Document:

Exhibit 10.111

 

PROPERTY
MANAGEMENT SUBCONTRACT

 

This PROPERTY
MANAGEMENT SUBCONTRACT (this “Agreement”)
is made and entered into as of the 3rd day of August 2007 (the “Effective
Date”), by and between HPT MANAGEMENT SERVICES LP, a Texas limited partnership
(the “Manager”), and FRISCO SQUARE
DEVELOPMENT, LTD., a Texas limited partnership (the “Subcontractor”).

 

A.                                   Behringer Harvard Opportunity REIT I, Inc.,
a Maryland corporation (“BH REIT”),
Behringer Harvard Opportunity Op I, LP, a Texas limited partnership (“BH OP”), and Manager have entered into
that certain Fourth Amended and Restated Property Management and Leasing
Agreement dated as of December 29, 2006 (the “Master Agreement”), pursuant to which
BH REIT and BH OP retained Manager to manage and coordinate the leasing of
certain properties acquired by BH REIT, BH OP or their Affiliates.

 

B.                                     Behringer Harvard Frisco Square LP, a
Delaware limited partnership or its subsidiary (“Owner”)
has acquired the land as more particularly described in Exhibit A
attached hereto, together with the office buildings, retail space and related
facilities located thereon and being a part of that development commonly
known as Frisco Square and located in Frisco, Texas (the “Property”).

 

C.                                     Owner is an affiliate of BH REIT and BH
OP and has retained Manager to manage and coordinate the leasing of the
Property in accordance with the terms of the Master Agreement.

 

D.                                    Manager wishes to subcontract certain of
its property management duties under the Master Agreement with respect to the
management and operation of the Property to Subcontractor, and Subcontractor
agrees to perform such duties and receive the fees and other consideration
provided for herein.

 

NOW, THEREFORE,
in consideration of the premises and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound hereby, do hereby agree, as follows:

 

ARTICLE 1

DEFINITIONS

 

The following terms have the respective meanings set
forth below for all purposes of this Agreement, and the definition of such
terms is equally applicable both to the singular and plural forms thereof. Capitalized
terms not defined herein shall have the meanings attributed to such terms in
the Master Agreement:

 

1.1                                 “Affiliate”
means, with respect to any Person: (i) any Person directly or indirectly
owning, controlling or holding, with the power to vote, ten percent (10%) or
more of the outstanding voting securities of such other Person; (ii) any
Person ten percent (10%) or more of whose outstanding voting securities are
directly or indirectly owned, controlled or held, with the power to vote, by
such other Person; (iii) any Person directly or indirectly controlling,
controlled by or under common control with such other Person; (iv) any
executive officer, director, trustee or general partner of such other Person;
and (v) any legal entity for which such Person acts as an executive
officer, director, trustee or general partner.

 

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1.2                                 “Budget”
has the meaning set forth in Section 3.4 hereof.

 

1.3                                 “Gross Revenues”
means all amounts actually collected, in cash, as rents or other charges for
the use and occupancy of the Property, but shall exclude: direct reimbursements
for tenant improvement overages; revenues from specialized contract services
for parking, telecom, and related services; security deposits (unless the
security deposits are applied towards base rent); Lease termination fees;
interest; and other investment income of Owner, as well as proceeds received by
Owner for a sale, exchange, condemnation, eminent domain taking, casualty or
other disposition of the Property.

 

1.4                                 “Improvements”
means buildings, structures, and equipment from time to time located on the
Property, as well as all parking and common areas located on the Property.

 

1.5                                 “Lease”
means, unless the context otherwise requires, any lease or sublease of the
Property made by Owner as landlord or by its predecessor, covering any portion
of the Property.

 

1.6                                 “Management Fees”
has the meaning set forth in Section 6.1 hereof.

 

1.7                                 “Person”
means an individual, corporation, association, business trust, estate, trust,
partnership, limited liability company or other legal entity.

 

1.8                                 “Texas Tax Code”
means the Texas Tax Code as amended by Texas H.B. 3, 79th Leg., 3rd C.S.
(2006), and reference to any provision of the Texas Tax Code Act shall mean
such provision as in effect from time to time, as the same may be amended,
and any successor provision thereto, as interpreted by any applicable
administrative rules as in effect from time to time.

 

ARTICLE 2

APPOINTMENT OF SUBCONTRACTOR;

SUBCONTRACTOR’S DUTIES AND AUTHORITY

 

2.1                                 Appointment of Subcontractor. Manager hereby engages and retains
Subcontractor to perform certain sub-management services in respect of the
Property as provided herein, and Subcontractor hereby accepts such engagement,
on the terms and conditions hereinafter set forth.

 

2.2                                 General Duties. Subcontractor shall devote its diligent efforts to
performing its duties hereunder to manage, operate, and maintain the Property
in a diligent, careful and vigilant manner for the purpose of maximizing the
cash flow of the Property. The services of Subcontractor are to be of scope and
quality not less than those generally performed by professional property
managers of other similar properties in the metropolitan area in which the
Property is located. Subcontractor shall make available to Manager the full
benefit of the judgment, experience and advice of the members of Subcontractor’s
organization and staff with respect to the policies and procedures to be
implemented in managing, operating and maintaining the Property.

 

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2.3                                 Specific Duties. Manager hereby delegates, subject to the limitations
of the Budget as set forth in Section 3.4 unless otherwise
previously approved in writing by Manager or Owner, to Subcontractor the
following authority and powers (all of which shall be exercised either in the
name of Subcontractor in its capacity as the Property’s property manager, or in
the name of Owner entered into by Subcontractor as Owner’s authorized agent,
and Owner shall assume all expenses in connection with such matters), and
Subcontractor’s specific duties shall include the following:

 

(a)                                  Lease Obligations. Subcontractor shall perform all duties of the
landlord under all Leases insofar as such duties relate to the operation,
maintenance, and day-to-day management of the Property. Subcontractor shall
institute such policies and procedures as Manager shall require (including
those policies and procedures necessary for compliance with the Sarbanes-Oxley
Act) and maintain a policies and procedures manual approved by Manager (the “Subcontractor
Policies and Procedures Manual”). Subcontractor shall also provide or cause to
be provided all services normally provided to tenants of like premises,
including where applicable and without limitation, gas, electricity or other
utilities required to be furnished to commercial tenants, repairs and
maintenance necessary to preserve the Property in its present condition and for
the operating efficiency thereof, and cleaning and janitorial service. Subcontractor
shall arrange for and supervise the performance of all installations and improvements
in space leased to any tenant that is either expressly required under the terms
of the Lease of such space or that is customarily provided or made available to
commercial tenants. More specifically, Subcontractor shall:

 

(i)                                     charge tenants all or any of the following, subject to
the approval of Owner and Manager and in accordance with the terms of the
applicable Lease: a late rent administrative charge, a non-negotiable check
charge, credit report fee, a subleasing or assignment administrative charge
and/or broker’s commission; and Subcontractor shall account for such charges
and/or commissions to Manager;

 

(ii)                                  with Manager’s prior written approval, terminate
tenancies at the Property and to sign and serve in the name of Owner such
notices as are deemed necessary by Subcontractor;

 

(iii)                               with Manager’s prior written approval, institute and
prosecute actions to evict tenants and to recover possession of the Property or
portions thereof;

 

(iv)                              with Manager’s authorization, and in accordance with
Subcontractor’s Policies and Procedures Manual (which may be revised from
time to time with Manager’s prior written approval), sue for and in the name of
Owner and recover rent and other sums due; and to settle, compromise, and
release such actions or suits, or reinstate such tenancies. All expenses of
litigation, including, but not limited to, attorneys’ fees, filing fees, court
costs and other expenses that Subcontractor shall incur in connection with the
collecting of rent and other sums, or to recover possession of the Property or
any portion thereof, shall be deemed to 

 

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be an operational
expense of the Property. Subcontractor and Manager shall concur on the
selection of the attorneys to handle such litigation.

 

(b)                                 Maintenance. Subcontractor shall cause the Property to be
maintained to the standard of similar properties in the metropolitan area in
which the Property is located. Subcontractor’s duties and supervision in this
respect shall include, without limitation, cleaning (or causing the cleaning
of) the interior and exterior of the Improvements and the public common areas
of the Property, as well as making and supervising any repairs, alterations,
and decoration of the Improvements, subject to and in strict compliance with
this Agreement, the Master Agreement, and the Leases. Construction activities
undertaken by Subcontractor, if any, will be limited to activities related to
the management, operation and maintenance of the Property (e.g., repairs,
renovations, and leasehold improvements).

 

(c)                                  Notice of Violations. Subcontractor shall, promptly upon receipt, forward
to Manager all notices of violation or other notices from any governmental
authority, board of fire underwriters or any insurance company, and shall make
such recommendations regarding compliance with such notice(s) as the
Subcontractor shall deem appropriate.

 

(d)                                 Personnel.

 

(i)                                     Subcontractor shall hire, supervise, discharge, and
pay all labor required for the operation and maintenance of the Property,
including, but not limited to, on-site personnel, managers, assistant managers,
engineers, janitors, maintenance supervisors and other employees required for
the operation and maintenance of the Property (provided, however, that neither
Owner nor Manager shall be responsible for the salary, bonus, expense or other
cost of any off-site supervisor or manager, or for any administrative
overhead), including personnel spending a portion of their working hours (to be
charged on a pro rata basis) at the Property. All actual expenses of such
employment (and specifically excluding any “mark-up” of employment expenses)
shall be deemed operational expenses of the Property to the extent set forth in
an approved Budget or otherwise authorized by this Agreement and shall be
proportionate to the amount of time the Property is owned by Owner and the
amount of time during such ownership such employee(s) work at or for the
Property. Notwithstanding the foregoing, however, in no event shall employee
discharge, severance, leave of absence, or similar charges or expenses be
deemed to be operational expenses of the Property.

 

(ii)                                  Subcontractor shall use due care in the selection and
supervision of such employees or independent contractors. Notwithstanding any
provision herein to the contrary, Manager shall approve in writing each of
Subcontractor’s employees or independent contractors assigned to operate and
maintain the Property pursuant to this Agreement. Upon the execution of this
Agreement and prior to any such employee or independent contractor performing
such property management duties, Subcontractor shall provide to Manager a list
of potential employees and independent contractors (each, a “Candidate”),
together with 

 

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information
relating to each such person, including, but not limited to any background
checks, current resumes, and references (“Application Materials”). Within seven
(7) days after Subcontractor submits the Application Materials to Manager,
Manager shall notify Subcontractor in writing whether Manager approves or
disapproves the Candidate. Manager’s approval of any Candidate shall be in
Manager’s sole discretion. If Manager disapproves of any Candidate, then
Manager shall notify Subcontractor thereof, in which case Subcontractor shall,
within seven (7) days after receipt of such notice, solicit additional
potential Candidates for Manager’s review and submit the corresponding
Application Materials to Manager for its review and approval. Manager shall
notify Subcontractor in writing whether it approves of the additional potential
Candidate. This process shall be repeated until Manager has approved an
additional potential Candidate. In reviewing the qualifications of any
Candidate, Manager shall have the right to interview such Candidate during the
seven (7)-day period after which Subcontractor submits the Application
Materials to Manager.

 

(iii)                               Subcontractor shall be responsible for the preparation
of and shall timely file all payroll tax reports and timely make payments, at
Subcontractor’s expense, of all withholding and other payroll taxes with
respect to each of Subcontractor’s employees; provided that the employer
portion of payroll taxes for Subcontractor’s employees working on site and
exclusively in connection with the Property shall be at the expense of Owner.

 

(e)                                  Contracts for Services. To the extent Manager has not already entered into
such contracts, Subcontractor shall negotiate and enter into contracts, in its
capacity as agent for Owner, for all items contemplated by the Budget that have
been approved by Owner and Manager; any emergency services or repairs for items
not exceeding Five Thousand and No/100 Dollars ($5,000.00); appropriate service
agreements and labor agreements for normal operation of the Property, which
have terms not to exceed twelve (12) months and contain a thirty (30) day
termination option without any penalty therefor (unless such agreements pertain
to elevator or utility services, in which event the term may vary with
Manager’s prior written approval) and be transferable upon a sale or other
conveyance of the Property; and agreements that have terms not to exceed twelve
(12) months and be transferable upon a sale or other conveyance of the Property
and contain a thirty (30) day termination option without any penalty therefor
for all budgeted maintenance, minor alterations, and utility services,
including, but not limited to, electricity, gas, fuel, water, steam, telephone,
window washing, scavenger service, landscaping, snow removal, pest
exterminating, fuel, oil, maintenance, decorating and legal services in
connection with the Leases, and other services as are customarily furnished or
rendered in connection with the operation of similar rental property in the
metropolitan area in which the Property is located.

