Document:

EXHIBIT
10.8.31

 

CONTINUING
GUARANTY

 

[Subsidiaries]

 

FOR VALUE RECEIVED, and in consideration of any loan
or other financial accommodation heretofore or hereafter at any time made or
granted to WESTAFF (USA), INC., a California corporation (“Borrower”), by
Agent or any Lender under (and as such terms are defined in) the Financing
Agreement referred to below, the undersigned, WESTAFF SUPPORT, INC., a
California corporation, and MEDIAWORLD INTERNATIONAL, a California corporation
(collectively, “Guarantors,” and each, individually, “Guarantor”),
each hereby agree as follows:

 

1.             Guaranty of Obligations.  Each Guarantor unconditionally,
absolutely and irrevocably, jointly and severally, guarantees the full and
prompt payment and performance when due, whether by acceleration or otherwise,
and at all times thereafter, of all present and future Obligations of Borrower
to Agent or any Lender or any other Secured Party (collectively, the “Benefited
Parties”) under (and as such terms are defined in ) the Financing Agreement
dated as of even date herewith, by and among Borrower, WESTAFF, INC., a
Delaware corporation and the sole shareholder of Borrower, as Parent Guarantor
(“Parent Guarantor”), the Lenders party thereto, and U.S. BANK NATIONAL
ASSOCIATION, as Agent (as the same may hereafter from time to time be amended,
modified, or restated, the “Financing Agreement”), and each of the other
agreements, documents and instruments entered into by Borrower in connection
therewith (all such Obligations are hereinafter referred to collectively as the
“Liabilities”).  This Continuing Guaranty (this “Guaranty”)
is a guaranty of payment and performance when due and not a guaranty of
collection.  Capitalized terms used but
not defined herein shall have the meaning given to them in the Financing
Agreement.

 

In the event of any default
by Borrower in making payment of, or default by Borrower in performance of, any
of the Liabilities, each Guarantor agrees on demand by Agent, on behalf of all
of the Benefited Parties, to pay and perform all of the Liabilities as are then
or thereafter become due and owing to any or all of the Benefited Parties or
are to be performed by Borrower under the terms of the Loan Documents.   Each Guarantor further agrees to pay all
expenses (including Attorneys’ Fees) paid or incurred by Agent, on behalf of
the Benefited Parties, in endeavoring to collect the Liabilities, or any part
thereof, and in enforcing this Guaranty.

 

Notwithstanding any
provision to the contrary contained herein or in any other of the Loan
Documents, the obligations of each Guarantor under this Guaranty and the other
Loan Documents shall be limited to an aggregate amount equal to the largest
amount that would not render such obligations subject to avoidance under the
Insolvency Laws or any comparable provisions of any applicable state law.

 

2.             Continuing Nature of Guaranty and Liabilities.  This Guaranty shall be
continuing and shall not be discharged, impaired or affected by:

 

1

 

(a)           the
insolvency of Borrower or the payment in full of all of the Liabilities at any
time or from time to time;

 

(b)           the
power or authority or lack thereof of Borrower to incur the Liabilities;

 

(c)           the
validity or invalidity of any of the Loan Documents or the documents securing
the same;

 

(d)           the
existence or non-existence of Borrower as a legal entity;

 

(e)           any
transfer by Borrower of all or any part of any collateral in which Agent has
been granted a lien or security interest pursuant to the Loan Documents;

 

(f)            any
statute of limitations affecting the liability of either or both Guarantors
under this Guaranty or the Loan Documents or the ability of Agent to enforce
this Guaranty or any provision of the Loan Documents; or

 

(g)           any
right of offset, counterclaim or defense of either or both Guarantors,
including, without limitation, those which have been waived by such Guarantor(s) pursuant
to Paragraph 6(g) hereof.

 

3.             Insolvency of Borrower or Guarantor(s).  Without limiting the
generality of any other provision hereof, each Guarantor agrees that, in the
event of the dissolution or insolvency of Borrower or either or both Guarantors
or the inability of Borrower or either or both Guarantors to pay its debts as
they mature, or an assignment by Borrower or either or both Guarantors for the
benefit of creditors, or the institution of any proceeding by or against
Borrower or either or both Guarantors alleging that Borrower or either or both
Guarantors is insolvent or unable to pay its debts as they mature, each Guarantor
will, jointly and severally, pay to Agent forthwith the full amount which would
be payable hereunder by such Guarantor if all of the Liabilities were then due
and payable, whether or not such event occurs at a time when any of the
Liabilities are otherwise due and payable.

 

4.             Payment of the Liabilities.  Any amounts received by
Agent from whatever source on account of the Liabilities may be applied by
Agent toward the payment of such of the Liabilities in the order of application
set forth in the Financing Agreement. 
Each Guarantor agrees that, if at any time all or any part of any
payment theretofore applied by Agent to any of the Liabilities is or must be
rescinded or returned by Agent for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy or reorganization of Borrower), such
Liabilities shall, for the purposes of this Guaranty and to the extent that
such payment is or must be rescinded or returned, be deemed to have continued
in existence notwithstanding such application by Agent, and this Guaranty shall
continue to be effective or be reinstated, as the case may be, as to such
Liabilities, all as though such application by Agent had not been made.  The guaranty set forth in Section 1
of this Guaranty is a guaranty of payment and not of collection, is a
continuing guarantee, and shall apply to all Liabilities whenever arising.

 

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5.             Permitted Actions of Agent.  Agent, on behalf of the
Benefited Parties, may from time to time, in its sole discretion and without
notice to Guarantors, take any or all of the following actions:

 

(a)           retain
or obtain a security interest in any assets of Borrower or any third party to
secure any of the Liabilities or any obligations of either or both Guarantors
hereunder;

 

(b)           retain
or obtain the primary or secondary obligation of any obligor or obligors, in
addition to Guarantors, with respect to any of the Liabilities;

 

(c)           extend
or renew for one or more periods (whether or not longer than the original
period), alter or exchange any of the Liabilities;

 

(d)           waive,
ignore or forbear from taking action or otherwise exercising any of its default
rights or remedies with respect to any default by Borrower under the Loan
Documents;

 

(e)           release,
waive or compromise any obligation of either or both Guarantors hereunder or
any obligation of any nature of any other obligor primarily or secondarily
obligated with respect to any of the Liabilities;

 

(f)            release
its security interest in, or surrender, release or permit any substitution or
exchange for, all or any part of any collateral now or hereafter securing any
of the Liabilities or any obligation hereunder, or extend or renew for one or
more periods (whether or not longer than the original period) or release,
waive, compromise, alter or exchange any obligations of any nature of any
obligor with respect to any such property; and

 

(g)           upon
the occurrence and at any time or from time to time during the continuance of
an Event of Default, demand payment of any of the Liabilities from either or
both Guarantors, whether or not Agent shall have exercised any of its rights or
remedies with respect to any property securing any of the Liabilities or any
obligation hereunder or proceeded against any other obligor primarily or
secondarily liable for payment or performance of any of the Liabilities.

 

6.             Specific Waivers.  Without
limiting the generality of any other provision of this Guaranty, each Guarantor
hereby expressly waives:

 

(a)           notice
of the acceptance by Agent of this Guaranty;

 

(b)           notice
of the existence, creation, payment, nonpayment, performance or nonperformance
of all or any of the Liabilities;

 

(c)           presentment,
demand, notice of dishonor, protest, notice of protest and all other notices
whatsoever with respect to the payment or performance of the Liabilities or the
amount thereof or any payment or performance by such Guarantor hereunder;

 

3

 

(d)           all
diligence in collection or protection of or realization upon the Liabilities or
any thereof, any obligation hereunder or any security for or guaranty of any of
the foregoing;

 

(e)           any
right to direct or affect the manner or timing of Agent’s enforcement of its
rights or remedies;

 

(f)            any
and all defenses which would otherwise arise upon the occurrence of any event
or contingency described in Paragraph 1 hereof or upon the taking of any
action by Agent permitted hereunder;

 

(g)           any
defense, right of set-off, claim or counterclaim whatsoever and any and all
other rights, benefits, protections and other defenses available to such
Guarantor now or at any time hereafter,
including, without limitation, under California Civil Code Sections 2787 to
2855, inclusive, and California Code of Civil Procedure Sections 580a, 580b, 580d
or 726, and all successor sections; and

 

(h)           all
other principles or provisions of law, if any, that conflict with the terms of
this Guaranty, including, without limitation, the effect of any circumstances
that may or might constitute a legal or equitable discharge of a guarantor or
surety.

 

7.             Irrevocability.  To the extent permitted under applicable
law, each Guarantor hereby further waives all rights to revoke this Guaranty at
any time, and all rights to revoke any agreement executed by such Guarantor at
any time to secure the payment and performance of such Guarantor’s obligations
under this Guaranty.

 

8.             Statutory Waiver of Rights and Defenses Regarding
Election of Remedies.  Each
Guarantor waives all rights and defenses arising out of an election of remedies
by Agent, even though that election of remedies, such as a nonjudicial
foreclosure with respect to security for a guaranteed obligation, has destroyed
such Guarantor’s rights of subrogation and reimbursement against Borrower by
the operation of any applicable law,
including without limitation Section 580d of the California Code of Civil
Procedure, or otherwise.

 

9.             Subrogation.  Neither Guarantor will exercise any
rights which it may acquire by way of subrogation under this Guaranty, by any
payment hereunder or otherwise, until all of the Obligations have been Paid in
Full.  If any amount shall be paid to such Guarantor on account of
such subrogation rights at any other time, such amount shall be held in trust
for the benefit of Agent and shall be forthwith paid to Agent to be credited
and applied to the Liabilities, whether matured or unmatured, in such manner as
Agent shall determine in its sole discretion.  Each Guarantor agrees that such Guarantor
shall have no right of recourse to security for the Liabilities, except through
the exercise of rights of subrogation pursuant to this Paragraph 9 and
through the exercise of rights of contribution pursuant to Paragraph 20.

