Document:

Exhibit 10.8.21

 

RECORDING
REQUESTED BY, AND

WHEN
RECORDED RETURN TO:

 

Latham & Watkins

633 W. 5th Street

Los Angeles, CA 90071

Attn:  Mary Ruhl, Esq.

 

 

INSTRUCTIONS
TO COUNTY RECORDER:

Index
this document as

(1)  Deed of Trust and

(2)  a fixture filing

 

Assessor’s
Parcel No(s).:  143-130-013 and
143-040-066

 

 

DEED OF
TRUST, ABSOLUTE ASSIGNMENT OF LEASES AND RENTS,

SECURITY AGREEMENT AND FIXTURE FILING

 

Effective as of May 17, 2002

 

Made by

 

WESTAFF
SUPPORT, INC.

 

as Trustor,

 

to

 

CHICAGO
TITLE COMPANY

 

as Trustee,

 

for the benefit of

 

GENERAL
ELECTRIC CAPITAL CORPORATION

 

as Agent,

 

as Beneficiary

 

 

 

 

 

DEED OF TRUST, ABSOLUTE
ASSIGNMENT OF LEASES AND RENTS,

SECURITY AGREEMENT AND FIXTURE FILING

 

THIS DEED OF
TRUST, ABSOLUTE ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE
FILING (this “Deed of Trust”) is made as
of May 16, 2002, but not effective until May 17, 2002 by WESTAFF SUPPORT, INC.,
a California corporation, having an address at P.O. Box 9280,
301 Lennon Lane, Walnut Creek, CA 94598 (“Trustor”),
to CHICAGO TITLE COMPANY, having an address at 590 Y gnacio Valley Road,
Suite 300, Walnut Creek, CA 94596 (“Trustee”),
for the benefit of GENERAL ELECTRIC CAPITAL CORPORATION (in its individual
capacity, “GE Capital”), as agent
for the US Revolving Lenders, the Term Lenders and the UK Revolving
Lenders (each as defined in the Multicurrency Credit Agreement defined below)
and as a Lender (together with its permitted successors and assigns, “Beneficiary”).

 

RECITALS:

 

A.            Reference is hereby made to that
certain Multicurrency Credit Agreement dated as of May 17, 2002, by and among
Beneficiary, Westaff (USA) Inc., a California corporation (“Westaff (USA)”), Westaff (CA), Inc., a
California corporation (“WCA”), Westaff Limited Partnership, a Delaware
limited partnership (“WLP”), Westaff (U.K.) Limited, a limited liability
company incorporated under the laws of England and Wales (“UK Borrower”) and Trustor (each of Westaff
(USA), WCA and WLP are sometimes referred to individually as a
“US Borrower” and collectively as the “US Borrowers”, and each US
Borrower, the UK Borrower and Trustor are sometimes referred to as a “Borrower” and collectively, as the “Borrowers”) (the “Credit
Agreement”).

 

B.            Pursuant to the Credit Agreement,
Lenders have or shall extend revolving and term credit facilities to Borrowers
of up to Fifty-Nine Million Dollars ($59,000,000), or its US Dollar
Equivalent (as defined in the Credit Agreement), in the aggregate, for the
purpose of refinancing certain indebtedness of Westaff (USA) and
UK Borrower, repaying certain intercompany loans made to US Borrower,
and providing (a) working capital financing for Borrowers, (b) funds
for other general corporate purposes of Borrowers and (c) funds for other
purposes permitted under the Credit Agreement; and for these purposes, Lenders
(as defined in the Credit Agreement) are willing to make certain loans and
other extensions of credit to Borrowers up to such amounts pursuant to the
terms of the Credit Agreement.

 

C.            Subject to the terms and conditions
of the Credit Agreement, the US Revolving Lenders and UK Revolving
Lenders have agreed to make available to US Borrowers and UK Borrower
financing pursuant to the Revolving Loan (as defined in the Credit Agreement)
and the Term Lenders have agreed to make available to Trustor term loan
financing in the maximum amount of Five Million Dollars ($5,000,000), evidenced
by certain promissory notes to the order of the Lenders (the “Term Notes”).

 

D.            Trustor has agreed to secure all of
its obligations under the Loan Documents (as defined in the Credit Agreement)
by granting to Beneficiary a security interest in and lien upon substantially
all existing and after-acquired personal and real property of Trustor.

 

 

 

 

E.             Trustor has agreed to enter into
this Deed of Trust in compliance with its obligation to grant to Beneficiary a
security interest in and lien upon substantially all existing and
after-acquired personal and real property of Trustor.

 

F.             In consideration of the foregoing
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Trustor has agreed to execute this Deed of
Trust.  Unless otherwise specifically
defined or used in this Deed of Trust to the contrary, capitalized terms shall
have the meanings as set forth in the Credit Agreement.

 

ARTICLE I.  DEED OF TRUST

 

1.1           Grant.  For the purposes of and upon the terms and
conditions in this Deed of Trust, Trustor does hereby grant, convey, mortgage,
transfer, bargain, and assign to Trustee, and successors and assigns of
Trustee, in trust for the benefit of Beneficiary, with power of sale and right
of entry and possession, all of Trustor’s right, title and interest, whether
now owned or hereafter acquired, in or to all of the following property, rights
and interests listed in subsections (a) through (k) below (hereinafter
collectively referred to as the “Secured Property”):

 

(a)           the real property described in Exhibit A attached hereto and
incorporated herein by reference (the “Property”);

 

(b)           all buildings and improvements now or
hereafter located on the Property (the “Improvements”);

 

(c)           all of the estate, right, title,
claim or demand of any nature whatsoever of Trustor, either in law or in
equity, in possession or expectancy, in and to the Property and the
Improvements or any part thereof;

 

(d)           all easements, rights-of-way, gores
of land, streets, ways, alleys, passages, sewer rights, waters, water courses,
water rights and powers, and all estates, rights, titles, interests,
privileges, liberties, tenements, hereditaments, and appurtenances of any
nature whatsoever, in any way belonging, relating or pertaining to the Property
and Improvements (including, without limitation, any and all development
rights, air rights or similar or comparable rights of any nature whatsoever now
or hereafter appurtenant to the Property or now or hereafter transferred to the
Property) and all land lying in the bed of any street, road or avenue, opened
or proposed, in front of or adjoining the Property to the center line thereof;

 

(e)           all machinery, apparatus, equipment,
fittings, fixtures and other property of every kind and nature whatsoever owned
by Trustor, or in which Trustor has or shall have an interest, now or hereafter
located upon the Property or Improvements, or appurtenances thereto, or usable
in connection with the present or future operation and occupancy of the
Property or Improvements and all building equipment, materials and supplies of
any nature whatsoever owned by Trustor, or in which Trustor has or shall have
an interest, now or hereafter located upon the Property or Improvements
(collectively, the “Equipment”);

 

 

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(f)            all awards or payments, including
interest thereon, and the right to receive the same, which may be made with
respect to the Property or Improvements whether from the exercise of the right
of eminent domain (including any transfer made in lieu of the exercise of said
right), or for any other injury to or decrease in the value of the Property or
Improvements;

 

(g)           all right, title and interest of
Trustor in and to any and all leases now or hereafter on or affecting the
Property, whether written or oral, and (to the extent assignable) all licenses
and other agreements for use or occupancy of the Property, together with all
security therefor and deposits thereunder and all guaranties thereof and all
monies payable thereunder;

 

(h)           all rents, awards, deposits (other
than security deposits in respect of leases), issues, profits, payments,
income, revenues, proceeds reimbursements and/or accounts receivable derived
from the sale, lease, sublease, license, concession or other grant of the right
of the use and occupancy of any portion of the Property or the Improvements;

 

(i)            all proceeds of and any unearned
premiums on any insurance policies covering the Property, Improvements or
Equipment, including, without limitation, the right to receive and apply the
proceeds of any insurance, judgments, or settlements made in lieu thereof, for
damage to the Property, Improvements or Equipment;

 

(j)            the right, in the name and on behalf
of Trustor, to appear in and defend any action or proceeding brought with
respect to the Property, Improvements or Equipment and to commence any action
or proceeding to protect the interest of Beneficiary in the Property,
Improvements or Equipment; and

 

(k)           all proceeds of each of the
foregoing.

 

TO HAVE AND TO
HOLD the above granted and described Secured Property unto Trustee, and its
successors and assigns, forever.

 

ARTICLE II.  OBLIGATIONS SECURED

 

2.1           Obligations Secured.  Trustor makes this grant and assignment for
the purpose of securing the following obligations (the “Obligations”):

 

(a)           Full and punctual payment by Trustor
to Beneficiary of all sums at any time owing by Trustor under the Term Notes,
under the Credit Agreement (including Trustor’s obligations under the guaranty
contained therein of the obligations of US Borrowers) and the other Loan
Documents (as defined in the Credit Agreement);

 

(b)           Full and punctual payment and
performance of all covenants and obligations of Trustor under this Deed of
Trust including, without limitation, indemnification obligations, and advances
made to protect the Secured Property;

 

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(c)           Full and punctual performance and
observance by Trustor of each other term, covenant, agreement, requirement,
condition and other provision to be performed or observed by Trustor under the
Loan Documents (as defined in the Credit Agreement);

 

(d)           Full and punctual payment and
performance of all future advances and other obligations that the then record
owner of all or part of the Secured Property may agree to pay and/or perform
(whether as principal, surety or guarantor) for the benefit of Beneficiary,
when such future advance or obligation is evidenced by a writing which recites
that it is secured by this Deed of Trust;

 

(e)           All interest and charges on all
Obligations secured hereby; and

 

(f)            All modifications, extensions and
renewals of any of the Obligations of Trustor, however evidenced, including,
without limitation: 
(i) modifications of the required principal payment dates or
interest payment dates or both under the Credit Agreement, as the case may be,
deferring or accelerating payment dates wholly or partly; or
(ii) amendments, modifications, extensions or renewals at a different rate
of interest of the Credit Agreement, whether or not any such amendment,
modification, extension or renewal of the Credit Agreement is evidenced by a
new or additional promissory note or notes.

 

2.2           Obligations.  The term “Obligations” is used herein in its
broadest and most comprehensive sense and shall be deemed to include, without
limitation, all interest and charges, prepayment charges, late charges or loan
fees at any time accruing or assessed on any of the Obligations of Trustor.

 

2.3           Incorporation.  All terms and conditions of the Loan
Documents which evidence any of the Obligations are incorporated herein by this
reference.  All persons who may have or
acquire an interest in the Secured Property shall be deemed to have notice of
the terms of the Obligations.

 

ARTICLE III.  ABSOLUTE ASSIGNMENT OF LEASES AND RENTS

 

3.1           Assignment.  Trustor irrevocably assigns to Beneficiary
all of Trustor’s right, title and interest in, to and under:  (a) all present and future leases of
the Secured Property or any portion thereof, if any, all licenses and
agreements relating to the management, leasing or operation of the Secured
Property or any portion thereof, and all other agreements of any kind relating
to the use and occupancy of the Secured Property or any portion thereof,
whether such leases, licenses and agreements are now existing or entered into
after the date hereof (the “Leases”),
provided, that it is acknowledged that the Secured Property is currently used
by Trustor for the operation of Trustor’s business; and (b) the rents,
issues, deposits and profits payable and all rights and benefits accruing to
Trustor under the Leases, if any (the “Rents”).  The term “Leases” shall also include all
guaranties of and security for the tenants’ performance thereunder, and all
amendments, extensions, renewals or modifications thereto which are permitted
hereunder.  This is a present and
absolute assignment, not an assignment for security purposes only, and
Beneficiary’s right to the Leases and Rents is not contingent upon, and may be
exercised without, possession of the Secured Property.

 

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3.2           Grant
of License.  Beneficiary confers
upon Trustor a revocable license (the “License”)
to collect and retain the Rents as they become due and payable, until the
occurrence of an Event of Default (as hereinafter defined).  Upon an Event of Default, the License shall
be automatically revoked and Beneficiary may collect and apply the Rents
pursuant to the terms hereof without notice and without taking possession of
the Secured Property.  All Rents
thereafter collected by Trustor shall be held by Trustor as trustee under a
constructive trust for the benefit of Beneficiary.  Trustor hereby irrevocably authorizes and directs the tenants
under the Leases to rely upon and comply with any notice or demand by
Beneficiary for the payment to Beneficiary of any rental or other sums which
may at any time become due under the Leases, or for the performance of any of
the tenants’ undertakings under the Leases, and the tenants shall have no right
or duty to inquire as to whether any Event of Default has actually occurred or
is then existing.  Trustor hereby
relieves the tenants from any liability to Trustor by reason of relying upon
and complying with any such notice or demand by Beneficiary.  Beneficiary may apply, in its sole
discretion, any Rents so collected by Beneficiary against any Obligation or any
other obligation of Trustor or any other person or entity, under any document
or instrument related to or executed by Trustor in connection with the Loan
Documents, whether existing on the date hereof, or hereafter arising.  Collection of any Rents by Beneficiary shall
not cure or waive any Event of Default or notice of default or invalidate any
acts done pursuant to such notice.

 

3.3           Effect of Assignment.  The foregoing irrevocable assignment shall
not cause Beneficiary to be:  (a) a
mortgagee in possession; (b) responsible for or liable for the control,
care, management or repair of the Secured Property or for performing any of the
terms, agreements, undertakings, obligations, representations, warranties,
covenants and conditions of the Leases; (c) responsible or liable for any
waste committed on the Secured Property by the tenants under any of the Leases
or by any other parties; for any dangerous or defective condition of the
Secured Property; or for any negligence in the management, upkeep, repair or
control of the Secured Property resulting in a loss or injury or death to any
tenant, licensee, employee, invitee or other person; or (d) responsible
for or obliged by any duty to produce rents or profits.  Beneficiary shall not directly or indirectly
be liable to Trustor or any other person as a consequence of:  (i) the failure to exercise any of the
rights, remedies or powers granted to Beneficiary hereunder; or (ii) the
exercise of any of the rights, remedies or powers granted to Beneficiary
hereunder, with the exception of Beneficiary’s or Trustee’s gross negligence or
willful misconduct in such exercise; or (iii) the failure or refusal of
Beneficiary to perform or discharge any obligation, duty or liability of
Trustor arising under the Leases prior to any foreclosure of Beneficiary’s
interest in the Secured Property or transfer of the Secured Property by deed in
lieu of foreclosure.

 

3.4           Covenants.  During the occurrence of an Event of Default
hereunder Trustor shall not, without the consent of Beneficiary:  (a) materially alter, modify or change
the terms of any Lease; (b) terminate or cancel any Lease; (c) accept
prepayments of the Rents for a period of more than one (1) month in
advance; (d) terminate or cancel any guaranties of any Lease; or (e) further
assign the whole or any part of the Rents. 
Trustor shall (i) fulfill or perform each and every provision of
the Leases on the part of Trustor to be fulfilled or performed,
(ii) promptly send copies of all notices of default which Trustor shall
send or receive under the Leases to Beneficiary, and (iii) enforce the
performance or observance of the provisions thereof by the tenants thereunder,
which enforcement may include termination of any such Lease in the

 

5

 

event
of a default thereunder.  Nothing
contained in this Section shall be construed as imposing on Beneficiary any of
the obligations of the lessor under the Leases.

