EXHIBIT 10.8.20


 




 





CREDIT
AGREEMENT


 


Dated
as of May 17, 2002


 


among


 


WESTAFF (USA) INC.,

WESTAFF (CA), INC.

WESTAFF LIMITED PARTNERSHIP


WESTAFF (U.K.) LIMITED,
and

WESTAFF SUPPORT, INC.


 


as Borrowers,


 


WESTAFF INC., 


 


as a Guarantor


 


THE LENDERS SIGNATORY HERETO


 


FROM TIME TO TIME,


 


as Lenders,


 


GENERAL ELECTRIC CAPITAL
CORPORATION,


as US Agent,

UK Agent and Security Trustee


 


and


 


BANK OF AMERICA, N. A.

as Documentation Agent


 


GECC CAPITAL MARKETS
GROUP, INC.


 


as Lead Arranger




 





 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
  1.

  	
  AMOUNT AND TERMS OF
  CREDIT

  
	
   

  	
   

  
	
   

  	
  1.1

  	
  Credit Facilities

  	
  2

  
	
   

  	
  1.2

  	
  Letters of Credit

  	
  9

  
	
   

  	
  1.3

  	
  Prepayments

  	
  9

  
	
   

  	
  1.4

  	
  Use of Proceeds

  	
  12

  
	
   

  	
  1.5

  	
  Interest and Applicable
  Margins

  	
  12

  
	
   

  	
  1.6

  	
  Eligible Accounts

  	
  16

  
	
   

  	
  1.7

  	
  Cash Management Systems

  	
  18

  
	
   

  	
  1.8

  	
  Fees

  	
  18

  
	
   

  	
  1.9

  	
  Receipt of Payments

  	
  19

  
	
   

  	
  1.10

  	
  Application and
  Allocation of Payments

  	
  20

  
	
   

  	
  1.11

  	
  Loan Account and Accounting

  	
  21

  
	
   

  	
  1.12

  	
  Indemnity

  	
  21

  
	
   

  	
  1.13

  	
  Access

  	
  21

  
	
   

  	
  1.14

  	
  Taxes

  	
  22

  
	
   

  	
  1.15

  	
  Capital
  Adequacy; Increased Costs; Illegality

  	
  23

  
	
   

  	
  1.16

  	
  Single Loan

  	
  26

  
	
   

  	
   

  	
   

  	
  28

  
	
  2.

  	
  CONDITIONS PRECEDENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Conditions to the
  Initial Loans

  	
  28

  
	
   

  	
  2.2

  	
  Further Conditions to
  Each Loan

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  REPRESENTATIONS AND
  WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Corporate
  Existence; Compliance with Law

  	
  32

  
	
   

  	
  3.2

  	
  Executive
  Offices, Collateral Locations, FEIN

  	
  32

  
	
   

  	
  3.3

  	
  Corporate
  Power, Authorization, Enforceable Obligations

  	
  32

  
	
   

  	
  3.4

  	
  Financial
  Statements and Projections

  	
  33

  
	
   

  	
  3.5

  	
  Material Adverse Effect

  	
  34

  
	
   

  	
  3.6

  	
  Ownership of Property;
  Liens

  	
  34

  
	
   

  	
  3.7

  	
  Labor Matters

  	
  35

  
	
   

  	
  3.8

  	
  Ventures,
  Subsidiaries and Affiliates; Outstanding Stock and Indebtedness

  	
  35

  
	
   

  	
  3.9

  	
  Government Regulation

  	
  36

  
	
   

  	
  3.10

  	
  Margin Regulations

  	
  36

  
	
   

  	
  3.11

  	
  Taxes

  	
  36

  
	
   

  	
  3.12

  	
  ERISA

  	
  37

  
	
   

  	
  3.13

  	
  No Litigation

  	
  38

  
	
   

  	
  3.14

  	
  Brokers

  	
  38

  
					



 


i

















 


	
   

  	
  3.15

  	
  Intellectual Property

  	
  38

  
	
   

  	
  3.16

  	
  Full Disclosure

  	
  38

  
	
   

  	
  3.17

  	
  Environmental Matters

  	
  39

  
	
   

  	
  3.18

  	
  Insurance

  	
  40

  
	
   

  	
  3.19

  	
  Deposit and
  Disbursement Accounts

  	
  40

  
	
   

  	
  3.20

  	
  Government Contracts

  	
  40

  
	
   

  	
  3.21

  	
  Customer and Trade
  Relations

  	
  40

  
	
   

  	
  3.22

  	
  Agreements and Other
  Documents

  	
  40

  
	
   

  	
  3.23

  	
  Solvency; No Winding Up

  	
  41

  
	
   

  	
  3.24

  	
  Status of Parent

  	
  41

  
	
   

  	
  3.25

  	
  Subordinated Debt

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  FINANCIAL
  STATEMENTS AND INFORMATION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Reports and Notices

  	
  42

  
	
   

  	
  4.2

  	
  Communication with
  Accountants

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  AFFIRMATIVE COVENANTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Maintenance
  of Existence and Conduct of Business

  	
  42

  
	
   

  	
  5.2

  	
  Payment of Charges

  	
  43

  
	
   

  	
  5.3

  	
  Books and Records

  	
  43

  
	
   

  	
  5.4

  	
  Insurance;
  Damage to or Destruction of Collateral

  	
  44

  
	
   

  	
  5.5

  	
  Compliance with Laws

  	
  46

  
	
   

  	
  5.6

  	
  Supplemental Disclosure

  	
  46

  
	
   

  	
  5.7

  	
  Intellectual Property

  	
  46

  
	
   

  	
  5.8

  	
  Environmental Matters

  	
  46

  
	
   

  	
  5.9

  	
  Landlords’ Agreements, Mortgagee
  Agreements, Bailee Letters and Real Estate Purchases

  	
  47

  
	
   

  	
  5.10

  	
  Further Assurances

  	
  48

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  NEGATIVE COVENANTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Mergers,
  Subsidiaries, Etc.

  	
  48

  
	
   

  	
  6.2

  	
  Investments; Loans and
  Advances

  	
  48

  
	
   

  	
  6.3

  	
  Indebtedness

  	
  49

  
	
   

  	
  6.4

  	
  Employee
  Loans and Affiliate Transactions

  	
  51

  
	
   

  	
  6.5

  	
  Capital Structure and
  Business

  	
  52

  
	
   

  	
  6.6

  	
  Guaranteed Indebtedness

  	
  52

  
	
   

  	
  6.7

  	
  Liens

  	
  52

  
	
   

  	
  6.8

  	
  Sale of Stock and Assets

  	
  53

  
	
   

  	
  6.9

  	
  ERISA,
  Pension Schemes

  	
  54

  
	
   

  	
  6.10

  	
  Financial Covenants

  	
  54

  
	
   

  	
  6.11

  	
  Hazardous Materials

  	
  54

  
	
   

  	
  6.12

  	
  Sale-Leasebacks

  	
  54

  



 


ii

















 


	
   

  	
  6.13

  	
  Cancellation of
  Indebtedness

  	
  54

  
	
   

  	
  6.14

  	
  Restricted Payments

  	
  54

  
	
   

  	
  6.15

  	
  Change of
  Corporate Name or Location; Change of Fiscal Year

  	
  55

  
	
   

  	
  6.16

  	
  No Impairment
  of Intercompany Transfers

  	
  56

  
	
   

  	
  6.17

  	
  No Speculative Transactions

  	
  56

  
	
   

  	
  6.18

  	
  Leases; Real Estate
  Purchases

  	
  56

  
	
   

  	
  6.19

  	
  Changes Relating
  to Subordinated Debt or Additional Subordinated Debt; Material Contracts

  	
  56

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  TERM

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Termination

  	
  57

  
	
   

  	
  7.2

  	
  Survival of
  Obligations Upon Termination of Financing Arrangements

  	
  57

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  EVENTS OF
  DEFAULT; RIGHTS AND REMEDIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  Events of Default

  	
  57

  
	
   

  	
  8.2

  	
  Remedies

  	
  60

  
	
   

  	
  8.3

  	
  Waivers by Credit Parties

  	
  60

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  ASSIGNMENT
  AND PARTICIPATIONS; APPOINTMENT OF AGENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Assignment and
  Participations

  	
  60

  
	
   

  	
  9.2

  	
  Appointment of Agents

  	
  63

  
	
   

  	
  9.3

  	
  Agents’ Reliance, Etc.

  	
  64

  
	
   

  	
  9.4

  	
  GE Capital and Affiliates

  	
  65

  
	
   

  	
  9.5

  	
  Lender Credit Decision

  	
  65

  
	
   

  	
  9.6

  	
  Indemnification

  	
  66

  
	
   

  	
  9.7

  	
  Successor Agents

  	
  66

  
	
   

  	
  9.8

  	
  Setoff and Sharing of
  Payments

  	
  67

  
	
   

  	
  9.9

  	
  Advances;
  Payments; Non-Funding Lenders; Information; Actions in Concert

  	
  67

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  SUCCESSORS AND ASSIGNS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.1

  	
  Successors and Assigns

  	
  70

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.1

  	
  Complete
  Agreement; Modification of Agreement

  	
  71

  
	
   

  	
  11.2

  	
  Amendments and Waivers

  	
  71

  
	
   

  	
  11.3

  	
  Fees and Expenses

  	
  73

  
	
   

  	
  11.4

  	
  No
  Waiver

  	
  74

  
	
   

  	
  11.5

  	
  Remedies

  	
  75

  
	
   

  	
  11.6

  	
  Severability

  	
  75

  
					



 


iii

















 


	
   

  	
  11.7

  	
  Conflict of Terms

  	
  75

  
	
   

  	
  11.8

  	
  Confidentiality

  	
  75

  
	
   

  	
  11.9

  	
  GOVERNING LAW

  	
  75

  
	
   

  	
  11.10

  	
  Notices

  	
  76

  
	
   

  	
  11.11

  	
  Section Titles

  	
  77

  
	
   

  	
  11.12

  	
  Counterparts

  	
  77

  
	
   

  	
  11.13

  	
  WAIVER OF JURY TRIAL

  	
  77

  
	
   

  	
  11.14

  	
  Press Releases and
  Related Matters

  	
  77

  
	
   

  	
  11.15

  	
  Reinstatement

  	
  78

  
	
   

  	
  11.16

  	
  Advice of Counsel

  	
  78

  
	
   

  	
  11.17

  	
  No Strict Construction

  	
  78

  
	
   

  	
  11.18

  	
  Judgment Currency

  	
  78

  
	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  CROSS-GUARANTY
  BY US BORROWER AND TERM BORROWER

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.1

  	
  Cross-Guaranty

  	
  79

  
	
   

  	
  12.2

  	
  Waivers by Borrowers

  	
  80

  
	
   

  	
  12.3

  	
  Benefit of Guaranty

  	
  80

  
	
   

  	
  12.4

  	
  Subordination of
  Subrogation, Etc.

  	
  80

  
	
   

  	
  12.5

  	
  Election of Remedies

  	
  80

  
	
   

  	
  12.6

  	
  Limitation

  	
  81

  
	
   

  	
  12.7

  	
  Contribution
  with Respect to Guaranty Obligations

  	
  82

  
	
   

  	
  12.8

  	
  Liability Cumulative

  	
  82

  



 


iv


 

















 


This MULTICURRENCY CREDIT AGREEMENT (this “Agreement”),
dated as of May 17, 2002 among WESTAFF, INC., a Delaware corporation (“Parent”),
WESTAFF (USA), INC., a California corporation (“Westaff USA”), WESTAFF
LIMITED PARTNERSHIP, a Delaware limited partnership (“WestLP”), WESTAFF
(CA), INC., a California corporation (“WCA” and, with Westaff (USA) and
WestLP, are sometime referred to as a “US Borrower” and collectively,
the “US Borrowers”)  WESTAFF
(U.K.) LIMITED, a limited liability company incorporated under the laws of
England and Wales (“UK Borrower”) and WESTAFF SUPPORT, INC., a
California corporation (“Term Borrower”) (the US Borrower, the UK
Borrower and the Term Borrower are sometimes referred as a “Borrower”
and collectively, as the “Borrowers”), GENERAL ELECTRIC CAPITAL
CORPORATION (in its individual capacity, “GE Capital”), as agent for the
US Revolving Lenders, the Term Lenders and the UK Revolving Lenders (each as
defined below), as Security Trustee for the UK Revolving Lenders and as a
Lender, and the other Lenders signatory hereto from time to time.


 


RECITALS


 


WHEREAS, Parent and Borrowers have requested that
Lenders extend revolving and term credit facilities to Borrowers of up to
Fifty-nine Million Dollars ($59,000,000) in the aggregate for the purpose of refinancing
certain indebtedness of Westaff (USA) and its Subsidiaries, and UK Borrower,
repaying certain intercompany loans made to UK Borrower, and providing (a)
working capital financing for Borrowers and their Subsidiaries, (b) funds for
other general corporate purposes of Borrowers and their Subsidiaries and (c)
funds for other purposes permitted hereunder; and for these purposes, Lenders
are willing to make certain loans and other extensions of credit to Borrowers
of up to such amounts upon the terms and conditions set forth herein; and


 


WHEREAS, US Borrowers operate as a consolidated
entity, are engaged in an integrated operation that requires that financing be
made available to them on a joint and several basis which would not be
available to them separately, and as a result each of the US Borrowers will
derive substantial benefit from the financing under this Agreement extended to
all of them; and


 


WHEREAS, US Borrowers and Term Borrower have agreed to
secure all of the obligations of the Borrowers under the Loan Documents by
granting to the Applicable Agent a security interest in and lien upon
substantially all existing and after-acquired personal and real property of US
Borrowers and Term Borrower; and


 


WHEREAS, UK Borrower has agreed to secure all of the
obligations of UK Borrower under the Loan Documents by granting to the UK Agent
a security interest in and lien and fixed and floating charges against
substantially all existing and after-acquired personal and real property of UK
Borrower; and


 


WHEREAS, the credit facilities provided to Borrowers
will benefit Parent and its Subsidiaries, and in consideration thereof, Parent
and certain of its direct and indirect Domestic


 


1

















 


Subsidiaries are willing to guarantee the obligations of Borrowers to
Agents and Lenders under the Loan Documents on the terms set forth in the
Guaranties and have agreed to secure all of their obligations under the Loan
Documents by granting liens and security interests upon their existing and
after acquired personal property; and


 


WHEREAS, prior to the date hereof, GE Capital
Australia has entered into the Australian Loan Documents with Westaff
(Australia) Pty Ltd., a Subsidiary of Term Borrower; and


 


WHEREAS, capitalized terms used in this Agreement
shall have the meanings ascribed to them in Annex A and, for purposes of
this Agreement and the other Loan Documents, the rules of construction set
forth in Annex A shall govern. 
All Annexes, Disclosure Schedules, Exhibits and other attachments
(collectively, “Appendices”) hereto, or expressly identified to this
Agreement, are incorporated herein by reference, and taken together with this
Agreement, shall constitute but a single agreement.  These Recitals shall be construed as part of the Agreement.


 


NOW, THEREFORE, in consideration of the premises and
the mutual covenants hereinafter contained, and for other good and valuable
consideration, the parties hereto agree as follows:


 


1.          AMOUNT AND TERMS OF CREDIT


 


1.1           Credit Facilities.


 


(a)           US
Revolving Credit Facility.


 


(i)            Subject
to the terms and conditions hereof, each US Revolving Lender agrees to make
available to US Borrowers from time to time until the Commitment Termination
Date its Pro Rata Share of advances to US Borrowers in Dollars (each, a “US
Revolving Credit Advance”).  The Pro
Rata Share of the US Revolving Loan of any US Revolving Lender shall not at any
time exceed its separate US Revolving Loan Commitment.  The obligations of each US Revolving Lender
hereunder shall be several and not joint. 
Until the Commitment Termination Date, US Borrowers may borrow, repay
and reborrow under this Section 1.1(a) in Dollars; provided
that the amount of any US Revolving Credit Advance to be made at any time shall
not exceed the Borrowing Availability at such time.  Borrowing Availability may be reduced by Reserves imposed by US
Agent in its reasonable credit judgment. 
Moreover, the sum of the US Revolving Loan and Swing Line Loan
outstanding to US Borrowers shall not exceed at any time the US Borrowing
Base.  Each US Revolving Credit Advance
shall be made on notice by Borrower Representative on behalf of the US
Borrowers to one of the representatives of US Agent identified in Schedule
1.1 at the address specified therein. 
Any such notice must be given no later than (1) 11:00 a.m. (California
time) on the Business Day of the proposed US Revolving Credit Advance, in the
case of an Index Rate Loan, or (2) 11:00 a.m. (California time) on the date
which is 3 Business Days prior to the proposed Revolving Credit Advance, in the
case of a LIBOR Loan.  Each such notice
(a “Notice of Revolving Credit 


 


2

















 


Advance”) must be given in writing
(by telecopy or overnight courier) substantially in the form of Exhibit
1.1(a)(i), and shall include the information required in such Exhibit and
such other information as may be required by US Agent.  If US Borrowers desire to have the US
Revolving Credit Advances bear interest by reference to a LIBOR Rate, Borrower Representative
must comply with Section 1.5(e).


 


(ii)           Except
as provided in Section 1.11, US Borrowers shall execute and deliver to
each US Revolving Lender a note to evidence the US Revolving Loan Commitment of
that US Revolving Lender.  Each note
shall be in the principal amount of the US Revolving Loan Commitment of the
applicable US Revolving Lender, dated the Closing Date and substantially in the
form of Exhibit 1.1(a)(ii)  (each
a “US Revolving Note” and, collectively, the “US Revolving Notes”).
Each US Revolving Note shall represent the obligation of the US Borrowers to
pay the amount of the applicable US Revolving Lender’s US Revolving Loan
Commitment or, if less, such US Revolving Lender’s Pro Rata Share of the
aggregate unpaid principal amount of all US Revolving Credit Advances together
with interest thereon as prescribed in Section 1.5.  The entire unpaid balance of the aggregate
US Revolving Loan and all other non-contingent Obligations of US Borrowers
shall be immediately due and payable in full in immediately available funds on
the Commitment Termination Date.


 


(iii)          Anything
in this Agreement to the contrary notwithstanding, at the request of Borrower
Representative, in its discretion US Agent may (but shall have absolutely no
obligation to), make US Revolving Credit Advances to US Borrowers on behalf of
US Revolving Lenders in amounts that cause the outstanding balance of the US
Revolving Loan to exceed the US Borrowing Base (less the Swing Line Loan) (any
such excess US Revolving  Credit Advances
are herein referred to collectively as “Overadvances”); provided that
(A) no such event or occurrence shall cause or constitute a waiver of US
Agent’s, Swing Line Lender’s or US Revolving Lenders’ right to refuse to make
any further Overadvances, Swing Line Advances or US Revolving Credit Advances,
or incur any Letter of Credit Obligations, as the case may be, at any time that
an Overadvance exists, and (B) no Overadvance shall result in a Default or
Event of Default based on US Borrowers’ failure to comply with Section
1.3(b)(i) for so long as US Agent permits such Overadvance to be
outstanding, but solely with respect to the amount of such Overadvance.  In addition, Overadvances may be made even
if the conditions to lending set forth in Section 2 have not been
met.  All Overadvances shall constitute
US Index Rate Loans, shall bear interest at the Default Rate and shall be
payable on demand.  Except as otherwise
provided in Section 1.10(c), the authority of US Agent to make
Overadvances is limited to an aggregate amount not to exceed $500,000 at any
time, shall not cause the aggregate US Revolving Loan to exceed the Maximum US
Amount, and may be revoked prospectively by a written notice to US Agent signed
by Revolving Lenders holding more than 50% of the Revolving Loan Commitments.


 


(b)           Term
Loan.


 


(i)            Subject
to the terms and conditions hereof, each Term Lender agrees to make a term loan
in Dollars (collectively, the “Term Loan”) on the Closing Date to 


 


3

















 


Term  Borrower in the amount of
the applicable Term Lender’s Term Loan Commitment.  The obligations of each Term Lender hereunder shall be several
and not joint.  Each such Term Loan
shall be evidenced by a promissory note executed by Term Borrower substantially
in the form of Exhibit 1.1(b) (each a “Term Note” and
collectively the “Term Notes”). 
Each Term Note shall represent the obligation of Term Borrower to pay
the applicable Term Lender’s Term Loan Commitment, together with interest
thereon as prescribed in Section 1.5.


 


(ii)           Term
Borrower shall repay the Term Loan in nineteen (19) consecutive quarterly
installments each in the amount of $250,000 on the first Business Day of each
January, April, July and October, commencing July 1, 2002.


 


The final installment due on April 30, 2007 shall be
in the amount of $250,000 or, if different, the remaining principal balance of
the Term Loan.


 


(iii)          Notwithstanding
Section 1.1(b)(ii), the aggregate outstanding principal balance of the
Term Loan shall be due and payable in full in immediately available funds on
the Commitment Termination Date, if not sooner paid in full.  No payment with respect to the Term Loan may
be reborrowed.


 


(iv)          Each
payment of principal with respect to the Term Loan shall be paid to US Agent
for the ratable benefit of each Term Lender making a Term Loan, ratably in
proportion to each such Term Lender’s respective Term Loan Commitment.


 


(c)           UK
Revolving Credit Facility


 


(i)            Subject
to the terms and conditions hereof, each UK Revolving Lender agrees to make
available to UK Borrower from time to time until the Commitment Termination
Date its Pro Rata Share of advances to UK Borrower in Pounds Sterling (each, a
“UK Revolving Credit Advance”). 
The Pro Rata Share of the UK Revolving Loan of any UK Revolving Lender
shall not at any time exceed its separate UK Revolving Loan Commitment.  The obligations of each UK Revolving Lender
hereunder shall be several and not joint. 
Until the Commitment Termination Date, UK Borrower may borrow, repay and
reborrow under this Section 1.1(c) in Pounds Sterling; provided
that the amount of any UK Revolving Credit Advance to be made at any time shall
not exceed the Borrowing Availability at such time.  Borrowing Availability may be reduced by Reserves imposed by UK
Agent in its reasonable credit judgment. 
Moreover, the UK Revolving Loan outstanding in Pounds Sterling shall not
exceed at any time the UK Borrowing Base. 
Each UK Revolving Credit Advance shall be made on notice by UK Borrower
to one of the representatives of UK Agent identified in Schedule 1.1 at
the address specified therein.  Any such
notice must be given no later than 9:00 a.m. (California time) three Business
Days  prior
to the proposed UK Revolving Credit Advance. 
Each such notice (a “Notice of Revolving Credit Advance”) is
irrevocable and must be given in writing (by telecopy or overnight courier)
substantially in the form of Exhibit 1.1(a)(i), and shall include the
information required in such Exhibit and such other information as may be
required by UK Agent.


 


4

















 


(ii)           Except
as provided in Section 1.11, UK Borrower shall execute and deliver to
each UK Revolving Lender a note to evidence the UK Revolving Loan Commitment of
that UK Revolving Lender, which note shall be denominated in Pounds
Sterling.  Each note shall be in the
principal amount of the UK Revolving Loan Commitment of the applicable UK
Revolving Lender, dated the Closing Date and substantially in the form of Exhibit
1.1(a)(ii)  (each a “UK Revolving
Note” and, collectively, the “UK Revolving Notes”). Each UK
Revolving Note shall represent the obligation of the UK Borrower to pay in
Pounds Sterling the amount of the applicable UK Revolving Lender’s UK Revolving
Loan Commitment or, if less, such UK Revolving Lender’s Pro Rata Share of the
aggregate unpaid principal amount of all UK Revolving Credit Advances together
with interest thereon as prescribed in Section 1.5.  The entire unpaid balance of the aggregate
UK Revolving Loan and all other non-contingent Obligations of UK Borrower shall
be immediately due and payable in full in immediately available funds on the
Commitment Termination Date.


 


(iii)          Anything
in this Agreement to the contrary notwithstanding, in its discretion the UK
Agent may (but shall have absolutely no obligation to), make UK Revolving
Credit Advances to UK Borrower in Pounds Sterling on behalf of UK Revolving
Lenders in amounts which shall not exceed the Borrowing Availability at such
time, nor cause the UK Revolving Loan to exceed the UK Borrowing Base.  The provisions of this Section 1(c)(iii)
shall not relieve the UK Revolving Lenders of their obligations to make UK
Revolving Credit Advances under Section 1.1(c)(i).  Unless the UK Agent has received at least
one Business Day’s prior written notice from Requisite Revolving Lenders
instructing it not to make a UK Revolving Credit Advance, the UK Agent shall,
notwithstanding the failure of any condition precedent set forth in Section
2.2, be entitled to fund that UK Revolving Credit Advance, and to have each
UK Revolving Lender purchase participating interests in accordance with this
Section.  Each UK Revolving Lender
shall, on the date such UK Revolving Credit Advance was to have been made
purchase from the UK Agent an undivided participation interest in the UK
Revolving Credit Advance in an amount equal to its Pro Rata Share of such
Revolving Credit Advance.  Upon request,
each UK Revolving Lender shall promptly transfer to the UK Agent, in
immediately available funds in Pounds Sterling (or its US Dollar Equivalent),
the amount of its participation interest. 
Each UK Revolving Lender’s obligation to purchase participation
interests in accordance with this  Section
1.1(c)(iii) shall be absolute and unconditional and shall not be affected
by any circumstance, including (A) any setoff, counterclaim, recoupment,
defense or other right that such UK Revolving Lender may have against the UK
Agent, UK Borrower or any other Person for any reason whatsoever; (B) the
occurrence or continuance of any Default or Event of Default; (C) any inability
of UK Borrower to satisfy the conditions precedent to borrowing set forth in
this Agreement at any time or (D) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing.  If any UK Revolving Lender does not make
available to UK Agent, as applicable, the amount required pursuant to this Section
1.1(c)(iii), UK Agent shall be entitled to recover such amount on demand
from such UK Revolving Lender, together with interest thereon for each day from
the date of non-payment until such amount is paid in full at the Federal Funds
Rate for the first two Business Days and at the UK Index Rate thereafter.


 


5

















 


(iv)          Anything
in this Agreement to the contrary notwithstanding, at the request of UK
Borrower, in its discretion UK Agent may (but shall have absolutely no
obligation to), make UK Revolving Credit Advances to UK Borrower in Pounds
Sterling on behalf of UK Revolving Lenders in amounts that cause the
outstanding balance of the UK Revolving Loan to exceed the UK Borrowing Base
(any such excess UK Revolving  Credit
Advances are herein referred to collectively as “Overadvances”); provided
that (A) no such event or occurrence shall cause or constitute a waiver of
UK Agent’s or UK Revolving Lenders’ right to refuse to make any further
Overadvances or UK Revolving Credit Advances, as the case may be, at any time
that an Overadvance exists, and (B) no Overadvance shall result in a Default or
Event of Default based on UK Borrower’s failure to comply with Section
1.3(b)(i) for so long as UK Agent permits such Overadvance to be
outstanding, but solely with respect to the amount of such Overadvance.  In addition, Overadvances may be made even
if the conditions to lending set forth in Section 2 have not been
met.  All Overadvances shall constitute
UK Index Rate Loans, shall bear interest at the Default Rate and shall be
payable on demand.  Except as otherwise
provided in Section 1.10(c), the authority of UK Agent to make
Overadvances is limited to an aggregate amount not to exceed £40,000 at any
time, shall not cause the aggregate UK Revolving Loan to exceed the Maximum UK
Amount, and may be revoked prospectively by a written notice to UK Agent signed
by Revolving Lenders holding more than 50% of the Revolving Loan Commitments.


 


(d)           Swing
Line Facility to US Borrowers.


 


(i)            US
Agent shall notify the Swing Line Lender upon US Agent’s receipt of any Notice
of Revolving Credit Advance from Borrower Representative.  Subject to the terms and conditions hereof,
the Swing Line Lender may, in its discretion, make available from time to time
until the Commitment Termination Date advances in Dollars (each, a “Swing
Line Advance”) in accordance with any such notice. The provisions of this Section
1.1(d) shall not relieve US Revolving Lenders of their obligations to make
US Revolving Credit Advances under Section 1.1(a); provided that
if the Swing Line Lender makes a Swing Line Advance pursuant to any such
notice, such Swing Line Advance shall be in lieu of any US Revolving Credit
Advance that otherwise may be made by US Revolving Credit Lenders pursuant to
such notice.  The aggregate amount of
Swing Line Advances outstanding shall not exceed at any time the lesser of (A)
the Swing Line Commitment and (B) the lesser of the Maximum US Amount and
(except for Overadvances) the US Borrowing Base, in each case, less the
outstanding balance of the US Revolving Loan at such time (“Swing Line
Availability”).  Moreover, except
for Overadvances, the Swing Line Loan outstanding to US Borrowers shall not
exceed at any time the US Borrowing Base less the US Revolving Loan
outstanding.  Until the Commitment
Termination Date, US Borrowers may from time to time borrow, repay and reborrow
under this Section 1.1(d).  Each
Swing Line Advance shall be made pursuant to a Notice of Revolving Credit
Advance delivered to US Agent by Borrower Representative on behalf of US
Borrowers in accordance with Section 1.1(a).  Any such notice must be given no later than 11:00 a.m.
(California time) on the Business Day of the proposed Swing Line Advance.  Unless the Swing Line Lender has received at
least one Business Day’s prior written notice from Requisite 


 


6

















 


Revolving Lenders instructing it not to make a Swing Line Advance, the
Swing Line Lender shall, notwithstanding the failure of any condition precedent
set forth in Section 2.2, be entitled to fund that Swing Line Advance,
and to have each US Revolving Lender make US Revolving Credit Advances in
accordance with Section 1.1(d)(iii) or purchase participating interests
in accordance with Section 1.1(d)(iv). 
Notwithstanding any other provision of this Agreement or the other Loan
Documents, the Swing Line Loan shall constitute an Index Rate Loan.  US Borrowers shall repay the aggregate
outstanding principal amount of the Swing Line Loan upon demand therefor by US
Agent.


 


(ii)           US
Borrowers shall execute and deliver to the Swing Line Lender a promissory note
to evidence the Swing Line Commitment. 
Each note shall be in the principal amount of the Swing Line Commitment
of the Swing Line Lender, dated the Closing Date and substantially in the form
of Exhibit 1.1(d)(ii)  (each a “Swing
Line Note” and, collectively, the “Swing Line Notes”). Each Swing
Line Note shall represent the obligation of US Borrowers to pay the amount of
the Swing Line Commitment or, if less, the aggregate unpaid principal amount of
all Swing Line Advances made to US Borrowers together with interest thereon as
prescribed in Section 1.5.  The
entire unpaid balance of the Swing Line Loan and all other noncontingent
Obligations shall be immediately due and payable in full in immediately
available funds on the Commitment Termination Date if not sooner paid in full.


 


(iii)          The
Swing Line Lender, at any time and from time to time in its sole and absolute
discretion, may on behalf of US Borrowers (and each US Borrower hereby
irrevocably authorizes the Swing Line Lender to so act on its behalf) request
each US Revolving Lender (including the Swing Line Lender) to make a  US Revolving Credit Advance to US  Borrowers (which shall be an Index Rate
Loan) in an amount equal to that Revolving Lender’s Pro Rata Share of the
principal amount of the Swing Line Loan (the “Refunded Swing Line Loan”)
outstanding on the date such notice is given. 
Unless any of the events described in Sections 8.1(h) or 8.1(i)
has occurred (in which event the procedures of Section 1.1(d)(iv) shall
apply) and regardless of whether the conditions precedent set forth in this
Agreement to the making of a US Revolving Credit Advance are then satisfied,
each US Revolving Lender shall disburse directly to US Agent its Pro Rata Share
of a US Revolving Credit Advance on behalf of the Swing Line Lender prior to
noon (California time) in immediately available funds on the Business Day next
succeeding the date that notice is given. 
The proceeds of those US Revolving Credit Advances shall be immediately
paid to the Swing Line Lender and applied to repay the Refunded Swing Line
Loan.


 


(iv)          If,
prior to refunding a Swing Line Loan with a US Revolving Credit Advance
pursuant to Section 1.1(d)(iii), one of the events described in Sections
8.1(h) or 8.1(i) has occurred, then, subject to the provisions of Section
1.1(d)(v) below, each US Revolving Lender shall, on the date such US
Revolving Credit Advance was to have been made purchase from the Swing Line
Lender an undivided participation interest in the Swing Line Loan in an amount
equal to its Pro Rata Share of such Swing Line Loan.  Upon request, each US Revolving Lender shall promptly transfer to
the Swing Line Lender, in immediately available funds, the amount of its
participation interest.


 


7

















 


(v)           Each
US Revolving Lender’s obligation to make US Revolving Credit Advances in
accordance with Section 1.1(d)(iii) and to purchase participation
interests in accordance with Section 1.1(d)(iv) shall be absolute and
unconditional and shall not be affected by any circumstance, including (A) any
setoff, counterclaim, recoupment, defense or other right that such US Revolving
Lender may have against the Swing Line Lender, any US Borrower or any other
Person for any reason whatsoever; (B) the occurrence or continuance of any
Default or Event of Default; (C) any inability of US Borrowers to satisfy the
conditions precedent to borrowing set forth in this Agreement at any time or
(D) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing.  If any
US Revolving Lender does not make available to US Agent or the Swing Line
Lender, as applicable, the amount required pursuant to Sections 1.1(d)(iii)
or 1.1(d)(iv), as the case may be, the Swing Line Lender shall be
entitled to recover such amount on demand from such US Revolving Lender,
together with interest thereon for each day from the date of non-payment until
such amount is paid in full at the Federal Funds Rate for the first two
Business Days and at the US Index Rate thereafter.


 


(e)           Reliance
on Notices; Appointment of Borrower Representative.  Each Agent shall be entitled to rely upon,
and shall be fully protected in relying upon, any Notice of Revolving Credit
Advance, Notice of Conversion/Continuation or similar notice believed by such
Agent to be genuine.  Each Agent may
assume that each Person executing and delivering any notice in accordance
herewith was duly authorized, unless the responsible individual acting thereon
for such Agent has actual knowledge to the contrary.  At the request of, and as an accommodation to US Borrowers, US
Revolving Lenders have agreed to make the US Revolving Loan to the US Borrowers
on a joint and several basis to provide the necessary funding for the
consolidated operations of the US Borrowers. 
In order to facilitate such arrangement, each US Borrower and Term
Borrower hereby designates Westaff (USA), Inc. as its representative and agent
on its behalf (in such capacity, “Borrower Representative”) for the
purposes of issuing Notices of Revolving Credit Advances and Notices of
Conversion/Continuation, giving instructions with respect to the disbursement
of the proceeds of the Loans, selecting interest rate options, requesting
Letters of Credit, giving and receiving all other notices and consents
hereunder or under any of the other Loan Documents and taking all other actions
(including in respect of compliance with covenants) on behalf of the US
Borrowers or the Term Borrower under the Loan Documents.  Borrower Representative hereby accepts such
appointment.  Each US Borrower further
authorizes and directs the US Revolving Lenders to credit the proceeds of any
Loans to an account in the name of the Borrower Representative, and agree that
no Lender or Agent shall have any responsibility to inquire into the
allocation, apportionment or the use of the proceeds of the Loans by or among
the US Borrowers.  Each Agent and each
Lender may regard any notice or other communication pursuant to any Loan
Document from Borrower Representative as a notice or communication from any US
Borrower, all US Borrowers or Term Borrower or all of them as the case may be,
and may give any notice or communication required or permitted to be given to
US Borrowers and Term Borrower hereunder to Borrower Representative on behalf
of such Borrower or Borrowers.  Each US
Borrower and Term Borrower agrees that each notice, election, representation
and warranty, covenant, agreement and undertaking made on its behalf by
Borrower Representative shall be deemed for all purposes to 


 


8

















 


have been made by such Borrower and shall be binding upon and
enforceable against such Borrower to the same extent as if the same had been
made directly by such Borrower.


 


1.2           Letters of Credit. 
Subject to and in accordance with the terms and conditions contained
herein and in Annex B, Borrower Representative, on behalf of the US
Borrowers, shall have the right to request, and US Revolving Lenders agree to
incur, or purchase participations in, Letter of Credit Obligations in respect
of US Borrowers.


 


1.3           Prepayments.


 


(a)           Voluntary
Prepayments.  Term Borrower may at
any time on at least 5 days’ prior written notice by Borrower Representative to
the US Agent voluntarily prepay all or part of the Term Loans without premium
or penalty; provided that any such prepayments shall be in a minimum
amount of $500,000 and integral multiples of $250,000 in excess of such
amount.  In addition, Borrowers may at
any time on at least 10 days’ prior written notice by Borrower Representative
or UK Borrower to the Agents terminate the applicable Revolving Loan Commitment
of all Lenders; provided that upon such termination of such Revolving
Loan Commitment, all Loans and other Obligations shall be immediately due and
payable in full and all Letter of Credit Obligations shall be cash
collateralized or otherwise satisfied in accordance with Annex B.  Any such voluntary prepayment and
termination of the Revolving Loan Commitment must be accompanied by the payment
of the Fee required by Section 1.8(c), if any, plus the payment of any
LIBOR funding breakage costs in accordance with Section 1.12(b).  Upon any such prepayment and termination of
the Revolving Loan Commitment, each Borrower’s right to request Revolving
Credit Advances, or request that Letter of Credit Obligations be incurred on
its behalf, or request Swing Line Advances, shall simultaneously be
terminated.  Any partial prepayments of
the Term Loans shall be applied to prepay the scheduled installments of the Term
Loans in inverse order of maturity.


 


(b)           Mandatory
Prepayments.


 


(i)            If
at any time (A) the aggregate outstanding balances of the US Revolving Loan and
the Swing Line Loan exceed the lesser of (x) the Maximum US Amount and (y) the
US Borrowing Base, or (B) the outstanding balance of the UK Revolving Loan
exceeds the lesser of (x) the Maximum UK Amount and (y) the UK Borrowing Base,
the Applicable Borrower shall immediately repay the aggregate outstanding
Revolving Credit Advances outstanding to such Applicable Borrower to the extent
required to eliminate such excess.  If
any such excess remains after repayment in full of the aggregate
outstanding  US Revolving Credit
Advances, US Borrowers shall provide cash collateral for the Letter of Credit
Obligations in the manner set forth in Annex B to the extent required to
eliminate such excess.  Notwithstanding
the foregoing, any Overadvance made pursuant to Section 1.1(a)(iii) or
(c)(iv) shall be repaid only on demand.


 


(ii)           Immediately
upon receipt by any Credit Party of proceeds of any asset disposition (excluding
proceeds of asset dispositions permitted by Sections 6.8(a), 6.8(c), 


 


9

















 


6.8(d), 6.8(e), and 6.8(f), but
including any sale of Stock of any Subsidiary of any Credit Party), Borrowers
shall prepay the Loans in an amount equal to all such proceeds, net of (A)
commissions and other reasonable and customary transaction costs, fees and
expenses properly attributable to such transaction and payable by the applicable
Credit Party in connection therewith (in each case, paid to non-Affiliates),
(B) transfer taxes, (C) amounts payable to holders of senior Liens (to the
extent such Liens constitute Permitted Encumbrances hereunder), if any, and (D)
an appropriate reserve for income taxes in accordance with GAAP in connection
therewith (the “Net Proceeds”). 
Any such prepayment shall be applied in accordance with Section
1.3(c).  Notwithstanding the
foregoing, (i) in the event of any such asset disposition by UK Borrower, only
the UK Revolving Loans shall be prepaid with the Net Proceeds of such
disposition; and (ii) after the repayment of the Term Loan in full, the Net
Proceeds of the sale by Term Borrower of the Mortgaged Properties, may be used
to prepay or repay up to one million dollars ($1,000,000) of Subordinated Debt,
provided  that no Default or Event of Default has occurred and is
continuing or would result from such payment. 
Parent shall contribute any such proceeds received by it to the
Borrowers, and shall cause any other Guarantor to distribute or contribute such
proceeds to the Applicable Borrower, to the extent required to enable such
Applicable Borrower to make the prepayment required hereunder.


 


(iii)          If
any Credit Party issues Stock (other than directors qualifying shares and other
than the issuance of Stock of Parent upon exercise of warrants, options and
purchasing rights pursuant to incentive, stock option and employee purchasing
plans) or incurs Indebtedness (other than as expressly permitted by Section
6.3 but including any Subordinated Debt issued after the Closing Date), no
later than the Business Day following the date of receipt of the proceeds
thereof, Parent shall contribute the proceeds to Borrowers and all Borrowers
(in the case of an issuance by Parent or any other Guarantor) or the issuing
Borrower shall prepay the Loans in an amount equal to all such proceeds, net of
underwriting discounts and commissions and other reasonable costs, fees and
expenses paid to non-Affiliates in connection therewith.  Any such prepayment shall be applied in
accordance with Section 1.3(c). 
Notwithstanding the foregoing, in the event of any such issuance by UK
Borrower, only the UK Revolving Loans shall be prepaid with the net proceeds of
such issuance.


