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);


 


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(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 


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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 


 


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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 


 


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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 


 


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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 


 


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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 


 


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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 


 


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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

  
													



 


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