Document:

Exhibit
10.8.25

 

 

SUBSIDIARY GUARANTY

 

THIS SUBSIDIARY GUARANTY (this “Guaranty”),
dated as of May 17, 2002, is made by and among the Guarantors identified as
such on the signature page hereof (each, a “Guarantor” and collectively,
“Guarantors”) in favor of GENERAL ELECTRIC CAPITAL CORPORATION, a
Delaware corporation, individually and as US Agent and UK Agent (in such
capacities, “Agent”) for itself and the lenders from time to time
signatory to the Credit Agreement hereinafter defined (“Lenders”).

W I T N E S S E T H:

WHEREAS, pursuant to that certain Multicurrency Credit
Agreement, dated as of the date hereof, by and among Westaff, Inc., a Delaware
corporation, Westaff (USA), Inc., a California corporation (“Westaff USA”),
Westaff (CA), Inc., a California corporation (“WCA”), Westaff Limited
Partnership, a Delaware limited partnership (“WestLP”, and collectively
with Westaff USA and WCA, the “US Borrowers”), Westaff (U.K.) Limited, a
limited liability company organized under the laws of England and Wales (“UK
Borrower”), Westaff Support, Inc., a California corporation (the “Term
Borrower” and together with US Borrowers and UK Borrower, the “Borrowers”
and each a “Borrower”), the Lenders from time to time party thereto, and
Agent (as from time to time amended, restated, amended and restated,
supplemented, replaced or otherwise modified, the “Credit Agreement”),
Lenders have agreed to make the Loans to Borrowers, and US Revolving Lenders
have agreed to incur Letter of Credit Obligations on behalf of Westaff USA;

WHEREAS, Guarantors are direct and wholly-owned
subsidiaries of US Borrower (other than Westaff Limited Partnership, a Delaware
limited partnership which is an indirect subsidiary of Westaff USA) and are
affiliates of Term Borrower and UK Borrower, and as such will derive direct and
indirect economic benefits from the making of the Loans and other financial
accommodations provided to Borrowers pursuant to the Credit Agreement; and

WHEREAS, in order to induce Agent and Lenders to enter
into the Credit Agreement and other Loan Documents and to induce Lenders to
make the Loans and to incur Letter of Credit Obligations as provided for in the
Credit Agreement, it is a condition to the obligations of Lenders to make the
Loans and to incur Letter of Credit Obligations that Guarantors agree to
guaranty payment of the Guaranteed Obligations (as hereinafter defined).

NOW, THEREFORE, in consideration of the premises and
the covenants hereinafter contained, and to induce Lenders to provide the Loans
and other financial accommodations under the Credit Agreement to Borrowers, it
is agreed as follows:

1.     DEFINITIONS.

Capitalized terms used
herein (including the preamble and recitals) shall have the meanings assigned
to them in the Credit Agreement or Annex A thereto, unless otherwise defined
herein.

 

References to this
“Guaranty” shall mean this Subsidiary Guaranty, including all amendments,
modifications and supplements and any annexes, exhibits and schedules to any of
the foregoing, and shall refer to this Subsidiary Guaranty as the same may be
in effect at the time such reference becomes operative.

2.     THE GUARANTY.

2.1           Guaranty
of Guaranteed Obligations of Borrowers. 
Each Guarantor hereby jointly and severally unconditionally guarantees
to Agent and Lenders, and their respective successors, endorsees, transferees
and assigns, the prompt payment (whether at stated maturity, by acceleration or
otherwise) and performance of the Obligations of Borrowers (hereinafter the “Guaranteed
Obligations”).  Each Guarantor
agrees that this Guaranty is a guaranty of payment and performance and not of
collection, and that their obligations under this Guaranty shall be primary,
absolute and unconditional, irrespective of, and unaffected by:

(a)           the genuineness, validity,
regularity, enforceability or any future amendment of, or change in this
Guaranty, any other Loan Document or any other agreement, document or
instrument to which any Credit Party and/or any Guarantor are or may become a
party;

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

(c)           the existence, value or condition of,
or failure to perfect its Lien against, any Collateral for the Guaranteed
Obligations or any action, or the absence of any action, by Agent in respect
thereof (including, without limitation, the release of any such security); or

(d)           the insolvency of any Credit Party;
or

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

it being agreed by each
Guarantor that its obligations under this Guaranty shall not be discharged
until the Termination Date.  Each
Guarantor shall be regarded, and shall be in the same position, as principal
debtor with respect to the Guaranteed Obligations.  Each Guarantor agrees that any notice or directive given at any
time to Agent which is inconsistent with the waiver in the immediately
preceding sentence shall be null and void and may be ignored by Agent and
Lenders, and, in addition, may not be pleaded or introduced as evidence in any
litigation relating to this Guaranty for the reason that such pleading or
introduction would be at variance with the written terms of this Guaranty,
unless Agent and Lenders have specifically agreed otherwise in writing.  It is agreed among each Guarantor, Agent and
Lenders that the foregoing waivers are of the essence of the transaction
contemplated by the Loan Documents and that, but for this Guaranty and such
waivers, Agent and Lenders would decline to enter into the Credit Agreement.

