Document:

Exhibit 10.1

 

AMENDED
AND RESTATED FORBEARANCE AGREEMENT

 

THIS AMENDED AND RESTATED FORBEARANCE AGREEMENT,
dated as of August 26, 2008, is entered into by and among the financial
institutions identified on the signature pages hereto (collectively, the “Lenders”),
U.S. Bank National Association, as administrative agent for the Lenders (in
such capacity, the “Agent”), Westaff (USA), Inc., a California
corporation (the “Borrower”), and Westaff, Inc., a Delaware
corporation and the sole shareholder of the Borrower, as parent guarantor (the “Parent
Guarantor”), with reference to the following
facts:

 

RECITALS

 

A.            The Borrower, the Parent Guarantor, the Agent and the
Lenders are parties to a Financing Agreement, dated as of February 14, 2008,
as amended (collectively, the “Financing Agreement”), pursuant to which
the Agent and the Lenders provide certain credit facilities to the Borrower.

 

B.            Certain Events of Default have occurred and are
continuing under Section 11.1(b)(1) of the Financing Agreement.  Such Events of Default were caused by the Borrower’s
failure to comply with Section 10.28 of the Financing Agreement,
due to the Borrower’s failure to achieve a Fixed Charge Coverage Ratio of at
least 1.25 to 1.00 for the Applicable Period ended April 19, 2008 (the “Initial
Event of Default”) and for the Applicable Period ended July 12, 2008
(the “New Event of Default” and collectively with the Initial Event of
Default, the “Existing Events of Default”).

 

C.            At
the request of the Borrower and the Parent Guarantor, the Agent and the Lenders
entered into a Forbearance Agreement with the Borrower and the Parent Guarantor
dated as of July 31, 2008 (the “Original Forbearance Agreement”),
pursuant to which the Agent and the Lenders agreed to forbear from exercising
their available default rights and remedies under the Financing Agreement, the
other Loan Documents, applicable law and equity (collectively, “Default
Rights and Remedies”) in response to the occurrence and continuance of the Initial
Event of Default through August 26, 2008.

 

D.            The
Borrower and the Parent Guarantor have requested that the Agent and the Lenders
agree to continue to forbear from exercising their Default Rights and Remedies
in response to the occurrence and continuance of both of the Existing Events of
Default through September 30, 2008.

 

E.             The
Agent and the Lenders are willing to continue to forbear from exercising their
Default Rights and Remedies in response to the occurrence and continuance of
the Existing Events of Default through September 30, 2008 on the terms and
conditions set forth in this Agreement, which shall amend, restate, replace and
supersede (but which shall not cause a novation of) the Original Forbearance
Agreement.

 

NOW, THEREFORE, the parties hereby agree as
follows:

 

1

 

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

 

2.             Limited Forbearance Agreement.  So long as no additional Events of Default
occur during such period, the Agent and the Lenders hereby agree to forbear
from exercising any of their Default Rights and Remedies in response to the
occurrence and continuance of the Existing Events of Default throughout the
period commencing on the date of this Agreement and ending on September 30,
2008 (the “Forbearance Period”).

 

3.             No Waiver. 
The agreement of the Agent and the Lenders under Section 2 of this
Agreement conditionally to forbear from exercising their Default Rights and
Remedies throughout the Forbearance Period shall not constitute a waiver of any
of their Default Rights and Remedies, and the Agent and the Lenders hereby expressly
reserve all such Default Rights and Remedies.

 

4.             Reserve for Payroll and Payroll Taxes.  The Agent shall continue to maintain a
reserve against Revolving Credit Availability to cover the Borrower’s payroll
and payroll tax obligations.  The
required amount of such reserve shall be based upon the assumptions that the Borrower’s
weekly payroll obligations total $4,400,000 and that the Borrower’s weekly federal
and state payroll tax obligations total $135,000.  The Agent shall adjust the required amount of
the reserve if the Borrower’s actual weekly payroll obligations total materially
more (or less) than $4,400,000 or if the Borrower’s actual weekly unemployment
taxes total materially more (or less) than $135,000.  The Agent shall add $135,000 to such reserve
each week.  Upon the Agent’s receipt of
evidence of the Borrower’s payment of all of its weekly federal and state
payroll tax obligations for the preceding quarter, the Agent shall relieve the
entire amount of the cumulative weekly reserves imposed by the Agent for such quarter
and thereafter shall add $135,000 to the reserve for each week of the following
quarter. The reserve against Revolving Credit Availability under this Section 4
shall be reduced by the $5,000,000 of cash which the Borrower maintains in a
deposit account at U.S. Bank National Association.