 


(iv)          If
at any time, the outstanding principal balance of the Term Loan exceeds 65% of
the appraised value of the Mortgaged Properties as set forth in the most recent
appraisal delivered to and approved by US Agent (the “Initial
Loan-to-Appraised Value Ratio”), Term Borrower shall immediately repay the
Term Loan in such amounts necessary to reduce the then current Term
Loan-to-appraised value ratio of the Mortgaged Properties to the Initial
Loan-to-Appraised Value ratio. 
Notwithstanding the foregoing, no more than one such appraisal may be
ordered at Borrowers’ expense in any 12-month period, provided, however,
that after the occurrence and during the continuance of an Event of Default,
the US Agent may, in its discretion, conduct any reasonable number of appraisals
at Borrowers’ expense.


 


10

















 


(c)           Application
of Certain Mandatory Prepayments.


 


(i)            Any
prepayments made by any US Borrower or Term Borrower pursuant to Sections
1.3(b)(ii) or (b)(iii) above shall be applied as follows: first, to Fees
and reimbursable expenses of the US Agent then due and payable pursuant to any
of the Loan Documents; second, for any prepayment by Term Borrower, to interest
then due and payable on the Term Loan; third, for any prepayment by Term
Borrower, to prepay the scheduled principal installments of the Term Loan in
inverse order of maturity, until prepaid in full; fourth, to interest then due
and payable on the Swing Line Loan; fifth, to the principal balance of the
Swing Line Loan until the same has been repaid in full; sixth, to interest then
due and payable on US Revolving Credit Advances; seventh, to the principal
balance of US Revolving Credit Advances and any Letter of Credit Obligations
then due and payable; until the same has been paid in full; eighth, for any
prepayment by any US Borrower, to interest then due and payable on the Term
Loan; ninth, for any payment by any US Borrower to prepay the scheduled
principal installments of the Term Loan in inverse order of maturity, until
paid in full; tenth, to any obligations with respect to Bank Products then due
and payable; eleventh to interest then due and payable on the UK Revolving
Credit Advances; and last to the principal balance of the UK Revolving Credit
Advances until the same has been paid in full. 
As long as no Default or Event of Default has occurred and is
continuing, any Net Proceeds remaining after such payments shall be remitted to
US Borrowers.  Neither the US Revolving
Loan Commitment nor the Swing Line Commitment shall be permanently reduced by
the amount of any such prepayments.


 


(ii)           Any
prepayments made by the UK Borrower pursuant to Sections 1.3(b)(ii) or
(b)(iii) above shall be applied as follows: first, to Fees and reimbursable
expenses of the UK Agent then due and payable pursuant to any of the Loan
Documents; second, to interest then due and payable on UK Revolving Credit
Advances; last, to the principal balance of UK Revolving Credit Advances until
the same has been paid in full.  As long
as no Default or Event of Default has occurred and is continuing, any Net
Proceeds remaining after such payments shall be remitted to UK Borrower. The UK
Revolving Loan Commitment shall not be permanently reduced by the amount of any
such prepayments.


 


(d)           Application
of Prepayments from Insurance and Condemnation Proceeds.  Prepayments from insurance or condemnation
proceeds required to be applied to prepay the Loans in accordance with Section
5.4(c) and the Mortgage(s), respectively, shall be applied as follows:  (i) insurance proceeds from casualties or
losses to cash or Inventory shall be applied, (x) if such prepayment relates to
cash or Inventory of any US Borrower, to the Swing Line Loans and, second, to
the Revolving Credit Advances of US Borrowers; and third, to the Revolving
Credit Advances of UK Borrower; and (y) if such prepayment relates to cash or
Inventory of UK Borrower, to the Revolving Credit Advances of UK Borrower, and
(ii) insurance or condemnation proceeds from casualties or losses to Equipment,
Fixtures and Real Estate of Term Borrower shall be applied to scheduled
installments of the Term Loan in inverse order of maturity, and then shall be
applied to the Swing Line Loan and then to the Revolving Credit Advances of US
Borrowers.  All other insurance and condemnation
proceeds required to be applied to prepay the Loans in accordance with Section
5.4(c) shall be applied to the Revolving Credit Loan; provided that
any such proceeds of UK Borrower shall only be applied to the UK 


 


11

















 


Revolving Loan.  Neither the
Revolving Loan Commitment nor the Swing Line Loan Commitment shall be
permanently reduced by the amount of any such prepayments.  If insurance or condemnation proceeds
received by UK Borrower required to be applied to prepay the Loans in
accordance with Section 5.4(c) exceed the outstanding principal balance
of the UK Revolving Credit Loan, the excess thereof shall be returned to UK
Borrower.  If insurance or condemnation
proceeds of US Borrower or Term Borrower required to be applied to prepay the
Loans in accordance with Section 5.4(c) exceed the outstanding principal
balances of the US Revolving Credit Advances and Swing Line Loan and, in the
case of the Term Borrower, the Term Loan, the excess thereof shall be returned
to US Borrowers or the Term Borrower, as applicable.  If the precise amount of insurance or condemnation proceeds
allocable to Inventory as compared to Equipment, Fixtures and Real Estate are
not otherwise determined, the allocation and application of those proceeds
shall be determined by the Applicable Agent, subject to the approval of
Requisite Lenders.


 


(e)           No
Implied Consent.  Nothing in this Section
1.3 shall be construed to constitute any Agent’s or any Lender’s consent to
any transaction that is not  permitted
by other provisions of this Agreement or the other Loan Documents.


 


1.4           Use of Proceeds.  Borrowers shall utilize
the proceeds of the Term Loan, the Revolving Loans and the Swing Line Advances
solely for the Refinancing (and to pay any related transaction expenses), to
repay intercompany Indebtedness to any Borrower, and for the financing of
Borrowers’ ordinary working capital and general corporate needs.  Disclosure Schedule (1.4) contains a
description of Borrowers’ sources and uses of funds as of the Closing Date,
including Loans and Letter of Credit Obligations to be made or incurred on that
date, and a funds flow memorandum detailing how funds from each source are to
be transferred to particular uses.


 


1.5           Interest and Applicable Margins.


 


(a)           The
Applicable Borrowers shall pay interest to the Applicable Agent, for the
ratable benefit  of the Applicable
Lenders in accordance with the various Loans being made by each Lender, in
arrears on each applicable Interest Payment Date, at the following rates:  (i) with respect to the Revolving Credit
Advances, the US Index Rate or the UK Index Rate, as the case may be, plus the
Applicable Revolver Index Margin per annum; or in the case of the US Revolving
Credit Advances only, at the election of Borrower Representative, the LIBOR
Rate plus the Applicable Revolver LIBOR Margin per annum, based on the
aggregate Revolving Credit Advances outstanding to such Borrower from time to
time; (ii) with respect to the Term Loan, the US Index Rate plus the Applicable
Term Loan Index Margin per annum; and (iii) with respect to the Swing Line
Loan, the US Index Rate plus the Applicable Revolver Index Margin per annum.


 


As of the Closing Date, the Applicable Margins are as
follows:


 


12

















 




	
  Applicable Revolver Index Margin

  	
   

  	
  0.75

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Applicable Revolver LIBOR Margin

  	
   

  	
  3.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Applicable Term Loan Index Margin

  	
   

  	
  6.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Applicable L/C Margin

  	
   

  	
  2.00

  	
  %

  






 


The Applicable Margins shall be adjusted (up or down)
prospectively on a quarterly basis as determined by Borrowers’ consolidated
financial performance, commencing with the first day of the first calendar
month that occurs more than 5 days after delivery of Borrowers’ quarterly
Financial Statements to Lenders for the Fiscal Quarter ending in April,
2003.  Adjustments in Applicable Margins
shall be determined by reference to the following grids:


 




	
  If Fixed
  Charge

  Coverage Ratio is:

  	
   

  	
  Level of 

  Applicable Margins:

  	
   

  
	
  >1.50:1.0

  	
   

  	
  Level I

  	
   

  
	
  31.50: 1.0, but 3 1.25: 1.0

  	
   

  	
  Level II

  	
   

  
	
  <1.25:1.0

  	
   

  	
  Level III

  	
   

  






 




	
   

  	
   

  	
  Applicable
  Margins

  	
   

  
	
   

  	
   

  	
  Level I

  	
   

  	
  Level II

  	
   

  	
  Level III

  	
   

  
	
  Applicable
  Revolver Index Margin

  	
   

  	
  0.25

  	
  %

  	
  0.75

  	
  %

  	
  1.25

  	
  %

  
	
  Applicable
  Revolver LIBOR Margin

  	
   

  	
  2.50

  	
  %

  	
  3.00

  	
  %

  	
  3.50

  	
  %

  
	
  Applicable Term
  Loan Index Margin

  	
   

  	
  5.50

  	
  %

  	
  6.00

  	
  %

  	
  6.50

  	
  %

  
	
  Applicable L/C
  Margin

  	
   

  	
  1.50

  	
  %

  	
  2.00

  	
  %

  	
  2.50

  	
  %

  






 


All adjustments in the
Applicable Margins after April, 2003 shall be implemented quarterly on a
prospective basis based on the Fixed Charge Coverage Ratio for Parent and its
Subsidiaries on a consolidated basis for the 13 Fiscal Periods then ended, for
each calendar month commencing at least 5 days after the date of delivery to
Lenders of the quarterly unaudited Financial Statements evidencing the need for an adjustment.  Concurrently with the delivery of those
Financial Statements, Borrower Representative shall deliver to Agents and
Lenders a certificate, signed by a Financial Officer, setting forth in
reasonable detail the basis for the continuance of, or any change in, the
Applicable Margins.  Borrowers hereby
agree, that if at any time after receipt by the Applicable Agent of any audited
Financial Statements required to be delivered hereunder, the Applicable Agent
determines in its sole discretion that an unjustified reduction in the
Applicable Margin has been granted to Borrowers, Borrowers shall pay upon
demand therefore an amount equal to the difference between (i) the interest
amount that should have been paid by Borrowers for such period but for such
unjustified reduction in the Applicable 


 


13

















 


Margin and (ii)
the interest amount actually paid by Borrowers for such period.  Failure to timely deliver any
Financial Statements required in this Section 1.5(a) shall, in addition
to any other remedy provided for in this Agreement, result in an increase in
the Applicable Margins to the highest level set forth in the foregoing grid,
until the first day of the first calendar month following the delivery of those
Financial Statements demonstrating that such an increase is not required.  If a Default or Event of Default has
occurred and is continuing at the time any reduction in the Applicable Margins
is to be implemented, that reduction shall be deferred until the first day of
the first calendar month following the date on which such Default or Event of
Default is waived or cured.


 


(b)           If
any payment on any Loan becomes due and payable on a day other than a Business
Day, the maturity thereof will be extended to the next succeeding Business Day
(except as set forth in the definition of LIBOR Period) and, with respect to
payments of principal, interest thereon shall be payable at the then applicable
rate during such extension.


 


(c)           All computations of Fees calculated
on a per annum basis and interest shall be made by the Applicable Agent on the
basis of a 360-day year, in each case for the actual number of days occurring
in the period for which such interest and Fees are payable.  Each of the US Index Rate and UK Index Rate
is a floating rate determined for each day. 
Each determination by the Applicable Agent of an interest rate and Fees
hereunder shall be presumptively true, absent manifest error.


 


(d)           So long as an Event of Default has
occurred and is continuing under Section 8.1(a), (h) or (i) or so long
as any other Event of Default has occurred and is continuing and at the
election of the Applicable Agent (or upon the written request of Requisite
Lenders) confirmed by written notice from the Applicable Agent to Borrower
Representative or UK Borrower, as applicable, the interest rates applicable to
the Loans 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 hereunder (“Default
Rate”), and all outstanding Obligations shall bear interest at the Default
Rate applicable to such Obligations. Interest and Letter of Credit Fees at the
Default Rate shall accrue from the initial date of such Event of Default until
that Event of Default is cured or waived and shall be payable upon demand.


 


(e)           Subject to the conditions precedent
set forth in Section 2.2, Borrower Representative shall have the option
to (i) request that any US Revolving Credit Advance be made as a LIBOR Loan,
(ii) convert at any time all or any part of outstanding US Revolving Loans
(other than the Swing Line Loan)  from
US Index Rate Loans to LIBOR Loans, (iii) convert any LIBOR Loan to a US Index
Rate Loan, subject to payment of LIBOR breakage costs in accordance with Section
1.12(b) if such conversion is made prior to the expiration of the LIBOR
Period applicable thereto, or (iv) continue all or any portion of any US
Revolving Loan (other than the Swing Line Loan) as a LIBOR Loan upon the
expiration of the applicable LIBOR Period and the succeeding LIBOR Period of
that continued Loan shall commence on the first day after the last day of the
LIBOR Period of the Loan to be continued. 
Any Loan or group of Loans 


 


14

















 


having the same proposed
LIBOR Period to be made or continued as, or converted into, a LIBOR Loan must
be in a minimum amount of $2,500,000 and integral multiples of $1,000,000 in
excess of such amount.  Any such election
must be made by 11:00 a.m. (California time) on the 3rd Business Day prior to
(1) the date of any proposed Advance which is to bear interest at the
LIBOR Rate, (2) the end of each LIBOR Period with respect to any LIBOR Loans to
be continued as such, or (3) the date on which Borrower Representative
wishes to convert any US Index Rate Loan to a LIBOR Loan for a LIBOR Period
designated by Borrower Representative in such election.  If no election is received with respect to a
LIBOR Loan by 11:00 a.m. (California time) on the 3rd Business Day prior to the
end of the LIBOR Period with respect thereto (or if a Default or an Event of
Default has occurred and is continuing or if the additional conditions
precedent set forth in Section 2.2 shall not have been satisfied), that
LIBOR Loan shall be converted to a US Index Rate Loan at the end of its LIBOR
Period.  Borrower Representative must
make such election by notice to US Agent in writing, by telecopy or overnight
courier.  In the case of any conversion
or continuation, such election must be made pursuant to a written notice (a “Notice
of Conversion/Continuation”) in the form of Exhibit 1.5(e).


 


(f)            Notwithstanding anything to the
contrary set forth in this Section 1.5, if a court of competent
jurisdiction determines in a final order that the rate of  interest payable by a Borrower hereunder exceeds the
highest rate of interest permissible under law (the “Maximum Lawful Rate”),
then so long as the Maximum Lawful Rate would be so exceeded, the rate of
interest payable hereunder by such Borrower shall be equal to the Maximum
Lawful Rate; provided, however, that if at any time thereafter the rate
of interest payable hereunder is less than the Maximum Lawful Rate, Borrowers
shall continue to pay interest hereunder at the Maximum Lawful Rate until such
time as the total interest received by the Applicable Agent, on behalf of the
Applicable Lenders, is equal to the total interest that would have been
received had the interest rate payable hereunder been (but for the operation of
this paragraph) the interest rate payable since the Closing Date as otherwise
provided in this Agreement. Thereafter, interest  hereunder shall be paid at the rate(s) of interest and in the
manner provided in Sections 1.5(a) through (e), unless and until the
rate of interest again exceeds the Maximum Lawful Rate, and at that time this
paragraph shall again apply.  In no
event shall the total interest received by any Lender pursuant to the terms
hereof exceed the amount that such Lender could lawfully have received had the
interest due hereunder been calculated for the full term hereof at the Maximum
Lawful Rate.  If the Maximum Lawful Rate
is calculated pursuant to this paragraph, such interest shall be calculated at
a daily rate equal to the Maximum Lawful Rate divided by the number of days in
the year in which such calculation is made. 
If, notwithstanding the provisions of this Section 1.5(f), a
court of competent jurisdiction shall finally determine that a Lender has
received interest hereunder in excess of the Maximum Lawful Rate, the
Applicable Agent shall, to the extent permitted by applicable law, promptly
apply such excess in the order specified in Section 1.10 and thereafter
shall refund any excess to the Applicable Borrower or as a court of competent
jurisdiction may otherwise order.


 


15

















 


1.6           Eligible
Accounts.  All of the Accounts owned by US Borrowers
and UK Borrower, and reflected in the most recent Borrowing Base Certificate
delivered by Applicable Borrower to the Applicable Agent shall be “Eligible
Accounts” for purposes of this Agreement, except any Account to which any
of the exclusionary criteria set forth below applies.  The Applicable Agent shall have the right to establish or modify
or eliminate Reserves against Eligible Accounts from time to time in its
reasonable credit judgment.  In
addition, each Agent reserves the right, at any time and from time to time
after the Closing Date, to adjust any of the criteria set forth below, to
establish new criteria and to adjust advance rates with respect to Eligible
Accounts, in its reasonable credit judgment, subject to the approval of
Requisite Revolving Lenders in the case of adjustments or the elimination of
Reserves which have the effect of making more credit available.  Eligible Accounts shall not include any
Account of any Borrower:


 


(a)           that
does not arise from the sale of goods or the performance of services by such
Credit Party in the ordinary course of its business;


 


(b)           (i)
upon which such Credit Party’s right to receive payment is not absolute or is
contingent upon the fulfillment of any condition whatsoever or (ii) as to which
such Credit Party is not able to bring suit or otherwise enforce its remedies
against the Account Debtor through judicial process, or (iii) if the Account
represents a progress billing consisting of an invoice for goods sold or used
or services rendered pursuant to a contract under which the Account Debtor’s
obligation to pay that invoice is subject to such Credit Party’s completion of further
performance under such contract or is subject to the equitable lien of a surety
bond issuer, or (iv)if the Account represents a billing for services not yet
performed by the Applicable Borrower and accepted by the Account Debtor;


 


(c)           in
the event that any defense, counterclaim, setoff or dispute is asserted as to
such Account;


 


(d)           that
is not a true and correct statement of bona fide indebtedness incurred in the
amount of the Account for merchandise sold to or services rendered and accepted
by the applicable Account Debtor;


 


(e)           other
than Revenue Week Accounts, with respect to which an invoice, reasonably
acceptable to the Applicable Agent in form and substance, has not been sent to
the applicable Account Debtor;


 


(f)            that
(i) is not owned by such Credit Party or (ii) is subject to any right, claim,
security interest or other interest of any other Person, other than Liens in
favor of the Applicable Agent, on behalf of itself and the Lenders;


 


(g)           that
arises from a sale to any director, officer, other employee or Affiliate of any
Credit Party, or to any entity that has any common officer or director with any
Credit Party;


 


16

















 


(h)           that
is the obligation of an Account Debtor that is a Governmental Authority,
including, without limitation, the government of the United States, Canada or
the United Kingdom, or a political subdivision thereof, or any state, county or
municipality or department, agency or instrumentality thereof unless such
Credit Party has complied with respect to such obligation with the Federal
Assignment of Claims Act of 1940, or any applicable foreign, state, county or
municipal law restricting assignment thereof in a manner satisfactory to the
Applicable Agent;


 


(i)            that
is the obligation of an Account Debtor located in a foreign country other than
(solely in the case of Accounts of a US Borrower), Canada (excluding the
province of Newfoundland, the Northwest Territories and the Territory of
Nunavit), or, (solely in the case of Accounts of the UK Borrower), the United
Kingdom, unless in each case payment thereof is assured by a letter of credit
assigned and delivered to the Applicable Agent, reasonably satisfactory to such
Agent as to form, amount and issuer;


 


(j)            to
the extent such Credit Party or any Affiliate thereof is liable for goods sold
or services rendered by the applicable Account Debtor to such Credit Party or
any Affiliate thereof but only to the extent of the potential offset;


 


(k)           that
arises with respect to goods that are delivered or services that are performed
on a bill-and-hold, cash-on-delivery basis or placed on consignment, guaranteed
sale or other terms by reason of which the payment by the Account Debtor is or
may be conditional;


 


(l)            that
is in default; provided, that, without limiting the generality of the
foregoing, an Account shall be deemed in default upon the occurrence of any of
the following:


 


(i)            the
Account is not paid within 90 days following its original invoice date;


 


(ii)           the
Account Debtor obligated upon such Account suspends business, makes a general
assignment for the benefit of creditors or fails to pay its debts generally as
they come due; or


 


(iii)          a
petition is filed by or against any Account Debtor obligated upon such Account
under any bankruptcy law or any other federal, state or foreign (including any
provincial) receivership, insolvency relief or other law or laws for the relief
of debtors;


 


(m)          that
is the obligation of an Account Debtor if 50% or more of the amount of all
Accounts owing by that Account Debtor are ineligible under the other criteria
set forth in this Section 1.6;


 


(n)           as
to which the Applicable Agent’s Lien thereon, on behalf of itself and the
applicable Lenders, is not a first priority perfected Lien (other than Prior
Claims for which Reserves have been established);


 


17

















 


(o)           as
to which any of the representations or warranties in the Loan Documents are
untrue;


 


(p)           to
the extent such Account is evidenced by a judgment, Instrument or Chattel
Paper;


 


(q)           to
the extent such Account exceeds any credit limit established by the Applicable
Agent, in its reasonable credit judgment, following prior notice of such limit
by such Agent to Borrower Representative or UK Borrower, as the case may be;


 


(r)            to
the extent that such Account (other than Accounts of Franchise Business
Activity), together with all other Accounts owing by such Account Debtor and
its Affiliates as of any date of determination exceeds 10% of all Eligible
Accounts of the US Borrowers or the UK Borrower, as applicable, and with
respect to Accounts of Franchise Business Activity, such Account, together with
all other Accounts owing by Franchise Business Activity, as of any date of
determination exceed 18% of all Eligible Accounts of the Applicable Borrower;


 


(s)           if
such Account is a Revenue Week Account, to the extent that such Account,
together with all other Revenue Week Accounts, exceeds 25% of the trade
accounts receivable balance (as reported on the trade accounts receivable aging
sub-ledger) as of the date of such reporting;


 


(t)            that
is payable in any currency other than Dollars or solely with respect to
Accounts of UK Borrower, Pounds Sterling;


 


(u)           that
is an Account constituting a healthcare insurance receivable or a Medicare or
Medicaid payment;


 


(v)           that
is an Account of a licensee of the Applicable Borrower; or


 


(w)          that
is otherwise unacceptable to the Applicable Agent in its reasonable credit
judgment.


 


1.7           Cash Management Systems.  On
or prior to the  Closing Date, Borrowers
will establish and will maintain until the Termination Date, the cash
management systems described in Annex C (the “Cash Management Systems”).


 


1.8           Fees.


 


(a)           Borrowers
shall pay to GE Capital, individually, the Fees specified in that certain fee letter
of even date herewith among Borrowers and GE Capital (the “GE Capital Fee
Letter”), at the times specified for payment therein, and GE Capital shall
pay to Bank of America the fees required by its commitment letter.


 


18

















 


(b)           As additional compensation for the
Revolving Lenders, the Applicable Borrower shall pay to the Applicable Agent,
for the ratable benefit of the Applicable Revolving Lenders, in arrears, on the
first Business Day of each month prior to the Commitment Termination Date and
on the Commitment Termination Date, a Fee (the “Unused Line Fee”) for
Borrowers’ non–use of available funds in an amount equal to one half of
one percent (0.50%) per annum (calculated on the basis of a 360 day year for
actual days elapsed) multiplied by the difference between (x) the Maximum US
Amount or Maximum UK Amount, as the case may be (as it may be reduced from time
to time), and (y) the average for the period of the daily closing balances of
the aggregate US Revolving Credit Advances or UK Revolving Credit Advances, as
the case may be, and in the case of the US Borrowers, the Swing Line Loan and
Letter of Credit Obligations outstanding during the period for which such Fee
is due.


 


(c)           If (i) the Credit Parties pay
after acceleration of the US Revolving Loan or the UK Revolving Loan, as
applicable, due to a voluntary default by any Borrower; (ii) US Borrowers or UK
Borrower voluntarily terminates the Revolving Loan Commitment; or (iii) any
Revolving Loan Commitment is terminated due to the voluntary default by any
Borrower, the Applicable Borrower shall pay to the Applicable Agent, for the
benefit of Applicable Revolving Lenders as liquidated damages and compensation
for the costs of being prepared to make funds available hereunder an amount
equal to the Applicable Percentage (as defined below) multiplied by the US
Revolving Loan Commitment or the UK Revolving Loan Commitment, as
applicable.  As used herein, the term
“Applicable Percentage” shall mean (x) 
three percent (3.0%), in  the
case of a prepayment on or prior to the first anniversary of the Closing Date,
(y) two percent (2.0%), in the case of a prepayment after the first anniversary
of the Closing Date but on or prior to the second anniversary thereof, and (z)
one percent (1.0%), in the case of a prepayment  after the second anniversary of the Closing Date but on or prior
to the third anniversary thereof.  The
Credit Parties agrees that the Applicable Percentages are a reasonable
calculation of Lenders’ lost profits in view of the difficulties and
impracticality of determining actual damages resulting from an early
termination of the Commitments.


 


(d)           US
Borrowers shall pay to US Agent, for the ratable benefit of US Revolving
Lenders, the Letter of Credit Fee on the face amount of Letters of Credit, as
provided in Annex B.


 


1.9           Receipt of Payments.  All payments under this
Agreement by (a) the US Borrowers shall be made not later than 1:00 p.m.
(California time) on the day when due in immediately available funds in Dollars
to the applicable Collection Account, and (b) the UK Borrower shall be made not
later than 1:00 p.m. (London time) on the day when due in immediately available
funds in Pounds Sterling to the applicable Collection Account.  For purposes of computing interest and Fees
and determining Borrowing Availability as of any date, all payments shall be
deemed received on the Business Day on which immediately available funds
therefor are in the account specified in the foregoing sentence by the time specified
therein.  Payments received after such
time on any Business Day or on a day that is not a Business Day shall be deemed
to have been received on the following Business Day.


 


19

















 


1.10         Application and Allocation of
Payments.


 


(a)           So
long as no Event of Default has occurred and is continuing, (i) payments
received from or with respect to Obligations of a Borrower consisting of
proceeds of Accounts of such Borrower (or in the case of a US Borrower, its
Domestic Subsidiaries) received in the ordinary course of business shall be
applied, first, to the Swing Line Loan (in the case of the US Borrower) and,
second, to the Applicable  Borrower’s
Revolving Loan; (ii) payments matching specific scheduled payments then due
shall be applied to those scheduled payments; (iii) voluntary prepayments shall
be applied as determined by Borrower Representative or UK Borrower, as
applicable, subject to the provisions of Section 1.3(a); (iv) mandatory
prepayments pursuant to Section 1.3(b)(i) shall be applied as set forth
in Section 1.3(b)(i) and (ii) and mandatory prepayments pursuant to Section
1.3(b)(ii) and (iii) shall be applied as set forth in Section 1.3(c);
(v) prepayments from insurance or condemnation proceeds shall be applied as set
forth in Section 1.3(d); and (vi) any other payments by the Applicable
Borrower shall be applied to the Revolving Loan, and after the Revolving Loan
has been paid in full, to Obligations with respect to Bank Products then due
and payable.  All payments and
prepayments applied to a particular Loan shall be applied ratably to the
portion thereof held by each Lender as determined by its Pro Rata Share.


 


(b)           As
to all payments made when an Event of Default has occurred and is continuing or
following the Commitment Termination Date, each Borrower hereby irrevocably
waives the right to direct the application of any and all such payments
received from or on behalf of such Borrower, and each Borrower hereby
irrevocably agrees that the Applicable Agent shall have the continuing
exclusive right to apply any and all such payments against the Obligations of
the Applicable Borrowers as such Agent may deem advisable notwithstanding any
previous entry by the Applicable Agent in the Loan Account or any other books
and records.  In the absence of a
specific determination by Applicable Agent with respect thereto, payments shall
be applied to amounts then due and payable in the order set forth in Section
1.3(c) and then to all other Obligations of the Applicable Borrower,
including expenses of Lenders to the extent reimbursable under Section 11.3.


 


(c)           The Applicable Agent is authorized
to, and at its sole election may, charge to the applicable Revolving Loan
balance on behalf of the Applicable Borrower and cause to be paid all Fees,
expenses, Charges, costs (including insurance premiums in accordance with Section
5.4(a)) and interest and principal, other than principal of the Revolving
Loan, owing by such Borrower under this Agreement or any of the other Loan
Documents if and to the extent such Borrower fails to pay promptly any such
amounts as and when due, even if the amount of such charges would exceed
Borrowing Availability at such time or would cause the balance of the US
Revolving Loan and the Swing Line Loan to US Borrowers to exceed the US
Borrowing Base or cause the balance of the UK Revolving Loan to exceed the UK
Borrowing Base, after giving effect to such charges.  At the Applicable Agent’s option and to the extent permitted by
law, any charges so made shall constitute part of the Revolving Loan hereunder.


 


20

















 


1.11         Loan Account and Accounting.  Each Agent shall
maintain a loan account (a “Loan Account”) on its books to record:  all Advances and the Term Loan to the
Applicable Borrower, all payments made by Borrowers, and all other debits and
credits as provided in this Agreement with respect to the Loans or any other
Obligations.  All entries in each Loan
Account shall be made in accordance with the Applicable Agent’s customary
accounting practices as in effect from time to time, and in the Applicable
Currency. The balance in the Loan Account, as recorded on the Applicable
Agent’s most recent printout or other written statement, shall, absent manifest
error, be presumptive evidence of the amounts due and owing to the Applicable
Agent and the Applicable Lenders by each Borrower; provided that any
failure to so record or any error in so recording shall not limit or otherwise
affect any Borrower’s duty to pay the Obligations.  The Applicable Agent shall render to Borrower Representative a
monthly accounting of transactions with respect to the Loans setting forth the
balance of the Loan Account as to each Borrower for the immediately preceding
month.  Unless Borrower Representative
notifies the Applicable Agent in writing of any objection to any such
accounting (specifically describing the basis for such objection), within 30
days after the date thereof, each and every such accounting shall be deemed
presumptively true, absent manifest error, in all respects as to all matters
reflected therein.  Only those items
expressly objected to in such notice shall be deemed to be disputed by
Borrowers.  Notwithstanding any
provision herein contained to the contrary, any Lender may elect (which
election may be revoked) to dispense with the issuance of Notes to that Lender
and may rely on the Loan Account as evidence of the amount of Obligations from
time to time owing to it.


 


1.12         Indemnity.


 


(a)           Each
Credit Party (other than UK Borrower) that is a signatory hereto shall jointly
and severally, and UK Borrower shall severally, indemnify and hold harmless
each of Agents, Lenders and their respective Affiliates, and each such Person’s
respective officers, directors, employees, attorneys, agents and
representatives (each, an “Indemnified Person”), from and against any
and all suits, actions, proceedings, claims, damages, losses, liabilities and
expenses (including reasonable attorneys’ fees and disbursements and other
costs of investigation or defense, including those incurred upon any appeal)
that may be instituted or asserted against or incurred by any such Indemnified
Person as the result of credit having been extended, suspended or terminated
under this Agreement and the other Loan Documents and the administration of
such credit, and in connection with or arising out of the transactions
contemplated hereunder and thereunder and any actions or failures to act in
connection therewith, including any and all Environmental Liabilities and legal
costs and expenses arising out of or incurred in connection with disputes
between or among any parties to any of the Loan Documents (collectively, “Indemnified
Liabilities”) save that in respect of UK Borrower, UK Borrower shall
indemnify and hold harmless each Indemnified Person for Indemnified Liabilities
arising in respect of the UK Revolving Loan Commitments and the UK Revolving
Loans, provided, that no such Credit Party shall be liable for any
indemnification to an Indemnified Person to the extent that any such suit,
action, proceeding, claim, damage, loss, liability or expense results from
that  Indemnified Person’s gross
negligence or willful misconduct, as 


 


21

















 


finally determined by a court of competent jurisdiction.  NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE
OR LIABLE TO ANY OTHER PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR
THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS
DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN
EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY
OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.


 


(b)           To induce US Revolving Lenders to
provide the LIBOR Rate option on the terms provided herein, if (i) any LIBOR
Loans are repaid in whole or in part prior to the last day of any applicable
LIBOR Period (whether that repayment is made pursuant to any provision of this
Agreement or any other Loan Document or occurs as a result of acceleration, by
operation of law or otherwise); (ii) any US Borrower shall default in payment
when due of the principal amount of or interest on any LIBOR Loan; (iii) any US
Borrower shall refuse to accept any borrowing of, or shall request a
termination of, any borrowing of, conversion into or continuation of, LIBOR
Loans after Borrower Representative has given notice requesting the same in
accordance herewith; or (iv) any US Borrower shall fail to make any prepayment
of a LIBOR Loan after Borrower  Representative
has given a notice thereof in accordance herewith, then US  Borrowers shall indemnify and hold harmless
each US Revolving Lender from and against all losses, costs and expenses
resulting from or arising from any of the foregoing.  Such indemnification shall include any loss (including loss of
margin) or expense arising from the reemployment of funds obtained by it or
from fees payable to terminate deposits from which such funds were
obtained.  For the purpose of
calculating amounts payable to a Lender under this subsection, each Lender
shall be deemed to have actually funded its relevant LIBOR Loan through the
purchase of a deposit bearing interest at the LIBOR Rate in an amount equal to
the amount of that LIBOR Loan and having a maturity comparable to the relevant
LIBOR Period; provided, that each Lender may fund each of its LIBOR Loans in
any manner it sees fit, and the foregoing assumption shall be utilized only for
the calculation of amounts payable under this subsection.  This covenant shall survive the termination
of this Agreement and the payment of the Notes and all other amounts payable
hereunder.  As promptly as practicable
under the circumstances, each Lender shall provide Borrower Representative,
with its written calculation of all amounts payable pursuant to this Section
1.12(b), and such calculation shall be binding on the parties hereto unless
Borrower Representative, shall object in writing within 10 Business Days of
receipt thereof, specifying the basis for such objection in detail.


 


1.13         Access. 
Each Credit Party that is a party hereto shall, during normal business
hours, from time to time upon three (3) Business Days’ prior notice as
frequently as the Applicable Agent determines to be appropriate, or at any time
without notice upon the occurrence and during the continuance of an Event of
Default: (a) provide the Applicable Agent and any of its officers, employees
and agents access to its properties, facilities, advisors and employees
(including officers) of each Credit Party and to the Collateral, (b) permit the
Applicable Agent, and any of its officers, employees and agents, to inspect,
audit and make 


 


22

















 


extracts from any Credit
Party’s books and records, and (c) permit the Applicable Agent, and its
officers, employees and agents, to inspect, review, evaluate and make test
verifications and counts of the Accounts, Inventory and other Collateral of any
Credit Party.  If a Default or Event of
Default has occurred and is continuing or if access is necessary to preserve or
protect the Collateral as determined by the Applicable Agent, each such Credit
Party shall provide such access to the Applicable Agent and to each Lender at
all times and without advance notice. 
Furthermore, so long as any Event of Default has occurred and is
continuing, Borrowers shall provide each Agent and each Lender with addresses
and telephone numbers to their suppliers and customers.  Each Credit Party shall make available to
the Applicable Agent and its counsel, as quickly as is possible under the
circumstances, originals or copies of all books and records that the Applicable
Agent may reasonably request.  Each
Credit Party shall deliver any document or instrument necessary for the
Applicable Agent, as it may from time to time reasonably request, to obtain
records from any service bureau or other Person that maintains records for such
Credit Party, and shall maintain duplicate records or supporting documentation
on media, including computer tapes and discs owned by such Credit Party.  The Applicable Agent will give the
Applicable Borrower at least 30 days’ prior written notice of regularly
scheduled audits, provided, however that no such notice shall be
required during the continuance of an Event of Default.  Applicable Agent shall conduct two audits
per calendar year, each of which shall be at Borrowers’ expense, provided,
however, that after the occurrence and during the continuance of an
Event of Default, Applicable Agent may conduct at Borrowers’ expense any number
of audits in its discretion. 
Representatives of other Lenders may accompany the Applicable Agent’s
representatives on regularly scheduled audits at no charge to Borrowers.


 


1.14         Taxes.


 


(a)           To
the extent permitted by law, any and all payments by each Borrower hereunder
(including any payments made pursuant to Section 12) or under the Notes
shall be made, in accordance with this Section 1.14, free and clear of
and without deduction for any and all present or future Taxes.  If any Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder (including any
sum payable pursuant to Section 12) or under the Notes or if any Agent
is required to deduct any Taxes from or in respect of any sum payable to any
Lender holding a participating interest in the UK Revolving Loan or the Swing
Line Loan, (i) the sum payable by the Applicable Borrower shall be increased as
much as shall be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
1.14) the Applicable Agent or Applicable Lenders, as applicable, receive an
amount equal to the sum they would have received had no such deductions been
made, (ii) such Borrower shall make such deductions, and (iii) such Borrower
shall pay the full amount deducted to the relevant taxing or other authority in
accordance with applicable law.  Within
30 days after the date of any payment of Taxes, Borrower Representative shall
furnish to the Applicable Agent the original or a certified copy of a receipt
evidencing payment thereof.  If any
Agent or any Lender receives any payment from a Governmental Authority expressly
identified as a refund of any Taxes 


 


23

















 


paid by the Applicable Borrower pursuant to this Section 1.14,
the Applicable Agent or the Applicable Lender receiving such refund payment
shall, in its discretion, either remit such refunded payment to the Applicable
Borrower or otherwise credit the amount of the payment to the Obligations of
the Applicable Borrower; provided, however, that (1) the Agents
and Lenders are obligated to remit or credit such refunded payments only to the
extent that such payments are readily identifiable; (2) except as provided in Section
1.14(f), the Agents and Lenders have no obligation to affirmatively seek or
request any such refund; and (3) the Agents and Lenders have no obligation to
modify their tax planning or account to any Borrower on matters relating to the
tax planning of the Agents or Lenders.


 


(b)           Each Borrower shall (jointly and
severally as to the US Borrowers and the Term Borrower and individually as to
UK Borrower) indemnify and, within 10 Business Days of demand therefor, pay
each Agent and each Lender for the full amount of Taxes (including any Taxes
imposed by any jurisdiction on amounts payable under this Section 1.14)
paid by such Agent or such Lender with respect to this Agreement or the
payments made by any Borrower, as appropriate, and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes were correctly or legally asserted.


 


(c)           Each US Revolving Lender or Term
Lender organized under the laws of a jurisdiction outside the United States (a
“Foreign Lender”) as to which payments to be made under this Agreement
or under the Notes are exempt from United States withholding tax under an
applicable statute or tax treaty shall provide to Borrower Representative and
US Agent a properly completed and executed IRS Form W-8ECI or Form W-8BEN or
other applicable form, certificate or document prescribed by the IRS or the
United States certifying as to such Foreign Lender’s entitlement to such exemption
(a “Certificate of Exemption”). 
Any foreign Person that seeks to become a US Revolving Lender or Term
Lender under this Agreement shall provide a Certificate of Exemption to
Borrower Representative and US Agent prior to becoming a Lender hereunder.  No foreign Person may become a US Revolving
Lender or Term Lender hereunder if such Person fails to deliver a Certificate
of Exemption in advance of becoming a Lender.


 


(d)           The
UK Borrower shall not be required to make an increased payment to a Lender or
the UK Agent under this Section 1.14 in respect of any deduction or
withholding, if on the date on which the payment falls due the relevant Lender
is not a Qualifying Lender in relation to the payment other than as a result of
any change after the date it became a Lender under this Agreement in or in the
interpretation, administration, or application of any law or Treaty, or any
published practice or concession of any relevant taxing authority.


 


(e)           For
the purposes of Section 1.14(d), the following definitions apply:-


 


24

















 


“Qualifying Lender” means a Lender which is
(on the date a payment falls due) beneficially entitled to interest payable to
that Lender in respect of an advance under this Agreement and is:


 


(i)            a
Lender;


 


(A)          which is a bank (as defined for the
purpose of section 349 of the United Kingdom Income and Corporation Taxes Act
1988 (the “Taxes Act”) ) making an
advance under a Loan Document; or


 


(B)           in respect of an advance made under
this Agreement by a person that was a bank (as defined for the purpose of
section 349 of the Taxes Act) at the time that that advance was made,


 


is within the charge to United Kingdom corporation tax
as respects any payments of interest made in respect of that advance; or


 


(ii)           a
Lender which is:


 


(A)          a company resident in the United
Kingdom for United Kingdom tax purposes;


 


(B)           a partnership each member of which is
a company resident in the United Kingdom for United Kingdom tax purposes; or


 


(C)           a company not so resident in the
United Kingdom which carries on a trade in the United Kingdom through a branch
or agency and which bring into account interest payable in respect of that
advance in computing its chargeable profits (within the meaning given by
section 11(2) of the Taxes Act);


 


and has given a Tax Confirmation to the UK Borrower (a
“UK Non-Bank Lender”); or


 


(iii)          a
Treaty Lender.


