Exhibit 10.8.17


EXECUTION VERSION


FORBEARANCE AND WAIVER AGREEMENT

AND AMENDMENT TO LOAN DOCUMENTS


This FORBEARANCE AND WAIVER
AGREEMENT AND AMENDMENT TO LOAN DOCUMENTS (this “Forbearance, Waiver and
Amendment”), dated as of March 27, 2002 (the “Forbearance, Waiver and
Amendment Effective Date”), is entered into by and among WESTAFF (USA),
INC. (formerly known as Western Staff Services (USA), Inc.) (“WSS”),
WESTERN MEDICAL SERVICES, INC. (“WMS” and together with WSS,
collectively the “Borrowers” and each of WMS and WSS individually, a “Borrower”),
each of the financial institutions party to the Credit Agreement (as that term
is defined below) (collectively, the “Banks”), BANK OF AMERICA, N.A.
(formerly known as Bank of America National Trust and Savings Association) (“BofA”),
as agent for the Banks (in such capacity, the “Agent”) and each of the
parties that are current active Subsidiaries (the “Existing Guarantors”) that
have previously executed that certain Guaranty dated as of March 4, 1998 in
favor of the Agent and the Banks.


RECITALS


A.            The Borrowers, the Banks, the Agent and BofA, as the
letter of credit issuing bank thereunder (in such capacity, the “Issuing
Bank”) entered into that certain Credit Agreement dated as of March 4,
1998, as amended by that certain First Amendment to Credit Agreement dated as
of May 15, 1998, as further amended by that certain Second Amendment to Credit
Agreement dated as of July 23, 1998, as further amended by that certain Third
Amendment to Credit Agreement dated as of January 22, 1999, as further amended
by that certain Fourth Amendment to Credit Agreement dated as of December 15,
1999, as further amended by that certain Fifth Amendment to Credit Agreement
dated as of November 7, 2000, (as amended, the “Credit Agreement”), pursuant
to which the Banks and the Issuing Bank agreed to provide certain financial
accommodations to or for the benefit of the Borrowers upon the terms and
conditions contained therein.  Unless
otherwise defined herein, capitalized terms and matters of construction defined
and established in the Credit Agreement shall be applied herein as defined and
established therein.


B.            Westaff, Inc. (formerly known as Western Staff Services,
Inc.) (“Parent”), Western Medical Services (NY), Inc., (“WMSNY”),
Western Technical Services, Inc. (“WTSI”) and MediaWorld International
(“MediaWorld”) are parties to that certain Guaranty dated as of March 4,
1998 (as amended by this Forbearance, Waiver and Amendment, the “Guaranty”),
made by the Guarantors in favor of the Agent and the Banks; WMSNY and WTST are
no longer active operating companies, and Parent and Mediaworld are the only
Existing Guarantors under the Guaranty.


C.            The Existing Guarantors and the Agent are parties to that
certain Guarantor Security Agreement (Receivables, Inventory, Equipment and
General Intangibles) dated as of March 4, 1998 (as amended by this Forbearance,
Waiver and Amendment, the “Guarantor Security Agreement”).


D.            The Borrowers have notified the Agent that certain Events
of Default have occurred and are continuing. 
Specifically, an Event of Default has occurred and is continuing
(i) under Section 7.01(a) of the Credit Agreement as a result of
the Borrowers’ failure to deliver 


 


 

















 


to the Agent an unqualified
opinion of a certified public account in connection with the audited
consolidated financial statements of the Parent for the fiscal year ended
November 3, 2001; (ii) under Sections 7.01(a) and 7.02(a)
of the Credit Agreement as a result of the Borrowers’ failure to deliver the
annual financial statements and officer’s certificate required thereunder
within the 120 days of the Borrowers’ fiscal year-end as specified therein;
(iii) under Section 8.04(e) of the Credit Agreement as a result of
the Borrowers’ failure to comply with the covenant requiring that loans and
investments in foreign Subsidiaries or Affiliates not exceed 25% of
Consolidated Net Worth as of the fiscal quarter ending on November 3, 2001
and as of the fiscal quarter ending January 26, 2002 (such Events of
Default described in clauses (i), (ii) and (iii) to be referred to
collectively herein as the “Forbearance Events of Default”); (iv) under Section
7.13(b) of the Credit Agreement as a result of the Borrowers’ failure to
cause certain domestic Material Subsidiaries to execute and deliver a guaranty
and security agreement in favor of the Agent for the benefit of the Banks;
(v) under Section 7.03(g) of the Credit Agreement as a result of
the Borrowers’ failure to deliver a written notice to the Agent of the Material
Adverse Effect resulting from the adverse arbitration award obtained by Synergy
Staffing, Inc. against the Parent; (vi) under Section 8.16 of the
Credit Agreement as a result of the Borrowers’ failure to comply with the Total
Debt to EBITDA Ratio covenant for the four fiscal quarter period ending
November 3, 2001 and the four fiscal quarter period ending January 26,
2002; (vii) under Section 8.17 of the Credit Agreement as a result
of the Borrowers’ failure to comply with the Fixed Charge Coverage Ratio
covenant for the four fiscal quarter period ending November 3, 2001 and
the four fiscal quarter period ending January 26, 2002; (viii) under Section 8.15
of the Credit Agreement as a result of the Borrowers’ failure to comply with
the ratio of Total Indebtedness to Total Capitalization covenant as of the
fiscal quarter ending on November 3, 2001 and as of the fiscal quarter
ending on January 26, 2002; and (ix) under Section 8.14 of the
Credit Agreement as a result of the Borrowers failure to comply with the ratio
of current assets to current liabilities as of the fiscal quarter ending on
November 3, 2001 and as of the fiscal quarter ending on January 26,
2002 (such Events of Default described in clauses (iv) through (ix)
above to referred to herein collectively as the “Waiver Events of Default”
and, together with the Forbearance Events of Default, the “Existing Events
of Default”).


E.             The Borrowers have requested that the Agent and the
Banks forbear from exercising their rights and remedies as a result of the
Forbearance Events of Default and that the Agent and the Banks waive the Waiver
Events of Default.


F.             The Agent and the Banks are willing to so forbear from
exercising their rights and remedies with respect to the Forbearance Events of
Default and to waive the Waiver Events of Default.


G.            In addition, the Agent, the Banks and the Borrowers have
agreed to amend the Credit Agreement in certain respects, and the Existing
Guarantors, the Agent and the Banks have agreed to amend the Guaranty and the
Guarantor Security Agreement in certain respects.


AGREEMENT


NOW,
THEREFORE, in consideration of the continued performance by the Borrowers of
their promises and obligations under the Credit Agreement and the other Loan
Documents, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby 


 


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acknowledged, the Borrowers, the Guarantors, the Agent and the Banks
(as applicable) hereby agree as follows:


1.             Ratification and Incorporation of Credit Agreement and
Other Loan Documents. 
Except as expressly modified by this Forbearance, Waiver and Amendment,
(a) the Borrowers hereby acknowledge, confirm and ratify all of the terms
and conditions set forth in, and all of their obligations under, the Credit
Agreement and the other Loan Documents, and (b) all of the terms and
conditions set forth in the Credit Agreement and the other Loan Documents are
incorporated herein by this reference as if set forth in full herein, as
amended hereby and subject to the terms hereof.  Without limiting the generality of the foregoing, the Borrowers
acknowledge and agree that as of March 27, 2002 (i) the aggregate
Effective Amount of all Revolving Loans was $0, and (ii) the aggregate
Effective Amount of all outstanding L/C Obligations was $11,842,500.  The Borrowers represent that they have no
offset, defense, counterclaim, dispute or disagreement of any kind or nature
whatsoever with respect to the amount of such Indebtedness.


