Exhibit 10.1


 


FIRST
AMENDMENT TO SECOND AMENDED AND RESTATED FORBEARANCE AGREEMENT


 


THIS FIRST AMENDMENT TO
SECOND AMENDED AND RESTATED FORBEARANCE AGREEMENT (this “Amendment”),
dated as of November 20, 2008, is entered into by and among the financial
institutions identified on the signature pages hereto (collectively, the “Lenders”),
U.S. Bank National Association, as administrative agent for the Lenders (in
such capacity, the “Agent”), Westaff (USA), Inc., a California
corporation (the “Borrower”), and Westaff, Inc., a Delaware
corporation and the sole shareholder of the Borrower, as parent guarantor (the “Parent
Guarantor”), with reference to the following
facts:


 


RECITALS


 


A.            The Borrower, the Parent
Guarantor, the Agent and the Lenders are parties to a Second Amended and
Restated Forbearance Agreement, dated as of September 30, 2008 (the “Forbearance
Agreement”), pursuant to which the Agent and the Lenders agreed to forbear
through November 21, 2008 from exercising their available Default Rights
and Remedies in response to the occurrence and continuation of certain Existing
Events of Default under the Financing Agreement, dated as of February 14,
2008, among the Borrower, the Parent Guarantor, the Agent and the Lenders, as
amended.


 


B.            The parties are in the process of exploring
further negotiations with respect to certain additional terms and conditions of
an extended forbearance period and, in an effort to provide additional time for
such discussions, the parties hereto wish to amend the Forbearance Agreement to
extend the term of the forbearance period thereunder by ten (10) business
days, from November 21, 2008 to December 5, 2008.


 


NOW, THEREFORE, the parties hereby agree as
follows:


 


1.             Defined Terms.  Any and all initially-capitalized terms used
in this Amendment (including, without limitation, in the recitals to this Amendment)
without definition shall have the respective meanings assigned thereto in the Forbearance
Agreement.


 


2.             Extension of Forbearance
Period.  Section 2 of the
Forbearance Agreement is hereby amended to read in full as follows:


 


                “2.  Limited Forbearance Agreement.  So long as no additional Events of Default
occur during such period, the Agent and the Lenders hereby agree to forbear
from exercising any of their Default Rights and Remedies in response to the
occurrence and continuance of the Existing Events of Default throughout the
period commencing on November 21, 2008 and ending on December 5, 2008
(the ‘Forbearance Period’).”


 


3.             No Waiver.  The agreement of the Agent and the Lenders
under Section 2 of this Amendment conditionally to forbear from exercising
their Default Rights and Remedies throughout the Forbearance Period as extended
hereby shall not constitute a waiver of either of the Existing Events of
Default, and the Agent and the Lenders hereby expressly reserve all their Default
Rights and Remedies in connection with the Existing Events of Default.


 


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4.             General Release.  In consideration of the agreement of the
Agent and the Lenders to enter into this Amendment and hereby conditionally
forbear from exercising their available Default Rights and Remedies throughout
the Forbearance Period as extended hereby, the Borrower and the Parent Guarantor
hereby release, discharge and acquit the Agent, each Lender and their
respective agents, servants, employees, successors and assigns from any and all
claims, demands, liabilities, obligations and causes of action, whether known
or unknown, against them, which the Borrower or the Parent Guarantor now own or
hold, which the Borrower or the Parent Guarantor has at any time heretofore
owned or held, or which the Borrower or the Parent Guarantor hereafter may own
or hold, by reason of any action, matter, cause or thing whatsoever done prior
to the date of this Amendment, including specifically, but not limited to, any
and all claims, demands, rights and causes of action whatsoever arising out of
or which could be alleged to arise out of the Forbearance Agreement, the Financing
Agreement or any of the other Loan Documents.