2.2           Demand
by Agent or Lenders.  In addition to
the terms of this Guaranty set forth in Section 2.1 hereof, and in no
manner imposing any limitation on such terms, it is expressly 

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understood and agreed that, if, at any time, the
outstanding principal amount of the Guaranteed Obligations under the Credit
Agreement (including all accrued interest thereon) is declared to be
immediately due and payable, then Guarantors shall, upon demand if no Event of
Default has occurred under Section 8.1(h) and (i) of the Credit Agreement with
respect to any Credit Party, and without demand if any such Event of Default
has occurred, pay to the holders of the Guaranteed Obligations the entire
outstanding Guaranteed Obligations due and owing to such holders.  Payment by Guarantors shall be made to Agent
in immediately available Federal funds to an account designated by Agent or at
the address set forth herein for the giving of notice to Agent or at any other
address that may be specified in writing from time to time by Agent, and shall
be credited and applied to the Guaranteed Obligations.

2.3           Enforcement
of Guaranty.  In no event shall
Agent have any obligation (although it is entitled, at its option) to proceed
against any Borrower or any other Credit Party or any Collateral pledged to
secure the Guaranteed Obligations before seeking satisfaction from any or all
of the Guarantors, and Agent may proceed, prior or subsequent to, or
simultaneously with, the enforcement of Agent’s rights hereunder, to exercise
any right or remedy which it may have against any Collateral, as a result of
any Lien it may have as security for all or any portion of the Guaranteed
Obligations.

2.4           Waiver.  In addition to, and without limiting any
other waivers contained herein, each Guarantor waives, and agrees that it shall
not at any time insist upon, plead or in any manner whatsoever claim or take
the benefit or advantage of, any appraisal, valuation, stay, extension,
marshaling of assets or redemption laws, or exemption, whether now or at any
time hereafter in force, which may delay, prevent or otherwise affect the
performance by such Guarantor of its Guaranteed Obligations under, or the
enforcement by Agent or Lenders of, this Guaranty.  Each Guarantor hereby waives diligence, presentment and demand
(whether for non–payment or protest or of acceptance, maturity, extension
of time, change in nature or form of the Guaranteed Obligations, acceptance of
further security, release of further security, composition or agreement arrived
at as to the amount of, or the terms of, the Guaranteed Obligations, notice of
adverse change in any Borrower’s financial condition or any other fact which
might increase the risk to any Guarantor) with respect to any of the Guaranteed
Obligations or all other demands whatsoever and waives the benefit of all
provisions of law which are or might be in conflict with the terms of this
Guaranty.  Each Guarantor waives all
rights and defenses arising out of an election of remedies by Agent or any
Lender.  Each Guarantor represents,
warrants and jointly and severally agrees that, as of the date of this
Guaranty, its obligations under this Guaranty are not subject to any offsets or
defenses against Agent or Lenders or any Credit Party of any kind.  Each Guarantor further jointly and severally
agrees that its obligations under this Guaranty shall not be subject to any
counterclaims, offsets or defenses against Agent or any Lender or against any
Credit Party of any kind which may arise in the future.

Additionally, each Guarantor further acknowledges and
agrees that California Civil Code Section 2856 authorizes and validates waivers
of a guarantor’s rights of subrogation and reimbursement and waivers of certain
other rights and defenses available to a guarantor under California law.  Based on the preceding sentence and without
limiting the generality of the foregoing waivers contained in this Section 2.4
or any other provision hereof, each Guarantor expressly waives to the maximum
extent permitted by law any and all rights and defenses 

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(except
the defense of indefeasible final payment in full), which might otherwise be
available to such Guarantor under California Civil Code Sections 2787 to 2855,
inclusive, 2899 and 3433 and under California Code of Civil Procedure Sections
580a, 580b, 580d and 726 (or any of such sections), or any other jurisdiction
to the extent the same are applicable to this Guaranty or the agreements,
covenants or obligations of such Guarantor hereunder.

2.5           Benefit
of Guaranty.  The provisions of this
Guaranty are for the benefit of Agent and Lenders and their respective
successors, transferees, endorsees and assigns permitted under the Credit
Agreement, and nothing herein contained shall impair, as between any Credit
Party and Agent or Lenders, the obligations of any Credit Party under the Loan
Documents.  In the event all or any part
of the Guaranteed Obligations are transferred, indorsed or assigned by Agent or
any Lender to any Person or Persons in accordance with the terms of the Credit
Agreement, any reference to “Agent” or “Lender” herein shall be deemed to refer
equally to such Person or Persons.