2.             Amendment of Credit Agreement.  The Credit Agreement is hereby amended as
follows:


(a)           The definitions of “Applicable
Margin” and “Guarantors” in Section 1.01 of the Credit
Agreement are hereby amended to read in their entirety as follows:


“Applicable Margin” means


(i)            with respect to Base Rate Loans, two percent (2%);


(ii)           with respect to Offshore Rate Loans, the Applicable
Offshore Rate Margin.


“Guarantors” means, when
used in the singular, any one of, and, when used in the plural, collectively
all of, the following companies:  the
Parent, WESTAFF SUPPORT, INC., a California corporation, WESTAFF (CA), INC., a
California corporation, WESTAFF (GP), INC., a California corporation, WESTAFF
(LP), INC., a California corporation and WESTAFF LP, a Delaware limited
partnership, and any other Person that may, after the date hereof, execute a
guaranty of the Borrowers’ obligations under this Agreement.


(b)           The following defined terms are
added, in the appropriate alphabetical order, to Section 1.01 of
the Credit Agreement:


“Forbearance, Waiver and
Amendment Effective Date” means March 28, 2002.


(c)           A new Subsection 2.01(c) is
hereby added to read in its entirety as follows:


 


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(c)           Notwithstanding any other provision
of this Agreement to the contrary, as of the Forbearance, Waiver and Amendment
Effective Date no Bank shall be obligated to make any Offshore Rate Loans to
any Borrower.


(d)           Subsection 11.16(b) is hereby
amended by deleting the phrase “EXCEPT AS OTHERWISE LIMITED BY SECTION 11.17”
from the beginning of the first sentence thereof.


(e)           Section 11.17 is hereby
amended to reading in its entirety as follows:


11.17       Waiver to Right to Trial by Jury.


EACH PARTY TO THIS AGREEMENT
HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT
OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY
JURY.


(f)            Schedule 2.01(b) is hereby
amended in its entirety as set forth in Exhibit A hereto.


3.             Amendment of Guaranty.  The Guaranty is hereby amended as follows:


(a)           Subsection 4.8(b) is hereby
amended by deleting the phrase “EXCEPT AS OTHERWISE LIMITED BY SECTION 4.9”
from the beginning of the first sentence thereof.


(b)           Section 4.9 is hereby amended
to read in its entirety as follows:


4.9           Waiver of Right to Trial by Jury.


EACH PARTY TO THIS GUARANTY
HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION ARISING UNDER THIS GUARANTY OR ANY OTHER LOAN DOCUMENT OR IN
ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO OR THERETO OR ANY OF THEM WITH RESPECT TO THIS GUARANTY OR ANY OTHER
LOAN DOCUMENT, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR
TORT OR OTHERWISE; AND EACH 


 


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PARTY HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.


4.             Amendment of Guarantor Security Agreement.  The Guarantor Security Agreement is hereby
amended as follows:


(a)           Section 18 is hereby amended
by deleting the phrase “EXCEPT AS OTHERWISE LIMITED BY SECTION 19” from the
beginning of the first sentence thereof.


(b)           Section 19 is hereby amended
in its entirety to read as follows:


SECTION 19  Waiver of Right to Trial By Jury.  EACH PARTY TO THIS AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH
RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR
TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY
JURY.


5.             Forbearance in Respect of Forbearance Events of
Default.


(a)           Acknowledgment.  The Borrowers hereby acknowledge and agree
that the Forbearance Events of Default have occurred and are continuing, which
entitle the Agent, at the request or with the consent of the Majority Banks, to
exercise certain rights and remedies, on its behalf and on behalf of the Banks,
under the Loan Documents and applicable law, and the Borrowers further
represent and warrant that as of the date hereof no Events of Default (other
than the Existing Events of Default) have occurred and are continuing.  The Borrowers hereby acknowledge and agree
that the Agent, at the request or with the consent of the Banks, has the
presently exercisable right, on its behalf and on behalf of the Banks, to
declare the Obligations to be immediately due and payable under the terms of
the Credit Agreement but the Agent, at the request of the Banks, has agreed to
forbear exercising such rights in accordance with this Agreement.


 


 


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(b)           Forbearance.


(i)            In reliance upon the
representations, warranties and covenants of the Borrowers contained in this
Forbearance, Waiver and Amendment, and subject to the terms and conditions of
this Forbearance, Waiver and Amendment and any documents or instruments
executed in connection herewith, the Agent and the Banks each agree, during the
period (the “Forbearance Term”) beginning on the date hereof and ending
on the earlier of (i) the occurrence of any Event of Default other than an
Existing Event of Default or (ii) April 30, 2002, to forbear from
exercising their rights and remedies under the Credit Agreement and other Loan
Documents in respect of or arising out of the Forbearance Events of Default,
subject to the conditions, amendments and modifications contained herein.


(ii)           Upon the termination of the
Forbearance Term, the agreement of the Agent and the Banks to forbear shall
automatically and without further action terminate and be of no force and
effect, it being expressly agreed that the effect of such termination will be
to permit the Agent and the Banks to exercise such rights and remedies
immediately, without any further notice, passage of time or forbearance of any
kind unless the Forbearance Events of Default are cured.


6.             Waiver of the Waiver Events of
Default.


(a)           Acknowledgment.  The Borrowers hereby acknowledge and agree
that the Waiver Events of Default have occurred and are continuing, each of
which entitles the Agent, at the request or with the consent of the Majority
Banks, to exercise certain rights and remedies, on its behalf and on behalf of
the Banks, under the Loan Documents and applicable law, and the Borrowers
further represent and warrant that as of the date hereof no Events of Default
(other than the Existing Events of Default) have occurred and are
continuing.  The Borrowers hereby
acknowledge and agree that the Agent, at the request or with the consent of the
Banks, has the presently exercisable right, on its behalf and on behalf of the
Banks, to declare the Obligations to be immediately due and payable under the
terms of the Credit Agreement but the Agent, at the request of the Banks, has
agreed to waive the Waiver Events of Default in accordance with this Agreement.


                (b)           Waiver.  Subject to the terms and conditions of this
Forbearance, Waiver and Amendment, the Agent and the Banks each agree to waive
the Waiver Events of Default.


7.             No Other Waivers; Reservation of
Rights.


(a)           Other than the Waiver Events of
Default, the Agent and the Banks have not waived, are not by this Forbearance,
Waiver and Amendment waiving, and have made no commitment to waive, any Events
of Default that may be continuing on the date hereof (including the Forbearance
Events of Default) or any Events of Default that may occur after the date
hereof (whether similar to the Existing Events of Default or otherwise), and
the Agent and the Banks have not agreed to forbear with respect to any of its
rights or remedies concerning any Events of Default (other than, during the
Forbearance Term, the Forbearance Events of Default to the extent expressly set
forth herein), that may have occurred or are continuing as of the date hereof
or that may occur after the date hereof.


 


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(b)           Subject to Section 5(b) above
(solely with respect to the Existing Events of Default) and to Section 6(b)
above (solely with respect to the Waiver Events of Default), the Agent and the
Banks reserve the right, in their discretion, to exercise any or all of their
rights and remedies under the Credit Agreement and the other Loan Documents as
a result of any Events of Default that may be continuing on the date hereof or
any Event of Default that may occur after the date hereof, and the Agent and
the Banks have not waived any of such rights or remedies, and nothing in this
Forbearance, Waiver and Amendment, and no delay on their part in exercising any
such rights or remedies, should be construed as a waiver of any such rights or
remedies.