 

ARTICLE IV.  SECURITY AGREEMENT AND FIXTURE FILING

 

4.1           Security
Interest.  Trustor hereby grants and
assigns to Beneficiary a security interest, to secure payment and performance
of all of the Obligations of Trustor, in all of the following described
personal property in which Trustor now or at any time hereafter has any
interest (collectively, the “Collateral”):

 

All goods, building and
other materials, supplies, work in process, equipment, machinery, fixtures,
furniture, furnishings, signs and other personal property, wherever situated,
which are or are to be incorporated into, used in connection with, or
appropriated for use on the real property and the improvements situated thereon
as described on Exhibit A
attached hereto and incorporated by reference herein (to the extent the same
are not effectively made a part of the Property pursuant to Section 1.1 above); together with all
rents, issues, deposits and profits of the Secured Property (to the extent, if
any, they are not subject to Article III
above); all inventory, accounts, cash receipts, deposit accounts, accounts
receivable, contract rights, letter of credit rights, general intangibles,
chattel paper, instruments, documents, notes, drafts, letters of credit,
insurance policies, insurance and condemnation awards and proceeds, any other
rights to the payment of money, trade names, trademarks and service marks
arising from or related to the Secured Property or any business now or
hereafter conducted thereon by Trustor; all permits, consents, approvals,
licenses, authorizations and other rights granted by, given by or obtained
from, any governmental entity with respect to the Secured Property; all
deposits or other security now or hereafter made with or given to utility
companies by Trustor with respect to the Secured Property; all advance payments
of insurance premiums made by Trustor with respect to the Secured Property; all
plans, drawings and specifications relating to the Secured Property; deposits,
accounts, refunds, cost savings and payments of any kind related to the Secured
Property or any portion thereof; together with all replacements and proceeds
of, and additions and accessions to, any of the foregoing; together with all
books, records and files relating to any of the foregoing.

 

This Deed of Trust
constitutes a financing statement filed as a fixture filing pursuant to the
provisions of Division 9 of the California Uniform Commercial Code, (“CUCC”) with respect to those portions of the
Secured Property consisting of goods which are or are to become fixtures
relating to the Secured Property.  The
addresses of Trustor (Debtor) and Beneficiary (Secured Party) are set forth in Section 5.8 below.  Terms used in the description of the
Collateral and not specifically defined shall have the meaning given such terms
in the CUCC.

 

4.2           Representations
and Warranties.  Trustor represents
and warrants that:  (a) Trustor
has, or will have, good title to the Collateral; and (b) Trustor has not
previously assigned or encumbered the Collateral, and no financing statement
covering any of the Collateral has been delivered to any other person or
entity.

 

4.3           Rights
of Beneficiary.  In addition to
Beneficiary’s rights as a “Secured Party” under the CUCC, Beneficiary may, but
shall not be obligated to, at any time without 

 

6

 

notice
(except as otherwise provided herein) and at the reasonable expense of
Trustor:  (a) give notice to any
person of Beneficiary’s rights hereunder and enforce such rights at law or in
equity; (b) insure, protect, defend and preserve the Collateral or any
rights or interests of Beneficiary therein; (c) inspect the Collateral,
provided such inspection is conducted in accordance with the Credit Agreement;
and (d) with Trustor’s consent or otherwise following an Event of Default,
endorse, collect and receive any right to payment of money owing to Trustor
under or from the Collateral.

 

4.4           Rights
of Beneficiary upon an Event of Default. 
Upon the occurrence of an Event of Default under this Deed of Trust,
then in addition to all of Beneficiary’s rights as a “Secured
Party” under the CUCC or otherwise at law:

 

(a)           Beneficiary may (i) upon written
notice, require Trustor to assemble any or all of the Collateral and make it
available to Beneficiary at the Property; (ii) without prior notice, enter
upon the Property or other place where any of the Collateral may be located and
take possession of, collect, sell, and dispose of any or all of the Collateral,
and store the same at locations acceptable to Beneficiary at Trustor’s expense;
(iii) sell, assign and deliver at any place or in any lawful manner all or
any part of the Collateral and bid and become purchaser at any such sales; and

 

(b)           Beneficiary may, for the account of
Trustor and at Trustor’s expense: 
(i) operate, use, consume, sell or dispose of the Collateral as
Beneficiary deems appropriate for the purpose of performing any or all of the
Obligations; (ii) enter into any agreement, compromise, or settlement,
including insurance claims, which Beneficiary may deem desirable or proper with
respect to any of the Collateral; and (iii) endorse and deliver evidences
of title for, and receive, enforce and collect by legal action or otherwise,
all indebtedness and obligations now or hereafter owing to Trustor in
connection with or on account of any or all of the Collateral.

 

Notwithstanding
the above, in no event shall Beneficiary be deemed to have accepted any
property other than cash in satisfaction of any obligation of Trustor to
Beneficiary unless Beneficiary shall make an express written election of said
remedy under the CUCC or other applicable law.

 

4.5           Power
of Attorney.  Trustor hereby
irrevocably appoints Beneficiary as Trustor’s attorney-in-fact (such agency
being coupled with an interest) for the sole purpose of preparing, filing or
recording, in Beneficiary’s name, or in the name of Trustor, financing
statements, continuation statements, applications for registration and like
papers necessary to create, perfect or preserve any of Beneficiary’s security
interests and rights in or to any of the Collateral (provided such appointment
shall not obligate Beneficiary to take any such action), and, upon an Event of
Default hereunder, taking any other action required of Trustor; provided,
however, that Beneficiary as such attorney-in-fact shall be accountable
only for such funds as are actually received by Beneficiary.

 

4.6           Possession
and Use of Collateral.  During the
occurrence of an Event of Default hereunder, the Collateral will be kept at the
Property and, except for Obsolete Collateral (as defined in Section 5.6 below) or as otherwise
permitted in this Section, will not be removed 

 

7

 

therefrom
without the consent of Beneficiary.  So
long as no Event of Default exists under this Deed of Trust, Trustor may
possess, use, move, transfer, sell and/or dispose of any of the Collateral to
the extent not otherwise prohibited by the Credit Agreement.

 

ARTICLE V.  RIGHTS AND DUTIES OF THE PARTIES

 

5.1           Warranty
of Title.  Trustor represents and
warrants that it has fee simple title to the Property and Improvements, and
good and marketable title to the Equipment and the balance of the Secured
Property, and that this Deed of Trust is a first and prior lien on the Secured
Property free and clear of all encumbrances and liens having priority over the
first lien of this Deed of Trust, except for (a) liens for real estate
taxes and assessments not yet due and payable, (b) the exceptions to title
(“Permitted Exceptions”) referred to in
the title policy issued to Beneficiary by Chicago Title Insurance Company as
policy number 1077449 in connection with the closing of the Loans (the “Title Policy”), and (c) zoning
restrictions, easements, licenses and other restrictions on the use of the
Property or minor irregularities in title thereto, which do not materially
impair the use, value or marketability of the Property.  In addition, Trustor represents and warrants
that Trustor has full power, authority and right to deliver and perform this
Deed of Trust and convey and encumber Trustor’s interest in the Secured
Property.  Trustor also represents and
warrants that (i) Trustor is now, and after giving effect to this Deed of
Trust will be in, a solvent condition, (ii) the execution and delivery of
this Deed of Trust by Trustor does not constitute a “fraudulent conveyance”
within the meaning of Title 11 of the United States Code as now
constituted or under any other applicable statute, and (iii) no bankruptcy
or insolvency proceedings are pending or contemplated by or against Trustor.

 

5.2           Taxes and Assessments.

 

(a)           Subject to Trustor’s right to contest
such payments pursuant to Section 5.2(b)
below, Trustor shall pay all taxes, assessments, water rates and sewer rents,
now or hereafter levied or assessed or imposed against the Secured Property or
any part thereof (the “Taxes”) and all
ground rents, maintenance charges, other impositions, and other charges, now or
hereafter levied or assessed or imposed against the Secured Property or any
part thereof (the “Other Charges”) as the
same become due and payable.  With the
exception of any Permitted Encumbrances, Trustor shall not suffer and shall
promptly cause to be paid and discharged any lien or charge whatsoever which
may be or become a lien or charge against the Secured Property, and shall
promptly pay for all utility services provided to the Secured Property.  Trustor shall furnish to Beneficiary, at the
request of Beneficiary, receipts for the payment of the Taxes and the Other
Charges prior to the date the same become delinquent.

 

(b)           Provided that no Event of Default is
then occurring, Trustor may, in good faith and with due diligence, contest or
cause to be contested the validity or amount of any such Taxes or Other Charges
without paying the same as provided in Section 5.2(a)
above, provided that:

 

(i)            such contest shall have the effect of
preventing or Trustor shall otherwise prevent the collection of the Taxes or
Other Charges so contested and the sale 

 

8

 

or forfeiture of the Secured Property or any part
thereof or interest therein to satisfy the same; and

 

(ii)           Trustor has notified Beneficiary in
writing of the intention of Trustor to contest the same or to cause the same to
be contested before any of such Taxes or Other Charges have been materially
increased by any interest, penalties, or costs; and

 

(iii)          Trustor has deposited with Beneficiary
cash, a bond or other security reasonably acceptable to Beneficiary in an
amount equal to one hundred ten percent (110%) (or such higher amount as may be
required by law) of the amounts being contested which exceed Two Hundred Fifty
Thousand Dollars ($250,000) in the aggregate and any additional interest,
charge or penalty arising from such contest.

 

Trustor shall keep
Beneficiary generally advised of the status of any contest as it continues and
shall promptly provide any information requested by Beneficiary with respect
thereto.  If Trustor fails to prosecute
such contest with due diligence or fails to maintain sufficient funds or
security on deposit as hereinabove provided, or, if any of the other conditions
to such contest are no longer being satisfied or if there has been a final
disposition of such contest or if such contest has been discontinued, without
satisfaction of the outstanding amount of Taxes or Other Charges due,
Beneficiary may, at its option, within ten (10) days following
Beneficiary’s written notice to Trustor (or such shorter period of time
necessary in Beneficiary’s opinion to prevent the sale or forfeiture of the
Secured Property or any part thereof or interest therein), apply the monies and
in connection therewith liquidate any investments of cash deposited with
Beneficiary, in payment of, or on account of, such Taxes or Other Charges, as
applicable, or any portion thereof then unpaid, including all penalties and
interest thereon.  If the amount of the
money so deposited is insufficient for the payment in full of such Taxes or
Other Charges, as applicable, including all penalties and interest thereon,
Trustor shall forthwith, upon demand, either deposit with Beneficiary a sum that,
when added to such funds then on deposit, is sufficient to make such payment in
full, or, if Beneficiary has applied funds on deposit on account of such Taxes
or Other Charges, as applicable, pay to the applicable taxing authority the
amount sufficient to fully satisfy the outstanding Taxes or Other Charges
due.  Provided that no Event of Default
shall then exist hereunder, Beneficiary shall, if so requested in writing by
Trustor, after final disposition of such contest and upon Trustor’s delivery to
Beneficiary of an official bill for such Taxes or Other Charges, apply the
money so deposited in full payment of such Taxes or Other Charges or that part
thereof then unpaid, including all penalties and interest thereon, and apply
any excess to the Revolving Loan in accordance with the Credit Agreement,
unless Trustor has paid all such Taxes or Other Charges, together with all
penalties and interest thereon, and has provided Beneficiary with evidence
satisfactory to Beneficiary of such payment, in which event Beneficiary shall
apply such money to the Revolving Loan in accordance with the Credit
Agreement.  All monies deposited with
Beneficiary pursuant to this Section 5.2(b)
are hereby pledged and conveyed to Beneficiary as additional security for all
amounts which now or at any time may be due to Beneficiary under the Loan
Documents.  Upon the occurrence of an
Event of Default, Beneficiary shall have the right to apply any and all monies
held pursuant to this

 

9

 

Section 5.2(b) to the
payment of the Taxes or Other Charges being contested or to any or all of the
Obligations, in such order and manner as Beneficiary may elect.

 

5.3           Insurance.

 

(a)           Trustor shall provide, maintain and
deliver to Beneficiary an “all risk” property damage insurance policy (insuring
against loss by hazards included within the term “extended coverage”),
vandalism and malicious mischief insurance, flood insurance and, subject to the
proviso set forth in Section 5.3(c)
below, any other type or form of hazard or property damage insurance reasonably
required by Beneficiary or governmental law or regulation from time to time,
covering the Property and all Improvements located thereon in an amount not
less than the full replacement cost of the Property and such Improvements
(without regard to depreciation), naming Beneficiary as the
beneficiary/mortgagee and with loss payable to Beneficiary, and which shall not
provide for a deductible amount greater than Five Thousand Dollars ($5,000)
without the consent of Beneficiary; provided, however, that Beneficiary may
only require flood insurance if all or any portion of the Improvements is or
becomes located in a special flood hazard area.  At Beneficiary’s request, but not more frequently than once annually,
Trustor shall deliver to Beneficiary such evidence as Beneficiary deems
reasonably satisfactory that such full replacement cost insurance (both in
amount and coverage) is in force.

 

(b)           Trustor shall also provide, maintain
and deliver to Beneficiary (i) commercial general liability insurance for
personal injury, bodily injury, death and property damage liability in amounts
not less than One Million Dollars ($1,000,000) per occurrence (together with a
Twenty-five Million Dollar ($25,000,000) umbrella policy), or such other amount
as Beneficiary may, in Beneficiary’s sole reasonable discretion, require from
time to time, and naming Beneficiary and the Lenders as additional insureds,
and which shall not provide for a deductible amount greater than Two Hundred
Fifty Thousand Dollars ($250,000) without the consent of Beneficiary;
(ii) such policies of workers compensation and similar insurance required
by applicable law, and (iii) subject to the proviso set forth in Section 5.3(c) below, such other
policies of insurance as Beneficiary shall reasonably require or any
governmental authority having jurisdiction over the Property or the Trustor
shall from time to time require.

 

(c)           Trustor shall maintain all required
insurance in companies, amounts, coverages and forms reasonably satisfactory to
and approved by Beneficiary; provided, however, that Trustor shall not be
required to maintain insurance coverages or coverage amounts which are greater
than or otherwise in excess of the coverages customarily maintained by owners
of similarly situated properties located in the geographic area surrounding the
Property.  Neither Beneficiary nor
Trustee shall, by reason of accepting, rejecting, approving or obtaining
insurance incur any liability for (i) the existence, nonexistence, form or
legal sufficiency thereof, (ii) the solvency of any insurer, or
(iii) the payment of losses.  All
such policies or certificates of insurance shall stipulate that Beneficiary is
to receive written notice thirty (30) days prior to any modification or
cancellation (or ten (10) days in the case of any cancellation due to
Trustor’s failure to pay premiums when due); shall contain a waiver of
subrogation against Beneficiary; and shall be primary and non-contributory to
any other insurance Beneficiary may possess. 

