS AND THE OTHER CREDIT PARTIES
AGREES THAT AGENT AND LENDERS MAY AT ANY TIME THEREAFTER PROCEED TO EXERCISE ANY
AND ALL OF THEIR RESPECTIVE RIGHTS AND REMEDIES UNDER ANY OR ALL OF THE CREDIT
AGREEMENT AND OTHER LOAN DOCUMENTS AND/OR APPLICABLE LAW OR EQUITY, INCLUDING,
WITHOUT LIMITATION, THEIR RESPECTIVE DEFAULT-RELATED REMEDIES IN CONNECTION WITH
THE SPECIFIED EVENTS OF DEFAULT.

3.4        THE BORROWERS AND THE OTHER CREDIT PARTIES FURTHER ACKNOWLEDGE AND
AGREE THAT NEITHER ANY ACTION TAKEN OR NOT TAKEN BY AGENT OR ANY LENDER PRIOR TO
THE DATE HEREOF NOR THE EXECUTION AND DELIVERY OF THIS FORBEARANCE (I) OTHER
THAN AS EXPRESSLY SET FORTH IN SECTION 6.1 WITH RESPECT TO THE WAIVER OF THE
WAIVED EVENT OF DEFAULT CONSTITUTES A WAIVER OF ANY DEFAULT OR EVENT OF DEFAULT,
INCLUDING THE SPECIFIED EVENTS OF DEFAULT, OR (II) PREJUDICES ANY RIGHTS OR
REMEDIES WHICH THE ANY AGENT OR ANY LENDER MAY HAVE, NOW OR IN THE FUTURE, UNDER
ANY OF THE LOAN DOCUMENTS OR IN LAW OR EQUITY, INCLUDING ANY RIGHTS OR REMEDIES
WITH RESPECT TO THE SPECIFIED EVENTS OF DEFAULT EXCEPT SOLELY TO THE EXTENT THAT
THE AGENT AND LENDERS HAVE AGREED, SUBJECT TO THE TERMS AND CONDITIONS OF THIS
FORBEARANCE, TO FORBEAR DURING THE FORBEARANCE PERIOD FROM EXERCISING THEIR
RIGHTS AND REMEDIES WITH RESPECT TO THE SPECIFIED EVENTS OF DEFAULT.

3.5        ANY AGREEMENT BY AGENT AND LENDERS TO EXTEND THE FORBEARANCE PERIOD
MUST BE SET FORTH IN WRITING AND SIGNED BY THE RESPECTIVE OFFICERS OF AGENT AND
THE REQUISITE LENDERS.  EACH OF THE BORROWER AND THE OTHER CREDIT PARTIES
ACKNOWLEDGES THAT AGENT AND LENDERS HAVE NOT MADE ANY ASSURANCES CONCERNING ANY
POSSIBILITY OF AN EXTENSION OF THE FORBEARANCE PERIOD AND ARE UNDER NO
OBLIGATION WHATSOEVER TO CONSIDER OR ENTER INTO SUCH AN EXTENSION.

4.             ACKNOWLEDGMENT OF DEFAULT RATE.  EACH OF THE BORROWERS AND THE
OTHER CREDIT PARTIES AGREE AND ACKNOWLEDGE THAT, PURSUANT TO SECTION 1.5(D) OF
THE CREDIT AGREEMENT AND NOTWITHSTANDING THIS FORBEARANCE, FROM AND AFTER JULY
7, 2007 THE INTEREST RATE APPLICABLE TO THE LOANS (INCLUDING ANY LOANS ADVANCED
DURING THE FORBEARANCE PERIOD) AND THE LETTER OF CREDIT FEES (BUT NOT THE UNUSED
LINE FEE), SHALL BE INCREASED BY TWO PERCENTAGE POINTS (2%) PER ANNUM ABOVE THE
RATES OF INTEREST OR THE RATE OF SUCH LETTER OF CREDIT FEES OTHERWISE APPLICABLE
UNDER THE CREDIT AGREEMENT.

 

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5.             ADDITIONAL AGREEMENTS OF THE PARTIES.