 

10.           Remedies.  Each
Guarantor agrees that, to the fullest extent permitted by law, as between
Guarantors, on the one hand, and Agent and the Benefited Parties, on the other
hand, the Liabilities may be declared to be forthwith due and payable as
provided in the Financing Agreement (and shall be deemed to have become
automatically due and payable in the circumstances provided in the Financing
Agreement) for purposes of Paragraph 1 of this 

 

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Guaranty notwithstanding any stay, injunction or other
prohibition preventing such declaration (or preventing the Liabilities from
becoming automatically due and payable) as against any other Person and that,
in the event of such declaration (or the Liabilities being deemed to have
become automatically due and payable), the Liabilities (whether or not due and
payable by any other Person) shall forthwith become due and payable by
Guarantors for purposes of Paragraph 1. 
Each Guarantor acknowledges and agrees that its and their obligations
hereunder are secured in accordance with the terms of the Security Documents
and that Agent and the Benefited Parties may exercise their remedies thereunder
in accordance with the terms thereof.

 

11.           Assignments and Participations with Respect to
Benefited Parties’ Rights.  Each Benefited Party may, from time to time, without
notice to Guarantors but only in accordance with the terms of the Financing
Agreement, assign or transfer any or all of its share of the Liabilities or any
interest therein, and/or grant participants in any or all of its share of the
Liabilities or any interest therein, 
and, notwithstanding any such assignment or transfer or participation
with respect to the Liabilities or any subsequent assignment or transfer or
participation thereof, the Liabilities shall be and remain the Liabilities for
the purpose of this Guaranty.  Each and every immediate and
successive assignee or transferee or participant in accordance with the terms
of the Financing Agreement with respect to of any portion of the Liabilities or
of any interest therein shall, to the extent of such party’s interest in the
Liabilities, be entitled to the benefits of this Guaranty to the same extent as
if such assignee or transferee or participant were Agent.

 

12.           Indulgences Not Waivers.  No delay in the exercise of any right or
remedy shall operate as a waiver thereof, and no single or partial exercise by
Agent of any right or remedy shall preclude other or further exercise thereof
or the exercise of any other right or remedy; nor shall any modification or
waiver of any of the provisions of this Guaranty be binding upon Agent, except
as expressly set forth in a writing duly signed and delivered by
Agent.  No action of Agent permitted hereunder shall in any way
affect or impair the rights of Agent or the obligations of Guarantors under
this Guaranty.

 

13.           Financial Condition of Borrower.  Each Guarantor represents
and warrants that it is fully aware of the financial condition of Borrower, and
each Guarantor delivers this Guaranty based solely upon its own independent
investigation of Borrower’s financial condition and in no part upon any
representation or statement of Agent or any Lender with respect
thereto.  Each Guarantor further represents and warrants that it is
in a position to and hereby does assume full responsibility for obtaining such additional
information concerning Borrower’s financial condition as each Guarantor may
deem material to his obligations hereunder, and such Guarantor is not relying
upon, nor expecting Agent to furnish such Guarantor any information in Agent’s
or any Lender’s possession concerning Borrower’s financial condition or
concerning any circumstances bearing on the existence or creation, or the risk
of nonpayment or nonperformance of the Liabilities.

 

Each Guarantor hereby waives any duty on the part of
Agent to disclose to such Guarantor any facts Agent or any other Benefited
Party may now or hereafter know about Borrower, regardless of whether Agent has
reason to believe that any such facts materially increase the risk beyond that
which such Guarantor intends to assume or has reason to believe that such facts
are unknown to such Guarantor.

 

5

 

Each Guarantor hereby knowingly accepts the full range
of risk encompassed within a contract of “continuing guaranty” which includes,
without limitation, the possibility that Borrower will contract for additional
indebtedness for which such Guarantor may be liable hereunder after Borrower’s
financial condition or ability to pay its lawful debts when they fall due has
deteriorated.

 

14.           Representations and Warranties.  Each Guarantor severally
represents and warrants to Agent, for the benefit of Agent and each of the
other Benefited Parties, as to itself that each of the following statements is
accurate and complete as of the date of this Guaranty:

 

(a)           this
Guaranty has been duly executed and delivered by such Guarantor and constitutes
a legal, valid and binding obligation of such Guarantor, enforceable against
such Guarantor in accordance with its terms, except as limited by bankruptcy,
insolvency or other laws of general application relating to or affecting the
enforcement of creditors’ rights generally;

 

(b)           the
execution, delivery and performance of this Guaranty do not (i) violate
any provisions of law or any order of any court or other agency of government
(each, a “Requirement of Law”), (ii) contravene any provision of
any Applicable Agreement to which such Guarantor is a party or by which such
Guarantor’s assets are bound (each, a “Contractual Obligation”), or (iii) result
in the creation or imposition of any lien, charge or encumbrance of any nature
upon any property, asset or revenue of such Guarantor, other than liens in
favor of Agent and other Permitted Liens;

 

(c)           all
consents, approvals, orders and authorizations of, and registrations,
declarations and filings with, any governmental agency or authority or other
person or entity, if any, which are required to be obtained in connection with
the execution and delivery of this Guaranty or the performance of such
Guarantor’s obligations hereunder have been obtained, and each is in full force
and effect;

 

(d)           Such
Guarantor has paid all taxes and other charges imposed by any governmental
agency or authority due and payable by such Guarantor other than those which
are being challenged in good faith by appropriate proceedings;

 

(e)           Such
Guarantor is not in violation of any Requirement of Law or Contractual
Obligation other than any violation the consequences of which could not have a
material adverse effect on such Guarantor’s ability to perform his obligations
hereunder (a “Material Adverse Effect”); and

 

(f)            no
action, proceeding, investigation or litigation is pending or, to the knowledge
of such Guarantor, overtly threatened in writing against such Guarantor by any
person or entity which would reasonably be expected to result in a Material
Adverse Effect.

 

15.           Binding Upon Successors.  This Guaranty shall be binding upon each
Guarantor and its successors and assigns and shall inure to the benefit of the
Benefited Parties and their respective successors and permitted assigns.

 

6

 

All references herein to Borrower shall be deemed to
include its successors and assigns, and all references herein to Guarantor or
Guarantors shall be deemed to include Guarantor or Guarantors and their
successors and assigns.

 

In addition and notwithstanding anything to the
contrary contained in this Guaranty or in any other agreement, document or
instrument between or among any of Agent, the Lenders, Borrower, Guarantors or
any third party, the obligations of Guarantors with respect to the Liabilities
shall be joint and several with any other person or entity that now or
hereafter executes a guaranty of any of the Liabilities separate from this
Guaranty.

 

16.           Notices.  All notices required or permitted to be
given hereunder shall be given in accordance with the notices procedures set
forth in Section 15.7 of the Financing Agreement.

 

17.           Governing Law; Additional Waivers.  This Guaranty has been
delivered and shall be governed by and construed in accordance with the
internal laws (as opposed to the conflicts of law provisions) of the State of
California.

 

EACH GUARANTOR AND AGENT HEREBY

 

(i)         WAIVES, TO THE
EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION TO ENFORCE OR DEFEND ANY MATTER ARISING FROM OR RELATED TO THIS
GUARANTY;

 

(ii)         IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN SAN
FRANCISCO COUNTY, CALIFORNIA, OVER ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY MATTER ARISING FROM OR RELATED TO THIS GUARANTY;

 

(iii)         IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT GUARANTOR MAY EFFECTIVELY DO SO, THE DEFENSE
OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING;

 

(iv)         agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in any other jurisdictions by suit on the judgment or in any other
manner provided by law; and

 

(v)         agrees not to
institute any legal action or proceeding against the other party or its
directors, officers, employees, agents or property concerning any matter
arising out of or relating to this Guaranty in any court other than one located
in San Francisco County, California.

 

Nothing herein shall affect or impair Agent’s right to
serve legal process in any manner permitted by law or Agent’s right to bring
any action or proceeding against such Guarantor or its property in the courts
of any other jurisdiction.  Wherever
possible each provision of this Guaranty shall be interpreted as to be
effective and valid under applicable law, 

 

7

 

but if any provision of this
Guaranty shall be prohibited by or invalid under such 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 Guaranty.

 

18.           Judicial Reference.

 

(a)           Guarantors
and Agent prefer that any dispute among them be resolved in litigation subject
to a jury trial waiver as set forth in the Transaction Documents (defined
below), but the California Supreme Court has held that pre-dispute waivers of
the right to a trial by jury not authorized by statute are unenforceable.  This judicial reference provision will be
applicable until:  (i) the
California Supreme Court holds that a pre-dispute jury trial waiver provision
similar to that contained in the Transaction Documents is valid or enforceable;
or (ii) the California Legislature enacts a statute which becomes law,
authorizing pre-dispute jury trial waivers of the type in the Transaction
Documents and, as a result, such waivers become enforceable.

 

(b)           Other
than (i) nonjudicial foreclosure of security interests in personal
property, (ii) the appointment of a receiver or (iii) the exercise of
other provisional remedies (any of which may be initiated pursuant to
applicable law), any controversy, dispute or claim (each, a “Claim”)
among either or both Guarantors and Agent arising out of or relating to this
Guaranty or any other document, instrument or agreement among either or both
Guarantors and Agent (collectively in this Section, the “Transaction
Documents”), will be resolved, notwithstanding anything to the contrary
contained in the Transaction Documents, by a reference proceeding in California
in accordance with the provisions of Section 638 et seq. of the California
Code of Civil Procedure (“CCP”), or their successor sections, which
shall constitute the exclusive remedy for the resolution of any Claim,
including whether the Claim is subject to the reference proceeding.  Except as provided in Paragraph 17 of
this Guaranty or as otherwise provided in the Transaction Documents, venue for
the reference proceeding will be in the Superior Court or Federal District
Court in the County or District where the real property, if any, is located or
in a County or District where venue is otherwise appropriate under applicable
law (the “Court”).