 


It is the intention of the
Borrower and the Parent Guarantor in executing this Amendment that the same
shall be effective as a bar to each and every claim, demand, and cause of
action hereinabove specified, and in furtherance of this intention the Borrower
and the Parent Guarantor each waives and relinquishes all rights and benefits
under Section 1542 of the Civil Code of the State of California, which
provides:


 


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


 


The Borrower and the Parent Guarantor
acknowledge that each of them may hereafter discover facts different from or in
addition to those now known or believed to be true with respect to such claims,
demands, or causes of action and agree that this Amendment shall be and remain
effective in all respects notwithstanding any such differences or additional
facts.


 


5.             Condition Precedent.  The effectiveness of this Amendment shall be
subject to the Agent’s receipt of this Amendment, duly executed by the
Borrower, the Parent Guarantor and each of the Lenders.


 


6.             Reaffirmation and
Ratification.  The Borrower
and the Parent Guarantor hereby reaffirm, ratify and confirm their respective Obligations
under the Forbearance Agreement, the Financing Agreement and the other Loan
Documents, acknowledge that all of the terms and conditions of the Forbearance
Agreement, the Financing Agreement and such other Loan Documents remain in full
force and effect, and further acknowledge that the security interests granted
to Agent in the Collateral are valid and perfected.


 


7.             Integration.  This Agreement constitutes the entire
agreement of the parties in connection with the subject matter hereof and
cannot be changed or terminated orally. 
All prior agreements, understandings, representations, warranties and
negotiations regarding the subject matter hereof, if any, are merged into this
Amendment.


 


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8.             Counterparts.  This Agreement may be executed in multiple
counterparts, each of which when so executed and delivered shall be deemed an
original, and all of which, taken together, shall constitute but one and the
same agreement.


 


9.             Governing Law.  This Agreement shall be governed by, and
construed and enforced in accordance with, the internal laws (as opposed to the
conflicts of law principles) of the State of California.


 


10.           Consent.      In connection with the Sale,
referred to in the consent letter attached hereto as Annex A, dated as
of September 26, 2008 (the “Consent”), which was delivered to
Westaff Support, Inc. and Parent Guarantor, Parent Guarantor has informed
the Agent that the Borrower received net proceeds in an amount of approximately
US$5,000,000. Notwithstanding this fact, and after consultation with the Parent
Guarantor regarding any adjustments to the Sale terms, the Agent hereby (i) acknowledges
that an amount less than $7,500,000 was received by Borrower in connection with
the Sale, and (ii) consents to the filing of a UCC-3 partial release of
the collateral in the form of Exhibit A to the Consent, as well as
the filing of the same form of UCC-3 partial release with respect to the UCC-1
financing statement filed by the Agent against the Parent Guarantor (Delaware
Department of State UCC filing 0744373 filed 2/29/08).


 


[Rest of page intentionally
left blank; signature pages follow]


 


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IN WITNESS WHEREOF, the parties hereto have
executed this Amendment by their respective duly authorized officers as of the
date first above written.


 


 


	
   

  	
  WESTAFF (USA), INC.,

  
	
   

  	
  a California corporation,

  
	
   

  	
  as the Borrower

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephen J. Russo

  
	
   

  	
   

  	
  Name: Stephen J. Russo

  
	
   

  	
   

  	
  Title: EVP, COO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WESTAFF, INC.,

  
	
   

  	
  a Delaware corporation,

  
	
   

  	
  as the Parent Guarantor

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephen J. Russo

  
	
   

  	
   

  	
  Name: Stephen J. Russo

  
	
   

  	
   

  	
  Title: EVP, COO

  



 


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  U.S. BANK NATIONAL ASSOCIATION,

  
	
   

  	
  as the Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Suzanne E. Geiger

  
	
   

  	
   

  	
  Suzanne E. Geiger

  
	
   

  	
   

  	
  Senior Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  U.S. BANK NATIONAL ASSOCIATION,

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Suzanne E. Geiger

  
	
   

  	
   

  	
  Suzanne E. Geiger

  
	
   

  	
   

  	
  Senior Vice President

  



 


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  WELLS FARGO BANK,

  
	
   

  	
  NATIONAL ASSOCIATION,

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Supremna Thurmond

  
	
   

  	
   

  	
  Supremna
  Thurmond

  
	
   

  	
   

  	
  Relationship
  Manager

  



 


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