Exhibit 10.8.19


 


UNSECURED SUBORDINATED NOTE


April  1, 2002


Walnut Creek, California


1.             Promise to
Pay.    This Unsecured Subordinated Note (this “Note”), is the
promise of WESTAFF (USA) INC., a California corporation (“Payor”) to pay
to W. Robert Stover, and his successors and assigns (“Holder”), the
principal amount and all interest accrued upon each subordinated loan (each, a
“Loan” and collectively, the “Loans”), made from time to time by
Holder to the undersigned, in an aggregate principal amount not to exceed at
any time TWO MILLION DOLLARS (US$2,000,000) (the “Maximum Note Amount”).  Upon the terms and conditions hereof, Payor
hereby unconditionally promises to pay to the order of Holder at such address
as Holder shall hereinafter designate to Payor in writing, in lawful money of
the United States of America and in immediately available funds, the Maximum
Note Amount or the aggregate unpaid principal amount of all Loans made by
Holder to or for the benefit of Payor, whichever is less, and to pay interest
on such Loans as computed in the manner set forth in Section 3
below.  All capitalized terms herein
shall have the meanings as provided in Section 13 below.


2.             Maturity;
Conversion Rights.


(a)           Subject to Section 4 hereof,
the principal amount of all Loans made under this Note, plus all accrued and
unpaid interest thereon, shall be due and payable on April 1, 2003.  Subject to the provisions of Section 4,
Payor may prepay all or any portion of this Note at any time without
penalty.  All payments to Holder shall
be accompanied by a certificate from an officer of Payor certifying that Payor
is not prohibited from making payments under Section 4(c) hereof.  All payments received from Payor hereunder
shall be applied first, to the payment of any unpaid interest under this Note,
and second, to reduce the principal balance hereunder.


(b)           If, during the term of this Note,
Westaff, Inc., a Delaware corporation and parent corporation of Payor, offers
subscription rights to its stockholders to purchase additional shares of its
common stock, then Holder shall have the option to convert, within ten (10)
days of the commencement of the offer and upon written notice to Westaff, Inc.
and Payor, the outstanding balance due hereunder into such subscription rights
on a dollar-for-dollar basis (the “Conversion Rights”).  The Conversion Rights are not subject to the
terms of subordination set forth in Section 4 below.


 


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3.             Interest
Rate.  Payor shall pay
interest to Holder on the outstanding and unpaid principal amount of each Loan
at the rate of twelve percent (12%) per annum (the “Interest Rate”)
calculated on the basis of a year of 365 days for the actual number of days
elapsed, provided, however, that in no event shall the Interest
Rate exceed the maximum rate permitted by law.  Interest
accruing on the principal amount of each Loan shall be paid by Payor to Holder
monthly, on the last business day of each calendar month (subject to the Section
4 hereof).


4.             Subordination.


(a)           Payor and Holder agree that all
payments under this Note are and shall be subordinate, to the extent and in the
manner hereinafter set forth, in right of payment to the prior indefeasible
cash payment in full of all of Payor’s payment obligations now or hereafter
existing in respect of any Senior Debt, whether for principal, interest, fees,
expenses or otherwise (such payment obligations being the “Senior
Obligations”).


(b)           Senior Debt Holders will be entitled
to receive payment in full of all Senior Obligations due in respect of Senior
Debt (including interest after the commencement of any bankruptcy proceeding at
the rate specified in the applicable Senior Debt) before Holder will be
entitled to receive any payment with respect to this Note, in the event of any
distribution to creditors of Payor:  (i)
in a liquidation or dissolution of Payor; (ii) in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to Payor or its
property; (iii) in an assignment for the benefit of creditors; or (iv) in any
marshaling of Payor’s assets and liabilities.


(c)           Payor may not make any payment in
respect of the Note:


(i)            in
the event any default in the payment of principal of, interest or premium, if
any, on any Senior Debt occurs and is continuing beyond any applicable period
of grace in the agreement, indenture or other document governing such Senior
Debt (a “Payment Default”), or


(ii)           in the event any
other default occurs and is continuing with respect to any  Senior Debt (the “Non-Payment
Default”) which permits the Senior Debt Holder as to which such default
relates to accelerate its maturity and Payor and Holder receives notice of such
default (a “Payment Blockage Notice”) from any Senior Debt Holder.