 

5.             Return of Travelers Letter of Credit.  The Borrower shall continue to use its best
efforts to cause The Travelers Indemnity Company (“Travelers”) as  promptly as practicable to return to the LC
Issuer the original, undrawn Letter of Credit in the face amount of
$27,000,0000 issued by the LC Issuer to Travelers.  The Borrower shall offer to provide Travelers
cash collateral in the amount of $27,000,000 in exchange for the Borrower’s
requested return of such Letter of Credit, and the Borrower shall obtain such
cash collateral by requesting a Revolving Loan under the Financing Agreement.

 

6.             Continued Imposition of Default Interest.  The Agent shall continue to assess interest
on the Obligations at the Default Rate throughout the Forbearance Period.

 

7.             Twice Weekly Delivery of Borrowing Base Certificates;
Updated Receivables Agings. 
Notwithstanding anything to the contrary set forth in Section 8.3
of the Financing Agreement, the Borrower shall continue to deliver a Borrowing
Base Certificate to the Agent not less frequently than twice each week.  With each such delivery of a Borrowing 

 

2

 

Base Certificate, the
Borrower shall deliver to the Agent an aging of the Eligible Billed
Receivables, so that the Agent can adjust the amount of such Receivables that
are outstanding more than 90 days after their invoice date, in relation to the
amount of such aged Receivables reflected in the immediately preceding
Borrowing Base Certificate delivered by the Borrower to the Agent.

 

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

 

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

 

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

 

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

 

9.             Forbearance Fee. 
In consideration of the agreement of the Agent and the Lenders to enter
into this Agreement and hereby conditionally forbear from exercising their
available Default Rights and Remedies throughout the Forbearance Period, the
Borrower shall pay to the Agent, for the ratable benefit of the Lenders, a
one-time forbearance fee in the amount of $25,000 (the “Forbearance Fee”).  The Forbearance Fee shall be fully-earned,
non-refundable and due and payable in one lump sum on the date of this
Agreement.  The Borrower and the Parent
Guarantor acknowledge and agree that the Agent shall effect payment of the Forbearance
Fee when due by charging the full amount thereof to the Borrower’s Revolving
Loans account.

 

3

 

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

 

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

 

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

 

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

 

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

 

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

 

4

 

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

 

 

	
   

  	
  WESTAFF
  (USA), INC.,

  
	
   

  	
  a
  California corporation,

  
	
   

  	
  as
  the Borrower

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  Christa Leonard

  
	
   

  	
  Name:

  	
   Christa
  Leonard

  
	
   

  	
  Title:

  	
  C.F.O.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WESTAFF,
  INC.,

  
	
   

  	
  a
  Delaware corporation,

  
	
   

  	
  as
  the Parent Guarantor

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  Christa Leonard

  
	
   

  	
  Name:

  	
   Christa
  Leonard

  
	
   

  	
  Title:

  	
  C.F.O.

  

 

1

 

	
   

  	
  U.S.
  BANK NATIONAL ASSOCIATION,

  
	
   

  	
  as
  the Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Daryl A. Hagstrom

  
	
   

  	
   

  	
  Daryl
  A. Hagstrom

  
	
   

  	
   

  	
  Vice
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  U.S.
  BANK NATIONAL ASSOCIATION,

  
	
   

  	
  as
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Daryl A. Hagstrom

  
	
   

  	
   

  	
  Daryl
  A. Hagstrom

  
	
   

  	
   

  	
  Vice
  President

  
				

 

2

 

	
   

  	
  WELLS FARGO BANK,

  
	
   

  	
  NATIONAL ASSOCIATION,

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Tony S. Lee

  
	
   

  	
   

  	
  Tony
  S. Lee

  
	
   

  	
   

  	
  Relationship
  Manager

  
				

 

3Exhibit
10.1

 

DEMAND
NOTE

 

	
  U.S.
  $900,000 

  	
  September 3, 2008

  

 

FOR VALUE RECEIVED, the undersigned, Granahan
McCourt Acquisition Corporation, a Delaware corporation (the “Borrower”), hereby unconditionally
promises to pay, as provided below, to David C. McCourt (the “Lender”), the principal sum of Nine-Hundred Thousand Dollars ($900,000),
by wire transfer of immediately available funds.  No interest shall accrue on the unpaid
principal balance of this Demand Note. 
Capitalized terms used and not defined herein shall have the meanings
set forth in Borrower’s fourth amended and restated certificate of
incorporation.