 


“Tax
Confirmation” means a confirmation by a Lender that the
person beneficially entitled to interest payable to that Lender in respect of
an advance hereunder is either:


 


(i)            a
company resident in the United Kingdom, or a partnership each member of which
is a company resident in the United Kingdom, for United Kingdom tax purposes;
or


 


25

















 


(ii)           a
company not so resident in the United Kingdom which carries on a trade in the
United Kingdom through a branch or agency and that interest payable in respect
of that advance falls to be brought into account in computing the chargeable
profits of that company for the purposes of section 11(2) of the Taxes Act.


 


“Treaty
Lender” means a Lender which:


 


(i)            is
treated as a resident for the purposes of the Treaty of the territory other
than the United Kingdom which is the party to the Treaty, beneficially owns the
payment in question and is not exempt from taxation on such interest;


 


(ii)           does
not carry on a business in the United Kingdom through a permanent establishment
with which that Lender’s participation in the Loan is effectively connected;


 


“Treaty”
means a double taxation convention in effect at the time of the payment between
the United Kingdom and the jurisdiction in which the Treaty Lender is resident
where under that Treaty payment by the UK Borrower can be made without any
withholding provided that the other requirements of the Treaty are satisfied.


 


(f)            A
Treaty Lender and each Credit Party which makes a payment to which that Treaty
Lender is entitled shall co-operate in completing any procedural formalities
necessary for that Credit Party to obtain authorization to make that payment
without a withholding or where any payment has been made with a deduction to
obtain a repayment from the relevant taxing authority of any tax previously
withheld and paid to that relevant tax authority; provided that in each case
any Treaty Lender and any Credit Party will be deemed to fulfil its obligations
to so co-operate unless its actions in that respect amount to gross negligence
or wilful misconduct.


 


(g)           A
UK Non-Bank Lender who is not a Treaty Lender which becomes a Lender on the day
on which this Agreement is entered into gives a Tax Confirmation to the UK
Borrower by entering into this Agreement.


 


1.15         Capital Adequacy; Increased Costs;
Illegality.


 


(a)           If
any Lender shall have determined that any law, treaty, governmental (or quasi–governmental)
rule, regulation, guideline or order regarding capital adequacy, reserve
requirements or similar requirements or compliance by any Lender with any
request or directive regarding capital adequacy, reserve requirements or
similar requirements (whether or not having the force of law), in each case,
adopted after the Closing Date, from any central bank or other Governmental
Authority increases or would have the effect of increasing the amount of
capital, reserves or other funds required to be maintained by such Lender and
thereby reducing the rate 


 


26

















 


of return on such Lender’s capital as a consequence of its obligations
hereunder, then Borrowers shall from time to time within 10 Business Days of
demand by such Lender (with a copy of such demand to US Agent) pay to US Agent,
for the account of such Lender, additional amounts sufficient to compensate
such Lender for such reduction.  A
certificate as to the amount of that reduction and showing the basis of the
computation thereof submitted by such Lender to Borrower Representative and to
US Agent shall be presumptively true, absent manifest error.


 


(b)           If, due to either (i) the
introduction of or any change in any law or regulation (or any change in the
interpretation thereof) or (ii) the compliance with any guideline or
request from any central bank or other Governmental Authority (whether or not
having the force of law), in each case adopted after the Closing Date, there
shall be any increase in the cost to any Lender of agreeing to make or making,
funding or maintaining any Loan, then the Applicable Borrower shall from time
to time, within 10 Business Days of demand by such Lender (with a copy of such
demand to the Applicable Agent), pay to the Applicable Agent for the account of
such Lender additional amounts sufficient to compensate such Lender for such
increased cost.  A certificate as to the
amount of such increased cost and including the basis for the calculation thereof,
submitted to Borrower Representative and to the Applicable Agent by such
Lender, shall be conclusive and binding on Borrowers for all purposes, absent
manifest error.  Each Lender agrees
that, as promptly as practicable after it becomes aware of any circumstances
referred to above which would result in any such increased cost, the affected
Lender shall, to the extent not inconsistent with such Lender’s internal
policies of general application, use reasonable commercial efforts to minimize
costs and expenses incurred by it and payable to it by Borrowers pursuant to
this Section 1.15(b).


 


(c)           Notwithstanding anything to the
contrary contained herein, if the introduction of or any change in any law or
regulation (or any change in the interpretation thereof) shall make it
unlawful, or any central bank or other Governmental Authority shall assert that
it is unlawful, for any Lender to agree to make or to make or to continue to
fund or maintain any LIBOR Loan, then, unless that Lender is able to make or to
continue to fund or to maintain such LIBOR Loan at another branch or office of
that Lender without, in that Lender’s opinion, adversely affecting it or its
Loans or the income obtained therefrom, on notice thereof and demand therefor
by such Lender to Borrower Representative through US Agent, (i) the
obligation of such Lender to agree to make or to make or to continue to fund or
maintain LIBOR Loans shall terminate and (ii) US Borrower shall forthwith
prepay in full all outstanding LIBOR Loans owing by such Borrower to such
Lender, together with interest accrued thereon, unless Borrower Representative
on behalf of such Borrower, within 5 Business Days after the delivery of such
notice and demand, converts all LIBOR Loans into Index Rate Loans.


 


(d)           Within 15 Business Days after receipt
by Borrower Representative or UK Borrower, as applicable, of written notice and
demand from any Lender (an “Affected Lender”) for payment of additional
amounts or increased costs as provided in Sections 1.14(a), 1.14(b), 1.15(a)
or 1.15(b), Borrower Representative or UK Borrower, as applicable, may, at
its option, notify the Applicable Agent and such Affected Lender of its
intention to replace the Affected Lender. 
So long as no Default or Event of Default has occurred and is continuing,
Borrower 


 


27

















 


Representative or UK
Borrower, as applicable, with the consent of the Applicable Agent, may obtain,
at Borrowers’ expense,  a
replacement Lender (“Replacement Lender”) for the Affected Lender, which
Replacement Lender must be reasonably satisfactory to the Applicable
Agent.  If Borrowers obtain a
Replacement Lender within 90 days following notice of their intention to do so,
the Affected Lender must sell and assign its Loans and Commitments to such
Replacement Lender for an amount equal to the principal balance of all Loans
held by the Affected Lender and all accrued interest and Fees with respect
thereto through the date of such sale; provided, that the Applicable
Borrowers shall have reimbursed such Affected Lender for the additional amounts
or increased costs that it is entitled to receive under this Agreement through
the date of such sale and assignment. 
Notwithstanding the foregoing, Borrowers shall not have the right to
obtain a Replacement Lender if the Affected Lender rescinds its demand for
increased costs or additional amounts within 15 days following its receipt of
Borrowers’ notice of intention to replace such Affected Lender.  Furthermore, if Borrowers give a notice of
intention to replace and do not so replace such Affected Lender within 90 days
thereafter, Borrowers’ rights under this Section 1.15(d) shall terminate
and Borrowers shall promptly pay all increased costs or additional amounts
demanded by such Affected Lender pursuant to Sections 1.14(a), 1.14(b),
1.15(a) and 1.15(b).


 


(e)           Each
Lender agrees that, upon the occurrence of any event giving rise to the payment
of additional amounts or increased costs under Section 1.14(a), 1.14(b),
1.15(a) or 1.15(b) with respect to such Lender, it will, if requested by the
Applicable Borrower, use reasonable efforts (subject to overall policy
considerations of such Lender) to designate another existing lending office of
such Lender for any Loans affected by such event with the object of reducing
the payments required hereunder; but only if such designation is made on terms
that, in the judgment of such Lender, cause such Lender and its lending
office(s) to suffer legal or regulatory disadvantage and no material economic
disadvantage, and provided, further, that nothing in this Section
shall affect or postpone any of the obligations of the Borrowers or the rights
of any Agent or any Lender pursuant to Section 1.14(a), 1.14(b), 1.15(a) or
1.15(b).


 


1.16         Single Loan. 
All Loans to each Borrower and all of the other Obligations of such
Borrower arising under this Agreement and the other Loan Documents shall
constitute one general obligation of that Borrower secured, until the
Termination Date, by all of the Collateral of such Borrower.


 


2.          CONDITIONS PRECEDENT


 


2.1           Conditions to the Initial Loans.  No
Lender shall be obligated to make any Loan or incur any Letter of Credit
Obligations on the Closing Date, or to take, fulfill, or perform any other
action hereunder, until the following conditions have been satisfied or
provided for in a manner satisfactory to Agents, or waived in writing by
Agents:


 


(a)           Credit
Agreement; Loan Documents.  This
Agreement or counterparts hereof shall have been duly executed by, and
delivered to, Borrowers, Parent, Agents and 


 


28

















 


Lenders; and Agents shall have received such documents, instruments,
agreements and legal opinions as Agents shall reasonably request in connection
with the transactions contemplated by this Agreement and the other Loan
Documents, including all those listed in the Closing Checklist attached hereto
as Annex D, each in form and substance reasonably satisfactory to
Agents.


 


(b)           Subordinated
Debt.  Westaff (USA) shall have
received cash proceeds of at least $3,000,000 from the issuance of the
Subordinated Notes, or capital contributions, or a combination thereof, and all
on terms and conditions acceptable to Agents and Required Lenders.


 


(c)           Australian
Loan Documents.  Westaff Australia
and GE Australia shall have entered into the Australian Loan Documents on terms
and conditions satisfactory to Agents, and all conditions to the effectiveness
thereof shall have been satisfied.


 


(d)           Repayment
of  Prior Lender Obligations, Senior
Notes and Intercompany Debt; Satisfaction of Outstanding L/Cs.  (i) 
Agents shall have received a fully executed original of pay-off letters
reasonably satisfactory to Agents confirming that all of the Prior Lender
Obligations, the Senior Notes will be repaid in full from the proceeds of the
Subordinated Debt, the Term Loan and the initial US Revolving Credit Advance
and all Liens upon any of the property of Parent or any Subsidiaries in favor
of Prior Lenders and Senior Noteholders shall be terminated by Prior Lenders or
Senior Noteholders immediately upon such payment, and containing a release of
all liabilities of the Credit Parties under the Prior Lender Obligations (other
than contingent indemnity obligations which survive repayment in full of the
Prior Lender Obligations and termination of any agreement related thereto in
accordance with the terms of the agreements governing such Prior Lender
Obligations); (ii) all letters of credit issued or guaranteed by any Prior
Lender shall have been terminated, cash collateralized or supported by a Letter
of Credit issued pursuant to Annex B, or assumed, as Obligations
hereunder, as mutually agreed upon by US Agent, Borrowers and such Prior
Lender; and (iii) UK Borrower and Westaff Australia shall have repaid in full
or in part the intercompany loans made by Westaff (USA), in amounts approved by
Agents and US Revolving Lenders.


 


(e)           Approvals.  Agents shall have received (i) satisfactory
evidence that the Credit Parties have obtained all required consents and
approvals of all Persons including all requisite Governmental Authorities, to
the execution, delivery and performance of this Agreement and the other Loan
Documents and the consummation of the Related Transactions or (ii) an officer’s
certificate in form and substance reasonably satisfactory to Agents affirming
that no such consents or approvals are required.


 


(f)            Opening
Availability.  (i) The Eligible
Accounts supporting the initial Revolving Credit Advances and the initial
Letter of Credit Obligations incurred and the amount of the Reserves to be
established on the Closing Date shall be sufficient in value, as determined by
Agents, to provide Borrowers with aggregate Borrowing Availability, which after
giving effect to the initial Revolving Credit Advance made to each Borrower, the
incurrence of any 


 


29

















 


initial Letter of Credit Obligations and the consummation of the
Related Transactions (on a pro forma basis, with trade payables being paid
currently, and expenses and liabilities being paid in the ordinary course of
business and without acceleration of sales) of at least the US Dollar
Equivalent of $5,500,000, and (ii) the Agents shall have received a Borrowing
Base Certificate for each US Borrower and UK Borrower setting forth its separate
Borrowing Base.


 


(g)           Payment
of Fees. Borrowers shall have paid the Fees required to be paid on the
Closing Date in the respective amounts specified in Section 1.8
(including, without limitation, the Fees specified in the GE Capital Fee
Letter), and shall have reimbursed Agents for all fees, costs and expenses of
closing presented as of the Closing Date.


 


(h)           Capital
Structure: Other Indebtedness.  The
capital structure of each Credit Party and the terms and conditions of all
Indebtedness of each Credit Party shall be acceptable to Agents in their sole
discretion.


 


(i)            Due
Diligence.  Agents shall have
completed their business and legal due diligence, including a roll forward of
the previous Collateral audit, with results reasonably satisfactory to Agents.


 


(j)            No
Changes.  As of the Closing Date,
there will have been (i) since November 3, 2001 (except as disclosed by any
Borrower in its subsequent unaudited financial statements, reports and
projections and delivered to Agents and Lenders prior to the date hereof), no
material adverse change, individually or in the aggregate, in the business,
financial or other condition of any Borrower or Westaff Australia or the
Borrowers and Westaff Australia taken as a whole, the industry in which any
Borrower or Westaff Australia operates, or the collateral which will be subject
to the security interest granted to the Agents or GE Australia or in the
prospects or projections of any Borrower or Westaff Australia or the Borrowers
and Westaff Australia taken as a whole, (ii) no litigation commenced which, if
successful, would have a material adverse impact on any Borrower or Westaff
Australia or the Borrowers and Westaff Australia taken as a whole, its or their
business, or its or their ability to repay the Financing, or that  would challenge the transactions under
consideration, (iii) since November 3, 2001, no material increase in the
liabilities, liquidated or contingent, of any Borrower or Westaff Australia or
the Borrowers and Westaff Australia taken as a whole, or a material decrease in
the assets of any Borrower or Westaff Australia or the Borrowers and Westaff
Australia taken as a whole; and (iv) since April 12, 2002, no change in loan
syndication, financial or capital market conditions generally that, in GE Capital’s
judgment would materially impair syndication of the Loans.


 


2.2           Further Conditions to Each Loan. 
Except as otherwise expressly provided herein, no Lender shall be
obligated to fund any Advance, convert or continue any Loan as a LIBOR Loan or
incur any Letter of Credit Obligation, if, as of the date thereof:


 


30

















 


(a)           any
representation or warranty by any Credit Party contained herein or in any other
Loan Document is untrue or incorrect as of such date, except to the extent that
such representation or warranty expressly relates to an earlier date and except
for changes therein expressly permitted or expressly contemplated by this
Agreement and the Applicable Agent or Requisite Revolving Lenders have determined
not to make such Advance, convert or continue any Loan as LIBOR Loan or incur
such Letter of Credit Obligation as a result of the fact that such warranty or
representation is untrue or incorrect;


 


(b)           any
event or circumstance having a Material Adverse Effect has occurred since the
Closing Date as determined by the Requisite Revolving Lenders and the
Applicable Agent or Requisite Revolving Lenders have determined not to make
such Advance, convert or continue any Loan as a LIBOR Loan or incur such Letter
of Credit Obligation as a result of the fact that such event or circumstance
has occurred;


 


(c)           any
Default or Event of Default has occurred and is continuing or would result
after giving effect to any Advance (or the incurrence of any Letter of Credit
Obligation), and the Applicable Agent or Requisite Revolving Lenders shall have
determined not to make any Advance, convert or continue any Loan as a LIBOR
Loan or incur any Letter of Credit Obligation as a result of that Default or
Event of Default; or


 


(d)           after
giving effect to any Advance made to the Applicable Borrower (or the incurrence
of any Letter of Credit Obligations), (i) in the case of an Advance to US
Borrowers, the outstanding principal amount of the US Revolving Loan and the
outstanding principal amount of the Swing Line Loan would exceed the lesser of
the US Borrowing Base and the US 
Maximum Amount, less the then outstanding principal amount of the Swing
Line Loan, or (ii) in the case of an Advance to UK Borrower, the outstanding
principal amount of the UK Revolving Loan would exceed such UK Borrowing Base.


 


The request and acceptance by any Borrower of the
proceeds of any Advance, the incurrence of any Letter of Credit Obligations or
the conversion or continuation of any Loan into, or as, a LIBOR Loan shall be
deemed to constitute, as of the date thereof, (i) a representation and warranty
by Borrowers that the conditions in this Section 2.2  have been satisfied and (ii) a reaffirmation
by US Borrowers and Term Borrower of the cross-guaranty provisions set forth in
Section 12 and (iii) a reaffirmation by Borrowers of the granting and
continuance of the Applicable Agent’s Liens, on behalf of itself and Lenders,
pursuant to the Collateral Documents.


 


3.          REPRESENTATIONS AND WARRANTIES


 


To induce Lenders
to make the Loans and to incur Letter of Credit Obligations, the Credit Parties
(other than UK Borrower) executing this Agreement, jointly and severally, and
UK Borrower, only in respect of itself, severally, make the following
representations and warranties to each Agent and each Lender with respect to
all Credit Parties, each and all of which 


 


31

















 


shall survive the
execution and delivery of this Agreement and are made after giving effect to
the Related Transactions.


 


3.1           Corporate Existence; Compliance
with Law. 
Each Credit Party (a) is a corporation, limited liability company,
general partnership or limited partnership duly organized, validly existing and
(where applicable) in good standing under the laws of its respective
jurisdiction of incorporation or organization set forth in Disclosure
Schedule (3.1); (b) is duly qualified to conduct business and is in good
standing in each other jurisdiction where its ownership or lease of property or
the conduct of its business requires such qualification, except where the
failure to be so qualified would not result in exposure to losses, damages or
liabilities in excess of $250,000; (c) has the requisite power and authority
and the legal right to own, pledge, mortgage or otherwise encumber and operate
its properties, to lease the property it operates under lease and to conduct
its business as now, heretofore and proposed to be conducted; (d) subject to
specific representations regarding Environmental Laws, has all material
licenses, permits, consents or approvals from or by, and has made all material
filings with, and has given all material notices to, all Governmental
Authorities having jurisdiction, to the extent required for such ownership,
operation and conduct; (e) is in compliance with its charter and bylaws or
partnership or operating agreement, as applicable; and (f) subject to specific
representations set forth herein regarding ERISA, Environmental Laws, tax and
other laws, is in compliance with all applicable provisions of law, including
laws relating to franchising and licensing, except where the failure to comply,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.


 


3.2           Executive Offices, Collateral
Locations, FEIN.  As
of the Closing Date, each Credit Party’s name as it appears in official filings
in its jurisdiction of incorporation or organization, jurisdiction of
incorporation or organization, organization type, organization number, if any,
issued by its jurisdiction of incorporation or organization, and the current
location of each Credit Party’s chief executive office and the warehouses and
premises at which any Collateral is located are set forth in Disclosure
Schedule (3.2), and except as set forth in Disclosure Schedule (3.2),
none of such locations has changed within the 12 months preceding the Closing
Date.  In addition, Disclosure
Schedule (3.2) lists the federal employer identification number of each
applicable Credit Party as of the Closing Date.


 


3.3           Corporate Power, Authorization,
Enforceable Obligations. 
The execution, delivery and performance by each Credit Party of the Loan
Documents to which it is a party and the creation of all Liens provided for
therein: (a) are within such Person’s power; (b) have been duly authorized by
all necessary corporate, limited liability company or partnership action; (c)
do not contravene any provision of such Person’s charter, bylaws or partnership
or operating agreement as applicable; (d) 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; (e) 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 


 


32

















 


bound, except where any
such violations, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect; (f) do not result in the creation
or imposition of any Lien upon any of the property of such Person other than
those in favor of the Applicable Agent, on behalf of itself and Lenders,
pursuant to the Loan Documents; and (g) do not require the consent or approval
of any Governmental Authority of the United States or the United Kingdom, or,
in each case, any political subdivision thereof, or any other Person, except
those referred to in Section 2.1(e), all of which will have been duly
obtained, made or complied with prior to the Closing Date.  Each of the Loan Documents shall be duly
executed and delivered by each Credit Party that is a party thereto and each
such Loan Document shall constitute a legal, valid and binding obligation of
such Credit Party enforceable against it in accordance with its terms, except
as enforceability may be limited by Insolvency Laws or similar laws affecting
creditors’ rights generally or by general equitable principles.


 


3.4           Financial Statements and Projections. 
Except for the Projections, all Financial Statements concerning Parent
and its Subsidiaries that are referred to below have been prepared in
accordance with GAAP consistently applied throughout the periods covered
(except as disclosed therein and except, with respect to unaudited Financial
Statements, for the absence of footnotes and normal year-end audit adjustments)
and present fairly in all material respects the financial position of the
Persons covered thereby as at the dates thereof and the results of their
operations and cash flows for the periods then ended.


 


(a)           Financial
Statements.  The following Financial
Statements attached hereto as Disclosure Schedule (3.4(a)) have been
delivered on or before the Closing Date:


 


(i)            The
audited consolidated balance sheets at November 3, 2001 and October 28, 2000
and the related statements of income and cash flows of Parent and its
Subsidiaries for the Fiscal Years then ended, certified by Arthur Andersen LLP,
and the unaudited consolidating balance sheets as of such date.


 


(ii)           The
unaudited consolidated and consolidating balance sheet(s) at March 23, 2002 and
the related statement(s) of income on a consolidated basis of Parent and its
Subsidiaries for the Fiscal Period then ended.


 


(b)           Pro
Forma.  The Pro Forma delivered on
or before the Closing Date and attached hereto as Disclosure Schedule
(3.4(b)) was prepared by Borrowers giving pro forma effect to the Related
Transactions, was based on the unaudited consolidated and consolidating balance
sheets of Parent and its Subsidiaries dated April 20, 2002, and was prepared in
accordance with GAAP, with only such adjustments thereto as would be required
in accordance with GAAP.


 


(c)           Projections.  The Projections delivered on or before the
Closing Date and described on Disclosure Schedule (3.4(c)) have been
prepared by Borrowers in light of the past operations of the businesses of the
Parent and its Subsidiaries, but including future payments of known contingent
liabilities and reflect projections for the 3 year period beginning on November


 


33

















 


4, 2001 on a Fiscal-Period-by-Fiscal-Period basis.  The Projections are based upon estimates and
assumptions stated therein, all of which Borrowers believe to be reasonable and
fair in light of current conditions and current facts known to Borrowers and,
as of the Closing Date, reflect Borrowers’ good faith and reasonable estimates
of the future financial performance of Borrowers and of the other information
projected therein for the period set forth therein.


 


3.5           Material Adverse Effect. 
Between November 3, 2001 and the Closing Date: (a) no Credit Party has
incurred any obligations, contingent or noncontingent liabilities, liabilities
for Charges, long-term leases or unusual forward or long-term commitments that
are not reflected in the Pro Forma and that, alone or in the aggregate, could
reasonably be expected to have a Material Adverse Effect, (b) no contract,
lease or other agreement or instrument has been entered into by any Credit
Party or has become binding upon any Credit Party’s assets and no law or regulation
applicable to any Credit Party has been adopted that has had or could
reasonably be expected to have a Material Adverse Effect, and (c) no Credit
Party is in default and to the best of Borrowers’ knowledge no third party is
in default under any material contract, lease or other agreement or instrument,
that alone or in the aggregate could reasonably be expected to have a Material
Adverse Effect.  Between November 3,
2001 and the Closing Date no event has occurred, that alone or together with
other events, could reasonably be expected to have a Material Adverse Effect,
except as disclosed in the unaudited financial statements of the Applicable
Borrower delivered to Applicable Agent prior to the Closing Date and attached
hereto as Disclosure Schedule 3.4.


 


3.6           Ownership of Property; Liens.  As
of the Closing Date, the real estate (“Real Estate”) listed in Disclosure
Schedule (3.6) constitutes all of the real property owned, leased,
subleased, or used by any Credit Party. 
Each Credit Party owns good and marketable fee simple title to all of
its owned Real Estate, and valid leasehold interests in all of its leased Real
Estate, all as described on Disclosure Schedule (3.6).  Disclosure Schedule (3.6) further
describes any Real Estate with respect to which any Credit Party is a lessor,
sublessor or assignor as of the Closing Date. 
Each Credit Party also has good title to, or valid leasehold interests
in, all of its personal property and assets, except where the failure to have
such good title or valid leasehold interest could not, individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect.  As of the Closing Date, none of the
properties and assets of any Credit Party are subject to any Liens other
than Permitted Encumbrances, and there are no facts,
circumstances or conditions  known to
any Credit Party that may result in any Liens (including Liens arising under
Environmental Laws) other than Permitted Encumbrances.  Each Credit Party has received all deeds,
assignments, waivers, consents, nondisturbance and attornment or similar
agreements, bills of sale and other documents, and has duly effected all
recordings, filings and other actions necessary to establish, protect and
perfect such Credit Party’s right, title and interest in and to all such Real
Estate and other Collateral.  Disclosure
Schedule (3.6) also describes any purchase options, rights of first refusal
or other similar contractual rights pertaining to any Real Estate.  As of the Closing Date, no portion of any
Credit Party’s Real Estate has suffered any material damage by fire or other
casualty loss that has not heretofore been repaired and restored in all
material respects to its original condition or 


 


34

















 


otherwise remedied.  As of the Closing Date, all material permits
required to have been issued to any Credit Party or appropriate to enable the
Real Estate to be lawfully occupied and used by any Credit Party for all of the
purposes for which it is currently occupied and used have been lawfully issued
and are in full force and effect.


 


3.7           Labor Matters.  As
of the Closing Date (a) no strikes or other material labor disputes against any
Credit Party are pending or, to any Credit Party’s knowledge, threatened; (b)
hours worked by and payment made to employees of each Credit Party comply in
all material respects with the Fair Labor Standards Act and comply in all
material respects with each other federal, state, local or foreign law
applicable to such matters; (c) all payments due from any Credit Party for
employee health and welfare insurance have been paid or accrued as a liability
on the books of such Credit Party; (d) except as set forth in Disclosure
Schedule (3.7), no Credit Party is a party to or bound by any collective
bargaining agreement, management agreement, consulting agreement, employment
agreement, bonus, restricted stock, stock option, or stock appreciation plan or
agreement or any similar plan, agreement or arrangement (and true and complete
copies of any agreements described on Disclosure Schedule (3.7) will be
or have been delivered to Agents, except that, with respect to employment
agreements, the Agent has received exemplars of typical employment agreements);
(e) there is no organizing activity involving any Credit Party pending or, to
any Credit Party’s knowledge, threatened by any labor union or group of
employees; (f) there are no representation proceedings pending or, to any
Credit Party’s knowledge, threatened with the National Labor Relations Board,
and no labor organization or group of employees of any Credit Party has made a
pending demand for recognition; and (g) except as set forth in Disclosure
Schedule (3.7), there are no material complaints or charges against any
Credit Party pending or, to the knowledge of any Credit Party, threatened to be
filed with any Governmental Authority or arbitrator based on, arising out of,
in connection with, or otherwise relating to the employment or termination of
employment by any Credit Party of any individual.


 


3.8           Ventures, Subsidiaries and
Affiliates; Outstanding Stock and Indebtedness. 
Except as set forth in Disclosure Schedule (3.8), as of the
Closing Date, no Credit Party has any Subsidiaries, is engaged in any joint
venture or partnership with any other Person, or is an Affiliate of any other
Person.  All of the issued and
outstanding Stock of each Credit Party (other than Parent) is owned by each of
the Stockholders and in the amounts set forth in Disclosure  Schedule (3.8).  As of the Closing Date, except as set forth
in Disclosure Schedule (3.8), there are no outstanding rights to
purchase, options, warrants or similar rights or agreements pursuant to which
any Credit Party may be required to issue, sell, repurchase or redeem any of
its Stock or other equity securities or any Stock or other equity securities of
its Subsidiaries.  All outstanding
Indebtedness and Guaranteed Indebtedness of each Credit Party as of the Closing
Date (except for the Obligations), giving effect to the Refinancing, is
described in Section 6.3 (including Disclosure Schedule (6.3)).  As of the Closing Date, none of the Credit
Parties other than Borrowers has any Indebtedness or Guaranteed Indebtedness
(except the Obligations), after giving effect to the Refinancing.  WMS conducts no operations and has no
assets.


 


35

















 


3.9           Government
Regulation.  No Credit Party is an
“investment company” or an “affiliated person” of, or “promoter” or “principal
underwriter” for, an “investment company,” as such terms are defined in the
Investment Company Act of 1940.  No
Credit Party is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act, or any other foreign, federal or state
statute that restricts or limits its ability to incur Indebtedness or to
perform its obligations hereunder. The making of the Loans by Lenders to
Borrowers, the incurrence of the Letter of Credit Obligations on behalf of
Borrowers, the application of the proceeds thereof and repayment thereof and
the consummation of the Related Transactions will not violate any provision of
any such statute or any rule, regulation or order issued by the Securities and
Exchange Commission or any other Governmental Authority.


 


3.10         Margin Regulations.  No
Credit Party is engaged, nor will it engage, principally or as one of its
important activities, in the business of extending credit for the purpose of
“purchasing” or “carrying” any “margin stock” as such terms are defined in
Regulation U of the Federal Reserve Board as now and from time to time
hereafter in effect (such securities being referred to herein as “Margin
Stock”).  No Credit Party owns any
Margin Stock, and none of the proceeds of the Loans or other extensions of
credit under this Agreement will be used, directly or indirectly, for the
purpose of purchasing or carrying any Margin Stock, for the purpose of reducing
or retiring any Indebtedness that was originally incurred to purchase or carry
any Margin Stock or for any other purpose that might cause any of the Loans or
other extensions of credit under this Agreement to be considered a “purpose
credit” within the meaning of Regulations T, U or X of the Federal Reserve
Board.  No Credit Party will take or permit
to be taken any action that might cause any Loan Document to violate any
regulation of the Federal Reserve Board.


 


3.11         Taxes. 
Except as disclosed in Disclosure Schedule (3.11), all material
tax returns, reports and statements, including information returns, required by
any Governmental Authority to be filed by any Credit Party have been filed with
the appropriate Governmental Authority and all Charges have been paid prior to
the date on which any fine, penalty, interest or late charge may be added
thereto for nonpayment thereof (or any such fine, penalty, interest, late
charge or loss has been paid), 
excluding Charges or other amounts being contested in accordance with Section
5.2(b).  Proper and accurate amounts
have been withheld by each Credit Party from its respective employees for all
periods in substantial compliance with all applicable federal, state, local and
foreign laws and such withholdings have been timely paid to the respective
Governmental Authorities.  Disclosure
Schedule (3.11), sets forth as  of the
Closing Date those taxable years for which any Credit Party’s tax returns are
currently being audited by the IRS or any other applicable Governmental
Authority, and any assessments or threatened assessments in connection with
such audit, or otherwise currently outstanding.  Except as described in Disclosure Schedule (3.11), as of
the Closing Date no Credit Party has executed or filed with the IRS or any
other Governmental Authority any agreement or other document extending, or
having the effect of extending, the period for assessment or collection of any
Charges.  None of the Credit Parties and
their respective predecessors are liable for any Charges: (a) under any
agreement (including any tax sharing agreements) or (b) to each Credit 


 


36

















 


Party’s  knowledge, as a transferee.  As of the Closing Date, no Credit Party has
agreed or been requested to make any adjustment under IRC Section 481(a), by
reason of a change in accounting method or otherwise, which would have a
Material Adverse Effect.


 


3.12         ERISA.


 


(a)           Disclosure
Schedule (3.12) lists (i) all ERISA Affiliates and (ii) all Plans and
Foreign Pension Plans and separately identifies all Pension Plans, including
Title IV Plans, Multiemployer Plans, ESOPs and Welfare Plans, including all
Retiree Welfare Plans.  Copies of all
such listed Plans, together with a copy of the latest IRS/DOL 5500-series form
for each such Plan, have been delivered to Agent.  Except with respect to Multiemployer Plans, each Qualified Plan
has been determined by the IRS to qualify under Section 401 of the IRC, the
trusts created thereunder have been determined to be exempt from tax under the
provisions of Section 501 of the IRC, and nothing has occurred that would cause
the loss of such qualification or tax-exempt status.  Each Plan is in compliance 
in all material respects with the applicable provisions of ERISA and the
IRC, including the timely filing of all reports required under the IRC or
ERISA, including the statement required by 29 CFR Section 2520.104-23.  Neither any Credit Party nor ERISA Affiliate
has failed to make any contribution or pay any amount due as required by either
Section 412 of the IRC or Section 302 of ERISA or the terms of any such Plan.  Neither any Credit Party nor ERISA Affiliate
has engaged in a “prohibited transaction,” as defined in Section 406 of ERISA
and Section 4975 of the IRC, in connection with any Plan, that would subject
any Credit Party to a material tax on prohibited transactions imposed by
Section 502(i) of ERISA or Section 4975 of the IRC.


 


(b)           Except as set forth in Disclosure
Schedule (3.12): (i) no Title IV Plan has any Unfunded Pension Liability;
(ii) no ERISA Event or event described in Section 4062(e) of ERISA with respect
to any Title IV Plan has occurred or is reasonably expected to occur; (iii)
there are no pending, or to the knowledge of any Credit Party, threatened
claims (other than claims for benefits in the normal course), sanctions,
actions or lawsuits, asserted or instituted against any Plan or Foreign Pension
Plan or any Person as fiduciary or sponsor of any Plan or Foreign Pension Plan;
(iv) no Credit Party or any ERISA Affiliate has incurred or reasonably expects
to incur any liability as a result of a complete or partial withdrawal from a
Multiemployer Plan; (v) within the last five years no Title IV Plan of any
Credit Party or ERISA Affiliate has been terminated, whether or not in a
“standard termination” as that term is used in Section 4041(b)(1) of ERISA, nor
has any Title IV Plan of any Credit Party or any ERISA Affiliate (determined at
any time within the last five years) with Unfunded Pension Liabilities been
transferred outside of the “controlled group” (within the meaning of Section
4001(a)(14) of ERISA) of any Credit Party or ERISA Affiliate (determined at
such time); (vi) except in the case of any ESOP, Stock of all Credit Parties
and their ERISA Affiliates makes up, in the aggregate, no more than 10% of fair
market value of the assets of any Plan measured on the basis of fair market
value as of the latest valuation date of any Plan; and (vii) no liability under
any Title IV Plan has been satisfied with the purchase of a contract from an
insurance company that is not rated AAA by the Standard & Poor’s
Corporation or an equivalent rating by another nationally recognized rating
agency.


 


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(c)           Each
Foreign Pension Plan has been maintained in substantial compliance with its
terms and with the requirements of any and all applicable laws, statutes, rules,
regulations and orders and has been maintained, where required, in good
standing with applicable regulatory authorities.  All contributions required to be made with respect to a Foreign
Pension Plan have been timely made. 
Except as set forth in Disclosure 3.12, the present value of the accrued
benefit liabilities (whether or not vested) under each Foreign Pension Plan
which is funded, determined as of the end of the most recently ended fiscal
year of each such Foreign Pension Plan on the basis of actuarial assumptions,
each of which is reasonable, did not exceed the fair market value of the assets
of such Foreign Pension Plan, and for each Foreign Pension Plan which is not
funded, the obligations of such Foreign Pension Plan are properly accrued on
the financial statements of the applicable Credit Party.


 


3.13         No Litigation.  No
action, claim, lawsuit, demand, investigation or proceeding is now pending or,
to the knowledge of any Credit Party, threatened against any Credit Party,
before any Governmental Authority or before any arbitrator or panel of
arbitrators (collectively, “Litigation”), (a) that challenges any Credit
Party’s right or power to enter into or perform any of its obligations under
the Loan Documents to which it is a party, or the validity or enforceability of
any Loan Document or any action taken thereunder, or (b) that has a reasonable
risk of being determined adversely to any Credit Party and that , if so
determined, could reasonably be expected to have a Material Adverse Effect.  Except as set forth on Disclosure
Schedule (3.13), as of the Closing Date there is no Litigation pending or,
to any Credit Party’s knowledge, threatened, that seeks damages in excess of
$250,000 or injunctive relief against, or alleges criminal misconduct of, any Credit
Party.


 


3.14         Brokers. 
Except as disclosed in Disclosure Schedule (3.14), no broker or
finder acting on behalf of any Credit Party or Affiliate thereof brought about
the obtaining, making or closing of the Loans or the Related Transactions, and
no Credit Party or Affiliate thereof has any obligation to any Person in
respect of any finder’s or brokerage fees in connection therewith.


 


3.15         Intellectual Property.  As
of the Closing Date, each Credit Party owns or has rights to use all
Intellectual Property necessary to continue to conduct its business as now or
heretofore conducted by it or proposed to be conducted by it, and each Patent,
Trademark, Copyright and License is listed, together with application or
registration numbers, as applicable, in Disclosure Schedule (3.15).  Each Credit Party conducts its business and
affairs without infringement of or interference with any Intellectual Property
of any other Person in any material respect, except where any such infringement
or interference, individually or in the aggregate, could not be reasonably
expected to have a Material Adverse Effect. 
Except as set forth in Disclosure Schedule (3.15), no Credit
Party is aware of any infringement claim by any other Person with respect to
any Intellectual Property owned, licensed or used by any Credit Party.


 


3.16         Full Disclosure.  No
information contained in this Agreement, any of the other Loan Documents,
Financial Statements or Collateral Reports or other written reports 


 


38

















 


from time to time delivered by or on behalf of any
Credit Party hereunder or any written statement furnished by or on behalf of
any Credit Party to any Agent or any Lender pursuant to the terms of this
Agreement contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading in light of the circumstances under
which they were made.  Projections from
time to time delivered hereunder are or will be based upon the estimates and
assumptions stated therein, all of which Borrowers believed at the time of
delivery to be reasonable and fair in light of current conditions and current
facts known to Borrowers as of such delivery date, and reflect Borrowers’ good
faith and reasonable estimates of the future financial performance of Borrowers
and of the other information projected therein for the period set forth
therein.  The Liens granted to the
Applicable Agent, on behalf of itself and Applicable Lenders, pursuant to the
Collateral Documents will at all times be fully perfected first priority Liens
in and to the Collateral described therein, subject, as to priority, only to
Permitted Encumbrances.


 


3.17         Environmental
Matters.


 


(a)           Except
as set forth in Disclosure Schedule (3.17), as of the Closing Date: (i)
the Real Estate is free of contamination from any Hazardous Material except as
disclosed in the Phase I Report described in Disclosure Schedule (3.17)
delivered to US Agent prior to the Closing Date and except for such
contamination that would not adversely impact the value or marketability of
such Real Estate and that would not result in Environmental Liabilities that
could reasonably be expected to exceed $50,000; (ii) no Credit Party has
caused, or to the best knowledge of Credit Parties after reasonable inquiry,
suffered to occur any Release of Hazardous Materials on, at, in, under, above,
to, from or about any of its Real Estate in violation of applicable
Environmental Laws; (iii) the Credit Parties are and have been in compliance
with all Environmental Laws, except for such noncompliance that would not
result in Environmental Liabilities which could reasonably be expected to
exceed $50,000; (iv) the Credit Parties have obtained, and are in compliance
with, all Environmental Permits required by Environmental Laws for the
operations of their respective businesses as presently conducted, except where
the failure to so obtain or comply with such Environmental Permits would not
result in Environmental Liabilities that could reasonably be expected to exceed
$50,000, and all such Environmental Permits are valid, uncontested and in good
standing; (v) no Credit Party is involved in operations or knows of any facts,
circumstances or conditions, including any Releases of Hazardous Materials,
that are likely to result in any Environmental Liabilities of such Credit Party
which could reasonably be expected to exceed $50,000, and no Credit Party has
permitted any current or former tenant or occupant of the Real Estate to engage
in any such operations; (vi) there is no Litigation arising under or related to
any Environmental Laws, Environmental Permits or Hazardous Material that seeks
damages, penalties, fines, costs or expenses in excess of $50,000 or injunctive
relief against, or that alleges criminal misconduct by, any Credit Party; (vii)
no notice has been received by any Credit Party identifying it as a
“potentially responsible 


 


39

















 


party” or requesting information under CERCLA or analogous state
statutes, and to the knowledge of the Credit Parties, there are no facts,
circumstances or conditions that may result in any Credit Party being
identified as a “potentially responsible party” under CERCLA or analogous state
statutes; and (viii) the Credit Parties have provided to Agents copies of all
existing environmental reports, reviews and audits and all written information
in the possession of the Credit Parties pertaining to actual or potential Environmental
Liabilities, in each case relating to any Credit Party.