5.1        NOTWITHSTANDING PARAGRAPH B OF ANNEX G OF THE CREDIT AGREEMENT, THE
PARTIES HERETO AGREE THAT THE BORROWERS AND OTHER CREDIT PARTIES SHALL NOT,
DURING THE FORBEARANCE PERIOD, BE REQUIRED TO SATISFY THE FIXED CHARGE COVERAGE
RATIO IF THE US BORROWER HAS BORROWING AVAILABILITY OF LESS THAN U.S. $7,500,000
ON ANY DATE OF DETERMINATION SPECIFIED IN THE CREDIT AGREEMENT, AND SUCH FAILURE
TO SO COMPLY DURING THE FORBEARANCE PERIOD SHALL NOT CONSTITUTE A DEFAULT OR AN
EVENT OF DEFAULT UNDER THE CREDIT AGREEMENT.

5.2        NOTWITHSTANDING PARAGRAPH (C)(II) OF ANNEX G OF THE CREDIT AGREEMENT,
THE PARTIES HERETO AGREE THAT THE BORROWERS AND OTHER CREDIT PARTIES SHALL NOT
BE REQUIRED TO SATISFY THE MINIMUM EBITDA REQUIREMENT SPECIFIED THEREIN FOR THE
QUARTER ENDING NOVEMBER 3, 2007, PROVIDED HOWEVER, THE PARENT AND ITS
SUBSIDIARIES SHALL HAVE A MINIMUM EBITDA FOR THE 13 FISCAL PERIODS ENDED
NOVEMBER 3, 2007 OF AT LEAST $1,000,000, AND ANY SUCH FAILURE SHALL NOT
CONSTITUTE A DEFAULT OR AN EVENT OF DEFAULT UNDER THE CREDIT AGREEMENT UNLESS
THE MINIMUM EBITDA REQUIREMENT SET FORTH IN THE PROVISO ABOVE IS NOT THEN
SATISFIED.

5.3        THE US BORROWER AGREES THAT IT SHALL PROVIDE TO THE US AGENT
CONSOLIDATED AND CONSOLIDATING PROJECTIONS FOR PARENT AND ITS SUBSIDIARIES FOR
EACH FISCAL PERIOD THROUGH THE END OF FISCAL YEAR 2008.  SUCH PROJECTIONS SHALL
INCLUDE CONSOLIDATED AND CONSOLIDATING INCOME STATEMENTS, BALANCE SHEETS AND
STATEMENTS OF CASH FLOWS FOR PARENT AND ITS SUBSIDIARIES.  THE US BORROWER WILL
DELIVER SUCH PROJECTIONS NO LATER THAN NOVEMBER 15, 2007.

5.4        IN CONSIDERATION OF THIS FORBEARANCE AND THE OTHER AGREEMENTS SET
FORTH HEREIN, THE BORROWERS HEREBY AGREE TO PAY TO US AGENT FOR THE BENEFIT OF
US AGENT AND THE LENDERS AN AGGREGATE FEE OF $183,333 (THE “FORBEARANCE FEE”),
WHICH FEE SHALL BE PAYABLE IN FOUR INSTALLMENTS OF $45,833.25, (I) THE FIRST
INSTALLMENT OF WHICH SHALL BE PAID BY BORROWERS NO LATER THAN THE EFFECTIVE
DATE, (II) THE SECOND INSTALLMENT OF WHICH SHALL BE PAID BY BORROWERS NO LATER
THAN THE 30TH DAY FOLLOWING THE EFFECTIVE DATE, (III) THE THIRD INSTALLMENT OF
WHICH SHALL BE PAID BY BORROWERS NO LATER THAN THE 60TH DAY FOLLOWING THE
EFFECTIVE DATE, AND (IV) THE FOURTH INSTALLMENT OF WHICH SHALL BE PAID BY
BORROWERS NO LATER THAN THE 90TH DAY FOLLOWING THE EFFECTIVE DATE, PROVIDED
HOWEVER, THAT THE US AGENT AND LENDERS HEREBY AGREE THAT IF THIS FORBEARANCE
LETTER IS TERMINATED BY WRITTEN MUTUAL AGREEMENT OF THE PARTIES HERETO (WHICH
AGREEMENT SHALL BE CONDITIONED UPON (A) THE US BORROWER HAVING ACHIEVED
BORROWING AVAILABILITY ACCEPTABLE TO THE AGENT AND LENDERS, (B) THE US BORROWER
HAVING SUCCESSFULLY NEGOTIATED A REDUCTION OF ITS OUTSTANDING LETTER OF CREDIT
IN FAVOR OF [TRAVELERS] ON TERMS ACCEPTABLE TO AGENT AND THE LENDERS, (C) THE
BORROWERS HAVING MET (IN THE DETERMINATION OF THE AGENT AND LENDERS) THE
PROJECTIONS DELIVERED PURSUANT TO SECTION 5.3 OF THIS FORBEARANCE (WHICH
PROJECTIONS SHALL BE SATISFACTORY TO AGENT AND LENDERS), AND (D) SUCCESSFUL
NEGOTIATION OF A MUTUALLY ACCEPTABLE CREDIT AGREEMENT OR AMENDMENT TO THE
EXISTING CREDIT AGREEMENT (IT BEING UNDERSTOOD THAT ANY SUCH CREDIT AGREEMENT OR
AMENDMENT SHALL BE SUBJECT TO THE CREDIT APPROVAL OF THE LENDERS)), ANY
INSTALLMENT DUE ON A DATE AFTER SUCH TERMINATION DATE SHALL NO LONGER BE PAYABLE
BY THE BORROWERS.  EXCEPT AS SET FORTH IN THE PROVISO OF THE IMMEDIATELY
PRECEDING SENTENCE, THE ENTIRE FORBEARANCE FEE SHALL BE PAYABLE IRRESPECTIVE OF
WHETHER THE FORBEARANCE TERMINATION DATE OCCURS ON OR BEFORE THE DATE UPON WHICH
ANY INSTALLMENT OF THE FORBEARANCE FEE IS PAYABLE IN ACCORDANCE WITH THE
IMMEDIATELY PRECEDING SENTENCE, AND THE FORBEARANCE FEE (OR ANY PORTION THEREOF)
SHALL NOT BE REFUNDABLE TO THE BORROWERS UNDER ANY CIRCUMSTANCES, INCLUDING,
WITHOUT LIMITATION THE