 

(c)           The
referee shall be a retired Judge or Justice selected by mutual written
agreement of the applicable Guarantor(s) and Agent.  If such Guarantor(s) and Agent do not
agree, the referee shall be selected by the Presiding Judge of the Court (or
his or her representative).  A request for
appointment of a referee may be heard on an ex parte or expedited basis, and
Guarantors and Agent agree that irreparable harm would result if ex parte
relief is not granted.  The referee shall
be appointed to sit with all the powers provided by law.  Pending appointment of the referee, the Court
has power to issue temporary or provisional remedies.

 

(d)           Guarantors
and Agent agree that time is of the essence in conducting the reference
proceedings. Accordingly, the referee shall be requested, subject to change in
the time periods specified herein for good cause shown, to (a) set the matter
for a status and trial-setting conference within fifteen (15) days after
the date of selection of the referee, (b) if practicable, try all issues of law
or fact within ninety (90) days after 

 

8

 

the date of
the conference and (c) report a statement of decision within
twenty (20) days after the matter has been submitted for decision.

 

(e)           The
referee will have power to expand or limit the amount and duration of
discovery.  The referee may set or extend
discovery deadlines or cutoffs for good cause, including a party’s failure to
provide requested discovery for any reason whatsoever.  Unless otherwise ordered based upon good cause
shown, neither Guarantors nor Agent shall be entitled to “priority” in
conducting discovery, depositions may be taken by Guarantors and Agent upon
seven (7) days written notice, and all other discovery shall be
responded to within fifteen (15) days after service.  All disputes relating to discovery which
cannot be resolved by Guarantors and Agent shall be submitted to the referee
whose decision shall be final and binding.

 

(f)            Except
as expressly set forth in this Guaranty, the referee shall determine the manner
in which the reference proceeding is conducted including the time and place of
hearings, the order of presentation of evidence, and all other questions that
arise with respect to the course of the reference proceeding.  All proceedings and hearings conducted before
the referee, except for trial, shall be conducted without a court reporter,
except that when any party so requests, a court reporter will be used at any
hearing conducted before the referee, and the referee will be provided a
courtesy copy of the transcript.  The
party making such a request shall have the obligation to arrange for and pay
the court reporter.  Subject to the
referee’s power to award costs to the prevailing party, the applicable
Guarantor(s) and Agent will equally share the cost of the referee and the
court reporter at trial.

 

(g)           The
referee shall be required to determine all issues in accordance with existing
case law and the statutory laws of the State of California.  The rules of evidence applicable to
proceedings at law in the State of California will be applicable to the
reference proceeding.  The referee shall
be empowered to enter equitable as well as legal relief, provide all temporary
or provisional remedies, enter equitable orders that will be binding on the
parties and rule on any motion which would be authorized in a trial,
including without limitation motions for summary judgment or summary
adjudication.  The referee shall issue a
decision and pursuant to CCP §644 the referee’s decision shall be entered by
the Court as a judgment or an order in the same manner as if the action had
been tried by the Court.  The final
judgment or order or from any appealable decision or order entered by the
referee shall be fully appealable as provided by law.  Guarantors and Agent reserve the right to
findings of fact, conclusions of laws, a written statement of decision, and the
right to move for a new trial or a different judgment, which new trial, if
granted, is also to be a reference proceeding under this provision.

 

(h)           If
the enabling legislation which provides for appointment of a referee is
repealed (and no successor statute is enacted) or if a reference procedure is
not available to the parties for any reason, any dispute among either or both
Guarantors and Agent that would otherwise be determined by reference procedure
will be resolved and determined by arbitration. 
The arbitration will be conducted by a retired judge or Justice, in
accordance with the California Arbitration Act § 1280 through
§ 1294.2 of the CCP as amended from time to time.

 

9

 

(i)            GUARANTORS
AND AGENT RECOGNIZE AND AGREE THAT ALL DISPUTES RESOLVED UNDER THIS REFERENCE
PROVISION WILL BE DECIDED BY A REFEREE AND NOT BY A JURY. AFTER CONSULTING (OR
HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR OWN CHOICE,
GUARANTORS AND AGENT EACH KNOWINGLY AND VOLUNTARILY AND FOR THEIR MUTUAL
BENEFIT AGREE THAT THIS REFERENCE PROVISION WILL APPLY TO ANY DISPUTE BETWEEN
THEM WHICH ARISES OUT OF OR IS RELATED TO THIS GUARANTY OR THE OTHER
TRANSACTION DOCUMENTS.

 

19.           ADVICE OF COUNSEL.  GUARANTORS ACKNOWLEDGE THAT THEY HAVE
EITHER OBTAINED THE ADVICE OF COUNSEL OR HAVE HAD THE OPPORTUNITY TO OBTAIN
SUCH ADVICE IN CONNECTION WITH THE TERMS AND PROVISIONS OF THIS GUARANTY.

 

20.           Contribution.  Guarantors
hereby agree as among themselves that, if any Guarantor shall make an Excess
Payment (as defined below), such Guarantor shall have a right of contribution
from each other Guarantor in an amount equal to such other Guarantor’s
Contribution Share (as defined below) of such Excess Payment.  The payment obligations of any Guarantor
under this Paragraph 20 shall be subordinate and subject in right of
payment to the Liabilities until such time as the Liabilities have been paid in
full, and no Guarantor shall exercise any right or remedy under this Paragraph
20 against any other Guarantor until such Liabilities have been paid in
full.  For purposes of this Paragraph
20, (a) “Excess Payment” shall mean the amount paid by any Guarantor
in excess of its Ratable Share of any Guaranteed Obligations; (b) “Ratable
Share” shall mean, for any Guarantor in respect of any payment of
Liabilities, the ratio (expressed as a percentage) as of the date of such
payment of Guaranteed Obligations of (i) the amount by which the aggregate
present fair salable value of all of its assets and properties exceeds the
amount of all debts and liabilities of such Guarantor (including contingent,
subordinated, unmatured, and unliquidated liabilities, but excluding the
obligations of such Guarantor hereunder) to (ii) the amount by which the
aggregate present fair salable value of all assets and other properties of all
of the Credit Parties exceeds the amount of all of the debts and liabilities
(including contingent, subordinated, unmatured, and unliquidated liabilities,
but excluding the obligations of the Credit Parties hereunder) of the Credit
Parties; (c) “Contribution Share” shall mean, for any Guarantor in
respect of any Excess Payment made by the other Guarantor, the ratio (expressed
as a percentage) as of the date of such Excess Payment of (i) the amount
by which the aggregate present fair salable value of all of its assets and
properties exceeds the amount of all debts and liabilities of such Guarantor
(including contingent, subordinated, unmatured, and unliquidated liabilities,
but excluding the obligations of such Guarantor hereunder) to (ii) the
amount by which the aggregate present fair salable value of all assets and
other properties of the Credit Parties other than the maker of such Excess
Payment exceeds the amount of all of the debts and liabilities (including
contingent, subordinated, unmatured, and unliquidated liabilities, but
excluding the obligations of the Credit Parties) of the Credit Parties other
than the maker of such Excess Payment; and (d) “Guaranteed Obligations”
shall mean the Liabilities guaranteed by Guarantors pursuant to Paragraph 1
of this Guaranty.  This Paragraph 20
shall not be deemed to affect any right of subrogation, indemnity,
reimbursement or contribution that any Guarantor may have under any applicable
law against Borrower in respect of any payment of Guaranteed Obligations.

 

10

 

21.           Entire Agreement.  This Guaranty contains the complete
understanding of the parties hereto with respect to the subject matter
herein.  Each Guarantor acknowledges that it is not relying upon any
statements or representations of Agent not contained in this Guaranty and that
such statements or representations, if any, are of no force or effect and are
fully superseded by this Guaranty.  This Guaranty may only be
modified by a writing executed by Guarantors and Agent.

 

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signature page follows]

 

11

 

IN WITNESS WHEREOF, Guarantors have executed this
Guaranty as of February 14, 2008.

 

 

	
   

  	
  “Guarantors”

  
	
   

  	
   

  
	
   

  	
  WESTAFF SUPPORT, INC., a California

  corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Dawn Jaffray

  
	
   

  	
   

  	
  Dawn
  Jaffray

  
	
   

  	
   

  	
  Senior
  Vice President and Chief

  Financial
  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  MEDIAWORLD INTERNATIONAL, a

  California corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Dawn Jaffray

  
	
   

  	
   

  	
  Dawn
  Jaffray

  
	
   

  	
   

  	
  Senior
  Vice President and Chief

  Financial
  Officer

  

 

 

	
  ACCEPTED BY:

  	
   

  
	
   

  	
   

  
	
  U.S. BANK NATIONAL

  ASSOCIATION,

  	
   

  
	
  as Agent

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Susan V. Freed

  	
   

  
	
   

  	
  Susan V. Freed

  	
   

  
	
   

  	
  Vice President

  	
   

  

 

12EXHIBIT 10.8.32

 

Execution Version

 

SECURITY AGREEMENT

 

THIS
SECURITY AGREEMENT (this “Agreement”), dated as of February 14,
2008, is entered into by and among U.S. BANK NATIONAL ASSOCIATION, a
national banking association, as administrative agent for the benefit of the
Secured Parties (as such term is defined in the Financing Agreement, as defined
below) (“Agent”), and WESTAFF (USA), INC., a California corporation (“Borrower”),
WESTAFF, INC., a Delaware corporation and the sole shareholder of Borrower (“Parent
Guarantor”), WESTAFF SUPPORT, INC., a California corporation and a wholly
owned subsidiary of Borrower (“Westaff Support”), and MEDIAWORLD
INTERNATIONAL, a California corporation and a wholly owned subsidiary of
Borrower (“MediaWorld”; and together with Borrower, Parent Guarantor and
Westaff Support, each is individually from time to time is referred to herein
as a “Grantor” and collectively as “Grantors”), with reference to
the following facts:

 

RECITALS

 

A.            Borrower, Parent Guarantor,
the Lenders party thereto (collectively, the “Lenders”) and Agent are
entering into a Financing Agreement of even date herewith (the “Financing
Agreement”), pursuant to which Agent and the Lenders propose to provide
certain credit facilities to Borrower.