 


(b)           Each Credit Party hereby acknowledges
and agrees that neither Agent (i) is now, nor has it ever been, in control of
any of the Real Estate or any Credit Party’s affairs, and (ii) does not have
the capacity through the provisions of the Loan Documents or otherwise to
influence any Credit Party’s conduct with respect to the ownership, operation
or management of any of its Real Estate or compliance with Environmental Laws
or Environmental Permits.


 


3.18         Insurance.  Disclosure
Schedule (3.18) lists all insurance policies of any nature maintained, as
of the Closing Date, for current occurrences by each Credit Party, as well as a
summary of the terms of each such policy.


 


3.19         Deposit and Disbursement Accounts.  Disclosure
Schedule (3.19) lists all banks and other financial institutions at which
any Credit Party maintains deposit or other accounts as of the Closing Date,
including any Disbursement Accounts, and such Schedule correctly identifies the
name, address and telephone number of each depository, the name in which the
account is held, a description of the purpose of the account, and the complete
account number therefor.


 


3.20         Government Contracts. 
Except as set forth in Disclosure Schedule (3.20), (which
Disclosure Schedule lists only the names of the Government Authorities with
which the Borrowers do business) as of April 20, 2002, no Credit Party is a
party to any contract or agreement with any Governmental Authority concerning
annual payments in excess of $25,000 and no Credit Party’s Accounts are subject
to the Federal Assignment of Claims Act (31 U.S.C. Section 3727) or any similar
foreign, state or local law.


 


3.21         Customer and Trade Relations.  As
of the Closing Date, except as set forth on Disclosure Schedule (3.21),
there exists no actual or, to the knowledge of any Credit Party, written
threatened termination or cancellation of, or any material adverse modification
or change in:   the business
relationship of any Credit Party with any customer or group of customers whose
purchases during the preceding 12 months caused them to be ranked among the ten
largest customers of such Borrower; or 
the business relationship of any Borrower with any supplier material to
its operations.


 


3.22         Agreements and Other Documents.  As
of the Closing Date, each Credit Party has provided to Agents or their counsel,
on behalf of Lenders, accurate and complete copies (or summaries) of all of the
following agreements or documents to which it is subject and each of which is
listed in Disclosure Schedule (3.22): 
supply agreements and purchase agreements not terminable by such Credit
Party within 60 days following written notice issued by such Credit Party and
involving transactions in excess of $250,000 per annum; leases of Equipment
having a remaining term of one year or longer and requiring aggregate rental
and 


 


40
















 


other payments in excess of $250,000 per annum;  licenses and permits held by the Credit Parties,
the absence of which could be reasonably likely to have a Material Adverse
Effect;  instruments and documents
evidencing any Indebtedness or Guaranteed Indebtedness of such Credit Party and
any Lien granted by such Credit Party with respect thereto; and instruments and
agreements evidencing the issuance of any equity securities, warrants, rights
or options to purchase equity securities of such Credit Party.


 


3.23         Solvency; No Winding Up. 
(a) Both before and after giving effect to (a) the Loans and Letter of
Credit Obligations to be made or incurred on the Closing Date or such other
date as Loans and Letter of Credit Obligations requested hereunder are made or
incurred, (b) the disbursement of the proceeds of such Loans pursuant to the
instructions of Borrower Representative or the UK Borrower, as applicable; (c)
the Refinancing and the consummation of the other Related Transactions; and (d)
the payment and accrual of all transaction costs in connection with the
foregoing, each Credit Party, other than WMS, 
is and will be Solvent.


 


(b)           No Winding Up.  Except as may be permitted in this
Agreement, no Credit Party has taken any corporate action nor have any other
steps been taken or legal proceedings been started or threatened against any
Credit Party for its winding up, dissolution, liquidation, administration,
reorganization or any suspension of payments or a moratorium of Indebtedness
(whether by voluntary arrangement, scheme of arrangement or otherwise) or for
the enforcement of any security arrangements or obligations given by a Credit
Party over all or any of its revenues or assets or for the appointment of a
custodian, receiver, liquidator, assignee, examiner, trustee, sequestrator,
administrative receiver or similar officer of it or any of its assets and
revenues.


 


3.24         Status of Parent.  Parent does not engage in any business other
than (i) owning the Stock of its Subsidiaries; (ii) ordinary course activities
with NASDAQ regarding trading of its Stock; (iii) procuring directors and
officers liability insurance coverage for its and its Subsidiaries directors
and officers; (vi) entering into guaranties of certain real property leases
entered into in the ordinary course of business by its foreign Subsidiaries;
(v) owing certain Intellectual Property as set forth in Disclosure Schedule
(3.15); and (vi) guaranteeing the obligations of Westaff
(USA) as a franchisor, in two states.


 


3.25         Subordinated Debt.  As
of the Closing Date, Borrowers have delivered to Agent a complete and correct
copy of the Subordinated Notes (including all schedules, exhibits, amendments,
supplements, modifications, assignments and all other documents delivered
pursuant thereto or in connection therewith). Westaff (USA) has the corporate
power and authority to incur the Indebtedness evidenced by the Subordinated
Notes.  All Obligations, including the
Letter of Credit Obligations and Obligations under the Guaranties, constitute
senior Indebtedness entitled to the benefits of the subordination provisions
contained in the Subordinated Notes. 
Borrowers acknowledge that Agent and each Lender are entering into this
Agreement and are extending the Commitments in reliance upon the subordination
provisions of the Subordinated Notes and this Section 3.25.


 


41

















 


3.26.        Franchise
Agreements.  The terms and
conditions of all franchise agreements between any of the Borrowers and its
franchisees are and will be substantially similar in all material respects to
the forms of Franchise Agreements provided to Agent and described on Disclosure
Schedule 3.26, and the agreements with the franchisees are consistent with
the Applicable Borrower’s practices as of the Closing Date.


 


4.          FINANCIAL STATEMENTS AND INFORMATION


 


4.1           Reports and Notices.


 


(a)           Each
Credit Party executing this Agreement hereby agrees that from and after the
Closing Date and until the Termination Date, it shall deliver to Agents or to
Agents and Lenders, as required, the Financial Statements, notices, Projections
and other information at the times, to the Persons and in the manner set forth
in Annex E.


 


(b)           Each Credit Party executing this
Agreement hereby agrees that, from and after the Closing Date and until the
Termination Date, it shall deliver to Agents or to Agents and Lenders, as required,
the various Collateral Reports (including Borrowing Base Certificates in the
form of Exhibit 4.1(b)) at the times, to the Persons and in the manner
set forth in Annex F.


 


4.2           Communication
with Accountants. 
Each Credit Party executing this Agreement authorizes (a) each Agent and
(b) so long as an Event of Default has occurred and is continuing, each Lender,
to communicate directly with its independent certified public accountants and
authorizes and shall instruct those accountants and advisors to communicate to
each Agent and each Lender information relating to any Credit Party with
respect to the business, results of operations and financial condition of any
Credit Party.  The Applicable Borrower
shall have the right to participate in any communication or be present at any
meeting between its accountants and any Agent or Lenders.


 


5.          AFFIRMATIVE COVENANTS


 


Each Credit Party
(other than UK Borrower) executing this Credit Agreement, jointly and severally
agrees as to all Credit Parties and UK Borrower agrees severally as to its own
actions that from and after the Closing Date and until the Termination Date:


 


5.1           Maintenance
of Existence and Conduct of Business. 
Each Credit Party shall:  do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and its rights and franchises;  continue to conduct its business
substantially as now conducted or as otherwise permitted hereunder;  at all times maintain, preserve and protect
all of its assets and properties necessary in the conduct of its business, and
keep the same in good repair, working order and condition in all material
respects (taking into consideration ordinary wear and tear) and from time to
time make, or cause to be made, all necessary or appropriate repairs,
replacements and improvements thereto consistent with industry practices;
and  transact business only in such
corporate and trade names as are set forth 


 


42

















 


in Disclosure Schedule
(5.1), or as are otherwise disclosed in writing to the Applicable Agent at
least 30 days prior to transacting business in such corporate or trade name not
set forth in Disclosure Schedule (5.1).  Notwithstanding the foregoing, (i) Westaff
Mexico, Westaff NZ and Westaff Support Services may be dissolved and their
assets transferred to the respective parent entity and (ii) no later than
December 31, 2002, each of WestLP (and its partners) and WCA shall be merged
into or liquidated into Westaff (USA), or dissolved with its assets transferred
to Westaff (USA); provided if the Credit Parties are unable to obtain
tax clearance to permit such dissolution to be completed by such date, then the
Accounts of WestLP and WCA shall be transferred to Westaff (USA) by December
31, 2002 and the dissolution completed by March 31, 2003.


 


5.2           Payment
of Charges.


 


(a)           Subject
to Section 5.2(b), each Credit Party shall pay and discharge or cause to
be paid and discharged promptly all Charges payable by it, including (i)
Charges imposed upon it, its income and profits, or any of its property (real,
personal or mixed) and all Charges with respect to tax, social security and
unemployment withholding with respect to its employees, (ii) lawful claims for
labor, materials, supplies and services or otherwise, and (iii) all storage or
rental charges payable to warehousemen or bailees, in each case, before any
thereof shall become past due.


 


(b)           Each Credit Party may in good faith
contest, by appropriate proceedings, the validity or amount of any Charges,
Taxes or claims described in Section 5.2(a); provided, that (i)
adequate reserves with respect to such contest are maintained on the books of
such Credit Party, in accordance with GAAP; (ii) no Lien shall have been filed
to secure payment of such Charges (other than payments to warehousemen and/or
bailees) that is superior to any of the Liens securing the Obligations and such
contest is maintained and prosecuted continuously and with diligence and
operates to suspend collection or enforcement of such Charges; (iii) no
material portion of the Collateral becomes subject to forfeiture or loss as a
result of such contest; (iv) such Credit Party shall promptly pay or discharge
such contested Charges, Taxes or claims and all additional charges, interest,
penalties and expenses, if any, and shall deliver to Agents evidence reasonably
acceptable to Agents of such compliance, payment or discharge, if such contest
is terminated or discontinued adversely to such Credit Party or the conditions
set forth in this Section 5.2(b) are no longer met; and (v) no Agent has
advised Borrowers in writing that such Agent reasonably believes that
nonpayment or nondischarge thereof could have or result in a Material Adverse
Effect, and (vi) if such Charges, Taxes or claims are imposed against Term
Borrower, such contest is conducted in accordance with Section 5.2 of the Deed
of Trust, dated as of the date hereof, granted by Term Borrower to US Agent.


 


5.3           Books and Records.  Each Credit Party shall keep adequate books
and records with respect to its business activities in which proper entries,
reflecting all financial transactions, are made in accordance with GAAP and in
the case of UK Borrower, UK GAAP, and on a basis consistent with the Financial
Statements attached as Disclosure Schedule (3.4(a)).


 


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5.4           Insurance;
Damage to or Destruction of Collateral.


 


(a)           The
Credit Parties shall, at their sole cost and expense, maintain the policies of
insurance described on Disclosure Schedule (3.18) as in effect on
the date hereof or otherwise in form and amounts and with insurers reasonably
acceptable to Agents.  Such policies of
insurance (or the loss payable and additional insured endorsements delivered to
the Applicable Agent) shall contain provisions pursuant to which the insurer
agrees to provide 30 days prior written notice to the Applicable Agent in the
event of any non-renewal, cancellation or amendment of any such insurance
policy; provided that only 10 days prior written notice to the Applicable Agent
is required in the event of cancellation for non-payment of premiums.  If any Credit Party at any time or times
hereafter shall fail to obtain or maintain any of the policies of insurance
required above, or to pay all premiums relating thereto, the Applicable Agent
may at any time or times thereafter, upon prior written notice to the
Applicable Borrower, obtain and maintain such policies of insurance and pay
such premiums and take any other action with respect thereto that the Applicable
Agent deems advisable.  No Agent shall
have any obligation to obtain insurance for any Credit Party or pay any
premiums therefor.  By doing so, an
Agent shall not be deemed to have waived any Default or Event of Default
arising from any Credit Party’s failure to maintain such insurance or pay any
premiums therefor.  All sums so
disbursed, including reasonable attorneys’ fees, court costs and other charges
related thereto, shall be payable on demand by Borrowers to the Applicable
Agent and shall be additional Obligations hereunder secured by the Collateral.


 


(b)           Each Agent reserves the right at any
time upon any change in any Credit Party’s risk profile (including any change
in the product mix maintained by any Credit Party or any laws affecting the
potential liability of such Credit Party) to require additional forms and
limits of insurance to, in the Applicable Agent’s opinion, adequately protect
both Agents’ and Lenders’ interests in all or any portion of the Collateral and
to ensure that each Credit Party is protected by insurance in amounts and with
coverage customary for its industry.  If
reasonably requested by an Agent, each Credit Party shall deliver to Agents
from time to time a report of a reputable insurance broker, reasonably
satisfactory to Agents, with respect to its insurance policies.


 


(c)           Each Borrower and each Guarantor
shall deliver to Agents, in form and substance reasonably satisfactory to
Agents, endorsements to (i) all “All Risk” and business interruption insurance
naming the Applicable Agent, on behalf of itself and Lenders, as loss payee,
and (ii) all general liability and other liability policies naming the
Applicable Agent, on behalf of itself and Lenders, as additional insured.  Each Borrower and each Guarantor  irrevocably makes, constitutes and appoints
each Agent (and all officers, employees or agents designated by the Applicable
Agent), so long as any Default or Event of Default has occurred and is
continuing or the anticipated insurance proceeds exceed $250,000, as such
Credit Party’s true and lawful agent and attorney-in-fact for the purpose of making,
settling and adjusting claims under such “All Risk” policies of insurance,
endorsing the name of such Credit Party on any check or other item of payment
for the proceeds of such “All Risk” policies of insurance and for making all
determinations and decisions with respect to such “All Risk” policies of


 


44

















 


insurance.  No Agent shall have any duty to exercise any
rights or powers granted to it pursuant to the foregoing
power-of-attorney.  Borrower
Representative shall promptly notify the Applicable Agent of any loss, damage,
or destruction to the Collateral in the amount of $250,000 or more, whether or
not covered by insurance.  After deducting
from such proceeds the expenses, if any, incurred by the Applicable Agent in
the collection or handling thereof, the Applicable Agent may, at its option,
apply such proceeds to the reduction of the Obligations of the Applicable
Borrower in accordance with Section 1.3(d); provided that in
the case of insurance proceeds pertaining to any Credit Party that is not a
Borrower, such insurance proceeds shall be applied ratably to all of the Loans
owing by each Borrower which are guaranteed by that Credit Party, or permit or
require the applicable Credit Party to use such money, or any
part thereof, to replace, repair, restore or rebuild
the Collateral in a diligent and expeditious manner with materials and
workmanship of substantially the same quality as existed before the loss,
damage or destruction. Notwithstanding the foregoing, if the casualty giving
rise to such insurance proceeds could not reasonably be expected to have a
Material Adverse Effect and such insurance proceeds do not exceed $250,000 in the
aggregate, the Applicable Agent shall permit the applicable Credit Party to
replace, restore, repair or rebuild the property; provided that if such
Credit Party shall not have, within 180 days of such casualty, completed or
entered into binding agreements to complete such replacement, restoration,
repair or rebuilding, the Applicable Agent may apply such insurance proceeds to
the Obligations in accordance with Section 1.3(d); provided,
further, that in the case of insurance proceeds pertaining to any Credit Party
that is not a Borrower, such insurance proceeds shall be applied ratably to all
of the Loans owing by each Borrower which are guaranteed by that Credit
Party.  All insurance proceeds that are
to be made available to any Borrower to replace, repair, restore or rebuild the
Collateral shall be applied by the Applicable Agent to reduce the outstanding
principal balance of the Revolving Loan of such Borrower (which application
shall not result in a permanent reduction of the Revolving Loan Commitment) and
upon such application, the Applicable Agent shall establish a Reserve against
the separate Borrowing Base of the affected Borrower in an amount equal to the
amount of such proceeds so applied.  All
insurance proceeds made available to any Credit Party that is not a Borrower to
replace, repair, restore or rebuild Collateral shall be deposited in a cash
collateral account.  Thereafter, such
funds shall be made available to that Borrower or Credit Party to provide funds
to replace, repair, restore or rebuild the Collateral as follows: (i) Borrower
Representative shall request a Revolving Credit Advance or a release from the
cash collateral account be made to the Applicable Borrower or Credit Party in
the amount requested to be released; (ii) so long as the conditions set forth
in Section 2.2 have been met, the Applicable Revolving Lenders shall
make such Revolving Credit Advance or the Applicable Agent shall release funds
from the cash collateral account; and (iii) in the case of insurance proceeds
applied against the Revolving Loan, the Reserve established with respect to
such insurance proceeds shall be reduced by the amount of such Revolving Credit
Advance.  To the extent not used to
replace, repair, restore or rebuild the Collateral, such insurance proceeds
shall be applied in accordance with Section 1.3(d); provided that
in the case of insurance proceeds pertaining to any Credit Party that is not a
Borrower, such insurance proceeds shall be applied ratably to all of the Loans
owing by each Borrower which are guaranteed by that Credit Party.


 


45

















 


5.5           Compliance
with Laws.  Each Credit Party
shall comply with all federal, state, local and foreign laws and regulations
applicable to it, including those relating to franchises, licensing, ERISA, and
labor matters and Environmental Laws and Environmental Permits, except to the
extent that the failure to comply, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.


 


5.6           Supplemental
Disclosure.  From time to time as may be reasonably
requested by any Agent (which request will not be made more frequently than
once each year absent the occurrence and continuance of a Default or an Event
of Default), the Credit Parties shall supplement each Disclosure Schedule
hereto, or any representation herein or in any other Loan Document, with
respect to any matter hereafter arising that, if existing or occurring at the
date of this Agreement, would have been required to be set forth or described
in such Disclosure Schedule or as an exception to such representation or that
is necessary to correct any information in such Disclosure Schedule or
representation which has been rendered inaccurate thereby (and, in the case of
any supplements to any Disclosure Schedule, such Disclosure Schedule shall be
appropriately marked to show the changes made therein); provided that
(a) no such supplement to any such Disclosure Schedule or representation shall
amend, supplement or otherwise modify any Disclosure Schedule or
representation, or be or be deemed a waiver of any Default or Event of Default
resulting from the matters disclosed therein, except as consented to by Agents
and Requisite Lenders in writing, and (b) no supplement shall be required or permitted
as to representations and warranties that relate solely to the Closing Date.


 


5.7           Intellectual
Property. 
Each Credit Party will conduct its business and affairs without
infringement of or interference with any Intellectual Property of any other
Person in any material respect by such Credit Party, except where the failure
to do so, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.


 


5.8           Environmental
Matters. 
Each Credit Party shall and shall cause each Person within its control
to: (a) conduct its operations and keep and maintain its Real Estate in
compliance with all Environmental Laws and Environmental Permits other than
noncompliance that could not reasonably be expected to have a Material Adverse
Effect; (b) implement any and all investigation, remediation, removal and
response actions that are appropriate or necessary to maintain the value and
marketability of the Real Estate or to otherwise comply with Environmental Laws
and Environmental Permits pertaining to the presence, generation, treatment,
storage, use, disposal, transportation or Release of any Hazardous Material on,
at, in, under, above, to, from or about any of its Real Estate; (c) notify
Agent promptly after such Credit Party becomes aware of any violation of
Environmental Laws or Environmental Permits or any Release in violation of
Environmental Laws on, at, in, under, above, to, from or about any Real Estate
that is reasonably likely to result in Environmental Liabilities in excess of
$50,000; and (d) promptly forward to Agents a copy of any order, notice,
request for information or any communication or report received by such Credit
Party in connection with any such violation or Release or any other matter
relating to any Environmental Laws or Environmental Permits that could
reasonably be expected to result in Environmental 


 


46

















 


Liabilities in excess of
$50,000, in each case whether or not the Environmental Protection Agency or any
Governmental Authority has taken or threatened any action in connection with
any such violation, Release or other matter. 
If  any Agent at any time has a
reasonable basis to believe that there may be a violation of any Environmental
Laws or Environmental Permits by any Credit Party or any Environmental
Liability arising thereunder, or a Release of Hazardous Materials in violation
of Environmental Laws on, at, in, under, above, to, from or about any of its
Real Estate, that, in each case, could reasonably be expected to have a
Material Adverse Effect, then  each Credit Party shall, upon any Agent’s written request (i)
cause the performance of such environmental audits including subsurface
sampling of soil and groundwater, and preparation of such environmental reports,
at Borrowers’ expense, as such Agent may from time to time reasonably request,
which shall be conducted by reputable environmental consulting firms reasonably
acceptable to Agents and shall be in form and substance reasonably acceptable
to Agents, and (ii) if the Applicable Borrower is not in compliance with the
foregoing clause (i) within a reasonable period of time, permit such Agent or
its representatives to have access to all Real Estate for the purpose of
conducting such environmental audits and testing as such Agent deems
appropriate, including subsurface sampling of soil and groundwater.  Borrowers shall reimburse Agents for the
costs of such audits and tests and the same will constitute a part of  the Obligations secured hereunder.


 


5.9           Landlords’
Agreements, Mortgagee Agreements, Bailee Letters
and Real Estate Purchases. 
Each Credit Party shall use commercially reasonable efforts to obtain a
landlord’s agreement, mortgagee agreement or bailee letter, as applicable, from
the lessor of each leased property designated by any Agent as material,
each  mortgagee of owned property or
bailee with respect to any warehouse, processor or converter facility or other
location where any material portion of the Collateral is stored or located,
which agreement or letter shall contain a waiver or subordination of all Liens
or claims that the landlord, mortgagee or bailee may assert against the
Collateral at that location, and shall otherwise be reasonably satisfactory in
form and substance to Agents.  With respect
to such locations or warehouse space leased or owned as of the Closing Date and
thereafter, if the Applicable Agent has requested but not received a
satisfactory landlord or mortgagee agreement or bailee letter as of the Closing
Date (or, if later, as of the date such location is acquired or leased), the
Applicable Agent may establish such Reserves as may be appropriate in its
reasonable credit judgment.  Each Credit
Party shall timely and fully pay and perform its obligations under all leases
and other agreements with respect to each leased location or public warehouse
where any material portion of  the
Collateral is or may be located.  To the
extent otherwise permitted hereunder, if any Borrower or Guarantor proposes to
acquire a fee ownership interest in Real Estate after the Closing Date, it
shall first provide to the Applicable Agent a mortgage or deed of trust
granting the Applicable Agent a first priority Lien on such Real Estate,
together with environmental audits, mortgage title insurance commitment, real
property survey, local counsel opinion(s), and, if required by the Applicable
Agent, supplemental casualty insurance and flood insurance, and such other
documents, instruments or agreements reasonably requested by Agent, in each
case, in form and substance reasonably satisfactory to such Agent.


 


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5.10         Further
Assurances.  Each Credit Party
executing this Agreement agrees that it shall and shall cause each other Credit
Party to, at such Credit Party’s expense and upon request of any Agent, duly
execute and deliver, or cause to be duly executed and delivered, to such Agent
such further instruments and do and cause to be done such further acts as may
be necessary or proper in the reasonable opinion of such Agent to carry out
more effectively the provisions and purposes of this Agreement or any other
Loan Document.


 


6.          NEGATIVE COVENANTS


 


Each Credit Party (other
than UK Borrower) executing this Agreement jointly and severally agrees as to
all Credit Parties and UK Borrower agrees severally as to its own actions that
from and after the Closing Date until the Termination Date:


 


6.1           Mergers, Subsidiaries, Etc.  No
Credit Party shall directly or indirectly, by operation of law or otherwise,
(a) form or acquire any Subsidiary, or (b) merge with, consolidate with,
acquire all or substantially all of the assets or Stock of, or otherwise
combine with or acquire, any Person, provided, however, that (i)
any Credit Party may merge with any other Credit Party, but if  Westaff (USA) is a party to such merger, it
shall be the surviving entity and otherwise if any Borrower is a party to such
merger with a Subsidiary, such Borrower shall be the surviving entity, and (ii)
Westaff (USA) may acquire the assets of WestLP (and its partners) and WCA.


 


6.2           Investments;
Loans and Advances. 
Except as otherwise expressly permitted by this Section 6, no
Credit Party shall make or permit to exist any investment in, or make, accrue
or permit to exist  loans or advances of
money to, any Person, through the direct or indirect lending of money, holding
of securities or otherwise, except that: 
(a) Credit Parties may hold investments comprised of notes payable, or
stock or other securities issued by Account Debtors to any Credit Party pursuant
to negotiated agreements with respect to settlement of such Account Debtor’s
Accounts in the ordinary course of business, so long as the aggregate amount of
such Accounts so settled by Credit Parties does not exceed $250,000; (b) each
Credit Party may maintain its existing investments in its Subsidiaries as of
the Closing Date and may make intercompany loans and advances to other Credit
Parties or their Subsidiaries permitted under Section 6.3 hereof and
employee loans permitted under Section 6.4; (c) Borrowers may make loans
or advances to licensees and franchisees in an aggregate amount outstanding not
to exceed the US Dollar Equivalent of $3,000,000; provided that such
loans or advances are secured and the Liens are assigned to the Applicable Agent;
provided  further that Borrowers shall not be obligated to assign
to Agent (and Borrowers hereby agree not to assign to any other Person) real
property collateral located in the State of Florida which secure such loans if
such assignments would result in a material stamp tax or duty; and (d) so long
as no Default or Event of Default has occurred and is continuing and there is
no outstanding Revolving Loan balance, Borrowers may make investments, subject
to Control Letters in favor of the Applicable Agent for the benefit of the
Applicable Lenders or otherwise subject to a perfected security interest (or
charge) in favor of the Applicable Agent for the benefit of the Applicable
Lenders (with the exception of payroll accounts and deposit accounts or securities,
commodities, investment or other similar 


 


48

















 


accounts that hold no
more than $25,000 individually (other than the accounts of Westaff (USA)
existing on the Closing Date at Sovereign Bank and Stillwater National Bank, provided
however, that amounts on deposit at each such institution shall not
exceed $40,000; and (2) the Surety Certificate of Deposit held at Bank of
America account number 212228977 (the “Surety Account”) in an amount not
to exceed $750,000) or $250,000 in the aggregate (not including amounts
deposited in the Surety Account up to $750,000), (i) in marketable direct
obligations issued or unconditionally guaranteed by the United States of
America or any agency thereof maturing within one year from the date of
acquisition thereof; (ii) commercial paper maturing no more than one year from
the date of creation thereof and currently having the highest rating obtainable
from either Standard & Poor’s Ratings Group or Moody’s Investors Service,
Inc.; (iii) certificates of deposit maturing no more than one year from
the date of creation thereof issued by commercial banks incorporated under the
laws of the United States of America, each having combined capital, surplus and
undivided profits of not less than $300,000,000 and having a senior unsecured
rating of “A” or better by a nationally recognized rating agency (an “A
Rated Bank”) provided, however, Borrowers may continue to
invest in certificate of deposit account number (1) 9110108796 at Bank of New Hampshire
in an amount not to exceed $9,000, (2) 10638 at Extarco Bank in an amount not
to exceed $5,000, (3) 37845 at Woodstown National Bank in an amount not to
exceed $12,000, and (4) 385100170393 at Comerica Bank in an amount not to
exceed $8,000; (iv) time deposits maturing no more than 30 days from the
date of creation thereof with A Rated Banks; and (v) mutual funds that invest
solely in one or more of the investments described in clauses (i) through (iv)
above.


 


6.3           Indebtedness.


 


(a)           No
Credit Party shall create, incur, assume or permit to exist any Indebtedness,
except (without duplication) (i) Indebtedness secured by purchase money
security interests and Capital Leases permitted in Section 6.7(c) and
refinancings thereof or amendments or modifications thereof that do not have
the effect of increasing the principal amount thereof or changing the
amortization thereof (other than to extend the same) and that are on terms no
less favorable to any Credit Party, any Agent or the Lenders than the terms of
the Indebtedness being refinanced; (ii) the Loans and the other Obligations;
(iii) unfunded pension fund and other employee benefit plan obligations and
liabilities to the extent they are permitted to remain unfunded under
applicable law; (iv) existing Indebtedness described in Disclosure Schedule
(6.3) (excluding the Prior Lender Obligations and the Senior Notes which
shall be repaid in full at closing) and (except for intercompany indebtedness,
which shall be subject to clause (x) below) refinancings thereof or amendments
or modifications thereto that do not have the effect of increasing the
principal amount thereof or changing the amortization thereof (other than to
extend the same) and that are otherwise on terms and conditions no less
favorable to any Credit Party, any Agent or any Lender, as determined by
Agents, than the terms of the Indebtedness being refinanced, amended or
modified;(v) Indebtedness specifically permitted under Section 6.17;
(vi) the Subordinated Debt; (vii) Additional Subordinated Debt, provided
that such Indebtedness does not provide for any scheduled principal payments
until all Obligations have been paid in full and all Commitments have been
terminated, immediately prior to and after 


 


49

















 


giving effect to such Indebtedness, no Default or Event of Default
shall have occurred and be continuing and such Indebtedness is subordinated on
terms satisfactory in all respects to the Applicable Agent in its sole
discretion; (viii) unsecured Indebtedness with respect to surety bonds
issued in connection with insurance programs or worker’s compensation
liabilities in an amount not to exceed the US Dollar Equivalent of $12,000,000
at any time outstanding; (ix) unsecured Indebtedness to PeopleSoft USA, Inc. in
an aggregate amount not to exceed $3,500,000; and (x) Indebtedness consisting
of intercompany loans and advances made by or on behalf of any Borrower to any
Credit Party or any Subsidiary of any Borrower (other than Westaff Singapore,
Westaff Mexico, Western NZ and Western Staff Services); provided, that:
(A) each Credit Party or Subsidiary receiving such intercompany loan or advance
shall have executed and delivered to the Applicable Borrower (prior to or
concurrently with the making of such loan or advance) a demand note or deed
(collectively, the “Intercompany Notes”) to evidence any such
intercompany Indebtedness owing at any time by such Credit Party or Subsidiary
to any Borrower, which Intercompany Notes shall be in form and substance reasonably
satisfactory to Agents and shall be pledged and delivered to the Applicable
Agent pursuant to the applicable Collateral Documents as additional collateral
security for the Obligations; (B) each Borrower and each of the Credit Parties
or Subsidiaries shall record all intercompany transactions on its books and
records in a manner reasonably satisfactory to Agents; (C) at the time any such
intercompany loan or advance is made by any Borrower and after giving effect
thereto, each such Borrower shall be Solvent; (D) no Default or Event of
Default would occur and be continuing after giving effect to any such proposed
intercompany loan; (E) in the case of any intercompany Indebtedness for which
any US Borrower is advancing funds, the US Borrowers shall have Borrowing
Availability under the US Borrowing Base of not less than $4,500,000 after
giving effect to such intercompany loan; (F) in the case of any intercompany
Indebtedness for which the UK Borrower is advancing funds, the UK Borrower
shall have Borrowing Availability under its UK Borrowing Base of not less than
the US Dollar Equivalent of $800,000, the Pound Sterling equivalent of which
shall be determined on the Closing Date by reference to the Spot Rate, after
giving effect to such intercompany loan; (G) the aggregate amount of such
intercompany Indebtedness owing by any Borrower (other than Indebtedness among
WestLP, WCA and Westaff (USA)) shall not exceed $2,000,000 at any one time
outstanding; (H) the aggregate balance of all such intercompany loans and
advances owing to Borrowers by any Subsidiary (other amounts owing to Westaff
(USA) from another US Borrower) shall not exceed $8,000,000 at any time, and
(I) the aggregate balance of all such intercompany loans and advances owing by
WMS and WMSNY (net of cash received from WMS and WMSNY) shall not exceed
$500,000 at any time outstanding; provided  however, that all
intercompany Indebtedness shall be recorded in the manner set forth in clause
(B) above; and (J) the recipient of such intercompany loans shall be
creditworthy as determined by the Applicable Agent.


 


(b)           No Credit Party shall, directly or
indirectly, voluntarily purchase, redeem, defease or prepay before the
scheduled payment date therefore any principal of, premium, if any, interest or
other amount payable in respect of any Indebtedness, other than (i) the
Obligations; (ii) the Refinancing; (iii) Indebtedness secured by a Permitted
Encumbrance if the asset securing 


 


50

















 


such Indebtedness
has been sold or otherwise disposed of in accordance with Sections 6.8(b) or
(c); (iv) Indebtedness permitted by Section 6.3(a)(v) upon any
refinancing thereof in accordance with Section 6.3(a)(v); (v)
intercompany Indebtedness owed to a Borrower; (vi) other Indebtedness
(excluding Subordinated Debt) not in excess of $250,000;
and (vii) the Subordinated Debt solely to the extent that payment is permitted
under Section 6.14.


 


(c)           Notwithstanding
any other provision of this Agreement, neither WestLP (nor its partners) nor
WCA shall incur any Indebtedness (other than the Obligations or Indebtness to
Westaff (USA)), or liabilities other than lease obligations, tax obligations,
payroll obligations and obligations to franchisees in the ordinary course of
business consistent with past practices and customary expenses incurred in
connection with any merger or liquidation required by Section 5.1.


 


6.4           Employee
Loans and Affiliate Transactions.


 


(a)           Except
as otherwise expressly permitted in this Section 6 with respect to Affiliates
(including the advance and repayment of intercompany loans, the payment of
royalties to one or more Borrowers, the payment of a management fee to Westaff
Support, Inc., and payments on Subordinated Debt and Additional Subordinated
Debt permitted under Section 6.14), no Credit Party shall enter into or
be a party to any transaction with any other Credit Party or any Affiliate
thereof except in the ordinary course of and pursuant to the reasonable
requirements of such Credit Party’s business and upon fair and reasonable terms
that are no less favorable to such Credit Party than would be obtained in a
comparable arm’s length transaction with a Person not an Affiliate of such
Credit Party.  In addition, if any such
transaction or series of related transactions involves payments in excess of
$250,000  in
the aggregate, the terms of these transactions must be disclosed in advance to
Agents and Lenders.  All such
transactions existing as of the date hereof are described in Disclosure
Schedule (6.4(a)).  Notwithstanding
the foregoing, except as permitted under Section 6.3 above, no Credit
Party shall enter into any transaction with WMSNY or WMS (if as a result of
such transaction with WMS, WMS would have a right to receive any payments from
such Credit Party or any of its Subsidiaries).


 


(b)           No
Credit Party shall enter into any lending or borrowing transaction with any
employees of any Credit Party, except loans to its respective employees in the
ordinary course of business consistent with past practices for travel and
entertainment expenses, relocation costs and similar purposes and stock option
financing up to a maximum of the US Dollar Equivalent of $2,500 to any employee
and up to a maximum of the US Dollar Equivalent of $ $25,000 in the aggregate
at any one time outstanding.


 


(c)           The
current aggregate compensation for the ten most highly compensated employees of
the Credit Parties, taken as a whole, as of the Closing Date is set forth in Disclosure
Schedule (6.4(c)).  The ten most
highly compensated employees of the Credit Parties in any Fiscal Year shall be
referred to as the “Selected Ten.” 
Beginning in Fiscal Year 2003, no Credit Party shall increase the direct
or indirect aggregate compensation (excluding stock options) of the Selected
Ten in such Fiscal Year by more than 15% (the “Permitted Increase”) in 


 


51

















 


excess of the aggregate compensation of the Selected Ten in the prior
Fiscal year (as increased by the Permitted Increase each year, the “Base
Compensation”), exclusive of (a) severance payments made to any
departing employees; and (b) cash incentive compensation in an amount not to
exceed, in the aggregate for all employees who are members of the Selected Ten,
(i) $350,000 in Fiscal Year 2002, and (ii) 15% of the pre-tax income of
the Parent and its Subsidiaries, taken as a whole, for each Fiscal Year
thereafter.  If, after the Closing Date
any employee is hired into a position that is not filled as of the Closing Date
or that did not exist as of the Closing Date (the “New Position”), and
if the employee in such New Position would be one of the Selected Ten in the
Fiscal Year that he or she is hired, then the Base Compensation shall be re-set
by deleting the lowest compensated Selected Ten employee included in the Base
Compensation for the prior Fiscal Year and substituting the compensation of the
New Position (after such adjustment, the “Re-set Base Compensation”).  In the Fiscal Year that the New Position is
filled and thereafter, the annual Permitted Increase shall be based upon the
Re-set base Compensation.


 


6.5           Capital
Structure and Business.  No Credit Party shall (a) make any changes
in any of its business objectives, purposes or operations that could in any way
adversely affect the repayment of the Loans or any of the other Obligations or
could reasonably be expected to have or result in a Material Adverse Effect;
(b) make any change in its capital structure as described in Disclosure
Schedule (3.8), including the issuance or sale of any shares of Stock,
warrants or other securities convertible into Stock or any revision of the
terms of its outstanding Stock; provided that Parent may issue or sell
shares of its Stock and warrants for cash so long as (x) the proceeds thereof
are applied in prepayment of the Obligations to the extent required by Section
1.3(b)(iii), and (y) no Change of Control occurs after giving effect
thereto, and (z) may redeem or repurchase shares of Parent’s Capital Stock to
the extent permitted under Section 6.14(f); or (c) amend its charter or
bylaws in a manner that would adversely affect Agents or Lenders or such Credit
Party’s duty or ability to repay the Obligations.  No Credit Party shall engage in any business other than the businesses
currently engaged in by it and businesses reasonably related thereto.


 


6.6           Guaranteed
Indebtedness.  No Credit Party shall create, incur, assume
or permit to exist any Guaranteed Indebtedness except (a) by endorsement of
instruments or items of payment for deposit to the general account of any
Credit Party, (b) for Guaranteed Indebtedness incurred for the benefit of any
other Credit Party if the primary obligation is expressly permitted by this
Agreement; (c) for support letters required by the law of foreign jurisdictions
in connection with the filing of any annual report or delivery of financial
statements for such a foreign Subsidiary; and (d) for Guaranteed
Indebtedness with respect to operating leases entered into by the UK Borrower,
Westaff Australia, Westaff New Zealand or any other Subsidiary of a Borrower in
an amount not to exceed $150,000 per year for any such lease or $350,000 per
year for all such leases guarantied by a Credit Party, collectively.


 


6.7           Liens.  No Credit Party shall create, incur, assume
or permit to exist any Lien on or with respect to its Accounts or any of its
other properties or assets (whether now owned or hereafter acquired) except for
(a) Permitted Encumbrances;  (b) Liens
in existence 


 


52

















 


on the date hereof and
summarized on Disclosure Schedule (6.7) securing the Indebtedness
described on Disclosure Schedule (6.3) and permitted refinancings,
extensions and renewals thereof, including extensions or renewals of any such
Liens; provided that the principal amount of the Indebtedness so secured
is not increased and the Lien does not attach to any other property; and (c)
Liens created after the date hereof by conditional sale or other title
retention agreements (including Capital Leases) or in connection with purchase
money Indebtedness with respect to Equipment and Fixtures acquired by any
Credit Party in the ordinary course of business, involving the incurrence of an
aggregate amount of purchase money Indebtedness and Capital Lease Obligations
of not more than the US Dollar Equivalent of $250,000 outstanding at any one
time for all such Liens (provided that such Liens attach only to the
assets subject to such purchase money debt and such Indebtedness is incurred
within 30 days following such purchase and does not exceed 100% of the purchase
price of the subject assets).   In
addition, no Credit Party shall become a party to any agreement, note,
indenture or instrument, or take any other action, that would prohibit the
creation of a Lien on any of its properties or other assets in favor of any
Agent, on behalf of itself and Lenders, as additional collateral for the
Obligations, except operating leases, Capital Leases purchase money financing
permitted hereunder or Licenses which prohibit Liens upon the assets that are subject
thereto.