 

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OCCURRENCE OF THE FORBEARANCE TERMINATION DATE BEFORE FEBRUARY 15, 2008.  THIS
PROVISION SHALL SURVIVE ANY TERMINATION OF THIS FORBEARANCE.

5.5        THE BORROWERS HEREBY AGREE THAT IN ADDITION TO ANY REQUIREMENTS SET
FORTH IN THE CREDIT AGREEMENT, AT ANY TIME THE REPRESENTATIONS AND WARRANTIES IN
THE CREDIT AGREEMENT ARE REQUIRED TO BE MADE OR ARE DEEMED TO BE MADE IN THE
CREDIT AGREEMENT OR UNDER ANY OTHER LOAN DOCUMENT (INCLUDING, WITHOUT
LIMITATION, IN CONNECTION WITH AN ADVANCE), THE PARENT AND THE US BORROWER,
JOINTLY AND SEVERALLY, AND THE UK BORROWER ONLY IN RESPECT OF ITSELF, SEVERALLY,
WILL BE DEEMED TO REPRESENT AND WARRANT THAT NO EVENT HAS OCCURRED AND IS
CONTINUING THAT WOULD CONSTITUTE A FORBEARANCE DEFAULT (WITHOUT GIVING EFFECT TO
ANY GRACE PERIOD SET FORTH IN CLAUSE (F) OF SUCH DEFINITION).

 

6.             LIMITED WAIVER OF EVENT OF DEFAULT.  SUBJECT TO THE SATISFACTION
OF THE CONDITIONS SET FORTH HEREIN, THE AGENT AND THE LENDERS HEREBY AGREE AS
FOLLOWS:

6.1        THE AGENTS AND THE LENDERS HEREBY WAIVE THE EVENT OF DEFAULT UNDER
THE CREDIT AGREEMENT THAT OCCURRED DUE TO THE FAILURE OF THE US BORROWER TO PAY
ON AUGUST 18, 2007, OR AT ANY TIME THEREAFTER, AMOUNTS OWING UNDER THAT CERTAIN
AMENDED AND RESTATED UNSECURED SUBORDINATED NOTE IN FAVOR OF ROBERT W. STOVER
DUE AUGUST 18, 2007.

7.             REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE BORROWERS. 
THE PARENT AND THE US BORROWER, JOINTLY AND SEVERALLY, AND THE UK BORROWER, ONLY
IN RESPECT OF ITSELF, SEVERALLY, MAKE THE FOLLOWING REPRESENTATIONS AND
WARRANTIES TO EACH LENDER AND EACH AGENT WITH RESPECT TO ALL CREDIT PARTIES:

7.1        POWER AND AUTHORITY.  EACH OF THE CREDIT PARTIES HAS ALL CORPORATE OR
OTHER ORGANIZATIONAL POWER AND AUTHORITY TO ENTER INTO THIS FORBEARANCE AND, AS
APPLICABLE, THE CONSENT OF GUARANTORS ATTACHED HERETO (THE “CONSENT”), AND TO
CARRY OUT THE TRANSACTIONS CONTEMPLATED BY, AND TO PERFORM ITS OBLIGATIONS UNDER
OR IN RESPECT OF, THIS FORBEARANCE (INCLUDING, WITHOUT LIMITATION, THE CONSENT).