 


(d)           Payments on this Note may and shall be
resumed (i) in the case of a Payment Default, or (ii) in the case
Payor and Holder receive a Payment Blockage Notice regarding a Non-Payment
Default, upon the date on which such Payment Default or Non-Payment Default is
cured or waived.


(e)           In the event that Holder receives any
payment with respect to this Note at a time when such payment is prohibited by Section
4(c) hereof, such payment (the “Unpermitted Payment”) shall be held
by Holder, in trust for the benefit of the Senior Debt Holders.  Upon written request of a Senior Debt
Holder, Holder shall deliver


 


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the Unpermitted Payment
in trust to such Senior Debt Holder to be applied to the Senior Obligations.


(f)            After all Senior Obligations are
paid in full and until this Note is paid in full, Holder shall be subrogated to
the rights of Senior Debt Holders to receive distributions applicable to Senior
Debt to the extent that distributions otherwise payable to Holder have been
applied to the payment of Senior Debt. 
A distribution made under Section 4(e) to Senior Debt
Holders that otherwise would have been made to Holder is not, as between Payor
and Holder, a payment by Payor on this Note.


(g)           This Section 4 defines the
relative rights of Holder and Senior Debt Holders.  Nothing in this Note shall:


(i)            impair, as between Payor and Holder,
the obligation of Payor, which is absolute and unconditional, to pay principal
of and interest on this Note in accordance with its terms;


(ii)           affect the relative rights of Holder
and creditors of Payor other than their rights in relation to Senior Debt
Holders; and


(iii)          if Payor fails because of this Section
4 to pay principal of or interest on this Note on the due date, the failure
is still a default hereunder.


 


(h)           No right of any Senior Debt Holder to
enforce the subordination of the indebtedness evidenced by this Note shall be
impaired by any act or failure to act by Payor or Holder or by the failure of
Payor or Holder to comply with the terms of this Note.


(i)            Upon any payment or distribution of
assets of Payor referred to in Section 4(a), Holder shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction or upon any certificate of a representative or of the liquidating
trustee or agent or other Person making any distribution to Holder of this Note
for the purpose of ascertaining the Persons entitled to participate in such
distribution, the Senior Debt Holders and other indebtedness of Payor, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Section 4.


(j)            For the purposes of this Note, the
Senior Obligations shall not be deemed to have been paid in full unless the
Senior Debt Holders shall have received indefeasible cash payment in full of
the Senior Obligations (whether matured or unmatured).


(k)           Holder (i) will not take, sue for, or
demand from Payor payment of all or any portion of this Note (with the
exception of a demand for a regularly scheduled interest payment) unless at
least 15 days’ prior written notice of such action is given to the Senior Debt
Holders pursuant to the notice instructions contained in the Credit Agreement
and the Note Purchase Agreements; and (ii) will not commence, or join with
any creditor other than the Senior Debt Holders in commencing, directly or
indirectly, or


 


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cause Payor to commence,
or assist Payor in commencing, any proceeding referred to in Section 4(a).


(l)            Holder undertakes to execute,
verify, deliver and file any proofs of claim that the Senior Debt Holders may
at any time require to prove and realize upon any rights or claims pertaining
to this Note and to effectuate the full benefit of the subordination contained
herein; and upon failure of Holder so to do, the Senior Debt Holders shall be
deemed to be irrevocably appointed the agent and attorney-in-fact of Holder to
execute, verify, deliver and file any such proofs of claim.


(m)          No right of the Senior Debt Holders to
enforce subordination as herein provided shall at any time or in any way be
affected or impaired by any failure to act on the part of Payor or the Senior
Debt Holders, or by any noncompliance by Payor with any of the terms and
provisions of this Note, regardless of any knowledge thereof that the Senior
Debt Holders may have or be otherwise charged with.