 


6.8           Sale of Stock and Assets.  No
Credit Party shall sell, transfer, convey, assign or otherwise dispose of any
of its properties or other assets, including the Stock of any of its
Subsidiaries (whether in a public or a private offering or otherwise) or any of
its Accounts, other than (a) the sale, transfer, conveyance or other
disposition by a Credit Party of Equipment or Fixtures that are obsolete or no
longer used or useful in such Credit Party’s business; (b) other Equipment and
Fixtures having a value not exceeding the US Dollar Equivalent of $25,000 in
any single transaction or the US Dollar Equivalent of $100,000 in the aggregate
in any Fiscal Year, with the exception of 
Equipment and Fixtures that are sold and replaced within 180 days with
Equipment or Fixtures of a similar value, quality and utility; (c) sales of
Inventory in the ordinary course of business; (d) the licensing of rights to
franchisees in the ordinary course of business consistent with practices as in
effect on the Closing Date; (e) the issuance or sale of Stock of Parent upon
exercise of warrants and options pursuant to employee and director incentive,
stock option and employee purchase plans; (f) the liquidation of investments
permitted under Section 6.2(d); (g) the issuance or transfer of Stock of the
Parent to Wood Warren as partial consideration for services provided in
brokering the acquisition of certain of the Subordinated Indebtedness; (h) the
sale of the Mortgaged Property if the Term Loan is repaid in full from the
proceeds of such sale and no Default or Event of Default has occurred and is
continuing; and (i) any merger or liquidation permitted or required by Section
5.1.  With respect to any
disposition of assets or other properties permitted pursuant to clause (a),
(b) or (h) above, subject to Section 1.3(b), each Agent agrees
on reasonable prior written notice to release its Lien on such assets or other
properties in order to permit the applicable Credit Party to effect such
disposition and shall execute and deliver to Borrowers, at Borrowers’ expense,
appropriate UCC-3 termination statements and other releases as reasonably
requested by Borrowers.


 


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6.9           ERISA,
Pension Schemes.  (a) No
Credit Party shall, or shall cause or permit any ERISA Affiliate to, cause or
permit to occur an event that could result in the imposition of a Lien under
Section 412 of the IRC or Section 302 or 4068 of ERISA or cause or
permit to occur an ERISA Event to the extent such ERISA Event could reasonably
be expected to have a Material Adverse Effect.


 


(b)           Each
Credit Party shall, if requested by the Agents, deliver to the Agents at such
time as such reports are prepared in order to comply with then statutory or
auditing requirements, actuarial reports in relation to the pension schemes for
the time being operated by the Credit Parties, and will ensure that all such
schemes are fully funded to the extent required by law based on reasonable
actuarial assumptions applicable in the jurisdiction in which the relevant
pension scheme is maintained.


 


6.10         Financial
Covenants.  Borrowers shall not
breach or fail to comply with any of the Financial Covenants.


 


6.11         Hazardous Materials.  No
Credit Party shall cause or permit a Release of any Hazardous Material on, at,
in, under, above, to, from or about any of the Real Estate where such Release
would (a) violate in any respect, or form the basis for any Environmental
Liabilities under, any Environmental Laws or Environmental Permits or (b) otherwise
adversely impact the value or marketability of any of the Real Estate or any of
the Collateral, other than such Release that could not reasonably be expected
to have a Material Adverse Effect.


 


6.12         Sale-Leasebacks.  No
Credit Party shall engage in any sale-leaseback, synthetic lease or similar
transaction involving any of its assets, other than a sale and leaseback of the
Mortgaged Property on terms and at lease rates which, taken as a whole, are
consistent with market at such time.


 


6.13         Cancellation
of Indebtedness.  No
Credit Party shall cancel any claim or debt owing to it, except for reasonable
consideration negotiated on an arm’s length basis and in the ordinary course of
its business consistent with past practices.


 


6.14         Restricted Payments.  No
Credit Party shall make any Restricted Payment, except (a) intercompany loans
and advances between Borrowers and their direct and indirect Subsidiaries to
the extent permitted by Section 6.3; (b) dividends and distributions by
Subsidiaries of any Borrower or any Guarantor promptly paid to such Borrower;
(c) employee loans permitted under Section 6.4(b); (d) payments of
principal and interest of Intercompany Notes issued in accordance with Section
6.3; (e) scheduled payments of interest with respect to Subordinated Debt
and Additional Subordinated Debt; provided, that (i) no Default or Event
of Default has occurred and is continuing or would result after giving effect
to any Restricted Payment pursuant to clause (e) above; (ii) Borrowers
collectively shall have aggregate Borrowing Availability of the US Dollar
Equivalent of at least fifteen percent (15%) of the Aggregate Borrowing Base
(but in no event less than the US Dollar Equivalent of $5,000,000) 


 


54

















 


after giving effect to
any Restricted Payment pursuant to clause (e) above; and (iii) the
timing of the Restricted Payments referred to in clause (e) above shall
be set at dates that permit the delivery of Fiscal Period Financial Statements
set forth in clause (a) of Annex E prior to each such payment;
(f) provided that no Default or Event of Default has occurred and is continuing
or would result after giving effect to any Restricted Payment pursuant to this
clause (f), payments to repurchase or retire any outstanding Stock, warrants,
options, or other rights of Parent made to departed employees, officers or
directors of any Credit Party not to exceed $250,000 in the aggregate; (g) the
payment of a management fee to Westaff Support, Inc. not to exceed 35% of any
Credit Party’s gross profit in any Fiscal Year; (h) the payment of royalties
and license fees by a Credit Party to any Borrower; and (x) payment of up
to $1 million of principal of Subordinated Debt from the proceeds of a sale of
the Mortgaged Properties; provided that (i) the Term Loan has been
repaid in full, and (y) no Default or Event of Default has occurred and is
continuing or would result after giving effect to any Restricted Payment
pursuant to this clause (i).


 


6.15         Change
of Corporate Name or Location; Change of Fiscal Year.  No
Credit Party shall (a) change its name as it appears in official filings in the
state of its incorporation or other organization; provided that any
Credit Party may change its name as it appears in official filings in the state
of its incorporation or other organization in the manner set forth on Schedule
6.15 upon giving 30 days’ prior written notice to the Agent and after all
actions necessary to continue the perfection of any Liens in favor of Agent, on
behalf of Lenders, in any Collateral have been completed or taken; (b) change
its chief executive office, principal place of business, corporate offices or
warehouses or locations at which Collateral is held or stored, or the location
of its records concerning the Collateral except upon 30 days prior notice to
the Applicable Agent; (c) change the type of entity that it is; (d) change its
organization identification number, if any, issued by its state of
incorporation or other organization; or (e) change its state of incorporation
or organization, in each case without at least 30 days prior written notice to
Agents and after the Applicable Agent’s written acknowledgment that any
reasonable action requested by Agents in connection therewith, including to
continue the perfection of any Liens in favor of the Applicable Agent, on
behalf of Lenders, in any Collateral, has been completed or taken, and provided
that any such new location for US Borrower and any Subsidiary organized under
the laws of the United States or any state thereof shall be in the continental
United States, any such new location for UK Borrower shall be in the United
Kingdom.  Without limiting the
foregoing, no Credit Party shall change its name, identity or corporate structure
in any manner that might make any financing or continuation statement (or
similar document) filed in connection herewith seriously misleading as such
term is defined in and/or used in the Code or any other then applicable
provision of the Code except upon prior written notice to Agents and Lenders
and after the Applicable Agent’s written acknowledgment that any reasonable
action requested by Agent in connection therewith, including to continue the
perfection of any Liens in favor of the Applicable Agent, on behalf of Lenders,
in any Collateral, has been completed or taken.  No
Credit Party shall change its Fiscal Year.


 


55

















 


6.16         No
Impairment of Intercompany Transfers.  No
Credit Party shall, nor shall it permit any of its Subsidiaries to, directly or
indirectly enter into or become bound by any agreement, instrument, indenture
or other obligation (other than this Agreement, the other Loan Documents and
the Australian Loan Documents) that could directly or indirectly restrict,
prohibit or require the consent of any Person with respect to the payment of
dividends or distributions or the making or repayment of intercompany loans by
a Subsidiary of any Borrower to any Borrower or between Borrowers.


 


6.17         No Speculative Transactions.  No
Credit Party shall engage in any transaction involving commodity options,
futures contracts or similar transactions, except solely to hedge against
fluctuations in the prices of commodities owned or purchased by it and the
values of foreign currencies receivable or payable by it and interest swaps,
caps or collars.


 


6.18         Leases;
Real Estate Purchases.  No
Credit Party shall enter into any operating lease for Equipment or Real Estate,
if the aggregate of all such operating lease payments payable in any year for
all Credit Parties on a consolidated basis would exceed $10,000,000.


 


6.19         Changes
Relating to Subordinated Debt  or
Additional Subordinated Debt; Material Contracts.


 


(a)           No Credit Party shall change or amend
the terms of any Subordinated Debt or Additional Subordinated Debt (or any
indenture or agreement in connection therewith) if the effect of such amendment
is to:  (a) increase the interest rate
on such Subordinated Debt or Additional Subordinated Debt; (b) change the dates
upon which payments of principal or interest are due on such Subordinated Debt
or Additional Subordinated Debt other than to extend such dates; (c) change any
default or event of default other than to delete or make less restrictive any
default provision therein, or add any covenant with respect to such
Subordinated Debt or Additional Subordinated Debt; (d) change the redemption or
prepayment provisions of such Subordinated Debt or Additional Subordinated Debt
other than to extend the dates therefor or to reduce the premiums payable in
connection therewith; (e) grant any security or collateral to secure payment of
such Subordinated Debt or Additional Subordinated Debt; or (f) change or amend
any other term if such change or amendment would materially increase the
obligations of the Credit Party thereunder or confer additional material rights
on the holder of such Subordinated Debt or Additional Subordinated Debt in a
manner adverse to any Credit Party, Agent or any Lender.


 


(b)           No
Credit Party shall change or amend the terms of any of the following material
contracts if such change would render such contracts more burdensome on any
Credit Party:  The Franchise Business
Activity Agreements described in Disclosure Schedule 6.19.


 


56

















 


7.          TERM


 


7.1           Termination. 
The financing arrangements contemplated hereby shall be in effect until
the Commitment Termination Date, and the Loans and all other Obligations shall
be automatically due and payable in full on such date.


 


7.2           Survival of Obligations Upon Termination
of Financing Arrangements. 
Except as otherwise expressly provided for in the Loan Documents, no
termination or cancellation (regardless of cause or procedure) of any financing
arrangement under this Agreement shall in any way affect or impair the
obligations,  duties and liabilities of the
Credit Parties or the rights of Agents and Lenders relating to any unpaid
portion of the Loans or any other Obligations, due or not due, liquidated,
contingent or unliquidated, or any transaction or event occurring prior to such
termination, or any transaction or event, the performance of which is required
after the Commitment Termination Date. 
Except as otherwise expressly provided herein or in any other Loan
Document, all undertakings, agreements, covenants, warranties and
representations of or binding upon the Credit Parties, and all rights of each
Agent and each Lender, all as contained in the Loan Documents, shall not
terminate or expire, but rather shall survive any such termination or
cancellation and shall continue in full force and effect until the Termination
Date; provided, that the provisions of Section 11, the payment
obligations under Sections 1.14 and 1.15, and the indemnities
contained in the Loan Documents shall survive the Termination Date.


 


8.          EVENTS OF DEFAULT; RIGHTS AND REMEDIES


 


8.1           Events
of Default.  The occurrence of any
one or more of the following events (regardless of the reason therefor) shall
constitute an “Event of Default” hereunder:


 


(a)           Any
Borrower (i) fails to make any payment of principal of, or interest on, or Fees
owing in respect of, the Loans or any of the other Obligations when due and
payable, or (ii) fails to pay or reimburse any Agent or Lenders for any expense
reimbursable hereunder or under any other Loan Document within 10 days
following any Agent’s demand for such reimbursement or payment of expenses.


 


(b)           Any
Credit Party fails or neglects to perform, keep or observe any of the
provisions of Sections 1.4, 1.7, 5.4(a) or 6, or any of the provisions
set forth in Annexes C or G, 
respectively.


 


(c)           Any
Borrower fails or neglects to perform, keep or observe any of the provisions of
Section 4 or any provisions set forth in Annexes E or F,
respectively, and the same shall remain unremedied for 3 days or more.


 


(d)           Any
Credit Party fails or neglects to perform, keep or observe any other provision
of this Agreement or of any of the other Loan Documents (other than any
provision 


 


57

















 


embodied in or covered by any other clause of this Section 8.1)
and the same shall remain unremedied for 30 days or more.


 


(e)           A
default or breach occurs under the Australian Loan Documents or under any other
agreement, document or instrument to which any Credit Party is a party that is
not cured within any applicable grace period therefor, and such default or
breach (i) involves the failure to make any payment when due in respect of
Indebtedness under the Australian Loan Documents or any Indebtedness or
Guaranteed Indebtedness (other than the Obligations) of any Credit Party in
excess of $500,000 in the aggregate (including (x) undrawn committed or
available amounts and (y) amounts owing to all creditors under any combined or
syndicated credit arrangements), or (ii) causes, or permits any holder of such
Indebtedness or Guaranteed Indebtedness or a trustee to cause, Indebtedness or
Guaranteed Indebtedness or a portion thereof in excess of $500,000 in the
aggregate to become due prior to its stated maturity or prior to its regularly
scheduled dates of payment, or cash collateral in respect thereof to be
demanded, in each case, other than if such default or acceleration is waived,
rescinded or adjusted by the holder thereof.


 


(f)            Any
information contained in any Borrowing Base Certificate is untrue or incorrect
in any respect (other than inadvertent, immaterial errors not exceeding the US
Dollar Equivalent $500,000 in the aggregate in any Borrowing Base Certificate),
or any representation or warranty herein or in any Loan Document or in any
written statement, report, financial statement or certificate (other than a
Borrowing Base Certificate) made or delivered to any Agent or any Lender by any
Credit Party is untrue or incorrect in any material respect as of the date when
made or deemed made.


 


(g)           Assets
of any Credit Party with a fair market value of $250,000 or more are attached,
seized, levied upon or subjected to a writ or distress warrant, or come within
the possession of any receiver, trustee, custodian or assignee for the benefit
of creditors of any Credit Party and such condition continues for 30 days or
more after the applicable Credit Party should have had knowledge thereof.


 


(h)           A
case or proceeding is commenced against any Credit Party seeking a decree or
order in respect of such Credit Party (i) under any Insolvency Laws, (ii)
appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator
(or similar official) for such Credit Party or for any substantial part of any
such Credit Party’s assets, or (iii) ordering the winding-up or liquidation of
the affairs of such Credit Party, and such case or proceeding shall remain
undismissed or unstayed for 60 days or more or a decree or order granting the
relief sought in such case or proceeding shall be entered by a court of
competent jurisdiction.


 


(i)            The UK Borrower takes any corporate
action or other steps are taken or legal proceedings are started for any
suspension of payments or a moratorium of Indebtedness or for its winding up,
dissolution, administration or re-organisation or for the appointment of a
liquidator, receiver, administrator, administrative receiver, conservator,
manager, custodian,


 


58

















 


examiner, trustee or similar
officer of it or of any or all of its revenues and assets, provided that this
Section 8.1(i) shall not apply to:


 


(i)            any proceedings, measures or order
relating to a solvent reconstruction, amalgamation, reorganisation or merger of
the UK Borrower, previously approved by the UK Agent in writing; or


 


(ii)           any petition presented against the UK
Borrower which the UK Borrower demonstrates to the satisfaction of the UK Agent
(acting reasonably), by providing an opinion of a leading firm of London
solicitors (or the London office of a leading law firm in the United States of
America) or otherwise, is frivolous, vexatious or an abuse of the court process
or which relates to a claim to which the UK Borrower has a good defence and
which is being vigorously defended in good faith by the UK Borrower and is
discharged, withdrawn or discontinued within 21 days of its presentation
(or such longer period as the UK Agent may allow) (acting reasonably).


 


(j)            Any
Credit Party (i) files a petition seeking relief under any Insolvency Laws,
(ii) consents to or fails to contest in a timely and appropriate manner the
institution of proceedings thereunder or the filing of any such petition or the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, examiner or sequestrator (or similar official) for such Credit
Party or for any substantial part of any such Credit Party’s assets, (iii)
makes an assignment for the benefit of creditors, (iv) takes any action in
furtherance of any of the foregoing; or (v) admits in writing its inability to,
or is generally unable to, pay its debts as such debts become due.


 


(k)           A
final judgment or judgments for the payment of money (except to the extent
adequately covered by insurance and as to which the insurance company has
acknowledged coverage in writing) in excess of $1,000,000 in the aggregate at
any time are outstanding against one or more of the Credit Parties and the same
are not, within 30 days after the entry thereof, discharged or execution
thereof stayed or bonded pending appeal, or such judgments are not discharged
prior to the expiration of any such stay.


 


(l)            Any
material provision of any Loan Document for any reason ceases to be valid,
binding and enforceable in accordance with its terms (or any Credit Party shall
challenge the enforceability of any Loan Document or shall assert in writing,
or engage in any action or inaction based on any such assertion, that any
provision of any of the Loan Documents has ceased to be or otherwise is not
valid, binding and enforceable in accordance with its terms), or any Lien created
under any Loan Document ceases to be a valid and perfected first priority Lien
(except as otherwise permitted herein or therein) in any of the Collateral
purported to be covered thereby other than as a result of Agent’s failure to
file continuation statements or maintain possession of any Collateral under its
control.


 


(m)          Any
Change of Control occurs.


 


59

















 


8.2           Remedies.


 


(a)           If
any Default or Event of Default has occurred and is continuing, any Agent may
(and at the written request of the Requisite Revolving Lenders shall), without
notice, suspend the Revolving Loan Commitments with respect to additional
Advances and/or the incurrence of additional Letter of Credit Obligations,
whereupon any additional Advances and additional Letter of Credit Obligations
shall be made or incurred in the Applicable Agent’s sole discretion (or in the
sole discretion of the Requisite Revolving Lenders, if such suspension occurred
at their direction) so long as such Default or Event of Default is
continuing.  If any Event of Default has
occurred and is continuing, the Applicable Agent may (and at the written
request of Requisite Lenders shall), without notice except as otherwise expressly
provided herein, increase the rate of interest applicable to the Loans and the
Letter of Credit Fees to the Default Rate in accordance with Section 1.5(d).


 


(b)           If
any Event of Default has occurred and is continuing, the Applicable Agent may
(and at the written request of the Requisite Lenders shall), without notice to
the Borrowers:  (i) terminate the US
Revolving Loan Commitments and/or the UK Revolving Loan Commitments with
respect to further Advances or the incurrence of further Letter of Credit Obligations;
(ii) declare all or any portion of the Obligations, including all or any
portion of any Loan to be forthwith due and payable, and require that the
Letter of Credit Obligations be cash collateralized as provided in Annex B,
all without presentment, demand, protest or further notice of any kind, all of
which are expressly waived by Borrowers and each other Credit Party; or (iii)
exercise any rights and remedies provided to the Applicable Agent under the
Loan Documents or at law or equity, including all remedies provided under the
Code or applicable laws of England and Wales; provided, that upon the
occurrence of an Event of Default specified in Sections 8.1(h) or (i),
the Commitments shall be immediately terminated and all of the Obligations,
including the aggregate Revolving Loan, shall become immediately due and
payable without declaration, notice or demand by any Person.


 


8.3           Waivers by Credit Parties. 
Except as otherwise provided for in this Agreement or by applicable law,
each Credit Party waives (including for purposes of Section 12): (a)
presentment, demand and protest and notice of presentment, dishonor, notice of
intent to accelerate, notice of acceleration, protest, default, nonpayment,
maturity, release, compromise, settlement, extension or renewal of any or all
commercial paper, accounts, contract rights, documents, instruments, chattel
paper and guaranties at any time held by any Agent on which any Credit Party
may in any way be liable, and hereby ratifies and confirms whatever any Agent
may do in this regard, (b) all rights to notice and a hearing prior to any
Agent’s taking possession or control of, or to any Agent’s replevy, attachment
or levy upon, the Collateral or any bond or security that might be required by
any court prior to allowing any Agent to exercise any of its remedies, and (c)
the benefit of all valuation, appraisal, marshaling and exemption laws.


 


9.          ASSIGNMENT AND PARTICIPATIONS;
APPOINTMENT OF AGENT


 


9.1           Assignment
and Participations.


 


 


60

















 


 


(a)           Subject
to the terms of this Section 9.1, any Lender may make an assignment to a
Qualified Assignee of, or sell participations in, at any time or times, the
Loan Documents, Loans, Letter of Credit Obligations and Commitments or any
portion thereof or interest therein, including any Lender’s rights, title,
interests, remedies, powers or duties thereunder; provided that any such
assignment shall be of a constant share of the Loans and Commitments.  Any assignment by a Lender shall: (i)
require the consent of the Applicable Agent (which consent shall not be
unreasonably withheld or delayed with respect to a Qualified Assignee) and the
execution of an assignment agreement (an “Assignment Agreement”)
substantially in the form attached hereto as Exhibit 9.1(a) and
otherwise in form and substance reasonably satisfactory to, and acknowledged
by, the Applicable Agent; (ii) be conditioned on such assignee Lender
representing to the assigning Lender and the Applicable Agent that it is
purchasing the applicable Loans to be assigned to it for its own account, for
investment purposes and not with a view to the distribution thereof; (iii)
after giving effect to any such partial assignment, the assignee Lender shall
have Commitments in an amount at least equal to the US Dollar Equivalent of $5,000,000
and the assigning Lender shall have retained Commitments in an amount at least
equal to the US Dollar Equivalent of 
$5,000,000; (iv) include a payment to the Applicable Agent of an
assignment fee of $3,500; and (v) so long as no Event of Default has occurred
and is continuing, require the consent of (i) Borrower Representative with
respect to assignments of Loans, Letter of Credit Obligations and Commitment to
US Borrower and/or Term Borrower; or (ii) UK Borrower with respect to
assignments of Loans and Commitments to UK Borrower, which consent, in each
case, shall not be unreasonably withheld, conditioned or delayed.  In the case of an assignment by a Lender
under this Section 9.1, the assignee shall have, to the extent of such
assignment, the same rights, benefits and obligations as all other Lenders
hereunder.  The assigning Lender shall
be relieved of its obligations hereunder with respect to its Commitments or
assigned portion thereof from and after the date of such assignment.  Each Borrower hereby acknowledges and agrees
that any assignment shall give rise to a direct obligation of the Applicable
Borrower to the assignee and that the assignee shall be considered to be a
“Lender”.  In all instances, each Lender’s
liability to make Loans hereunder shall be several and not joint and shall be
limited to such Lender’s Pro Rata Share of the applicable Commitment.  In the event any Agent or any Lender assigns
or otherwise transfers all or any part of the Obligations held by it, such
Agent or any such Lender shall so notify Borrowers and Borrowers shall, upon
the request of such Agent or such Lender, execute new Notes in exchange for the
Notes, if any, being assigned. 
Notwithstanding the foregoing provisions of this Section 9.1(a),
any Lender may at any time pledge the Obligations held by it and such Lender’s
rights under this Agreement and the other Loan Documents to a Federal Reserve
Bank, and any Lender that is an investment fund may assign the Obligations held
by it and such Lender’s rights under this Agreement and the other Loan
Documents to another investment fund managed by the same investment advisor; provided,
that no such pledge to a Federal Reserve Bank shall release such Lender from
such Lender’s obligations hereunder or under any other Loan Document.


 


(b)           Any
participation by a Lender of all or any part of its Commitments shall be made
with the understanding that all amounts payable by Borrowers hereunder shall be



 


61

















 


determined as if that Lender had not sold such participation, and that
the holder of any such participation shall not be entitled to require such
Lender to take or omit to take any action hereunder except actions directly
affecting (i) any reduction in the principal amount of, or interest rate or
Fees payable with respect to, any Loan in which such holder participates, (ii)
any extension of the scheduled amortization of the principal amount of any Loan
in which such holder participates or the final maturity date thereof, and (iii)
any release of all or substantially all of the Collateral securing the Loan in
which such holder participates (other than in accordance with the terms of this
Agreement, the Collateral Documents or the other Loan Documents).  Solely for purposes of Sections 1.12,
1.14, 1.15 and 9.8, each Borrower acknowledges and agrees that a
participation shall give rise to a direct obligation of Borrowers to the
participant and the participant shall be considered to be a “Lender,” provided,
however, that a Borrower’s obligations and liabilities hereunder,
including under Sections 1.12, 1.14, 1.15 and 9.8 shall not be increased
due to any such participation.  Except
as set forth in the preceding sentence no Borrower or Credit Party shall have
any obligation or duty to any participant. 
Neither any Agent nor any Lender (other than the Lender selling a
participation) shall have any duty to any participant and may continue to deal
solely with the Lender selling a participation as if no such sale had occurred.


 


(c)           Except
as expressly provided in this Section 9.1, no Lender shall, as between
Borrowers and that Lender, or any Agent and that Lender, be relieved of any of
its obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or granting of participation in, all or any part of the Loans,
the Notes or other Obligations owed to such Lender.


 


(d)           Each
Credit Party executing this Agreement shall assist any Lender permitted to sell
assignments or participations under this Section 9.1 as reasonably required
to enable the assigning or selling Lender to effect any such assignment or
participation, including the execution and delivery of any and all agreements,
notes and other documents and instruments as shall be reasonably requested and,
if requested by the Applicable Agent, the preparation of informational
materials for, and the participation of management in meetings with, potential
assignees or participants.  Each Credit
Party executing this Agreement shall certify the correctness, completeness and
accuracy of all descriptions of the Credit Parties and their respective affairs
contained in any selling materials provided by them and all other information
provided by them and included in such materials, except that any Projections
delivered by Borrowers shall only be certified by Borrowers as having been
prepared by Borrowers in compliance with the representations contained in Section
3.4(c).


 


(e)           Any
Lender may furnish any information concerning Credit Parties in the possession
of such Lender from time to time to assignees and participants (including
prospective assignees and participants); provided that such Lender shall
obtain from assignees or participants confidentiality covenants substantially
equivalent to those contained in Section 11.8.


 


(f)            Notwithstanding
anything to the contrary contained herein, any Lender (a “Granting Lender”),
may grant to a special purpose funding vehicle (an “SPC”), identified as
such in writing by the Granting Lender to Agents and Borrowers,


 


62

















 


the option to provide to Borrowers all or any part of any Loans that
such Granting Lender would otherwise be obligated to make to Borrowers pursuant
to this Agreement; provided that (i) nothing herein shall constitute a
commitment by any SPC to make any Loan; (ii) if an SPC elects not to exercise
such option or otherwise fails to provide all or any part of such Loan, the
Granting Lender shall be obligated to make such Loan pursuant to the terms
hereof and (iii) such SPC shall not be entitled to any payments under Sections
1.14 or 1.15 hereof, or any indemnification payment, in excess of the
payment that that would have been payable to the Granting Lender.  The making of a Loan by an SPC hereunder
shall utilize the Commitment of the Granting Lender to the same extent, and as
if such Loan were made by such Granting Lender.  No SPC shall be liable for any indemnity or similar payment
obligation under this Agreement (all liability for which shall remain with the
Granting Lender).  Any SPC may (i) with
notice to, but without the prior written consent of, Borrowers and Agents and
without paying any processing fee therefor assign all or a portion of its
interests in any Loans to the Granting Lender or to any financial institutions
(consented to by Borrowers and Agents) providing liquidity and/or credit
support to or for the account of such SPC to support the funding or maintenance
of Loans and provided that such assignee shall not be entitled to any payments
under Sections 1.14 or 1.15 hereof, or any indemnification
payment hereunder, and (ii) disclose on a confidential basis any non-public
information relating to its Loans to any rating agency, commercial paper dealer
or provider of any surety, guarantee or credit or liquidity enhancement to such
SPC.  This Section 9.1(f) may not
be amended without the prior written consent of each Granting Lender, all or
any of whose Loans are being funded by an SPC at the time of such
amendment.  For the avoidance of doubt,
the Granting Lender shall for all purposes, including without limitation, the
approval of any amendment or waiver of any provision of any Loan Document or
the obligation to pay any amount otherwise payable by the Granting Lender under
the Loan Documents, continue to be the Lender of record hereunder.


 


(g)           Notwithstanding
anything to the contrary contained herein, so long as no Event of Default has
occurred and is continuing, no Lender shall assign or sell participations in
any portion of its Loans or Commitments to a potential Lender or participant,
if the assignee Lender or participant would be subject to capital adequacy or
similar requirements under Section 1.15(a), increased costs under Section
1.15(b) or (d), an inability to fund LIBOR Loans under Section
1.15(c), or withholding taxes in accordance with Section 1.14.


 


9.2           Appointment
of Agents.  GE
Capital is hereby appointed to act on behalf of all US Revolving Lenders and
Term Lenders as US Agent under this Agreement and the other Loan Documents, and
to act on behalf of all UK Revolving Lenders as UK Agent and Security Trustee
under this Agreement and the other Loan Documents.  The Security Trustee shall hold the benefit of the Collateral of
UK Borrower in trust for itself and other Applicable Lenders and will apply all
payments and other benefits received by it under the UK Debenture, the Pledge
Agreement and any other Collateral Documents in accordance with the provisions
of 


 


63

















 


this Agreement and the
other Loan Documents.  The
provisions of this Section 9.2 are solely for the benefit of Agents and
Lenders and no  Credit Party nor
any other Person shall have any rights as a third party beneficiary of any of
the provisions hereof.  In performing
its functions and duties under this Agreement and the other Loan Documents,
each Agent shall act solely as an agent of the Lenders and does not assume and
shall not be deemed to have assumed any obligation toward or relationship of
agency or trust with or for any Credit Party or any other Person.  No Agent shall have any duties or
responsibilities except for those expressly set forth in this Agreement and the
other Loan Documents.  The duties of
Agents shall be mechanical and administrative in nature and no Agent shall
have, or be deemed to have, by reason of this Agreement, any other Loan
Document or otherwise a fiduciary relationship in respect of any Lender.  Except as expressly set forth in this
Agreement and the other Loan Documents, no Agent shall have any duty to
disclose, and shall not be liable for failure to disclose, any information
relating to any Credit Party or any of their respective Subsidiaries or any
Account Debtor that is communicated to or obtained by GE Capital or any of its
Affiliates in any capacity.  Neither any
Agent nor any of its Affiliates nor any of their respective officers,
directors, employees, agents or representatives shall be liable to any Lender
for any action taken or omitted to be taken by it hereunder or under any other
Loan Document, or in connection herewith or therewith, except for damages
caused by its or their own gross negligence or willful misconduct.


 


If any Agent shall request instructions from Requisite
Lenders, Requisite Revolving Lenders, Supermajority Revolving Lenders or all
affected Lenders with respect to any act or action (including failure to act)
in connection with this Agreement or any other Loan Document, then such Agent
shall be entitled to refrain from such act or taking such action unless and
until such Agent shall have received instructions from Requisite Lenders,
Requisite Revolving Lenders, 
Supermajority Revolving Lenders or all affected Lenders, as the case may
be, and such Agent shall not incur liability to any Person by reason of so
refraining.  Each Agent shall be fully
justified in failing or refusing to take any action hereunder or under any
other Loan Document (a) if such action would, in the opinion of such Agent, be
contrary to law or the terms of this Agreement or any other Loan Document, (b)
if such action would, in the opinion of such Agent, expose such Agent to
Environmental Liabilities or (c) if such Agent shall not first be indemnified
to its satisfaction against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such action.  Without limiting the foregoing, no Lender
shall have any right of action whatsoever against any Agent as a result of such
Agent acting or refraining from acting hereunder or under any other Loan
Document in accordance with the instructions of Requisite Lenders, Requisite
Revolving Lenders, Supermajority Revolving Lenders or all affected Lenders, as
applicable.


 


9.3           Agents’ Reliance, Etc. 
Neither any Agent nor any of its Affiliates nor any of their respective
directors, officers, agents or employees shall be liable for any action taken
or omitted to be taken by it or them under or in connection with this Agreement
or the other Loan Documents, except for damages caused by its or their own
gross negligence or willful misconduct. 
Without limiting the generality of the foregoing, each Agent:  (a) 
may treat the payee of any Note as the holder thereof until the
Applicable Agent receives written notice of the 


 


64

















 


assignment or transfer
thereof signed by such payee and in form reasonably satisfactory to the
Applicable Agent; (b) may consult with legal counsel, independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts; (c) makes no warranty or
representation to any Lender and shall not be responsible to any Lender for any
statements, warranties or representations made  in or in connection with this Agreement or the other Loan
Documents; (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement or the other Loan Documents on the part of any Credit Party or to inspect
the Collateral (including the books and records) of any Credit Party; (e) shall
not be responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or the
other Loan Documents or any other instrument or document furnished pursuant
hereto or thereto; and (f) shall incur no liability under or in respect of this
Agreement or the other Loan Documents by acting upon any notice, consent,
certificate or other instrument or writing (which may be by telecopy, telegram,
cable or telex) believed by it to be genuine and signed or sent by the proper
party or parties.


 


9.4           GE Capital and Affiliates. 
With respect to its Commitments hereunder, GE Capital shall have
the same rights and powers under this Agreement and the other Loan Documents as
any other Lender and may exercise the same as though it were not an Agent; and
the terms “Lender,” “Lenders,” US Revolving Lender, Term Lender or UK Revolving
Lender shall, unless otherwise expressly indicated, include GE Capital in its
individual capacity.  GE Capital and its
Affiliates may lend money to, invest in, and generally engage in any kind of
business with, any Credit Party, any of their Affiliates and any Person who may
do business with or own securities of any Credit Party or any such Affiliate,
all as if GE Capital was not an Agent and without any duty to account therefor
to Lenders.  GE Capital and Affiliates
may accept fees and other consideration from any Credit Party for services in
connection with this Agreement or otherwise without having to account for the
same to Lenders.  Each Lender
acknowledges the potential conflict of interest between GE Capital as a Lender
holding disproportionate interests in the Loans, and GE Capital as Agent, or as
a result of GE Australia being a lender and agent under the Australian Loan
Documents.


 


9.5           Lender Credit Decision. 
Each Lender acknowledges that it has, independently and without reliance
upon any Agent or any other Lender and based on the Financial Statements
referred to in Section 3.4(a) and such other documents and information
as it has deemed appropriate, made its own credit and financial analysis of the
Credit Parties and its own decision to enter into this Agreement.  Each Lender also acknowledges that it will,
independently and without reliance upon any Agent or any other Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement.  Each Lender
acknowledges the potential conflict of interest of each other Lender as a
result of Lenders holding disproportionate interests in the Loans, and
expressly consents to, and waives any claim based upon, such conflict of
interest.


 


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9.6           Indemnification. 
Lenders agree to indemnify Agents (to the extent not reimbursed by
Credit Parties and without limiting the obligations of the Credit Parties under
the Loan Documents), ratably according to their respective Pro Rata Shares,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever that may be imposed on, incurred by, or asserted
against any Agent in any way relating to or arising out of this Agreement or
any other Loan Document or any action taken or omitted to be taken by any Agent
in connection therewith; provided, that no Lender shall be liable for
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from
Agent’s gross negligence or willful misconduct. Without limiting the foregoing,
each Lender agrees to reimburse each Agent promptly upon demand for its ratable
share of any out-of-pocket expenses (including reasonable counsel fees)
incurred by such Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through negotiations,
legal proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement and each other Loan Document, to the
extent that such Agent is not reimbursed for such expenses by Credit Parties.


 


9.7           Successor
Agents. 
Any Agent may resign at any time by giving not less than 30 days’ prior
written notice thereof to Lenders and Borrower Representative.  Upon any such resignation, the Requisite
Lenders shall have the right to appoint a successor Agent.  If no successor Agent shall have been so
appointed by the Requisite Lenders and shall have accepted such appointment
within 30 days after the resigning Agent’s giving notice of resignation, then
the resigning Agent may, on behalf of Lenders, appoint a successor Agent, which
shall be a Lender, if a Lender is willing to accept such appointment, or
otherwise shall be a commercial bank or financial institution or a subsidiary
of a commercial bank or financial institution if such commercial bank or
financial institution is organized under the laws of the United States of
America or of any State thereof and has a combined capital and surplus of at
least the Dollar Equivalent of $300,000,000. 
If no successor Agent has been appointed pursuant to the foregoing,
within 30 days after the date such notice of resignation was given by the
resigning Agent, such resignation shall become effective and the Requisite
Lenders shall thereafter perform all the duties of Agent hereunder until such
time, if any, as the Requisite Lenders appoint a successor Agent as provided
above.  Any successor Agent appointed by
Requisite Lenders hereunder shall be subject to the approval of Borrower
Representative, such approval not to be unreasonably withheld or delayed; provided
that such approval shall not be required if a Default or an Event of Default
has occurred and is continuing.  Upon
the acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall succeed to and become vested with all the rights, powers,
privileges and duties of the resigning Agent. 
Upon the earlier of the acceptance of any appointment as Agent hereunder
by a successor Agent or the effective date of the resigning Agent’s
resignation, the resigning Agent shall be discharged from its duties and
obligations under  this Agreement and the other
Loan Documents, except that any indemnity rights or other rights in favor of
such resigning Agent shall continue. 
After any resigning Agent’s resignation hereunder, the provisions of this
Section 9 shall inure to 


 


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its benefit as to any
actions taken or omitted to be taken by it while it was acting as Agent under
this Agreement and the other Loan Documents.


 


9.8           Setoff
and Sharing of Payments.  In
addition to any rights now or hereafter granted under applicable law and not by
way of limitation of any such rights, upon the occurrence and during the
continuance of any Event of Default and subject to Section 9.9(f), each
Lender is hereby authorized at any time or from time to time, without notice to
any Credit Party or to any other Person except as set forth in this Section
9.8, any such notice being hereby expressly waived, to offset and to
appropriate and to apply any and all balances held by it at any of its offices
for the account of any Borrower or Guarantor (regardless of whether such
balances are then due to such Borrower or Guarantor) and any other properties
or assets at any time held or owing by that Lender or that holder to or for the
credit or for the account of any Borrower or Guarantor against and on account
of any of the Obligations that are not paid when due provided, however, that
such Lenders agree to give subsequent notice to the affected Credit Parties as
promptly as is practicable after taking any actions described in this
sentence.  Any Lender exercising a right
of setoff or otherwise receiving any payment on account of the Obligations in
excess of its Pro Rata Share thereof shall purchase for cash (and the other
Applicable Lenders or holders shall sell) such participations in each such
other Lender’s or holder’s Pro Rata Share of the Obligations as would be
necessary to cause such Lender to share the amount so offset or otherwise
received with each other Applicable Lender or holder in accordance with their
respective Pro Rata Shares (other than offset rights exercised by any Lender
with respect to Sections 1.12, 1.14 or 1.15).  Each US Revolving Lender’s obligation under this Section 9.8
shall be in addition to and not in limitation of its obligations to purchase a
participation in an amount equal to its Pro Rata Share of the Swing Line Loans
under Section 1.1.  Each Credit
Party that is a Borrower or Guarantor agrees, to the fullest extent permitted
by law, that (a) any Lender may exercise its right to offset with respect to
amounts in excess of its Pro Rata Share of the Obligations and may sell
participations in such amounts so offset to other Applicable Lenders and
holders and (b) any Lender so purchasing a participation in the Loans made or other
Obligations held by other Lenders or holders may exercise all rights of offset,
bankers’ lien, counterclaim or similar rights with respect to such
participation as fully as if such Lender or holder were a direct holder of the
Loans and the other Obligations in the amount of such participation.  Notwithstanding the foregoing, if all or any
portion of the offset amount or payment otherwise received is thereafter
recovered from the Lender that has exercised the right of offset, the purchase
of participations by that Lender shall be rescinded and the purchase price
restored without interest. 
NOTWITHSTANDING THE FOREGOING, NO LENDER SHALL EXERCISE ANY SUCH RIGHTS
OF SETOFF WITHOUT THE PRIOR WRITTEN CONSENT OF AGENTS.


 


9.9           Advances; Payments; Non-Funding Lenders;
Information; Actions in Concert.


 


(a)           Advances;
Payments.


 


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(i)            US
Revolving Lenders shall refund or participate in the Swing Line Loan in
accordance with clauses (iii) and (iv) of Section 1.1(c).  If the Swing Line Lender declines to make a
Swing Line Loan or if Swing Line Availability is zero, or if the UK Agent
declines to make a UK Revolving Credit Advance on behalf of UK Revolving
Lenders, the Applicable Agent shall notify the Applicable Lenders, promptly
after receipt of a Notice of Revolving Credit Advance and in any event prior to
11:00 a.m. (California time), in the case of a US Revolving Credit Advance and
10:00 am  London
Time in the case of a UK Revolving Credit Advance on the date such Notice of
Revolving Advance is received, by telecopy, telephone or other similar form of
transmission.  Each Lender shall make
the amount of such Lender’s Pro Rata Share of such Revolving Credit Advance
available to the Applicable Agent in same day funds by wire transfer to the
Applicable Agent’s account as set forth in Annex H not later than noon
(California time), in the case of a US Revolving Credit Advance and 10:00 am
London Time in the case of a UK Revolving Credit Advance on the requested
funding date, in the case of an Index Rate Loan, and not later than 8:00 a.m.
(California time) on the requested funding date, in the case of a LIBOR
Loan.  After receipt of such wire
transfers (or, in the Applicable Agent’s sole discretion, before receipt of
such wire transfers), subject to the terms hereof, the Applicable Agent shall
make the requested Revolving Credit Advance to the Applicable Borrower.  All payments by each Lender shall be made
without setoff, counterclaim or deduction of any kind.