7.2        DUE AUTHORIZATION, NON-CONTRAVENTION.  THE EXECUTION, DELIVERY AND
PERFORMANCE BY EACH CREDIT PARTY OF THIS FORBEARANCE AND THE CONSENT, AS
APPLICABLE, AND THE PERFORMANCE OF THE OBLIGATIONS OF EACH CREDIT PARTY UNDER OR
IN RESPECT OF THIS FORBEARANCE (INCLUDING, WITHOUT LIMITATION, THE CONSENT)
(A) HAVE BEEN DULY AUTHORIZED BY ALL NECESSARY CORPORATE, LIMITED LIABILITY
COMPANY OR PARTNERSHIP ACTION, (B) DO NOT CONTRAVENE ANY PROVISION OF SUCH
PERSON’S CHARTER, BYLAWS OR PARTNERSHIP OR OPERATING AGREEMENT, AS APPLICABLE,
(C) DO NOT VIOLATE ANY LAW OR REGULATION OR ANY ORDER OR DECREE OF ANY COURT OR
GOVERNMENTAL AUTHORITY OF THE UNITED STATES OR THE UNITED KINGDOM OR, IN EACH
CASE, ANY POLITICAL SUBDIVISION THEREOF, (D) DO NOT CONFLICT WITH OR RESULT IN
THE BREACH OR TERMINATION OF, CONSTITUTE A DEFAULT UNDER OR ACCELERATE OR PERMIT
THE ACCELERATION OF ANY PERFORMANCE REQUIRED BY, ANY INDENTURE, MORTGAGE, DEED
OF TRUST, LEASE, AGREEMENT OR OTHER INSTRUMENT TO WHICH SUCH PERSON IS A PARTY
OR BY WHICH SUCH PERSON OR ANY OF ITS PROPERTY IS BOUND, EXCEPT WHERE ANY SUCH
VIOLATIONS, INDIVIDUALLY OR IN THE AGGREGATE, COULD NOT REASONABLY BE EXPECTED
TO HAVE A MATERIAL ADVERSE EFFECT, AND (E) DO NOT RESULT IN THE CREATION OR
IMPOSITION OF ANY LIEN ON ANY OF THE PROPERTY OF SUCH PERSON.

 

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7.3        EXECUTION, DELIVERY AND ENFORCEABILITY.  THIS FORBEARANCE AND THE
CONSENT HAVE BEEN DULY EXECUTED AND DELIVERED BY EACH CREDIT PARTY WHICH IS A
PARTY THERETO AND THIS FORBEARANCE AND THE CONSENT, CONSTITUTE THE LEGAL, VALID
AND BINDING OBLIGATIONS OF SUCH CREDIT PARTY, ENFORCEABLE IN ACCORDANCE WITH
THEIR TERMS, EXCEPT AS ENFORCEABILITY MAY BE LIMITED BY INSOLVENCY LAWS OR
SIMILAR LAWS AFFECTING CREDITORS’ RIGHTS GENERALLY OR BY GENERAL EQUITABLE
PRINCIPLES.

7.4        NO DEFAULT, EVENT OF DEFAULT OR FORBEARANCE DEFAULT.  EXCEPT FOR THE
SPECIFIED EVENTS OF DEFAULT, NO EVENT HAS OCCURRED AND IS CONTINUING AFTER
GIVING EFFECT TO THIS FORBEARANCE (INCLUDING, WITHOUT LIMITATION, THE CONSENT)
OR WILL RESULT FROM THE EXECUTION AND DELIVERY OF THIS FORBEARANCE OR THE
CONSENT THAT WOULD CONSTITUTE A DEFAULT, AN EVENT OF DEFAULT OR A FORBEARANCE
DEFAULT (WITHOUT GIVING EFFECT TO ANY GRACE PERIOD SET FORTH IN CLAUSE (F) OF
SUCH DEFINITION).