 

(f)                                    Expenses. Subcontractor shall analyze all bills (except to the
extent Manager undertakes such analysis) received for services, work and
supplies in connection with Subcontractor’s maintenance and operation of the Property,
pay all such bills when due, and, if requested by Manager, pay, when due,
utility and water charges, sewer rent and assessments, and any other amount
payable with respect to the Property, including 

 

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bills for taxes
and insurance. Such payments shall be processed in accordance with the Managing
Agent Manual (defined below). All bills shall be paid by Subcontractor within
the time required to obtain discounts, if any. Manager may from time to
time request that Subcontractor forward certain bills to Manager promptly after
receipt, and Subcontractor shall comply with any such request. Subcontractor
shall pay all bills, assessments, real property taxes, insurance premiums and
any other amount payable with respect to the Property out of the Account (as
hereinafter defined). All expenses shall be billed to the Property at net cost
(i.e., less all rebates, commissions, discounts and allowances, however
designated). Provided that funds in the Account are available or otherwise made
available to Subcontractor for such purposes, Subcontractor shall give Manager
the benefit of any favorable pricing or discounts available to Subcontractor
for goods or services to be obtained from third parties in connection with its
services hereunder. Notwithstanding the foregoing, however, if Subcontractor
fails to timely submit payment for any bills as set forth in this Section 2.4(f) and
incurs a late charge or fee therefor, Subcontractor shall pay such late charge
or fee out of Subcontractor’s own funds, and such late charge or fee shall not
be disbursed from the Account.

 

Moreover,
Subcontractor shall not contract with or make purchases from Affiliates of
Subcontractor without the prior written approval of Manager. Subcontractor may at
any time and from time to time request and receive the prior written
authorization of Manager of any one or more purchases or other expenditures,
notwithstanding that Subcontractor may otherwise be authorized hereunder
to make such purchases or expenditures.

 

(g)                                 Monies Collected. Subcontractor shall, in accordance with all
applicable laws and with the policies and procedures set forth in Subcontractor’s
Policies and Procedures Manual (which may be revised from time to time
with Manager’s prior written approval) regarding the collection of rent and
other monies, timely collect all rents, assessments and other monies,
including, but not limited to, tenant payments for real estate taxes, property
liability and other insurance, damages and repairs, common area maintenance,
tax reduction fees and all other tenant reimbursements, administrative charges,
proceeds of rental interruption insurance, parking fees, income from coin
operated machines and other miscellaneous income, due or to become due, in the form of
either wire transfers or a check or money order, from tenants and any sums
otherwise due Owner with respect to the Property in the ordinary course of
business, and deposit such collections in the Account. Upon the request of
Manager, Subcontractor shall request, demand, collect and provide receipt for
all such rent and other monies and institute legal proceedings in the name of
Owner for the collection thereof and for the dispossession of any tenant in
default under its Lease.

 

Subcontractor may endorse any and all checks
received in connection with the operation of the Property and drawn to the
order of Owner, and Manager shall, upon request, furnish Subcontractor’s
depository with an appropriate authorization for Subcontractor to make such
endorsement. Subcontractor shall also have the authority to collect and handle
tenants’ security deposits, including the right to apply such security deposits
to unpaid rent, and to comply, on behalf of Owner, with applicable state or
local laws concerning security deposits and interest thereon, if any.

 

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(h)                                 Banking Accommodations. Manager shall establish and maintain separate
account(s) (the “Account”)
for funds relating to the Property, in a bank determined by Manager, which
Account shall be in compliance with lender requirements, if applicable. All
monies deposited from time to time in the Account shall be deemed to be trust
funds and shall be and remain the property of Owner and shall be withdrawn and
disbursed by Subcontractor for the account of Owner only as expressly permitted
by this Agreement for the purposes of performing the obligations of
Subcontractor hereunder. No monies collected by Subcontractor on Owner’s behalf
shall be commingled with funds of Subcontractor. The Account shall be
maintained, and monies shall be deposited therein and withdrawn therefrom, in
accordance with the following:

 

(i)                                     All sums received from rents and other income from the
Property shall be promptly deposited by Subcontractor in the Account. Subcontractor
shall have the right to designate two (2) or more persons, subject to
Manager’s approval, who shall be authorized to draw against the Account, but
only for purposes authorized by this Agreement. Except for payments required in
the event of an emergency as provided in Section 3.4, any
withdrawal by Subcontractor of an amount in excess of the applicable amount
provided for in the Budget then in effect shall require Manager’s prior written
approval.

 

(ii)                                  All sums due to Subcontractor hereunder, whether for
compensation, reimbursement for expenditures, or otherwise, as herein provided,
shall be a charge against the operating revenues of the Property and shall be
paid and/or withdrawn by Subcontractor from the Account prior to making any
other disbursements therefrom.

 

(iii)                               Upon instruction by the Manager, Subcontractor shall
forward to Manager all monies contained in the Account other than a reserve in
an amount designated by Manager and any other amounts otherwise provided in the
Budget, which shall remain in the Account.

 

(i)                                     Controlling Agreements. If Subcontractor is provided with copies of any
Articles of Incorporation, Agreements of Limited Partnership, Joint Venture
Partnership Agreements, and Operating Agreements, Loan Agreements, Deeds of
Trust, mortgage, etc., with respect to Owner, as applicable (the “Controlling Agreements”),
Subcontractor shall use reasonable care to avoid any act or omission that, in
the performance of its duties hereunder, shall in any way conflict with the
terms of the Controlling Agreements.

 

(j)                                     Signs. Subcontractor, with Manager’s prior written
approval, shall place and remove, or cause to be placed and removed, such signs
upon the Property as Subcontractor deems appropriate, subject, however, to the
terms and conditions of the Leases and to any applicable ordinances and
regulations.

 

2.4                                 Authority of Subcontractor. To the extent that Manager is granted
authority to act under the Master Agreement, Manager hereby delegates to
Subcontractor such authority as is necessary for Subcontractor to perform its
obligations under this Agreement. The foregoing 

 

7

 

notwithstanding,
Subcontractor shall have no authority to enter into on Owner’s or Manager’s
behalf, and shall not bind either Owner or Manager with respect to, any
transfer or disposition of the Property, any Lease, debt for borrowed money or
other obligation or agreement not expressly authorized hereunder.

 

ARTICLE 3

ACCOUNTING; RECORDS AND REPORTS

 

3.1                                 Records. Subcontractor shall, in accordance with the
accounting policies and procedures set forth in the Behringer Harvard Policies
and Procedures Manual for Managing Agents (the “Managing Agent Manual”) (which may be revised from
time to time in Manager’s discretion), maintain all office records and books of
account and shall record therein, and keep copies of, each invoice received
from services, work and supplies ordered in connection with Subcontractor’s
maintenance and operation of the Property. Such records shall be maintained in
accordance with Generally Accepted Accounting Principles (“GAAP”). Manager and persons designated
by Manager shall at all reasonable times upon not less than five (5) business
days prior written notice have access to and the right to audit and make
independent examinations of such records, books and accounts and all vouchers,
files and all other material pertaining to the Property and this Agreement, all
of which Subcontractor agrees to keep safe, available and separate from any
records not pertaining to the Property, at a place recommended by Subcontractor
and approved by Manager.

 

3.2                                 Monthly Reports. On or before the tenth (10th) day after the end of
each month during the term of this Agreement, Subcontractor shall prepare and
timely deliver to Manager the reports and statements for the Property as set
forth in the Managing Agent Manual, as well as a monthly performance report
(the “Monthly Performance Report”),
in the form attached hereto as Exhibit B as may be
revised from time to time in Manager’s discretion. Subcontractor shall also
provide reports for other periods (i.e., quarterly or semi-annual reports
and/or reforecasts) as reasonably requested by Manager.

 

3.3                                 Tenant Surveys. No later than thirty (30) days following the actual
date that Subcontractor actually assumes management of the Property (the “Management Commencement Date”),
Subcontractor will deliver to all tenants a Tenant Survey Form, a copy of which
is attached hereto as Exhibit C. Subcontractor shall use its diligent
efforts to collect responses from all tenants within sixty (60) days of the
Management Commencement Date. Upon the expiration of said sixty (60) days
period, Subcontractor shall submit a written report to Manager. The report will
benchmark all areas suggested by tenants to be less than satisfactory, having a
score of 3 or less, on the Survey Form. Subcontractor will also submit a
specific action plan to correct any unsatisfactory areas within a reasonable
period of time. Thereafter, Subcontractor will conduct tenant surveys once in
any given twelve (12) month period and will provide Manager with results and
action plans resulting therefrom.

 

3.4                                 Budgets. Not later than October 1 (or as otherwise
approved by Manager) of each calendar year, Subcontractor shall prepare and
submit to Manager for approval an operating Budget and capital Budget with
respect to the Property for the calendar year immediately following such
submission. The Budgets shall be in the form of the Budget approved by 

 

8

 

Manager
prior to the date thereof. As often as reasonably necessary during the period
covered by any such Budget, Subcontractor may submit to Manager for
approval an updated Budget incorporating such changes as shall be necessary to
reflect cost over-runs and the like during such period. If Manager does not
disapprove any such Budget within sixty (60) days after receipt thereof by
Manager, such Budget shall be deemed approved. If Manager shall disapprove any
such Budget, it shall so notify Subcontractor within said sixty (60) day period
and explain the reasons therefor. If Manager disapproves of any Budget,
Subcontractor shall submit a revised Budget within ten (10) days after
receipt of the notice of disapproval, and Manager shall have ten (10) days
to provide notice to Subcontractor if it disapproves of any such revised Budget.
Any such Budget approved by Manager, including any amendments thereto approved
by Manager, shall be herein referred to as the “Budget”. Subcontractor will not incur any costs other than
those estimated in any Budget, except for:

 

(a)                                  tenant improvements and real estate commissions
required under a Lease and approved by Manager;

 

(b)                                 maintenance or repair costs under Five Thousand and
No/100 Dollars ($5,000.00) per each Property, to a maximum of two and one-half
percent (2.5%) of the Budget’s line item for such expense;

 

(c)                                  costs incurred in emergency situations in which action
is immediately necessary for the preservation or safety of the Property, or for
the safety of occupants or other persons (or to avoid the suspension of any
necessary service of the Property); and

 

(d)                                 expenditures for real estate taxes and assessments
with respect to the Property.

 

Subcontractor
will use its diligent efforts to operate within the approved Budget. Any
bonuses paid to employees of Subcontractor (whether or not shown on a budget
approved by Manager or Owner) shall always be subject to the specific written
approval of Manager immediately prior to the actual payment of such bonuses,
and absent such specific written approval Subcontractor shall be responsible
for the payment of such bonuses out of Subcontractor’s own funds. Upon
expiration or termination of this Agreement, Subcontractor shall be reimbursed
only for unused vacation time or other employee benefits owed to an employee
that accrued during the term of this Agreement while such employee was
dedicated to the Property. Notwithstanding anything to the contrary set forth
in this Agreement, if this Agreement is terminated at the request of
Subcontractor, then Subcontractor shall pay from its own funds any costs
incurred by reason of termination of any of Subcontractor’s employees.

 

3.5                                 Performance of Accounting Function. Manager and Subcontractor acknowledge
that all accounting performed by Subcontractor with respect to the Property
shall be done on Subcontractor’s accounting system. Manager may elect upon
90 days written notice to Subcontractor to have all accounting performed by
Subcontractor with respect to the property conducted on the computer system of
Manager by means of remote access software. In the event Manager makes such
election, it will provide the appropriate user access to its computer system
and training for Subcontractor’s staff. Such access and training will be
provided at no cost to Subcontractor and will be held at the offices of the
Manager located in Addison, Texas. 

 

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Subcontractor
acknowledges that an owner of direct or indirect interests in each Owner is part of
a consolidated group whose parent company is a publicly registered entity or
that operates in a manner similar to a publicly registered entity, and that it
is of utmost importance that Subcontractor perform its accounting
functions with respect to the Property in an accurate and timely manner in
order to enable such parent company to comply with all of its regulatory and
other similar obligations. Notwithstanding anything contained herein to the
contrary, in the event that more than two (2) times in any period of
twelve (12) consecutive months Subcontractor either (i) causes a material
inaccuracy to be present in any financial report prepared by Subcontractor with
respect to the Property, or (ii) fails to prepare and deliver to Owner any
report required by this Agreement in a timely manner, then Owner or
Manager shall have the right at any time thereafter, by written notice to
Subcontractor, to relieve Subcontractor of its accounting and reporting duties
under this Agreement with respect to such Property. In such event, the
Management Fees defined in Section 6.1 shall be reduced by one and
one-half percent (1.5%) of Gross Revenues (e.g., if the Management Fees at that
time are two and one-half percent (2.5%) of Gross Revenues, the Management
Fees would be reduced to equal one percent (1.0%) of Gross Revenues).

 

(a)                                  Property Data:  “Property
Data” shall mean any and all data or other information of any kind in any way
relating or pertaining to the Behringer Harvard Programs, its business or its
clients (existing or prospective), or any properties, or other assets or
proprietary interests of the Behringer Harvard Programs or its clients
(existing or prospective), and whether prepared, collected, or otherwise made
available by or to Subcontractor in connection with the performance of its
obligations under this Agreement or otherwise, except for information described
in Section 3.5(c) below.