8.             Conditions to Effectiveness.  The effectiveness of this Forbearance,
Waiver and Amendment is subject to satisfaction of each of the following
conditions:


(a)           the receipt by the Agent and the
Banks of copies of this Forbearance, Waiver and Amendment duly executed by the
Borrowers;


(b)           the receipt by the Agent of duly
executed copies of a Certificate of Additional Guarantor, in substantially the
form of Exhibit B attached hereto, from each of Westaff (CA), Inc. (“WCA”),
Westaff (GP), Inc. (“WGP”), Westaff (LP), Inc. (“WLP”), and
Westaff LP (“LP” and, collectively with WCA, WGP and WLP, the “Additional
Guarantors”), whereby the Additional Guarantors shall elect and agree to be
bound by all the terms, conditions and obligations applicable to a Guarantor
under the Guaranty (as amended by this Forbearance, Waiver and Amendment);


(c)           the receipt by the Agent of a
Guaranty, in substantially the form of Exhibit C attached hereto, duly
executed by Westaff Support, Inc. (“WSI”) in favor of the Agent (the
“WSI Guaranty”);


(d)           the receipt by the Agent of duly
executed copies of a Certificate of Additional Grantor, in substantially the
form of Exhibit D attached hereto, from each of the Additional
Guarantors and WSI, whereby the Additional Guarantors and WSI shall elect and
agree to be bound by all the terms, conditions and obligations applicable to a
Grantor (as that term is defined in the Guarantor Security Agreement) under the
Guarantor Security Agreement (as amended by this Forbearance, Waiver and
Amendment) and shall pledge, assign, transfer, hypothecate and set over to the
Agent for is benefit and the ratable benefit of the Banks a security interest
in all of the Additional Guarantors’ and WSI’s right, title and interest in, to
and under certain property;


(e)           the recordation of the Deed of Trust,
Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing,
dated as of March 26, 2002, made by WSI to Chicago Title Company for the
benefit of BofA, as agent (the “Deed of Trust”);


(f)            the receipt by the Agent of evidence
satisfactory to the Agent that the Borrowers have delivered all promissory notes
made by Licensees or Franchisees, along with copies of all security agreements,
guaranties and stock certificates delivered in connection with such promissory
notes, required to be delivered to the Agent pursuant to Sections 7.14(c)
and 8.04(c) of the Credit Agreement, with the exception of security
documents relating to real 


 


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property in the state of Florida, and with the
exception of any foreign Subsidiary promissory notes not available on the date
hereof and to be delivered by the Borrowers pursuant to Section 9(g)
hereof;


(g)           the receipt by the Agent of such
other documents, agreements or filings as the Agent may reasonably request to
evidence the Borrowers’ compliance with the terms and conditions of the Credit
Agreement, the other Loan Documents, and this Forbearance, Waiver and
Amendment;


(h)           satisfactory arrangements by
Borrowers acceptable to the Agent for payment in full by the Borrowers of all
unpaid costs and expenses (including Attorney Costs) incurred by the Agent as
of the date hereof in the development, preparation, negotiation and execution
of this Forbearance, Waiver and Amendment and any other amendment, amendment
and restatement, waiver, consent, restructuring or other modification of the
provisions to the Credit Agreement or any other Loan Documents (whether or not
the transactions contemplated hereby or thereby have been consummated), the
amount of such Attorney Costs incurred through March 25, 2002 being One Hundred
Sixty Thousand Three Hundred Forty-Six Dollars and Ninety-One Cents
($160,346.91);


(i)            satisfactory arrangements by
Borrowers acceptable to the Agent for payment in full by the Borrowers of all
title insurance premiums, fees and expenses, including escrow and recording
fees, in connection with the recordation of the Deed of Trust;


(j)            payment in full by the Borrowers of
a forbearance fee as set forth in that certain Fee Letter Agreement dated as of
March 26, 2002 between the Borrowers and the Agent; and


(k)           the absence of any Defaults or Events
of Default, other than the Existing Events of Default.


9.             Certain Agreements of the Loan
Parties.


(a)           Negative Pledge Covenant.  Each Borrower hereby covenants and agrees
that, during the Forbearance Term, no Borrower shall, and nor shall any
Borrower suffer or permit any other Loan Party to, directly or indirectly,
make, create, incur, assume or suffer to exist any Lien upon or with respect to
any part of its Property, whether now owned or hereafter acquired, other than
(i) Liens in existence as of the date of this Forbearance, Waiver and
Amendment, including the Lien on $5,500,000 of cash held at Travellers
Indemnity to support insurance obligations of WSS, (ii) the Lien evidenced
by the Deed of Trust, and (iii) Liens in favor of the Agent for any Cash
Collateralized amounts as required by Section 9(b).


(b)           Cash Collateralization of
Additional Letters of Credit. 
Notwithstanding any provision in the Credit Agreement or any other Loan
Document, the Borrowers agree that, during the Forbearance Term, the Issuing
Bank shall not be obligated to Issue, and no Bank shall be obligated to
participate in, Letters of Credit for the account of WSS unless the Borrowers
(in addition to complying with the applicable terms and conditions of the
Credit Agreement) Cash Collateralize, for the benefit of the Agent and the
Banks only (and not the Note Purchasers), such 


 


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additional Letters of Credit in an amount equal to the
maximum amounts available for drawings under such additional Letters of Credit.


(c)           Availability of Revolving Loans.


(i)            Notwithstanding any provision in the
Credit Agreement or any other Loan Document, the Borrowers agree that, except
as set forth in clause (ii) below, during the Forbearance Term no Bank shall be
obligated to make Revolving Loans to the Borrowers, unless all of the Banks
shall agree in writing and in their sole discretion that Revolving Loans shall
be available during the Forbearance Term.


(ii)           Notwithstanding clause (i) above, the
Banks agree to make, on a limited basis, Revolving Loans (“Limited Revolving
Loans”) to WSS during the Forbearance Term, subject to the following
conditions:


(A)          WSS shall submit to the Agent before
11:00 a.m. on the date (any such date, a “Delivery Date”) two (2)
Business Days prior to the requested Borrowing Date for a Limited Revolving
Loan both of the following:  (I) a
certificate substantially in the form of Exhibit E attached hereto (a “Borrowing
Base Certificate”) setting forth the amount of Acceptable Accounts,
calculated as of the Friday immediately preceding such Delivery Date, and (II)
an irrevocable written notice in accordance with Section 11.02 of the
Credit Agreement in the form of the Request for Borrowing attached as Exhibit
F hereto.  For purposes of this subclause
(A), the term “Acceptable Accounts” shall have the meaning ascribed to it
in Attachment 1 to Exhibit E hereto.


(B)           The Effective Amount of Limited
Revolving Loans during the Forbearance Term shall not exceed two million
dollars ($2,000,000.00) at any one time.


(C)           After giving effect to any Limited
Revolving Loan, the Effective Amount of all Revolving Loans and L/C Obligations
(with the exception of L/C Obligations that are Cash Collateralized) shall not
exceed an amount equal to the lesser of (I) the Aggregate Commitment and (II)
the Borrowing Base (as that term is defined in Attachment 1 to Exhibit
E hereto).


(D)          WSS shall repay in full the Effective
Amount of such Limited Revolving Loans within three (3) Business Days after the
date that the proceeds of such Limited Revolving Loans are first made available
to WSS.


(E)           WSS shall use such Revolving Loans
only for the purposes of paying any outstanding payroll or withholding tax
obligations incurred in the ordinary course of the Borrowers’, the Parent’s or
any domestic Subsidiary’s business.


(F)           No Default or Event of Default (other
than the Existing Events of Default) shall have occurred and be continuing.


(iii)          The Borrowers agree that the failure
by WSS to satisfy any of the conditions set forth in subclauses (ii)(C), (D)
and (E) shall constitute an Event of Default under Section 9.01(c)
of the Credit Agreement.


 


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(d)           Release of Claims.