 

10

 

Upon Beneficiary’s request Trustor shall deliver
certificates to Beneficiary evidencing such policies of insurance and payment
of the premiums therefor.  Sums paid to
Beneficiary by any insurer shall be applied in accordance with the Credit
Agreement.

 

5.4           Insurance and Condemnation
Proceeds.

 

(a)           Assignment of Claims.  Trustor absolutely and irrevocably assigns
to Beneficiary all of the following rights, claims and amounts (collectively, “Claims”), all of which shall be paid to
Beneficiary unless otherwise set forth in the Credit Agreement:  (i) all awards of damages and all other
compensation payable directly or indirectly by reason of a condemnation or
proposed condemnation for public or private use affecting all or any part of,
or any interest in, the Secured Property; (ii) all other claims and awards
for damages to or decrease in value of all or any part of, or any interest in,
the Secured Property; (iii) all proceeds of any insurance policies payable
by reason of loss sustained to all or any part of the Secured Property, whether
or not such insurance policies were required under this Deed of Trust or by
Beneficiary; and (iv) all interest which may accrue on any of the foregoing.  Trustor shall give Beneficiary prompt
written notice of the occurrence of any casualty affecting greater than five
percent (5%) of the value of the Property, or the institution of any
proceedings for eminent domain or for the condemnation of, the Secured Property
or any portion thereof.  So long as no
Event of Default has occurred and is continuing at the time, Trustor shall have
the right to adjust, compromise and settle any Claim of $250,000 or less
without the consent of Beneficiary, provided, however, all awards, proceeds and
other sums described herein payable in relation to any Claims shall continue to
be payable directly to Beneficiary and applied in accordance with the Credit
Agreement.  During the occurrence of an
Event of Default Beneficiary may commence, appear in, defend or prosecute any
Claim and may adjust, compromise and settle all Claims (except for Claims which
Trustor may settle as provided herein), but shall not be responsible for any
failure to commence, appear in, defend, prosecute or collect any such Claim
regardless of the cause of the failure. 
All awards, proceeds and other sums described herein shall be payable to
Beneficiary, and each insurance company which has issued an insurance policy
with respect to the Secured Property is hereby authorized and directed to make
payment for all losses covered by such insurance policy to Beneficiary alone,
and not to Beneficiary and Trustor jointly. 
Trustor agrees to execute all documents and make all deliveries required
in order to permit adjustment and payment of insurance proceeds as provided
above.

 

5.5           Maintenance of the Secured
Property.

 

(a)           Trustor shall (i) keep the
Secured Property in good and safe condition and repair, free from waste,
including, making all repairs and replacements, structural or nonstructural,
foreseen or unforeseen, ordinary or extraordinary, as the same become necessary
or appropriate, to keep the Secured Property in good and safe condition and
repair, (ii) pay all operating costs of the Secured Property, (iii) complete,
within a reasonable time, and pay for any building or buildings or other
Improvements now or at any time in the process of erection upon the Property,
(iv) comply with any restrictions and covenants of record with respect to
the Property and the use thereof, and (v) perform 

 

11

 

all agreements, undertakings and functions necessary
to operate and maintain the Secured Property as currently operated.

 

(b)           Without the prior written consent of
Beneficiary, Trustor shall not cause, suffer or permit any (i) (x)
Material Alterations of the Property or the Improvements except (A) as
required by any applicable law, or (B) as permitted or required to be made
by the terms of any Leases approved by Beneficiary (with respect to work in any
space demised thereunder), or (y) demolition or removal of any portion of
the Improvements or Equipment except for the removal of any such portion which
is simultaneously replaced with equivalent materials or which are worn out, obsolete
or no longer used or useful in connection with the operation of the Property (“Obsolete Collateral”) and the removal of which
shall not adversely affect the use or operation of the Improvements.  Without the prior written consent of
Beneficiary, Trustor shall not cause, suffer or permit any (i) change in
the intended use or occupancy of the Property for which the Improvements have
been constructed which would adversely affect the use or operation of the
Improvements; (ii) zoning reclassification with respect to the Property
which would materially and adversely affect the valuation of the Secured
Property; or (iii) unlawful use of, or nuisance to exist upon, the
Property.  Without limiting the
generality of the foregoing, Trustor will not, by act or omission (y) impair
the integrity of the Property as separate and apart from all other premises, or
(z) permit or suffer to permit the Property to be used by the public or
any person or entity in such manner as might make possible a claim of adverse
usage or possession or any implied dedication or easement.  As used herein, the term “Material Alteration” shall mean any alteration,
improvement or replacement (x) the cost of which (including any related
alteration, improvement or replacement) shall exceed $500,000 (excluding tenant
improvement work pursuant to Leases), or (y) which (A) materially and
adversely affects the mechanical, electrical, heating, ventilating,
air-conditioning or other building or operating systems of any of the
Improvements, (B) materially and adversely affects the structure or
structural soundness of any of the Improvements, (C) reduces or materially
and adversely affects the usability of loading docks or parking spaces or the
access to such loading docks or parking spaces from outside the Property, or
(D) otherwise has a material adverse effect on the Secured Property, the
lien of this Deed of Trust, or the ability of Trustor to perform the
Obligations.

 

5.6           [intentionally
omitted]

 

5.7           Transfer
or Encumbrance of the Secured Property. 
Except as otherwise expressly provided in this Deed of Trust or
permitted under the Credit Agreement, no part of the Secured Property nor any
interest of any nature whatsoever therein shall in any manner be further
encumbered, sold, transferred, assigned or conveyed, or permitted to be further
encumbered, sold, transferred, assigned or conveyed without the prior consent
of Beneficiary, which consent in any and all circumstances may be withheld in
the sole and absolute discretion of Beneficiary.  The provisions of the foregoing sentence of this Section 5.7 shall apply to each and
every such further encumbrance, sale, transfer, assignment or conveyance,
regardless of whether or not Beneficiary has consented to, or waived by its
action or inaction its rights hereunder with respect to, any such previous
further encumbrance, sale, transfer, assignment or 

 

12

 

conveyance,
and irrespective of whether such further encumbrance, sale, transfer,
assignment or conveyance is voluntary, by reason of operation of law or is
otherwise made.

 

5.8           Notice.  Any notice, report, demand or other
instrument authorized or required to be given or furnished (“Notices”) shall be in writing and shall be
given as follows:  (i) by hand
delivery; (ii) by deposit in the United States mail as first class
certified mail, return receipt requested, postage paid; (iii) by overnight
nationwide commercial courier service; or (iv) by telecopy transmission
with a confirmation copy to be delivered by duplicate notice in accordance with
any of clauses (i) through (iii) above, in each case, to the party
intended to receive the same at the following address(es):

 

If to Trustor:                                                                            Westaff
Support, Inc.

P.O. Box  9280

301 Lennon Lane

Walnut Creek, CA 94598

Attn:  Treasurer

Facsimile:  (925) 930–5361

 

With a copy to:                                                             Westaff
Support, Inc.

Legal Department

P.O. Box  9280

301 Lennon Lane

Walnut Creek, CA 94598

Attn:  General Counsel

Facsimile:  (925) 930–5361

 

If to Beneficiary:                                                        General
Electric Capital Corporation.

6130 Stoneridge Mall Road, Suite 300

Pleasanton, CA  94588

Attention:  Westaff Account Manager

Facsimile:  (925) 730 6496

 

With a copy to:                                                             Latham &
Watkins

633 W. 5th Street

Los Angeles, CA 90071

Facsimile:  (213) 891–8763

Attn:  Mary Ruhl, Esq.

 

Notice delivered
in accordance with the foregoing shall be effective in accordance with the
Credit Agreement.  Notice for any party
may be given by its respective counsel.

 

5.9           Changes
in Laws Regarding Taxation.  If
after the date of this Deed of Trust, the state in which the Property is
located passes any law imposing a tax, either directly or indirectly, on this
Deed of Trust, or the Obligations, then, Trustor, after written demand by
Trustee or Beneficiary, shall pay such tax prior to the delinquency thereof, or
reimburse Trustee or Beneficiary within fifteen (15) days after such
written demand, as applicable.  If any
law of the state in which the Property is located prohibits Trustor from paying
the tax on this Deed of 

 

13

 

Trust,
or the Obligations, or reimbursing Trustee or Beneficiary for payment thereof,
then the Obligations shall be due and payable within sixty (60) days after
written demand by Beneficiary to Trustor. 
Nothing in this Section 5.9
shall require Trustor to pay any income, franchise or excise tax imposed upon
Trustee or Beneficiary.

 

5.10         Right
of Entry.  Beneficiary and its
agents shall have the right to enter and inspect the Secured Property at all
reasonable times, during Trustor’s normal business hours and otherwise in
accordance with the provisions of the Credit Agreement.

 

5.11         Performance
of Other Agreements.  Trustor shall
observe and perform each and every material term to be observed or performed by
Trustor pursuant to the terms of any agreement or recorded instrument affecting
or pertaining to the Secured Property.

 

5.12         Acceptance
of Trust; Powers and Duties of Trustee. 
Trustee accepts this trust when this Deed of Trust is recorded.  From time to time upon written request of
Beneficiary and presentation of this Deed of Trust, or a certified copy
thereof, for endorsement, and without affecting the personal liability, if any,
of any person for payment of any indebtedness or performance of any Obligation,
Trustee may, without liability therefor and without notice:  (a) reconvey all or any part of the
Property; (b) consent to the making of any map or plat thereof;
(c) join in granting any easement thereon; (d) join in any
declaration of covenants and restrictions; or (e) join in any extension
agreement or any agreement subordinating the lien or charge hereof.  Except as may otherwise be required by
applicable law, Trustee or Beneficiary may from time to time apply to any court
of competent jurisdiction for aid and direction in the execution of the trusts
hereunder and the enforcement of the rights and remedies available hereunder,
and Trustee or Beneficiary may obtain orders or decrees directing or confirming
or approving acts in the execution of said trusts and the enforcement of said
remedies.  Trustee has no obligation to
notify any party of any pending sale or any action or proceeding unless held or
commenced and maintained by Trustee under this Deed of Trust.  Trustee shall not be obligated to perform
any act required of it hereunder unless the performance of the act is requested
in writing and Trustee is reasonably indemnified and held harmless against
loss, cost, liability and expense.

 

5.13         Compensation
of Trustee; Exculpation.  Trustor
shall pay to Trustee reasonable compensation and reimbursement for services and
expenses in the administration of this trust, including, without limitation,
reasonable attorneys’ fees.  Beneficiary
shall not directly or indirectly be liable to Trustor or any other person as a
consequence of:  (i) the exercise
of the rights, remedies or powers granted to Beneficiary in this Deed of Trust;
(ii) the failure or refusal of Beneficiary to perform or discharge any
obligation or liability of Trustor under any agreement related to the Secured
Property or under this Deed of Trust; or (iii) any loss sustained by
Trustor or any third party resulting from Beneficiary’s failure to lease the
Property after an Event of Default or from any other act or omission of
Beneficiary in managing the Property after an Event of Default unless the loss
is caused by the willful misconduct or gross negligence of Beneficiary and no
such liability, in the absence of Beneficiary’s willful misconduct or gross
negligence, shall be asserted or enforced against Beneficiary, all such
liability being expressly waived and released by Trustor.

 

14

 

5.14         Substitution
of Trustee.  From time to time, by a
writing signed and acknowledged by Beneficiary and recorded in the Office of
the Recorder of the County in which the Property is situated, Beneficiary may
appoint another trustee to act in the place and stead of Trustee or any
successor.  Such writing shall set forth
any information required by applicable law. 
The recordation of such instrument of substitution shall discharge
Trustee herein named and shall appoint the new trustee as the trustee hereunder
with the same effect as if originally named trustee herein.  A writing recorded pursuant to the
provisions of this paragraph shall be conclusive proof of the proper
substitution of such new trustee.

 

5.15         Representations, Warranties and
Covenants Concerning the Secured Property. 
Trustor represents, warrants and covenants as follows:

 

(a)           First Lien.  Upon the execution by Trustor and the
recording of this Deed of Trust, and upon the execution and filing of UCC–1
financing statements or amendments thereto, Beneficiary will have a valid first
lien on the Secured Property and a valid security interest in the Equipment
subject to no liens, charges or encumbrances other than the Permitted
Encumbrances.

 

(b)           Access/Utilities.  The Property and the Improvements have
adequate rights of access to public ways and is served by adequate water,
sewer, sanitary sewer and storm drain facilities.  All roads necessary for the full utilization of the Property and
the Improvements for their current purpose have been completed and dedicated to
public use and accepted by all governmental authorities or are the subject of
access easements for the benefit of the Property.

 

(c)           Multiple Tax Lots.  The Property consists of multiple tax lots;
no portion of said tax lots covers property other than the Property or a
portion of the Property and no portion of the Property lies in any other tax
lot.

 

(d)           Special Assessments.  Except as disclosed in the Title Policy,
there are no pending or, to the knowledge of Trustor, proposed special or other
assessments for public improvements or otherwise affecting the Property, nor,
to the knowledge of Trustor, are there any contemplated improvements to the Property
that may result in such special or other assessments.

 

(e)           Flood Zone.  The Property is not located in a special
flood hazard area as defined by the Federal Insurance Administration.

 

(f)            No Condemnation.  No part of any property subject to this Deed
of Trust has been taken in condemnation or other like proceeding to an extent
which would impair the value of the Secured Property or the usefulness of such
property, nor is any proceeding pending, threatened or known to be contemplated
for the partial or total condemnation or taking of the Secured Property.

 

(g)           No Labor or Materialmen Claims.  All parties furnishing labor and materials
have been paid in full and, except for such liens or claims insured against by
the policy of title insurance to be issued in connection with the Loan, there
are no mechanics’, laborers’ or materialmens’ liens or claims outstanding for
work, labor or 

 

15

 

materials affecting the Secured Property, whether
prior to, equal with or subordinate to the lien of this Deed of Trust.

 

(h)           No Purchase Options.  No tenant, person, party, firm, corporation
or other entity has an option to purchase the Secured Property, any portion
thereof or any interest therein.

 

(i)            Boundary Lines.  All of the Improvements which were included
in determining the appraised value of the Secured Property lie wholly within
the boundaries and building restriction lines of the Property, and no
improvements on adjoining properties encroach upon the Property, and no
easements or other encumbrances upon the Property encroach upon any of the
Improvements, so as to affect the value or marketability of the Improvements
except those which are insured against by title insurance.