 

(b)                                 Safeguarding Property Data: 
Subcontractor recognizes that the Property Data is owned by Manager. Thus,
Subcontractor shall establish and maintain safeguards consistent with industry
standard and reasonably necessary to prevent the destruction, loss, or
alteration of any Property Data in the possession of Subcontractor. Such
safeguards shall be subject to the reasonable approval of Manager, which
approval shall not be unreasonably withheld. Manager agrees to store, maintain
and safeguard the Property Data during the term of this Agreement and up to
seven (7) years following the expiration or earlier termination of this
Agreement. All reasonable costs associated with storing and maintaining the
Property Data and related records shall be borne by the Property.

 

(c)                                  Confidentiality:

 

(i)                                     Subcontractor acknowledges that some or all of the
Property Data may be proprietary and confidential in nature. Subcontractor
shall use the Property Data only for purposes of this Agreement and shall not
disclose such Property Data to any third party without the prior written
consent of Manager.

 

(ii)                                  Notwithstanding the foregoing, Subcontractor may disclose
the Property Data to Subcontractor’s employees, agents, attorneys, consultants,
or subcontractors as and to the extent required to perform its obligations
under this Agreement, provided that Subcontractor requires such persons to
protect the 

 

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Property Data and
to use the information solely in furtherance of the purposes for which the
information was disclosed to Subcontractor.

 

(iii)                               Subcontractor’s obligations under this Section 3.5
will not apply to information that:  (i) is
or becomes generally available to the public without breach by the
Subcontractor, or (ii) is independently developed by the Subcontractor
without use of the disclosed Property Data.

 

(iv)                              Subcontractor expressly understands and acknowledges (a) that
the Confidential Information may constitute material, non-public
information regarding the Behringer Harvard Programs; (b) several of the
entities within the Behringer Harvard Programs are publicly-held; (c) that
federal and state securities laws forbid a person from purchasing, selling or
otherwise engaging in transactions in securities or derivative securities
related to securities of a public company while in possession of material,
nonpublic information about that company, or communicating such information to
another person who may purchase, sell or otherwise engage in transactions
in securities or derivative securities related to securities of that public
company; and (d) that such laws provide strict penalties (including civil
and criminal fines and incarceration) for the violation thereof. Subcontractor
agrees not to violate those laws. Subcontractor also agrees to take steps to
assure that each person given access through Subcontractor to such Confidential
Information is aware of those laws and to take all necessary steps to supervise
each person given access to such Confidential Information to assure that such
person does not violate those laws.

 

(v)                                 If Subcontractor receives a subpoena or other validly
issued administrative or judicial demand requiring it to disclose the Property
Data, Subcontractor shall provide prompt notice to Manager of such demand and,
if reasonably practicable, shall afford Manager an opportunity to object to
such demand; however, the Subcontractor shall thereafter be permitted to
disclose such Property Data to the extent required by law.

 

(vi)                              Subcontractor may disclose to third parties the
existence and general nature of, but not the amounts payable by the Property or
Manager to Subcontractor under any of the specific terms of, this Agreement.

 

(vii)                           Upon termination or expiration of this Agreement,
Subcontractor shall return to Manager any and all Confidential Information in
Subcontractor’s possession, except to extent the Property Data must be retained
or is required for internal record-keeping purposes in compliance with
applicable professional standards.

 

(viii)                        The provisions of this Section 3.5 shall
survive the expiration or earlier termination of this Agreement.

 

(d)                                 Work Product:  Manager and
Subcontractor shall each have (jointly, not exclusively) ownership in and to
any proprietary tools and methodologies (work product) 

 

11

 

created by
Subcontractor and/or Manager exclusively in connection with this Agreement. If
Subcontractor, in connection with the performance of its obligations under this
Agreement, uses any pre-existing software owned or licensed by Subcontractor,
such software shall remain the property of Subcontractor (or the licensor, as
the case may be), and Manager shall have no proprietary rights therein. Likewise,
if Manager, in connection with the performance of its obligations under this
Agreement, uses any pre-existing software owned or licensed by Manager, such
software shall remain the property of Manager (or the licensor, as the case may be),
and Subcontractor shall have no proprietary rights therein. Upon the expiration
or earlier termination of this Agreement, Subcontractor shall furnish to
Manager, without charge, one (1) master copy of the work product jointly
owned by Manager and Subcontractor, including computer software and the
documentation developed by Subcontractor relating thereto. Upon written
request by one party, Manager and Subcontractor shall in good faith
prepare and execute such licensing or other agreements as
are necessary or appropriate to effectuate the intent of the foregoing
provisions of this Section 3.5(d).

 

3.6                                 Legal Requirements. Subcontractor shall execute and file when due all
forms, reports, and returns required by law relating to the employment of its
personnel. Subcontractor shall be responsible for notifying Manager in the
event it receives notice that any Improvement on the Property or any equipment
thereon does not comply with the requirements of any statute, ordinance, law or
regulation of any governmental body or of any public authority or official
thereof having or claiming to have jurisdiction thereover. Subcontractor shall
promptly forward to Manager any complaints, warnings, notices or summonses
received by it relating to such matters. Subcontractor is authorized to
disclose the ownership of the Property to any such officials.

 

In the event it is alleged or charged that any
Improvement or any equipment on the Property or any act or failure to act by
Owner with respect to the Property or the sale, rental, or other disposition
thereof fails to comply with, or is in violation of, any of the requirements of
any constitutional provision, statute, ordinance, law, or regulation of any
governmental body or any order or ruling of any public authority or official
thereof having or claiming to have jurisdiction thereover, and Subcontractor,
in its sole and absolute discretion, considers that the action or position of
Owner with respect thereto may result in damage or liability to
Subcontractor, Subcontractor shall have the right to cancel this Agreement at
any time by written notice to Owner of its election so to do, which
cancellation shall be effective upon the service of such notice. Such
cancellation shall not release the indemnities of Owner set forth in the Owner
Agreement and shall not terminate any liability or obligation of Manager or
Owner to Subcontractor for any payment, reimbursement, or other sum of money
then due and payable to Subcontractor hereunder.

 

3.7                                 REIT Requirements. Manager shall not engage in any transaction or
arrangement or operate or manage the Property in a manner that would adversely
affect the ability of Owner to qualify as a real estate investment trust (“REIT”)
within the meaning of Section 856 of the Internal Revenue Code of 1986, as
amended (the “Code”), or would result in Owner holding any assets other than “real
estate assets” as defined in Section 856(c)(5)(B) of the Code (“Non-REIT
Assets”) or generating income which would not qualify under Section 856(c)(3) and
856(d) of the Code (“Non-REIT Income”). Manager shall take such actions
(or refrain from taking such 

 

12

 

actions)
with respect to the Property and the management and other services provided by
Manager as are reasonably required to protect Owner’s REIT status or to avoid
Owner’s receipt of Non-REIT Income and/or Non-REIT assets (as the case may be).

 

ARTICLE 4

MASTER AGREEMENT

 

Master Agreement. This Agreement is subject and subordinate in all
respects to the Master Agreement. Subcontractor has received a copy of the
Master Agreement and is familiar with the terms thereof. Subcontractor shall
perform its duties under this Agreement in accordance with the Master
Agreement and will not, by its act or omission to act, cause a default under
the Master Agreement. Owner and Manager agree that the Master Agreement will
not be modified or amended in any way that adversely affects the rights or
obligations of Subcontractor hereunder. Except for termination of the Master
Agreement by Owner upon default (as provided in Section 7.1 of the Master
Agreement) or with respect to a Property upon the sale or other transfer
thereof to an unaffiliated entity, neither Owner nor Manager shall voluntarily
terminate the Master Agreement prior to its stated expiration without the prior
written consent of Subcontractor. If the Master Agreement is terminated by
Owner due to a default by Manager, Manager shall indemnify, defend, exculpate
and save Subcontractor harmless from and against all losses, costs and expenses
incurred or suffered by Subcontractor as a result of such early termination;
provided, however, that if Subcontractor’s willful misconduct, negligence, or
unlawful acts causes such default, the foregoing indemnity and exculpation
shall not apply.

 

ARTICLE 5

EXPENSES

 

5.1                                 Manager’s Expenses. Except as otherwise specifically provided in this
Agreement, all costs and expenses incurred hereunder by Subcontractor in fulfilling
its duties hereunder shall be for the account of and on behalf of Manager. Such
costs and expenses shall, subject to the terms contained in this Agreement,
include the wages and salaries and other employee-related expenses of all
on-site employees of Subcontractor who are engaged in the operation,
management, and maintenance or access control of the Property, including taxes,
insurance and benefits relating to such employees, and legal, travel and other
out-of-pocket expenses that are directly related to the management of the
Property, to the extent set forth in a Budget approved by Manager. All costs
and expenses for which Manager is responsible under this Agreement shall be
paid by Subcontractor out of the Account. In the event the Account does not
contain sufficient funds to pay all said expenses, Manager shall fund all sums
necessary to meet such additional costs and expenses prior to delinquency.

 

5.2                                 Subcontractor’s Expenses. Subcontractor shall, out of its own
funds, pay all of its general overhead and administrative expenses and
employee-related costs (except as otherwise described in this Agreement as
being an operational expense of the Property). Subcontractor shall not enter
into any contract with an Affiliate of Subcontractor with respect to any
Property without obtaining the prior written consent of Manager.

 

13

 

ARTICLE 6

SUBCONTRACTOR’S COMPENSATION

 

6.1                                 Management Fees. During the term of this Agreement, Subcontractor
shall be entitled to a monthly management fee (the “Management Fee”) in an amount equal to
three percent (3.0%) of Gross Revenue for the Project for such month payable
monthly in arrears.

 

6.2                                 Special Leases. Notwithstanding anything contained herein to the
contrary, in the event that (a) a Lease that was in effect prior to Owner’s
acquisition of a Property limits the reimbursable management fee to an amount
less than the Management Fee described in Section 6.1, or (b) any
Lease requires Owner to provide only minimal services to the tenant thereunder,
then Manager and Subcontractor shall agree in good faith upon the appropriate
Management Fee to be paid with respect to that particular Lease, and the
Management Fee provided in Section 6.1 will not necessarily be
applicable.

 

6.3                                 Construction Management. Subcontractor shall supervise construction performed
by or on behalf of Owner with respect to the Property, including, but not
limited to, capital repairs and improvements, major building reconstruction and
tenant improvements (collectively, “Construction
Work”). Manager will pay (or Owner will pay) Subcontractor a
construction supervision fee equal to one and one-half percent (1.5%) of all
hard construction costs incurred in connection with such Construction Work,
unless tenant improvements merely involve painting, carpeting or re-flooring,
for which such improvements Subcontractor shall earn no construction
supervision fee. Such fees shall be due and payable to and by Subcontractor as
contractors are paid for construction activities.

 

6.4                                 Audit Adjustment. If any audit of the records, books or accounts
relating to the Property discloses an overpayment or underpayment of Management
Fees, Manager or Subcontractor shall promptly pay to the other party the amount
of such overpayment or underpayment, as the case may be. If such audit
discloses an overpayment of Management Fees to Subcontractor for any fiscal
year of more than the correct Management Fees for such fiscal year,
Subcontractor shall bear the cost of such audit.

 

6.5                                 Property Management Software. If Owner requires that Subcontractor
use property management software other than the current version of the property
management software used by Subcontractor on the date hereof, Manager agrees to
provide and pay for (or Owner will provide and pay for) all non-standard
hardware, initial software and subsequent software upgrades, software
conversion costs, annual licensing agreement fees, and initial training,
including travel costs, related to such software change. If this Agreement terminates
or expires, or if such software is no longer required by Manager, then all such
software and licenses shall be and remain the property of Manager (or the
licensor, as the case may be), and Subcontractor shall have no proprietary
rights thereto, in which case Subcontractor shall return to Manager, within
thirty (30) days after such termination, expiration or cessation of use, any
and all property management software and related items.

 

6.6                                 Limitation on Compensation. Notwithstanding anything contained
herein to the contrary, in no event shall Manager (or Owner) be obligated to
pay Subcontractor compensation 

 

14

 

under
this Article 6 in excess of the compensation that Manager is
entitled to receive under Article V of the Master Agreement.

 

ARTICLE 7

INSURANCE AND INDEMNIFICATION

 

7.1                                 Property Insurance. Manager shall cause to be placed and kept in force,
at Owner’s expense, causes of loss – special form commercial property
insurance for the Property that contains coverages and is issued by companies
that are acceptable to Manager, in Manager’s sole discretion. Such policy(ies)
shall name Owner as the named insured and any mortgagee(s) as loss payee. Policy
terms and conditions shall comply with the requirements of the applicable
mortgage(s) and Leases affecting the Property.