(i)            Each Borrower hereby acknowledges
and agrees that it does not have any defenses, counterclaims, offsets,
cross-claims, claims or demands of any kind or nature whatsoever that can be
asserted to reduce or eliminate all or any part of the liability of such
Borrower to repay the Agent, any Bank or the Issuing Bank as provided in the
Credit Agreement and the other Loan Documents or to seek affirmative relief or
damages of any kind or nature from the Agent, any Bank or the Issuing
Bank.  Each Borrower hereby voluntarily
and knowingly releases and forever discharges the Agent, the Banks and the
Issuing Bank and the Agent’s, each of the Banks’ and the Issuing Bank’s
predecessors, agents, employees, consultants, advisors, attorneys, successors
and assigns, from all possible claims, demands, actions, causes of action,
damages, costs, expenses, and liabilities whatsoever, known or unknown,
anticipated or unanticipated, suspected or unsuspected, fixed, contingent, or
conditional, at law or in equity, originating in whole or in part on or before
the Forbearance, Waiver and Amendment Effective Date, which such Borrower may
now have or may hereafter have against the Agent, any Bank or the Issuing Bank
or the Agent’s, any Bank’s or the Issuing Bank’s predecessors, agents,
employees, consultants, advisors, attorneys, successors and assigns, if any,
and irrespective of whether or not any such claims arise out of contract, tort,
violation of law or regulations, or otherwise, including without limitation,
the exercise of any rights and remedies under this Forbearance, Waiver and
Amendment, the Credit Agreement or the other Loan Documents, and negotiation
and execution of this Forbearance, Waiver and Amendment, the Credit Agreement
and the other Loan Documents.


(ii)           Each Borrower acknowledges and agrees
that it understands the meaning and effect of Section 1542 of the California
Civil Code which provides:


“A
general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor.”


Each Borrower agrees to assume the risk of any and all
unknown, unanticipated or misunderstood defenses, claims, contracts,
liabilities, indebtedness and obligations which are released, waived and
discharged pursuant to this Subsection 5(d).  Each Borrower hereby waives and relinquishes all rights and
benefits which it might otherwise have under the aforementioned Section 1542 of
the California Civil Code or any similar law, to the extent such law may be
applicable, without regard to the release of such unknown, unanticipated or
misunderstood defenses, claims, contracts, liabilities, indebtedness and
obligations.  To the extent that such
laws may be applicable, each Borrower waives and releases any right or defense
which it might otherwise have under any other law or any applicable
jurisdiction which might limit or restrict the effectiveness or scope of any of
its waivers or releases hereunder.


(e)           Attorney Costs, Fees and Expenses.  On a monthly basis, within five (5) business
days of receipt of a written invoice from the Agent, the Borrowers agree (i) to
pay or reimburse the Agent for all reasonable costs and expenses incurred in
connection with the development, preparation, negotiation and execution of any
amendment, amendment and restatement, waiver, consent, restructuring or other
modification of the provisions of this 


 


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Forbearance, Waiver and Amendment, the Credit
Agreement and the other Loan Documents (whether or not the transactions
contemplated hereby or thereby are consummated), and the consummation and
administration of the transactions contemplated hereby and thereby, including
all Attorney Costs, and (ii) to pay or reimburse the Agent and each Bank for
all reasonable costs and expenses incurred in connection with the enforcement,
attempted enforcement, or preservation of any rights or remedies under this
Forbearance, Waiver and Amendment, the Credit Agreement or the other Loan
Documents (including all such costs and expenses incurred during any “workout”
or restructuring in respect of the Obligations and during any legal proceeding,
including any proceeding under any Debtor Relief Law), including all Attorney
Costs.  The foregoing costs and expenses
shall include all search, filing, recording, title insurance and appraisal
charges and fees and taxes related thereto, and other out-of-pocket expenses
incurred by the Agent and the cost of independent public accountants and other
outside experts retained by the Agent or any Bank.  The agreements in this Section 9(e) shall survive the
termination of the Commitments and repayment of all other Obligations.


(f)            Payment of Appraisal Fees.  The Borrowers agree to pay in full, within
five (5) Business Days of the Forbearance, Waiver and Amendment Effective Date,
all real estate appraisal fees incurred in connection with the Deed of Trust.


(g)           Delivery of Foreign Subsidiary
Promissory Notes.  Notwithstanding
the requirements set forth in Section 5(m) of the Borrower Security
Agreement and Section 5(m) of the Guarantor Security Agreement that
the Borrowers and the Guarantors immediately deliver to the Agent all instruments
held by such Person (including instruments executed and delivered by foreign
Subsidiaries), the Borrowers and the Guarantors (and the Additional Guarantors
and WSI, having agreed to become Grantors under the Guarantor Security
Agreement and to be bound by the terms, conditions and obligations of a Grantor
thereunder) agree, within fourteen (14) Business Days of the Forbearance,
Waiver and Amendment Effective Date, to deliver to the Agent all promissory
notes made by foreign Subsidiaries in favor of any Borrower, Guarantor or
Additional Guarantor (appropriately endorsed or accompanied by appropriate
instruments of assignment or transfer).


10.           Certain
Agreements of the Agent and the Banks.


(a)           Negotiation of Amendment and
Restatement of Credit Agreement. 
The Agent and the Banks agree (subject, among other things, to their
satisfactory review of the financial condition and prospects of the Borrowers),
to negotiate in good faith with the Borrowers an amendment and restatement of
the Credit Agreement in order to replace the Credit Agreement with a new credit
facility with WSS as the sole borrower and on terms acceptable to the Agent and
the Banks; provided, however, that nothing in this Section
10(a) shall obligate or commit the Agent or any Bank to enter into any
agreement to amend and restate the Credit Agreement.


11.           Miscellaneous.


(a)           Entire Agreement.  This Forbearance, Waiver and Amendment,
together with the Credit Agreement and the other Loan Documents, is the entire
agreement between the parties hereto with respect to the subject matter
hereof.  This Forbearance, Waiver and 


 


11

















 


Amendment supersedes all prior and contemporaneous
oral and written agreements and discussions with respect to the subject matter
hereof.  Except as otherwise expressly
modified herein, the Loan Documents shall remain in full force and effect.


(b)           Counterparts.  This Forbearance, Waiver and Amendment may
be executed in identical counterpart copies, each of which shall be an original,
but all of which shall constitute one and the same agreement.  Delivery of an executed counterpart of a
signature page to this Forbearance, Waiver and Amendment by facsimile
transmission shall be effective as delivery of a manually executed counterpart
thereof.


(c)           Headings.  Section headings used herein are for
convenience of reference only, are not part of this Forbearance, Waiver and
Amendment, and are not to be taken into consideration in interpreting this
Forbearance, Waiver and Amendment.


(d)           Recitals.  The recitals set forth at the beginning of
this Forbearance, Waiver and Amendment are true and correct, and such recitals
are incorporated into and are a part of this Forbearance, Waiver and Amendment.


(e)           Governing Law.  This Forbearance, Waiver and Amendment shall
be governed by, and construed and enforced in accordance with, the laws of the
State of California applicable to contracts made and performed in such state,
without regard to the principles thereof regarding conflict of laws.


(f)            Effect.  Upon the effectiveness of this Forbearance,
Waiver and Amendment, from and after the date hereof, each reference in the
Credit Agreement to “this Agreement,” “hereunder,” “hereof,” or words of like
import shall mean and be a reference to the Credit Agreement as amended hereby,
and each reference in the other Loan Documents to the Credit Agreement,
“thereunder,” “thereof,” or words of like import shall mean and be a reference
to the Credit Agreement as amended hereby.


(g)           No Novation.  The execution, delivery, and effectiveness
of this Forbearance, Waiver and Amendment shall not (a) limit, impair,
constitute a waiver of, or otherwise affect any right, power, or remedy of the
Agent or the Banks under the Credit Agreement or any other Loan Document, except
as specifically set forth herein, (b) constitute a waiver of any provision
in the Credit Agreement or in any of the other Loan Documents, except as
specifically set forth herein, or (c) except as expressly modified by this
Forbearance, Waiver and Amendment, alter, modify, amend, or in any way affect
any of the terms, conditions, obligations, covenants, or agreements contained
in the Credit Agreement, all of which are ratified and affirmed in all respects
and shall continue in full force and effect.