 

(j)            Compliance with Laws.  To the Trustor’s knowledge, all federal,
state and local laws, rules and regulations applicable to the Secured Property,
including, without limitation, all zoning and building requirements and all
requirements of the Americans With Disabilities Act of 1990, as amended from
time to time (42 U.S.C. §12101 et seq.) have been satisfied or
complied with, except where any such failure to comply has not and will not
result in a material adverse effect to the value, use or operation of the
Property.  Trustor is in possession of
all certificates of occupancy and all other licenses, permits and other
authorizations required by applicable law for the existing use of the Property
and the Improvements.  All such
certificates of occupancy and other licenses, permits and authorizations are
valid and in full force and effect. 
Trustor covenants to comply with all conditions and requirements of all
licenses, permits and other authorizations as required by applicable law with
respect to the Property and the Improvements.

 

5.16         Indemnification.  In addition to any other indemnifications
provided herein, Trustor shall protect, defend, indemnify and save harmless
Beneficiary and the Lenders (collectively, the “Indemnified
Parties”) from and against all liabilities, obligations, claims,
demands, damages, penalties, causes of action, losses, fines, costs and
expenses (including, without limitation, reasonable attorneys’ fees and
disbursements) (collectively “Subject Claims”),
imposed upon or incurred by or asserted against the Indemnified Parties by
reason of (a) ownership of this Deed of Trust, the Secured Property or any
interest therein or receipt of any Rents; (b) any accident, injury to or
death of persons or loss of or damage to property occurring in, on or about the
Secured Property or any part thereof or on the adjoining sidewalks, curbs,
adjacent property or adjacent parking areas, streets or ways; (c) any use,
nonuse or condition in, on or about the Secured Property or any part thereof or
on adjoining sidewalks, curbs, adjacent property or adjacent parking areas,
streets or ways; (d) any failure on the part of Trustor to perform or
comply with any of the terms of this Deed of Trust; (e) performance of any
labor or services or the furnishing of any materials or other property in
respect of the Secured Property or any part thereof; (f) any failure of
the Secured Property to comply with the Americans With Disabilities Act of
1990, as amended from time to time (42 U.S.C. §12101 et seq.); (g) any
representation or warranty made in this Deed of Trust being false or misleading
in any material respect as of the date such representation or warranty was
made; (h) any claim by brokers, 

 

16

 

finders
or similar persons claiming to be entitled to a commission in connection with
any transaction involving the Secured Property or any part thereof under any
legal requirement or any liability asserted against the Indemnified Parties
with respect thereto; and (i) the claims of any lessee of any or any portion
of the Secured Property or any person acting through or under any lessee or
otherwise arising under or as a consequence of any Lease, with the exception of
any such Subject Claims which are imposed upon or incurred by or asserted
against the Indemnified Parties either by reason of the gross negligence or
willful misconduct of the Indemnified Parties and/or Trustee, or with respect
to any matter first arising after any foreclosure of Beneficiary’s interest in
the Secured Property or transfer of the Secured Property by deed in lieu of
foreclosure.  Any amounts payable to the
Indemnified Parties by reason of the application of this paragraph shall be
secured by this Deed of Trust and shall become immediately due and payable and
shall bear interest at the Default Rate (as defined in the Credit Agreement)
from the date loss or damage is sustained by the Indemnified Parties until
paid.  The obligations and liabilities
of Trustor under this Section 5.16
shall survive and termination, satisfaction, or assignment of this Deed of
Trust and the exercise by Beneficiary of any of its rights or remedies
hereunder, including, but not limited to, the acquisition of the Secured
Property by foreclosure or a conveyance in lieu of foreclosure.

 

ARTICLE VI.  EVENTS OF DEFAULT AND REMEDIES

 

6.1           Events of Default.  The occurrence of any one or more of the
following events shall constitute an “Events of
Default” under this Deed of Trust:

 

(a)           (i) the failure of Trustor to
pay or perform any obligation when due under the Loan Documents; (ii) the
failure of Trustor to perform or cause to be performed any obligation, term or
condition under this Deed of Trust and any such failure shall remain unremedied
for thirty (30) days or more; or (iii) the failure of any
representation or warranty of Trustor contained in this Deed of Trust to be
truthful in all material respects; or

 

(b)           if Trustor shall fail to pay prior to
delinquency any installment of any tax or assessment against the Secured
Property, which tax or assessment has become a lien on the Secured Property
except where Trustor is challenging such tax or assessment in accordance with Section 5.2(b) above; or

 

(c)           if the Secured Property shall become
subject (i) to any tax lien other than a lien for local real estate taxes
and assessments not due and payable, or (ii) to any lis pendens, notice of
pendency, stop order, mechanic’s or materialman’s lien or other lien of any
nature whatsoever, with the exception of any such liens which are the subject
of any challenge by Trustor pursuant to Section 5.2(b)
above or are otherwise Permitted Encumbrances hereunder, and such lien has not
either be discharged of record or in the alternative insured or bonded over to
the reasonable satisfaction of Beneficiary within a period of thirty (30)
days after the same is filed or recorded, in each case irrespective of whether
the same is superior or subordinate in lien or other priority to the lien of
this Deed of Trust.

 

17

 

6.2           Rights and Remedies.  At any time during the continuance of an
Event of Default, Beneficiary and/or Trustee shall have all of the following
rights and remedies:

 

(a)           To declare all Obligations
immediately due and payable;

 

(b)           With or without notice, and without
releasing Trustor from any Obligation, and without becoming a mortgagee in
possession, to cure any breach or default of Trustor and, in connection
therewith, to enter upon the Secured Property and to do such acts and things as
Beneficiary and/or Trustee deem reasonably necessary to inspect, investigate,
assess and protect the security hereof, including, without limitation:  (i) to appear in and defend any action
or proceeding purporting to affect the security hereof or the rights or powers
of Beneficiary and/or Trustee hereunder; (ii) to pay, purchase, contest or
compromise any encumbrance, charge, lien or claim of lien which, in the sole
judgment of either Beneficiary or Trustee, is or may be senior in priority
hereto, the judgment of either Beneficiary or Trustee being conclusive as between
the parties hereto; (iii) to obtain insurance; (iv) to pay any
premiums or charges with respect to insurance required to be carried hereunder;
(v) to obtain a court order to enforce Beneficiary’s right to enter and
inspect the Secured Property; and/or (vi) to employ counsel, accountants,
contractors and other appropriate persons to assist them;

 

(c)           To commence and maintain an action or
actions in any court of competent jurisdiction to foreclose this instrument as
a mortgage or to obtain specific enforcement of the covenants of Trustor
hereunder, and Trustor agrees that such covenants shall be specifically
enforceable by injunction or any other appropriate equitable remedy and that
for the purposes of any suit brought under this subparagraph, Trustor waives
the defense of laches and any applicable statute of limitations;

 

(d)           To apply to a court of competent
jurisdiction for and obtain appointment of a receiver of the Property as a
matter of strict right upon ex parte application and without notice to Trustor
and without regard to:  (i) the
adequacy of the security for the repayment of the Obligations; (ii) the
existence of a declaration that the Obligations are immediately due and
payable; or (iii) the filing of a notice of default; and Trustor hereby
consents to such appointment, waives any and all notices of and defenses to
such appointment, agrees that it will not oppose any such appointment, and
hereby expressly agrees that such appointment shall be made as a matter of
absolute right to Beneficiary; such appointment may be made either before or
after sale, without notice, without regard to the solvency or insolvency of
Trustor at the time of application for such receiver, and without regard to the
then value of the Secured Property or whether the same shall be then occupied
as a homestead or not; and Beneficiary hereunder or any employee or agent
thereof may be appointed as such receiver. 
Such receiver shall have all powers and duties prescribed by law in order
to preserve the value, marketability or rentability of the Secured Property or
increase the income therefrom or protect the security hereof, including, but
not limited to, the power to make all necessary and needful repairs, and to pay
all taxes, assessments and charges against the Secured Property and all
premiums for insurance thereon, and the power to make leases to be binding upon
all parties, including Trustor, the purchaser at a sale pursuant to a judgment
of foreclosure and any person acquiring an interest in the Secured Property
after entry of a judgment of foreclosure. 
In 

 

18

 

addition, such receiver shall also have the power to
sue for or otherwise collect the Rents, including those past due and unpaid,
and to extend or modify any then existing Leases, which extensions and
modifications may provide for terms to expire, or for options to tenants to
extend or renew terms to expire, beyond the maturity date of the Loan and
beyond the date the issuance of a deed or deeds to a purchaser or purchasers at
a foreclosure sale, it being understood and agreed that any such Leases, and
the options or other provisions to be contained therein, shall be binding upon
Trustor and all the persons whose interest in the Secured Property are subject
to the lien hereof and upon the purchaser or purchasers at any foreclosure
sale, notwithstanding any redemption, reinstatement, discharge of the
Obligations, satisfaction of any foreclosure judgment, or issuance of any
certificate of sale or deed to any purchaser. 
In addition, such receiver shall have the power to collect the Rents
during the pendency of such foreclosure suit and, in case of a sale and
deficiency, during the full statutory period of redemption, if any, whether
there be a redemption or not, as well as during any further times when Trustor,
except for the intervention of such receiver, would be entitled to collection
of such Rents, and such receiver shall have all other powers which may be
necessary or are usual in such cases for the protection, possession, control,
management and operation of the Secured Property during the whole of said
period.  The court may, from time to
time, authorize the receiver to apply the net income from the Secured Property
in payment in whole or in part of the Obligations or the indebtedness secured
by a decree foreclosing this Deed of Trust, or any taxes or liens which may
become superior to the lien hereof or of such decree, or to any loan deficiency
owed by Trustor to Beneficiary in case of a sale and deficiency.

 

(e)           To enter upon, possess, manage and
operate the Secured Property or any part thereof; to take and possess all
documents, books, records, papers and accounts of Trustor or the then owner of
the Secured Property; to make, terminate, enforce or modify leases of the
Secured Property upon such terms and conditions as Beneficiary deems proper; to
elect to disaffirm any Lease made subsequent to this Deed of Trust without
Beneficiary’s prior written consent; to make repairs, alterations and
improvements to the Secured Property necessary, in Beneficiary’s sole judgment,
to protect or enhance the security hereof; to conduct a marketing or leasing
program with respect to the Secured Property, or employ a marketing or leasing
agent or agents to do so, directed to the leasing or sale of the Secured
Property under such terms and conditions as Beneficiary may in its sole
discretion deem appropriate or desirable; to employ such contractors,
subcontractors, materialmen, architects, engineers, consultants, managers,
brokers, marketing agents, or other employees, agents, independent contractors
or professionals, as Beneficiary may in its sole discretion deem appropriate or
desirable to implement and effectuate the rights and powers herein granted; to
maintain actions in forcible entry and detainer, ejectment for possession and
actions in distress for rent; to delegate or assign any and all rights and
powers given to Beneficiary or Trustee by this Deed of Trust; and to do any
acts which Beneficiary or Trustee in their sole discretion deems appropriate or
desirable to protect the security hereof and use such measures, legal or
equitable, as Beneficiary or Trustee may in their sole discretion deem
appropriate or desirable to implement and effectuate the provisions of this
Deed of Trust.  In such event,
Beneficiary shall have, and Trustor hereby gives and grants to Beneficiary, the
right, power and authority to make and enter into Leases, licenses and
occupancy agreements with respect 

 

19

 

to the Secured Property or portions thereof for such
Rents and for such periods of occupancy and upon conditions and provisions as
Beneficiary may deem desirable in its sole discretion, and Trustor expressly
acknowledges and agrees that the term of such Lease, license or occupancy
agreement may extend beyond the date of any foreclosure sale of the Security
Property; it being the intention of Trustor that in such event Beneficiary
shall be deemed to be and shall be the attorney-in-fact of Trustor for the purpose
of making and entering into Leases, licenses or occupancy agreements of parts
or portions of the Secured Property for the Rents and upon the terms,
conditions and provisions deemed desirable to Beneficiary in its sole
discretion and with like effect as if such Leases, licenses or occupancy
agreements had been made by Trustor as the owner in fee simple of the Secured
Property free and clear of any conditions or limitations established by this
Deed of Trust.  Beneficiary shall have
the right to apply the net income generated from the Secured Property, after
allowing a reasonable fee for the collection thereof and for the management and
leasing of the Secured Property, to the payment of operating expenses, taxes,
insurance premiums and other charges applicable to the Secured Property, or in
reduction of the Obligations in such order and manner as Beneficiary shall
select.  The power and authority hereby
given and granted by Trustor to Beneficiary shall be deemed to be coupled with
an interest, shall not be revocable by Trustor so long as any of the
Obligations remains outstanding, shall survive the voluntary or involuntary
dissolution of Trustor and shall not be affected by any disability or
incapacity suffered by Trustor subsequent to the date hereof.  In connection with any action taken by
Beneficiary pursuant to this Section, Beneficiary shall not be liable for any
loss sustained by Trustor resulting from any failure to let the Secured
Property, or any part thereof, or from any other act or omission of Beneficiary
in managing the Secured Property, nor shall Beneficiary be obligated to perform
or discharge any obligation, duty or liability under any Lease, license or
occupancy agreement covering the Secured Property or any part thereof or under
or by reason of this instrument or the exercise of rights or remedies
hereunder.  Nothing in this Section
shall impose on Beneficiary any duty, obligation or responsibility for the
control, care, management or repair of the Secured Property, or for the
carrying out of any of the terms and conditions of any such Lease, license or
occupancy agreement, nor shall it operate to make Beneficiary responsible or
liable for any waste committed on the Secured Property by the tenants or by any
other parties or for any dangerous or defective condition of the Secured
Property, or for any negligence in the management, upkeep, repair or control of
the Secured Property, unless any such loss or damage arises from the gross
negligence or willful misconduct of Beneficiary.  Trustor hereby assents to, ratifies and confirms any and all
actions of Beneficiary with respect to the Secured Property taken under this
Section.

 

(f)            To execute a written notice of such
default and of the election to cause the Secured Property to be sold to satisfy
the Obligations.  Trustee shall give and
record such notice as the law then requires as a condition precedent to a
foreclosure sale.  When the minimum
period of time required by law after such notice has elapsed, Trustee, without
notice to or demand upon Trustor except as required by law, shall sell the
Secured Property at the time and place of sale fixed by it in the notice of
sale, at one or several sales, either as a whole or in separate parcels and in
such manner and order, all as Beneficiary in its sole discretion may determine,
at public auction to the highest bidder 

 

20

 

for cash, in lawful money of the United States,
payable at time of sale.  Neither
Trustor nor any other person or entity other than Beneficiary shall have the
right to direct the order in which the Secured Property is sold.  Subject to requirements and limits imposed
by law, Trustee may from time to time postpone sale of all or any portion of
the Secured Property by public announcement at such time and place of sale, and
from time to time may postpone the sale by public announcement at the time and
place fixed by the preceding postponement. 
The power of sale under this Deed of Trust shall not be exhausted by any
one or more sales (or attempts to sell) as to all or any portion of the Secured
Property remaining unsold, but shall continue unimpaired until all of the
Secured Property has been sold by exercise of the power of sale in this Deed of
Trust and all Obligations have been paid and discharged in full.  Trustee shall deliver to the purchaser at
such sale a deed conveying the Secured Property or portion thereof so sold, but
without any covenant or warranty, express or implied.  The recitals in the deed of any matters or facts shall be conclusive
proof of the truthfulness thereof.  Any
person, including Trustee, Trustor or Beneficiary, may purchase at the sale;

 

(g)           To resort to and realize upon the
security hereunder and any other security now or hereafter held by Beneficiary
concurrently or successively and in one or several consolidated or independent
judicial actions or lawfully taken non-judicial proceedings, or both, and to
apply the proceeds received upon the Obligations all in such order and manner
as Trustee and Beneficiary or either of them determine in their sole
discretion;

 

(h)           To exercise such other rights Trustee
or Beneficiary may have with respect to the Secured Property under this Deed of
Trust, the CUCC or otherwise at law; and

 

(i)            To exercise such other rights as
Trustee or Beneficiary may have at law or equity or pursuant to the terms and
conditions of this Deed of Trust.