 

The aggregate outstanding principal amount of this
Demand Note (this “Demand Note”)
shall be due and payable in cash on the earliest of (a) one (1) business
day following the Lender’s written demand to Borrower for such payment, (b) upon
consummation of a Business Combination and (c) upon liquidation of the
Trust Fund (the “Maturity Date”).  This Demand Note may be prepaid in whole or
in part without penalty by the Borrower at any time prior to the Maturity Date.

 

The following shall constitute events of default (each,
an “Event of Default”) for
purposes of this Demand Note: (i) a default by Borrower in the payment of
the principal of this Demand Note when due and payable if such default is not
cured by Borrower within two (2) days after Lender has given Borrower
written notice of such default; (ii) the institution by Borrower of
proceedings to be adjudicated as bankrupt or insolvent, or the consent by it to
the institution of bankruptcy or insolvency proceedings against it or the
filing by it of a petition or answer or consent seeking reorganization or
release under the federal bankruptcy laws, or any other applicable law, or the
consent by it to the filing of any such petition or the appointment of a
receiver, liquidator, assignee, trustee or other similar official of Borrower,
or of any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the taking of corporate action by
Borrower in furtherance of any such action; and (iii) if, within thirty
(30) days after the commencement of an action against Borrower seeking any
bankruptcy, insolvency, reorganization, liquidation, dissolution or similar
relief under any present or future statute, law or regulation, such action
shall not have been resolved in favor of Borrower or all orders or proceedings
thereunder affecting the operations or the business of Borrower stayed, or if
the stay of any such order or proceeding shall thereafter be set aside, or if,
within thirty (30) days after the appointment without the consent or
acquiescence of Borrower of any trustee, receiver or liquidator of Borrower or
of all or any substantial part of the properties of Borrower, such appointment
shall not have been vacated; provided that the adoption of a plan of
dissolution and distribution and its implementation by the Borrower’s board of
directors that is approved by its stockholders due to the failure of Borrower
to complete a Business Combination shall not in any instance be deemed an Event
of Default hereunder.  If an Event of
Default shall occur, Lender may declare this Demand Note and all amounts
payable hereunder to be forthwith due and payable, whereupon this Demand Note and
all such amounts shall become forthwith due and payable.

 

Notwithstanding anything to the contrary contained
herein, Lender hereby acknowledges and agrees that, prior to a Business
Combination, Lender shall have no right, title or interest in or to any of the
funds in the Trust Fund, notwithstanding the fact that such funds were received
for the purchase and sale of securities of Borrower, or any funds distributed
from the Trust Fund 

 

 

other than in a Business Combination
Distribution (as defined below), and that Lender’s sole recourse for repayment
of any and all amounts due under this Demand Note shall be against the assets
or properties of Borrower never deposited into the Trust Fund or distributed to
Borrower from the Trust Fund in a Business Combination Distribution. Lender
hereby irrevocably waives any claim Lender may have to funds in the Trust Fund,
and any funds distributed from the Trust Fund other than in a Business
Combination Distribution, at law or in equity, and agrees not to make any such
claim. A “Business Combination Distribution” means a distribution from the
Trust Fund in connection with the consummation of a Business Combination.

 

Time is of the essence for the performance and
observance of each agreement and obligation of Borrower hereunder.

 

This Demand Note and its validity, construction and
performance shall be governed in all respects by the laws of the State of New
York applicable to contracts entered into and to be performed wholly within
said State.

 

Borrower hereby waives diligence, presentment,
protest, demand and notice of every kind. 
This Demand Note may not be amended, modified, changed or terminated
orally.  This Demand Note shall bind the
legal representatives, successors and permitted assigns of the undersigned and
shall inure to the benefit of the Lender and its successors and assigns.  Each provision of this Demand Note shall
survive until all amounts due hereunder are paid in full as described herein,
shall be interpreted as consistent with existing law and shall be deemed
amended to the extent necessary to comply with any conflicting law.  If a court deems any provision hereof
invalid, the remainder of this Demand Note shall remain in effect.

 

IN WITNESS WHEREOF, the undersigned, by its
authorized officer, has duly executed this Demand Note as of the day and year
first above written.

 

	
   

  	
   

  	
  GRANAHAN MCCOURT
  ACQUISITION 

  
	
   

  	
   

  	
  CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Patrick Tangney

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Patrick Tangney

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Accepted and agreed:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  DAVID C. MCCOURT

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  /s/ David C. McCourt

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