 

7.2                                 Personal Property of Subcontractor. Neither Owner nor Manager shall be
liable to Subcontractor, its employees, agents, customers or invitees for loss
or damage to their personal property and business records located at the
Property. Subcontractor shall obtain and keep in full force and effect during
the term of this Agreement extended coverage property insurance covering one
hundred percent (100%) of the replacement cost of Subcontractor’s personal
property. Subcontractor shall procure from its insurers waivers of subrogation
with respect to claims against Owner and/or Manager under policies in which
Owner and/or Manager is not named an additional insured.

 

7.3                                 Liability Insurance. Manager shall at all times during the term of this
Agreement carry Commercial General Liability (“CGL”) insurance with respect to each Property in an amount
of not less than Two Million Dollars and No/100 ($2,000,000.00). Such policy
shall be primary and non-contributory over such CGL insurance carried by
Subcontractor. Subcontractor shall at all times during the term of this
Agreement carry CGL insurance covering the actions taken by Subcontractor in
performing its obligations under this Agreement with minimum limits of at least
Two Million Dollars and No/100 ($2,000,000.00) issued by an insurance company
acceptable to Owner. Owner, Manager and Subcontractor shall be named as an
additional insured, respectively, on such policies of each other.

 

7.4                                 Workers’ Compensation and Employer’s Liability
Insurance. Subcontractor
shall carry Worker’s Compensation insurance in statutory amounts. In addition,
Subcontractor shall carry Employer’s Liability Insurance in not less than the
following amounts:

 

(a)                                  $1,000,000 bodily injury by accident, each accident;

 

(b)                                 $1,000,000 bodily injury by disease, each employee;
and

 

(c)                                  $1,000,000 bodily injury by disease, policy limit.

 

7.5                                 Commercial Automobile Liability Insurance. Subcontractor shall carry Automobile
Liability Insurance with limits of not less than One Million Dollars
($1,000,000.00) combined single limit. Owner and Manager shall be named as an
additional insured on such policy.

 

15

 

7.6                                 Property Managers Professional Liability Insurance. Subcontractor shall carry property
manager’s professional liability insurance with limits of not less than One
Million Dollars ($1,000,000.00) per claim.

 

7.7                                 Employee Dishonesty Insurance. Subcontractor shall carry employee
dishonesty insurance of not less than One Million Dollars and No/100
($1,000,000.00) per loss. Such insurance shall include coverage for loss
sustained by Owner or Manager resulting from Subcontractor’s employee
dishonesty. Owner and Manager shall be named as a loss payee on such policy.

 

7.8                                 Property Losses. Subcontractor shall promptly investigate and report
to Manager and/or Manager’s insurance carrier all claims for damage to the
Property. With Manager’s approval, Subcontractor may be authorized to
settle claims for damage to the Property up to a maximum of Ten Thousand
Dollars and No/100 ($10,000.00), and Subcontractor shall, if so authorized,
provide Manager with notice and evidence of such settlements. Property claims
in excess of Ten Thousand Dollars and No/100 ($10,000.00) shall, at Manager’s
option, be settled by Manager.

 

7.9                                 Cooperation with Insurers. Subcontractor shall cooperate with and
provide reasonable access to the Property to representatives of insurance
companies and insurance brokers or agents with respect to insurance that is in
effect or for which application has been made. Subcontractor shall use its
diligent efforts to comply with all requirements of insurers.

 

7.10                           Accidents and Claims. Subcontractor shall promptly investigate and shall
report in detail to Manager, promptly after Subcontractor obtains knowledge
thereof, all accidents, claims for damage relating to ownership, operation or
maintenance of the Property, and any damage or destruction to the Property and
the estimated costs of repair thereof, and shall prepare for approval by
Manager all reports required by an insurance company in connection with any
such accident, claim, damage, or destruction. Such reports shall be given to
Manager within forty-eight (48) hours (or next business-day, if any accident,
claim, damage or destruction occurs on a non-business day) of any such
accident, claim, damage, or destruction, and shall also be noted in the monthly
operating statement delivered to Manager pursuant to Section 3.3. Subcontractor
shall assist Manager with Manager’s settlement of any claim against an
insurance company arising out of any policy, in executing proofs of loss and
adjustments of loss, and in collecting and receiving loss proceeds.

 

7.11                           Certificates of Insurance. Subcontractor shall provide to Manager
a certificate of insurance evidencing that the insurance policies required
pursuant to this Article VII are in full force and effect and shall
provide to Manager evidence of Subcontractor’s renewal of such insurance
policies annually at least twenty (20) days prior to expiration of such
policies. Subcontractor shall collect from all tenants of the Property
certificates of insurance evidencing the existence of all insurance required by
each tenant’s Lease. Subcontractor shall use its best efforts to obtain a new
certificate of insurance from each tenant at least twenty (20) days prior to
the date on which an insurance policy described in a certificate of insurance
previously delivered by the tenant would expire. Subcontractor shall promptly
forward to Owner and Manager copies of all certificates of insurance collected,
and Subcontractor shall retain the original of each certificate for its tenant
file.

 

16

 

7.12                           Contractors and Vendors. Subcontractor shall require that all parties
performing work on or with respect to the Property, including, without
limitation, contractors, subcontractors, materialmen and service vendors,
maintain insurance coverage at such party’s expense, in the following minimum
amounts and naming Subcontractor, Owner and Manager as additional insured:

 

	
  (a)

  	
   

  	
  Worker’s
  Compensation:

  	
   

  	
  Statutory
  Amount

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  Employer’s
  Liability:

  	
   

  	
  $1,000,000
  bodily injury by accident, each accident;

  
	
   

  	
   

  	
   

  	
   

  	
  $1,000,000
  bodily injury by disease, each employee;

  
	
   

  	
   

  	
   

  	
   

  	
  $1,000,000
  bodily injury by disease, policy limit

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (c)

  	
   

  	
  Commercial
  General Liability

  	
   

  	
  $1,000,000
  each occurrence;

  
	
   

  	
   

  	
   

  	
   

  	
  including
  Broad Form Endorsement

  
	
   

  	
   

  	
   

  	
   

  	
  $2,000,000
  general aggregate

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (d)

  	
   

  	
  Commercial
  Automobile

  	
   

  	
  $1,000,000
  combined single limit Liability

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (e)

  	
   

  	
  Umbrella
  Liability:

  	
   

  	
  $1,000,000

  

 

Subcontractor
must obtain Manager’s written permission prior to waiving any of the above
insurance requirements. Upon prior notice to Subcontractor, Manager shall have
the right to increase the amounts of insurance described above and to require
additional insurance. Subcontractor shall obtain and keep on file a certificate
of insurance evidencing the existence of the coverages described above prior to
permitting any contractor, subcontractor, materialman or vendor to work on the
Property.

 

7.13                           Indemnification.

 

(a)                                  Subcontractor hereby agrees to indemnify, hold
harmless and defend Owner, Manager and all Affiliates of Owner and Manager from
and against any and all claims, causes of action, demands, suits, proceedings,
loss, judgments, damage, awards, liens, fines, costs, reasonable attorney’s
fees and expenses, of every kind and nature whatsoever (collectively, “Losses”) that may arise,
directly or indirectly, from or in connection with Subcontractor’s negligence,
willful misconduct, breach of this Agreement, or any actual or alleged
misrepresentations made by Subcontractor or its employees or agents to tenants,
prospective tenants, other real estate brokers or other third parties;
Subcontractor’s violation of any law or regulation applicable to real estate
brokers or sales persons generally; or Subcontractor’s failure to pay any
commission it has agreed to pay to a cooperating broker. This indemnity shall
survive the termination of this Agreement.

 

(b)                                 Manager shall indemnify and hold Subcontractor and its
stockholders, partners, members, managers, officers, directors, employees,
managers, successors and 

 

17

 

assigns
(collectively, the “Indemnified Parties”)  harmless from and against all claims, damages
and costs (including, but not limited to, reasonable attorneys’ fees and
expenses) arising out of or in connection with the management of the Property
and the operation thereof, except for acts of Subcontractor not authorized by
this Agreement, Subcontractor’s acts of negligence or willful misconduct, or
violations of any law by Subcontractor, its employees and agents (collectively,
“Unauthorized Acts”). Subcontractor
shall indemnify and hold Owner harmless from and against all claims, damages
and costs (including, but not limited to, reasonable attorneys’ fees and
expenses) determined to have arisen out of or in connection with Unauthorized
Acts. The indemnities contained herein shall survive the termination of this
Agreement.

 

7.14                           Waiver of Subrogation.

 

(a)                                  Manager agrees to waive all rights of recovery and
subrogation rights against Subcontractor, its agents, servants or employees for
any loss or damage insured by the insurance described in Section 7.1.
This waiver shall apply regardless of whether such insurance is actually
procured by Manager, and notification of the existence of this waiver shall be
disclosed to Manager’s insurers. This provision shall also apply with respect
to any insurance policies presently maintained and substituted hereafter.

 

(b)                                 Subcontractor agrees to waive all rights of recovery
and subrogation rights against Manager, its agents, servants or employees for
any loss or damage insured by the insurance described in Sections 7.2, 7.3,
7.4, 7.5, 7.6 and 7.7. This waiver shall apply
regardless of whether such insurance is actually procured by Subcontractor, and
notification of the existence of this waiver shall be disclosed to
Subcontractor’s insurers. This provision shall also apply with respect to any
insurance policies presently maintained and substituted hereafter. Within
thirty (30) days following the Commencement Date, Subcontractor will provide
Manager with a certificate of insurance evidencing all requirements set forth
in this section with respect to such Property.

 

ARTICLE 8

TERM AND TERMINATION

 

8.1                                 Term. This Agreement shall commence on the date first
above written and shall continue for one (1) year, subject to the
provisions of Sections 8.2 and 8.3, below. Notwithstanding the
foregoing, however, Manager shall have the right to terminate this Agreement,
in whole or in part with respect to any Property, without cause for any
reason or for no reason upon thirty (30) days prior written notice to
Subcontractor to such effect.

 

8.2                                 Events of Termination. Notwithstanding anything contained herein to the
contrary, this Agreement shall terminate, upon the earlier to occur of: (a) the
sale of the Property; or (b) the termination or expiration of the Master
Agreement governing the management of the Property.

 

18

 

8.3                                 Termination by Subcontractor. Subcontractor shall have the right to
terminate this Agreement upon written notice to Manager and Owner upon the
occurrence of any of the following events:

 

(a)                                  Manager or Owner fails in any respect to perform a
material obligation under this Agreement (i) within five (5) days after notice of
such failure from Subcontractor if the failure involves the payment of money,
or (ii) within thirty (30) days after notice of such failure
from Subcontractor if the failure involves action other than the payment of
money, or longer if Manager or Owner has commenced to cure a non-monetary default
within the thirty (30) days period and continues to diligently and continuously
prosecute the cure to a favorable conclusion.

 

(b)                                 Manager or Owner files a petition or case seeking
relief under the liquidation provisions of any bankruptcy or other debtor
relief laws of the United States or any state or other competent jurisdiction.

 

(c)                                  The occurrence of an event whereby (i) a
petition or case is filed against Manager or Owner seeking relief under the
bankruptcy, arrangement, reorganization or other debtor relief laws of the
United States or any state or other competent jurisdiction, or (ii) a
court of competent jurisdiction enters an order, judgment or decree appointing,
without the consent of Manager or Owner, a receiver or a trustee for Manager or
Owner, as the case may be, or for all or any part of their respective
property, and such petition, order, judgment or decree is not discharged within
one hundred eighty (180) days after the entry thereof.

 

8.4                                 Subcontractor’s Obligations Upon Termination. Upon the termination of this Agreement,
Subcontractor shall have the following duties:

 

(a)                                  Subcontractor shall, within two (2) business days
of such termination, deliver to Manager or its designee, all books and records
with respect to the Property (including, without limitation, all original
Leases) and all keys or combinations to locks then in Subcontractor’s
possession.

 

(b)                                 Subcontractor shall transfer and assign to Manager, or
its designee, to the extent assignable, all service contracts and personal property
relating to or used in the operation and maintenance of the Property, except
personal property paid for and owned by Subcontractor. Subcontractor shall
also, for a period of sixty (60) days immediately following the date of such
termination, make itself reasonably available to consult with and advise
Manager, or its designee, regarding the operation, maintenance, and leasing of
the Property at a rate of compensation to be determined.

 

(c)                                  Subcontractor shall render to Manager an accounting of
all funds of Owner in its possession and shall deliver to Manager a statement
of all Management Fees claimed to be due to Subcontractor and shall cause the
funds of Owner held by Subcontractor relating to the Property to be paid to
Manager or its designee. In addition, within thirty (30) days after such
termination, Subcontractor shall make a full accounting to Manager for all
monies received pursuant to this Agreement for the fiscal year in 

 

19

 

which termination
occurs and shall deliver to Manager all books, records and other documents
pertaining to the management, operation and leasing of the applicable Property,
including executing and delivering such signature cards and other documentation
as may be reasonably requested by Manager to transfer or close, at Manager’s
election, all bank accounts established pursuant to the provisions hereto and
to transfer any of the Owner’s funds in such accounts to the accounts
designated by Manager.