 


(ii)           On
the 2nd Business Day of each calendar week or more frequently at the Applicable
Agent’s election (each, a “Settlement Date”), the Applicable Agent shall
advise each Lender by telephone, or telecopy of the amount of such Lender’s Pro
Rata Share of principal, interest and Fees paid for the benefit of US Revolving
Lenders or UK Revolving Lenders with respect to each applicable Loan.  Provided that each Applicable Lender has
funded all payments or Advances required to be made by it and has purchased all
participations required to be purchased by it under this Agreement and the
other Loan Documents as of such Settlement Date, the US  Agent shall pay to each US Revolving Lender
such Lender’s Pro Rata Share of principal, interest and Fees paid by US
Borrower since the previous Settlement Date for the benefit of such Lender on
the Loans held by it and the UK Agent shall pay to each UK Revolving Lender
such Lender’s Pro Rata Share of any interest and Fees paid by UK Borrower since
the previous Settlement Date or the UK Revolving Loans held by it.  To the extent that any US Revolving Lender
or UK Revolving Lenders (a “Non-Funding Lender”) has failed to fund all
such payments and Advances or failed to fund the purchase of all such
participations, the Applicable  Agent
shall be entitled to set off the funding short-fall against that Non-Funding
Lender’s Pro Rata Share of all payments received from the Applicable  Borrower. 
Such payments shall be made by wire transfer to such Lender’s account
(as specified by such Lender in Annex H or the applicable Assignment
Agreement) not later than 11:00 a.m. (California time) on the next Business Day
following each Settlement Date.


 


(b)           Availability
of Lender’s Pro Rata Share.  The
Applicable Agent may assume that each Applicable Lender will make its Pro Rata
Share of each Revolving Credit Advance available to Applicable Agent on each
funding date.  If such Pro Rata Share is
not, in fact, paid to the Applicable Agent by such Applicable Lender when due, the
Applicable Agent


 


68

















 


will be entitled to recover such amount on demand from such Revolving
Lender without setoff, counterclaim or deduction of any kind.  If any Revolving Lender fails to pay the
amount of its Pro Rata Share forthwith upon the Applicable Agent’s demand, the
Applicable Agent shall promptly notify Borrower Representative and the
Applicable Borrower shall immediately repay such amount to Applicable
Agent.  Nothing in this Section
9.9(b) or elsewhere in this Agreement or the other Loan Documents shall be
deemed to require any Agent to advance funds on behalf of any Revolving Lender
or to relieve any Revolving Lender from its obligation to fulfill its
Commitments hereunder or to prejudice any rights that Borrowers may have
against any Revolving Lender as a result of any default by such Revolving
Lender hereunder.  To the extent that
any Agent advances funds to any Borrower on behalf of any Revolving Lender and
is not reimbursed therefor on the same Business Day as such Advance is made,
any Agent shall be entitled to retain for its account all interest accrued on
such Advance until reimbursed by the applicable Revolving Lender.


 


(c)           Return
of Payments.


 


(i)            If
any Agent pays an amount to a Lender under this Agreement in the belief or expectation
that a related payment has been or will be received by such Agent from
Borrowers and such related payment is not received by such Agent, then such
Agent will be entitled to recover such amount from such Lender on demand
without setoff, counterclaim or deduction of any kind.


 


(ii)           If
any Agent determines at any time that any amount received by such Agent under
this Agreement must be returned to any Borrower or paid to any other Person
pursuant to any insolvency law or otherwise, then, notwithstanding any other
term or condition of this Agreement or any other Loan Document, such Agent will
not be required to distribute any portion thereof to any Lender.  In addition, each Lender will repay to such
Agent on demand any portion of such amount that such Agent has distributed to
such Lender, together with interest at such rate, if any, as such Agent is
required to pay to any Borrower or such other Person, without setoff,
counterclaim or deduction of any kind.


 


(d)           Non-Funding
Lenders.  The failure of any Non–Funding
Lender to make any Revolving Credit Advance or any payment required by it
hereunder or to purchase any participation in any Swing Line Loan or UK
Revolving Credit Advance to be made or purchased by it on the date specified
therefor shall not relieve any other Lender (each such other Revolving Lender,
an “Other Lender”) of its obligations to make such Advance or purchase
such participation on such date, but neither any Other Lender nor any Agent
shall be responsible for the failure of any Non-Funding Lender to make an
Advance, purchase a participation or make any other payment required
hereunder.  Notwithstanding anything set
forth herein to the contrary, a Non-Funding Lender shall not have any voting or
consent rights under or with respect to any Loan Document or constitute a
“Lender” or a “Revolving Lender” (or be included in the calculation of
“Requisite Lenders”, “Requisite Revolving Lenders” or “Supermajority Revolving
Lenders” hereunder) for any voting or consent rights under or with respect to
any Loan Document.  At Borrower
Representative’s request, the Applicable Agent or a Person reasonably 


 


69

















 


acceptable to such Agent shall have the right with such Agent’s consent
and in such Agent’s sole discretion (but shall have no obligation) to purchase
from any Non-Funding Lender, and each Non-Funding Lender agrees that it shall,
at such Agent’s request, sell and assign to such Agent or such Person, all of
the Commitments of that Non-Funding Lender for an amount equal to the principal
balance of all Loans held by such Non-Funding Lender and all accrued interest
and fees with respect thereto through the date of sale, such purchase and sale
to be consummated pursuant to an executed Assignment Agreement.


 


(e)           Dissemination
of Information.  Each Agent shall
use reasonable efforts to provide Lenders with any notice of Default or Event
of Default received by such Agent from, or delivered by such Agent to, any
Credit Party, with notice of any Event of Default of which such Agent has
actually become aware and with notice of any action taken by Agent following
any Event of Default; provided, that no Agent shall be liable to any
Lender for any failure to do so, except to the extent that such failure is
attributable to such Agent’s gross negligence or willful misconduct.  Lenders acknowledge that Borrowers are
required to provide Financial Statements and Collateral Reports to Lenders in
accordance with Annexes E and F hereto and agree that neither Agent
shall have any duty to provide the same to Lenders.


 


(f)            Actions
in Concert.  Anything in this
Agreement to the contrary notwithstanding, each Lender hereby agrees with each
other Lender that no Lender shall take any action to protect or enforce its
rights arising out of this Agreement or the Notes (including exercising any
rights of setoff) without first obtaining the prior written consent of Agents
and Requisite Lenders, it being the intent of Lenders that any such action to
protect or enforce rights under this Agreement and the Notes shall be taken in
concert and at the direction or with the consent of Agents or Requisite
Lenders.


 


9.10         Co-Agents.  None of the Lenders identified on the
following page or signature page of this Agreement as a “co-agent”,
“documentation agent” or “syndication agent” shall have any right, power,
obligation, liability or duty under this Agreement or any other Loan Document,
other than those applicable to it as a Lender.


 


10. SUCCESSORS AND ASSIGNS


 


10.1         Successors
and Assigns. 
This Agreement and the other Loan Documents shall be binding on and
shall inure to the benefit of each Credit Party, Agents, Lenders and their
respective successors and assigns (including, in the case of any Credit Party,
a debtor-in-possession on behalf of such Credit Party), except as otherwise
provided herein or therein.  No Credit
Party may assign, transfer, hypothecate or otherwise convey its rights,
benefits, obligations or duties hereunder or under any of the other Loan Documents
without the prior express written consent of Agents and Lenders.  Any such purported assignment, transfer,
hypothecation or other conveyance by any Credit Party without the prior express
written consent of Agents and Lenders shall be void.  The terms and provisions of this Agreement are for the purpose of
defining the relative rights and obligations of each Credit Party, Agents and
Lenders with respect to the transactions contemplated hereby and no Person
shall be a third party 


 


70

















 


beneficiary of any of the
terms and provisions of this Agreement or any of the other Loan Documents.


 


11. MISCELLANEOUS


 


11.1         Complete
Agreement; Modification of Agreement. 
The Loan Documents constitute the complete agreement between the parties
with respect to the subject matter thereof and may not be modified, altered or
amended except as set forth in Section 11.2.  Any letter of interest, commitment letter, or fee letter (other
than the GE Capital Fee Letter) or confidentiality
agreement, if any, between any Credit Party and any Agent or any Lender or any
of their respective Affiliates, predating this Agreement and relating to a
financing of substantially similar form, purpose or effect shall be superseded
by this Agreement.


 


11.2         Amendments and Waivers. 



 


(a)           Except
for actions expressly permitted to be taken by an Agent, no amendment,
modification, termination or waiver of any provision of this Agreement or any
other Loan Document, or any consent to any departure by any Credit Party
therefrom, shall in any event be effective unless the same shall be in writing
and signed by Agents and Borrowers, and by Requisite Lenders, Requisite
Revolving Lenders, Supermajority Revolving Lenders or all affected Lenders, as
applicable.  Except as set forth in
clauses (b) and (c) below, all such amendments, modifications, terminations or
waivers requiring the consent of any Lenders shall require the written consent
of Requisite Lenders.


 


(b)           No amendment, modification,
termination or waiver of or consent with respect to any provision of this
Agreement that increases the percentage advance rates set forth in the
definition of the UK Borrowing Base or the US Borrowing Base, or that makes
less restrictive the nondiscretionary criteria for exclusion from Eligible
Accounts set forth in Section 1.6, shall be effective unless the same
shall be in writing and signed by Agents, Supermajority Revolving Lenders and
Borrowers.  No amendment, modification,
termination or waiver of or consent with respect to any provision of this
Agreement that waives compliance with the conditions precedent set forth in Section
2.2 to the making of any Loan or the incurrence of any Letter of Credit
Obligations shall
be effective unless the same shall be in writing and signed by Agents,
Requisite Revolving Lenders and Borrowers. 
Notwithstanding anything contained in this Agreement to the contrary, no
waiver or consent with respect to any Default or any Event of Default shall be effective
for purposes of the conditions precedent to the making of Loans or the incurrence
of Letter of Credit Obligations set forth in Section 2.2 unless the same
shall be in writing and signed by Agents, Requisite Revolving Lenders and
Borrowers.


 


(c)           No
amendment, modification, termination or waiver shall, unless in writing and
signed by each Agent and each Lender directly affected thereby: (i) increase
the principal amount of any Lender’s Commitment (which action shall be deemed
only to affect those Lenders whose Commitments are increased and may be
approved by Requisite Lenders, including those Lenders whose Commitments are
increased); (ii) reduce the principal of, rate of 


 


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interest on or Fees payable with respect to any Loan or Letter of
Credit Obligations of any affected Lender; (iii) extend any scheduled payment
date (other than payment dates of mandatory prepayments under Section
1.3(b)(ii)-(iii)) or final maturity date of the principal amount of any
Loan of any affected Lender; (iv) waive, forgive, defer, extend or postpone any
payment of interest or Fees as to any affected Lender; (v) except as otherwise
permitted herein or in the other Loan Documents, release any Guaranty, or
release, or permit any Credit Party to sell or otherwise dispose of, any
Collateral with a book value exceeding $5,000,000 (which action shall be deemed
to directly affect all Lenders); (vi) change the percentage of the Commitments
or of the aggregate unpaid principal amount of the Loans that shall be required
for Lenders or any of them to take any action hereunder; and (vii) amend or
waive this Section 11.2 or the definitions of the terms “Requisite
Lenders”, “Requisite Revolving Lenders” or “Supermajority Revolving Lenders”
insofar as such definitions affect the substance of this Section 11.2.  Furthermore, no amendment, modification,
termination or waiver affecting the rights or duties of any Agent or L/C Issuer
under this Agreement or any other Loan Document shall be effective unless in
writing and signed by that Agent or L/C Issuer, as the case may be, in addition
to Lenders required hereinabove to take such action.  Each amendment, modification, termination or waiver shall be
effective only in the specific instance and for the specific purpose for which
it was given.  No amendment,
modification, termination or waiver shall be required for Agent to take
additional Collateral pursuant to any Loan Document.  No amendment, modification, termination or waiver of any
provision of any Note shall be effective without the written concurrence of the
holder of that Note.  No notice to or
demand on any Credit Party in any case shall entitle such Credit Party or any
other Credit Party to any other or further notice or demand in similar or other
circumstances.  Any amendment,
modification, termination, waiver or consent effected in accordance with this Section
11.2 shall be binding upon each holder of the Notes at the time outstanding
and each future holder of the Notes.


 


(d)           If,
in connection with any proposed amendment, modification, waiver or termination
(a “Proposed Change”):


 


(i)            requiring
the consent of all affected Lenders, the consent of Requisite Lenders is
obtained, but the consent of other Lenders whose consent is required is not
obtained (any such Lender whose consent is not obtained as described in this clause
(i) and in clauses (ii), (iii) and (iv) below being
referred to as a “Non-Consenting Lender”),


 


(ii)           requiring
the consent of Supermajority Revolving Lenders, the consent of Requisite
Revolving Lenders is obtained, but the consent of Supermajority Revolving
Lenders is not obtained,


 


(iii)          requiring
the consent of Requisite Revolving Lenders, the consent of Revolving Lenders
holding 51% or more of the aggregate Revolving Loan Commitments is obtained,
but the consent of Requisite Revolving Lenders is not obtained, or


 


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(iv)          requiring
the consent of Requisite Lenders, the consent of Lenders holding 51% or more of
the aggregate Commitments is obtained, but the consent of Requisite Lenders is
not obtained,


 


then, so long as an Agent is not a Non-Consenting Lender, at Borrower
Representative’s request, any Agent or a Person reasonably acceptable to Agents
shall have the right with Agents’ consent and in Agents’ sole discretion (but
shall have no obligation) to purchase from such Non-Consenting Lenders, and
such Non-Consenting Lenders agree that they shall, upon any Agent’s request,
sell and assign to any Agent or such Person, all of the Commitments of such
Non-Consenting Lenders for an amount equal to the principal balance of all
Loans held by the Non-Consenting Lenders and all accrued interest and Fees with
respect thereto through the date of sale, such purchase and sale to be
consummated pursuant to an executed Assignment Agreement.


 


(e)           Upon
payment in full in cash and performance of all of the Obligations (other than
indemnification Obligations), termination of the Commitments and a release of
all claims against Agents and Lenders, and so long as no suits, actions,
proceedings or claims are pending or threatened against any Indemnified Person
asserting any damages, losses or liabilities that are Indemnified Liabilities,
Agents shall deliver to Borrowers termination statements, mortgage releases and
other documents necessary or appropriate to evidence the termination of the
Liens securing payment of the Obligations.


 


11.3         Fees
and Expenses.  Borrowers shall
reimburse (i) Agents for all reasonable fees, costs and expenses (including the
reasonable fees and expenses of all of its counsel, advisors, consultants and
auditors) and (ii) Agents (and, with respect to clauses (c), (d) and (e)
below, all Lenders) for all reasonable fees, costs and expenses, including the
reasonable fees, costs and expenses of counsel or other advisors (including
environmental and management consultants and appraisers), incurred in
connection with the negotiation, preparation and filing and/or recordation of
the Loan Documents and incurred in connection with:


 


(a)           the
forwarding to Borrowers or any other Person on behalf of Borrowers by any Agent
of the proceeds of any Loan (including a wire transfer fee of $25 per wire
transfer);


 


(b)           any
amendment, modification or waiver of, consent with respect to, or termination
of, any of the Loan Documents or advice in connection with the syndication and
administration of the Loans made pursuant hereto or its rights hereunder or
thereunder;


 


(c)           any
litigation, contest, dispute, suit, proceeding or action (whether instituted by
any Agent, any Lender, any Credit Party or any other Person and whether as a party,
witness or otherwise) in any way relating to the Collateral, any of the Loan
Documents or any other agreement to be executed or delivered in connection
herewith or therewith, including any litigation, contest, dispute, suit, case,
proceeding or action, and any appeal or review thereof, in connection with a
case commenced by or against any or all of the Credit Parties or any other
Person that may be obligated to any Agent by virtue of the Loan Documents;
including any such litigation, contest, dispute, suit, proceeding or action
arising in connection with any work-out or 


 


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restructuring of the Loans during the pendency of one or more Events of
Default; provided that in the case of reimbursement of counsel for
Lenders other than an Agent, such reimbursement shall be limited to one counsel
for all such Lenders; provided, further, that no Person shall be
entitled to reimbursement under this clause (c) in respect of any litigation,
contest, dispute, suit, proceeding or action to the extent any of the foregoing
results from such Person’s gross negligence or willful misconduct;


 


(d)           any
attempt to enforce any remedies of any Agent against any or all of the Credit
Parties or any other Person that may be obligated to any Agent or any Lender by
virtue of any of the Loan Documents, including any such attempt to enforce any
such remedies in the course of any work-out or restructuring of the Loans
during the pendency of one or more Events of Default; provided, that in
the case of reimbursement of counsel for Lenders other than Agents, such
reimbursement shall be limited to one counsel for all such Lenders;


 


(e)           any
workout or restructuring of the Loans during the pendency of one or more Events
of Default; provided, that in the case of reimbursement of counsel for Lenders
other than Agent, such reimbursement shall be limited to one counsel for all
such Lenders; and


 


(f)            efforts
to (i) monitor the Loans or any of the other Obligations, (ii) evaluate,
observe or assess any of the Credit Parties or their respective affairs, and
(iii) verify, protect, evaluate, assess, appraise, collect, sell, liquidate or
otherwise dispose of any of the Collateral;


 


including, as to each of clauses (a) through (f) above, all reasonable
attorneys’ and other professional and service providers’ fees arising from such
services and other advice, assistance or other representation, including those
in connection with any appellate proceedings, and all reasonable expenses,
costs, charges and other fees incurred by such counsel and others in connection
with or relating to any of the events or actions described in this Section
11.3, all of which shall be payable, on demand, by Borrowers to
Agents.  Without limiting the generality
of the foregoing, such expenses, costs, charges and fees may include:
reasonable fees, costs and expenses of accountants, environmental advisors,
appraisers, investment bankers, management and other consultants and
paralegals; court costs and expenses; photocopying and duplication expenses;
court reporter fees, costs and expenses; long distance telephone charges; air
express charges; telegram or telecopy charges; secretarial overtime charges;
and reasonable expenses for travel, lodging and food paid or incurred in
connection with the performance of such legal or other advisory services.


 


11.4         No Waiver. 
Any Agent’s or any Lender’s failure, at any time or times, to require
strict performance by the Credit Parties of any provision of this Agreement or
any other Loan Document shall not waive, affect or diminish any right of any
Agent or such Lender thereafter to demand strict compliance and performance
herewith or therewith.  Any suspension
or waiver of an Event of Default shall not suspend, waive or affect any other
Event of Default whether the same is prior or subsequent thereto and whether
the same or of a different type. 
Subject to the provisions of Section 11.2, none of the
undertakings, agreements,


 


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warranties, covenants and
representations of any Credit Party contained in this Agreement or any of the
other Loan Documents and no Default or Event of Default by any Credit Party
shall be deemed to have been suspended or waived by any Agent or any Lender,
unless such waiver or suspension is by an instrument in writing signed by an
officer of or other authorized employee of the Applicable Agent and the
applicable required Lenders, and directed to Borrowers specifying such
suspension or waiver.


 


11.5         Remedies. 
Agents’ and Lenders’ rights and remedies under this Agreement shall be
cumulative and nonexclusive of any other rights and remedies that any Agent or
any Lender may have under any other agreement, including the other Loan
Documents, by operation of law or otherwise. 
Recourse to the Collateral shall not be required.


 


11.6         Severability. 
Wherever possible, each provision of this Agreement and the other Loan
Documents shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement or any other Loan
Document shall be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or the remaining
provisions of this Agreement or such other Loan Document.


 


11.7         Conflict
of Terms.  Except as otherwise
provided in this Agreement or any of the other Loan Documents by specific
reference to the applicable provisions of this Agreement, if any provision contained
in this Agreement conflicts with any provision in any of the other Loan
Documents, the provision contained in this Agreement shall govern and control.


 


11.8         Confidentiality. 
Each Agent and each Lender agree to use commercially reasonable efforts
(equivalent to the efforts such Agent or such Lender applies to maintaining the
confidentiality of its own confidential information) to maintain as
confidential all confidential information provided to them by the Credit
Parties and designated as confidential for a period of 2 years following
receipt thereof, except that any Agent and any Lender may disclose such
information (a) to Persons employed or engaged by such Agent or such Lender;
(b) to any bona fide assignee or participant or potential assignee or
participant that has agreed to comply with the covenant contained in this Section
11.8 (and any such bona fide assignee or participant or potential assignee
or participant may disclose such information to Persons employed or engaged by
them as described in clause (a) above); (c) as required or requested by
any Governmental Authority or reasonably  believed
by such Agent or such Lender to be compelled by any court decree, subpoena or
legal or administrative order or process; (d) as, on the advice of such Agent’s
or such Lender’s counsel, is required by law; (e) in connection with the
exercise of any right or remedy under the Loan Documents or in connection with
any Litigation to which such Agent or such Lender is a party; or (f) that
ceases to be confidential through no fault of such Agent or any Lender or any
of their employees or agents.


 


11.9         GOVERNING LAW.  EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS,


 


75

















 


INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS
SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL 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 CREDIT PARTY 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 THE CREDIT PARTIES, AGENTS
AND LENDERS PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR
TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS; PROVIDED, THAT AGENTS, LENDERS AND THE CREDIT PARTIES
ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT
LOCATED OUTSIDE OF SAN FRANCISCO COUNTY PROVIDED  FURTHER,  THAT NOTHING IN THIS AGREEMENT SHALL BE
DEEMED OR OPERATE TO PRECLUDE ANY AGENT FROM BRINGING SUIT OR TAKING OTHER
LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY
OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF ANY AGENT.  EACH
CREDIT PARTY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN
ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH CREDIT PARTY HEREBY
WAIVES ANY OBJECTION THAT SUCH CREDIT PARTY 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
CREDIT PARTY 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 CREDIT PARTY AT THE ADDRESS SET FORTH IN ANNEX I
OF THIS AGREEMENT AND  THAT SERVICE SO
MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH CREDIT PARTY’S ACTUAL
RECEIPT THEREOF OR 3 DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER
POSTAGE PREPAID.


 


11.10       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 parties, or whenever any of the parties desires to give or serve upon any
other parties any communication with respect to this Agreement, each such notice,
demand, request, consent, approval, declaration or other communication shall be
in writing and shall be deemed to have been validly served,


 


76

















 


given or delivered: (a)
upon the earlier of actual receipt and 5 Business Days after deposit in the
United States Mail, registered or certified mail, return receipt requested,
with proper postage prepaid; (b) upon transmission, when sent by telecopy or
other similar facsimile transmission (with such telecopy or facsimile promptly
confirmed by delivery of a copy by personal delivery or United States Mail as
otherwise provided in this Section 11.10); (c) 1 Business Day after
deposit with a reputable overnight courier with all charges prepaid or (d) when
delivered, if hand–delivered by messenger, all of which shall be
addressed to the party to be notified and sent to the address or facsimile
number indicated in Annex I or to such other address (or facsimile
number) as may be substituted by notice given as herein provided.  The giving of any notice required hereunder
may be waived in writing by the party entitled to receive such notice.  Failure or delay in delivering copies of any
notice, demand, request, consent, approval, declaration or other communication
to any Person (other than Borrower Representative or Agent) designated in Annex
I to receive copies shall in no way adversely affect the effectiveness of
such notice, demand, request, consent, approval, declaration or other
communication.


 


11.11       Section Titles.  The
Section titles and Table of Contents contained in this 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.


 


11.12       Counterparts. 
This Agreement may be executed in any number of separate counterparts,
each of which shall collectively and separately constitute one agreement.


 


11.13       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 THEIR DISPUTES 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 AGENTS, LENDERS AND ANY CREDIT PARTY ARISING
OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.


 


11.14       Press
Releases and Related Matters. 
Each Credit Party executing this Agreement agrees that neither it nor
its Affiliates will in the future issue any press releases or other public
disclosure using the name of GE Capital or any Lender or any of its affiliates
or referring to this Agreement, the other Loan Documents or the Related
Transactions Documents without at least 2 Business Days’ prior notice to GE
Capital and such Lender and without the prior written consent of GE Capital and
such Lender unless (and only to the extent that) such 


 


77

















 


Credit Party or
Affiliate, except in connection with the filing of a lawsuit to enforce its
rights under this Agreement, is required to do so under law and then, in any
event, such Credit Party or Affiliate will consult with GE Capital and such
Lender before issuing such press release or other public disclosure.  Each Credit Party consents to the
publication by any Agent or any Lender of a tombstone or similar advertising
material relating to the financing transactions contemplated by this
Agreement.  Agent or such Lender shall
provide a draft of any such tombstone or similar advertising material to each
Credit Party for review and comment prior to the publication thereof.  Each Agent reserves the right to provide to
industry trade organizations information necessary and customary for inclusion
in league table measurements.


 


11.15       Reinstatement. 
This Agreement shall remain in full force and effect and continue to be
effective should any petition be filed by or against any Credit Party for
liquidation or reorganization, should any Credit Party 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 Credit Party’s
assets, and shall continue to be effective or to 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.


 


11.16       Advice
of Counsel.  Each of the parties
represents to each other party hereto that it has discussed this Agreement and,
specifically, the provisions of Sections 11.9 and 11.13, with its
counsel.


 


11.17       No
Strict Construction. 
The parties hereto have participated jointly in the negotiation and
drafting of this Agreement.  In the
event an ambiguity or question of intent or interpretation arises, this
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 Agreement.


 


11.18       Judgment
Currency.  If, for the purpose of obtaining judgment in
any court, it is necessary to convert an amount due hereunder in the currency
in which it is due (the “Original Currency”) into another currency (the
“Second Currency”), the rate of exchange applied shall be that at which,
in accordance with normal banking procedures, the Applicable Agent could
purchase in the applicable foreign exchange market, the Original Currency with
the Second Currency on the date two Business Days preceding that on which
judgment is given.  Each Credit Party
which is a party to this Agreement agrees that its obligation in respect of any
Original Currency due from it hereunder shall, notwithstanding any judgment or
payment in such other currency, be discharged only to the extent that, on the
Business Day following the date the Applicable Agent receives payment of any
sum so adjudged to be due hereunder in the Second Currency, the Applicable Agent
may, in accordance with normal banking procedures, purchase,


 


78
















 


in the applicable foreign exchange market, the Original Currency with
the amount of the Second Currency so paid; and if the amount of the Original
Currency so purchased or could have been so purchased is less than the amount
originally due in the Original Currency, each Credit Party agrees as a separate
obligation and notwithstanding any such payment or judgment to indemnify the
Applicable Agent against such loss.  The
term “rate of exchange” in this Section 11.18 means the Spot Rate at
which the Applicable Agent, in accordance with normal practices, is able on the
relevant date to purchase the Original Currency with the Second Currency, and
includes any premium and costs of exchange payable in connection with such
purchase.


 


12. CROSS-GUARANTY BY US BORROWERS AND TERM
BORROWER


 


12.1         Cross-Guaranty.  Each US Borrower and Term Borrower each
hereby agrees that such Borrower is jointly and severally liable for, and
hereby absolutely and unconditionally guarantees to Agents, US Revolving
Lenders, UK Revolving Lenders and the Term Lenders and their respective
successors and assigns, the full and prompt payment (whether at stated
maturity, by acceleration or otherwise) and 
performance of, all Obligations owed or hereafter owing to Agents and
Lenders by each other Borrower.  Each US
Borrower and Term Borrower agrees that its guaranty obligation hereunder is a
continuing guaranty of payment and performance and not of collection, that its
obligations under this Section 12 shall not be discharged until
payment and performance, in full, of the Obligations has occurred, and that its
obligations under this Section 12 shall be absolute and unconditional,
irrespective of, and unaffected by,


 


(a)           the
genuineness, validity, regularity, enforceability or any future amendment of,
or change in, this Agreement, any other Loan Document or any other agreement,
document or instrument to which any Borrower is or may become a party;


 


(b)           the
absence of any action to enforce this Agreement (including this Section 12)
or any other Loan Document or the waiver or consent by any Agent and Lenders
with respect to any of the provisions thereof;


 


(c)           the
existence, value or condition of, or failure to perfect its Lien against, any
security for the Obligations or any action, or the absence of any action, by
any Agent and Lenders in respect thereof (including the release of any such
security);


 


(d)           the
insolvency of any Credit Party; or


 


(e)           any
other action or circumstances that might otherwise constitute a legal or
equitable discharge or defense of a surety or guarantor.


 


Each US Borrower and Term Borrower shall be regarded, and shall be in
the same position, as principal debtor with respect to the Obligations
guaranteed hereunder.


 


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12.2         Waivers
by Borrowers.  Each US Borrower
and Term Borrower expressly waives all rights it may have now or in the future
under any statute, or at common law, or at law or in equity, or otherwise, to
compel Agents or Lenders to marshal assets or to proceed in respect of the
Obligations guaranteed hereunder against any other Credit Party, any other
party or against any security for the payment and performance of the
Obligations before proceeding against, or as a condition to proceeding against,
such Borrower.  It is agreed among each
US Borrower and Term Borrower, Agents and Lenders that the foregoing waivers
are of the essence of the transaction contemplated by this Agreement and the
other Loan Documents and that, but for the provisions of this Section 12
and such waivers, Agents and Lenders would decline to enter into this
Agreement.


 


Each US Borrower and Term Borrower further
acknowledges and agrees that California Civil Code Section 2856 authorizes and
validates waivers of a guarantor’s rights of subrogation and reimbursement and
waivers of certain other rights and defenses available to a guarantor under
California law.  Based on the preceding
sentence and without limiting the generality of the foregoing waivers contained
in this Section 12.2 or any other provision of this Article 12,
each Borrower expressly waives to the extent permitted by law any and all
rights and defenses (except the defense of indefeasible final payment in full),
which might otherwise be available to such Borrower under California Civil Code
Sections 2787 to 2855, inclusive, 2899 and 3433 and under California Code of
Civil Procedure Sections 580a, 580b, 580d and 726 (or any of such sections), or
any other jurisdiction to the extent the same are applicable to this Agreement
or the agreements, covenants or obligations of such Borrower hereunder.


 


12.3         Benefit
of Guaranty.  Each US Borrower
and Term Borrower agrees that the provisions of this Section 12 are for
the benefit of US Agent, US Revolving Lenders, UK Revolving Lenders and Term
Lenders and their respective successors, transferees, endorsees and assigns,
and nothing herein contained shall impair, as between any other Borrower and
Agents or any Lenders, the obligations of such other Borrower under the Loan
Documents.


 


12.4         Subordination
of Subrogation, Etc. 
Notwithstanding anything to the contrary in this Agreement or in any
other Loan Document, and except as set forth in Section 12.7, each
US Borrower and Term Borrower hereby expressly and irrevocably subordinates to
the Obligations any and all rights at law or in equity it may have to
subrogation, reimbursement, 
exoneration, contribution, indemnification or set off and any and all
defenses available to a surety, guarantor or accommodation co-obligor.  Each US Borrower and Term Borrower
acknowledges and agrees that this subordination is intended to benefit US
Agent, US Revolving Lenders, UK Revolving Lenders and Term Lenders and shall
not limit or otherwise affect such Borrower’s liability hereunder or the
enforceability of this Section 12, and that such Agents, such
Lenders and their respective successors and assigns are intended third party
beneficiaries of the subordination, waivers and agreements set forth in this Section
12.4.


 


12.5         Election
of Remedies.  If any Agent or
any Lender may, under applicable law, proceed to realize its benefits under any
of the Loan Documents giving such Agent or such Lender a Lien upon any Collateral,
whether owned by any Borrower or by any


 


80

















 


other Person, either by judicial foreclosure or by non–judicial
sale or enforcement, any Agent or any Lender may, at its sole option, determine
which of its remedies or rights it may pursue without affecting any of its
rights and remedies under this Section 12.  If, in the exercise of any of its rights and remedies, any Agent
or any Lender shall forfeit any of its rights or remedies, including its right to
enter a deficiency judgment against any Borrower or any other Person, whether
because of any applicable laws pertaining to “election of remedies” or the
like, each US Borrower and Term Borrower hereby consents to such action by such
Agent or such Lender and waives any claim based upon such action, even if such
action by such Agent or such Lender shall result in a full or partial loss of
any rights of subrogation that each Borrower might otherwise have had but for
such action by such Agent or such Lender. 
Any election of remedies that results in the denial or impairment of the
right of any Agent or any Lender to seek a deficiency judgment against any
Borrower shall not impair any other Borrower’s obligation to pay the full
amount of the Obligations.  In the event
any Agent or any Lender shall bid at any foreclosure or trustee’s sale or at
any private sale permitted by law or the Loan Documents, such Agent or such
Lender may bid all or less than the amount of the Obligations and the amount of
such bid need not be paid by such Agent or such Lender but shall be credited
against the Obligations.  The amount of
the successful bid at any such sale, whether any Agent, any Lender or any other
party is the successful bidder, shall be conclusively deemed to be the fair
market value of the Collateral and the difference between such bid amount and
the remaining balance of the Obligations shall be conclusively deemed to be the
amount of the  Obligations guaranteed
under this Section 12, notwithstanding that any present or future law or
court decision or ruling may have the effect of reducing the amount of any
deficiency claim to which any Agent or any Lender might otherwise be entitled
but for such bidding at any such sale.


 


12.6         Limitation.  Notwithstanding any provision herein
contained to the contrary, the liability of each US Borrower and Term Borrower
under this Section 12 (which liability is in any event in addition to
amounts for which such Borrower is primarily liable under Section 1)
shall be limited to an amount not to exceed as of any date of determination the
greater of:


 


(a)           the
net amount of all Loans advanced to any other Borrower under this Agreement and
then re-loaned or otherwise transferred to, or for the benefit of, such
Borrower; and


 


(b)           the
amount that could be claimed by Agents and Lenders from such Borrower under
this Section 12 without rendering such claim voidable or avoidable under
Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state
Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar
statute or common law after taking into account, among other things, such
Borrower’s right of contribution and indemnification from the other Borrower
under Section 12.7.


 


81

















 


12.7         Contribution with Respect to
Guaranty Obligations.


 


(a)           To
the extent that a US Borrower or Term Borrower shall make a payment under this Section 12
of all or any of the Obligations (other than Loans made to that Borrower for
which it is primarily liable) (a “Guarantor Payment”) that, taking into
account all other Guarantor Payments then previously or concurrently made by
the other Borrower, exceeds the amount that such Borrower would otherwise have
paid if each Borrower had paid the aggregate Obligations satisfied by such
Guarantor Payment in the same proportion that such Borrower’s “Allocable
Amount” (as defined below) (as determined immediately prior to such Guarantor
Payment) bore to the aggregate Allocable Amounts of the other Borrower as determined
immediately prior to the making of such Guarantor Payment, then, following
indefeasible payment in full in cash of the Obligations and termination of the
Commitments, such Borrower shall be entitled to receive contribution and
indemnification payments from, and be reimbursed by, the other Borrower for the
amount of such excess, pro rata based upon its respective Allocable Amounts in
effect immediately prior to such Guarantor Payment.


 


(b)           As
of any date of determination, the “Allocable Amount” of any Borrower shall be
equal to the maximum amount of the claim that could then be recovered from such
Borrower under this Section 12 without rendering such claim voidable or
avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any
applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance
Act or similar statute or common law.


 


(c)           This
Section 12.7 is intended only to define the relative rights of US  Borrowers and Term Borrower and nothing set
forth in this Section 12.7 is intended to or shall impair the
obligations of such Borrowers,  jointly
and severally, to pay any amounts as and when the same shall become due and
payable in accordance with the terms of this Agreement, including Section
12.1.  Nothing contained in this Section
12.7 shall limit the liability of any Borrower to pay the Loans made
directly or indirectly to that Borrower and accrued interest, Fees and expenses
with respect thereto for which such Borrower shall be primarily liable.


 


(d)           The
parties hereto acknowledge that the rights of contribution and indemnification
hereunder shall constitute assets of the Borrower to which such contribution
and indemnification is owing.


 


(e)           The
rights of the indemnifying Borrowers against other Credit Parties under this Section
12.7 shall be exercisable upon the full and indefeasible payment of the
Obligations and the termination of the Commitments.


 


12.8         Liability
Cumulative.  The liability of
Term Borrower and each US Borrower under this Section 12 is in addition
to and shall be cumulative with all liabilities of Term Borrower and each US
Borrower to Agents and Lenders under this Agreement and the other Loan
Documents to which such Borrower is a party or in respect of any Obligations or
obligation of the other Borrower, without any limitation as to amount, unless
the instrument or agreement evidencing or creating such other liability
specifically provides to the contrary.


 


82

















 


IN WITNESS WHEREOF, this Agreement has been duly
executed as of the date first written above.


 


	
   

  	
  WESTAFF
  (USA), INC.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/

  	
  Dirk A. Sodestrom

  	
   

  
	
   

  	
  Name:

  	
  Dirk A. 
  Sodestrom

  
	
   

  	
  Title:

  	
  Senior Vice President and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  WESTAFF
  SUPPORT, INC.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/

  	
  Dirk A. Sodestrom

  	
   

  
	
   

  	
  Name:

  	
  Dirk A. 
  Sodestrom

  
	
   

  	
  Title:

  	
  Senior Vice President and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  WESTAFF
  (CA), INC.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/

  	
  Dirk A. Sodestrom

  	
   

  
	
   

  	
  Name:

  	
  Dirk A. 
  Sodestrom

  
	
   

  	
  Title:

  	
  Senior Vice President and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  WESTAFF
  LIMITED PARTNERSHIP

  
	
   

  	
   

  
	
   

  	
  By:  WESTAFF
  (GP), INC.,

  
	
   

  	
  its General Partner

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/

  	
  Dirk A. Sodestrom

  	
   

  
	
   

  	
  Name:

  	
  Dirk A. 
  Sodestrom

  
	
   

  	
  Title:

  	
  Senior Vice President and Chief Financial Officer

  



 


83

















 


	
   

  	
  WESTAFF
  (U.K.) LIMITED

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/

  	
  Dwight S. Pedersen

  	
   

  
	
   

  	
  Name:

  	
  Dwight S. Pedersen

  
	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/

  	
  Patricia M. Newman

  	
   

  
	
   

  	
  Name:

  	
  Patricia M. Newman

  
	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GENERAL
  ELECTRIC CAPITAL CORPORATION,

  
	
   

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

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/

  	
  Lawrence E. Ridgway

  	
   

  
	
   

  	
  By: Lawrence E. Ridgway

  
	
   

  	
  Duly Authorized Signatory

  
	
   

  	
   

  
	
   

  	
  BANK
  OF AMERICA, N. A.,

  
	
   

  	
  as Documentation Agent, a US Revolving Lender, 

  a Term Lender and a UK Revolving Lender

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/

  	
  Philip J. Sefchovich

  	
   

  
	
   

  	
  Name: Philip J. Sefchovich

  
	
   

  	
  Title: Assistant Vice President

  



 


84

















 


The following Persons are signatories to this
Agreement in their capacity as Credit Parties and not as Borrowers.


 


	
   

  	
  WESTAFF,
  INC.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Dirk A. Sodestrom

  	
   

  
	
   

  	
  Name: Dirk A. 
  Sodestrom

  	
   

  
	
   

  	
  Title:

  	
  Senior Vice President and Chief Financial 

  Officer

  
					



 


85

















 


ANNEX A


to


CREDIT AGREEMENT


 


DEFINITIONS


 


Capitalized terms used in the Loan Documents shall
have (unless otherwise provided elsewhere in the Loan Documents) the following
respective meanings, and all references to Sections, Exhibits, Schedules or
Annexes in the following definitions shall refer to Sections, Exhibits,
Schedules or Annexes of or to the Agreement:


 


“Account Debtor” means any Person who may
become obligated to any Credit Party under, with respect to, or on account of,
an Account, Chattel Paper or General Intangibles (including a payment intangible).


 


“Accounting Changes” has the meaning ascribed
thereto in Annex G.