2.6           Modification
of Guaranteed Obligations, Etc. 
Each Guarantor hereby acknowledges and agrees that Agent and Lenders may
at any time or from time to time, with or without the consent of, or notice to,
Guarantors:

(a)           change or extend the manner, place or
terms of payment of, or renew or alter all or any portion of, the Guaranteed
Obligations;

(b)           take any action under or in respect
of the Loan Documents in the exercise of any remedy, power or privilege
contained therein or available to it at law, equity or otherwise, or waive or
refrain from exercising any such remedies, powers or privileges;

(c)           amend or modify, in any manner
whatsoever, the Loan Documents;

(d)           extend or waive the time for any
Credit Party’s performance of, or compliance with, any term, covenant or
agreement on its part to be performed or observed under the Loan Documents, or
waive such performance or compliance or consent to a failure of, or departure
from, such performance or compliance;

(e)           take and hold Collateral for the
payment of the Guaranteed Obligations guarantied hereby or sell, exchange,
release, dispose of, or otherwise deal with, any property pledged, mortgaged or
conveyed, or in which Agent or Lenders have been granted a Lien, to secure any
Obligations;

(f)            release anyone who may be liable in
any manner for the payment of any amounts owed by Guarantors or any Credit
Party to Agent or any Lender;

(g)           modify or terminate the terms of any
intercreditor or subordination agreement pursuant to which claims of other
creditors of any Guarantor or any Credit Party are subordinated to the claims
of Agent and Lenders; and/or

(h)           apply any sums by whomever paid or
however realized to any amounts owing by any Guarantor or any Credit Party to
Agent or any Lender in such manner as Agent or any Lender shall determine in
its discretion;

 

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and Agent and Lenders
shall not incur any liability to any Guarantor as a result thereof, and no such
action shall impair or release the Guaranteed Obligations of Guarantors or any
of them under this Guaranty.

2.7           Reinstatement.  This Guaranty shall remain in full force and
effect and continue to be effective should any petition be filed by or against
any Credit Party or any Guarantor for liquidation or reorganization, should any
Credit Party or any Guarantor become insolvent or make an assignment for the
benefit of creditors or should a receiver or trustee be appointed for all or
any significant part of such Credit Party’s or such Guarantor’s assets, and
shall continue to be effective or be reinstated, as the case may be, if at any
time payment and performance of the Guaranteed Obligations, or any part
thereof, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by Agent or any Lender, whether as a
“voidable preference”, “fraudulent conveyance”, or otherwise, all as though
such payment or performance had not been made. 
In the event that any payment, or any part thereof, is rescinded,
reduced, restored or returned, the Guaranteed Obligations shall be reinstated
and deemed reduced only by such amount paid and not so rescinded, reduced,
restored or returned.

2.8           Deferral
of Subrogation, Etc. 
Notwithstanding anything to the contrary in this Guaranty, or in any
other Loan Document, each Guarantor hereby:

(a)           expressly and irrevocably waives, on
behalf of itself and its successors and assigns (including any surety) until
the Termination Date, any and all rights at law or in equity to subrogation, to
reimbursement, to exoneration, to contribution, to indemnification, to set off
or to any other rights that could accrue to a surety against a principal, to a
guarantor against a principal, to a guarantor against a maker or obligor, to an
accommodation party against the party accommodated, to a holder or transferee
against a maker, or to the holder of any claim against any Person, and which
such Guarantor may have or hereafter acquire against any Credit Party in
connection with or as a result of such Guarantor’s execution, delivery and/or
performance of this Guaranty, or any other documents to which such Guarantor is
a party or otherwise; and

(b)           acknowledges and agrees (i) that this
waiver is intended to benefit Agent and Lenders and shall not limit or
otherwise affect any Guarantor’s liability hereunder or the enforceability of
this Guaranty, and (ii) that Agent, Lenders and their respective successors and
assigns permitted under the Credit Agreement are intended third party
beneficiaries of the waivers and agreements set forth in this Section 2.8
and their rights under this Section 2.8 shall survive payment in full of
the Guaranteed Obligations.

2.9           Election
of Remedies.   If Agent may, under
applicable law, proceed to realize benefits under any of the Loan Documents
giving Agent and Lenders a Lien upon any Collateral owned by any Credit Party,
either by judicial foreclosure or by non–judicial sale or enforcement,
Agent may, at its sole option, determine which of such remedies or rights it
may pursue without affecting any of such rights and remedies under this
Guaranty.  If, in the exercise of any of
its rights and remedies, Agent shall forfeit any of its rights or remedies,
including its right to enter a deficiency judgment against any Credit Party,
whether because of any applicable laws pertaining to “election of remedies” or
the like, each Guarantor hereby consents to such action by Agent and waives any
claim based upon such action, even if such action by Agent shall result in a
full or partial loss of any rights of subrogation which such Guarantor might
otherwise have had but 

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for such action by Agent.  Any election of remedies which results in the denial or
impairment of the right of Agent to seek a deficiency judgment against any
Credit Party shall not impair each Guarantor’s obligation to pay the full
amount of the Guaranteed Obligations. 
In the event Agent shall bid at any foreclosure or trustee’s sale or at
any private sale permitted by law or the Loan Documents, Agent may bid all or
less than the amount of the Guaranteed Obligations and the amount of such bid
need not be paid by Agent but shall be credited against the Guaranteed
Obligations.  Subject to the applicable
law, the amount of the successful bid at any such sale shall be conclusively
deemed to be the fair market value of the collateral and the difference between
such bid amount and the remaining balance of the Guaranteed Obligations shall
be conclusively deemed to be the amount of the Guaranteed Obligations
guaranteed under this Guaranty, notwithstanding that any present or future law
or court decision or ruling may have the effect of reducing the amount of any
deficiency claim to which Agent and Lenders might otherwise be entitled but for
such bidding at any such sale.