 

(d)                                 All provisions of this Agreement that require
Subcontractor to have insured, or to protect, defend, save, hold harmless and
indemnify or to reimburse Owner or Manager shall survive any expiration or
termination of this Agreement and, if Owner or Manager are or become involved
in any claim, proceeding or litigation by reason of having been Owner or
Manager during the term of this Agreement, such provisions shall apply as if
this Agreement were still in effect.

 

8.5                                 Manager’s Obligations Upon Termination. Manager shall pay or reimburse
Subcontractor for any sums of money due it under this Agreement for services
and expenses through the date of termination of this Agreement. All provisions
of this Agreement that require Owner or Manager to have insured, or to protect,
defend, save, hold harmless and indemnify or to reimburse Subcontractor shall
survive any expiration or termination of this Agreement and, if Subcontractor
is or becomes involved in any claim, proceeding or litigation by reason of
having been Subcontractor during the term of this Agreement, such provisions
shall apply as if this Agreement were still in effect.

 

ARTICLE 9

MISCELLANEOUS

 

9.1                                 Treatment Under Texas Margin Tax. Pursuant to the Master Agreement,
Manager is a “management company” within the meaning of Section 171.0001(11)
of the Texas Tax Code in connection with Owner’s ownership and operation of the
Property. All amounts paid from Manager to Subcontractor pursuant to this
Agreement as Expenses under Section 5.1 or Subcontractor’s Compensation
under Article 6 are specified costs incurred by Manager in its conduct of
the active trade or business of Owner and are reimbursed by Owner within the
meaning of Section 171.1011(m-1) of the Texas Tax Code. In addition,
certain amounts paid from Manager to Subcontractor under this Agreement are (i) “flow-though
funds” that Manager is mandated by law or fiduciary duty to distribute to other
entities, within the meaning of Section 171.1011(f) of the Texas Tax
Code, and (ii) “flow-through funds” in the form of “sales commissions”
and “subcontracting payments” that Manager is mandated by contract to
distribute to other entities, within the meaning of Section 171.1011(g) of
the Texas Tax Code. The terms of this Agreement shall be interpreted in a
manner consistent with the characterization of the Manager as a “management
company” with respect to Owner as defined in Section 171.0001(11), and
with the characterization of the reimbursements as “flow-though funds” within
the meaning of Section 171.1011(f)-(g) of the Texas Tax Code.

 

9.2                                 Notices. All notices, approvals, consents and other
communications hereunder shall be in writing, and, except when receipt is
required to start the running of a period of time, 

 

20

 

shall
be deemed given when delivered in person (which shall include, but not be
limited to, delivery by courier or reputable overnight carrier, e.g. Federal
Express) or on the third (3rd) business day after its mailing by either party
by registered or certified United States mail, postage prepaid and return
receipt requested, to the other party, at the addresses set forth after their
respect name below or at such different addresses as either party shall have
theretofore advised the other party in writing in accordance with this Section 9.2.

 

	
  Manager:

  	
   

  	
  HPT Management Services LP

  
	
   

  	
   

  	
  15601 Dallas Parkway, Suite 600

  
	
   

  	
   

  	
  Addison, Texas 75001

  
	
   

  	
   

  	
  Attn: President and Chief Operating Officer

  
	
   

  	
   

  	
   

  
	
  Owner:

  	
   

  	
  Behringer Harvard Holdings, LLC

  
	
   

  	
   

  	
  15601 Dallas Parkway, Suite 600

  
	
   

  	
   

  	
  Addison, Texas 75001

  
	
   

  	
   

  	
  Attn: Chief Legal Officer

  
	
   

  	
   

  	
   

  
	
  Subcontractor:

  	
   

  	
  Frisco Square Development, Ltd.

  
	
   

  	
   

  	
  c/o Fairways Equities, LLC

  
	
   

  	
   

  	
  16250 Dallas Parkway, Suite 102

  
	
   

  	
   

  	
  Dallas, Texas 75248

  
	
   

  	
   

  	
  Attn: Cathy Sweeney

  
	
   

  	
   

  	
   

  
	
  Copy to:

  	
   

  	
  Winstead PC

  
	
   

  	
   

  	
  5400 Renaissance Tower

  
	
   

  	
   

  	
  1201 Elm Street

  
	
   

  	
   

  	
  Dallas, Texas 75270

  
	
   

  	
   

  	
  Attn: Thomas Helfand, Esq.

  

 

9.3                                 Governing Law; Venue. This Agreement shall be governed by and construed in
accordance with the laws of the state in which the Property is located, without
regard to any choice of law rules.

 

9.4                                 Assignment. Subcontractor may not assign or delegate its
duties and rights, either in whole or in part, under this Agreement without the
prior written consent of Manager, in its sole discretion. Manager shall have
the right, exercised by and upon written notice to Subcontractor, to assign its
rights under this Agreement to an Affiliate of Manager. Subject to the
foregoing limitations regarding assignment, this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns. Whenever in this Agreement a reference is made to any
of the parties hereto, such reference shall be deemed to include a reference to
the successors and assigns of such parties.

 

9.5                                 No Waiver. The failure of Manager, Subcontractor or Owner to
seek redress for violation or to insist upon the strict performance of any
covenant or condition of this Agreement shall not constitute a waiver thereof
for the future.

 

9.6                                 Amendments. This Agreement may be amended only by an
instrument in writing signed by the party against whom enforcement of the
amendment is sought.

 

21

 

9.7                                 Headings. The headings of the various subdivisions of this
Agreement are for reference only and shall not define or limit any of the terms
or provisions hereof.

 

9.8                                 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.

 

9.9                                 Entire Agreement. This Agreement contains the entire understanding and
all agreements between Manager and Subcontractor respecting the management of
the Property. There are no representations, agreements, arrangements or
understandings, oral or written, between Manager and Subcontractor relating to
the management of the Property that are not fully expressed herein.

 

9.10                           Disputes. If there shall be a dispute between or among
Manager, Subcontractor or Owner relating to this Agreement resulting in
litigation, the prevailing party in such litigation shall be entitled to
recover from the other party to such litigation such amount as the court shall
fix as reasonable attorneys’ fees. Any dispute between Owner, Manager, and
Subcontractor with respect to the determination of the Management Fees payable
with respect to the Property pursuant to this Agreement, shall be submitted for
final and binding arbitration pursuant to the rules of the American
Arbitration Association (“AAA”).
Unless the parties otherwise agree, any such arbitration shall be held in the
city in which the AAA has an office that is closest to the Property to which
the dispute relates, before a single arbitrator selected by the AAA, who is
either a licensed real estate broker, MAI appraiser or attorney concentrating
his or her practice in commercial real estate matters. The decision of the
arbitrator shall be final and binding on the parties and enforceable in any
court of competent jurisdiction.

 

9.11                           Activities of Subcontractor. Subcontractor’s personnel located at
any particular Property shall not engage in other activities or business
ventures that are in competition with the business of Owner while at the
Property except in connection with Subcontractor’s management activity in
connection with any other development by Subcontractor on land within Frisco
Square.

 

9.12                           Independent Contractor. Subcontractor shall not be construed as a joint
venturer or partner of either Manager or Owner pursuant to this Agreement, and
none of such parties shall have the power to bind or obligate the other party
except as set forth herein. It is the intent of the parties that: (a) the
status of Manager to Owner under the Master Agreement is that of an independent
contractor; (b) the status of Subcontractor to Manager under this
Agreement is that of an independent contractor; and (c) the status of
Subcontractor to Owner is that of an independent subcontractor.

 

9.13                           No Third-Party Rights. Nothing expressed or referred to in this Agreement
will be construed to give any Person other than the parties to this Agreement
any legal or equitable right, remedy or claim under or with respect to this
Agreement or any provision of this Agreement, except such rights as shall inure
to a successor or permitted assignee pursuant to Section 8.4.

 

22

 

9.14                           Documents
Required by Lender. In the event that a mortgagee of the
Property (a “Mortgagee”)
requests that Subcontractor execute a document in connection with a loan to
Owner, Subcontractor will respond to such request promptly and will not
unreasonably withhold its consent to such document. Without limiting the
generality of the preceding sentence, Subcontractor agrees that it will execute
and deliver the following documents within five (5) days after request
therefore: (a) an agreement that a Mortgagee may terminate this
Agreement if a default occurs in respect of the loan secured by the Property; (b) an
estoppel certificate certifying that this Agreement is in full force and effect
and containing such other certifications as may be reasonably requested; (c) an
agreement subordinating this Agreement to any mortgage or deed or trust held by
a Mortgagee; and (d) a waiver by Subcontractor of any right to assert a
lien against the Property. Subcontractor shall use reasonable care to avoid any
act or omission that, in the performance of its duties hereunder, shall in any
way conflict with the terms of any mortgage documents in respect of the
Property, provided that Subcontractor has been furnished with copies of such
mortgage documents.

 

9.15                           Compliance
Amendments. Notwithstanding anything contained
herein to the contrary, in the event that legal counsel for Owner reasonably
determines that an amendment to this Agreement is necessary or advisable in
order for this Agreement to comply with applicable securities laws, the
offering documents pertaining to the applicable Behringer Harvard Program or
the Statement of Policy Regarding Real Estate Programs of the North American
Securities Administrators Association, Inc., effective September 29,
1993, as amended, then Manager and Subcontractor shall, within ten (10) days
after request from Owner, execute such an amendment; provided, however, that no
such amendment may decrease the compensation to which Subcontractor is
entitled hereunder or materially increase Subcontractor’s out-of-pocket
expenses, reimbursement rights, liabilities or obligations under this Agreement
or alter termination rights hereunder without Subcontractor’s prior written
consent.

 

9.16                           Publicity. Subcontractor
shall not reference Owner or any Affiliate of Owner in any of its marketing
materials, announcements or press releases without the express written consent
of Owner.

 

9.17                           Specific Performance. The parties acknowledge that damages may be an
insufficient remedy in the event of a breach by a party under this Agreement
and agree that in the event of any such breach a party shall have the right to
equitable remedies, including specific performance and injunctive relief.

 

[THE REMAINDER OF THIS PAGE HAS
BEEN INTENTIONALLY LEFT BLANK]

 

23

 

IN WITNESS WHEREOF, the parties have executed this Property Management Agreement as of
the date first above written.

 

	
   

  	
  MANAGER:

  
	
   

  	
   

  
	
   

  	
  HPT
  MANAGEMENT SERVICES LP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gerald J. Reihsen, III

  	
   

  
	
   

  	
   

  	
  Gerald J. Reihsen, III

  
	
   

  	
   

  	
  Executive Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SUBCONTRACTOR:

  
	
   

  	
   

  
	
   

  	
  FRISCO SQUARE DEVELOPMENT, LTD.,

  
	
   

  	
  a Texas limited partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Fairway FS Development LLC,

  
	
   

  	
   

  	
  a Texas limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/ James C. Leslie

  	
   

  
	
   

  	
   

  	
  Name:

  	
  James C. Leslie

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Mgr of GP

  	
   

  
									

 

 

Exhibit A

 

Owner, Building and Legal Descriptions

 

TRACT 13 AS SHOWN ON
SURVEY PREPARED
BY DANA BROWN R.P.L.S. #5336, DATED 06/27/07, LAST REVISED 07/10/07:

 

BEING
a tract of land situated in the W.B. Watkins Survey, Abstract No. 1004,
Collin County, Texas, and being all of Lot Fl-10, Block F-l, Frisco Square
Phase 2, an addition to the City of Frisco, Texas recorded in Cabinet P, Page 724,
Map Records, Collin County, Texas, and being more particularly described as
follows:

 

BEGINNING
at an X-cut set in concrete at the southeast corner of said Lot Fl-10 at the
intersection of the east Right-of-Way line of Coleman Boulevard (114’
Right-of-Way) and the north Right-of-Way line of Frisco Square Boulevard (70.5’
Right-of-Way) as dedicated to the City of Frisco recorded in Cabinet N, Page 690,
Map Records, Collin County, Texas,-

 

THENCE
with the east Right-of-Way line of said Coleman Boulevard the following calls:
North 07°39’03” West a distance of 23.62 feet to an X-cut set in concrete for
corner; North 82°20’57” East a distance of 4.00 feet to an X-cut set in
concrete for corner;

 

North
07°39’03” West a distance of 91.13 feet to an X-cut set in concrete at the
northwest corner of said Lot Fl-10;

 

THENCE
with north line of said Lot    Fl-10
the following calls:

 

North
82°20’57” East a distance of 82.75 feet to an X-cut set in concrete for corner;

 

South
07°3 9’03” East a distance of 23.75 feet to an X-cut set in concrete for
corner;

 

South
52°39’03” East a distance of 10.61 feet to an X-cut set in concrete for corner;

 

North
82°20’57” East a distance of 12.20 feet to an X-cut set in concrete for corner;

 

North
07°39’03” West a distance of 0.75 feet to an X-cut set in concrete for corner;