7.5        REPRESENTATIONS AND WARRANTIES.  AFTER GIVING EFFECT TO THIS
FORBEARANCE, EACH OF THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THE LOAN
DOCUMENTS IS AND WILL BE TRUE AND CORRECT IN ALL MATERIAL RESPECTS ON AND AS OF
THE DATE HEREOF AND AS OF THE EFFECTIVE DATE OF THIS FORBEARANCE, EXCEPT TO THE
EXTENT THAT SUCH REPRESENTATIONS AND WARRANTIES SPECIFICALLY RELATE TO AN
EARLIER DATE, IN WHICH CASE THEY WERE TRUE, CORRECT AND COMPLETE IN ALL MATERIAL
RESPECTS AS OF SUCH EARLIER DATE.

7.6        OTHER MATERIAL AGREEMENTS.  THE OCCURRENCE OF THE SPECIFIED EVENTS OF
DEFAULT DO NOT RESULT IN A BREACH OR DEFAULT UNDER ANY OTHER MATERIAL AGREEMENT
OR CONTRACT TO WHICH ANY OF THE BORROWERS OR CREDIT PARTIES ARE A PARTY OR BY
WHICH ITS PROPERTY MAY BE BOUND, EXCEPT FOR ANY SUCH BREACHES OR DEFAULTS WHICH
HAVE BEEN WAIVED.

8.             CONDITIONS TO EFFECTIVENESS OF THIS FORBEARANCE.  THIS
FORBEARANCE SHALL BE EFFECTIVE AS OF THE DATE THAT ALL OF THE FOLLOWING
CONDITIONS ARE SATISFIED, AS DETERMINED BY THE AGENT:

(I) SUCH FORBEARANCE HAS BEEN SIGNED BY, AND WHEN COUNTERPARTS HEREOF SHALL HAVE
BEEN DELIVERED TO THE US AGENT OR ITS COUNSEL (BY HAND DELIVERY, MAIL OR
TELECOPY) BY THE PARENT, THE BORROWERS AND THE LENDERS;

 

(II) EACH GUARANTOR SHALL HAVE DELIVERED TO THE US AGENT OR ITS COUNSEL EXECUTED
COUNTERPARTS OF THE CONSENT;

 

(III) BORROWERS SHALL HAVE PAID TO THE US AGENT FOR THE PRO-RATA BENEFIT OF THE
LENDERS THE FIRST INSTALLMENT OF THE FORBEARANCE FEE AS REQUIRED BY SECTION 4.4
HEREOF;

 

(IV) BORROWERS SHALL HAVE DELIVERED TO THE US AGENT OR ITS COUNSEL A CERTIFICATE
CERTIFYING (X) THAT THE CHARTERS, BYLAWS (OR OTHER SIMILAR ORGANIZATIONAL
DOCUMENTS) AND RESOLUTIONS AUTHORIZING THE EXECUTION, DELIVERY AND PERFORMANCE
BY THE CREDIT PARTIES OF THEIR OBLIGATIONS UNDER THE CREDIT AGREEMENT AND THE
OTHER LOAN DOCUMENTS, EACH IN THE FORM DELIVERED TO THE AGENT ON THE CLOSING
DATE, ARE IN FULL FORCE AND EFFECT AND HAVE NOT BEEN AMENDED, RESCINDED OR
OTHERWISE MODIFIED

 

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AS OF THE DATE OF THIS FORBEARANCE (OTHER THAN AN AMENDMENT TO PARENT’S BYLAWS
TO INCREASE THE NUMBER OF MEMBERS OF THE BOARD OF DIRECTORS FROM FIVE TO NINE),
(Y) THAT THE RESOLUTIONS ATTACHED THERETO ARE THE ONLY RESOLUTIONS ADOPTED WITH
RESPECT TO THIS FORBEARANCE, AND (Z) THAT NO FURTHER AUTHORIZATION OR CONSENT IS
REQUIRED TO BE OBTAINED WITH RESPECT TO THE EXECUTION, DELIVERY AND PERFORMANCE
OF THIS FORBEARANCE, THE CONSENT AND THE CREDIT AGREEMENT AS MODIFIED HEREBY;
AND AN INCUMBENCY CERTIFICATE FOR EACH CREDIT PARTY; AND

 