 

B.            Concurrently therewith and
herewith, (i) Parent Guarantor is entering into a Continuing Guaranty
dated as of even date herewith in favor of Agent for the benefit of the Secured
Parties (the “Parent Guaranty”), pursuant to which Parent Guarantor
agrees to guaranty the payment and performance of Borrower’s obligations under
the Financing Agreement and the other Loan Documents; and (ii) Westaff
Support and MediaWorld are entering into a Continuing Guaranty dated as of even
date herewith in favor of Agent for the benefit of the Secured Parties (the “Subsidiary
Guaranty”), pursuant to which Westaff Support and MediaWorld agree to
guaranty the payment and performance of Borrower’s obligations under the
Financing Agreement and the other Loan Documents.

 

C.            Borrower is a member
of an affiliated group of companies that includes each other Grantor.

 

D.            The proceeds of the
extensions of credit under the Financing Agreement will be used in part to
enable Borrower to make valuable transfers to one or more of the other Grantors
in connection with the operation of their respective businesses.

 

E.             Borrower and the
other Grantors are engaged in related businesses, and each Grantor will derive
substantial direct and indirect benefit from the making of the extensions of
credit under the Financing Agreement.

 

F.             It is a condition to the
effectiveness of the Financing Agreement that each Grantor enter into this
Agreement with Agent and hereby grant Agent a security interest in the
Collateral described below to secure the payment and performance of such
Grantor’s obligations to Agent and the Lenders under the Financing Agreement
and the other related Loan Documents entered into in connection with (and as
defined in) the Financing Agreement.

 

 

G.            To induce Agent and the
Lenders to enter into the Financing Agreement and the other Loan Documents with
Borrower and provide Borrower the credit facilities contemplated thereunder,
each Grantor is willing to enter into this Agreement with Agent and grant Agent
a security interest in the Collateral.

 

NOW, THEREFORE, the parties hereby agree as follows:

 

1.             DEFINITIONS.

 

1.1           Financing Agreement.  Any capitalized term used but not defined
herein shall have the meaning ascribed thereto in the Financing Agreement.

 

1.2           Defined Terms.  In addition to the other terms defined in
this Agreement, whenever the following capitalized terms (whether or not
underscored) are used, they shall be defined as follows:

 

“Code”
means the Uniform Commercial Code, as enacted in the State of California, as
amended or superseded from time to time after the date of this Agreement.

 

“Collateral”
means all of each Grantor’s right, title and interest in and to all of each
such Grantor’s personal property and assets, tangible and intangible, now
existing or hereafter acquired or arising, and wherever located, including:

 

(i)            all of such Grantor’s
accounts, chattel paper, deposit accounts, documents, equipment, fixtures,
instruments, inventory, investment property, general intangibles, goods, and
letter-of-credit rights;

 

(ii)           all of such Grantor’s right,
title and interest in and to the commercial tort claims listed, or required to
be listed, in Exhibit 5.7 to this Agreement;

 

(iii)          without limiting the
description of the property or any rights or interests in the property
described above in this definition of Collateral, all of such Grantor’s right,
title and interest in and to (a) all of such Grantor’s money, cash, and
other funds; (b) all attachments, accessions, parts and appurtenances to,
all substitutions for, and all replacements of any and all of such Grantor’s
equipment, fixtures and other goods; (c) all of such Grantor’s agreements,
as-extracted collateral, tangible chattel paper, electronic chattel paper,
health-care-insurance receivables, leases, lease contracts, lease agreements,
payment intangibles, proceeds of letters of credit, promissory notes, records
and software; and (d) all of such Grantor’s franchises, customer lists,
insurance refunds, insurance refund claims, tax refunds, tax refund claims,
pension plan refunds, pension plan reversions, (i) patents and patent
applications, (ii) service marks, service mark applications, trademarks,
trademark applications and trade names and all good will associated with any of
the foregoing, (iii) trade secrets, (iv) copyrights and copyright
applications and (v) licenses of all rights or property interests in any
of the foregoing;

 

(iv)          all supporting obligations;

 

(v)           all of the products and
proceeds of all of the foregoing described property and interests in property,
including cash proceeds and noncash proceeds, and including proceeds of 

 

2

 

any insurance, whether in the
form of original collateral or any of the property or rights or interests in
property described above in this definition of Collateral; and

 

(vi)          all of the foregoing, whether now owned or existing
or hereafter acquired or arising, or in which such Grantor now has or hereafter
acquires any right, title or interest;

 

provided, however,
that the Collateral shall not include any Excluded Property.

 

“Excluded Property” means collectively,

 

(i)            any equipment, fixture,
inventory or other goods of such Grantor which is subject to a Permitted Lien,
but solely to the extent that the documents evidencing such Permitted Lien
explicitly prohibit the grant of a security interest in or Lien on such
property or asset; provided, however, that at such time as such
property or asset is no longer subject to such Lien or such prohibition, such
property or asset shall (without any act or delivery by any Person) constitute
Collateral hereunder;

 

(ii)           any rights of such Grantor
under any General Intangible existing prior to the Closing Date (other than
with respect to any Account, payment intangible, Chattel Paper or promissory
note related thereto or as may otherwise be provided under applicable law) (the
“Affected Collateral”) if and solely to the extent the creation by the
relevant Grantor of a security interest pursuant to this Agreement in such
Grantor’s right, title and interest in such Affected Collateral (A) is
prohibited by legally enforceable provisions of any contract, agreement,
instrument or indenture governing such Affected Collateral and such prohibition
is not otherwise ineffective as a matter of law (such as pursuant Section 9-406(f),
9-407(a) or 9-408(a) of the Code), (B) would give any other
party to such contract, agreement, instrument or indenture a legally
enforceable right to terminate its obligations thereunder or (C) is
permitted only with the consent of another party, if the requirement to obtain
such consent is legally enforceable and is not otherwise ineffective as a
matter of law (such as pursuant Section 9-406(f), 9-407(a) or 9-408(a) of
the Code) and such consent has not been obtained (provided, that in any
event any account or any money or other amounts due or to become due under any
such contract, agreement, instrument or indenture shall not be Excluded
Property to the extent that any of the foregoing is (or if it contained a
provision limiting the transferability or pledge thereof would be) subject to Section 9-406
of the Code); provided, however, that, notwithstanding the
foregoing, at such time as such Affected Collateral is no longer subject to
such prohibition, such right of termination or such consent requirement, as the
case may be, such Affected Collateral shall (without any act or delivery by any
Person) constitute Collateral hereunder;

 

(iii)          34% of each class of the
issued and outstanding voting Capital Stock of any Foreign Subsidiary owned by
any Grantor, if and solely to the extent that the grant of a Lien herein in the
Capital Stock of such Foreign Subsidiary would constitute an investment of
earnings in United States property under Section 956 (or a successor
provision) of the Internal Revenue Code, which investment would trigger any
increase in the gross income of a United States shareholder of such Grantor
pursuant to Section 951 (or a successor provision) of the Internal Revenue
Code (it being understood and agreed that the remaining 66% of each class of
the issued and outstanding voting Capital Stock of each such Foreign Subsidiary
and all non-voting

 

3

 

Capital Stock of each such
Foreign Subsidiary shall constitute Collateral hereunder owned by any Grantor;

 

(iv)          any (A) of the Capital
Stock of Westaff Australia and (B) “Junior Debt,” as such term is defined
in the Australian Subordination Agreement, in each case, only for so long as
the Australian Subordination Deed remains in effect and prohibits any Grantor
from (x) pledging any of the Capital Stock of Westaff Australia and (y) granting
a security interest in such Junior Debt; and

 

(v)           any Permit now or hereafter acquired or held by any
Grantor, together with all amendments, modifications, extensions, renewals and
replacements of any thereof) solely to the extent the granting of a security
interest therein in favor of Agent would be prohibited by applicable law and
such prohibition is not otherwise ineffective as a matter of law; provided,
however, that at such time as such Permit is no longer subject to such
prohibition, such Permit shall (without any act or delivery by any Person)
constitute Collateral hereunder.

 

“Government Contracts” means each of the
contracts entered into by Borrower with Government Authorities, as such
contracts may be amended, restated, replaced, extended or reaffirmed from time
to time, which Government Contracts as of the Closing Date are identified on Schedule
9.29 of the Financing Agreement.

 

“Permit” means any and all permits,
certificates, approvals, authorizations, consents, licenses, variances,
franchises or other instruments, however characterized, of any Governmental
Authority (or any Person acting on behalf of a Government Authority).

 

“Surety Account” means that certain U.S. Bank National
Association Account no. 98554000 which has been pledged by Borrower to the
Washington State Department of Labor and Industries as security for providing
workers’ compensation benefits and assessments in the event of default by the
self insurer.

 

1.3           Other Definitional Provisions; Construction.  Unless otherwise specified,

 

(i)            As used in this Agreement,
accounting terms relating to Borrower not defined in this Agreement have the
respective meanings given to them in accordance with GAAP.

 

(ii)           The definition of any
document, instrument or agreement includes all schedules, attachments and
exhibits thereto and all renewals, extensions, supplements, restatements and
amendments thereof.  All Exhibits and
Schedules attached to this Agreement are incorporated into, made and form an
integral part of, this Agreement for all purposes.