 

North
82°20’57” East a distance of 17.34 feet to an X-cut set in concrete for corner;

 

South
07°39’03” East a distance of 0.75 feet to an X-cut set in concrete for corner;

 

1

 

North
82°20’57” East a distance of 15.19 feet to an X-cut set in concrete for corner;

 

North
07°3 9’03” West a distance of 1.50 feet to an X-cut set in concrete for corner;

 

North
82°20’57” East a distance of 25.28 feet to an X-cut set in concrete for corner;

 

South
07°39’03” East a distance of 1.50 feet to an X-cut set in concrete for corner;

 

North
82°20’57” East a distance of 14.77 feet to an X-cut set in concrete for corner;
North 07°3 9’03” West a distance of 0.75 feet to an X-cut set in concrete for
corner;

 

North
82°20’57” East a distance of 17.08 feet to an X-cut set in concrete for corner
in the west line of future Lot 8, Block F-l;

 

THENCE
South 07°39’03” East with the west line of said future Lot 8, Block F-l a
distance of 81.75 feet to a pk nail set in concrete for corner in the north
Right-of-Way line of said Frisco Square Boulevard;

 

THENCE
with the north Right-of-Way line of said Frisco Square Boulevard the following
calls:

 

South
82°20’57” West a distance of 31.85 feet to a point for corner,-South 07°3 9’03”
East a distance of 2.50 feet to an X-cut set in concrete for corner; South
82°20’57” West a distance of 25.28 feet to an X-cut set in concrete for corner;
North 07°39’03” West a distance of 2.50 feet to an X-cut set in concrete for
corner; South 82°20’57” West a distance of 29.25 feet to an X-cut set in
concrete for corner; South 07°39’03” East a distance of 2.50 feet to an X-cut
set in concrete for corner; South 82°20’57” West a distance of 19.33 feet to an
X-cut set in concrete for corner; North 07°39’03” West a distance of 2.50 feet
to an X-cut set in concrete for corner; South 82°20’57” West a distance of
67.33 feet to X-cut set in concrete for corner; South 07°39’03” East a distance
of 2.50 feet to X-cut set in concrete for corner;

 

South
82°20’57” West a distance of 23.08 feet to the POINT OF BEGINNING and
containing 0.4245 acre of land.

 

TRACT 7 AS SHOWN ON SURVEY PREPARED BY DANA BROWN R.P.L.S. #5336, DATED 06/27/07, LAST REVISED
07/10/07:

 

2

 

BEING a tract of land
situated in the W.B. Watkins Survey, Abstract No. 1004, Collin County,
Texas, and being all of Lot Fl-1, Block F-l, Frisco Square Phase 2, an addition
to the City of Frisco, Texas recorded in Cabinet P, Page 724, Map Records,
Collin County, Texas, and being more particularly described as follows:

 

BEGINNING
at a 5/8” iron rod with red cap marked KHA set at the corner clip intersection of
the south Right-of-Way line of Main Street (variable width Right-of-Way) and
the most easterly northeast corner of Coleman Boulevard (114’ Right-of-Way) as
dedicated to the City of Frisco recorded in Cabinet N, Page 690, Map
Records, Collin County, Texas;

 

THENCE
North 85°05’00” East with the south Right-of-Way line of said Main Street a
distance of 190.04 feet to a 5/8” iron rod with red cap marked KHA set for
corner;

 

THENCE
South 04°55’00” East departing the south Right-of-Way line of said Main Street
a distance of 96.67 feet to a 5/8” iron rod with red cap marked KHA set for
corner, said point being an inner ell corner in the north line of Lot Fl-11 of
said Frisco Square Phase 2;

 

THENCE
with the north line of said Lot Fl-11 the following calls:

 

South
85°05’00” West a distance of 112.09 feet to a 5/8” iron rod with red cap marked
KHA set for corner;

 

South
07°39’03” East a distance of 14.21 feet to a 5/8” iron rod with red cap marked
KHA set for corner;

 

South
82°20’57” West a distance of 85.74 feet to a 5/8” iron rod with red cap marked
KHA set for corner in the east Right-of-Way line of said Coleman Boulevard;

 

THENCE
with the east Right-of-Way line of said Coleman Boulevard the following calls:

 

North
07°39’03” West a distance of 102.58 feet to a 5/8” iron rod with red cap marked
KHA set for corner;

 

North
38°42’59” East a distance of 17.25 feet to the POINT OF BEGINNING and
containing 0.4746 acre of land.

 

WITH RESPECT TO THE FIRST FLOOR
RETAIL SPACE ONLY, TRACT 11/LOT F1-11 AS SHOWN ON SURVEY PREPARED BY DANA BROWN R.P.L.S.
#5336, DATED 06/27/07, LAST REVISED 07/10/07:

 

BEING
a tract of land situated in the W.B. Watkins Survey, Abstract No. 1004,
Collin County, Texas, and being all of Lot Fl-11, Block F-l, Frisco Square
Phase 2, an addition to the City of Frisco, Texas recorded in Cabinet P, Page 724,
Map Records, Collin County, Texas, and being more particularly described as
follows:

 

BEGINNING
at an X-cut set in concrete at the northwest corner of said Lot Fl-11 in the
east Right-of-Way line of Coleman Boulevard (114’ Right-of-Way) as dedicated to
the City of Frisco recorded in Cabinet N, Page 690, Map Records, Collin
County, Texas;

 

THENCE
North 82°20’57” East a distance of 82.97 feet to an X-cut set in concrete for
corner;

 

3

 

THENCE
South 07°39’03” East a distance of 5.50 feet to an X-cut set in concrete for
corner;

 

THENCE
North 82°20’57” East a distance of 71.70 feet to a 5/8” iron rod with red cap
marked KHA set for corner;

 

THENCE
South 07°39’03” East a distance of 280.50 feet to a 5/8” iron rod with red cap
marked KHA set for corner;

 

THENCE
South 82°20’57” West a distance of 71.70 feet to an X-cut set in concrete for
corner;

 

THENCE
South 07°39’03” East a distance of 4.84 feet to an X-cut set in concrete for
corner;

 

THENCE
South 82°20’57” West a distance of 82.97 feet to an X-cut set in concrete for
corner in the east Right-of-Way line of said Coleman Boulevard;

 

THENCE
North 07°39’03” West with the east Right-of-Way line of said Coleman Boulevard
a distance of 290.84 feet to the POINT OF BEGINNING and containing 1.0157 acres
of land.

 

WITH RESPECT TO THE FIRST FLOOR
RETAIL SPACE ONLY, TRACT 11/LOT B1-6 AS SHOWN ON SURVEY PREPARED BY DANA BROWN R.P.L.S.
#5336, DATED 06/27/07, LAST REVISED 07/10/07:

 

BEING
a tract of land situated in the W.B. Watkins Survey, Abstract No. 1004,
Collin County, Texas, and being all of Lot Bl-6, Block. B-l, Frisco Square
Phase 2, an addition to the City of Frisco, Texas recorded in Cabinet P, Page 724,
Map Records, Collin County, Texas, and being more particularly described as
follows:

 

BEGINNING
at an X-cut set in concrete at the northeast corner of said Lot Bl-6 in the
west Right-of-Way line of Coleman Boulevard (114’ Right-of-Way) as dedicated to
the City of Frisco recorded in Cabinet N, Page 690, Map Records, Collin
County, Texas;

 

THENCE
South 07°39’03” East with the west Right-of-Way line of said Coleman Boulevard
a distance of 290.84 feet to an X-cut set in concrete for corner;

 

THENCE
South 82°20’57” West departing the west Right-of-Way line of said Coleman
Boulevard a distance of 82.97 feet to an X-cut set in concrete for corner;

 

THENCE
North 07°39’03” West a distance of 4.84 feet to an X-cut set in concrete for
corner;

 

THENCE
South 82°20’57” West a distance of 71.70 feet to a 5/8” iron rod with red cap
marked KHA set for corner;

 

THENCE
North 07°39’03” West a distance of 280.50 feet to a 5/8” iron rod with red cap
marked KHA set for corner;

 

THENCE
North 82°20’57” East a distance of 71.70 feet to an X-cut set in concrete for
corner;

 

THENCE
North 07°39’03” West a distance of 5.50 feet to an X-cut set in concrete for
corner;

 

THENCE
North 82°20’57” East a distance of 82.97 feet to the POINT OF BEGINNING and
containing 1.0157 acres of land.

 

4

 

Exhibit B

 

Monthly Performance Report

 

(See attached.)

 

1

 

Exhibit C

 

Tenant Survey Form

 

(See attached.)

 

1Exhibit
10.8.20.11

 

FORBEARANCE AGREEMENT, LIMITED
WAIVER

AND CONSENT OF GUARANTORS

 

 

 

                This FORBEARANCE AGREEMENT, LIMITED WAIVER AND CONSENT OF GUARANTORS (this
“Forbearance”) is dated as of October 18, 2007 and entered into by and
among WESTAFF, INC., a Delaware
corporation (“Parent”), WESTAFF (USA),
INC., a California corporation (“US Borrower”), WESTAFF (U.K.) LIMITED, a limited liability
company incorporated under the laws of England and Wales (“UK Borrower”)
WESTAFF SUPPORT, INC., a California
corporation (“Term Borrower”, and together with US Borrower and UK
Borrower, the “Borrowers”), the financial institutions signatory hereto
that are parties as Lenders to the Credit Agreement referred to below (the “Lenders”),
and GENERAL ELECTRIC CAPITAL CORPORATION,  as agent (in such capacity, the “Agent”)
for the US Revolving Lenders, the Term Lenders and the UK Revolving Lenders (as
defined in the Credit Agreement referred to below) and as a US Revolving
Lender, a UK Revolving Lender and a Term Lender, and BANK OF
AMERICA, N.A., as a US Revolving Lender, a UK Revolving Lender and a
Term Lender, is made with respect to the subject matter contained herein.

 

Recitals

 

                Whereas,
the Parent, the Borrowers, the Lenders and Agent have entered into that certain
Multicurrency Credit Agreement dated as of May 17, 2002 as amended by that
certain First Amendment to Multicurrency Credit Agreement, Limited Waivers and
Consent of Guarantors, dated as of October 31, 2002, as further amended by that
certain Second Amendment to Multicurrency Credit Agreement, Limited Waivers and
Consent of Guarantors, dated as of June 13, 2003, that certain Third Amendment
to Multicurrency Credit Agreement, Limited Waivers and Consent of Guarantors,
dated as of September 25, 2003, that certain Fourth Amendment to Multicurrency
Credit Agreement, Limited Waivers and Consent of Guarantors, dated as of
February 20, 2004, that certain Fifth Amendment to Multicurrency Credit
Agreement and Consent of Guarantors, dated as of July 31, 2004, that certain Sixth
Amendment to Multicurrency Credit Agreement and Consent of Guarantors, dated as
of January 5, 2004, that certain Seventh Amendment to Multicurrency Credit
Agreement, Limited Waiver and Consent of Guarantors, dated as of August 19,
2005, that certain Eighth Amendment to Multicurrency Credit Agreement, Limited
Waiver and Consent of Guarantors dated as of March 1, 2006, that certain Ninth Amendment To Multicurrency Credit
Agreement And Consent Of Guarantors. dated as of July 25, 2006, that certain
Tenth Amendment To Multicurrency
Credit Agreement and Consent of Guarantors dated as of January 2, 2007, and
that certain Eleventh Amendment
To Multicurrency Credit Agreement and Consent of Guarantors dated as of May 24,
2007  and as further modified by certain
consents and waivers of the Lenders prior to the date hereof (as so amended and
modified, the “Credit Agreement”; capitalized terms used in this
Forbearance without definition shall have the meanings given such terms in the
Credit Agreement); and

                Whereas, certain
Events of Default described in Annex I attached hereto (the “Specified
Events of Default” have occurred and are continuing and the Agent and
Lenders have

 

 

the right to enforce their
rights and remedies with respect to the Obligations under the Loan Documents;
and

                Whereas,
Borrowers have asked that the Agent and the Lenders waive the Waived Event of
Default (as defined herein) described in Section 6.1 hereof, and the Agent and
the Lenders have agreed to waive the Waived Event of Default; and

                Whereas, the Borrowers have requested
that the Agent and each Lender agree to forbear, and Agent and each Lender are
willing to forbear to the extent provided herein and subject to the terms and
conditions contained herein, from enforcing any remedies available to them
under the Loan Documents that arise as a result of the Specified Events of
Default for a limited period of time, and to continue advancing Loans under the
Credit Agreement, provided that the Credit Parties meet the conditions set
forth here in and otherwise comply with this Forbearance.

                Now, therefore, in consideration of the
premises and the mutual agreements set forth herein and for other consideration
the receipt of and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, agree as follows:

1.             RECITALS.  The
recitals set forth above are true and correct and are hereby incorporated into
the body of this Forbearance by reference.