(V) THE US BORROWER ON BEHALF OF ITSELF AND THE OTHER CREDIT PARTIES AND THE UK
BORROWER ON BEHALF OF ITSELF SHALL HAVE DELIVERED TO THE US AGENT OR ITS COUNSEL
A CERTIFICATE CERTIFYING THAT THE REPRESENTATIONS AND WARRANTIES CONTAINED
HEREIN AND IN THE LOAN DOCUMENTS ARE TRUE AND CORRECT IN ALL MATERIAL RESPECTS
AS OF SUCH DATE (EXCEPT TO THE EXTENT THAT SUCH REPRESENTATIONS AND WARRANTIES
SPECIFICALLY RELATE TO AN EARLIER DATE, IN WHICH CASE THEY WERE TRUE, CORRECT
AND COMPLETE IN ALL MATERIAL RESPECTS AS OF SUCH EARLIER DATE), AND OTHER THAN
THE SPECIFIED EVENTS OF DEFAULT, NO DEFAULT, EVENT OF DEFAULT OR FORBEARANCE
DEFAULT (WITHOUT GIVING EFFECT TO ANY GRACE PERIOD SET FORTH IN CLAUSE (F) OF
SUCH DEFINITION) HAS OCCURRED AND WILL BE CONTINUING (AFTER GIVING EFFECT TO
THIS FORBEARANCE, INCLUDING SECTION 6.1 HEREOF).

 

 

9.             EFFECT OF LIMITED WAIVER, FORBEARANCE; RATIFICATION.  THIS
FORBEARANCE IS A LOAN DOCUMENT.  FROM AND AFTER THE DATE ON WHICH THIS
FORBEARANCE BECOMES EFFECTIVE, ALL REFERENCES IN THE LOAN DOCUMENTS TO THE
CREDIT AGREEMENT SHALL MEAN THE CREDIT AGREEMENT AS AMENDED OR SUPPLEMENTED
HEREBY.  EXCEPT AS EXPRESSLY AMENDED OR WAIVED HEREBY, THE CREDIT AGREEMENT AND
THE OTHER LOAN DOCUMENTS, INCLUDING THE LIENS GRANTED THEREUNDER, SHALL REMAIN
IN FULL FORCE AND EFFECT, AND ALL TERMS AND PROVISIONS THEREOF ARE HEREBY
RATIFIED AND CONFIRMED.  EACH OF THE PARENT AND EACH BORROWER CONFIRMS THAT, AS
AMENDED HEREBY, EACH OF THE LOAN DOCUMENTS IS IN FULL FORCE AND EFFECT.  THE
LIMITED WAIVER CONTAINED IN SECTION 6.1 HEREOF, AND THE FORBEARANCE CONTAINED
HEREIN, ARE LIMITED TO THE PRECISE TERMS HEREOF, AND NEITHER THE AGENT NOR ANY
LENDER IS OBLIGATED TO CONSIDER OR CONSENT TO ANY ADDITIONAL REQUEST BY ANY
BORROWER, ANY CREDIT PARTY OR ANY OTHER PERSON FOR ANY OTHER FORBEARANCE,
WAIVER, CONSENT OR AMENDMENT WITH RESPECT TO THE CREDIT AGREEMENT OR ANY LOAN
DOCUMENTS.  EACH OF THE BORROWERS AND THE OTHER CREDIT PARTIES ACKNOWLEDGES THAT
THE LENDERS AND THE AGENT HAVE NOT MADE ANY ASSURANCES CONCERNING ANY
POSSIBILITY OF AN EXTENSION OF THE FORBEARANCE PERIOD.  THE FORBEARANCE
CONTAINED HEREIN IS NOT AND SHALL NOT BE DEEMED TO BE A WAIVER OF THE AGENT’S OR
ANY LENDER’S RIGHT TO PAYMENT OF ANY PRINCIPAL, INTEREST OR FEES OWING IN
RESPECT OF THE LOANS OR ANY OF THE OTHER OBLIGATIONS UNDER THE CREDIT AGREEMENT
OR ANY OTHER LOAN DOCUMENT.

10.           ACKNOWLEDGMENT OF OUTSTANDING AMOUNTS.  EACH OF THE BORROWERS AND
THE OTHER CREDIT PARTIES HEREBY ACKNOWLEDGES AND AGREES THAT THE AGGREGATE
OUTSTANDING PRINCIPAL AMOUNT OF THE US REVOLVING LOAN IS $36,639,049.00 (ALL IN
THE FORM OF OUTSTANDING LETTERS OF CREDIT AS OF OCTOBER 16, 2007) AND THE
AGGREGATE OUTSTANDING PRINCIPAL AMOUNT OF THE UK REVOLVING LOAN IS £9,833.71 (AS
OF OCTOBER 16, 2007), AND THAT SUCH PRINCIPAL AMOUNTS, PLUS INTEREST AND FEES,
ARE PAYABLE PURSUANT TO THE CREDIT AGREEMENT AND OTHER LOAN DOCUMENTS WITHOUT
DEFENSE, OFFSET, WITHHOLDING, COUNTERCLAIM OR DEDUCTION OF ANY KIND.  THIS
SECTION SHALL ANY SURVIVE TERMINATION OF THIS FORBEARANCE.