 

(iii)          “Hereunder,” “herein,” “hereto,”
“this Agreement” and words of similar import refer to this entire document; “including”
is used by way of illustration and not by way of limitation, unless the context
clearly indicates the contrary; the singular includes the plural and
conversely; and any action required to be taken by Borrower is to be taken
promptly, unless the context clearly indicates the contrary.

 

4

 

(iv)          All of the uncapitalized
terms contained in this Agreement which are now or hereafter defined under the
Code will, unless the context indicates otherwise, have the meanings provided
for now or hereafter in the Code.

 

2.             GRANT OF SECURITY INTEREST; SET-OFF AND
RELATED MATTERS.

 

2.1           Security Interest.  As security for the full, prompt and complete
payment and performance by each Grantor of its respective obligations under the
Financing Agreement and the other Loan Documents, including, without
limitation, the Obligations (as such term is defined in the Financing
Agreement) of Borrower and the joint and several Liabilities (as such term is
defined in the applicable Affiliate Guaranty Agreements) of Parent Guarantor,
Westaff Support and MediaWorld (collectively, for purposes of this Agreement,
the “Obligations”), each Guarantor hereby grants to, and creates in
favor of, Agent, for the benefit of the Secured Parties, a continuing security
interest in, and Lien on, all of the Collateral.

 

2.2           Government Contracts.  In addition to, and without limiting any of
the foregoing, in order to support the payment and performance of the
Obligations, and until the Revolving Credit Commitment Termination Date, each
Grantor hereby absolutely assigns, sells and transfers to Agent, for benefit of
the Secured Parties, all claims and moneys due or to become due under the
Government Contracts, and agrees that all payments due or to become due under
the Government Contracts shall be made to and at the direction of Agent.

 

2.3           Set-Off.  All cash, moneys, investment property and
other properties of any Grantor and the proceeds thereof now or hereafter held
or received by Agent from or for the account of any Grantor, including any and
all deposits (general or special), account balances and credits of any Grantor
with any Secured Party at any time existing, (i) are part of the
Collateral, (ii) will be held as security for the Obligations, and (iii) may
be set-off and applied against any or all Obligations at any time following the
occurrence and during the continuance of any Event of Default, and after the
occurrence of and during the continuance of an Event of Default, Agent has the
right at any time to refuse to allow withdrawals from any account of any
Grantor.  At any time following the
occurrence and during the continuance of any Event of Default, each Grantor
authorizes each Secured Party and its and their respective Affiliates to pay or
to deliver to Agent any deposits or other sums credited by, or due from, such
Affiliates to any Grantor for application against any or all Obligations, all
without further notice to Grantors (such notice being expressly waived) and
without any necessity on Agent’s part to resort to other security or sources of
reimbursement for the Obligations.  The
rights given to Agent and the Secured Parties hereunder are cumulative with
Agent’s and the Secured Parties’ other rights and remedies, including other
rights of setoff.  Agent will promptly
notify Borrower of Agent’s receipt of such funds for application against the
Obligations, but Agent’s failure to do so will not affect the validity or
enforceability thereof.

 

3.             PERFECTION OF AGENT’S SECURITY INTEREST; DUTY
OF CARE.

 

3.1           Required Grantor Actions.  Until the termination of this Agreement, each
Grantor shall perform any and all steps and take all actions reasonably
requested by Agent from time to time to perfect, maintain, protect, and enforce
Agent’s security interest in, and Lien on, the Collateral, including (i) executing
and delivering all appropriate documents and instruments as 

 

5

 

Agent may determine are
necessary or reasonably desirable to perfect, preserve, or enforce Agent’s
interest in the Collateral, all in form and substance satisfactory to Agent, (ii) delivering
to Agent any warehouse receipts or other documents of title covering that
portion of the Collateral which may be located in warehouses and in respect of
which warehouse receipts are issued, (iii) upon the occurrence and the
continuance of any Event of Default, transferring inventory to warehouses
approved by Agent, (iv) placing notations on such Grantor’s books of
account to disclose Agent’s security interest and Lien therein, and (v) taking
such other steps and actions as deemed necessary or reasonably desirable by
Agent to perfect and enforce Agent’s security interest in, and Lien on, and
other rights and interests in, the Collateral.

 

3.2           Financing Statements; Notices.  Each Grantor hereby irrevocably authorizes
Agent at any time and from time to time to file in any filing office in any
jurisdiction any initial financing statements and amendments thereto that (a) indicate
the Collateral (i) as all assets of such Grantor, whether now owned or
hereafter acquired or arising, and all proceeds and products thereof, (ii) as
being of an equal or lesser scope or with greater detail, and (b) provide
any other information required by Part 5 of Article 9 of the Uniform
Commercial Code as enacted in any jurisdiction for the sufficiency or filing
office acceptance of any financing statement or amendment, including whether
such Grantor is an organization, the type of organization and any
organizational identification number issued to such Grantor.  Each Grantor hereby irrevocably authorizes
Agent at any time and from time to time to correct or complete, or to cause to
be corrected or completed, any financing statements, continuation statements or
other such documents as have been filed naming such Grantor as debtor and Agent
as secured party.  Each Grantor agrees to
furnish any such information to Agent promptly upon request.  At Agent’s request, each Grantor will execute
notices appropriate under any applicable requirements of law that Agent deems
desirable to evidence, perfect, or protect its security interest in and other
Liens on the Collateral in such form(s) as are satisfactory to Agent.  Each Grantor, jointly and severally, agrees
to pay the cost of filing all financing statements and other notices in all public
offices where filing is deemed by Agent to be necessary or desirable to
perfect, protect or enforce the security interest and Lien granted to Agent
hereunder.  A carbon, photographic,
photostatic or other reproduction of this Agreement or of a financing statement
is sufficient as a financing statement. 
Agent is hereby authorized to give notice to any creditor, landlord or
any other Person as may be necessary or desirable under applicable laws to
evidence, protect, perfect, or enforce the security interest and Lien granted
to Agent in the Collateral.

 

3.3           Bailees; Consignees; Warehousemen.  If any Collateral having a value in excess of
$100,000 individually or $250,000 in the aggregate is in the possession or
control of any warehouseman or any of any Grantor’s consignees, agents,
processors, customers or other bailees, upon the request of Agent the
applicable Grantor shall notify such warehousemen, consignee, agents,
processors, customers or other bailees of Agent’s security interest and Lien
therein, and upon Agent’s request, such Grantor shall use commercially
reasonable efforts to obtain a bailee letter agreement and financing statements
acceptable to Agent from such warehousemen, consignees, agents, processors,
customers or other bailees, pursuant to which each such warehousemen,
consignee, agent, processor, customer or other bailee acknowledges in an
authenticated record that such Person is holding the Collateral for Agent’s
benefit, and such documentation from any secured creditor or lessor of such Person
as Agent may request.

 

6

 

3.4           Impositions; Protection of Agent’s Interests.  To protect, perfect, or enforce, from time to
time, Agent’s rights or interests in the Collateral, Agent may, in its
discretion (but without any obligation to do so), (i) discharge any Liens
(other than Permitted Liens so long as no Event of Default has occurred and is
continuing) at any time levied or placed on the Collateral, (ii) pay any
insurance to the extent any Grantor has failed to timely pay the same, (iii) if
determined by the Agent, in its reasonable judgment, to be necessary to protect
the Collateral, maintain guards where any Collateral is located if an Event of
Default has occurred and is continuing, and (iv) obtain any record from
any service bureau and pay such service bureau the cost thereof.  All costs and expenses incurred by Agent in
exercising its discretion under this Section 3.4 will be part of
the Obligations, payable on Agent’s demand and secured by the Loan Collateral.

 

3.5           Agent’s Duty of Care.  Agent shall have no duty of care with respect
to the Collateral except that Agent shall exercise reasonable care with respect
to the Collateral in Agent’s custody. 
Agent shall be deemed to have exercised reasonable care if (i) such
property is accorded treatment substantially equal to that which Agent accords
its own property or (ii) Agent takes such action with respect to the
Collateral as the applicable Grantor shall reasonably request in writing.  Agent will not be deemed to have, and nothing
in this Section 3.5 may be construed to deem that Agent has, failed
to exercise reasonable care in the custody or preservation of Collateral in its
possession merely because either (a) Agent failed to comply with any
request of any Grantor or (b) Agent failed to take steps to preserve
rights against any Persons in such property. 
Each Grantor agrees that Agent has no obligation to take steps to
preserve rights against any prior parties.

 

3.6           Verification.  Except as may otherwise be provided by the
Financing Agreement, after the occurrence and during the continuance of any
Event of Default, Agent, in its own name or in the name of others, may
periodically communicate with each Grantor’s account debtors, customers and
other obligors to verify with them, to Agent’s satisfaction, the existence,
amount and terms of any sums owed by such account debtors, customers or other
obligors to each Grantor and the nature of any such account debtor’s, customer’s
or other obligor’s relationship with such Grantor.

 

3.7           [Reserved].

 

3.8           Control Agreement.  With respect to any of the Collateral for
which control of such Collateral is a method of perfection under the Uniform
Commercial Code as enacted in any jurisdiction, including all of each Grantor’s
right, title and interest in deposit accounts, investment property, electronic
chattel paper and letter-of-credit rights, and without limiting the obligations
of each Grantor under the provisions of Sections 3.9, 3.10,
and 3.11 below, each Grantor shall, on Agent’s reasonable request,
cause to be executed by each Person that Agent determines is appropriate, a
control agreement in a form reasonably acceptable to Agent; provided that, the
Grantors are not required to obtain such a control agreement for such
Collateral in deposit, investment or securities accounts which do not have a
balance in excess of $25,000 (or $750,000 with respect to the Surety Account),
and provided further, that at no time shall the aggregate balances (other than
amounts deposited in the Surety Account up to $750,000) for all Grantors in
such deposit, investment or securities accounts exceed $250,000 in the
aggregate.