2.10         Funds
Transfers.  If any Guarantor shall
engage in any transaction as a result of which any Borrower is required to make
a mandatory prepayment with respect to the Guaranteed Obligations under the
terms of the Credit Agreement (including any issuance or sale of such
Guarantor’s Stock or any sale of its assets), such Guarantor shall distribute
to, or make a contribution to the capital of, one or more of the Borrowers an
amount equal to the mandatory prepayment required under the terms of the Credit
Agreement.

3.     DELIVERIES.

In a form satisfactory to Agent, each Guarantor shall
deliver to Agent (with sufficient copies for each Lender), concurrently with
the execution of this Guaranty and the Credit Agreement, the Loan Documents and
other instruments, certificates and documents as are required to be delivered
by Guarantors to Agent under the Credit Agreement and the other Loan Documents
or such other documents as may be reasonably requested by Agent.

4.     REPRESENTATIONS
AND WARRANTIES.

To induce Lenders to make the Loans and incur Letter
of Credit Obligations under the Credit Agreement, each Guarantor jointly and
severally makes the representations and warranties as to such Guarantor
applicable to the Credit Parties contained in the Credit Agreement, each of
which is incorporated by reference and repeated herein to Agent and Lenders,
each and all of which shall survive the execution and delivery of this
Guaranty.

5.     FURTHER ASSURANCES.

Each Guarantor agrees, upon the written request of
Agent or any Lender, to execute and deliver to Agent or such Lender, from time
to time, any additional instruments or documents reasonably considered
necessary by Agent or such Lender to cause this Guaranty to be, become or
remain valid and effective in accordance with its terms.

6.     PAYMENTS
FREE AND CLEAR OF TAXES.

All payments required to
be made by each Guarantor hereunder shall be made to Agent and Lenders free and
clear of, and without deduction for, any and all present and future 

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Taxes.  If any
Guarantor shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder, (a) the sum payable shall be increased as much as shall
be necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 6) Agent or
Lenders, as applicable, receive an amount equal to the sum they would have
received had no such deductions been made, (b) such Guarantor shall make such
deductions, and (c) such Guarantor shall pay the full amount deducted to the
relevant taxing or other authority in accordance with applicable law.  Within thirty (30) days after the date of
any payment of Taxes, each applicable Guarantor shall furnish to Agent the
original or a certified copy of a receipt evidencing payment thereof. Each Guarantor
shall jointly and severally indemnify and, within ten (10) days of demand
therefor, pay Agent and each Lender for the full amount of Taxes (including any
Taxes imposed by any jurisdiction on amounts payable under this Section 6)
paid by Agent or such Lender, as appropriate, and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes were correctly or legally asserted.

7.     OTHER
TERMS.

7.1           Entire
Agreement.  This Guaranty, together
with the other Loan Documents, constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior
agreements relating to a guaranty of the loans and advances under the Loan
Documents or the Guaranteed Obligations or both.

7.2           Headings.  The headings in this Guaranty are for
convenience of reference only and are not part of the substance of this
Guaranty.

7.3           Severability.  Whenever possible, each provision of this
Guaranty shall be interpreted in such a manner to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.

7.4           Notices.  Whenever it is provided herein that any
notice, demand, request, consent, approval, declaration or other communication
shall or may be given to or served upon any of the parties by any other party,
or whenever any of the parties desires to give or serve upon another any such
communication with respect to this Guaranty, each such notice, demand, request,
consent, approval, declaration or other communication shall be in writing and
shall be given in the manner, and deemed received, as provided for in Section
11.10 (“Notices”) and Annex I of the Credit Agreement, and in respect of any
Guarantor, to the address and facsimile numbers specified on Schedule I
hereto.

7.5           Successors
and Assigns.  This Guaranty and all
obligations of Guarantors hereunder shall be binding upon the successors and
assigns of each Guarantor (including a debtor-in-possession on behalf of such
Guarantor) and shall, together with the rights and remedies of Agent, for
itself and for the benefit of Lenders, hereunder, inure to the benefit of Agent
and Lenders, all future holders of any instrument evidencing any of the
Obligations and their respective successors and assigns as permitted under the
Credit Agreement.  No sales of
participations, other sales, assignments, transfers or other dispositions of
any agreement 

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governing or instrument evidencing the Obligations or
any portion thereof or interest therein shall in any manner affect the rights of
Agent and Lenders hereunder.  No
Guarantor may assign, sell, hypothecate or otherwise transfer any interest in
or obligation under this Guaranty.

7.6           No
Waiver; Cumulative Remedies; Amendments. 
Neither Agent nor any Lender shall by any act, delay, omission or
otherwise be deemed to have waived any of its rights or remedies hereunder, and
no waiver shall be valid unless in writing, signed by Agent and then only to
the extent therein set forth.  A waiver
by Agent, for itself and the ratable benefit of Lenders, of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which Agent would otherwise have had on any future occasion.  No failure to exercise nor any delay in
exercising on the part of Agent or any Lender, any right, power or privilege
hereunder, shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
future exercise thereof or the exercise of any other right, power or
privilege.  The rights and remedies
hereunder provided are cumulative and may be exercised singly or concurrently,
and are not exclusive of any rights and remedies provided by law.  None of the terms or provisions of this
Guaranty may be waived, altered, modified, supplemented or amended except by an
instrument in writing, duly executed by Agent and Guarantors.