2.             DEFINED TERMS.  The
following terms shall have the meanings set forth below:

2.1        “Effective
Date”  means the date on which all conditions to the effectiveness of this
Forbearance set forth in Section 8 shall have been satisfied.

2.2        “Forbearance
Default” means:

(a)                   After
giving effect to the agreements of the parties set forth herein, the occurrence
of any Default or Event of Default other than the Specified Events of Default;
or

(b)                   the
failure of any representation or warranty made by any Borrower or any other
Credit Party under or in connection with this Forbearance (including any
representation or warranty required to be made from time to time pursuant to
Section 5.5 of this Forbearance) to be true and complete in all material
respects as of the date when made; or

(c)                   at
any time during the first sixty (60) days of the Forbearance Period (such
period, the “Initial Forbearance Period”), the US Borrower shall have
Borrowing Availability of less than U.S. $1,000,000 for more than any two (2)
consecutive Business Days; or

(d)                   the
failure, as of the tenth (10th) Business Day after the expiration of
the Initial Forbearance Period and as of the end of each seven (7) day period
thereafter, of the US Borrower to have an average daily Borrowing Availability
for the immediately preceding ten (10) Business Days of at least U.S. $8,000,000;
or

 

S-2

 

(e)                   any
default (other than any other Forbearance Default) by Borrowers or any other
Credit Party under this Forbearance, including, without limitation, a breach by
such Borrower or Credit Party of any covenant or obligation specified below or
the failure of any Borrower or any other Credit Party to perform any of its
obligations hereunder, and, except with respect to a breach of this Forbearance
that cannot be cured (including, without limitation, a breach of Section 5.2),
such default continues for five (5) Business Days; or

(f)                    the
commencement of a receivership, insolvency proceeding under any of the
Insolvency Laws, assignment for the benefit of creditors or other action with respect to any Borrower or
any other Credit Party seeking the issuance of a
warrant of attachment, execution, distraint or similar process resulting in
control or possession against any material part of such Borrower’s or Credit
Party’s assets.

2.3        “Forbearance
Period” means the period of time from the Effective Date to and including
the Forbearance Termination Date

2.4        “Specified
Events of Default” means those Events of Default described on Annex I to
this Forbearance.

2.5        “Forbearance
Termination Date” means the earlier to occur of (a) 5:00 p.m., Los Angeles
time, on February 15, 2008, or (b) the date upon which a Forbearance Default
occurs.

2.6        “Waived
Event of Default” means that Event of Default described in Section 6.1 of
this Forbearance.

3.             FORBEARANCE.  Subject to the conditions and upon the terms
set forth in this Forbearance:

3.1        Each of the Borrowers and the other Credit Parties
agrees and acknowledges that (i) each of the Specified Events of Default has
occurred and is continuing, (ii) each of the Specified Events of Defaults is
incurable and is not subject to any grace or cure period, (iii) except for the
Specified Events of Default and the Waived Event of Default, no other Defaults
or Events of Default have occurred and are continuing as of the date hereof, and
(iv) but for this Forbearance Agreement, each Specified Event of Default would
relieve Agent and Lenders from any obligation to make any Loans or provide
other financial accommodations under the Credit Agreement and other Loan
Documents, and in accordance with the terms of the Loan Documents would entitle
Agent, Lenders and/or the Requisite Lenders, as applicable, to, among other
things, (A) suspend or terminate any commitment to provide Swing Line Loans,
Revolving Loans, Term Loans or UK Revolving Loans or provide other financial
accommodations, including Letters of Credit, 
under any or all of the Credit Agreement and the other Loan Documents,
(B) declare all Obligations to be immediately due and payable and without notice
or demand, and/or (C) take any and all enforcement actions (including, without
limitation, the enforcement of liens and security interests in the Collateral)
or otherwise exercise any or all rights and remedies provided for by any or all
of the Credit Agreement or other Loan Documents or applicable law.

 

S-3

 

3.2        Provided that no Forbearance Default occurs, each
of the Agent and the Lenders agrees that, (a) until the expiration of the
Forbearance Period and except as set forth in this Forbearance, it will forbear
from the exercise of default-related remedies with respect to the Obligations
against Borrowers or any other Credit Party under the Credit Agreement or any
other Loan Document (“Default-related Remedies”) solely with respect to
the Specified Events of Default; and (b) during the Forbearance Period, the
Lenders agree to continue to advance Loans subject to the terms and conditions
set forth herein and the terms and conditions of the Credit Agreement and the
other Loan Documents; provided, however, from and after the date
of this Forbearance, the Lenders shall have no obligation to make LIBOR Loans
or convert any US Index Rate Loans into LIBOR Loans.

3.3        On
the Forbearance Termination Date, Agent’s and any Lenders’ agreement hereunder
to forbear from exercising their Default-related Remedies with respect to the
Specified Events of Default shall immediately and automatically terminate
without the requirement of any demand, presentment, protest, or notice of any
kind, all of which each of the Borrowers and the other Credit Parties
waives.  Each of the Borrowers and the
other Credit Parties agrees that Agent and Lenders may at any time thereafter
proceed to exercise any and all of their respective rights and remedies under
any or all of the Credit Agreement and other Loan Documents and/or applicable
law or equity, including, without limitation, their respective Default-related
Remedies in connection with the Specified Events of Default.

3.4        The
Borrowers and the other Credit Parties further acknowledge and agree that
neither any action taken or not taken by Agent or any Lender prior to the date
hereof nor the execution and delivery of this Forbearance (i) other than as
expressly set forth in Section 6.1 with respect to the waiver of the Waived Event
of Default constitutes a waiver of any Default or Event of Default, including
the Specified Events of Default, or (ii) prejudices any rights or remedies
which the any Agent or any Lender may have, now or in the future, under any of
the Loan Documents or in law or equity, including any rights or remedies with
respect to the Specified Events of Default except solely to the extent that the
Agent and Lenders have agreed, subject to the terms and conditions of this
Forbearance, to forbear during the Forbearance Period from exercising their
rights and remedies with respect to the Specified Events of Default.

3.5        Any
agreement by Agent and Lenders to extend the Forbearance Period must be set
forth in writing and signed by the respective officers of Agent and the
Requisite Lenders.  Each of the Borrower
and the other Credit Parties acknowledges that Agent and Lenders have not made
any assurances concerning any possibility of an extension of the Forbearance
Period and are under no obligation whatsoever to consider or enter into such an
extension.

4.             ACKNOWLEDGMENT OF DEFAULT RATE.  Each
of the Borrowers and the other Credit Parties agree and acknowledge that,
pursuant to section 1.5(d) of the Credit Agreement and notwithstanding this
Forbearance, from and after July 7, 2007 the interest rate applicable to the
Loans (including any Loans advanced during the Forbearance Period) and the
Letter of Credit Fees (but not the Unused Line Fee), shall be increased by two
percentage points (2%) per annum above the rates of interest or the rate of
such Letter of Credit Fees otherwise applicable under the Credit Agreement.

 

S-4

 

5.             ADDITIONAL AGREEMENTS OF THE PARTIES.

5.1        Notwithstanding paragraph b of Annex G
of the Credit Agreement, the parties hereto agree that the Borrowers and other
Credit Parties shall not, during the Forbearance Period, be required to satisfy
the Fixed Charge Coverage Ratio if the US Borrower has Borrowing Availability
of less than U.S. $7,500,000 on any date of determination specified in the
Credit Agreement, and such failure to so comply during the Forbearance Period
shall not constitute a Default or an Event of Default under the Credit
Agreement.

5.2        Notwithstanding
paragraph (c)(ii) of Annex G of the Credit Agreement, the parties
hereto agree that the Borrowers and other Credit Parties shall not be required
to satisfy the minimum EBITDA requirement specified therein for the quarter
ending November 3, 2007, provided  however, the Parent and its
Subsidiaries shall have a minimum EBITDA for the 13 Fiscal Periods ended
November 3, 2007 of at least $1,000,000, and any such failure shall not
constitute a Default or an Event of Default under the Credit Agreement unless
the minimum EBITDA requirement set forth in the proviso above is not then
satisfied.

5.3        The
US Borrower agrees that it shall provide to the US Agent consolidated and
consolidating projections for Parent and its Subsidiaries for each Fiscal
Period through the end of Fiscal Year 2008. 
Such projections shall include consolidated and consolidating income
statements, balance sheets and statements of cash flows for Parent and its
Subsidiaries.  The US Borrower will
deliver such projections no later than November 15, 2007.

5.4        In consideration of this
Forbearance and the other agreements set forth herein, the Borrowers hereby
agree to pay to US Agent for the benefit of US Agent and the Lenders an
aggregate fee of $183,333 (the “Forbearance Fee”), which fee shall be payable
in four installments of $45,833.25, (i) the first installment of which shall be
paid by Borrowers no later than the Effective Date, (ii) the second installment
of which shall be paid by Borrowers no later than the 30th day following the
Effective Date, (iii) the third installment of which shall be paid by Borrowers
no later than the 60th day following the Effective Date, and (iv) the fourth
installment of which shall be paid by Borrowers no later than the 90th day
following the Effective Date, provided however, that the US Agent and Lenders hereby
agree that if this Forbearance Letter is terminated by written mutual agreement
of the parties hereto (which agreement shall be conditioned upon (a) the US
Borrower having achieved Borrowing Availability acceptable to the Agent and
Lenders, (b) the US Borrower having successfully negotiated a reduction of its
outstanding letter of credit in favor of [Travelers] on terms acceptable to
Agent and the Lenders, (c) the Borrowers having met (in the determination of
the Agent and Lenders) the projections delivered pursuant to Section 5.3 of
this Forbearance (which projections shall be satisfactory to Agent and
Lenders), and (d) successful negotiation of a mutually acceptable credit
agreement or amendment to the existing Credit Agreement (it being understood that
any such credit agreement or amendment shall be subject to the credit approval
of the Lenders)), any installment due on a date after such termination date
shall no longer be payable by the Borrowers. 
Except as set forth in the proviso of the immediately preceding
sentence, the entire Forbearance Fee shall be payable irrespective of whether
the Forbearance Termination Date occurs on or before the date upon which any
installment of the Forbearance Fee is payable in accordance with the
immediately preceding sentence, and the Forbearance Fee (or any portion
thereof) shall not be refundable to the Borrowers under any circumstances,
including, without limitation the

 

S-5

 

occurrence of the Forbearance Termination Date
before February 15, 2008.  This provision
shall survive any termination of this Forbearance.

5.5        The
Borrowers hereby agree that in addition to any requirements set forth in the
Credit Agreement, at any time the representations and warranties in the Credit
Agreement are required to be made or are deemed to be made in the Credit
Agreement or under any other Loan Document (including, without limitation, in
connection with an Advance), the Parent and the US Borrower, jointly and
severally, and the UK Borrower only in respect of itself, severally, will be
deemed to represent and warrant that no event has occurred and is continuing
that would constitute a Forbearance Default (without giving effect to any grace
period set forth in clause (f) of such definition).

 

6.             LIMITED WAIVER OF EVENT OF DEFAULT.  Subject to the satisfaction of the conditions
set forth herein, the Agent and the Lenders hereby agree as follows:

6.1        The
Agents and the Lenders hereby waive the Event of Default under the Credit
Agreement that occurred due to the failure of the US Borrower to pay on August
18, 2007, or at any time thereafter, amounts owing under that certain Amended
and Restated Unsecured Subordinated Note in favor of Robert W. Stover due
August 18, 2007.

7.             REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE BORROWERS.  The Parent and the US Borrower, jointly and severally, and
the UK Borrower, only in respect of itself, severally, make the following
representations and warranties to each Lender and each Agent with respect to
all Credit Parties:

7.1        Power and Authority.  Each of the Credit Parties has all corporate or other
organizational power and authority to enter into this Forbearance and, as
applicable, the Consent of Guarantors attached hereto (the “Consent”),
and to carry out the transactions contemplated by, and to perform its
obligations under or in respect of, this Forbearance (including, without
limitation, the Consent).

7.2        Due Authorization, Non-Contravention.  The execution, delivery and performance by each Credit
Party of this Forbearance and the Consent, as applicable, and the performance
of the obligations of each Credit Party under or in respect of this Forbearance
(including, without limitation, the Consent) (a) have been duly authorized
by all necessary corporate, limited liability company or partnership action,
(b) do not contravene any provision of such Person’s charter, bylaws or
partnership or operating agreement, as applicable, (c) do not violate any
law or regulation or any order or decree of any court or Governmental Authority
of the United States or the United Kingdom or, in each case, any political
subdivision thereof, (d) do not conflict with or result in the breach or
termination of, constitute a default under or accelerate or permit the acceleration
of any performance required by, any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which such Person is a party or by which such
Person or any of its property is bound, except where any such violations,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect, and (e) do not result in the creation or
imposition of any Lien on any of the property of such Person.