 

7

 

3.9           Promissory Notes and Tangible Chattel Paper.  If any Grantor shall at any time hold or
acquire any promissory notes or tangible chattel paper evidencing obligations
owing to such Grantor in excess of $100,000 (individually or as part of a
related series of transactions) that is not Excluded Property, such Grantor
shall forthwith endorse, assign and deliver the same to Agent, accompanied by
such instruments of transfer or assignment duly executed in blank as Agent may
from time to time specify.

 

3.10         Electronic Chattel Paper and Transferable Records.  If any Grantor at any time holds or acquires
an interest in any electronic chattel paper or any “transferable record,” as
that term is defined in Section 201 of the Federal Electronic Signatures
in Global and National Commerce Act, or in § 16 of the Uniform Electronic Transactions
Act as in effect in any relevant jurisdiction, such Grantor shall promptly
notify Agent thereof and, at the request and option of Agent, shall take such
action as Agent may reasonably request to vest in Agent control, under
§ 9-105 of the Uniform Commercial Code, of such electronic chattel paper
or control under Section 201 of the Federal Electronic Signatures in
Global and National Commerce Act or, as the case may be, § 16 of the
Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of
such transferable record.

 

3.11         Letter-of-Credit Rights.  If any Grantor is at any time now or
hereafter a beneficiary under a letter of credit having a face amount in excess
of $100,000, such Grantor shall promptly notify Agent thereof and, at the
request and option of Agent, such Grantor shall, pursuant to an agreement in
form and substance satisfactory to Agent, either, at the option of Agent, (i) arrange
for the issuer and any confirmer or other nominated person of such letter of
credit to consent to an assignment to Agent of the proceeds of the letter of
credit or (ii) arrange for Agent to become the beneficiary of the letter
of credit.

 

3.12         Commercial Tort Claims.  If any Grantor shall at any time hold or
acquire a commercial tort claim for an asserted amount in excess of $100,000,
such Grantor shall promptly notify Agent in a writing signed by such Grantor of
the particulars thereof and grant to Agent in such writing a security interest
therein and in the proceeds thereof, all upon the terms of this Agreement, with
such writing to be in form and substance satisfactory to Agent.

 

4.             POWER OF ATTORNEY.

 

4.1           Grant of Power.  Each Grantor does hereby severally make,
constitute and appoint Agent (or any officer or agent of Agent) as such Grantor’s
true and lawful attorney-in-fact, with full power of substitution, in the name
of such Grantor or in the name of Agent or otherwise, for the use and benefit
of Agent, but at the joint and several cost and expense of Grantors, (i) to
endorse the name of such Grantor on any instruments, notes, checks, drafts,
money orders, or other media of payment (including payments payable under any
policy of insurance on the Collateral) or Collateral that may come into the
possession of Agent or any Affiliate of Agent in full or part payment of any of
the Obligations; (ii) upon the occurrence and during the continuance of
any Event of Default, to sign and indorse the name of such Grantor on any
invoice, freight or express bill, bill of lading, storage or warehouse receipts,
drafts against debtors, assignments, verifications and notices in connection
with any Collateral, and any instrument or document relating thereto or to any
of such Grantor’s rights therein; (iii) to file financing statements
pursuant to the Code and other notices appropriate under applicable law as 

 

8

 

Agent deems necessary to
perfect, preserve, and protect Agent’s rights and interests under this
Agreement; (iv) after an Event of Default has occurred and is continuing,
to obtain the insurance referred to in Section 10.14 of the
Financing Agreement and indorse any drafts and cancel any insurance so obtained
by Agent; (v) after an Event of Default has occurred and is continuing, to
give written notice to the United States Post Office to effect change(s) of
address so that all mail addressed to such Grantor may be delivered directly to
Agent; and (vi) to do any and all things necessary or desirable to perfect
Agent’s security interest in, and Lien on, and other rights and interests in,
the Collateral, to preserve and protect the Collateral and to otherwise carry
out this Agreement.

 

4.2           Duration; Ratification of Acts.  This power of attorney, being coupled with an
interest, will be irrevocable for the term of this Agreement and all
transactions under this Agreement and thereafter until the Obligations have
been Paid in Full.  Each Grantor jointly
and severally ratifies and approves all acts of such attorney, and neither
Agent nor its attorney will be liable for any acts or omissions or for any
error of judgment or mistake of fact or law, other than as results from such
Person’s own gross negligence or willful misconduct.  Each Grantor shall will execute and deliver
promptly to Agent all instruments necessary or desirable, as determined in
Agent’s discretion, to further Agent’s exercise of the rights and powers
granted it in this Section 4.

 

5.             WARRANTIES AND REPRESENTATIONS.  To induce Agent and the Lenders to make the
Loans and other extensions of credit pursuant to the Loan Documents, each
Grantor severally represents to Agent that the following statements are, and
will continue throughout the term of this Agreement to be, true:

 

5.1           Jurisdiction of Organization; Places of Business,
etc.  Such Grantor’s (i) jurisdiction
of organization is the jurisdiction identified on Exhibit 5.1, (ii) exact
legal name is as set forth in the first paragraph of this Agreement (as may be
updated from time to time as provided in Section 6.2), (iii) chief
executive office and principal place of business are set forth on Exhibit 5.1
(as may be updated from time to time as provided in Section 6.2), (iv) offices
or locations where such Grantor keeps the Collateral (except for inventory in
transit) or conducts any of its business are listed on Exhibit 5.1
(as may be updated from time to time as provided in Section 6.2), (v) federal
tax identification number is identified on Exhibit 5.1, and (vii) organizational
identification number in its jurisdiction of organization is identified on Exhibit 5.1.

 

5.2           Prior Locations Of Collateral.  Except for inventory in transit, none of the
inventory or equipment constituting part of the Collateral has been at, or has
been removed from, any location as of the date of this Agreement other than
those locations set forth on Exhibit 5.1.

 

5.3           Names.  All trade names, assumed names, fictitious
names and other names used by such Grantor during the 5 year period preceding
the date of this Agreement are set forth on Exhibit 5.3, and such
Grantor has not, during the preceding 5 year period, except as may be set
forth on Exhibit 5.3, acquired any of its assets in any bulk
transfer.

 

5.4           Investment Property.  Exhibit 5.4 lists all of such
Grantor’s rights, title or interests in, or with respect to, any investment
property as of the Closing Date.

 

9

 

5.5           Letter-of-Credit Rights.  Exhibit 5.5 lists all of such
Grantor’s rights, title or interests in, or with respect to, any letters of
credit as of the Closing Date.

 

5.6           Electronic Chattel Paper.  Exhibit 5.6 lists all of such
Grantor’s rights, title or interests in, or with respect to, any electronic
chattel paper as of the Closing Date.

 

5.7           Commercial Tort Claims.  Exhibit 5.7 lists all of such
Grantor’s rights, titles or interests in, or with respect to, any commercial
tort claims as of the Closing Date.

 

5.8           Instruments.  Exhibit 5.8 lists all of such
Grantor’s rights, titles or interests in, or with respect to, any instruments,
including promissory notes having and outstanding or committed principal amount
in excess of $100,000, as of the Closing Date.

 

5.9           State of Title.  Such Grantor has good and marketable title
to, and ownership of, all the Collateral not owned by the other Grantors, free
and clear of all Liens except to the extent, if any, of the Permitted Liens.

 

6.             COLLATERAL COVENANTS.  Until the Obligations are fully paid,
performed and satisfied and this Agreement is terminated, each Grantor shall:

 

6.1           Claims Against Collateral.  Maintain the Collateral, as the same is
constituted from time to time, free and clear of all Liens, except to the
extent, if any, of the Permitted Liens, and defend or cause to be defended the
Collateral against all of the claims and demands of all Persons whomsoever
(except to the extent, if any, of the Permitted Liens).

 

6.2           Notice of Change in Place of Business; Names, etc.  (i) Give Agent at least 30 Business
Days advance notice in writing of any change in Borrower’s (a) chief
executive office or (b) exact legal name as set forth in the first
paragraph of this Agreement, and (ii) not, without the prior written consent
of Agent, change Borrower’s jurisdiction of organization.

 

6.3           [Reserved].

 

6.4           Notice of Adverse Information.  Promptly notify Agent in writing of any Lien
or claim known to the Borrower which could reasonably be expected to materially
and adversely affect the value of any material portion of the Collateral or the
rights of Agent with respect thereto.

 

6.5           Equipment.  Maintain the equipment in good operating
condition and repair in accordance with the Grantors’ standard business
practice, ordinary wear and tear excepted.

 

6.6           [Reserved].

 

6.7           Insurance.  Insure the Collateral in accordance with the
terms of the Financing Agreement.

 

6.8           Removal of Collateral.  Not remove any of the Collateral (except for
inventory in transit) with a value in excess of $100,000 at any one location or
$250,000 in the aggregate, in each case during any Fiscal Year, from the
locations set forth in Exhibit 5.1 of this Agreement or 

 

10

 

keep any of such Collateral
(except for inventory in transit) at any other office or location without
providing Agent with an updated Exhibit 5.1 within 30 days thereof.

 

6.9           No Liens.  Not create or permit to be created or to
exist any Lien on any of the Collateral except to the extent, if any, of the
Permitted Liens.

 

7.             TERM.  Subject to Section 11.6 below,
this Agreement will terminate on the later to occur of (i) the Payment in
Full of the Obligations or (ii) the termination of the Financing
Agreement.