7.7           Termination.  This Guaranty is a continuing guaranty and
shall remain in full force and effect until the Termination Date.  Immediately after the Termination Date,
Agent shall deliver to Guarantors, at Guarantors’ expense, such documents as
Guarantors may reasonably request to evidence such termination.

7.8           Counterparts.  This Guaranty may be executed in any number
of counterparts, each of which shall collectively and separately constitute one
and the same agreement.

7.9           GOVERNING
LAW; CONSENT TO JURISDICTION AND VENUE.

IN ALL RESPECTS,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS GUARANTY
AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA  APPLICABLE
TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, AND ANY APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA.  EACH
GUARANTOR HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED
IN SAN FRANCISCO COUNTY, CITY OF SAN FRANCISCO, CALIFORNIA, SHALL HAVE
EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN OR
AMONG GUARANTORS, AGENT OR ANY LENDER PERTAINING TO THIS GUARANTY OR TO ANY
MATTER ARISING OUT OF OR RELATING TO THIS GUARANTY OR ANY OF THE OTHER LOAN
DOCUMENTS, PROVIDED, THAT AGENT AND GUARANTORS ACKNOWLEDGE THAT
ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE
OF SAN FRANCISCO COUNTY, AND, PROVIDED, FURTHER, THAT
NOTHING IN THIS GUARANTY SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE
ON THE COLLATERAL OR ANY OTHER SECURITY FOR 

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THE GUARANTEED
OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT,
FOR THE BENEFIT OF AGENT AND LENDERS. 
EACH GUARANTOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH
GUARANTOR HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM  NON  CONVENIENS
AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY SUCH COURT.  EACH
GUARANTOR HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL ADDRESSED TO SUCH GUARANTOR AS PROVIDED HEREIN AND THAT SERVICE SO MADE
SHALL BE DEEMED COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT THEREOF AND FIVE
(5) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.

7.10         WAIVER
OF JURY TRIAL.

BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX
FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), EACH GUARANTOR AND AGENT DESIRES
THAT DISPUTES ARISING HEREUNDER OR RELATING HERETO BE RESOLVED BY A JUDGE
APPLYING SUCH APPLICABLE LAWS. 
THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL
SYSTEM AND OR ARBITRATION, EACH GUARANTOR AND AGENT WAIVES ALL RIGHTS TO TRIAL
BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED
WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION
WITH THIS GUARANTY AND THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED
HERETO OR THERETO.

7.11         Limitation
on Guaranteed Obligations. 
Notwithstanding any provision herein contained to the contrary, each
Guarantor’s liability hereunder shall be limited to an amount not to exceed as
of any date of determination the greater of:

(a)           the net amount of all Loans and other
extensions of credit (including Letters of Credit) advanced under the Credit
Agreement and directly or indirectly re-loaned or otherwise transferred to, or
incurred for the benefit of, such Guarantor, plus interest thereon at the
applicable rate specified in the Credit Agreement; or

(b)           the amount which could be claimed by
Agent and Lenders from such Guarantor under this Guaranty without rendering
such claim voidable or avoidable under Section 548 of Chapter 11 of the
Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act,
Uniform Fraudulent Conveyance Act or similar statute or common law after taking

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into account, among other things, such Guarantor’s
right of contribution and indemnification from each other Guarantor under Section
7.12 and such Guarantor’s right of subrogation from Borrowers under law.

7.12         Contribution with Respect to
Guaranteed Obligations.

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

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

(c)           This Section 7.12 is intended
only to define the relative rights of Guarantors and nothing set forth in this Section
7.12 is intended to or shall impair the obligations of Guarantors, jointly
and severally, to pay any amounts as and when the same shall become due and
payable in accordance with the terms of this Guaranty.

(d)           The rights of the parties under this Section
7.12 shall be exercisable upon the full and indefeasible payment of the
Guaranteed Obligations and the termination of the Credit Agreement and the
other Loan Documents.

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

7.14         Judgment
Currency.  If, for the purpose of
obtaining judgment in any court, it is necessary to convert an amount due
hereunder in the currency in which it is due (the “Original Currency”)
into another currency (the “Second Currency”), the rate of exchange
applied shall be that at which, in accordance with normal banking procedures,
the Agent could purchase in the applicable foreign exchange market, the
Original Currency with the Second Currency on the date two (2) Business Days
preceding that on which judgment is given. 
Each Guarantor agrees that its obligation in respect of any Original
Currency due from it hereunder shall, notwithstanding any judgment or payment
in such other currency, be discharged only to the extent that, on the 

10

 

Business Day following the date the Agent receives
payment of any sum so adjudged to be due hereunder in the Second Currency, the
Agent may, in accordance with normal banking procedures, purchase, in the
applicable foreign exchange market, the Original Currency with the amount of
the Second Currency so paid; and if the amount of the Original Currency so
purchased or could have been so purchased is less than the amount originally
due in the Original Currency, each Guarantor agrees as a separate obligation
and notwithstanding any such payment or judgment to indemnify the Agent against
such loss.  The term “rate of exchange”
in this Section 7.13 means the Spot Rate at which the Agent, in
accordance with normal practices, is able on the relevant date to purchase the
Original Currency with the Second Currency, and includes any premium and costs
of exchange payable in connection with such purchase.