 

Upon sale of the
Secured Property at any judicial or non-judicial foreclosure, Beneficiary may
credit bid (as determined by Beneficiary in its sole and absolute discretion)
all or any portion of the Obligations.

 

In connection with
any sale or sales hereunder, Beneficiary may elect to treat any of the Secured
Property which consists of a right in action or which is property that can be
severed from the real property covered hereby or any improvements thereon
without causing structural damage thereto as if the same were personal property
or a fixture, as the case may be, and dispose of the same in accordance with
applicable law, separate and apart from the sale of real property.  Any sale of any personal property or
fixtures hereunder shall be conducted in any manner permitted by the CUCC.

 

6.3           Application
of Foreclosure Sale Proceeds.  In
the event of any foreclosure sale, Trustee shall apply the proceeds of such
sale in the following order of priority: 
First, to Fees and reimbursable expenses of the Beneficiary and
the Applicable Agent (as defined in the Credit Agreement) then due and payable
pursuant to any of the Loan Documents; Second, to the Obligations of the
Trustor in such order as determined by Beneficiary until all Obligations have
been paid in full, and then as required by law.

 

21

 

6.4           No
Cure or Waiver.  Neither
Beneficiary’s nor Trustee’s nor any receiver’s entry upon and taking possession
of all or any part of the Secured Property, nor any collection of rents,
issues, profits, insurance proceeds, condemnation proceeds or damages, other
security or proceeds of other security, or other sums, nor the application of
any collected sum to any Obligation, nor the exercise of any other right or
remedy by Trustee or Beneficiary or any receiver shall cure or waive any
default or notice of default under this Deed of Trust or any other Loan
Document, or nullify the effect of any notice of default or sale (unless all
Obligations then due have been paid or performed in accordance with their terms
and Trustor has cured all other defaults hereunder), or impair the status of
the security, or prejudice Trustee or Beneficiary in the exercise of any right
or remedy, or be construed as an affirmation by Beneficiary of any tenancy,
lease or option or a subordination of the lien of this Deed of Trust.

 

6.5           Payment
of Costs, Expenses and Attorneys’ Fees. 
Trustor agrees to pay to Beneficiary upon demand all costs and expenses
incurred by Trustee or Beneficiary in the enforcement of the terms and
conditions of this Deed of Trust (including, without limitation, statutory
trustee’s fees, court costs and attorneys’ fees, whether incurred in litigation
or not) with interest from the date of expenditure until said sums have been
paid at the Default Rate (as defined in the Credit Agreement).

 

6.6           Power
to File Notices and Cure Defaults. 
Trustor hereby irrevocably appoints Beneficiary and its successors and
assigns, as its attorney-in-fact, which agency is coupled with an interest
to:  (a) execute and/or record any
notices of completion, cessation of labor, or any other notices that Beneficiary
deems appropriate to protect Beneficiary’s interest; and (b) upon the
occurrence of an Event of Default, perform any obligation of Trustor hereunder;
provided, however, that: 
(i) Beneficiary as such attorney-in-fact shall only be accountable
for such funds as are actually received by Beneficiary; and
(ii) Beneficiary shall not be liable to Trustor or any other person or
entity for any failure to act under this Section.

 

6.7           Rights
Cumulative, No Waiver.  All rights,
powers and remedies of Trustee and/or Beneficiary provided in this Deed of Trust,
may be exercised at any time by Beneficiary, except as expressly provided
herein, and from time to time after the occurrence of any Event of Default, are
cumulative and not exclusive, may be pursued singularly, successively, or
together at the sole discretion of Trustee and/or Beneficiary, and shall be in
addition to any other rights, powers or remedies provided by law or
equity.  The failure to exercise any
such right or remedy shall in no event be construed as a waiver or a release
thereof.  Trustee’s or Beneficiary’s
exercise of any right or remedy shall not constitute a cure of any Event of
Default unless all sums then due and payable to Beneficiary under the Loan
Documents or under this Deed of Trust are repaid and Trustor has cured all
other defaults.  No waiver shall be
implied from any failure of Beneficiary to take, or any delay by Beneficiary in
taking, action concerning any Event of Default, or from any previous waiver of
any similar or unrelated Event of Default. 
Any waiver or approval under the Loan Documents or under this Deed of
Trust must be in writing and shall be limited to its specific terms.

 

6.8           Trustor’s Waiver of Guarantor
Rights.

 

(a)           Conditions to Exercise of Rights.  Trustor hereby waives any right it may now
or hereafter have to require Beneficiary, as a condition to the exercise of any
remedy 

 

22

 

or other right against Trustor hereunder or under any
other document executed by Trustor in connection with any Obligation:  (i) to proceed against any
US Borrower or UK Borrower, or against any other collateral assigned
to Beneficiary by Trustor, by any US Borrower or UK Borrower, or by
any guarantor; (ii) to pursue any other right or remedy in Beneficiary’s
power; (iii) to give notice of the time, place or terms of any public or
private sale of real or personal property collateral assigned to Beneficiary by
any US Borrower or UK Borrower or any guarantor; or (iv) to make
or give (except as otherwise expressly provided in the Credit Agreement) any
presentment, demand, protest, notice of dishonor, notice of protest or other
demand or notice of any kind in connection with any Obligation or any
collateral (other than the Secured Property) for any Obligation.

 

(b)           Defenses.  Trustor hereby waives any defense it may now
or hereafter have that relates to: 
(i) any disability or other defense of UK Borrower or any
US Borrower, or other person; (ii) the cessation, from any cause
other than full performance, of the obligations of UK Borrower or any
US Borrower, or any other person; (iii) the application of the
proceeds of the Credit Agreement, by UK Borrower or any US Borrower,
or other person, for purposes other than the purposes represented to Trustor by
UK Borrower or any US Borrower, otherwise intended or understood by
Trustor, or UK Borrower or any US Borrower; (iv) any act or
omission by Beneficiary which directly or indirectly results in or contributes
to the release of UK Borrower or any US Borrower, or other person or
any collateral for any Obligation; (v) the unenforceability or invalidity
of any collateral assignment (other than this Deed of Trust) or guaranty with
respect to any Obligation, or the lack of perfection or continuing perfection
or lack of priority of any lien (other than the lien hereof) which secures any
Obligation; (vi) any failure of Beneficiary to marshal assets in favor of
Trustor or any other person; (vii) any modification of any Obligation,
including any renewal, extension, acceleration or increase in interest rate; (viii) any
law which provides that the obligation of a surety or guarantor must neither be
larger in amount nor in other respects more burdensome than that of the
principal or which reduces a surety’s or guarantor’s obligation in proportion
to the principal obligation; (ix) any right of subrogation, any right to
enforce any remedy which Beneficiary may have against UK Borrower or any
US Borrower and any right to participate in, or benefit from, any security
for the Credit Agreement now or hereafter held by Beneficiary; (x) any
defense based upon Beneficiary’s failure to disclose to Trustor any information
concerning UK Borrower’s or any US Borrower’s financial condition or
any other circumstances bearing on UK Borrower’s or any US Borrower’s
ability to pay all sums payable under the Credit Agreement and the other Loan
Documents; (xi) any failure of Beneficiary to file or enforce a claim in
any bankruptcy or other proceeding with respect to any person; (xii) the
election by Beneficiary, in any bankruptcy proceeding of any person, of the
application or non-application of Section 1111(b)(2) of the United States
Bankruptcy Code; (xiii) any extension of credit or the grant of any lien
under Section 364 of the United States Bankruptcy Code; (xiv) any use
of cash collateral under Section 363 of the United States Bankruptcy Code;
and (xv) any agreement or stipulation with respect to the provision of
adequate protection in any bankruptcy proceeding of any person.

 

23

 

(c)           Subrogation.  Trustor hereby waives, until such time as
all Obligations are fully paid and performed and all commitments to extend
further financing under the Credit Agreement have been terminated, any right to
participate in any collateral now or hereafter assigned to Beneficiary with
respect to any Obligation.

 

(d)           Borrower Information.  Trustor warrants and agrees:  (i) that Trustor has not relied, and
will not rely, on any representations or warranties by Beneficiary to Trustor
with respect to the credit worthiness of UK Borrower or any
US Borrower or the prospects of repayment of any Obligation from sources
other than the Secured Property; (ii) that Trustor has adequate means of
obtaining from UK Borrower and US Borrowers on a continuing basis
financial and other information pertaining to the business operations, if any,
and financial condition of UK Borrower and any US Borrowers;
(iii) that Trustor assumes full responsibility for keeping informed with
respect to UK Borrower’s and each US Borrower’s business operations,
if any, and financial condition; (iv) that Beneficiary shall have no duty
to disclose or report to Trustor any information now or hereafter known to
Beneficiary with respect to any Borrower, including, without limitation, any
information relating to any of Borrower’s business operations or financial
condition; and (v) that Trustor is familiar with the terms and conditions
of the Credit Agreement.

 

(e)           Reinstatement of Lien.  Beneficiary’s rights hereunder shall be
reinstated and revived, and the enforceability of this Deed of Trust shall
continue, with respect to any amount at any time paid on account of any
obligations under the Credit Agreement or any other Loan Document which
Beneficiary is thereafter required to restore or return in connection with a
bankruptcy, insolvency, reorganization or similar proceeding with respect to
any Credit Party (as defined in the Credit Agreement).

 

(f)            Lawfulness and Reasonableness.  Trustor warrants that all of the waivers in
this Deed of Trust are made with full knowledge of their significance, and of
the fact that events giving rise to any defense or other benefit waived by
Trustor may destroy or impair rights which Trustor would otherwise have against
Beneficiary, UK Borrower or any US Borrower, or against
collateral.  Trustor agrees that all
such waivers are reasonable under the circumstances and further agrees that, if
any such waiver is determined (by a court of competent jurisdiction) to be
contrary to any law or public policy, the other waivers herein shall
nonetheless remain in full force and effect.

 

(g)           Enforceability.  Trustor hereby acknowledges that:  (i) the obligations undertaken by
Trustor in this Deed of Trust are complex in nature, and (ii) numerous
possible defenses to the enforceability of these obligations may presently
exist and/or may arise hereafter, and (iii) as part of Beneficiary’s
consideration for entering into this transaction, Beneficiary has specifically
bargained for the waiver and relinquishment by Trustor of all such defenses,
and (iv) Trustor has had the opportunity to seek and receive legal advice
from skilled legal counsel in the area of financial transactions of the type
contemplated herein.  Given all of the
above, Trustor does hereby represent and confirm to Beneficiary that Trustor is
fully informed regarding, and that Trustor does thoroughly understand:  (A) the nature of all such possible
defenses, and (B) the circumstances under which such defenses may arise,
and (C) the benefits which such defenses might confer 

 

24

 

upon Trustor, and (D) the legal consequences to
Trustor of waiving such defenses. 
Trustor acknowledges that Trustor makes this Deed of Trust with the
intent that this Deed of Trust and all of the informed waivers herein shall
each and all be fully enforceable by Beneficiary, and that Beneficiary is
induced to enter into this transaction in material reliance upon the presumed
full enforceability thereof.

 

ARTICLE VII.  MISCELLANEOUS PROVISIONS

 

7.1           Governing
Law.  This Deed of Trust shall be
governed by and construed in accordance with the laws of the State of
California without reference to conflicts of law rules.

 

7.2           Consent
to Jurisdiction.  Trustor
irrevocably submits to the jurisdiction of: 
(a) any state or federal court sitting in the City and County of
San Francisco, State of California, over any suit, action or proceeding,
arising out of or relating to this Deed of Trust; and (b) any state court
sitting in the county of the state where the Property are located over any
suit, action or proceeding, brought by Trustee or Beneficiary related to the
exercise of the power of sale under this Deed of Trust or any action brought by
Beneficiary to enforce its rights with respect to the Secured Property.  Trustor irrevocably waives, to the fullest
extent permitted by law, any objection that Trustor may now or hereafter have
to the laying of venue of any such suit, action, or proceeding brought in any
such court and any claim that any such suit, action, or proceeding brought in
any such court has been brought in an inconvenient forum.

 

7.3           Further
Acts.  Trustor will, at the cost of
Trustor, and without expense to Trustee or Beneficiary do, execute, acknowledge
and deliver all and every such further acts, deeds, conveyances, mortgages,
assignments, notices of assignments, transfers and assurances as Trustee or
Beneficiary shall, from time to time, require for the better assuring,
conveying, assigning, transferring and confirming unto Trustee or Beneficiary
of the property and rights hereby mortgaged or intended now or hereafter so to
be, or which Trustor may be or may hereafter become bound to convey or assign
to Trustee or Beneficiary or for carrying out the intention or facilitating the
performance of the terms of this Deed of Trust or for filing, registering or
recording this Deed of Trust and, on demand, will execute and deliver and
hereby authorizes Beneficiary to execute in the name of Trustor to the extent
Beneficiary may lawfully do so, one or more financing statements, chattel
mortgages or comparable security instruments, to evidence more effectively the
lien hereof upon the Secured Property.

 

7.4           Headings.  The headings, titles and captions of various
sections of this Deed of Trust are for convenience of reference only and are
not to be construed as defining or limiting, in any way, the scope or intent of
the provisions hereof.

 

7.5           Limitation
of Interest.  This Deed of Trust is
subject to the express condition that at no time shall Trustor be obligated or
required to pay interest at a rate which could subject Beneficiary to either
civil or criminal liability as a result of being in excess of the maximum
interest rate which Trustor is permitted by law to contract or agree to pay.  If by the terms of this Deed of Trust
Trustor is at any time required or obligated to pay interest at a rate in
excess of such maximum rate, the rate of interest shall be deemed to be
immediately reduced to such maximum rate and the interest payable shall be
computed at such maximum rate and all 

 

25

 

prior
interest payments in excess of such maximum rate shall be applied and shall be
deemed to have been payments in reduction of the principal balance of the
Obligations.

 

7.6           Sole
Discretion of Beneficiary.  Except
as may otherwise be expressly provided to the contrary, wherever pursuant to
this Deed of Trust, Beneficiary or Trustee exercises any right given to
Beneficiary or Trustee to consent or not consent, or to approve or disapprove, or
any arrangement or term is to be satisfactory to Beneficiary or Trustee the
decision of Beneficiary or Trustee to consent or not consent, or to approve or
disapprove or to decide that arrangements or terms are satisfactory or not
satisfactory, shall be in the sole but reasonable discretion of Beneficiary or
Trustee, as applicable.