(h)           Conflict of Terms.  In the event of any inconsistency between
the provisions of this Forbearance, Waiver and Amendment and any provision of
the Credit Agreement, the terms and provisions of this Forbearance, Waiver and
Amendment shall govern and control.


[THE SIGNATURE PAGES FOLLOW]


 


 


12

















 


IN WITNESS WHEREOF, this
Forbearance Agreement and Sixth Amendment to Credit Agreement has been duly
executed as of the date first written above.


“Borrowers”



WESTAFF (USA), INC.





By:      /s/ Dirk A. Sodestrom

Name:  Dirk A. Sodestrom

Title:  Senior Vice President and
Chief Financial Officer


WESTERN
MEDICAL SERVICES, INC.





By: /s/ Gary A. Kittleson

Name: Gary A. Kittleson

Title:  Executive Vice President and
Chief Financial Officer


“Agent”



BANK OF AMERICA, N.A.





By:      /s/ Dora A. Brown

Name: Dora A. Brown

Title:  Vice President


“Banks”



BANK OF AMERICA, N.A.





By:      /s/ Carol M. Clements

Name:  Carol M. Clements

Title:  Senior Vice President


COMERICA
BANK—CALIFORNIA





By:      /s/ Ronald Tucker

Name: Ronald Tucker, Vice President


13

















 


Title:
________________________________________


UNITED
CALIFORNIA BANK (formerly known as Sanwa Bank California)





By:      /s/ Jerry M. Dermott

Name: Jerry M. Dermott

Title: Vice President


“Existing Guarantors”



WESTAFF, INC.





By:      /s/ Dirk A. Sodestrom

Name: Dirk A. Sodestrom

Title: Senior Vice President and Chief Financial Officer


MEDIAWORLD
INTERNATIONAL





By:      /s/ Dirk A. Sodestrom

Name: Dirk A. Sodestrom

Title: Senior Vice President and Chief Financial Officer


 


 


14

















 


Exhibit A



SCHEDULE 2.01(b)

REVOLVING COMMITMENT


I.              Revolving
Commitment before the Forbearance, Waiver and Amendment Effective Date:


	
   

  	
  Name of Bank

  	
  Commitment Percentage

  	
  Revolving Commitment

  	
  L/C Commitment

  
	
   

  	
  Bank of America, N.A.
  (formerly known as Bank of America National Trust and Savings Association)

  	
  43.420210000%

  	
  $39,078,189

  	
  $8,684,042

  
	
   

  	
  Comerica
  Bank—California

  	
  33.333333333%

  	
  $30,000,000

  	
  $6,666,667

  
	
   

  	
  United California Bank
  (formerly known as Sanwa Bank California)

  	
  23.246456667%

  	
  $20,921,811

  	
  $4,649,291

  
	
   

  	
  TOTAL

  	
  100.000000000%

  	
  $90,000,000

  	
  $20,000,000

  



 


II.            Revolving
Commitment on and as of the Forbearance, Waiver and Amendment Effective Date:


	
   

  	
  Name of Bank

  	
  Commitment Percentage

  	
  Revolving Commitment

  	
  L/C Commitment

  
	
   

  	
  Bank of America, N.A.
  (formerly known as Bank of America National Trust and Savings Association)

  	
  43.420210000%

  	
  $11,289,255

  	
  $8,684,042

  
	
   

  	
  Comerica
  Bank—California

  	
  33.333333333%

  	
  $8,666,667

  	
  $6,666,667

  
	
   

  	
  United California Bank
  (formerly known as Sanwa Bank California)

  	
  23.246456667%

  	
  $6,044,078

  	
  $4,649,291

  
	
   

  	
  TOTAL

  	
  100.000000000%

  	
  $26,000,000

  	
  $20,000,000

  



 


 


A-1

















 


Exhibit B



CERTIFICATE
OF ADDITIONAL GUARANTOR


 


Reference is made to that
certain Guaranty dated as of March ___, 1998 (as amended, amended and restated,
modified, supplemented or renewed from time to time, the “Guaranty”), by
and among the Guarantors from time to time party thereto in favor of BANK OF
AMERICA, N.A. (formerly known as Bank of America National Trust and Savings
Association) (“BofA”) for its benefit and the benefit of the financial
institutions (the “Banks”) from time to time party to the Credit
Agreement dated as of March 4, 1998 (as now in effect or hereafter extended,
renewed, modified, supplemented, amended or restated from time to time, the “Credit
Agreement”) among WESTAFF (USA), INC. (formerly known as Western Staff
Services (USA), Inc.) (“WUSAI”), WESTERN MEDICAL SERVICES, INC. (“WMS”
and, together with WUSAI, each a “Borrower” and collectively, the “Borrowers”),
the Banks referred to therein and BofA as agent for the Banks (in such
capacity, the “Agent”).  Unless
otherwise defined herein or in the Guaranty, capital terms used in this
Certificate have the meanings given to them in the Credit Agreement.


Each of Westaff (CA), Inc.,
a California Corporation, Westaff (GP), Inc., a California corporation, Westaff
(LP), Inc., a California corporation and Westaff Limited Partnership, a
Delaware limited partnership (individually and collectively “Additional
Guarantor”), is a Subsidiary of Westaff (USA), Inc. (with the exception of
Westaff Limited Partnership, which is 99% owned by Westaff (LP), Inc., and 1%
owned by Westaff (GP), Inc.  Each
Additional Guarantor hereby elects to become a Guarantor under the Guaranty,
and agrees to be bound by all the terms, conditions, and obligations applicable
to a Guarantor thereunder as of the date hereof.


Each Additional Guarantor
hereby represents and warrants that each of the representations and warranties
set forth in the Guaranty are true and correct as of the date hereof as
applicable to Additional Guarantor.


This Certificate is dated
March ___, 2002.


	
  WESTAFF (CA), INC.  

   

  By:______________________________________________

  Dirk
  A. Sodestrom 

  Title:
  ______________________________________

  	
   

  	
  WESTAFF (GP), INC.  

   

  By:______________________________________________

  Dirk
  A. Sodestrom 

  Title:
  ______________________________________

  
	
   

  
	
  WESTAFF (LP), INC.  

   

  By:
  _____________________________________________

  Dirk A. Sodestrom

  Title:______________________________________

  	
   

  	
  WESTAFF LIMITED PARTNERSHIP, A DELAWARE 

  LIMITED PARTNERSHIP 

   

  BY: WESTAFF
  (GP), INC., ITS GENERAL PARTNER  

   

  By:
  ____________________________________________

  Dirk A. Sodestrom 

  Title:_______________________________________

  
	
   

  	
   

  	
   

  



 


 


 


B-1

















 


 


 


ACCEPTED AND AGREED TO:


 


BANK OF AMERICA, N.A., in
its capacity as Agent


 


By:                                                                                        


Name:                                                                                   


Title:  
                                                                                    


 


 


B-2

















 


 


Exhibit C


 


FORM OF WSI GUARANTY


 


[SEE ATTACHED]


 


 


 


C-1

















 


 


Exhibit D


 


CERTIFICATE OF ADDITIONAL GRANTOR


Reference is made to that
certain Guarantor Security Agreement (Receivables, Inventory, Equipment and
General Intangibles) dated as of March ___, 1998 (as now in effect or hereafter
extended, renewed, modified, supplemented, amended or restated from time to
time, the “Security Agreement”), by and among the Grantors from time to
time party thereto in favor of BANK OF AMERICA, N.A. (formerly known as Bank of
America National Trust and Savings Association) (“BofA”) for its benefit
and the benefit of the financial institutions (the “Banks”) from time to
time party to the Credit Agreement dated as of March 4, 1998 (as now in effect
or hereafter extended, renewed, modified, supplemented, amended or restated
from time to time, the “Credit Agreement”) among WESTAFF (USA), INC.
(formerly known as Western Staff Services (USA), Inc.) (“WUSAI”),
WESTERN MEDICAL SERVICES, INC. (“WMS” and, together with WUSAI, each a “Borrower”
and collectively, the “Borrowers”), the Banks referred to therein and
BofA, as agent for the Banks (in such capacity, the “Agent”).  Unless otherwise defined herein or in the
Security Agreement, or in the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of California, capitalized terms used
in this Certificate have the meanings given to them in the Credit Agreement.