 

S-8

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11.           RELEASE AND WAIVER OF CLAIMS, DEFENSES AND RIGHTS OF SET OFF. 
EACH OF THE PARENT AND THE BORROWERS ACKNOWLEDGES THAT THE US AGENT, THE UK
AGENT AND THE LENDERS HAVE PERFORMED ALL OBLIGATIONS AND DUTIES OWED TO THE
PARENT AND THE BORROWERS UNDER THE LOAN DOCUMENTS THROUGH THE DATE HEREOF, AND
EACH SUCH PARTY FURTHER, ACKNOWLEDGES, REPRESENTS AND WARRANTS THAT NONE OF THE
PARENT OR THE BORROWERS HAS ANY CLAIM, CAUSE OF ACTION, DEFENSE, OR RIGHT OF SET
OFF AGAINST THE US AGENT, THE UK AGENT OR ANY LENDER OR LENDERS, AND, TO THE
EXTENT THAT ANY SUCH PARTY HAS ANY SUCH RIGHTS, EACH OF THE PARENT AND THE
BORROWERS HEREBY RELEASES, WAIVES, AND FOREVER DISCHARGES THE US AGENT, THE UK
AGENT AND THE LENDERS (TOGETHER WITH EACH OF THEIR PREDECESSORS, SUCCESSORS AND
ASSIGNS) AND EACH OF THEIR OFFICERS, DIRECTORS, EMPLOYEES, AGENT AND
REPRESENTATIVES FROM EACH ACTION, CAUSE OF ACTION, SUIT, DEBT, DEFENSE, RIGHT OF
SET OFF, OR OTHER CLAIM WHATSOEVER, IN LAW OR IN EQUITY, KNOWN OR UNKNOWN
AGAINST THE US AGENT, THE UK AGENT OR THE LENDERS, OR SUCH OFFICERS, EMPLOYEES,
AGENT OR REPRESENTATIVES.  EACH OF THE PARENT AND EACH BORROWER HEREBY
SPECIFICALLY WAIVES AS AGAINST THE US AGENT, THE UK AGENT OR THE LENDERS ANY
RIGHTS THEY OR ANY OF THEM MAY HAVE UNDER SECTION 1542 OF THE CALIFORNIA CIVIL
CODE, WHICH PROVIDES AS FOLLOWS:  “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS
WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE
TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY
AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”  THIS SECTION SHALL SURVIVE ANY
TERMINATION OF THIS FORBEARANCE.

12.           APPLICABLE LAW.  THIS FORBEARANCE SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS AND DECISIONS OF
THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE
AND ANY APPLICABLE LAWS OF THE UNITED STATES.  THIS SECTION SHALL SURVIVE ANY
TERMINATION OF THIS FORBEARANCE.

13.           COMPLETE AGREEMENT.  THIS FORBEARANCE SETS FORTH THE COMPLETE
AGREEMENT OF THE PARTIES IN RESPECT TO THE SUBJECT MATTER HEREOF.  THE
EXECUTION, DELIVERY AND EFFECTIVENESS OF THIS FORBEARANCE DO NOT CONSTITUTE A
WAIVER OF ANY DEFAULT OR EVENT OF DEFAULT, AMEND OR MODIFY ANY PROVISION OF ANY
LOAN DOCUMENT OR CONSTITUTE A COURSE OF DEALING OR ANY OTHER BASIS FOR ALTERING
THE OBLIGATIONS OF ANY CREDIT PARTY.

14.           CAPTIONS; COUNTERPARTS.  THE CATCHLINES AND CAPTIONS HEREIN ARE
INTENDED SOLELY FOR CONVENIENCE OF REFERENCE AND SHALL NOT BE USED TO INTERPRET
OR CONSTRUE THE PROVISIONS HEREOF. THIS FORBEARANCE MAY BE EXECUTED BY ONE OR
MORE OF THE PARTIES TO THIS FORBEARANCE ON ANY NUMBER OF SEPARATE COUNTERPARTS
(INCLUDING BY TELECOPY), ALL OF WHICH TAKEN TOGETHER SHALL CONSTITUTE BUT ONE
AND THE SAME INSTRUMENT.