 

8.             AGENT’S RIGHTS AND REMEDIES.

 

8.1           Remedies.  (i)  On the occurrence and during
the continuance of an Event of Default and after the lapse of any applicable
period of cure provided in Section 11.2 of the Financing Agreement,
Agent may immediately, at any time, while such Event of Default is continuing,
take any one or more of the following actions, without notice, demand or legal
process of any kind (except as may be required by law), all of which each
Grantor waives to the fullest extent permitted by law:

 

(a)           proceed to enforce payment of the Obligations and to
exercise all of the rights and remedies afforded to Agent by the Uniform
Commercial Code as enacted in any jurisdiction, under the terms of the Loan
Documents and by law and in equity provided, including those set forth below in
this Section 8.1;

 

(b)           take possession of the Collateral and maintain such
possession on any Grantor’s premises at no cost to Agent, or remove the
Collateral, or any part thereof, to such other place(s) as Agent may
desire;

 

(c)           enter on any premises on which the Collateral, or
any part or records thereof, may be situated and remove the same therefrom, for
which action no Grantor shall assert against Agent any claim for trespass,
breach of the peace or similar claim and no Grantor shall not hinder Agent’s efforts
to effect such removal;

 

(d)           require Grantors, at their joint and several cost,
to assemble the Collateral and make it available at a place designated by
Agent;

 

(e)           collect, compromise, take, sell or otherwise deal
with the Collateral and proceeds thereof in its own name or in the name of any
Grantor, including (1) bringing suit on any one or more of the accounts,
chattel paper, instruments, documents, leases or other agreements
(collectively, “Contracts”) in the name of any Grantor or Agent, and exercise
all such other rights respecting the Contracts, in the name of any Grantor or
Agent, including the right to accelerate or extend the time of payment, settle,
release in whole or in part any amounts owing on any Contract and issue credits
in the name of any Grantor or Agent, and including proceeding against any
collateral or security provided in respect of any Contract and (2) bringing
suit on any one or more of the general intangibles, in the name of any Grantor
or Agent, and exercise all such other rights respecting the general
intangibles, including the right to accelerate or extend the time of payment,
settle, release in whole or in part any amounts owing on any general intangible

 

11

 

and issue credits in the name
of any Grantor or Agent, and including proceeding against any collateral or
security provided in respect of any general intangible;

 

(f)            sell part or all of the Collateral at public or
private sale(s), for cash, upon credit or otherwise, at such prices and upon
such terms as Agent deems advisable, at Agent’s discretion, and Agent may, if
Agent deems it reasonable, postpone or adjourn any sale of the Collateral from
time to time by an announcement at the time and place of sale or by announcement
at the time and place of such postponed or adjourned sale, without being
required to give a new notice of sale, and without being obligated to make any
sale of the Collateral regardless of notice of sale having been given;

 

(g)           to the extent Agent has not so acted or is currently
so acting pursuant to the other terms of this Agreement, notify any Grantor’s
customers, account debtors and any other Persons (1) obligated on the
Collateral to make payment or otherwise render performance to or for the benefit
of Agent and (2) that, without limiting the generality of clause (1),
the Contracts and general intangibles have been assigned to Agent and that
payments should be made directly to Agent;

 

(h)           require any Grantor, using such form as Agent may
approve, to notify such Grantor’s customers, account debtors and any other
Persons, and to indicate on all of any such Grantor’s correspondence to such
customers, account debtors and other Persons, that the Contracts and general
intangibles must be paid to Agent directly;

 

(i)            sign any indorsements, assignments or other writings
of conveyance or transfer in connection with any disposition of the Collateral;

 

(j)            sell, assign, transfer or otherwise dispose of all
or any part of the Collateral in any manner permitted by law and do any other
thing and exercise any other right or remedy which Agent may, with or without
judicial process, do or exercise under applicable law, and in any such sale
Agent may sell, assign, transfer or otherwise dispose of all or any part of the
Collateral without giving any warranties and Agent may specifically disclaim
any warranties of title and the like;

 

(k)           apply for and have a receiver appointed under state
or federal law by a court of competent jurisdiction in any action taken by
Agent to enforce its rights and remedies under this Agreement and, as
applicable, the other Loan Documents in order to manage, protect, preserve, and
sell and otherwise dispose of all or any portion of the Collateral and continue
the operation of the business of any Grantor, and to collect all revenues and
profits thereof and apply the same to the payment of all expenses and other
charges of such receivership, including the compensation of the receiver, and
to the payment of the Obligations until a sale or other disposition of such
Collateral is finally made and consummated;

 

(l)            enforce the obligations of an account debtor or
other Person obligated on collateral and exercise the rights of the debtor with
respect to the obligation of the account debtor or other Person obligated on
collateral to make payment or otherwise render performance to any Grantor, and
with respect to any property that secures the obligations of the account debtor
or 

 

12

 

other Person obligated on
collateral, in any case directly or through collection agencies or other
collection specialists; and

 

(m)          without limiting the provisions of Section 2.3
above, apply (or instruct another Person to apply) to the Obligations the
balance of any deposit account that is part of the Collateral.

 

(ii)           Each Grantor acknowledges that portions of the
Collateral could be difficult to preserve and dispose of and be further subject
to complex maintenance and management. 
Accordingly, Agent, in exercising its rights under this Section 8.1,
shall have the widest possible latitude to preserve and protect the Collateral
and Agent’s security interest in and Lien thereon.  Moreover, each Grantor acknowledges and
agrees that Agent shall have no obligation to, and each Grantor hereby waives
to the fullest extent permitted by law any right that it may have to require
Agent to (a) clean up or otherwise prepare any of the Collateral for sale,
(b) pursue any Person to collect any of the Obligations or (c) exercise
collection remedies against any Persons obligated on the Collateral.  Agent’s compliance with applicable local,
state or federal law requirements, in addition to those imposed by the Uniform
Commercial Code as enacted in any jurisdiction, in connection with a
disposition of any or all of the Collateral will not be considered to adversely
affect the commercial reasonableness of any disposition of any or all of the
Collateral under the Uniform Commercial Code as enacted in any jurisdiction.

 

8.2           Notice of Disposition; Allocations.  If any notice is required by law to
effectuate any sale or other disposition of the Collateral, (i) Agent will
give the applicable Grantor(s) written notice of the time and place of any
public sale or of the time after which any private sale or other intended
disposition thereof will be made, and at any such public or private sale, Agent
may purchase all or any of the Collateral; and (ii) Agent and each Grantor
agree that such notice will not be unreasonable as to time if given in
compliance with this Agreement ten days prior to any sale or other
disposition.  The proceeds of the sale
will be applied first to all costs and expenses of such sale including
Attorneys’ Fees and other costs and expenses, and second to the payment of all
Obligations in the manner and order determined by Agent in its discretion.  Each Grantor shall remain jointly and
severally liable to Agent and the Lenders for any deficiency.  Unless otherwise directed by law, Agent will
return any excess to Borrower.

 

8.3           Payment of Expenses.  Grantors shall, jointly and severally, pay to
Agent, on its demand, all costs and expenses, including court costs, Attorneys’
Fees and costs of sale, incurred by Agent in exercising any of its rights or
remedies hereunder, all of which constitute part of the Obligations and are
secured by the Loan Collateral.

 

9.             INDEMNIFICATION.  In consideration of the execution and
delivery of the Financing Agreement and the making of any Loan to Borrower,
each Grantor agrees, jointly and severally, to indemnify and hold Agent and
each other Secured Party and each of Agent’s and such other Secured Party’s
directors, Affiliates and agents (for the purposes of this Section 9
each is an “Indemnified Party”) harmless from and against any and all
claims, losses, obligations and liabilities arising out of or resulting from
any or all of (i) this Agreement and (ii) the transactions
contemplated by this Agreement (including enforcement of this Agreement),
except for claims, losses or liabilities to the extent resulting from an
Indemnified Party’s gross negligence or willful misconduct.  The indemnification provided for in this Section 9
is in 

 

13

 

addition to, and not in
limitation of, any other indemnification or insurance provided by any Grantor
to Agent or any other Secured Party.

 

10.           NOTICE.  Any notice, certificate, request,
notification and other communication required, permitted or contemplated
hereunder must be in writing and given in accordance with the Financing Agreement.

 

11.           GENERAL.

 

11.1         Severability.  If any term of this Agreement is found
invalid under California law or other laws of mandatory application by a court
of competent jurisdiction, the invalid term will be considered excluded from
this Agreement and will not invalidate the remaining terms of this Agreement.

 

11.2         GOVERNING LAW.  THIS AGREEMENT HAS BEEN DELIVERED AND
ACCEPTED AT AND SHALL BE DEEMED TO HAVE BEEN MADE AT LOS ANGELES,
CALIFORNIA.  THIS AGREEMENT SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF CALIFORNIA (WITHOUT REGARD TO CALIFORNIA CONFLICTS OF LAW PRINCIPLES).

 

11.3         WAIVER OF JURISDICTION.  AS A SPECIFICALLY BARGAINED INDUCEMENT FOR
AGENT TO ENTER INTO THIS AGREEMENT AND EXTEND CREDIT TO BORROWER, EACH GRANTOR
AND AGENT AGREE THAT ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF OR ARISING
OUT OF THIS AGREEMENT, ITS VALIDITY OR PERFORMANCE AND WITHOUT LIMITATION ON
THE ABILITY OF AGENT, ITS SUCCESSORS AND ASSIGNS, TO INITIATE AND PROSECUTE IN
ANY APPLICABLE JURISDICTION ACTIONS RELATED TO THE REPAYMENT AND COLLECTION OF
THE OBLIGATIONS AND THE EXERCISE OF ALL OF AGENT’S RIGHTS AGAINST ANY GRANTOR
WITH RESPECT THERETO AND ANY SECURITY OR PROPERTY OF ANY GRANTOR, INCLUDING
DISPOSITIONS OF THE COLLATERAL, SHALL BE INITIATED AND PROSECUTED AS TO ALL
PARTIES AND THEIR SUCCESSORS AND ASSIGNS AT LOS ANGELES, CALIFORNIA.  AGENT AND EACH GRANTOR CONSENTS TO AND
SUBMITS TO THE EXERCISE OF JURISDICTION OVER ITS PERSON BY ANY COURT SITUATED
AT LOS ANGELES, CALIFORNIA HAVING JURISDICTION OVER THE SUBJECT MATTER, AND
CONSENTS THAT ALL SERVICE OF PROCESS BE MADE BY CERTIFIED MAIL DIRECTED TO ANY
GRANTOR OR AGENT AT THEIR RESPECTIVE ADDRESSES SET FORTH IN THE FINANCING
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR AS OTHERWISE PROVIDED UNDER THE LAWS OF
THE STATE OF CALIFORNIA.  EACH GRANTOR
WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO
VENUE OF ANY ACTION INSTITUTED HEREUNDER, AND CONSENTS TO THE GRANTING OF SUCH
LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.