Each of Westaff Support,
Inc., a California corporation, Westaff (CA), Inc., a California Corporation (“WCAI”),
Westaff (GP, Inc.), a California corporation (“WGPI”), Westaff (LP),
Inc., a California corporation (“WLPI”) and Westaff Limited Partnership,
a Delaware limited partnership (“WLP”) (individually and collectively “Additional
Grantor”), is a Subsidiary of WUSAI (with the exception of WLP, which is
99% owned by WLPI and 1% owned by WGPI).  Each Additional Grantor hereby elects to become a Grantor under
the Security Agreement, and agrees to be bound by all the terms, conditions,
and obligations applicable to a Grantor thereunder as of the date hereof.


As security for the payment
and performance of the Secured Obligations, each Additional Grantor hereby
pledges, assigns, transfers, hypothecates and sets over to the Agent for its
benefit and for the ratable benefit of the Banks, and hereby grants to the
Agent for its benefit and for the ratable benefit of the Banks, a security
interest in, all of such Additional Grantor’s right, title and interest in, to
and under the following property, wherever located and whether now existing or
owned or hereafter acquired or arising: (i) all Accounts; (ii) all Chattel
Paper; (iii) all Deposit Accounts; (iv) all Documents; (v) all Equipment; (vi)
all General Intangibles; (vii) all Instruments; (viii) all Inventory; (ix) all
Books; (x) all Investment Property; (xi) all Securities Accounts; (xii) all
Rights to Payment; (xiii) all Commercial Tort Claims, and (xiv) all products
and Proceeds of any and all of the foregoing.


Each Additional Grantor
hereby represents and warrants to the Agent that:


(a)           Such
Additional Grantor’s name as it appears in official filings in the state of its
incorporation or other organization, the type of entity of Additional Grantor
(including corporation, partnership, limited partnership or limited liability
company), the organizational identification number issued by Additional Grantor’s
state of incorporation or organization or a statement that no such number has
been issued, 


 


D-1

















 


Additional Grantor’s
state of organization or incorporation and the location of Additional Grantor’s
chief executive office and principal place of business are set forth in Schedule
1 hereto.  Such Additional Grantor
has only one state of incorporation or organization.


(b)           All
locations where Books pertaining to the Rights to Payment are kept, including
all equipment necessary for accessing such Books and the names and addresses of
all service bureaus, computer or data processing companies and other Persons
keeping any Books or collecting Rights to Payment for such Additional Grantor,
are set forth Schedule 1 hereto.


(c)           All
trade names and trade styles under which such Additional Grantor presently
conducts its business operations are set forth in Schedule 1 hereto,
and, except as set forth in Schedule 1 hereto, such Additional Grantor
has not, at any time during the preceding five years: (i) been known as or used
any other corporate, trade or fictitious name; (ii) changed its name;
(iii) been the surviving or resulting corporation in a merger or
consolidation; or (iv) acquired through asset purchase or otherwise any
business of any Person.


(d)           No
Inventory is stored with any bailee, warehouseman or similar Person or on any
premises leased to such Additional Grantor, nor has any Inventory been
consigned to Additional Grantor or consigned by Additional Grantor to any
Person or is held by such Additional Grantor for any Person under any “bill and
hold” or other arrangement, except as set forth in Schedule 1 hereto.


(e)           Except
as set forth in Schedule 1 hereto, such Additional Grantor (directly or
through any Subsidiary) does not own, possess or use under any licensing
arrangement any patents, copyrights, trademarks, service marks or trade name,
nor is there currently pending before any Governmental Authority any
application for registration of any patent, copyright, trademark, service mark
or trade name.


(f)            The
names and addresses of all financial institutions at which such Additional
Grantor maintains Deposit Accounts or Securities Accounts, and the account
numbers and account names of such Deposit Accounts and Securities Accounts, are
set forth in Schedule 1 hereto.


(g)           Each
of the remaining representations and warranties set forth in the Security
Agreement are true and correct as of the date hereof as applicable to such
Additional Grantor.


 


 


D-2

















 


This Certificate is dated March______, 2002.


 


 


 


	
  WESTAFF SUPPORT, INC.  

   

  By:______________________________________________

  Dirk
  A. Sodestrom 

  Title:
  ______________________________________

  	
   

  	
  WESTAFF (LP), INC.  

   

  By:______________________________________________

  Dirk
  A. Sodestrom 

  Title:
  ______________________________________

  
	
   

  
	
  WESTAFF (CA), INC.  

   

  By:
  _____________________________________________

  Dirk A. Sodestrom

  Title:______________________________________

  	
   

  	
  WESTAFF (GP), INC.  

   

  By:______________________________________________

  Dirk
  A. Sodestrom 

  Title: ______________________________________

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  WESTAFF LIMITED PARTNERSHIP, A DELAWARE 

  LIMITED PARTNERSHIP 

   

  BY: WESTAFF
  (GP), INC., ITS GENERAL PARTNER  

   

  By:
  ____________________________________________

  Dirk A. Sodestrom 

  Title:_______________________________________

  



 


 


 


ACCEPTED AND AGREED TO:


 


BANK OF AMERICA, N.A., in its capacity as Agent


 


By:                                                                                        


Name:                                                                                   


Title:  
                                                                                    


 


 


 


D-3

















 


 


Schedule 1 to Certificate of Additional Grantor


 


1.                                      Locations of Chief Executive
Office and Principal Place of Business of each Additional Grantor


 


 


2.                                      Locations of Books
Pertaining to Rights to Payment of each Additional Grantor


                


 


3.                                      Corporate Name, State of
Incorporation, Organizational Identification Number, Trade Names and Trade
Styles:  Other Corporate, Trade or
Fictitious Names, Etc. of Borrower and each Additional Grantor


 


 


4.                                      Inventory Stored with
Warehousemen or on Leased Premises, Etc. of each Additional Grantor


 


 


5.                                      Patents, Copyrights,
Trademarks, Etc. of each Additional Grantor


 


 


6.                                      Deposit Accounts of each
Additional Grantor


 


 


7.                                      Locations in the United
States where Additional Grantors own, lease, or occupy any real property


 


 


D-4

















 


 


Exhibit E


 


WEEK-END COLLATERAL REPORT AND BORROWING CERTIFICATE

(Refer to Attachment 1 for definitions of terms)


Note:  Items denoted
by an “*” are not included in the calculation of the Borrowing Base for
purposes of determining eligibility for Limited Revolving Loans during the
Forbearance Term.


	
  WEEK
  ENDING __________________

  FRIDAY _____________, 2002

  
	
   

  	
  ACCOUNTS RECEIVABLE

  	
  REVOLVING FACILITY

  	
   

  	
   

  
	
  1.)

  	
  Beginning
  of Week G/L Balance

  	
  $

  	
  
   

  

  
	
  2.)

  	
  ADD:  Gross Sales for the Week

  	
  $

  	
  
   

  

  
	
  3.)

  	
  ADD:  Debit Memos, Returned Checks, Other Debit
  Adjustments

  	
  $

  	
  
   

  

  
	
  4.)

  	
  LESS:  Net Cash Collections for the Week

  	
  $

  	
  
   

  

  
	
  5.)

  	
  LESS:  Credit Memos, Discounts, Other Credit
  Adjustments

  	
  $

  	
  
   

  

  
	
  6.)