 

7.7           Reasonableness.  If at any time Trustor believes that
Beneficiary has not acted reasonably in granting or withholding any approval or
consent under this Deed of Trust, as to which approval or consent either
Beneficiary has expressly agreed to act reasonably, or absent such agreement, a
court of law having jurisdiction over the subject matter would require
Beneficiary to act reasonably, then Trustor’s sole remedy shall be to seek
injunctive relief or specific performance and no action for monetary damages or
punitive damages shall in any event or under any circumstances be maintained by
Trustor against Beneficiary.

 

7.8           Recovery
of Sums Required To Be Paid. 
Beneficiary shall have the right from time to time to take action to
recover any sum or sums which constitute a part of the Obligations as the same
become due, without regard to whether or not the balance of the Obligations
shall be due, and without prejudice to the right of Beneficiary thereafter to
bring an action of foreclosure, or any other action, for a default or defaults
by Trustor existing at the time such earlier action was commenced.

 

7.9           Authority.  Trustor (and the undersigned representative
of Trustor, if any) has full power, authority and legal right to execute this
Deed of Trust, and to mortgage, give, grant, bargain, sell, convey, confirm and
assign the Secured Property pursuant to the terms hereof and to keep and
observe all of the terms of this Deed of Trust on Trustor’s part to be
performed.

 

7.10         Severability.  If any term, covenant or condition of this
Deed of Trust shall be held to be invalid, illegal or unenforceable in any
respect by a court of competent jurisdiction, this Deed of Trust shall be
construed without such provision.

 

7.11         Counterparts.  This Deed of Trust may be executed in any
number of counterpart originals and each such counterpart original shall be
deemed to constitute but one and the same instrument.

 

7.12         Waiver
of Notice.  Trustor shall not be
entitled to any notices of any nature whatsoever from Beneficiary except with
respect to matters for which this Deed of Trust or applicable law specifically
and expressly provides for the giving of notice by Beneficiary to Trustor, and
Trustor hereby expressly waives the right to receive any notice from
Beneficiary with respect to any matter for which this Deed of Trust or
applicable law do not specifically and expressly provide for the giving of
notice by Beneficiary to Trustor.

 

26

 

7.13         No
Oral Change.  This Deed of Trust may
only be modified, amended or changed by an instrument in writing signed by
Trustor and Beneficiary, and may only be released, discharged or satisfied of
record by an instrument in writing signed by Beneficiary.  No waiver of any term, covenant or provision
of this Deed of Trust shall be effective unless given in writing by Beneficiary
and if so given by Beneficiary shall only be effective in the specific instance
in which given.

 

7.14         Absolute
and Unconditional Obligation. 
Trustor acknowledges that Trustor’s obligation to pay the Obligations in
accordance with the provisions of this Deed of Trust is and shall at all times
continue to be absolute and unconditional in all respects other than upon full
satisfaction of all obligations of the Credit Parties under the Credit
Agreement and the other Loan Documents other than unmatured indemnity
obligations, and shall at all times be valid and enforceable irrespective of
any other agreements or circumstances of any nature whatsoever which might
otherwise constitute a defense to this Deed of Trust or the obligation of
Trustor thereunder to pay the Obligations or the obligations of any other
person relating to this Deed of Trust other than the full satisfaction of all
obligations of the Credit Parties under the Credit Agreement and the other Loan
Documents other than unmatured indemnity obligations and Trustor absolutely,
unconditionally and irrevocably waives any and all right to assert any defense,
setoff, counterclaim or crossclaim of any nature whatsoever with respect to the
obligation of Trustor to pay the Obligations in accordance with the provisions
of this Deed of Trust or the obligations of any other person relating to this
Deed of Trust, other than upon full satisfaction of all obligations of the
Credit Parties under the Credit Agreement and the other Loan Documents other
than unmatured indemnity obligations, in any action or proceeding brought by
Beneficiary to collect the Obligations, or any portion thereof, or to enforce,
foreclose and realize upon the lien and security interest created by this Deed
of Trust or any other document or instrument securing repayment of the
Obligations, in whole or in part.

 

7.15         [Intentionally
deleted]

 

7.16         WAIVER OF
TRIAL BY JURY.  TRUSTOR
HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY
JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH
RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS DEED OF TRUST, OR ANY
CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS
GIVEN KNOWINGLY AND VOLUNTARILY BY TRUSTOR, AND IS INTENDED TO ENCOMPASS
INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY
JURY WOULD OTHERWISE ACCRUE. 
BENEFICIARY IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY
PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY TRUSTOR.

 

7.17         Waiver
of Statutory Rights.  To the full
extent permitted by law, Trustor hereby covenants and agrees that it will not
at any time insist upon or plead, or in any manner whatsoever claim or take any
advantage of, any stay, exemption or extension law or any so-called “moratorium
law” now or at any time hereafter in force, nor claim, take or insist upon any
benefit or advantage of or from any law now or hereafter in force providing for
the valuation or 

 

27

 

appraisement
of the Secured Property, or any part thereof, prior to any sale or sales
thereof to be made pursuant to any provisions herein contained, or to any
decree, judgment or order of any court of competent jurisdiction; or claim or
exercise any rights under any statute now or hereafter in force to redeem the property,
or any part thereof, or relating to the marshaling thereof, upon foreclosure
sale or other enforcement hereof.  To
the full extent permitted by law, Trustor hereby expressly waives any and all
rights to reinstatement and redemption, on its own behalf, on behalf of all
persons claiming or having an interest (direct or indirect) by, through or
under Trustor and on behalf of each and every person acquiring any interest in
or title to the Secured Property subsequent to the date hereof, it being the
intent hereof that any and all such rights of reinstatement and redemption of
Trustor and such other persons, are and shall be deemed to be hereby waived to
the full extent permitted by applicable law. 
To the full extent permitted by law, Trustor hereby waives any statute
of limitations applicable to this Deed of Trust.  To the full extent permitted by law, Trustor agrees that it will
not, by invoking or utilizing any applicable law or laws or otherwise, hinder,
delay or impede the exercise of any right, power or remedy herein or otherwise
granted or delegated to Trustee or Beneficiary, but will suffer and permit the
exercise of every such right, power and remedy as though no such law or laws
have been or will have been made or enacted. 
To the full extent permitted by law, Trustor hereby agrees that no
action for the enforcement of the lien or any provision hereof shall be subject
to any defense which would not be good and valid in an action at law upon the
Note.

 

7.18         Solvency,
Binding Effect and Enforceability. 
Trustor is (and, after giving effect to this Deed of Trust, will be)
Solvent (as defined in the Credit Agreement). 
This Deed of Trust is the legal, valid and binding obligation of the
Trustor enforceable in accordance with its terms.

 

7.19         Relationship.  The relationship of Beneficiary to Trustor
hereunder is strictly and solely that of collateral agent for the benefit of
lenders and nothing contained in this Deed of Trust, or any other document or
instrument now or hereafter executed and delivered in connection therewith or
otherwise in connection with the Loan Documents secured hereby is intended to
create, or shall in any event or under any circumstance be construed as
creating, a partnership, joint venture, tenancy-in-common, joint tenancy or
other relationship of any nature whatsoever between Beneficiary and Trustor
other than as collateral agent for the benefit of lenders and guarantor.

 

7.20         Non
Waiver.  The failure of Beneficiary
to insist upon strict performance of any term of this Deed of Trust shall not
be deemed to be a waiver of any term of this Deed of Trust.

 

7.21         Reconveyance.  Upon satisfaction of all Obligations secured
by this Deed of Trust with the exception of any unmatured indemnity obligations
set forth hereunder and termination of all commitments to extend financing
under the Credit Agreement, Beneficiary shall, or shall cause Trustee to,
reconvey the Property and shall surrender this Deed of Trust and all notes
evidencing debt, if any, secured by this Deed of Trust to the Trustor.  Such reconveyance shall be completed in
accordance with the provisions of Section 2941 of the California Civil
Code.  Notwithstanding the foregoing, in
the event that Trustor sells the Property in compliance with the Credit
Agreement, upon application of the proceeds thereof in accordance with the
Credit Agreement, Beneficiary shall cause Trustee to reconvey the Property and 

 

28

 

surrender
the Deed of Trust in accordance with the provisions of Section 2941 of the
California Civil Code.

 

[Signature page follows]

 

29

 

IN
WITNESS WHEREOF, Trustor has duly executed this Deed of Trust as of the day and
year first above written.

 

 

	
   

  	
  WESTAFF SUPPORT, INC.,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Dirk A. Sodestrom

  	
   

  
	
   

  	
   

  
	
   

  	
  Name: Dirk A. Sodestrom

  
	
   

  	
   

  
	
   

  	
  Title: Senior Vice
  President and Chief Financial Officer

  

 

30

 

CERTIFICATE OF
ACKNOWLEDGEMENT

 

State of California

 

County of San Francisco

 

 

On May 16, 2002,
before me, Tony Klein, Notary Public, personally appeared DIRK A. SODESTROM

 

o personally
known to me                                                                 ý
proved to me on the basis of satisfactory evidence 

to be
the person whose name is subscribed to the within instrument and acknowledged
to me that he executed the same in his authorized capacity, and that by his
signature on the instrument the person, or the entity upon behalf of which the
person acted, executed the instrument.

 

	
   

  	
    /s/ Tony
  Klein

  
	
   

  	
   

  
	
   

  	
  Tony Klein

  

 

[Notary Seal]

 

31

 

EXHIBIT A

 

Description of Property

 

That certain real
property situated in the State of California, County of Contra Costa and
described as follows:

 

PARCEL ONE:

 

LOT 13,
SUBDIVISION 5886, FILED FEBRUARY 17, 1981, IN BOOK 249 OF MAPS,
PAGE 13, CONTRA COSTA COUNTY RECORDS.

 

PARCEL TWO:

 

AN EASEMENT AND
RIGHT-OF-WAY IN, ON, OVER AND UNDER PARCEL A OF SAID SUBDIVISION,
HEREINBEFORE DESCRIBED, FOR INGRESS, EGRESS, ROADS, STREETS, WALKS, DRIVEWAYS,
PARKING AREAS, SUBSURFACE WIRES AND CONDUITS FOR THE TRANSMISSION OF
ELECTRICITY FOR LIGHTING, HEATING, POWER, TELEPHONE, CONNECTION THEREWITH, AND
PUBLIC SEWERS, SEWAGE DISPOSAL SYSTEMS, STORM WATER DRAINS, LAND DRAINS AND
PIPES, WATER SYSTEMS, SPRINKLING SYSTEMS, WATER HEATING AND GAS LINES OR PIPES,
AND ALL EQUIPMENT IN CONNECTION THEREWITH, AND PUBLIC UTILITIES, TOGETHER WITH
THE RIGHT TO MAINTAIN THE SAME AND THE RIGHT TO CONVEY THE SAME TO OTHERS.

 

ASSESSOR’S PARCEL
NO. 143-130-013

 

PARCEL THREE:

 

PARCEL B, AS
SAID PARCEL IS SHOWN ON THE PARCEL MAP FILED SEPTEMBER 1, 1972,
BOOK 23 OF PARCEL MAPS, PAGE 48, CONTRA COSTA COUNTY RECORDS.

 

ASSESSOR’S PARCEL
NO. 143-040-066

 

32Exhibit 10.8.22

 

PLEDGE
AGREEMENT

 

THIS PLEDGE AGREEMENT, dated as of May 17, 2002
(together with all amendments, in any, from time to time hereto, this “Agreement”)
is made by and among Westaff, Inc., as Parent (“Parent”), a Delaware
corporation, Westaff (USA), Inc., a California corporation (“Westaff USA”),
Westaff Support, Inc., a California corporation (“Term Borrower”),
Western Medical Services, Inc., a California corporation (“WMS”),
Westaff (CA), Inc., a California corporation (“WCA”), Westaff Limited
Partnership, a Delaware limited partnership (“WestLP”, and collectively
with Parent, Westaff USA and Term Borrower, WCA and WMS, the “Pledgors”,
and each individually, a “Pledgor”), and GENERAL ELECTRIC CAPITAL
CORPORATION, individually and in its capacity as US Agent and UK Agent for
Lenders (“Agent”).

 

W I T N E S S E T
H:

 

WHEREAS, pursuant to that certain Multicurrency Credit
Agreement dated as of the date hereof by and among Parent, Westaff USA, WCA,
West LP (from time to time, Westaff USA, WCA and WestLP are referred to
hereunder collectively as “US Borrowers”), Term Borrower, Westaff (U.K.)
Limited, a limited liability company organized under the laws of England and
Wales (“UK Borrower”), Agent and Lenders from time to time party thereto
(including all annexes, exhibits and schedules thereto, and as from time to
time amended, restated, amended and restated, supplemented, replaced or
otherwise modified, the “Credit Agreement”), Lenders have agreed to make
the Loans to US Borrowers, Term Borrower and UK Borrower, and US Revolving
Lenders have agreed to incur Letter of Credit Obligations on behalf of Westaff
USA;

 

WHEREAS, Parent has pursuant to a Parent Guaranty
dated as of the date hereof, and WMS has pursuant to a Subsidiary Guaranty
dated as of the date hereof, together with the other guarantors party thereto,
guarantied the Obligations of the Borrowers under the Credit Agreement and the
other Loan Documents;

 

WHEREAS, each Pledgor is the record and beneficial
owner of the shares of Stock of each Subsidiary listed opposite such Pledgor’s
name in Part A of Schedule I hereto and the owner of the promissory
notes and instruments listed in Part C of Schedule I hereto;

 

WHEREAS, each Pledgor benefits from the credit
facilities made available to Borrowers under the Credit Agreement;

 

WHEREAS, in order to induce Agent and Lenders to make
the Loans and to incur the Letter of Credit Obligations as provided for in the
Credit Agreement, it is a condition to the obligations of Lenders to make the
Loans and to incur Letter of Credit Obligations that each 

 

 

Pledgor agrees to pledge the Pledged Collateral (as
hereinafter defined) to Agent in accordance herewith.

 

NOW, THEREFORE, in consideration of the premises and
the covenants hereinafter contained and to induce Lenders to make Loans and to
incur Letter of Credit Obligations under the Credit Agreement, it is agreed as
follows:

 

1.             Definitions.  Unless otherwise defined herein, terms
defined in the Credit Agreement or Annex A thereto are used herein (including
the preamble and recitals) as therein defined, and the following shall have
(unless otherwise provided elsewhere in this Agreement) the following
respective meanings (such meanings being equally applicable to both the
singular and plural form of the terms defined):

 

“Bankruptcy Code” means title 11, United States
Code, as amended from time to time, and any successor statute thereto.

 

“Foreign Pledged Entity” means Westaff A/S, a
corporation organized in Denmark, Westaff NZ Limited, a corporation organized
in New Zealand or Westaff AS, a corporation organized in Norway.