 

S-6

 

7.3        Execution, Delivery and Enforceability.  This Forbearance and the
Consent have been duly executed and delivered by each Credit Party which is a
party thereto and this Forbearance and the Consent, constitute the legal, valid
and binding obligations of such Credit Party, enforceable in accordance with
their terms, except as enforceability may be limited by Insolvency Laws or
similar laws affecting creditors’ rights generally or by general equitable
principles.

7.4        No Default, Event of Default or Forbearance Default.  Except for the Specified Events of Default, no event has occurred
and is continuing after giving effect to this Forbearance (including, without
limitation, the Consent) or will result from the execution and delivery of this
Forbearance or the Consent that would constitute a Default, an Event of Default
or a Forbearance Default (without giving effect to any grace period set forth
in clause (f) of such definition).

7.5        Representations and Warranties.  After giving effect to this Forbearance, each of the
representations and warranties contained in the Loan Documents is and will be
true and correct in all material respects on and as of the date hereof and as
of the effective date of this Forbearance, except to the extent that such
representations and warranties specifically relate to an earlier date, in which
case they were true, correct and complete in all material respects as of such
earlier date.

7.6        Other
Material Agreements.  The
occurrence of the Specified Events of Default do not result in a breach or
default under any other material agreement or contract to which any of the
Borrowers or Credit Parties are a party or by which its property may be bound,
except for any such breaches or defaults which have been waived.

8.             CONDITIONS TO EFFECTIVENESS OF THIS FORBEARANCE.  This Forbearance shall be
effective as of the date that all of the following conditions are satisfied, as
determined by the Agent:

(i) such Forbearance has been signed by, and when
counterparts hereof shall have been delivered to the US Agent or its counsel
(by hand delivery, mail or telecopy) by the Parent, the Borrowers and the
Lenders;

 

(ii) each Guarantor shall have delivered to the US
Agent or its counsel executed counterparts of the Consent;

 

(iii) Borrowers shall have paid to the US Agent for
the pro-rata benefit of the Lenders the first installment of the Forbearance
Fee as required by Section 4.4 hereof;

 

(iv) Borrowers shall have delivered to the US Agent
or its counsel a certificate certifying (x) that the charters, bylaws (or other
similar organizational documents) and resolutions authorizing the execution,
delivery and performance by the Credit Parties of their obligations under the
Credit Agreement and the other Loan Documents, each in the form delivered to
the Agent on the Closing Date, are in full force and effect and have not been
amended, rescinded or otherwise modified

 

S-7

 

as of the date of this Forbearance (other than an
amendment to Parent’s bylaws to increase the number of members of the board of
directors from five to nine), (y) that the resolutions attached thereto are the
only resolutions adopted with respect to this Forbearance, and (z) that no
further authorization or consent is required to be obtained with respect to the
execution, delivery and performance of this Forbearance, the Consent and the
Credit Agreement as modified hereby; and an incumbency certificate for each
Credit Party; and

 

(v) the US Borrower on behalf of itself and the
other Credit Parties and the UK Borrower on behalf of itself shall have
delivered to the US Agent or its counsel a certificate certifying that the
representations and warranties contained herein and in the Loan Documents are
true and correct in all material respects as of such date (except to the extent
that such representations and warranties specifically relate to an earlier
date, in which case they were true, correct and complete in all material
respects as of such earlier date), and other than the Specified Events of
Default, no Default, Event of Default or Forbearance Default (without giving
effect to any grace period set forth in clause (f) of such definition) has
occurred and will be continuing (after giving effect to this Forbearance,
including Section 6.1 hereof).

 

 

9.             EFFECT OF LIMITED WAIVER, FORBEARANCE; RATIFICATION.  This Forbearance is a Loan Document.  From and after the date on which this
Forbearance becomes effective, all references in the Loan Documents to the Credit
Agreement shall mean the Credit Agreement as amended or supplemented
hereby.  Except as expressly amended or
waived hereby, the Credit Agreement and the other Loan Documents, including the
Liens granted thereunder, shall remain in full force and effect, and all terms
and provisions thereof are hereby ratified and confirmed.  Each of the Parent and each Borrower confirms
that, as amended hereby, each of the Loan Documents is in full force and
effect.  The limited waiver contained in
Section 6.1 hereof, and the forbearance contained herein, are limited to
the precise terms hereof, and neither the Agent nor any Lender is obligated to
consider or consent to any additional request by any Borrower, any Credit Party
or any other Person for any other forbearance, waiver, consent or amendment
with respect to the Credit Agreement  or any
Loan Documents.  Each of the Borrowers
and the other Credit Parties acknowledges that the Lenders and the Agent have
not made any assurances concerning any possibility of an extension of the
Forbearance Period.  The forbearance
contained herein is not and shall not be deemed to be a waiver of the Agent’s
or any Lender’s right to payment of any principal, interest or fees owing in
respect of the Loans or any of the other Obligations under the Credit Agreement  or any other Loan Document.

10.           ACKNOWLEDGMENT OF OUTSTANDING AMOUNTS.  Each of the
Borrowers and the other Credit Parties hereby acknowledges and agrees that the
aggregate outstanding principal amount of the US Revolving Loan is
$36,639,049.00 (all in the form of outstanding Letters of Credit as of October
16, 2007) and the aggregate outstanding principal amount of the UK Revolving
Loan is £9,833.71 (as of October 16, 2007), and that such principal amounts,
plus interest and fees, are payable pursuant to the Credit Agreement and other
Loan Documents without defense, offset, withholding, counterclaim or deduction
of any kind.  This section shall any survive termination of this Forbearance.

 

S-8

 

11.           RELEASE AND WAIVER OF CLAIMS, DEFENSES AND RIGHTS OF
SET OFF.  Each of the Parent
and the Borrowers acknowledges that the US Agent, the UK Agent and the Lenders
have performed all obligations and duties owed to the Parent and the Borrowers
under the Loan Documents through the date hereof, and each such party further,
acknowledges, represents and warrants that none of the Parent or the Borrowers
has any claim, cause of action, defense, or right of set off against the US
Agent, the UK Agent or any Lender or Lenders, and, to the extent that any such
party has any such rights, each of the Parent and the Borrowers hereby
releases, waives, and forever discharges the US Agent, the UK Agent and the
Lenders (together with each of their predecessors, successors and assigns) and
each of their officers, directors, employees, agent and representatives from
each action, cause of action, suit, debt, defense, right of set off, or other
claim whatsoever, in law or in equity, known or unknown against the US Agent,
the UK Agent or the Lenders, or such officers, employees, agent or representatives.  Each of the Parent and each Borrower hereby
specifically waives as against the US Agent, the UK Agent or the Lenders any
rights they or any of them may have under Section 1542 of the California Civil
Code, which provides as follows:  “A general
release does not extend to claims which the creditor does not know or suspect
to exist in his or her favor at the time of executing the release, which if
known by him or her must have materially affected his or her settlement with
the debtor.”  This section shall survive
any termination of this Forbearance.

12.           APPLICABLE LAW. 
THIS FORBEARANCE SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS AND DECISIONS OF THE STATE OF
CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY
APPLICABLE LAWS OF THE UNITED STATES. 
THIS SECTION SHALL SURVIVE ANY TERMINATION OF THIS FORBEARANCE.

13.           COMPLETE AGREEMENT. 
This Forbearance sets forth the complete agreement of the
parties in respect to the subject matter hereof.  The execution, delivery and effectiveness of
this Forbearance do not constitute a waiver of any Default or Event of Default,
amend or modify any provision of any Loan Document or constitute a course of
dealing or any other basis for altering the Obligations of any Credit Party.

14.           CAPTIONS; COUNTERPARTS.  The catchlines and captions herein
are intended solely for convenience of reference and shall not be used to
interpret or construe the provisions hereof. This Forbearance may be executed
by one or more of the parties to this Forbearance on any number of separate
counterparts (including by telecopy), all of which taken together shall
constitute but one and the same instrument.

 

[signatures following; remainder of page intentionally left blank]

 

S-9

IN WITNESS WHEREOF, each of the undersigned has duly executed this
Forbearance, Limited Waiver and Consent of Guarantors effective as of the date
set forth above.

	
  WESTAFF (USA), INC.

  
	
  By:

  	
  /s/ Dawn
  Jaffray

  
	
  Name:

  	
  Dawn
  Jaffray

  
	
  Title:

  	
  CFO
  & SVP

  
	
  WESTAFF SUPPORT, INC.

  
	
  By:

  	
  /s/ Dawn
  Jaffray

  
	
  Name:

  	
  Dawn
  Jaffray

  
	
  Title:

  	
  SVP
  & CFO

  
	
  WESTAFF (U.K.) LIMITED

  
	
  By:

  	
  /s/
  Michael Willis

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  
	
  GENERAL ELECTRIC CAPITAL  CORPORATION,

  
	
  as US
  Agent, UK Agent, a US Revolving Lender, a Term Lender and a UK Revolving Lender

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Robert M. Brichacek

  
	
  Name:

  	
  Robert
  M. Brichacek

  
	
  Title: 

  	
  Authorized
  Signatory

  
	
  BANK OF AMERICA, N. A.,

  
	
  as
  Documentation Agent, a US Revolving Lender, a Term Lender and a UK Revolving
  Lender

  
	
  By:

  	
  /s/
  David Knoblauch

  
	
  Name:

  	
  David
  Knoblauch

  
	
  Title: 

  	
  SVP

  

 

S10

 

The
following Person is a signatory to this Forbearance, Limited Waiver and Consent
of Guarantors in its capacity as a Credit Party and not as a Borrower.

	
  WESTAFF, INC.

  
	
   

  	
   

  
	
  By:

  	
  /s/ Dawn
  Jaffray

  
	
  Name:

  	
  Dawn
  Jaffray

  
	
  Title

  	
  SVP
  & CFO

  

 

S11

 

 

CONSENT OF GUARANTORS

 

 

Each of the undersigned is
a Guarantor of the Obligations of the Borrowers under the Credit Agreement and
each other Loan Document (including US Borrower and Term Borrower in its
capacity as a Guarantor of the Obligations of the other Borrowers) and hereby
(a) consents to the foregoing Forbearance, (b) acknowledges that
notwithstanding the execution and delivery of the foregoing Forbearance,
including without limitation, the imposition of the Default Rate, the
obligations of each of the undersigned Guarantors are not impaired or affected
and the Parent Guaranty, the Subsidiary Guaranty, and the cross-guaranty
contained in the Credit Agreement continue in full force and effect, and
(c) ratifies the Parent Guaranty, the Subsidiary Guaranty or the
cross-guaranty contained in the Credit Agreement, as applicable, and each of
the Loan Documents to which it is a party and further ratifies the Liens
granted by it to any Agent for its benefit and the benefit of the Lenders.

 

[signatures following; remainder of
page intentionally left blank]

 

Consent-1

 

 

	
                                  IN
  WITNESS WHEREOF, each of the undersigned has executed and delivered this
  CONSENT OF GUARANTORS as of the date first set forth above. 

  

 

	
   

  	
   

  
	
  WESTAFF, INC.

  
	
   

  	
   

  
	
  By

  	
  /s/ Dawn Jaffray

  
	
  Name:

  	
  Dawn Jaffray

  
	
  Title:

  	
  SVP & CFO

  
	
   

  	
   

  
	
  WESTERN MEDICAL SERVICES, INC.,
 a California corporation

  
	
   

  	
   

  
	
  By:

  	
  /s/ Dawn
  Jaffray

  
	
  Name:

  	
  Dawn
  Jaffray

  
	
  Title:

  	
  SVP
  & CFO

  
	
   

  	
   

  
	
  WESTAFF (USA), INC.

  
	
   

  	
   

  
	
  By:

  	
  /s/ Dawn
  Jaffray

  
	
  Name:

  	
  Dawn
  Jaffray

  
	
  Title:

  	
  SVP
  & CFO

  
	
   

  	
   

  
	
  WESTAFF SUPPORT, INC.

  
	
   

  	
   

  
	
  By:

  	
  /s/ Dawn
  Jaffray

  
	
  Name:

  	
  Dawn
  Jaffray

  
	
  Title:

  	
  SVP
  & CFO

  
	
   

  	
   

  
	
  MEDIAWORLD INTERNATIONAL

  
	
   

  	
   

  
	
  By:

  	
  /s/ Dawn
  Jaffray

  
	
  Name:

  	
  Dawn
  Jaffray

  
	
  Title:

  	
  SVP
  & CFO

  

 

 

Annex I

Specified Events of Default

 

1.                                 Parent and its
Subsidiaries have failed to maintain, on a consolidated basis, for the 13
Fiscal Periods ended August 4, 2007, and for the 13 Fiscal Periods ended
September 1, 2007, a Minimum Fixed Charge Coverage Ratio of not less than 1.25
to 1.0, as required by paragraph (b) of Annex G to the Credit Agreement.

 

2.                                       Parent and its
Subsidiaries have failed to have, on a consolidated basis, at the end of the
Fiscal Quarter ended July 7, 2007, for the 13 Fiscal Periods then ended, a
Minimum EBITDA of $9,000,000, as required by 
paragraph (c) of Annex G to the Credit Agreement.

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