  	
  End of Week G/L Balance as
  of  _/_/02 (See Schedule “B” for
  reconciliation)

  	
  $

  	
  
   

  

  
	
  7.)

  	
  A/R
  Aging Balance as of the same date

  	
  $

  	
  
   

  

  
	
   

  	
  Variance,
  if any (Line 6 minus Line 7)

  	
  $

  	
  
   

  

  
	
  8.)

  	
  Ineligible
  Accounts Receivable (Per Attached Schedule A)

  	
  $

  	
  
   

  

  
	
  9.)

  	
  Net
  Eligible Accounts Receivable (Line 7 Aging Balance minus Line 8)

  	
  $

  	
  
   

  

  
	
  BORROWING
  BASE

  	
   

  	
   

  
	
   

  	
  Accounts
  Receivable

  	
   

  	
   

  
	
  13.)

  	
  Gross Availability (85% of Line 9) 

  	
  $

  	
  
   

  

  
	
  [14.)

  	
  Restricted  Cash 
  (@100%)]*

  	
  $

  	
  
   

  

  
	
  [15.)

  	
  Overadvance  Facility 
  (See schedule A)]*

  	
  $

  	
  
   

  

  
	
  [16.)

  	
  Real
  Estate availability  ($10,050,000 @
  70%)]*

  	
  $

  	
  
   

  

  
	
  17.)

  	
  TOTAL 
  Availability

  	
   

  	
  
   

  

  
	
  LOAN
  DETAIL

  	
   

  	
   

  
	
   

  	
  Bank
  Group—Reference Rate

  	
  $                                                      

  	
  $

  	
   

  
	
   

  	
  Bank
  Group—IBOR

  	
  $                                                      

  	
  $

  	
   

  
	
   

  	
  Stand-by
  L/Cs (at 100%)

  	
  $                                                      

  	
  $

  	
   

  
	
   

  	
  [Senior
  Notes (secured by A/R)

  	
  $                                                      ]*

  	
  $

  	
   

  
	
   

  	
  Other
  (Specify)

  	
  $                                                      

  	
  $

  	
   

  
	
  18.)

  	
  Total
  Obligations at Month-end

  	
  $

  	
  
   

  

  
	
  19.)

  	
  Net Borrowing Base Availability (Line 17
  minus Line 18)

  	
  $

  	
  
   

  

  



 


 


E-1

















 


The undersigned
represents and warrants that:


(A)  The information
provided above and in the accompanying supporting documentation is true,
complete and correct, and complies fully with the conditions, with terms and
covenants of the Forbearance and Waiver Agreement and Amendment to Loan
Documents (the “Forbearance, Waiver and Amendment”) dated as of March 27, 2002
among the Borrowers, the Agent, the Banks and the Guarantors.


(B)   Since the date of
the last financial statement or certification furnished to the Agent:


(a)   To the best knowledge, after making due
inquiry, of the undersigned, there has been no material adverse change in the
financial condition or operations of the undersigned; and


(b)   To the best knowledge, after making due
inquiry, of the undersigned there is no event which is, or with notice or lapse
of time or both would be, a default under that certain Credit Agreement dated
as of March 4, 1998 by and among the Borrowers, the Agent and the Banks
(other than the Existing Events of Default, as that term is defined in the
Forbearance, Waiver and Amendment).


 


	
  Westaff (USA), Inc.  

  	
   

  
	
   

  	
   

  
	
  By:
  _____________________________________________________________

  	
  Date:
  __________________________

  
	
  (Signature & Title)

  	
   

  



 


 


E-2

















 


Westaff (USA), Inc.

SCHEDULE A

SCHEDULE OF INELIGIBLES         

FOR THE WEEK ENDING FRIDAY, __________, 2002


	
   

  	
  Ineligible Accounts Receivable

  	
   

  	
   

  
	
  1

  	
  COD, Consignment or
  Guaranteed Sales

  	
  $

  	
  
   

  

  
	
  2

  	
  Contested

  	
  $

  	
  
   

  

  
	
  3

  	
  Contra Elimination

  	
  $

  	
  
   

  

  
	
  4

  	
  Unbilled FBA
  receivables

  	
  $

  	
  
   

  

  
	
  5

  	
  Estimated unbilled
  others

  	
  $

  	
  
   

  

  
	
  6

  	
  Nonjusticiable

  	
  $

  	
  
   

  

  
	
  7

  	
  Encumbered

  	
  $

  	
  
   

  

  
	
  8

  	
  IntraCompany

  	
  $

  	
  
   

  

  
	
  9

  	
  Government

  	
  $

  	
  
   

  

  
	
  10

  	
  Defaulted

  	
  $

  	
  
   

  

  
	
  11

  	
  Nondelivered goods

  	
  $

  	
  
   

  

  
	
  12

  	
  Note obligations

  	
  $

  	
  
   

  

  
	
  13

  	
  Excess concentration
  limit

  	
  $

  	
  
   

  

  
	
  14

  	
  Debit
  Memos/Chargebacks

  	
  $

  	
  
   

  

  
	
  15

  	
  Other (Specify)  ____________________________________

  	
  $

  	
  
   

  

  
	
   

  	
  TOTAL ACCOUNTS RECEIVABLE INELIGIBLES

  	
  $

  	
  
   

  

  
	
   

  	
  (To Line #8 of Borrowing
  Certificate)

  	
   

  	
   

  
	
   

  	
  [Overadvance
  Facility:

  	
   

  	
   

  
	
  16

  	
  Unbilled FBA
  receivables (line 11) 

  	
  $

  	
  
   

  

  
	
  17

  	
  Revenue Week Accrual

  	
  $

  	
  
   

  

  
	
  18

  	
  G/L adjustment to
  Revenue Week Accrual

  	
  $

  	
  
   

  

  
	
  19

  	
  Total

  	
  $

  	
   

  
	
   

  	
  Lesser of:

  	
   

  	
   

  
	
  20

  	
  Advance Rate @ 60% of
  line 19

  	
  $

  	
  $

  	
   

  
	
  21

  	
  Overadvance Facility

  	
  $                                   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Overadvance Facility amount  Line #16 of Borrowing Certificate)]*

  	
  $

  	
  
   

  

  



 


 


E-3

















 


Westaff (USA), Inc.

SCHEDULE B

ACCOUNTS RECEIVABLE RECONCILIATION 

FOR THE WEEK ENDING: FRIDAY,

____________, 2002


	
  Westaff (USA), Inc.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Accounts
  Receivable Reconciliation

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  As of ______________
  in $000:

  	
  Aging

  	
  G/L

  	
  Financials

  
	
   

  	
   

  	
   

  	
   

  
	
  Balance per Source
  Records:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Revenue  Week

  	
   

  	
   

  	
   

  
	
  Unapplied  Cash

  	
   

  	
   

  	
   

  
	
  Adjustments: Accrual
  Revenue Week

  	
   

  	
   

  	
   

  
	
  Foreign

  	
   

  	
   

  	
   

  
	
  Unexplained

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total
  Adjustments

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Reconciled  Totals

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Variance ineligible:

  	
   

  	
   

  	
   

  
	
  Variance Between Aging
  & G/L (if G/L is lower)

  	
   

  	
   

  



 


 


E-4

















 


Attachment 1 to Exhibit E


 


Definitions


As used in the Forbearance, Waiver and Amendment and
in this Exhibit E, the following terms shall have the meanings set forth
below:


“Acceptable Accounts”
means, the Accounts of the Loan Parties which are determined to be Acceptable
Accounts by the Agent in its sole but reasonable discretion.  Without limiting the discretion of the Agent
to establish other criteria of ineligibility, for an Account to be considered
an Acceptable Account the following requirements must be satisfied:


(a)           the Account must have resulted from the sale of goods or
services by any Loan Party in the ordinary course of its business (and with
respect to goods, without any further obligation on the part of such Loan Party
to service, repair, or maintain any such goods sold);


(b)           there shall be no conditions which must be satisfied
before the applicable Loan Party is entitled to receive payment of the Account;


(c)           the Account must not have arisen from a COD sale, a consignment
or a guaranteed sale;


(d)           to the best of the applicable Loan Party’s knowledge,
there must be no claim by the Account Debtor to such Account or any defense
asserted to payment of the Account, in each case whether valid or otherwise;


(e)           such Account is not subject to any counterclaims or
offsets which have been or may be, to the best of the applicable Loan Party’s
knowledge, asserted against such Loan Party by the Account Debtor (including
offsets for any “contra accounts” owed by the Loan Party to the Account Debtor
for goods purchased by such Loan Party or for services performed for such Loan
Party); provided, however, that the Agent, in its sole
discretion, may permit WSS to include such Account as an Acceptable Account
and, to the extent any counterclaims, offsets, credit balances, or contra
accounts exist in favor of such Account Debtor, such amounts shall be deducted
from the Account balance;


(f)            the Account represents a genuine obligation of the
Account Debtor for goods sold or services rendered to and accepted by the
Account Debtor;


(g)           the applicable Loan Party has sent an invoice to the
Account Debtor in the amount of the Account;


(h)           the applicable Loan Party is not prohibited by the laws of
the state where the Account Debtor is located from bringing an action in the
courts of that state to enforce the Account Debtor’s obligation to pay the
Account;


(i)            the applicable Loan Party has taken
all appropriate actions to ensure access to the courts of the state where the
Account Debtor is located, including, where necessary, the filing of a “Notice
of Business Activities Report” or other similar filing with the applicable
state agency 


 


E-5

















 


or the qualification by the applicable Loan Party as a foreign
corporation authorized to transact business in such state;


(j)            the Account is owned by the applicable Loan Party free of
any title defects or any Liens or interests of others except the security
interest in favor of the Agent;


(k)           the Account Debtor with respect to such Account is not (i)
an employee, Affiliate, or Subsidiary of WSS, the Parent, or an entity which
has common officers or directors with WSS, (ii) the U.S. government or any
Governmental Authority unless WSS complies with the procedures in the Federal
Assignment of Claims Act, 41 U.S.C. § 15, with respect to the Account, or (iii)
any state, county, city, town or municipality, (iv) any Person or entity
located in a foreign country;


(l)            the Account is not a Defaulted Account;


(m)          the Account is not the obligation of an Account Debtor who is
the Account Debtor on Defaulted Accounts of 50% or more of the Accounts upon
which such debtor is obligated;


(n)           the Account does not arise from the sale of goods which
remain in the applicable Loan Party’s 
possession or under the applicable Loan Party’s control;


(o)           the Account is not evidenced by a promissory note or
chattel paper, nor is the Account Debtor obligated to the applicable Loan Party
under any other obligation which is evidenced by a promissory note; and


(p)           the Agent believes, in the exercise of its reasonable
judgment, that the prospect of collection of such Account is not impaired by
reason of the Account Debtor’s financial inability to pay.


In addition to the foregoing
limitations, the dollar amount of Accounts included as Acceptable Accounts
which are the obligations of a single Account Debtor shall not exceed the
concentration limit established for such Account Debtor.  To the extent the total of such Accounts
exceeds an Account Debtor’s concentration limit, the amount of any such excess
shall be excluded.  The concentration
limit for each Account Debtor other than FBS shall be equal to 10% of the total
amount of the Acceptable Accounts at that time and the concentration limit for
FBS shall be equal to 15% of the total amount of the Acceptable Accounts at
that time.


“Acceptable Unbilled
Accounts” means Accounts of any Loan Party otherwise constituting
Acceptable Accounts which have not yet been submitted for payment to the
Account Debtor obligated therefor but for which such Loan Party has recognized
the revenue to be generated therefrom in accordance with such Loan Party’s
standard accounting practices, or, with respect to FBS only, invoiced the
amounts to be paid thereunder but has not yet submitted such invoice for
payment to FBS in order to present a consolidated invoice to FBS which will
include all related Accounts.


“Accounts” means,
with respect to each Loan Party, all of such Loan Party’s now owned or
hereafter acquired or arising “accounts”, as defined or used in the UCC,
including any rights 


 


E-6

















 


to payment for the sale or
lease of goods or rendition of services, whether or not they have been earned
by performance.


“Account Debtor”
means each Person obligated in any way on or in connection with an Account.


“Agent” means Bank of
America, N.A., in its capacity as agent for the Banks under the Credit
Agreement.


“Borrowing Base”
means, for purposes of providing the information required of WSS by Section
9(c)(ii)(A) of the Forbearance, Waiver and Amendment for any Delivery Date,
the sum, calculated as of the Friday immediately preceding such Delivery Date,
of (a) 85% of the balance due on Acceptable Accounts as of the Friday
immediately preceding such Delivery Date, plus (b) the lesser of
(A) $7,000,000 and (B) 70% of Acceptable Unbilled Accounts.  For the purposes of the Forbearance, Waiver
and Amendment, the Borrowing Base on any date of determination shall be
presumed to be the Borrowing Base determined pursuant to the latest Borrowing
Base Certificate delivered by the Borrower prior to such date of determination.


“Borrowing Base
Certificate” has the meaning given such term in Section 9(c)(ii)(A)
of the Forbearance, Waiver and Amendment.


“Defaulted Account”
means, collectively, (a) an Account which is not paid within the 90 days period
starting on its invoice date; (b) an Account for which 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 (c) an Account for which any petition is filed by or against the Account
Debtor obligated upon such Account under any Debtor Relief Laws.


“Delivery Date” has
the meaning given such term in Section 9(c)(ii)(A) of the Forbearance,
Waiver and Amendment.


“FBS” means the Franchise
Business Association or any successor Governmental Authority.


“Governmental Authority”
means any nation or government, any state or other political subdivision
thereof, any agency, authority, instrumentality, regulatory body, court,
administrative tribunal, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative powers or functions
of or pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.


“Person” means any
individual, trustee, corporation, general partnership, limited partnership,
limited liability company, joint stock company, trust, unincorporated
organization, bank, business association, firm, joint venture, Governmental
Authority or other legal entity.


 


 


E-7

















 


 


Exhibit F


 


FORM OF REQUEST FOR BORROWING


Date: 
___________, _____


To:  Bank of
America, N.A., as Agent


Ladies and Gentlemen:


Reference is made to (i) that certain Credit
Agreement, dated as of March 4, 1998 (as amended, restated, extended,
supplemented or otherwise modified in writing from time to time, the “Agreement;”
the terms defined therein being used herein as therein defined), among Westaff
(USA) Inc. (formerly known as Western Staff Services (USA), Inc.), a California
corporation, (“WSS”), Western Medical Services, Inc. a California corporation
(“WMS” and together with WSS, the “Borrowers”), the Banks from
time to time party thereto, and Bank of America, N.A. (formerly known as Bank
of America National Trust and Savings Association) (“BofA”) as agent for
the Banks (in such capacity, the “Agent”); and (ii) that certain
Forbearance and Waiver Agreement and Amendment to Loan Documents, dated as of
March 27, 2002, (the “Forbearance, Waiver and Amendment”) among the
Borrowers, the Agent, the Banks and the Guarantors.


The undersigned hereby requests a Borrowing of
Revolving Loans:


1.             On
________________________(a Business Day).


2.             In
the amount of $__________________________.


The Borrowing requested herein complies with the
proviso to the first sentence of Section 9(c)(ii) of the Forbearance,
Waiver and Amendment.


WESTAFF (USA), INC.


 


 


 


By:                                                                                                  

Name:                                                                                             

Title:                                                                                               


 


 


 


F-1