 

“Pledged Collateral” has the meaning assigned
to such term in Section 2 hereof.

 

“Pledged Entity” means an issuer of Pledged
Shares or Pledged Indebtedness.

 

“Pledged Indebtedness” means all Intercompany
Notes and other Indebtedness owing to any Pledgor, as evidenced by promissory
notes and instruments as listed on Part C of Schedule I hereto;

 

“Pledged Shares” means those shares listed on
Part B of Schedule I hereto.

 

“Secured Obligations” has the meaning assigned
to such term in Section 3 hereof.

 

Unless otherwise stated herein, all rules of
interpretation and construction set forth in Annex A and Annex G of the Credit
Agreement shall be incorporated by reference hereof.

 

2.             Pledge.  As collateral security for the payment and
performance of all its Secured Obligations, each Pledgor, to the extent
applicable, hereby pledges to Agent, and grants to Agent for itself and the
benefit of Lenders, a first priority security interest in the following (collectively,
the “Pledged Collateral”):

 

(a)           The
Pledged Shares and the certificates representing the Pledged Shares, and all
dividends, distributions, cash, instruments and other property or proceeds from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Shares; and

 

(b)           Such
portion, as determined by Agent as provided in Section 6(d) below, of
any additional Stock of a Pledged Entity from time to time acquired by Pledgor
in any 

 

2

 

manner (which Stock shall be deemed to be part of the
Pledged Shares), and the certificates representing such additional shares, and
all dividends, distributions, cash, instruments and other property or proceeds from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such Stock, provided, however, that
with respect to any Foreign Pledged Entity, in no event shall any Pledgor be
required to pledge the Stock of any Foreign Pledged Entity otherwise required
to be pledged pursuant to this Agreement (i) if and solely to the extent
that such pledge would constitute an investment of earnings in United States
property under Section 956 (or a successor provision) of the IRC, which
investment would trigger an increase in the gross income of a United States
shareholder of such Pledgor pursuant to Section 951 (or a successor provision)
of the IRC; or (ii) if such pledge would result in a material stamp tax, duty
or other tax imposed upon any Pledgor or upon any Pledged Entity; and

 

(c)           The
Pledged Indebtedness and the promissory notes or instruments evidencing the
Pledged Indebtedness, and all interest, cash, instruments and other property
and assets from time to time received, receivable or otherwise distributed in
respect of the Pledged Indebtedness; and

 

(d)           All
additional Indebtedness arising after the date hereof and owing to such Pledgor
and evidenced by promissory notes or other instruments, together with such
promissory notes and instruments, and all interest, cash, instruments and other
property and assets from time to time received, receivable or otherwise
distributed in respect of that Pledged Indebtedness.

 

3.             Security for Obligations.  This Agreement secures, and the Pledged
Collateral is security for, the prompt payment in full when due, whether at
stated maturity, by acceleration or otherwise, and performance of all
Obligations of each Pledgor of any kind under or in connection with the Credit
Agreement and the other Loan Documents, and all obligations of each Pledgor now
or hereafter existing under this Agreement including, without limitation, all
fees, costs and expenses whether in connection with collection actions
hereunder or otherwise (collectively, the “Secured Obligations”),
subject to the terms of Sections 11 and 13 relating to the
termination and release of the Pledged Collateral upon the terms described
therein.

 

4.             Delivery of Pledged Collateral.  All certificates and all promissory notes
and instruments evidencing the Pledged Collateral shall be delivered to and
held by or on behalf of Agent, for itself and the benefit of Lenders, pursuant
hereto.  All Pledged Shares shall be
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance satisfactory to Agent and all promissory notes or other
instruments evidencing the Pledged Indebtedness shall be endorsed by the
applicable Pledgor.

 

5.             Representations and Warranties.  Each Pledgor represents and warrants to
Agent, with respect to itself and with respect to its Pledged Collateral:

 

(a)           Pledgor
is, and at the time of delivery of the Pledged Shares to Agent will be, the
sole holder of record and the sole beneficial owner of the Pledged Collateral
pledged by Pledgor free and clear of any Lien thereon or affecting the title
thereto, except for the Lien created by this Agreement; and Pledgor is and at
the time of delivery of the 

 

3

 

Pledged Indebtedness to Agent will be, the sole owner
of the Pledged Collateral pledged by Pledgor free and clear of any Lien thereon
or affecting title thereto, except for the Lien created by this Agreement;

 

(b)           All
of the Pledged Shares pledged by Pledgor have been duly authorized, validly issued
and are fully paid and non-assessable; 
the Pledged Indebtedness pledged by Pledgor has been duly authorized,
authenticated or issued and delivered by, and is the legal, valid and binding
obligations of, the Pledged Entities, and, to the best knowledge of Pledgor
after reasonable inquiry, no such Pledged Entity is in default under any such
Pledged Indebtedness;

 

(c)           Pledgor
has the right and requisite authority to pledge, assign, transfer, deliver,
deposit and set over the Pledged Collateral pledged by Pledgor to Agent as
provided herein;

 

(d)           None
of the Pledged Shares or Pledged Indebtedness has been issued or transferred in
violation of the securities registration, securities disclosure or similar laws
of any jurisdiction to which such issuance or transfer may be subject;

 

(e)           All
of the Pledged Shares pledged by Pledgor are presently owned by Pledgor, and
are presently represented by the certificates listed on Part B of Schedule I
hereto.  As of the date hereof, there
are no existing options, warrants, calls or commitments of any character
whatsoever relating to the Pledged Shares;

 

(f)            No
consent, approval, authorization or other order or other action by, and no
notice to or filing with, any Governmental Authority or any other Person is
required (i) for the pledge by Pledgor of its Pledged Collateral pursuant to
this Agreement or for the execution, delivery or performance of this Agreement
by Pledgor, or (ii) for the exercise by Agent of the voting or other rights
provided for in this Agreement or the remedies in respect of the Pledged
Collateral pursuant to this Agreement, except as may be required in connection
with such disposition by the applicable laws affecting the offering and sale of
securities generally and except, with respect to any Pledged Shares of a
Foreign Pledged Entity, compliance with any applicable laws of the jurisdiction
of incorporation or formation of such Foreign Pledged Entity;

 

(g)           The
pledge, assignment and delivery of the Pledged Collateral pursuant to this
Agreement will create a valid first priority Lien on and a first priority
perfected security interest in favor of the Agent for the benefit of Agent and
Lenders in the Pledged Collateral and the proceeds thereof under the California
Uniform Commercial Code, securing the payment of the Secured Obligations,
subject to no other Lien;

 

(h)           This
Agreement has been duly authorized, executed and delivered by Pledgor and
constitutes a legal, valid and binding obligation of Pledgor enforceable
against Pledgor in accordance with its terms;

 

(i)            The
Pledged Shares constitute (i) 100% of the issued and outstanding shares of
Stock of each Domestic Subsidiary of Pledgor; and (ii) 66% of Pledgor’s 

 

4

 

ownership interest in the issued and outstanding
shares of Stock of each of the Foreign Pledged Entities; and

 

(j)            Except
as disclosed on Part C of Schedule I, none of the Pledged Indebtedness
pledged by Pledgor is subordinated in right of payment to other Indebtedness
(except for the Secured Obligations).

 

The representations and warranties set forth in this Section
5 shall survive the execution and delivery of this Agreement.

 

6.             Covenants.

 

(a)           Each
Pledgor covenants and agrees that until the Termination Date:

 

(i)            Without the prior written consent of
Agent, Pledgor will not sell, assign, transfer, pledge, or otherwise encumber
any of its rights in or to the Pledged Collateral, or any unpaid dividends,
interest or other distributions or payments with respect to the Pledged
Collateral or grant a Lien in the Pledged Collateral, unless otherwise
expressly permitted by the Credit Agreement;

 

(ii)           Pledgor will, at its expense,
promptly execute, acknowledge and deliver all such instruments and take all
such actions as Agent from time to time may reasonably request in order to
ensure to Agent and Lenders the benefits of the Liens in and to the Pledged
Collateral intended to be created by this Agreement, including the filing of
any necessary Code financing statements, which may be filed by Agent with or
(to the extent permitted by law) without the signature of Pledgor, and will
cooperate with Agent, at Pledgor’s expense, in obtaining all necessary
approvals and making all necessary filings under federal, state, local or
foreign law in connection with such Liens or any sale or transfer of the
Pledged Collateral;

 

(iii)          Pledgor has and will defend the title
to the Pledged Collateral and the Liens of Agent in the Pledged Collateral
against the claim of any Person and will maintain and preserve such Liens; and

 

(iv)          Pledgor will, upon obtaining ownership
of any additional Stock or promissory notes or instruments of a Pledged Entity
or Stock or promissory notes or instruments otherwise required to be pledged to
Agent pursuant to any of the Loan Documents, which Stock, notes or instruments
are not already Pledged Collateral, promptly (and in any event within three (3)
Business Days) deliver to Agent a Pledge Amendment, duly executed by Pledgor,
in substantially the form of Schedule II hereto (a “Pledge Amendment”)
in respect of any such additional Stock, notes or instruments, pursuant to
which Pledgor shall pledge to Agent all of such additional Stock, notes and
instruments, subject to the limitations set forth in Section 2(b) hereof.   Pledgor hereby authorizes Agent to attach
each Pledge Amendment to this Agreement and agrees that all Pledged Shares and
Pledged Indebtedness listed on any Pledge Amendment delivered to Agent shall
for all purposes hereunder be considered Pledged Collateral.

 

(b)           Agent
covenants and agrees that, upon the written request of WMS in connection with
the dissolution of Western Medical Services (NY) Inc. (“WMSNY”), it shall
promptly 

 

5

 

return all share certificates of WMSNY (delivered to Agent
pursuant to this Pledge Agreement to WMS for the purpose of such dissolution.

 

7.             Pledgor’s Rights.  As long as no Default or Event of Default
shall have occurred and be continuing and until written notice shall be given
to the applicable Pledgor in accordance with Section 8(a) hereof:

 

(a)           such
Pledgor shall have the right, from time to time, to vote and give consents with
respect to the Pledged Collateral, or any part thereof for all purposes not
inconsistent with the provisions of this Agreement, the Credit Agreement or any
other Loan Document; provided, however, that no vote shall be
cast, and no consent shall be given or action taken, which would (i) have a
Material Adverse Effect on the value of the Pledged Collateral or impair the
Lien and security interest granted to Agent hereunder, (ii) which would
authorize, effect or consent to any matter prohibited by the Credit Agreement,
(iii) change the authorized number of shares, the stated capital or the
authorized share capital of a Pledged Entity; (iv) cause additional shares of a
Pledged Entity’s Stock to be issued, (v) alter the voting rights with respect
to the Stock of a Pledged Entity; and

 

(b)           such
Pledgor shall be entitled, from time to time, to collect all cash dividends
paid in respect of the Pledged Shares and all principal and interest payments
in respect of the Pledged Indebtedness to the extent not in violation of the
Credit Agreement, all of which shall be deposited upon receipt into Blocked
Accounts; and

 

(c)           all
dividends paid in respect of the Pledged Shares (other than such cash dividends
as are permitted to be paid to Pledgors in accordance with clause  (b)
above) shall be delivered to Agent to hold as Pledged Collateral and shall, if
received by any Pledgor, be received in trust for the benefit of Agent, be
segregated from the other property of such Pledgor, and be delivered promptly
to Agent as Pledged Collateral in the same form as so received (with any
necessary indorsement).

 

8.             Defaults
and Remedies; Proxy.

 

(a)           Upon
the occurrence of an Event of Default and during the continuation of such Event
of Default, and concurrently with written notice to the applicable Pledgor, to
the maximum extent permitted by applicable law, Agent (personally or through an
agent) is hereby authorized and empowered to transfer and register in its name
or in the name of its nominee the whole or any part of the Pledged Collateral,
to exchange certificates or instruments representing or evidencing Pledged
Collateral for certificates or instruments of smaller or larger denominations,
to exercise the voting and all other rights as a holder with respect thereto,
to collect and receive all cash dividends, interest, principal and other
distributions made thereon, to sell in one or more sales after ten (10) days’ notice
of the time and place of any public sale or of the time at which a private sale
is to take place (which notice Pledgors agree is commercially reasonable) the
whole or any part of the Pledged Collateral and to otherwise act with respect
to the Pledged Collateral as though Agent was the outright owner thereof.  Any sale shall be made at a public or
private sale at Agent’s place of business, or at any place to be named in the
notice of sale, either for 

 

6

 

cash or upon credit or for future delivery at such
price as Agent may deem fair, and Agent may be the purchaser of the whole or
any part of the Pledged Collateral so sold at a public sale and hold the same
thereafter in its own right free from any claim of any Pledgor or any right of
redemption.  Each sale shall be made to
the highest bidder, but Agent reserves the right to reject any and all bids at
such sale which, in its reasonable discretion, it shall deem inadequate.  Demands of performance, except as otherwise
herein specifically provided for, notices of sale, advertisements and the
presence of property at sale are hereby waived and any sale hereunder may be
conducted by an auctioneer or any officer or agent of Agent.  EACH PLEDGOR HEREBY IRREVOCABLY CONSTITUTES
AND APPOINTS AGENT AS THE PROXY AND ATTORNEY-IN-FACT OF SUCH PLEDGOR WITH
RESPECT TO THE PLEDGED COLLATERAL, INCLUDING, AFTER THE OCCURRENCE AND DURING
THE CONTINUANCE OF AN EVENT OF DEFAULT, THE RIGHT TO VOTE THE PLEDGED SHARES,
WITH FULL POWER OF SUBSTITUTION TO DO SO. 
THE APPOINTMENT OF AGENT AS PROXY AND ATTORNEY-IN-FACT IS COUPLED WITH
AN INTEREST AND SHALL BE IRREVOCABLE UNTIL THE TERMINATION DATE.  IN ADDITION TO THE RIGHT TO VOTE THE PLEDGED
SHARES AFTER THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT,
THE APPOINTMENT OF AGENT AS PROXY AND ATTORNEY-IN-FACT SHALL INCLUDE THE RIGHT,
AFTER THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, TO
EXERCISE ALL OTHER RIGHTS, POWERS, PRIVILEGES AND REMEDIES TO WHICH A HOLDER OF
THE PLEDGED SHARES WOULD BE ENTITLED (INCLUDING GIVING OR WITHHOLDING WRITTEN
CONSENTS OF SHAREHOLDERS, CALLING SPECIAL MEETINGS OF SHAREHOLDERS AND VOTING
AT SUCH MEETINGS). SUCH PROXY SHALL BE EFFECTIVE, AUTOMATICALLY AND WITHOUT THE
NECESSITY OF ANY ACTION (INCLUDING ANY TRANSFER OF ANY PLEDGED SHARES ON THE
RECORD BOOKS OF THE ISSUER THEREOF) BY ANY PERSON (INCLUDING THE ISSUER OF THE
PLEDGED SHARES OR ANY OFFICER OR AGENT THEREOF), UPON THE OCCURRENCE AND
CONTINUANCE OF AN EVENT OF DEFAULT. 
NOTWITHSTANDING THE FOREGOING, AGENT SHALL NOT HAVE ANY DUTY TO EXERCISE
ANY SUCH RIGHT OR TO PRESERVE THE SAME AND SHALL NOT BE LIABLE FOR ANY FAILURE
TO DO SO OR FOR ANY DELAY IN DOING SO.