5.               Subrogation.  Subject to the payment in full of all the Senior Debt and until
this Note shall be paid in full, Holder shall be subrogated to the rights of
the Senior Debt Holders (to the extent of payments or distributions previously
made to such Senior Debt Holders pursuant to the provisions of Section 4
above) to receive payments or distributions of assets of Payor applicable to
the Senior Debt.  No such payments or
distributions applicable to the Senior Debt shall, as between Payor and its
creditors, other than the Senior Debt Holders and Holder, be deemed to be a
payment by Payor to or on account of this Note; and for the purposes of such subrogation,
no payments or distributions to the Senior Debt Holders to which Holder would
be entitled except for the provisions of this Section 5 shall, as
between Payor and its creditors, other than the Senior Debt Holders and Holder,
be deemed to be a payment by Payor to or on account of the Senior Debt.


6.             Usury
Savings Provision.  Under no
circumstances (and notwithstanding any other provisions of this Note) shall the
interest charged, collected, or contracted for on this Note exceed the Maximum
Rate Permitted by Law.  The term “Maximum
Rate Permitted by Law” as used in this Note means the maximum rate of
interest permitted under applicable law. 
If any part of this Note cannot be enforced, this fact will not affect
the rest of this Note.


7.             Reimbursement
of Expenses.  If Holder
incurs any out-of-pocket expenses (including, without limitation, the fees and
expenses of Holder’s attorneys) in connection with the placement of this Note
in the hands of its attorneys for collection, or if this Note is collected
through any legal proceedings at law or in equity or in bankruptcy,
receivership or other court proceedings, then Payor shall pay to Holder, on
demand, all reasonable costs and expenses of collection, including, but not
limited to, court costs and reasonable attorneys’ fees.


8.             Notices. Any confirmation, notice or any other
communication provided for hereunder shall be in writing or by a
telecommunications device capable of creating a written record, and shall be
effective (a) upon personal delivery thereof, 


 


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including without
limitation, by overnight mail and courier service or the United States mail,
certified or registered, postage prepaid, return receipt requested, or (b) in
the case of notice by such telecommunications device, when properly transmitted
and confirmed by telephone, addressed to the party to be noticed as follows:


                If to Payor at:


 


Westaff (USA), Inc.


301 Lennon Lane


Walnut Creek, CA 
94598


Attn:  Mr. Dirk
Sodestrom


Senior Vice President & Chief Financial Officer


 


                If to Holder at:


 


Mr.  W. Robert Stover


298 North Wiget Lane


Walnut Creek, CA 94598


 


 


or to such other address as either party may hereafter
designate for itself by written notice to the other party in the manner herein
prescribed.


9.             Binding
Nature; Assignment.  This
Note and all of the provisions hereof shall be binding upon and inure to the
benefit of Payor and Holder and their respective successors and permitted
assigns, but neither this Note nor any of the rights, interests or obligations
hereunder shall be assigned or transferred by Payor without the prior written
consent of Holder.


10.           Amendments
and Waivers.


(a)           The Senior Debt and any Senior
Obligations may be amended, modified, increased, waived or extended, without notice
to or consent of Holder, and such amendment, modification, increase, waiver or
extension shall not change or modify the subordinated nature of this Note or
Holder’s or Payor’s obligations under Section 4 hereof.


(b)           Except as otherwise expressly provided
herein, this Note may not be amended or modified except by written instruments
signed by each of the Senior Debt Holders, Payor and Holder.  Each waiver or consent under any provision
hereof shall be effective only in the specific instances for the purpose for
which given.  Holder may delay or forego
the enforcement of any of its rights or remedies under this Note or any other
document evidencing or securing this Note without losing them.  Payor and any other Person who signs,
guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for performance, notice of non-performance, protest, notice
of protest, notice of dishonor, notice of default, or any other notice
whatsoever.  Upon any change in the
terms of this Note in compliance with this Section 10 and unless
otherwise expressly stated in writing, no party who signs this Note, whether as
Payor, guarantor, accommodation Payor or endorser, shall be released from
liability.


 


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11.           Applicable Law.    THIS
NOTE SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE
SUBSTANTIVE LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO ANY
CONFLICT OF LAWS PRINCIPLE OR RULE THAT MIGHT REQUIRE THE APPLICATION OF THE
LAWS OF ANOTHER JURISDICTION.