 

[signatures following; remainder of page intentionally left blank]

 

S-9

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IN WITNESS WHEREOF, each of the undersigned has duly executed this Forbearance,
Limited Waiver and Consent of Guarantors effective as of the date set forth
above.

WESTAFF (USA), INC.

By:

/s/ Dawn Jaffray

Name:

Dawn Jaffray

Title:

CFO & SVP

WESTAFF SUPPORT, INC.

By:

/s/ Dawn Jaffray

Name:

Dawn Jaffray

Title:

SVP & CFO

WESTAFF (U.K.) LIMITED

By:

/s/ Michael Willis

Name:

 

Title:

 

GENERAL ELECTRIC CAPITAL CORPORATION,

as US Agent, UK Agent, a US Revolving Lender, a Term Lender and a UK Revolving
Lender

 

 

By:

/s/ Robert M. Brichacek

Name:

Robert M. Brichacek

Title:

Authorized Signatory

BANK OF AMERICA, N. A.,

as Documentation Agent, a US Revolving Lender, a Term Lender and a UK Revolving
Lender

By:

/s/ David Knoblauch

Name:

David Knoblauch

Title:

SVP

 

S10

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The following Person is a signatory to this Forbearance, Limited Waiver and
Consent of Guarantors in its capacity as a Credit Party and not as a Borrower.

WESTAFF, INC.

 

 

By:

/s/ Dawn Jaffray

Name:

Dawn Jaffray

Title

SVP & CFO

 

S11

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CONSENT OF GUARANTORS

 

 

Each of the undersigned is a Guarantor of the Obligations of the Borrowers under
the Credit Agreement and each other Loan Document (including US Borrower and
Term Borrower in its capacity as a Guarantor of the Obligations of the other
Borrowers) and hereby (a) consents to the foregoing Forbearance,
(b) acknowledges that notwithstanding the execution and delivery of the
foregoing Forbearance, including without limitation, the imposition of the
Default Rate, the obligations of each of the undersigned Guarantors are not
impaired or affected and the Parent Guaranty, the Subsidiary Guaranty, and the
cross-guaranty contained in the Credit Agreement continue in full force and
effect, and (c) ratifies the Parent Guaranty, the Subsidiary Guaranty or the
cross-guaranty contained in the Credit Agreement, as applicable, and each of the
Loan Documents to which it is a party and further ratifies the Liens granted by
it to any Agent for its benefit and the benefit of the Lenders.

 

[signatures following; remainder of page intentionally left blank]

 

Consent-1

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                                IN WITNESS WHEREOF, each of the undersigned has
executed and delivered this CONSENT OF GUARANTORS as of the date first set forth
above.

 

 

 

WESTAFF, INC.

 

 

By

/s/ Dawn Jaffray

Name:

Dawn Jaffray

Title:

SVP & CFO

 

 

WESTERN MEDICAL SERVICES, INC.,
a California corporation

 

 

By:

/s/ Dawn Jaffray

Name:

Dawn Jaffray

Title:

SVP & CFO

 

 

WESTAFF (USA), INC.

 

 

By:

/s/ Dawn Jaffray

Name:

Dawn Jaffray

Title:

SVP & CFO

 

 

WESTAFF SUPPORT, INC.

 

 

By:

/s/ Dawn Jaffray

Name:

Dawn Jaffray

Title:

SVP & CFO

 

 

MEDIAWORLD INTERNATIONAL

 

 

By:

/s/ Dawn Jaffray

Name:

Dawn Jaffray

Title:

SVP & CFO

 

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Annex I

Specified Events of Default

 

1.                                 Parent and its Subsidiaries have failed to
maintain, on a consolidated basis, for the 13 Fiscal Periods ended August 4,
2007, and for the 13 Fiscal Periods ended September 1, 2007, a Minimum Fixed
Charge Coverage Ratio of not less than 1.25 to 1.0, as required by paragraph (b)
of Annex G to the Credit Agreement.

 

2.                                       Parent and its Subsidiaries have failed
to have, on a consolidated basis, at the end of the Fiscal Quarter ended July 7,
2007, for the 13 Fiscal Periods then ended, a Minimum EBITDA of $9,000,000, as
required by  paragraph (c) of Annex G to the Credit Agreement.

 

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