 

(b)           If,
at the original time or times appointed for the sale of the whole or any part
of the Pledged Collateral, the highest bid, if there be but one sale, shall be
inadequate to discharge in full all the Secured Obligations, or if the Pledged
Collateral be offered for sale in lots, if at any of such sales, the highest
bid for the lot offered for sale would indicate to Agent, in its discretion,
that the proceeds of the sales of the whole of the Pledged Collateral would be
unlikely to be sufficient to discharge all the Secured Obligations, Agent may,
on one or more occasions and in its discretion, postpone any of said sales by
public announcement at the time of sale or the time of previous postponement of
sale, and no other notice of such postponement or postponements of sale need be
given, any other notice being hereby waived; provided, however,
that any sale or sales made after such postponement shall be after ten (10)
days’ notice to Pledgor.

 

7

 

(c)           If,
at any time when Agent shall determine to exercise its right to sell the whole
or any part of the Pledged Collateral hereunder, such Pledged Collateral or the
part thereof to be sold shall not, for any reason whatsoever, be effectively
registered under the Securities Act of 1933, as amended (or any similar statute
then in effect) (the “Act”), Agent may, in its discretion (subject only to
applicable requirements of law), sell such Pledged Collateral or part thereof
by private sale in such manner and under such circumstances as Agent may deem
necessary or advisable, but subject to the other requirements of this Section
8, and shall not be required to effect such registration or to cause the
same to be effected.  Without limiting
the generality of the foregoing, in any such event, Agent in its discretion (x)
may, in accordance with applicable securities laws, proceed to make such
private sale notwithstanding that a registration statement for the purpose of
registering such Pledged Collateral or part thereof could be or shall have been
filed under said Act (or similar statute), (y) may approach and negotiate with
a single possible purchaser to effect such sale, and (z) may restrict such sale
to a purchaser who is an accredited investor under the Act and who will
represent and agree that such purchaser is purchasing for its own account, for
investment and not with a view to the distribution or sale of such Pledged
Collateral or any part thereof.  With
respect to the shares of Stock of any Foreign Pledged Entity, Agent may take
any and all actions as may be required under applicable foreign laws to effect
any such sale, and each Pledgor of such Stock agrees to provide any
documentation, deeds, certificates, powers or attorney or other assistance as
may be required to effect such sales in accordance with such foreign laws.  In addition to a private sale as provided
above in this Section 8, if any of the Pledged Collateral shall not be
freely distributable to the public without registration under the Act (or
similar statute) at the time of any proposed sale pursuant to this Section 8,
then Agent shall not be required to effect such registration or cause the same
to be effected but, in its discretion (subject only to applicable requirements
of law), may require that any sale hereunder (including a sale at auction) be
conducted subject to the following restrictions as to:

 

(i)            the
financial sophistication and ability of any Person permitted to bid or purchase
at any such sale;

 

(ii)           the
content of legends to be placed upon any certificates representing the Pledged
Collateral sold in such sale, including restrictions on future transfer
thereof;

 

(iii)          the
representations required to be made by each Person bidding or purchasing at
such sale relating to that Person’s access to financial information about
Pledgor and such Person’s intentions as to the holding of the Pledged
Collateral so sold for investment for its own account and not with a view to
the distribution thereof; and

 

(iv)          such
other matters as Agent may, in its discretion, deem necessary or appropriate in
order that such sale (notwithstanding any failure so to register) may be
effected in compliance with the Bankruptcy Code and other laws affecting the
enforcement of creditors’ rights, the Act, all applicable state and foreign
securities laws and other applicable laws.

 

8

 

(d)           Each
Pledgor recognizes that Agent may be unable to effect a public sale of any or
all the Pledged Collateral and may be compelled to resort to one or more
private sales thereof in accordance with clause (c) above.  Each Pledgor also acknowledges that any such
private sale may result in prices and other terms less favorable to the seller
than if such sale were a public sale and, notwithstanding such circumstances,
agrees that any such private sale shall not be deemed to have been made in a
commercially unreasonable manner solely by virtue of such sale being
private.  Agent shall be under no
obligation to delay a sale of any of the Pledged Collateral for the period of
time necessary to permit the Pledged Entity to register such securities for
public sale under the Act, or under applicable state securities laws, even if
the Pledgors and the Pledged Entity would agree to do so.

 

(e)           Each
Pledgor agrees to the maximum extent permitted by applicable law that following
the occurrence and during the continuance of an Event of Default it will not at
any time plead, claim or take the benefit of any appraisal, valuation, stay,
extension, moratorium or redemption law now or hereafter in force in order to
prevent or delay the enforcement of this Agreement, or the absolute sale of the
whole or any part of the Pledged Collateral or the possession thereof by any
purchaser at any sale hereunder, and each Pledgor waives the benefit of all
such laws to the extent it lawfully may do so. 
Each Pledgor agrees that it will not interfere with any right, power and
remedy of Agent provided for in this Agreement or now or hereafter existing at
law or in equity or by statute or otherwise, or the exercise or beginning of
the exercise by Agent of any one or more of such rights, powers or
remedies.  No failure or delay on the
part of Agent to exercise any such right, power or remedy and no notice or
demand which may be given to or made upon any Pledgor by Agent with respect to
any such remedies shall operate as a waiver thereof, or limit or impair Agent’s
right to take any action or to exercise any power or remedy hereunder, without
notice or demand, or prejudice its rights as against Pledgor in any respect.

 

(f)            Each
Pledgor further agrees that a breach of any of the covenants contained in this Section
8 will cause irreparable injury to Agent, that Agent shall have no adequate
remedy at law in respect of such breach and, as a consequence, agrees that each
and every covenant contained in this Section 8 shall be specifically
enforceable against such Pledgor, and such Pledgor hereby waives and agrees not
to assert any defenses against an action for specific performance of such
covenants except for a defense that the Secured Obligations are not then due and
payable in accordance with the agreements and instruments governing and
evidencing such obligations.

 

9.             Waiver.  No delay on Agent’s part in exercising any
power of sale, Lien, option or other right hereunder, and no notice or demand
which may be given to or made upon any Pledgor by Agent with respect to any
power of sale, Lien, option or other right hereunder, shall constitute a waiver
thereof, or limit or impair Agent’s right to take any action or to exercise any
power of sale, Lien, option, or any other right hereunder, without notice or
demand, or prejudice Agent’s rights as against any Pledgor in any respect.

 

10.           Assignment.  Agent or any Lender may assign, indorse or
transfer any instrument evidencing all or any part of the Secured Obligations
as provided in, and in accordance with, the 

 

9

 

Credit Agreement,
as applicable, and the holder of such instrument shall be entitled to the
benefits of this Agreement.

 

11.           Termination.  Immediately following the Termination Date,
Agent shall deliver to each Pledgor the Pledged Collateral pledged by such
Pledgor at the time subject to this Agreement, all instruments of assignment
executed in connection therewith, free and clear of the Liens hereof, and all proper
documents and instruments (including UCC–3 termination statements or
releases) acknowledging the termination hereof of such Pledged Collateral, and,
except as otherwise provided herein, all of the Pledgors’ obligations hereunder
shall at such time terminate.

 

12.           Lien Absolute.  All rights of Agent hereunder, and all
obligations of Pledgors hereunder, shall be absolute and unconditional
irrespective of:

 

(a)           any
lack of validity or enforceability of the Credit Agreement, any other Loan
Document or any other agreement or instrument governing or evidencing any
Secured Obligations;

 

(b)           any
change in the time, manner or place of payment of, or in any other term of, all
or any part of the Secured Obligations, or any other amendment or waiver of or
any consent to any departure from the Credit Agreement,  any other Loan Document or any other
agreement or instrument governing or evidencing any Secured Obligations;

 

(c)           any
exchange, release or non–perfection of any other Collateral, or any
release or amendment or waiver of or consent to departure from any guaranty,
for all or any of the Secured Obligations;

 

(d)           the
insolvency of any Credit Party; or

 

(e)           any
other circumstance which might otherwise constitute a defense available to, or
a discharge of, any Pledgor.

 

13.           Release.  Each Pledgor consents and agrees that Agent
or Lenders, as the case may be, may at any time, or from time to time, in its
discretion:

 

(a)           renew,
extend or change the time of payment, and/or the manner, place or terms of
payment of all or any part of the Secured Obligations; and

 

(b)           exchange,
release and/or surrender all or any of the Collateral (including the Pledged
Collateral), or any part thereof, by whomsoever deposited, which is now or may
hereafter be held by Agent in connection with all or any of the Secured
Obligations; all in such manner and upon such terms as Agent may deem proper,
and without notice to or further assent from any Pledgor, it being hereby
agreed that Pledgors shall be and remain bound upon this Agreement, irrespective
of the value or condition of any of the Collateral, and notwithstanding any
such change, exchange, settlement, compromise, surrender, release, renewal or
extension, and notwithstanding also that the Secured Obligations may, at any
time, exceed the aggregate principal amount thereof set forth in the Credit
Agreement, or any other agreement governing any Secured Obligations.  Each 

 

10

 

Pledgor hereby waives notice of acceptance of this
Agreement, and also presentment, demand, protest and notice of dishonor of any
and all of the Secured Obligations, and promptness in commencing suit against
any party hereto or liable hereon, and in giving any notice to or of making any
claim or demand hereunder upon any Pledgor. 
No act or omission of any kind on Agent’s part shall in any event affect
or impair this Agreement.

 

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

 

15.           Miscellaneous.

 

(a)           Agent
may execute any of its duties hereunder by or through agents or employees and
shall be entitled to advice of counsel concerning all matters pertaining to its
duties hereunder.

 

(b)           Each
Pledgor jointly and severally agrees to promptly reimburse Agent for all actual
out-of-pocket expenses, including, without limitation, reasonable counsel fees,
incurred by Agent in connection with the administration and enforcement of this
Agreement.

 

(c)           Neither
Agent, nor any of its respective officers, directors, employees, agents or counsel
shall be liable for any action lawfully taken or omitted to be taken by it or
them hereunder or in connection herewith, except for its or their own gross
negligence or willful misconduct as finally determined by a court of competent
jurisdiction.

 

(d)           THIS
AGREEMENT SHALL BE BINDING UPON EACH PLEDGOR AND ITS SUCCESSORS AND ASSIGNS
(INCLUDING A DEBTOR-IN-POSSESSION ON BEHALF OF PLEDGOR), AND SHALL INURE TO THE
BENEFIT OF, AND BE ENFORCEABLE BY, AGENT AND ITS SUCCESSORS AND ASSIGNS, AND
SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT
STATE, AND NONE OF THE TERMS OR PROVISIONS OF THIS AGREEMENT MAY BE WAIVED,
ALTERED, MODIFIED OR AMENDED EXCEPT IN WRITING DULY SIGNED FOR AND ON BEHALF OF
AGENT AND THE APPLICABLE PLEDGOR.

 

11

 

16.           Severability.  If for any reason any provision or
provisions hereof are determined to be invalid and contrary to any existing or
future law, such invalidity shall not impair the operation of or effect those
portions of this Agreement which are valid.

 

17.           Notices.  Except as otherwise provided herein,
whenever it is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by any other party, or whenever any of the parties desires to
give and serve upon any other party any communication with respect to this
Agreement, each such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and shall be given in the manner, and
deemed received, as provided for in Section 11.10 and Annex I of the
Credit Agreement.  Failure or delay in
delivering copies of any notice, demand, request, consent, approval,
declaration or other communication to the persons designated to receive copies
shall in no way adversely affect the effectiveness of such notice, demand,
request, consent, approval, declaration or other communication.

 

18.           Section Titles.  The Section titles contained in this
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.

 

19.           Counterparts.  This Agreement may be executed in any number
of counterparts, which shall, collectively and separately, constitute one
agreement.

 

20.           Benefit of Lenders.  All security interests granted or
contemplated hereby shall be for the benefit of Agent and Lenders, and all
proceeds or payments realized from the Pledged Collateral in accordance
herewith shall be applied to the Obligations in accordance with the terms of
the Credit Agreement.

 

[Signature Page
Follows]

 

12

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed as of the date first written above.

 

	
   

  	
  WESTAFF, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dirk A. Sodestrom

  	
   

  
	
   

  	
  Name:

  	
  Dirk A. Sodestrom

  	
   

  
	
   

  	
  Title:

  	
  Senior Vice President and Chief Financial

  
	
   

  	
   

  	
  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WESTAFF (USA), INC.,

  
	
   

  	
  a California corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dirk A. Sodestrom

  	
   

  
	
   

  	
  Name:

  	
  Dirk A. Sodestrom

  	
   

  
	
   

  	
  Title:

  	
  Senior Vice President and Chief Financial

  
	
   

  	
   

  	
  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WESTAFF SUPPORT, INC.,

  
	
   

  	
  a California corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dirk A. Sodestrom

  	
   

  
	
   

  	
  Name:

  	
  Dirk A. Sodestrom

  	
   

  
	
   

  	
  Title:

  	
  Senior Vice President and Chief Financial

  
	
   

  	
   

  	
  Officer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WESTERN MEDICAL SERVICES, INC.

  
	
   

  	
  a California corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gary A. Kittleson

  	
   

  
	
   

  	
  Name:

  	
  Gary A. Kittleson

  	
   

  
	
   

  	
  Title:

  	
  Executive V.P. and CFO
  and Secretary

  
							

 

13

 

	
   

  	
  WESTAFF LIMITED
  PARTNERSHIP,

  
	
   

  	
  a Delaware limited
  partnership

  
	
   

  
	
   

  	
  WESTAFF
  (GP), INC.

  
	
   

  	
  its
  General Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dirk A.
  Sodestrom

  	
   

  
	
   

  	
  Name

  	
  Dirk A.
  Sodestrom

  	
   

  
	
   

  	
  Title:

  	
  Senior Vice
  President and 

  	
   

  
	
   

  	
   

  	
  Chief Financial
  Officer

  	
   

  
	
   

  
	
   

  	
  WESTAFF (CA), INC.,

  
	
   

  	
  a California corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dirk A. Sodestrom

  	
   

  
	
   

  	
  Name:

  	
  Dirk A. Sodestrom

  	
   

  
	
   

  	
  Title:

  	
  Senior Vice President and Chief 

  	
   

  
	
   

  	
   

  	
  Financial Officer

  	
   

  
	
   

  	
   

  
	
   

  	
  GENERAL ELECTRIC CAPITAL CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lawrence E. Ridgway

  	
   

  
	
   

  	
  Name: 
  Lawrence E. Ridgway

  
	
   

  	
  Its Duly Authorized
  Signatory

  
											

 

14

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