12.           Waiver of
Jury Trial.  EACH OF THE PARTIES HERETO WAIVES ITS RESPECTIVE
RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF OR RELATED TO THIS NOTE, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION
OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY, WHETHER WITH
RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE.  EACH PARTY HERETO AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION
SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.  WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT
THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS
SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN
WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS
SUBORDINATION AGREEMENT OR ANY PROVISION HEREOF.  THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS SUBORDINATION AGREEMENT.


13.           Definitions.


 


(a)           For the purposes of this Note, the terms below
shall have the following meanings:


 


“Agent” means Bank of America, N.A. (formerly known as Bank of
America National Trust and Savings Association), as agent for the Banks under
the Credit Agreement.


 


“Banks” means each of the financial institutions party to the
Credit Agreement.


 


“Borrowers” means, collectively, Payor and Western Medical Services, Inc.


 


“Credit Agreement” that certain Credit Agreement dated as of
March 4, 1998, as amended by that certain First Amendment to Credit Agreement
dated as of May 15, 1998, as further amended by that certain Second Amendment
to Credit Agreement dated as of July 23, 1998, as further amended by that
certain Third Amendment to Credit Agreement dated as of January 22, 1999, as
further amended by that certain Fourth Amendment to Credit Agreement dated as
of December 15, 1999, as further amended by that certain Fifth Amendment to
Credit Agreement dated as of November 7, 2000, between the Borrowers, the
Banks, and the Agent, and as further amended by that certain Forbearance and
Waiver Agreement and Amendment to Loan Documents, dated as of March 27, 2002,
as further amended, supplemented or amended and restated from time to time.


 


 


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“Note Purchase Agreements” means each of
(i) that certain Note
Purchase Agreement (as amended, the “Jackson Note Purchase Agreement”)
by and among the Borrowers and PPM America, Inc. as Attorney in Fact (“PPM”)
on behalf of Jackson National Life Insurance, and (ii) the Note Purchase
Agreement (as amended, the “Nationwide Note Purchase Agreement”) between
the Borrowers and Nationwide Life Insurance Company, each as amended,
supplemented or amended and restated from time to time.


 


“Note Purchasers” means each of the Jackson National Life Insurance
and Nationwide Life Insurance Company, their successors and assigns, and each
other note purchase under the Note Purchase Agreements.


 


“Senior Debt Holders” means the Agent and
the Banks under the Credit Agreement and the Note Purchasers under the Note
Purchase Agreement, and their respective successors, participants and assigns.


 


“Senior
Debt” means (a) all indebtedness and obligations now or hereafter existing or owed by
Payor to the Senior Debt Holders pursuant to the Credit Agreement, the Note Purchase Agreements or any instruments
or other documents executed by Payor with or in favor of the Senior Debt
Holders in connection therewith, as such agreements may be amended,
supplemented, modified, extended, restated or replaced, and whether for principal,
premium, interest, fees, expenses, indemnities or otherwise; and (b) all Debt
owed by Payor to the Senior Debtor Holders in connection with any refinancing,
refunding, restructuring or replacement of all or any part of the Senior Debt
described in clause (a).


 


(b)                 The
meanings of defined terms are equally applicable to the singular and plural
forms of the defined terms.


(c)                  Unless
otherwise expressly provided herein, references to agreements (including this
Note) and other contractual instruments shall be deemed to include all
subsequent amendments. amendment and restatements and other modifications
thereto.


(d)                 The words
“hereof,” “hereto,” “herein,” “hereunder” and similar words refer to this Note
as a whole and not to any particular provision of this Note; and Section and
clause references are to this Note unless otherwise specified.


(e)                  The
captions and headings of this Note are for convenience of reference only and
shall not affect the interpretation of this Note.


 


[Signature Page to Follow]


 


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                IN WITNESS
WHEREOF, Payor has caused this Note to be duly executed by its officer hereunto
authorized as of the date first above written.


 


WESTAFF (USA) INC., a
California corporation:


 


By: /s/  Dirk A. Sodestrom


Name:  Dirk A. Sodestrom


Title:  Senior Vice President and Chief Financial
Officer


 


 


The undersigned
hereby acknowledges and consents to the terms and conditions of the above
Unsecured Subordinated Note:


 


/s/ W. Robert
Stover


W. Robert Stover, an
individual


 


 


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