8.     SECURITY.

To secure payment of each Guarantor’s obligations
under this Guaranty, concurrently with the execution of this Guaranty, each
Guarantor has entered into a Security Agreement pursuant to which each
Guarantor has granted to Agent for the benefit of Lenders a security interest
in substantially all of its personal property and has entered into a Pledge
Agreement pursuant to which certain Guarantors have pledged the Pledged
Collateral (defined therein) to Agent for the benefit of Lenders.

9.     CREDIT
AGREEMENT AND ASSET SALES.

Each Guarantor agrees to
perform, comply with and be bound by the covenants contained in Sections 4, 5
and 6 of the Credit Agreement applicable to the Credit Parties (which
provisions are incorporated herein by reference).

Each Guarantor further agrees that promptly  upon receipt by such Guarantor of proceeds
of any asset disposition (excluding proceeds of asset dispositions
permitted by Section 6.8 (a), 6.8(c), 6.8(d), 6.8(e) and 6.8(f) of the Credit
Agreement, but including any sale of Stock of any Subsidiary of any Credit
Party), such Guarantor shall distribute or contribute (as the case may be) (and
any Guarantor which is the parent of any such distributing or contributing
Guarantor shall cause to be distributed or contributed) such proceeds to the
Applicable Borrowers to prepay the Loans as set forth in the Credit Agreement.

[Signature Pages
to Follow]

11

 

IN WITNESS WHEREOF, the parties hereto have executed
and delivered this Guaranty as of the date first above written.

	
   

  	
  WESTAFF (GP), INC.,

  
	
   

  	
  a California
  corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Dirk
  A. Sodestrom

  
	
   

  	
  Name: Dirk A. Sodestrom

  
	
   

  	
  Title: Senior Vice
  President and Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WESTAFF
  (LP), INC.,

  
	
   

  	
  a California corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Dirk
  A. Sodestrom

  
	
   

  	
  Name: Dirk A. Sodestrom

  
	
   

  	
  Title: Senior Vice
  President and Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WESTERN
  MEDICAL SERVICES, INC.,

  
	
   

  	
  a California corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Gary
  A. Kittleson

  
	
   

  	
  Name: Gary A. Kittleson

  
	
   

  	
  Title: Executive Vice President and

  
	
   

  	
   

  	
  Chief Financial Officer

  
				

 

12

 

 

	
   

  	
  MEDIAWORLD
  INTERNATIONAL,

  
	
   

  	
  a California corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Dirk
  A. Sodestrom

  
	
   

  	
  Name: Dirk Sodestrom

  
	
   

  	
  Title: Senior Vice President and Chief Financial
  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  GENERAL
  ELECTRIC CAPITAL CORPORATION,

  
	
   

  	
  as Agent

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  Lawrence E. Ridgway

  
	
   

  	
  Name: Lawrence E. Ridgway

  
	
   

  	
  Title: Duly Authorized Signatory

  

 

13Exhibit
10.8.26

 

AMENDED AND RESTATED

 

UNSECURED SUBORDINATED NOTE

 

	
  $2,000,000

  	
  May 17, 2002

  
	
   

  	
  Walnut Creek,
  California

  

 

1.             Promise to
Pay.    This Amended and
Restated Unsecured Subordinated Note (this “Note”), is the promise of
WESTAFF (USA), INC., a California corporation (“Payor”) to pay to W.
Robert Stover, and his successors and assigns (“Holder”), the principal
amount and all interest accrued upon the loan (the “Loan”), made f by
Holder to the undersigned, the principal amount of TWO MILLION DOLLARS (US$2,000,000)
(the “Principal Amount”).  Upon
the terms and conditions hereof, Payor hereby unconditionally promises to pay
to the order of Holder at such address as Holder shall hereinafter designate to
Payor in writing, in lawful money of the United States of America and in
immediately available funds, the Principal Amount and to pay interest on the
outstanding principal balance of the Loan as computed in the manner set forth
in Section 3 below.  All
capitalized terms herein shall have the meanings as provided herein (including Section
13 below), and if not defined herein, shall have the respective meanings as
defined in Annex A of that certain Multicurrency Credit Agreement dated on or
about the date hereof by and among Westaff (USA), Inc., Westaff (U.K.) Limited,
Westaff Support, Inc., Westaff (CA), Inc., and Westaff Limited Partnership, as
Borrowers, Westaff, Inc., as Guarantor, General Electric Capital Corporation,
as Agent, and the Lenders signatory thereto (as amended, supplemented,
replaced, refinanced or otherwise modified from time to time, “Credit
Agreement”).