 


“Accounts” means all “accounts,” as such term
is defined or used in the Code, or the Companies Act, as applicable, now owned
or hereafter acquired by any Credit Party, including (a) all accounts
receivable, other receivables, book debts and other forms of obligations (other
than forms of obligations evidenced by Chattel Paper, or Instruments),
(including any such obligations that may be characterized as an account or
contract right under the Code), (b) all of each Credit Party’s rights in, to
and under all purchase orders or receipts for goods or services, (c) all of
each Credit Party’s rights to any goods represented by any of the foregoing
(including unpaid sellers’ rights of rescission, replevin, reclamation and
stoppage in transit and rights to returned, reclaimed or repossessed goods),
(d) all rights to payment due to any Credit Party for property sold, leased,
licensed, assigned or otherwise disposed of, for a policy of insurance issued
or to be issued, for a secondary obligation incurred or to be incurred, for
energy provided or to be provided, for the use or hire of a vessel under a
charter or other contract, arising out of the use of a credit card or charge
card, or for services rendered or to be rendered by such Credit Party or in
connection with any other transaction (whether or not yet earned by performance
on the part of such Credit Party), (e) all health care insurance receivables
and (f) all collateral security of any kind, given by any Account Debtor or any
other Person with respect to any of the foregoing.


 


“Additional Subordinated Debt” means
Indebtedness of Westaff (USA) not to exceed $10,000,000 at any time outstanding
that is subordinated to the Obligations in all respects in a manner and on
terms satisfactory to the US Agent and Lenders in their sole discretion, as to
right and time of payment and as to any other rights and remedies thereunder.


 


“Advance” means any US Revolving Credit
Advance, UK Revolving Credit Advance or Swing Line Advance, as the context may
require.


 


A-1

















 


“Affiliate” means, with respect to any Person,
(a) each Person that, directly or indirectly, owns or controls, whether
beneficially, or as a trustee, guardian or other fiduciary, 5% or more of the
Stock having ordinary voting power in the election of directors of such Person,
(b) each Person that controls, is controlled by or is under common control with
such Person, (c) each of such Person’s officers, directors, joint venturers and
partners and (d) in the case of Borrowers, the immediate family members,
spouses and lineal descendants of individuals who are Affiliates of any
Borrower.  For the purposes of this
definition, “control” of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise; provided, however, that the term “Affiliate”
shall specifically exclude each Agent and each Lender.


 


“Agent” means either of US Agent or UK Agent
and/or Security Trustee, and “Agents” means both of them.


 


“Aggregate Borrowing Base” means, as of any
date of determination, an amount equal to (i) the sum of the US Borrowing Base
and the US Dollar Equivalent of the UK Borrowing Base less (ii) any
Reserves except to the extent already deducted therefrom.


 


“Agreement” means the Multicurrency Credit
Agreement by and among Borrowers, the other Credit Parties party thereto, GE
Capital, as US Agent and US Revolving Lender, and as UK Agent and UK Revolving
Lender, and the other Lenders from time to time party thereto, as the same may
be amended, supplemented, restated or otherwise modified from time to time.


 


“Appendices” has the meaning ascribed to it in
the recitals to the Agreement.


 


“Applicable Agent” means (a) with respect to
matters relating to any US Borrower, the Term Borrower, the US Borrowing Base,
the US Revolving Credit Advances, the US Revolving Loan, Swing Line Loans,
Letters of Credit and the Term Loans (or any Guaranties of such Obligations),
the US Agent, and (b) with respect to matters relating to the UK Borrower, the
UK Borrowing Base, the UK Revolving Credit Advances and the UK Revolving Loan
(or any Guaranties of such Obligations), the UK Agent.


 


“Applicable Agent’s Liens” means the Liens in
the Collateral granted to the Applicable Agent, for the benefit of the
Applicable Agent and the Lenders, pursuant to the Agreement and the other Loan
Documents.


 


“Applicable Borrower” means (a) with respect to
matters relating to US Revolving Credit Advances, the US Revolving Loan, Swing
Line Loans, Letters of Credit and the US Borrowing Base, the US Borrowers (or
any of them), (b) with respect to matters relating to the Term Loan, the Term
Borrower and (c) with respect to matters relating to the UK Revolving Credit
Advances, the UK Revolving Loan and the UK Borrowing Base, the UK Borrower.


 


A-2

















 


“Applicable Currency” means as to any Loan or
other Obligation or any payment thereof, Dollars or Pounds Sterling in which
the Loan or such other Obligation is denominated or payable.


 


“Applicable Index Rate” for any day, means the
US Index Rate or the UK Index Rate, as applicable, then in effect for such day.


 


“Applicable L/C Margin” means the per annum
fee, from time to time in effect, payable with respect to outstanding Letter of
Credit Obligations as determined by reference to Section 1.5(a).


 


“Applicable Lenders” means (a) with respect to
matters relating to US Revolving Credit Advances, the US Revolving Loan, the
Term Loan, Swing Line Loans or Letters of Credit, (or any Guaranties of such
Obligations) the US Revolving Lenders, (b) with respect to matters relating to
the Term Loan (or any Guaranties of such Obligations), the Term Lenders and (c)
with respect to matters relating to the UK Revolving Credit Advances and the UK
Borrowing Loan (or any Guaranties of such Obligations), the UK Revolving
Lenders.


 


“Applicable Margins” means, collectively, the
Applicable L/C Margin, the Applicable Revolver Index Margin, the Applicable
Term Loan Index Margin, the Applicable Revolver LIBOR Margin.


 


“Applicable Revolver Index Margin” means the
per annum interest rate margin from time to time in effect and payable in
addition to the US Index Rate applicable to the US Revolving Loan or Swing Line
Loan, or in addition to the UK Index Rate applicable to the UK Revolving Loan,
each as determined by reference to Section 1.5(a).


 


“Applicable Revolver LIBOR Margin” means the
per annum interest rate from time to time in effect and payable in addition to
the LIBOR Rate applicable to the US Revolving Loan, as determined by reference
to Section 1.5(a).


 


“Applicable Term Loan Index Margin” means the
per annum interest rate from time to time in effect and payable in addition to
the US Index Rate applicable to the Term Loan, as determined by reference to Section
1.5(a).


 


“Assignment Agreement” has the meaning ascribed
to it in Section 9.1(a).


 


“Australian Credit Party” means Westaff
(Australia) Pty. Ltd., Western Personnel Services Pty. Ltd (Australia) and
Western Temporary Services Pty. Limited (Australia).


 


“Australian Loan Documents” means the Australia
Dollar Facility Agreement dated as of May 16, 2002 entered into by and among GE
Australia, on behalf of itself and certain lenders, and Westaff Australia and
the Debenture of even date therewith and all guaranties, promissory notes and
other agreements and instruments executed and delivered in connection therewith.


 


A-3

















 


“Authorized Officer” of (i) each US Borrower
and Term Borrower means Dirk A. Sodestrom, Christa C. Leonard, Dwight S.
Pedersen, or John P. Sanders and (ii) the UK Borrower means  Mohamed Ghanti or Patricia M. Newman; and in
each case, any other officer designated to the Applicable Agent in writing from
time to time as an Authorized Officer by the Applicable Borrower.


 


“Bank of America” means Bank of America, N.A.


 


“Bank Products” means any one or more of the
following types of services or facilities extended to a Borrower by a Lender or
any of its affiliates in reliance on such Lender’s agreement to indemnify such
affiliate: (i) credit cards; (ii) cash management or related services,
including automatic clearinghouse transfers of funds for the account of a
Credit Party pursuant to agreement or overdrafts; (iii) controlled disbursement
services; and (iv) foreign exchange contracts currency swap agreements,
interest rate swap, cap or collar agreements or similar agreements designed to
hedge currency interest rate risks.


 


“Bankruptcy Code” means the provisions of Title
11 of the United States Code, 11 U.S.C. §§101 et  seq.


 


“Blocked Accounts” has the meaning ascribed to
it in Annex C.


 


“Borrower Representative” means Westaff (USA),
Inc. in its capacity as Borrower Representative for US Borrowers and Term
Borrower pursuant to the provisions of Section 1.1(e).


 


“Borrowers” and “Borrower” have the
respective meanings ascribed thereto in the preamble to the Agreement; provided
that upon its dissolution, each of WCA and WestLP shall cease to be a Borrower
hereunder.


 


“Borrowing Availability” means as of any date
of determination (a) as to the US Borrowers, the lesser of (i) the Maximum US
Amount and (ii) the US Borrowing Base, in each case less the sum of the
aggregate Revolving Loan and Swing Line Loan then outstanding to the US
Borrowers or  (b) as to the UK Borrower,
the lesser of (i) the Maximum UK Amount and (ii) the UK Borrowing base, in each
case less the sum of the Revolving Loan outstanding to the UK Borrower; provided
that an Overadvance in accordance with Section 1.1 may cause the
Revolving Loan and, in the case of the US Borrowers, the Swing Line Loan to
exceed the US Borrowing Base or the UK Borrowing Base of the Applicable
Borrower by the amount of such permitted Overadvance.


 


“Borrowing Base” means, as the context may
require, the US Borrowing Base, and the UK Borrowing Base or any such Borrowing
Base.


 


“Borrowing Base Certificate” means a certificate
to be executed and delivered from time to time by each Borrower in the form
attached to the Agreement as Exhibit 4.1(b).


 


A-4

















 


“Business Day” means any day that is not a
Saturday, a Sunday or a day on which banks are required or permitted to be
closed in the States of  California
and/or New York and (a) in reference to LIBOR Loans or UK Revolving Loans means
any such day that is also a LIBOR Business Day.


 


“Capital Expenditures” means, with respect to
any Person, all expenditures (by the expenditure of cash or the incurrence of
Indebtedness) by such Person during any measuring period for any fixed assets
or improvements or for replacements, substitutions or additions thereto that
have a useful life of more than one year and that are required to be
capitalized under GAAP.


 


“Capital Lease” means, with respect to any
Person, any lease of any property (whether real, personal or mixed) by such
Person as lessee that, in accordance with GAAP, would be required to be
classified and accounted for as a capital lease on a balance sheet of such
Person.


 


“Capital Lease Obligation” means, with respect
to any Capital Lease of any Person, the amount of the obligation of the lessee
thereunder that, in accordance with GAAP, would appear on a balance sheet of
such lessee in respect of such Capital Lease.


 


“Cash Collateral Account” has the meaning
ascribed to it Annex B.


 


“Cash Equivalents” has the meaning ascribed to
it in Annex B.


 


“Cash Management Systems” has the meaning ascribed
to it in Section 1.7.


 


“Change of Control” means any of the
following:  (a) any person or group of
persons (within the meaning of the Securities Exchange Act of 1934,) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by
the Securities and Exchange Commission under the Securities Exchange Act of
1934,) of 50% or more of the issued and outstanding shares of capital Stock of
Parent having the right to vote for the election of directors of Parent under
ordinary circumstances; (b) during any period of twelve consecutive calendar
months, individuals who at the beginning of such period constituted the board
of directors of Parent (together with any new directors whose election by the
board of directors of Parent or whose nomination for election by the
Stockholders of Parent was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason other than death or disability to constitute a
majority of the directors then in office; (c) Parent ceases to own and control,
directly or indirectly, all of the economic and voting rights associated with
all of the outstanding capital Stock of each US Borrower, Term Borrower or UK
Borrower, or Westaff Australia or (d) any US Borrower, Term Borrower, UK
Borrower or Westaff Australia ceases to own and control, directly or
indirectly, all of the economic and voting rights associated with all of the
outstanding capital Stock of any of its Subsidiaries that is a Credit Party.


 


A-5

















 


“Charges” means all federal, state, county,
city, municipal, local, foreign or other governmental taxes (including taxes
owed to the PBGC at the time due and payable), levies, assessments, charges,
liens, claims or encumbrances upon or relating to (a) the Collateral, (b) the
Obligations of any Credit Party, (c) the employees, payroll, income or gross receipts
of any Credit Party, (d) any Credit Party’s ownership or use of any properties
or other assets, or (e) any other aspect of any Credit Party’s business.


 


“Chattel Paper” means any “chattel paper,” as
such term is defined in the Code, including electronic chattel paper, now owned
or hereafter acquired by any Credit Party.


 


“Closing Date” means May 17, 2002.


 


“Closing Checklist” means the schedule,
including all appendices, exhibits or schedules thereto, listing certain
documents and information to be delivered in connection with the Agreement, the
other Loan Documents and the transactions contemplated thereunder,
substantially in the form attached hereto as Annex D.


 


“Code” means the Uniform Commercial Code as the
same may, from time to time, be enacted and in effect in the State of
California; provided, that to the extent that the Code is used to define
any term herein or in any Loan Document and such term is defined differently in
different Articles or Divisions of the Code, the definition of such term contained
in Article or Division 9 shall govern; provided  further, that in
the event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of, or remedies with respect to, any Agent’s
or any Lender’s Lien on any Collateral is governed by the Uniform Commercial
Code as enacted and in effect in a United States jurisdiction other than the
State of California, the term “Code” shall mean the Uniform Commercial
Code as enacted and in effect in such other jurisdiction solely for purposes of
the provisions thereof relating to such attachment, perfection, priority or
remedies and for purposes of definitions related to such provisions.


 


“Collateral” means the property covered by the
Collateral Documents and any other property, real or personal, tangible or
intangible, now existing or hereafter acquired, that may at any time be or
become subject to a security interest or Lien in favor of any Agent, on behalf
of itself and any or all Lenders, to secure the Obligations of any Credit
Party.


 


“Collateral Documents” means the Security
Agreement, the Pledge Agreement, the Share Charge, the UK Debenture, the
Guaranties, the Copyright Security Agreement, the Patent Security Agreement,
the Trademark Security Agreement, the Mortgages, and all similar agreements
entered into guaranteeing payment of, or granting a Lien upon property as
security for payment of, the Obligations of any Credit Party.


 


“Collateral Reports” means the reports with
respect to the Collateral referred to in Annex F.


 


“Collection Account” means, as the context
requires (a) that certain account of US Agent, account number  502-328-54 in the name of US Agent at
Bankers Trust Company in


 


A-6

















 


New York, New York ABA No. 021 001 033, Reference: CFN4698-Westaff and
(b) that certain account of UK Agent, account number 60802697 in the name of UK
Agent at Barclays Bank, London, Swift Code BARCGB22, Local Code 20 00 00,
Treasury Code B962W, in each or such other account as may be specified in
writing by the Applicable Agent as the “Collection Account.”


 


“Commitment Termination Date” means the
earliest of (a) May 17, 2007, (b) the date of termination of Lenders’
obligations to make Advances and to incur Letter of Credit Obligations or
permit existing Loans to remain outstanding pursuant to Section 8.2(b),
and (c) the date of indefeasible prepayment in full by Borrowers of the Loans
and the cancellation and return (or stand-by guarantee) of all Letters of
Credit or the cash collateralization of all Letter of Credit Obligations
pursuant to Annex B, and the permanent reduction of all Commitments to
zero.


 


“Commitments” means (a) as to any Applicable
Lender, the aggregate of such Lender’s 
Revolving Loan Commitment (including without duplication the Swing Line
Lender’s Swing Line Commitment as a subset of its US Revolving Loan Commitment)
and Term Loan Commitment as set forth on Annex J to the Agreement
or in the most recent Assignment Agreement executed by such Lender and (b) as
to all Lenders, the aggregate of all Lenders’ Revolving Loan Commitments
(including without duplication the Swing Line Lender’s Swing Line Commitment as
a subset of its US Revolving Loan Commitment) and Term Loan Commitments, which
aggregate commitments shall be Fifty-Nine Million Dollars ($59,000,000) on the
Closing Date, as to each of clauses (a) and (b), as such Commitments may be
reduced, amortized or adjusted from time to time in accordance with the
Agreement.


 


“Companies Act” means the Companies Act 1985 of the United
Kingdom, as the same may from time to time be enacted and in effect in the
United Kingdom.


 


“Compliance Certificate” has the meaning
ascribed to it in Annex E.


 


“Concentration Accounts” has the meaning
ascribed to it in Annex C.


 


“Contracts” means all “contracts,” as such term
is defined in the Code, now owned or hereafter acquired by any Credit Party, in
any event, including all contracts, undertakings, or agreements (other than
rights evidenced by Chattel Paper, Documents or Instruments) in or under which
any Credit Party may now or hereafter have any right, title or interest,
including any agreement relating to the terms of payment or the terms of
performance of any Account.


 


“Control Letter” means a letter agreement
between an Agent and (i) the issuer of uncertificated securities with respect
to uncertificated securities in the name of any Credit Party, (ii) a securities
intermediary with respect to securities, whether certificated or
uncertificated, securities entitlements and other financial assets held in a
securities account in the name of any Credit Party, (iii) a futures commission
merchant or clearing house, as applicable, with respect to commodity accounts
and commodity contracts held by any Credit Party, whereby, among other


 


A-7

















 


things, the issuer, securities intermediary or futures commission
merchant disclaims any security interest in the applicable financial assets,
acknowledges the Lien of such Agent, on behalf of itself Lenders, on such
financial assets, and agrees to follow the instructions or entitlement orders
of such Agent without further consent by the affected Credit Party.


 


“Copyright License” means any and all rights
now owned or hereafter acquired by any Credit Party under any written agreement
granting any right to use any Copyright or Copyright registration.


 


“Copyright Security Agreements” means the
Copyright Security Agreements made in favor of the Applicable Agent by the
applicable Credit Party.


 


“Copyrights” means all of the following now
owned or hereafter adopted or acquired by any Credit Party: (a) all copyrights
and General Intangibles of like nature (whether registered or unregistered),
all registrations and recordings thereof, and all applications in connection therewith,
including all registrations, recordings and applications in the United States
Copyright Office or in any similar office or agency of the United States, any
state or territory thereof, or any other country or any political subdivision
thereof, and (b) all reissues, extensions or renewals thereof.


 


“Credit Parties” means Parent, each Borrower,
and each Guarantor.


 


“Default” means any event that, with the
passage of time or notice or both, would, unless cured or waived, become an
Event of Default.


 


“Default Rate” has the meaning ascribed to it
in Section 1.5(d).


 


“Deposit Accounts” means all “deposit accounts”
as such term is defined in the Code, now or hereafter held in the name of any
Credit Party.


 


“Disbursement Accounts” has the meaning
ascribed to it in Annex C.


 


“Disclosure Schedules” means the Schedules
prepared by Borrowers and denominated as Disclosure Schedules (1.4)
through (6.19) in the Index to the Agreement.


 


“Documents” means all “documents,” as such term
is defined in the Code, now owned or hereafter acquired by any Credit Party,
wherever located.


 


“Dollars” or “$”  means lawful currency of the United States
of America.


 


“Domestic Subsidiary” means a Subsidiary of
Parent organized under the laws of a State of the United States.


 


“EBITDA” means, with respect to any Person for
any fiscal period, without duplication, an amount equal to (a) consolidated net
income of such Person for such period


 


A-8

















 


determined in accordance with GAAP, minus (b) the sum of (i)
income tax credits, (ii) interest income, (iii) gain from extraordinary items
for such period, (iv) any aggregate net gain (but not any aggregate net loss)
during such period arising from the sale, exchange or other disposition of
capital assets by such Person (including any fixed assets, whether tangible or
intangible, all inventory sold in conjunction with the disposition of fixed
assets and all securities), (v) any other non-cash gains that have been added
in determining consolidated net income, in each case to the extent included in
the calculation of consolidated net income of such Person for such period in
accordance with GAAP, and (vi) gains from foreign currency exchange
adjustments, but without duplication, plus (c) the sum of (i) any
provision for income taxes, (ii) Interest Expense, (iii) loss from
extraordinary items for such period, (iv) depreciation and amortization for
such period, (v) amortized debt discount for such period, (vi) the amount of
any deduction to consolidated net income as the result of any grant to any
members of the management or employees of such Person of any Stock, in each
case to the extent included in the calculation of consolidated net income of
such Person for such period in accordance with GAAP, (vii) losses from foreign
currency exchange adjustments, and (viii) write-down of good will, but without
duplication.  For purposes of this
definition, the following items shall be excluded in determining consolidated
net income of a Person without duplication: (1) the income (or deficit) of any
other Person accrued prior to the date it became a Subsidiary of, or was merged
or consolidated into, such Person or any of such Person’s Subsidiaries; (2) the
income (or deficit) of any other Person (other than a Subsidiary) in which such
Person has an ownership interest, except to the extent any such income has
actually been received by such Person in the form of cash dividends or
distributions; (3) the undistributed earnings of any Subsidiary of such Person
to the extent that the declaration or payment of dividends or similar
distributions by such Subsidiary is not at the time permitted by the terms of
any contractual obligation or requirement of law applicable to such Subsidiary;
(4) any restoration to income of any contingency reserve, except to the extent
that provision for such reserve was made out of income accrued during such
period; (5) any write-up of any asset; (6) any net gain from the collection of
the proceeds of life insurance policies; (7) any net gain arising from the
acquisition of any securities, or the extinguishment, under GAAP, of any
Indebtedness, of such Person, (8) in the case of a successor to such Person by
consolidation or merger or as a transferee of its assets, any earnings of such
successor prior to such consolidation, merger or transfer of assets, and (9)
any deferred credit representing the excess of equity in any Subsidiary of such
Person at the date of acquisition of such Subsidiary over the cost to such
Person of the investment in such Subsidiary.


 


“Eligible Accounts” has the meaning ascribed to
it in Section 1.6.


 


“Environmental Laws” means all applicable
federal, state, local and foreign laws, statutes, ordinances, codes, rules,
standards and regulations, now or hereafter in effect, and any applicable
judicial or administrative interpretation thereof, including any applicable
judicial or administrative order, consent decree, order or judgment, imposing
liability or standards of conduct for or relating to the regulation and
protection of human health, safety, the environment and natural resources
(including ambient air, surface water, groundwater, wetlands, land surface or
subsurface strata, wildlife, aquatic species and vegetation).  Environmental Laws include the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C.


 


A-9

















 


§§ 9601 et seq.) (“CERCLA”); the Hazardous Materials
Transportation Authorization Act of 1994 (49 U.S.C. §§ 5101 et seq.);
the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. §§ 136 et
seq.); the Solid Waste Disposal Act (42 U.S.C. §§ 6901 et seq.);
the Toxic Substance Control Act (15 U.S.C. §§ 2601 et seq.); the Clean
Air Act (42 U.S.C. §§ 7401 et seq.); the Federal Water Pollution Control
Act (33 U.S.C. §§ 1251 et seq.); the Occupational Safety and Health Act
(29 U.S.C. §§ 651 et seq.); and the Safe Drinking Water Act (42 U.S.C.
§§ 300(f) et seq.), and any and all regulations promulgated
thereunder, and all analogous state, local and foreign counterparts or
equivalents and any transfer of ownership notification or approval statutes.


 


“Environmental Liabilities” means, with respect
to any Person, all liabilities, obligations, responsibilities, response,
remedial and removal costs, investigation and feasibility study costs, capital
costs, operation and maintenance costs, losses, damages, punitive damages,
property damages, natural resource damages, consequential damages, treble
damages, costs and expenses (including all reasonable fees, disbursements and
expenses of counsel, experts and consultants), fines, penalties, sanctions and
interest incurred as a result of or related to any claim, suit, action,
investigation, proceeding or demand by any Person, whether based in contract,
tort, implied or express warranty, strict liability, criminal or civil statute
or common law, arising under any Environmental Laws, Environmental Permits, or
in connection with any Release or threatened Release or presence of a Hazardous
Material whether on, at, in, under, from or about or in the vicinity of any
real or personal property.


 


“Environmental Permits” means all permits,
licenses, authorizations, certificates, approvals or registrations required by
any Governmental Authority under any Environmental Laws.


 


“Equipment” means all “equipment,” as such term
is defined in the Code, now owned or hereafter acquired by any Credit Party,
wherever located and, in any event, including all such Credit Party’s machinery
and equipment, including processing equipment, conveyors, machine tools, data
processing and computer equipment, including embedded software and peripheral
equipment and all engineering, processing and manufacturing equipment, office
machinery, furniture, materials handling equipment, tools, attachments,
accessories, automotive equipment, trailers, trucks, forklifts, molds, dies,
stamps, motor vehicles, rolling stock and other equipment of every kind and
nature, trade fixtures and fixtures not forming a part of real property,
together with all additions and accessions thereto, replacements therefor, all
parts therefor, all substitutes for any of the foregoing, fuel therefor, and
all manuals, drawings, instructions, warranties and rights with respect
thereto, and all products and proceeds thereof and condemnation awards and
insurance proceeds with respect thereto.


 


“ERISA” means the Employee Retirement Income
Security Act of 1974, as amended from time to time, and any regulations
promulgated thereunder.


 


A-10

















 


“ERISA Affiliate” means, with respect to any
Credit Party, any trade or business (whether or not incorporated) that,
together with such Credit Party, are treated as a single employer within the
meaning of Sections 414(b), (c), (m) or (o) of the IRC.


 


“ERISA Event” means, with respect to any Credit
Party or any ERISA Affiliate, (a) any event described in Section 4043(c) of
ERISA with respect to a Title IV Plan; (b) the withdrawal of any Credit Party
or ERISA Affiliate from a Title IV Plan subject to Section 4063 of ERISA during
a plan year in which it was a substantial employer, as defined in Section
4001(a)(2) of ERISA; (c) the complete or partial withdrawal of any Credit Party
or any ERISA Affiliate from any Multiemployer Plan; (d) the filing of a notice of
intent to terminate a Title IV Plan or the treatment of a plan amendment as a
termination under Section 4041 of ERISA; (e) the institution of proceedings to
terminate a Title IV Plan or Multiemployer Plan by the PBGC; (f) the failure by
any Credit Party or ERISA Affiliate to make when due required contributions to
a Multiemployer Plan or Title IV Plan or Foreign Pension Plan unless such
failure is cured within 30 days; (g) any other event or condition that might
reasonably be expected to constitute grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any Title IV
Plan or Multiemployer Plan or for the imposition of liability under Section
4069 or 4212(c) of ERISA; (h) the termination of a Multiemployer Plan under
Section 4041A of ERISA or the reorganization or insolvency of a Multiemployer
Plan under Section 4241 or 4245 of ERISA; or (i) the loss of a Qualified Plan’s
qualification or tax exempt status; or (j) the termination of a Plan described
in Section 4064 of ERISA.


 


“ESOP” means a Plan that is intended to satisfy
the requirements of Section 4975(e)(7) of the IRC.


 


“Event of Default” has the meaning ascribed to
it in Section 8.1.


 


“Fair Labor Standards Act” means the Fair Labor
Standards Act, 29 U.S.C. §201 et  seq.


 


“Federal Funds Rate” means, for any day, a
floating rate equal to the weighted average of the rates on overnight Federal
funds transactions among members of the Federal Reserve System, as determined
by Agent in its sole discretion, which determination shall be presumptively
true, absent manifest error.


 


“Federal Reserve Board” means the Board of
Governors of the Federal Reserve System of the United States.


 


“Fees” means any and all fees payable to any
Agent or any Lender or L/C Issuer pursuant to the Agreement or any of the other
Loan Documents.


 


“Financial Covenants” means the financial
covenants set forth in Annex G.


 


“Financial Officer” means a chief financial
officer, treasurer or controller.


 


A-11

















 


“Financial Statements” means the consolidated
and consolidating income statements, statements of cash flows and balance
sheets of Parent and its Subsidiaries delivered in accordance with Section
3.4 and Annex E.


 


“Fiscal Period” means any of the 13 four-week
accounting periods of Borrowers.


 


“Fiscal Quarter” means any of the quarterly
accounting periods of Borrowers, the first three of which comprise 12 weeks and
the fourth of which comprises 16 or 17 weeks.


 


“Fiscal Year” means any of the annual 52 or 53
week accounting periods of Borrowers ending on the Saturday nearest the end of
October of each year.


 


“Fixed Charges” means, with respect to any
Person for any fiscal period, (a) the aggregate of all Interest Expense
paid or accrued during such period, plus (b) scheduled payments of principal
with respect to Indebtedness during such period.


 


“Fixed Charge Coverage Ratio” means, with
respect to any Person for any fiscal period, the ratio of (a) EBITDA less
Capital Expenditures during such period less an amount equal to income
taxes paid in cash net of cash tax refunds received (but in no case shall such
amount be less than zero) during such period to (b) Fixed Charges.


 


“Fixtures” means all “fixtures” as such term is
defined in the Code, now owned or hereafter acquired by any Credit Party.


 


“Foreign Pension Plan” means any plan, scheme,
fund or other similar program established, maintained or contributed to outside
the United States by any Credit Party primarily for the benefit of employees of
the Credit Party residing or working outside the United States, which plan,
fund or other similar program provides, or results in, retirement income, a
deferral of income in contemplation of retirement or payments to be made upon
termination of employment, and which plan is not subject to ERISA or the IRC.


 


“Franchise Agreements” means those certain
Franchise Agreements entered into from time to time between any of the
Borrowers and franchisees, a form of which is set forth in Disclosure
Schedule 3.26.


 


“Funded Debt” means, with respect to any
Person, without duplication, all Indebtedness for borrowed money evidenced by
notes, bonds, debentures, or similar evidences of Indebtedness that by its
terms matures more than one year from, or is directly or indirectly renewable
or extendible at such Person’s option under a revolving credit or similar
agreement obligating the lender or lenders to extend credit over a period of
more than one year from the date of creation thereof, and specifically
including Capital Lease Obligations, current maturities of long–term
debt, revolving credit and short–term debt extendible beyond one year at
the option of the debtor, and also including, 
in the case of Borrowers, the Obligations and, without duplication,
Guaranteed Indebtedness consisting of guaranties of Funded Debt of other
Persons.


 


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“GAAP” means generally accepted accounting
principles in the United States of America consistently applied, as such term
is further defined in Annex G to the Agreement.


 


“GE Australia” means GE Capital Finance Pty
Limited.


 


“GE Capital” means General Electric Capital
Corporation, a Delaware corporation.


 


“GE Capital Fee Letter” means that certain
letter, dated as of April 12, 2002, among GE Capital and Borrowers with respect
to certain Fees to be paid from time to time by Borrowers to GE Capital.


 


“General Intangibles” means all “general
intangibles,” as such term is defined in the Code, now owned or hereafter
acquired by any Credit Party, including all right, title and interest that such
Credit Party may now or hereafter have in or under any Contract, all payment
intangibles, customer lists, Licenses, Copyrights, Trademarks, Patents, and all
applications therefor and reissues, extensions or renewals thereof, rights in
Intellectual Property, interests in partnerships, joint ventures and other
business associations, licenses, permits, copyrights, trade secrets,
proprietary or confidential information, inventions (whether or not patented or
patentable), technical information, procedures, designs, knowledge, know–how,
software, data bases, data, skill, expertise, experience, processes, models,
drawings, materials and records, goodwill (including the goodwill associated
with any Trademark or Trademark License), all rights and claims in or under
insurance policies (including insurance for fire, damage, loss and casualty,
whether covering personal property, real property, tangible rights or
intangible rights, all liability, life, key man and business interruption
insurance, and all unearned premiums), uncertificated securities, choses in
action, deposit, checking and other bank accounts, rights to receive tax
refunds and other payments, rights to receive dividends, distributions, cash,
Instruments and other property in respect of or in exchange for pledged Stock
and Investment Property, rights of indemnification, all books and records,
correspondence, credit files, invoices and other papers, including without
limitation all tapes, cards, computer runs and other papers and documents in
the possession or under the control of such Credit Party or any computer bureau
or service company from time to time acting for such Credit Party.


 


“Goods” means all “goods” as defined in the
Code, now owned or hereafter acquired by any Credit Party, wherever located,
including embedded software to the extent included  in “goods” as defined in the Code, manufactured homes, standing
timber that is cut and removed for sale and unborn young of animals.


 


“Governmental Authority” means any nation or
government, any state or other political subdivision thereof, and any agency,
department or other entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.


 


“Guaranteed Indebtedness” means as to any
Person, any obligation of such Person guaranteeing, providing comfort or
otherwise supporting any Indebtedness, lease, dividend, or other obligation (“primary
obligation”) of any other Person (the “primary obligor”) in any


 


A-13

















 


manner, including any obligation or arrangement of such Person to (a)
purchase or repurchase any such primary obligation, (b) advance or supply funds
(i) for the purchase or payment of any such primary obligation or (ii) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency or any balance sheet condition of the
primary obligor, (c) purchase property, securities or services primarily for
the purpose of assuring the owner of any such primary obligation of the ability
of the primary obligor to make payment of such primary obligation, (d) protect
the beneficiary of such arrangement from loss (other than product warranties
given in the ordinary course of business) or (e) indemnify the owner of such
primary obligation against loss in respect thereof.  The amount of any Guaranteed Indebtedness at any time shall be
deemed to be an amount equal to the lesser at such time of (x) the stated or
determinable amount of the primary obligation in respect of which such
Guaranteed Indebtedness is incurred and (y) the maximum amount for which such
Person may be liable pursuant to the terms of the instrument embodying such
Guaranteed Indebtedness, or, if not stated or determinable, the maximum
reasonably anticipated liability (assuming full performance) in respect
thereof.


 


“Guaranties” means, collectively, the Parent
Guaranty, each US Subsidiary Guaranty, and any other guaranty executed by any
Guarantor in favor of Agent and Lenders in respect of the Obligations of any
Credit Party.


 


“Guarantors” means Parent, each US Borrower (in
its capacity as a guarantor of the Obligations of Term Borrower, the other US
Borrowers and UK Borrower), Westaff (GP), Inc., Westaff (LP), Inc., Term
Borrower (in its capacity as a guarantor of the Obligations of the US Borrowers
and UK Borrower), Western Medical Services, Inc., Mediaworld International, and
each other Person, if any, that executes a guaranty or other similar agreement
in favor of any Agent, for itself and the ratable benefit of any Lenders, in
connection with the transactions contemplated by the Agreement and the other
Loan Documents.


 


“Hazardous Material” means any substance,
material or waste that is regulated by, or forms the basis of liability now or
hereafter under, any Environmental Laws, including any material or substance
that is (a) defined as a “solid waste,” “hazardous waste,” “hazardous
material,” “hazardous substance,” “extremely hazardous waste,”  “restricted hazardous waste,” “pollutant,”
“contaminant,” “hazardous constituent,” “special waste,” “toxic substance” or
other similar term or phrase under any Environmental Laws, or (b) petroleum or
any fraction or by–product thereof, asbestos, polychlorinated biphenyls
(PCB’s), or any radioactive substance.


 


“Indebtedness” means, with respect to any
Person, without duplication, (a) all indebtedness of such Person for borrowed
money or for the deferred purchase price of property payment for which is
deferred 6 months or more, but excluding obligations to trade creditors
incurred in the ordinary course of business that are unsecured and not overdue
by more than 6 months unless being contested in good faith, (b) all
reimbursement and other obligations with respect to letters of credit, bankers’
acceptances and surety bonds, whether or not matured, (c) all obligations
evidenced by notes, bonds, debentures or similar instruments, (d) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to


 


A-14

















 


property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are
limited to repossession or sale of such property), (e) all Capital Lease
Obligations and the present value (discounted at the US Index Rate as in effect
on the Closing Date) of future rental payments under all synthetic leases, (f)
all obligations of such Person under commodity purchase or option agreements or
other commodity price hedging arrangements, in each case whether contingent or
matured, (g) all obligations of such Person under any foreign exchange
contract, currency swap agreement, interest rate swap, cap or collar agreement
or other similar agreement or arrangement designed to alter the risks of that
Person arising from fluctuations in currency values or interest rates, in each
case whether contingent or matured, (h) all Indebtedness referred to above
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property or
other assets (including accounts and contract rights) owned by such Person,
even though such Person has not assumed or become liable for the payment of
such Indebtedness, and (i) the Obligations.


 


“Indemnified Liabilities” has the meaning
ascribed to it in Section 1.12.


 


“Indemnified Person” has the meaning ascribed
to in Section 1.12.


 


“Index Rate Loan” means a Loan or portion
thereof bearing interest by reference to the US Index Rate or the UK Index
Rate.


 


“Insolvency Laws” means any of the Bankruptcy
Code or the Insolvency
Act 1986 of the United Kingdom, each as now or hereafter in effect,
any successors to such statutes and any other applicable insolvency or other
similar laws of any jurisdiction.


 


“Instruments” means all “instruments,” as such
term is defined in the Code, now owned or hereafter acquired by any Credit
Party, wherever located, and, in any event, including all certificated
securities, all certificates of deposit, and all promissory notes and other
evidences of indebtedness, other than instruments that constitute, or are a
part of a group of writings that constitute, Chattel Paper.


 


“Intellectual Property” means any and all Licenses,
Patents, Copyrights, Trademarks, and the goodwill associated with such
Trademarks.


 


“Intercompany Notes” has the meaning ascribed
to it in Section 6.3.


 


“Interest Expense” means, with respect to any
Person for any fiscal period, interest expense (whether cash or non-cash) of
such Person determined in accordance with GAAP for the relevant period ended on
such date, including, interest expense with respect to any Funded Debt of such
Person and interest expense for the relevant period that has been capitalized
on the balance sheet of such Person.


 


“Interest Payment Date” means (a) as to any
Index Rate Loan to US Borrowers or Term Borrower, the first Business Day of
each month to occur while such Loan is outstanding,


 


A-15

















 


(b) as to any Index Rate Loan to UK Borrower, the first Business Day of
each month to occur while such Loan is outstanding, and (c) as to any LIBOR
Loan, the last day of  the applicable
LIBOR Period; provided that, in addition to the foregoing, each of (x)
the date upon which all of the Commitments have been terminated and the Loans
have been paid in full and (y) the Commitment Termination Date shall be deemed
to be an “Interest Payment Date” with respect to any interest that has then accrued
under the Agreement.  Notwithstanding
the foregoing, interest on the UK Revolving Loans shall accrue but shall not be
due until the earlier of (x) the date which is ninety (90) days after the
Closing Date and (b) UK Borrower’s receipt of a tax clearance certificate
permitting payments to be made without tax withholding, and on such date all
accrued interest shall be paid to the UK Agent for the benefit of the UK
Revolving Lenders.


 


“Inventory” means all “inventory,” as such term
is defined in the Code, now owned or hereafter acquired by any Credit Party,
wherever located, and in any event including inventory, merchandise, goods and
other personal property that are held by or on behalf of any Credit Party for
sale or lease or are furnished or are to be furnished under a contract of
service, or that constitute raw materials, work in process, finished goods,
returned goods, or materials or supplies of any kind, nature or description
used or consumed or to be used or consumed in such Credit Party’s business or
in the processing, production, packaging, promotion, delivery or shipping of
the same, including all supplies and embedded software.


 


“Investment Property” means all “investment
property” as such term is defined in the Code now owned or hereafter acquired
by any Credit Party, wherever located, including (i) all securities, whether
certificated or uncertificated, including stocks, bonds, interests in limited
liability companies, partnership interests, treasuries, certificates of
deposit, and mutual fund shares; (ii) all securities entitlements of any Credit
Party, including the rights of any Credit Party to any securities account and
the financial assets held by a securities intermediary in such securities
account and any free credit balance or other money owing by any securities
intermediary with respect to that account; (iii) all securities accounts of any
Credit Party; (iv) all commodity contracts of any Credit Party; and (v) all
commodity accounts held by any Credit Party.


 


“IRC” means the Internal Revenue Code of 1986
and all regulations promulgated thereunder.


 


“IRS” means the Internal Revenue Service.


 


“L/C Issuer” has the meaning ascribed to it in Annex
B.


 


“L/C Sublimit” has the meaning ascribed to it
in Annex B.


 


“Lenders” means GE Capital the other Lenders
named on the signature pages of the Agreement, and, if any such Lender shall
decide to assign all or any portion of the Obligations held by it, such term
shall include any assignee of such Lender.


 


“Letter of Credit Fee” has the meaning ascribed
to it in Annex B.


 


A-16

















 


“Letter of Credit Obligations” means all
outstanding obligations incurred by US Agent and US Revolving Lenders at the
request of Borrower Representative, whether direct or indirect, contingent or
otherwise, due or not due, in connection with the issuance of Letters of Credit
by US Agent or another L/C Issuer or the purchase of a participation as set
forth in Annex B with respect to any Letter of Credit.  The amount of such Letter of Credit
Obligations shall equal the maximum amount that may be payable at such time or
at any time thereafter by US Agent or US Revolving Lenders thereupon or
pursuant thereto.


 


“Letters of Credit” means documentary or
standby letters of credit issued for the account of US Borrower by any L/C
Issuer, and bankers’ acceptances issued by a US Borrower, for which Agent and
Lenders have incurred Letter of Credit Obligations.