 

11.4         Survival and Continuation of Representations and
Warranties.  All of each
Grantor’s representations and warranties contained in this Agreement shall (i) survive
the execution, delivery and acceptance hereof by the parties hereto and the
closing of the 

 

14

 

transactions described herein
or related hereto and (ii) shall be brought down from time to time as
provided in the Financing Agreement and any certificate delivered pursuant to
the last sentence of Section 8.9 thereof.

 

11.5         Agent’s Additional Rights Regarding Collateral.  All of the Obligations shall constitute one
obligation secured by all of the Collateral. 
In addition to Agent’s other rights and remedies under the Loan
Documents, Agent may, in its discretion exercised in good faith, following the
occurrence and during the continuance of any Event of Default:  (i) exchange, enforce, waive or release
any of the Collateral or portion thereof, (ii) apply the proceeds of the
Collateral against the Obligations and direct the order or manner of the
liquidation thereof (including any sale or other disposition), as Agent may,
from time to time, in each instance determine, and (iii) settle,
compromise, collect or otherwise liquidate any such security in any manner
without affecting or impairing its right to take any other further action with
respect to any security or any part thereof.

 

11.6         Application of Payments; Revival of Obligations.  Agent shall have the continuing right to
apply or reverse and reapply any payments to any portion of the
Obligations.  To the extent any Grantor
makes a payment or payments to Agent or Agent receives any payment or proceeds
of the Collateral or any other security for any Grantor’s benefit, which
payment(s) or proceeds or any part thereof are subsequently voided,
invalidated, declared to be fraudulent or preferential, set aside or required
to be repaid to a trustee, receiver or any other party under any bankruptcy
act, state or federal law, common law or equitable cause, then, to the extent
of such payment(s) or proceeds received, the Obligations or part thereof
intended to be satisfied shall be revived and shall continue in full force and
effect, as if such payment(s) or proceeds had not been received by Agent.

 

11.7         Additional Waivers by Grantors.  Each Grantor waives presentment and protest
of any instrument and notice thereof, and, except as expressly provided in the
Loan Documents, demand, notice of default and all other notices to which such Grantor
might otherwise be entitled.  No Grantor
shall assert any claim against Agent or any other Secured Party on any theory
of liability for consequential, special, indirect or punitive damages.

 

11.8         Equitable Relief.  Each Grantor recognizes that, in the event
any Grantor fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy of law may prove to be inadequate
relief to Agent; therefore, each Grantor agrees that Agent, if Agent so
requests, shall be entitled to temporary and permanent injunctive relief in any
such case without the necessity of proving actual damages.

 

11.9         Entire Agreement; Counterparts; Fax Signatures.  This Agreement and the other Loan Documents
set forth the entire agreement of the parties with respect to subject matter of
this Agreement and supersede all previous understandings, written or oral, in
respect thereof.  Any request from time
to time by any Grantor for Agent’s consent under any provision in the Loan
Documents must be in writing, and any consent to be provided by Agent under the
Loan Documents from time to time must be in writing in order to be binding on
Agent; however, Agent will have no obligation to provide any consent
requested by any Grantor, and Agent may, for any reason in its discretion
exercised in good faith, elect to withhold the requested consent.  Two or more duplicate originals of this
Agreement may be signed by the parties, each of which 

 

15

 

shall be an original but all of
which together shall constitute one and the same instrument.  Any documents delivered by, or on behalf of,
any Grantor by fax transmission (i) may be relied on by Agent as if the
document were a manually signed original and (ii) will be binding on such
Grantor for all purposes of the Loan Documents.

 

11.10       Headings.  Section headings in this Agreement are
included for convenience of reference only and shall not relate to the
interpretation or construction of this Agreement.

 

11.11       Cumulative Remedies.  The remedies provided in this Agreement and
the other Loan Documents are cumulative and not exclusive of any remedies
provided by law.  Exercise of one or more
remedy(ies) by Agent does not require that all or any other remedy(ies) be
exercised and does not preclude later exercise of the same remedy.

 

11.12       Waivers and Amendments in Writing.  Failure by Agent to exercise any right,
remedy or option under this Agreement or in any Loan Documents or delay by
Agent in exercising the same shall not operate as a waiver by Agent of its
right to exercise any such right, remedy or option.  No waiver by Agent shall be effective unless
it is in writing and then only to the extent specifically stated.  This Agreement may only be amended, modified,
supplemented or restated in a writing signed by Agent and each Grantor affected
thereby and may not be amended, modified, supplanted or otherwise changed
orally.

 

11.13       Recourse to Directors or Officers.  The obligations of each party under this
Agreement are solely the corporate obligations of each party.  No recourse shall be had for any obligation
or claim arising out of or based upon this Agreement against any stockholder,
employee, officer, or director of each party.

 

11.14       Assignment.  Agent shall have the right to assign this
Agreement and the other Loan Documents in accordance with Section 14.1 of
the Financing Agreement.  No Grantor may
assign, transfer or otherwise dispose of any of its rights or obligations
hereunder, by operation of law or otherwise, and any such assignment, transfer
or other disposition without Agent’s written consent (with the consent of the
Lenders as specified in Section 14.2 of the Financing Agreement)
shall be void.  All of the rights,
privileges, remedies and options given to any Secured Party under the Loan
Documents shall inure to the benefit of the successors and assigns of the
applicable Secured Party, and all the terms, conditions, covenants, provisions
and warranties herein shall inure to the benefit of and bind the permitted successors
and assigns of each Grantor and each Secured Party, respectively.

 

11.15       Agent.  As among the Secured Parties, (a) Agent
shall hold all items of the Collateral at any time received under this
Agreement in accordance with the terms of this Agreement and the Financing
Agreement and (b) by accepting the benefits of this Agreement, each
Secured Party acknowledges and agrees that (1) the obligations of Agent as
holder of the Collateral and any interests therein and with respect to any
disposition of any of the Collateral or any interests therein are only those
obligations expressly set forth in this Agreement and the Financing Agreement
and (2) this Agreement may be enforced only by the action of Agent and
that no other Secured Party shall have any right individually to seek to
enforce or to enforce this Agreement, it being understood and agreed that such
rights and remedies may be exercised by 

 

16

 

Agent, for the benefit of the
Secured Parties, upon the terms of this Agreement and the Financing Agreement.

 

11.16       Conflict.  If there is any conflict, ambiguity, or
inconsistency, in Agent’s judgment, between the terms of this Agreement and any
of the other Loan Documents, then the applicable terms and provisions, in Agent’s
judgment, providing Agent with greater rights, remedies, powers, privileges, or
benefits will control.

 

11.17       WAIVER OF JURY TRIAL.  AS A SPECIFICALLY BARGAINED INDUCEMENT FOR
AGENT TO ENTER INTO THIS AGREEMENT AND FOR TE LENDERS AND THE OTHER SECURED
PARTIES TO EXTEND CREDIT TO BORROWER, EACH GRANTOR AND AGENT EACH WAIVES TRIAL
BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING IN RESPECT OF OR
ARISING OUT OF THIS AGREEMENT OR THE CONDUCT OF THE RELATIONSHIP BETWEEN AGENT
AND GRANTORS.

 

11.18       Incorporation of Judicial
Reference Provisions.  The
judicial reference provisions set forth in Section 15.15 of the
Financing Agreement are hereby incorporated into this Agreement by reference
(provided that for purposes of this Section 11.18, each reference
to “Borrower” therein shall be deemed to refer to Grantors, individually and
collectively, hereunder) .

 

17

 

IN
WITNESS WHEREOF, this Agreement has been duly executed by each Grantor as of the
date first set forth above in the preamble to this Agreement.

 

	
   

  	
  WESTAFF (USA), INC., a California corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Dawn M. Jaffray

  
	
   

  	
   

  	
  Dawn
  M. Jaffray

  
	
   

  	
   

  	
  Senior
  Vice President and Chief Financial

  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WESTAFF, INC., a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Dawn M. Jaffray

  
	
   

  	
   

  	
  Dawn
  M. Jaffray

  
	
   

  	
   

  	
  Senior
  Vice President and Chief Financial

  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WESTAFF SUPPORT, INC., a California

  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Dawn M. Jaffray

  
	
   

  	
   

  	
  Dawn
  M. Jaffray

  
	
   

  	
   

  	
  Senior
  Vice President and Chief Financial

  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MEDIAWORLD INTERNATIONAL, a California 

  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Dawn M. Jaffray

  
	
   

  	
   

  	
  Dawn
  M. Jaffray

  
	
   

  	
   

  	
  Senior
  Vice President and Chief Financial

  Officer

  

 

18

 

Accepted at Los Angeles, California as of the date 

first set forth above in the preamble to this Agreement.

 

February 14,
2008

 

	
  U.S. BANK NATIONAL ASSOCIATION,

  	
   

  
	
  as Agent

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Susan V. Freed

  	
   

  
	
   

  	
  Susan V. Freed

  	
   

  
	
   

  	
  Vice President

  	
   

  

 

19

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