 

This Note is an amendment and restatement of that
certain Unsecured Subordinated Note, dated April 1,  2002, by the Payor in favor of the Holder, in the maximum
principal amount of $2,000,000 (the “Prior Note”).  This Note amends, restates and replaces in
full the Prior Note, which shall be returned by the Holder to the Payor and
marked “cancelled.”

 

2.             Maturity; Conversion Rights.

 

(a)           Subject
to Section 4 hereof, the Principal Amount of the Loan made under this
Note, plus all accrued and unpaid interest thereon, shall be due and payable on
August 18, 2007 (the “Maturity Date”). 
Subject to the provisions of Section 4(c), Payor may prepay
all or any portion of this Note at any time without penalty.  All payments to Holder shall be accompanied
by a certificate from an officer of Payor certifying that Payor is not
prohibited from making payments under Section 4(c) hereof.  All payments received from Payor hereunder
shall be applied first, to the payment of any unpaid interest under this Note,
and second, to reduce the principal balance hereunder.

 

1

 

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

 

3.             Interest
Rate.  Payor shall pay
interest to Holder on the outstanding and unpaid principal amount of the Loan
at the rate (the “Interest Rate”) equal to the US Index Rate (as
calculated under the Credit Agreement) plus seven percent (7%), calculated on
the basis of a year of 365 days for the actual number of days elapsed and
compounded monthly, provided, however, that in no event shall the
Interest Rate exceed the maximum rate permitted by law.  Interest accruing on the principal amount of
the Loan shall be paid by Payor to Holder 60 calendar days after the end of
each Fiscal Quarter (subject to the Section 4(c) hereof).  For the purposes of this Note, “Fiscal
Quarter” means any of the quarterly accounting periods of Payor, the first
three of which comprise 12 weeks and the fourth of which comprises 16 or 17
weeks.

 

4.             Subordination.

 

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

 

(b)           Senior
Debt Holders (as defined in Section 13 below) will be entitled to
receive payment in full of all Senior Obligations due in respect of Senior Debt
(including interest after the commencement of any bankruptcy proceeding at the
rate specified in the applicable Senior Debt, without regard to whether or not
such interest is an allowed claim, but except for any contingent indemnity
obligation) before Holder will be entitled to receive any payment with respect
to this Note, in the event of any distribution to creditors of Payor:  (i) in a liquidation or dissolution of
Payor; (ii) in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to Payor or its property; (iii) in an assignment
for the benefit of creditors; or (iv) in any marshaling of Payor’s assets and
liabilities.

 

(c)           Payor
may make principal and interest payments under this Note when due, without
acceleration, except, as long as any Senior Obligations are outstanding, Payor
may not make any principal or interest payment in respect of this Note in the
event of any of the following:

 

 

2

 

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

 

(ii)           in
the event (A) any default (other than a Payment Default) occurs and is
continuing with respect to any  Senior Debt which, with the giving of
notice or the passage of time, would permit the Agent or the Senior Debt
Holders to accelerate the maturity of the Senior Debt; or (B) after giving
effect to the payment to be made in respect of this Note, a default would exist
that, with the giving of notice or the passage of time, would  permit the Agent or the Senior Debt Holders
to accelerate the maturity of the Senior Debt; or (C) after giving effect to
the proposed payment hereunder, the Borrowers under the Credit Agreement shall
have an aggregate Borrowing Availability (as defined in the Credit Agreement)
of the US Dollar Equivalent  (as defined
in the Credit Agreement) of less than the greater of (y) fifteen percent (15%)
of the Aggregate Borrowing Base (as defined in the Credit Agreement) or (y)
$5,000,000, and in each instance under Clauses (A), (B) and (C) hereof, any
Senior Debt Holder shall have delivered to Payor and Holder at the addresses
set forth in Section 8 below notice of such default or condition (a “Payment
Blockage Notice”) from any Senior Debt Holder.

 

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

 

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

 

(f)            Intentionally
Left Blank.

 

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

 

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

 

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

 

 

 

3

 

 

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

 

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

 

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

 

(j)            For
the purposes of this Note, the Senior Obligations shall not be deemed to have
been paid in full unless the Senior Debt Holders shall have received cash
payment in full of all Senior Obligations (whether matured or unmatured), with
the exception of contingent indemnity obligations and all commitments to extend
further financial accommodations under the Credit Agreement shall have
terminated.

 

(k)           Holder
(i) will not take, sue for, or demand from Payor payment of all or any portion
of this Note (with the exception of a demand for a regularly scheduled interest
payment for which payment is permitted under Section 4(c)); (ii) will not
commence, or join with any creditor other than the Senior Debt Holders in
commencing, directly or indirectly, or cause Payor to commence, or assist Payor
in commencing, any proceeding referred to in Section 4(a); and (iii)
will not initiate, prosecute or participate in any claim, action or other
proceeding challenging the enforceability, validity, perfection or priority of
the Senior Debt or any lien or security interest granted to secure the Senior
Debt..