 


“Letter-of-Credit Rights” means
“letter-of-credit rights” as such term is defined in the Code, now owned or
hereafter acquired by any Credit Party, including rights to payment or
performance under a letter of credit, whether or not such Credit Party, as
beneficiary, has demanded or is entitled to demand payment or performance.


 


“LIBOR Business Day” means a Business Day on
which banks in the City of London are generally open for interbank or foreign
exchange transactions.


 


“LIBOR Loan” means a Loan or any portion
thereof bearing interest by reference to the LIBOR Rate.


 


“LIBOR Period” means, with respect to any LIBOR
Loan, each period commencing on a LIBOR Business Day selected by Borrower
Representative pursuant to the Agreement and ending one, two or three months
thereafter, as selected by Borrower Representative’s irrevocable notice to US Agent
as set forth in Section 1.5(e); provided, that the foregoing
provision relating to LIBOR Periods is subject to the following:


 


(a)            if any LIBOR Period would otherwise
end on a day that is not a LIBOR Business Day, such LIBOR Period shall be
extended to the next succeeding LIBOR Business Day unless the result of such
extension would be to carry such LIBOR Period into another calendar month in
which event such LIBOR Period shall end on the immediately preceding LIBOR
Business Day;


 


(b)           any LIBOR Period that would otherwise
extend beyond the Commitment Termination Date shall end 2 LIBOR Business Days
prior to such date;


 


(c)           any LIBOR Period that begins on the
last LIBOR Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such LIBOR
Period) shall end on the last LIBOR Business Day of a calendar month;


 


(d)           Borrower Representative shall select
LIBOR Periods so as not to require a payment or prepayment of any LIBOR Loan
during a LIBOR Period for such Loan; and


 


A-17

















 


(e)           Borrower Representative shall select
LIBOR Periods so that there shall be no more than 5 separate LIBOR Loans in
existence at any one time.


 


“LIBOR Rate” means for each LIBOR Period, a
rate of interest determined by US Agent equal to:


 


(a)           the offered rate for deposits in
United States Dollars for the applicable LIBOR Period that appears on Telerate
Page 3750 as of 11:00 a.m. (London time), on the second full LIBOR Business
Day next preceding the first day of such LIBOR Period (unless such date is not
a Business Day, in which event the next succeeding Business Day will be used);
divided by


 


(b)           a number equal to 1.0 minus
the aggregate (but without duplication) of the rates (expressed as a decimal
fraction) of reserve requirements in effect on the day that is 2 LIBOR Business
Days prior to the beginning of such LIBOR Period (including basic,
supplemental, marginal and emergency reserves under any regulations of the Federal
Reserve Board or other Governmental Authority having jurisdiction with respect
thereto, as now and from time to time in effect) for Eurocurrency funding
(currently referred to as “Eurocurrency Liabilities” in Regulation D of the
Federal Reserve Board that are required to be maintained by a member bank of
the Federal Reserve System.


 


If such interest rates shall cease to be available
from Telerate News Service, the LIBOR Rate shall be determined from such
financial reporting service or other information as shall be mutually
acceptable to US Agent and Borrower Representative.


 


“License” means any Copyright License, Patent
License, Trademark License or other license of rights or interests now held or
hereafter acquired by any Credit Party.


 


“Lien” means any mortgage or deed of trust,
pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim,
security interest, easement or encumbrance, or preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
(including any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security
interest under the Code or comparable law of any jurisdiction).


 


“Litigation” has the meaning ascribed to it in
Section 3.13.


 


“Loan Account” has the meaning ascribed to it
in Section 1.11.


 


“Loan Documents” means the Agreement, the
Notes, the Collateral Documents, each Letter of Credit application, and all
other agreements, instruments, documents and certificates identified in the
Closing Checklist executed and delivered to, or in favor of, any Agent or any
Lender and including all other pledges, powers of attorney, consents,
assignments, contracts, notices, and all other written matter whether
heretofore, now or hereafter executed by


 


A-18

















 


or on behalf of any Credit Party, or any employee of any Credit Party,
and delivered to any Agent or any Lender in connection with the Agreement or
the transactions contemplated thereby. 
Any reference in the Agreement or any other Loan Document to a Loan
Document shall include all appendices, exhibits or schedules thereto, and all
amendments, restatements, supplements or other modifications thereto, and shall
refer to the Agreement or such Loan Document as the same may be in effect at
any and all times such reference becomes operative.


 


“Loans” means the Revolving Loan, the Swing
Line Loan and the Term Loan.


 


“Lock Boxes” has the meaning ascribed to it in Annex
C.


 


“Margin Stock” has the meaning ascribed to in Section
3.10.


 


“Material Adverse Effect” means a material
adverse effect on (a) the business, assets, operations, prospects or financial
or other condition of any Borrower or the Borrowers and the Credit Parties,
taken as a whole, (b) any Borrower’s ability to pay any of the Loans or any of
the other Obligations in accordance with the terms of the Agreement or the
Guarantors’ joint and several ability to pay any Obligations under any of the
Guaranties, (c) the Collateral or the Applicable Agent’s Liens, on behalf of
itself and Lenders, on the Collateral or the priority of such Liens, or (d) any
Agent’s or any Lender’s rights and remedies under the Agreement and the other
Loan Documents.  Without limiting the
generality of the foregoing, any event or occurrence adverse to one or more
Credit Parties which results or could reasonably be expected to result in costs
and/or liabilities or loss of revenues, individually or in the aggregate, to
any Credit Party in any 30-day period in excess of 10% of the lesser of the
Maximum Amount and the Aggregate Borrowing Base at any date of determination
shall constitute a Material Adverse Effect.


 


“Maximum Amount” means, as of any date of
determination, the US Dollar Equivalent of $54,000,000, as such amount may be
reduced in accordance with the Agreement.


 


“Maximum UK Amount” means the US Dollar
Equivalent of $4,000,000 in Pounds Sterling (or £2,740,289.10) as determined by
reference to the Spot Rate two Business Days prior to the Closing Date (or
$1.4597/£), as such amount may be reduced in accordance with the Agreement.


 


“Maximum US Amount” means $50,000,000, as such
amount may be reduced in accordance with the Agreement.


 


“Mortgaged Properties” has the meaning assigned
to it in Annex D.


 


“Mortgages” means each of the mortgages, deeds
of trust, leasehold mortgages, leasehold deeds of trust, collateral assignments
of leases or other real estate security documents delivered by any Credit Party
to US Agent on behalf of itself and Lenders with respect to the Mortgaged
Properties, all in form and substance reasonably satisfactory to US Agent.


 


A-19

















 


“Multiemployer Plan” means a “multiemployer
plan” as defined in Section 4001(a)(3) of ERISA, and to which any Credit Party
or ERISA Affiliate is making, is obligated to make or has made or been
obligated to make, contributions on behalf of participants who are or were employed
by any of them.


 


“Non-Funding Lender” has the meaning ascribed
to it in Section 9.9(a)(ii).


 


“Notes” means, collectively, the Revolving
Notes, the Swing Line Notes and the Term Notes.


 


“Notice of Conversion/Continuation” has the
meaning ascribed to it in Section 1.5(e).


 


“Notice of Revolving Credit Advance” has the
meaning ascribed to it in Section 1.1(a).


 


“Obligations” means, with respect to any Credit
Party, all loans, advances, debts, liabilities and obligations for the
performance of covenants, tasks or duties or for payment of monetary amounts
(whether or not such performance is then required or contingent, or such
amounts are liquidated or determinable) owing by such Credit Party to any Agent
or any Lender, and all covenants and duties regarding such amounts, of any kind
or nature, present or future, whether or not evidenced by any note, agreement
or other instrument, arising under the Agreement or any of the other Loan
Documents.  This term includes all principal,
interest (including all interest that accrues after the commencement of any
case or proceeding by or against any Credit Party in any Insolvency Proceeding,
whether or not allowed in such case or proceeding), Fees, Charges, expenses,
attorneys’ fees, liabilities (including fees and charges) with respect to Bank
Products and any other sum chargeable to any Credit Party under the Agreement
or any of the other Loan Documents.


 


“Overadvance” has the meaning ascribed to it in
Section 1.1(a)(iii) and Section 1.1(c)(iii), as applicable.


 


“Parent” has the meaning ascribed thereto in
the recitals to the Agreement.


 


“Parent Guaranty” means the guaranty of even
date herewith executed by Parent in favor of Agents and Lenders.


 


“Patent License” means rights under any written
agreement now owned or hereafter acquired by any Credit Party granting any
right with respect to any invention on which a Patent is in existence.


 


“Patent Security Agreements” means the Patent
Security Agreements made in favor of the Applicable Agent by the applicable
Credit Party.


 


A-20

















 


“Patents” means all of the following in which
any Credit Party now holds or hereafter acquires any interest: (a) all letters
patent of the United States or of any other country, all registrations and
recordings thereof, and all applications for letters patent of the United
States or of any other country, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State, or any other country, and (b)
all reissues, continuations, continuations-in-part or extensions thereof.


 


“Payment Account” means each bank account
established pursuant to the Security Agreement or the UK Debenture to which the
proceeds of Accounts and other Collateral are deposited or credited, and which
is maintained in the name of the Applicable Agent or the Applicable Borrower,
as the Applicable Agent may determine, on terms acceptable to the Applicable
Agent.


 


“PBGC” means the Pension Benefit Guaranty
Corporation.


 


“Pension Plan” means a Plan described in
Section 3(2) of ERISA.


 


“Permitted Encumbrances” means the following
encumbrances: (a) Liens for taxes or assessments or other governmental Charges
not yet due and payable or which are being contested in accordance with Section
5.2(b); (b) pledges or deposits of money securing statutory obligations
under workers’ compensation, unemployment insurance, social security or public
liability laws or similar legislation (excluding Liens under ERISA); (c)
pledges or deposits of money securing bids, tenders, contracts (other than
contracts for the payment of money) or leases to which any Credit Party is a
party as lessee made in the ordinary course of business; (d) mechanics’ or
similar liens arising in the ordinary course of business, so long as such Liens
attach only to Equipment, Fixtures and/or Real Estate and which are either
unperfected or are being contested in good faith in accordance with Section
5.2(b); (e) carriers’, warehousemen’s, suppliers’ or other similar
possessory liens arising in the ordinary course of business, so long as such
Liens attach do not at any time attach to Accounts; (f) deposits securing, or
in lieu of, surety, performance, appeal or customs bonds in proceedings to
which any Credit Party is a party; (g) any attachment or judgment lien not
constituting an Event of Default under Section 8.1(j); (h) zoning
restrictions, easements, licenses, or other restrictions on the use of any Real
Estate or other minor irregularities in title (including leasehold title)
thereto, so long as the same do not materially impair the use, value, or
marketability of such Real Estate; (i) presently existing or hereafter created
Liens in favor of the Applicable Agent, on behalf of the Applicable Lenders;
(j) the Financing Statement listing WMS, as debtor, and DVI Business Credit
Corporation and Intrepid U.S.A., Inc., as Secured Parties, filed with the
Secretary of State of the State of California on October 18, 1999 (file number
9929460570); (k) Liens expressly permitted under clauses (b) and (c)
of Section 6.7 of the Agreement; and (l) the Lien on Bank of America
Account 21228977 and amounts therein securing the liabilities of US Borrower to
the State of Washington for worker’s compensation; provided  however,
that amounts in such account shall at no time exceed $750,000.


 


A-21

















 


“Person” means any individual, sole
proprietorship, partnership, joint venture, trust, unincorporated organization,
association, corporation, limited liability company, institution, public
benefit corporation, other entity or government (whether federal, state,
county, city, municipal, local, foreign, or otherwise, including any
instrumentality, division, agency, body or department thereof).


 


“Plan” means, at any time, an “employee benefit
plan”, as defined in Section 3(3) of ERISA, that any Credit Party or ERISA
Affiliate maintains, contributes to or has an obligation to contribute to or
has maintained, contributed to or had an obligation to contribute to at any
time within the past 7 years on behalf of participants who are or were employed
by any Credit Party or ERISA Affiliate.


 


“Pledge Agreements” means, collectively, the
Pledge Agreement, and the Share Charge, each of even date herewith entered into
by and among US Agent, on behalf of itself and Lenders, and the Credit Parties
that are signatories thereto.


 


“Pounds Sterling” and “£” each mean
lawful currency of the United Kingdom.


 


“Preferential Debts” has the meaning specified
in Section 386 of the Insolvency Act of 1986
of the United Kingdom.


 


“Prior Claims” means all Liens created by
applicable laws (in contrast to those granted voluntarily) which rank or are
capable of ranking prior or pari passu with the Applicable Agent’s
Liens against all or part of the Collateral, including for amounts owing for
vacation pay, employee deductions and contributions, goods and services taxes,
sales taxes, corporate taxes, realty taxes, business taxes, workers’
compensation, pension plan or fund obligations and overdue rents.


 


“Prior Lenders” means collectively (a) Bank of
America, N.A. and the other lenders which are parties to the Credit Agreement
dated as of March 4, 1998, as amended and (b) National Westminster Bank plc.


 


“Prior Lender Obligations” means (i) all
obligations and liabilities of the Credit Parties under the Credit Agreement
dated as of March 4, 1998 among Westaff (USA), Western Medical Services, Inc.,
certain lenders and Bank of America, N.A., as agent, as amended, and (ii) all
obligations and liabilities of UK Borrower under its credit facility with
National Westminster Bank plc, and (iii), in each case, all associated
documents, instruments and agreements.


 


“Proceeds” means “proceeds,” as such term is
defined in the Code, including (a) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to any Borrower or Guarantor from time
to time with respect to any of the Collateral, (b) any and all payments (in any
form whatsoever) made or due and payable to any Borrower or Guarantor from time
to time in connection with any requisition, confiscation, condemnation, seizure
or forfeiture of all or any part of the Collateral by any Governmental
Authority (or any Person acting under color of governmental authority), (c) any
claim of any Borrower or Guarantor against third parties (i) for


 


A-22

















 


past, present or future infringement of any Patent or Patent License,
or (ii) for past, present or future infringement or dilution of any Copyright,
any claim of any Borrower or Guarantor against third parties (i) for past,
present or future infringement of any Patent or Patent License, or (ii) for
past, present or future infringement or dilution of any Copyright, Copyright
License, Trademark or Trademark License, or for injury to the goodwill
associated with any Trademark or Trademark License, (d) any recoveries by any
Borrower or Guarantor against third parties with respect to any litigation or
dispute concerning any of the Collateral including claims arising out of the
loss or nonconformity of, interference with the use of, defects in, or
infringement of rights in, or damage to, Collateral, (e) all amounts collected
on, or distributed on account of, other Collateral, including dividends,
interest, distribution and Instruments with respect to Investment Property and
pledged Stock, and (f) any and all other amounts, rights to payment or other
property acquired upon the sale, lease, license, exchange or other disposition
of Collateral and all rights arising out of Collateral.


 


“Pro Forma” means the unaudited consolidated
and consolidating balance sheet of Parent and its Subsidiaries as of April 20,
2002 after giving pro  forma effect to the Related Transactions.


 


“Projections” means Borrowers’ forecasted
consolidated and consolidating (on a basis reasonably acceptable to the
Lenders):  (a) balance sheets; (b)
profit and loss statements; (c) cash flow statements; and (d) capitalization
statements, and otherwise consistent with the historical Financial Statements
of the Parent and its Subsidiaries, together with appropriate supporting
details and a statement of underlying assumptions.


 


“Pro Rata Share” means with respect to all
matters relating to any Lender, (a) with respect to the US Revolving Loan, the
percentage obtained by dividing (i) the US Revolving Loan Commitment of that
Lender by (ii) the aggregate US Revolving Loan Commitments of all Lenders, (b)
with respect to the UK Revolving Loan, the percentage obtained by dividing (i)
the UK Revolving Loan Commitment of that Lender by (ii) the aggregate UK
Revolving Loan Commitments of all Lenders, (c) with respect to the Term
Loan(s), the percentage obtained by dividing (i) the Term Loan Commitment of
that Lender by (ii) the aggregate Term Loan Commitments of all Lenders, (and in
the case of  clauses (a), (b) or (c) as
any such percentages may be adjusted by assignments permitted pursuant to Section
9.1) and with respect to all Loans, the percentage obtained by dividing (i)
the aggregate Commitments of that Lender by (ii) the aggregate Commitments of
all Lenders, and (f) with respect to all Loans on and after the Commitment
Termination Date, the percentage obtained by dividing (i) the aggregate US
Dollar Equivalent of the outstanding principal balance of the Loans held by
that Lender, by (ii) the US Dollar Equivalent of the outstanding principal
balance of the Loans held by all Lenders.


 


“Qualified Assignee” means (a) any Qualifying
Lender, any Affiliate of any Lender and, with respect to any Lender that is an
investment fund that invests in commercial loans, any other investment fund
that invests in commercial loans and that is managed or advised by the same
investment advisor as such Lender or by an Affiliate of such investment advisor,
and


 


A-23

















 


(b) any commercial bank, savings and loan association or savings bank
or any other entity which is an “accredited investor” (as defined in Regulation
D under the Securities Act of 1933) which extends credit or buys loans as one
of its businesses, including insurance companies, mutual funds, lease financing
companies and commercial finance companies, in each case, which has a rating of
BBB or higher from S&P and a rating of Baa2 or higher from Moody’s at the
date that it becomes a Lender and which, through its applicable lending office,
is capable of lending to Borrowers without the imposition of any withholding or
similar taxes; provided that no Person determined by any Agent to be
acting in the capacity of a vulture fund or distressed debt purchaser shall be
a Qualified Assignee, and no Person or Affiliate of such Person (other than a
Person that is already a Lender) holding Subordinated Debt or Stock issued by
any Credit Party shall be a Qualified Assignee.


 


“Qualified Plan” means a Pension Plan that is
intended to be tax-qualified under Section 401(a) of the IRC.


 


“Qualifying Lender” has the meaning ascribed to
it in Section 1.14.


 


“Real Estate” has the meaning ascribed to it in
Section 3.6.


 


“Refinancing” means the repayment in full by
Borrowers of the Prior Lender Obligations and the Senior Notes on the Closing
Date and the repayment by UK Borrower and Westaff Australia of intercompany
loans from US Borrower.


 


“Refunded Swing Line Loan” has the meaning
ascribed to it in Section 1.1(d)(iii).


 


“Related Transactions” means the initial
borrowings under the Revolving Loan and the Term Loan on the Closing Date, the
Refinancing, the issuance of the Subordinated Notes, the initial borrowings
under the Australian Loan Documents, the payment of all fees, costs and
expenses associated with all of the foregoing and the execution and delivery of
all of the Related Transactions Documents.


 


“Related Transactions Documents” means the Loan
Documents, the Subordinated Notes, the Australian Loan Documents, and all other
agreements or instruments executed in connection with the Related Transactions.


 


“Release” means any release, threatened
release, spill, emission, leaking, pumping, pouring, emitting, emptying, escape,
injection, deposit, disposal, discharge, dispersal, dumping, leaching or
migration of Hazardous Material in excess of amounts permitted under law in the
indoor or outdoor environment, including the movement of Hazardous Material
through or in the air, soil, surface water, ground water or property.


 


“Requisite Lenders” means Lenders having (a)
more than 66 2/3% of the Commitments of all Lenders, or (b) if the Commitments
have been terminated, more than 66 2/3% of the aggregate outstanding
amount of all Loans.


 


A-24

















 


“Requisite Revolving Lenders” means Lenders
having (a) more than 66 2/3% of the Revolving Loan Commitments of all Lenders,
or (b) if the Revolving Loan Commitments have been terminated, more than 66
2/3% of the aggregate outstanding amount of the Revolving Loan


 


“Reserves” means (a) reserves established by
the Applicable Agent from time to time in respect of Preferential Debts or
Prior Claims, (b) reserves established pursuant to Section 5.4(c), (c) any
reserve established for payroll taxes; (d) any reserve for UK Value Added
Taxes, and (e) such other reserves against Eligible Accounts or Borrowing
Availability of the Applicable Borrower that the Applicable Agent may, in its
reasonable credit judgment, establish from time to time.  Without limiting the generality of the
foregoing, Reserves established to ensure the payment of accrued Interest
Expenses or Indebtedness shall be deemed to be a reasonable exercise of the
Applicable Agent’s credit judgment.


 


“Restricted Payment” means, with respect to any
Credit Party (a) the declaration or payment of any dividend or the incurrence
of any liability to make any other payment or distribution of cash or other
property or assets in respect of Stock; (b) any payment on account of the
purchase, redemption, defeasance, sinking fund or other retirement of such
Credit Party’s Stock or any other payment or distribution made in respect
thereof, either directly or indirectly; (c) any payment or prepayment of
principal of, premium, if any, or interest, fees or other charges on or with
respect to, and any redemption, purchase, retirement, defeasance, sinking fund
or similar payment and any claim for rescission with respect to, any
Subordinated Debt; (d) any payment made to redeem, purchase, repurchase or
retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire Stock of such Credit Party now or hereafter
outstanding; (e) any payment of a claim for the rescission of the purchase or
sale of, or for material damages arising from the purchase or sale of, any
shares of such Credit Party’s Stock or of a claim for reimbursement,
indemnification or contribution arising out of or related to any such claim for
damages or rescission; (f) any payment, loan, contribution, or other transfer
of funds or other property to any Stockholder of such Credit Party other than
payment of compensation in the ordinary course of business to Stockholders who
are employees of such Person; and (g) any payment of management fees (or other
fees of a similar nature) by such Credit Party to any Stockholder of such
Credit Party or its Affiliates.


 


 “Retiree
Welfare Plan” means, at any time, a Welfare Plan that provides for
continuing coverage or benefits for any participant or any beneficiary of a
participant after such participant’s termination of employment, other than
continuation coverage provided pursuant to Section 4980B of the IRC and at the
sole expense of the participant or the beneficiary of the participant.


 


“Revenue Week Account” means an Account for
which the services have been performed and accepted by the customer (as
evidenced by an approved time card) but for which an invoice has not been
issued; provided that each Revenue Week Account shall cease to be an
Eligible Account upon the earlier of (x) seven (7) days after the receipt of
the approved time card or (y) the issuance of an invoice for such Account.


 


A-25

















 


“Revolving Credit Advance” means any US Revolving
Credit Advance or UK Revolving Credit Advance.


 


“Revolving Lenders” means, as of any date of
determination, Lenders having a Revolving Loan Commitment.


 


“Revolving Loan” means, at any time, the sum of
(i) the US Dollar Equivalent of the aggregate amount of Revolving Credit
Advances outstanding to Borrowers plus (ii) the aggregate Letter of
Credit Obligations incurred on behalf of US Borrowers.  Unless the context otherwise requires,
references to the outstanding principal balance of the Revolving Loan shall
include the outstanding balance of Letter of Credit Obligations.


 


“Revolving Loan Commitment” means (a) as to any
Applicable Lender, the aggregate, the commitment of such Lender to make
Revolving Credit Advances or incur Letter of Credit Obligations as set forth on
Annex J to the Agreement or in the most recent Assignment Agreement
executed by such Lender and (b) as to all Applicable Lenders, the aggregate the
commitment of all Lenders to make Revolving Credit Advances or incur Letter of
Credit Obligations, which aggregate commitment shall be the US Dollar
Equivalent of Fifty-four Million Dollars ($54,000,000) on the Closing Date, as
such amount may be adjusted, if at all, from time to time in accordance with
the Agreement.


 


“Revolving Notes” means, collectively, the US
Revolving Notes and the UK Revolving Notes.


 


“Security Agreement” means the Security
Agreement of even date herewith entered into by and among US Agent, on behalf
of itself and  Lenders, and each Credit
Party that is a signatory thereto.


 


“Security Trustee” means the UK Agent as the
Security Trustee for the UK Revolving Lenders under the Collateral Documents to
which the UK Borrower is a party.


 


“Senior Notes” means the notes, in the
aggregate original principal amount of $30,000,000 issued under the Note
Purchase Agreement dated May 15, 1998, as amended.


 


“Senior Noteholders” means the holders of the
Senior Notes.


 


“Share Charge” means the Share Charge between
Term Borrower and the Security Trustee, on behalf of the Lenders, with respect
to the Shares of UK Borrower.


 


“Software” means all “software” as such term is
defined in the Code, now owned or hereafter acquired by any Credit Party, other
than software embedded in any category of Goods, including all computer
programs and all supporting information provided in connection with a
transaction related to any program.


 


A-26

















 


“Solvent” 
means, with respect to any Person on a particular date, that on such
date (a) the fair value of the property of such Person is greater than the
total amount of liabilities, including contingent liabilities, of such Person;
(b) the present fair salable value of the assets of such Person is not less
than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured; (c) such Person does
not intend to, and does not believe that it will, incur debts or liabilities
beyond such Person’s ability to pay as such debts and liabilities mature; and
(d) such Person is not engaged in a business or transaction, and is not about
to engage in a business or transaction, for which such Person’s property would
constitute an unreasonably small capital. 
The amount of contingent liabilities (such as litigation, guaranties and
pension plan liabilities) at any time shall be computed as the amount that, in
light of all the facts and circumstances existing at the time, represents the
amount that can be reasonably be expected to become an actual or matured
liability.  In calculating whether any
Person is Solvent, such calculation shall include any rights of contribution or
subrogation such Party may have as a joint and several obligor or guarantor
under common law, statute or agreement. 
Notwithstanding the foregoing, with respect to the UK Borrower,
“Solvent” means that such company is not insolvent within the meaning of the
Insolvency Act of 1986.


 


“Spot Rate” for any Applicable Currency means
the rate quoted by the Applicable Agent as the spot rate for the purchase by
the Applicable Agent of the Applicable Currency with Dollars, or of Dollars
with the Applicable Currency, as the case may be, at approximately 9:00 a.m.
(Applicable Agent’s local time) on such date as of which the foreign exchange
computation is made for delivery two Business Days later.


 


“Stock” means all shares, options, warrants,
general or limited partnership interests, membership interests or other
equivalents (regardless of how designated) of or in a corporation, partnership,
limited liability company or equivalent entity whether voting or nonvoting,
including common stock, preferred stock or any other “equity security” (as such
term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated
by the Securities and Exchange Commission under the Securities Exchange Act of
1934).


 


“Stockholder” means, with respect to any
Person, each holder of Stock of such Person.


 


“Subordinated Debt” means the Indebtedness of
Westaff (USA) evidenced by the Subordinated Notes.


 


“Subordinated Notes” means (a) that certain
Unsecured Subordinated Note due August 17, 2007 issued by Westaff (USA) in
favor of Dwight S. Pedersen in an aggregate original principal amount of
$1,000,000, together with (b) that certain Amended and Restated Unsecured
Subordinated Note due August 17, 2007 issued by Westaff (USA) in favor of
Robert W. Stover in original principal amount of $2,000,000.


 


A-27

















 


 “Subsidiary”
means, with respect to any Person, (a) any corporation of which an aggregate of
more than 50% of the outstanding Stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of
whether, at the time, Stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) is at the time, directly or indirectly, owned legally or
beneficially by such Person or one or more Subsidiaries of such Person, or with
respect to which any such Person has the right to vote or designate the vote of
50% or more of such Stock whether by proxy, agreement, operation of law or
otherwise, and (b) any partnership or limited liability company in which such
Person and/or one or more Subsidiaries of such Person shall have an interest (whether
in the form of voting or participation in profits or capital contribution) of
more than 50% or of which any such Person is a general partner or may exercise
the powers of a general partner.  Unless
the context otherwise requires, each reference to a Subsidiary shall be a
reference to a Subsidiary of the Parent or a Borrower.


 


“Supermajority Revolving Lenders” means Lenders
having  (a) 80% or more of the Revolving
Loan Commitments of all Lenders, or (b) if the Revolving Loan Commitments have
been terminated, 80% or more of the aggregate outstanding amount of the
Revolving Loan (with the Swing Line Loan being attributed to the Lender making
such Loan) and Letter of Credit Obligations.


 


“Supporting Obligations” means all “supporting
obligations” as such term is defined in the Code, including letters of credit
and guaranties issued in support of Accounts, Chattel Paper, Documents, General
Intangibles, Instruments, or Investment Property.


 


“Swing Line Advance” has the meaning ascribed
to it in Section 1.1(d)(i).


 


“Swing Line Availability” has the meaning
ascribed to it in Section 1.1(d)(i).


 


“Swing Line Commitment” means, as to the Swing
Line Lender, the commitment of the Swing Line Lender to make Swing Line
Advances as set forth on Annex J to the Agreement, which commitment
constitutes a subfacility of the US Revolving Loan Commitment of the Swing Line
Lender, and which commitment shall be Ten Million Dollars ($10,000,000) on the
Closing Date.


 


“Swing Line Lender” means GE Capital.


 


“Swing Line Loan” means, as the context may
require, at any time, the aggregate amount of Swing Line Advances outstanding
to US Borrower.


 


“Swing Line Note” has the meaning ascribed to
it in Section 1.1(d)(ii).


 


“Taxes” means taxes, levies, imposts,
deductions, Charges or withholdings, and all liabilities with respect thereto,
excluding taxes imposed on or measured by the net income of an Agent or a
Lender by the jurisdictions under the laws of which such Agent or such Lender
is organized or conduct business or any political subdivision thereof.


 


A-28

















 


“Term Borrower” has the meaning given that term
in the preamble to the Agreement.


 


“Term Lenders” means those Lenders having Term
Loan Commitments.


 


“Term Loan” has the meaning assigned to it in Section
1.1(b)(i).


 


“Term Loan Commitment” means (a) as to any
Lender with a Term Loan Commitment, the commitment of such Lender to make its
Pro Rata Share of the Term Loan as set forth on Annex J to the
Agreement or in the most recent Assignment Agreement executed by such Lender,
and (b) as to all Lenders with a Term Loan Commitment, the aggregate commitment
of all Lenders to make the Term Loan, which aggregate commitment shall be Five
Million Dollars ($5,000,000) on the Closing Date.  After advancing the Term Loan, each reference to a Lender’s Term
Loan Commitment shall refer to that Lender’s Pro Rata Share of the outstanding
Term Loan.


 


“Term Note” has the meaning assigned to it in Section
1.1(b)(i).


 


“Termination Date” means the date on which (a)
the Loans have been indefeasibly repaid in full, (b) all other Obligations
(other than contingent indemnification obligations that survive the termination
of this Agreement as to which no claim has been made) under the Agreement and
the other Loan Documents have been completely discharged (c) all Letter of
Credit Obligations have been cash collateralized, canceled or backed by standby
letters of credit in accordance with Annex B, and (d) none of Borrowers
shall have any further right to borrow any monies under the Agreement.


 


“Title IV Plan” means a Pension Plan (other
than a Multiemployer Plan), that is covered by Title IV of ERISA, and that any
Credit Party or ERISA Affiliate maintains, contributes to or has an obligation
to contribute to on behalf of participants who are or were employed by any of
them.


 


“Trademark License” means rights under any
written agreement now owned or hereafter acquired by any Credit Party granting
any right to use any Trademark.


 


“Trademark Security Agreements” means the
Trademark Security Agreements in favor of the Applicable Agent executed by the
applicable Credit Party.


 


“Trademarks” means all of the following now
owned or hereafter existing or adopted or acquired by any Credit Party: (a) all
trademarks, trade names, corporate names, business names, trade styles, service
marks, logos, other source or business identifiers, prints and labels on which
any of the foregoing have appeared or appear, designs and general intangibles
of like nature (whether registered or unregistered), all registrations and
recordings thereof, and all applications in connection therewith, including
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
state or territory thereof, or any other country or any political subdivision
thereof; (b)


 


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all reissues, extensions or renewals thereof; and (c) all goodwill
associated with or symbolized by any of the foregoing.


 


“UK Agent” means GE Capital in its capacity as
UK Agent and Security Trustee for the UK Revolving Lenders or its successors
appointed pursuant to Section 9.7.


 


“UK Borrower” has the meaning given that term
in the preamble to the Agreement.


 


“UK Borrowing Base” means, as of any date of
determination by UK Agent, from time to time, an amount equal to (a) up to 85%
of the book value of UK Borrower’s Eligible Accounts (other than Revenue Week
Accounts) in Pounds Sterling plus (b) up to 70% of the book value of UK
Borrower’s Eligible Accounts consisting of Revenue Week Accounts; less
(c) any Reserves established by UK Agent at such time.


 


“UK Debenture” means the Debenture of even date
herewith entered into by and among UK Agent, as Security Trustee, and each
Credit Party that is a signatory thereto.


 


“UK Index Rate” means, for any day, the rate of
interest in effect for such day as published from time to time in The Wall
Street Journal as the British “prime rate” under the heading
“Foreign Prime Rates” in the “Money Rates” section of the Money & Investing
section thereof or, if such rate is not so published, then as published for
such date in any other reference source reasonably selected by the UK
Agent.  Any change in the British prime
rate shall take effect at the opening of business on the day specified in the
publication of such change.  Each
Interest Rate based upon the UK Index Rate shall be adjusted simultaneously
with any change in the UK Index Rate.


 


“UK Revolving Credit Advance” has the meaning given
that term in Section 1.1(c)(i) of the Agreement.


 


“UK Revolving Lender” means GE Capital, the
other Lenders named on the signature pages of the Agreement as UK Revolving
Lenders and, if any such Lender shall decide to assign and/or transfer all or
any portion of the rights and/or Obligations held by it as a UK Revolving
Lender, such term shall include any such assignee of such Lender in accordance
with Section 9.1 of the Agreement.


 


“UK Revolving Loan” means, at any time, the
aggregate amount of UK Revolving Credit Advances outstanding.


 


“UK Revolving Loan Commitment” means (a) as to
any UK Revolving Lender, the commitment of a UK Revolving Lender to make UK
Revolving Credit Advances as set forth in Annex J to the Agreement or in
the most recent Assignment Agreement executed by such UK Revolving Lender and
(b) as to all UK Revolving Lenders, the aggregate commitment of all UK
Revolving Lenders to make UK Revolving Credit Advances, which aggregate
commitment shall


 


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be £2,740,300 on the Closing Date, as such amount may be adjusted, if
at all, from time to time in accordance with the Agreement.


 


 “Unfunded
Pension Liability” means, at any time, the aggregate amount, if any, of the
sum of (a) the amount by which the present value of all accrued benefits under
each Title IV Plan exceeds the fair market value of all assets of such Title IV
Plan allocable to such benefits in accordance with Title IV of ERISA, all
determined as of the most recent valuation date for each such Title IV Plan
using the actuarial assumptions for funding purposes in effect under such Title
IV Plan, and (b) for a period of 5 years following a transaction which might
reasonably be expected to be covered by Section 4069 of ERISA, the liabilities
(whether or not accrued) that could be avoided by any Credit Party or any ERISA
Affiliate as a result of such transaction.


 


“Unused Line Fee” has the meaning ascribed to
it in Section 1.8(b).


 


“US Agent” means GE Capital in its capacity as
Agent for US Revolving Lenders and Term Lenders or its successor appointed
pursuant to Section 9.7.


 


“US Borrower” and “US Borrowers” have
the meaning given these terms in the preamble to the Agreement; provided
that upon its dissolution, each of WCA and WestLP shall cease to be a Borrower
hereunder.


 


“US Borrowing Base” means, as of any date of
determination by US Agent from time to time, an amount equal to (a) up to 85%
of the book value of Eligible Accounts of US Borrowers (other than Revenue Week
Accounts) plus (b) up to 70% of the book value of Eligible Accounts of
US Borrowers consisting of Revenue Week Accounts, less (c) any Reserves
established by US Agent at such time.


 


“US Dollar Equivalent” means, at any time, (a)
as to any amount denominated in Dollars, the amount thereof; (b) as to any
amount denominated in Pounds Sterling, the equivalent amount in Dollars as
determined by the Agent at such time on the basis of the Spot Rate for the
purchase of Dollars with Pounds Sterling on the most recent computation date.


 


“US Index Rate” means, for any day, a floating
rate equal to the higher of (i) the rate publicly quoted from time to time by The Wall
Street Journal as the “base rate on corporate loans posted by at
least 75% of the nation’s 30 largest banks” (or, if The Wall Street Journal
ceases quoting a base rate of the type described, the highest per annum rate of
interest published by the Federal Reserve Board in Federal Reserve statistical
release H.15 (519) entitled “Selected Interest Rates” as the Bank prime
loan rate or its equivalent), and (ii) the Federal Funds Rate plus 50 basis
points per annum.  Each change in any
interest rate provided for in the Agreement based upon the US Index Rate shall
take effect at the time of such change in the US Index Rate.


 


“US Revolving Credit Advance” has the meaning
given that term in Section 1.1(a)(i) of the Agreement.


 


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“US Revolving Lender” means GE Capital, the
other Lenders named on the signature pages of the Agreement as US Revolving
Lenders and, if any such Lender shall decide to assign and/or transfer all or
any portion of the rights and Obligations held by it as a US Revolving Lender
in accordance with Section 9.1 of the Agreement, such term shall include
any such assignee of such Lender.


 


“US Revolving Loan” means, at any time the
aggregate amount of US Revolving Credit Advances outstanding, plus the amount
of Letter of Credit Obligations then outstanding.


 


“US Revolving Loan Commitment” means (a) as to
any US Revolving Lender, the commitment of a US Revolving Lender to make US
Revolving Credit Advances as set forth in Annex J to the Agreement or in
the most recent Assignment Agreement executed by such US Revolving Lender and
(b) as to all US Revolving Lenders, the aggregate commitment of all US
Revolving Lenders to make US Revolving Credit Advances, which aggregate
commitment shall be Fifty Million Dollars ($50,000,000) on the Closing Date, as
such amount may be adjusted, if at all, from time to time in accordance with
the Agreement.


 


“US Subsidiary Guaranty” means the Guaranty of
even date herewith executed by each of Westaff (GP), Inc., Westaff (LP), Inc.,
Western Medical Services, Inc. and Mediaworld International and any other
Guaranty of the Obligations of any Borrower executed and delivered by any
Subsidiary of Parent which is organized under the laws of the United States or
any state thereof.


 


“WCA” means Westaff (CA), Inc.


 


“Welfare Plan” means a Plan described in
Section 3(i) of ERISA.


 


“Westaff Australia” means Westaff (Australia)
Pty. Ltd.


 


 “Westaff
Mexico” means Westaff de Mexico S.A. de C.V.


 


“Westaff Singapore” means Westaff (Singapore)
Pte. Ltd.


 


“Westaff (USA)” means Westaff (USA), Inc.


 


“Western NZ” means Western Staff Services (NZ)
Limited.


 


“Western Staff Services” means Western Staff
Services Ltd. (UK).


 


“WestLP” means Westaff Limited Partnership, a
Delaware limited partnership.


 


“WMS” means Western Medical Services, Inc., a
California corporation.


 


“WMSNY” means Western Medical Services (NY),
Inc., a New York corporation.


 


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Rules of construction with respect to accounting terms
used in the Agreement or the other Loan Documents shall be as set forth in Annex
G.  All other undefined terms contained
in any of the Loan Documents shall, unless the context indicates otherwise,
have the meanings provided for by the Code to the extent the same are used or
defined therein; in the event that any term is defined differently in different
Articles or Divisions of the Code, the definition contained in Article or
Division 9 shall control.  Unless
otherwise specified, references in the Agreement or any of the Appendices to a
Section, subsection or clause refer to such Section, subsection or clause as
contained in the Agreement.  The words
“herein,” “hereof” and “hereunder” and other words of similar import refer to
the Agreement as a whole, including all Annexes, Exhibits and Schedules, as the
same may from time to time be amended, restated, modified or supplemented, and
not to any particular section, subsection or clause contained in the Agreement
or any such Annex, Exhibit or Schedule.


 


Wherever from the context it appears appropriate, each
term stated in either the singular or plural shall include the singular and the
plural, and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, feminine and neuter genders.  The words “including”, “includes” and “include” shall be deemed
to be followed by the words “without limitation”; the word “or” is not
exclusive; references to Persons include their respective successors and
assigns (to the extent and only to the extent permitted by the Loan Documents)
or, in the case of governmental Persons, Persons succeeding to the relevant
functions of such Persons; and all references to statutes and related
regulations shall include any amendments of the same and any successor statutes
and regulations.  Whenever any provision
in any Loan Document refers to the knowledge (or an analogous phrase) of any
Credit Party, such words are intended to signify that an Authorized Officer of
such Credit Party has actual knowledge or awareness of a particular fact or
circumstance or that such Credit Party, if it had exercised reasonable
diligence, would have known or been aware of such fact or circumstance.


 


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