 

(l)            Holder
undertakes to execute, verify, deliver and file any proofs of claim that the
Senior Debt Holders may at any time require to prove and realize upon any
rights or claims pertaining to this Note and to effectuate the full benefit of
the subordination contained herein; and upon failure of Holder so to do, the
Senior Debt Holders shall be deemed to be irrevocably appointed the agent and
attorney-in-fact of Holder to execute, verify, deliver and file any such proofs
of claim; provided, that neither the Agent nor any Senior Debt Holder shall
have any obligation to execute, verify, deliver or file such proof of claim.

 

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

 

 

4

 

5.             Subrogation.  Subject to the payment in full of all the
Senior Debt (other than contingent indemnity obligations) and termination of
all commitments to extend further financial accommodations under the Credit
Agreement and until this Note shall be paid in full, Holder shall be subrogated
to the rights of the Senior Debt Holders (to the extent of payments or
distributions previously made to such Senior Debt Holders pursuant to the
provisions of Section 4 above) to receive payments or distributions
of assets of Payor applicable to the Senior Debt.  No such payments or distributions applicable to the Senior Debt
shall, as between Payor and its creditors, other than the Senior Debt Holders
and Holder, be deemed to be a payment by Payor to or on account of this Note;
and for the purposes of such subrogation, no payments or distributions to the
Senior Debt Holders to which Holder would be entitled except for the provisions
of this Section 5 shall, as between Payor and its creditors, other
than the Senior Debt Holders and Holder, be deemed to be a payment by Payor to
or on account of the Senior Debt.  If
all or any part of any payment to the Senior Debt Holders is recovered from or
required to be repaid by any Senior Debt Holder, then this Agreement shall be
reinstated and any payment or distribution to Holder at any time thereafter,
whether pursuant to the right of subrogation or otherwise, shall be deemed to
have been received in trust for the Senior Debt Holders and promptly paid to
the Agent to be applied to the Senior Debt.

 

6.             Usury
Savings Provision.  Under no
circumstances (and notwithstanding any other provisions of this Note) shall the
interest charged, collected, or contracted for on this Note exceed the maximum
rate permitted by law.  If any part of
this Note cannot be enforced, this fact will not affect the rest of this Note.

 

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

 

8.             Notices. Any confirmation, notice or any other
communication provided for hereunder shall be in writing or by a
telecommunications device capable of creating a written record, and shall be
effective (a) upon personal delivery thereof, including without limitation, by
overnight mail and courier service or the United States mail, certified or
registered, postage prepaid, return receipt requested, or (b) in the case of
notice by such telecommunications device, when properly transmitted and
confirmed by telephone, addressed to the party to be noticed as follows:

 

 

5

 

If to Payor at:

 

Westaff (USA), Inc.

P.O. Box 9280

Walnut Creek, CA  94598

Attention:  Treasurer

Telecopier No.: 925-930-5361

Telephone No.: 925-952-2502

 

with copies to:

 

Westaff (USA), Inc.

P.O. Box 9280

Walnut Creek, CA  94598

Attention:  Chief Financial Officer

Telecopier No.: 925-934-5489

Telephone No.: 925-256-1518

 

Westaff (USA), Inc.

P.O. Box 9280

Walnut Creek, CA  94598

Attention: Legal Department

Telecopier No.: 925-937-0593

Telephone No.: 925-930-5349

 

If to Holder at:

 

Mr.  W. Robert Stover

c/o Westaff (USA), Inc.

P.O. Box 9280

Walnut Creek, CA 
94598

 

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

 

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

 

10.           Amendments
and Waivers.

 

(a)           The
Senior Debt and any Senior Obligations may be amended, modified, increased,
waived or extended, without notice to or consent of Holder, and such amendment,
modification, increase, waiver or extension shall not change 

 

6

 

 

or modify the subordinated nature of this Note or Holder’s or Payor’s
obligations under Section 4 hereof.

 

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

 

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

 

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

 

13.           Definitions.

 

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

 

“Agent” means General Electric Capital
Corporation, as agent for the Lenders under the Credit Agreement, and
its successors and assigns.

 

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

 

“Credit Agreement” has the meaning set forth in
the introductory paragraph hereto.

 

“Senior Debt Holders” means the Agent and the
Lenders under the Credit Agreement and their respective successors,
participants and assigns, as permitted under the Credit Agreement.

 

“Senior Debt”
means all indebtedness and obligations now or hereafter existing or owed by
Payor to the Senior Debt Holders pursuant to the Credit Agreement  or any instruments or other documents
executed by Payor with or in favor of the Senior

 

7

 

Debt Holders in connection therewith, as such agreements may be
amended, supplemented, replaced, refinanced or otherwise modified from time to
time, and whether for principal, premium, interest, fees, expenses, indemnities
or otherwise.

 

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

 

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

 

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

 

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

 

[Signature Page to
Follow]

 

8

 

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

 

	
   

  	
  WESTAFF (USA), INC., a California corporation:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dirk A. Sodestrom

  
	
   

  	
  Name:

  	
  Dirk A. Sodestrom

  
	
   

  	
  Title:

  	
  Senior Vice President and Chief Financial Officer

  
				

 

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

 

	
  /s/ W. Robert Stover

  	
   

  
	
  W. Robert Stover, an individual

  

 

9

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