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Exhibit 10.1
AMENDED AND RESTATED FORBEARANCE AGREEMENT
THIS AMENDED AND RESTATED FORBEARANCE AGREEMENT, dated as of
August 26, 2008, is entered into by and among the financial
institutions identified on the signature pages hereto
(collectively, the " Lenders "), U.S. Bank National
Association, as administrative agent for the Lenders (in such
capacity, the " Agent "), Westaff (USA), Inc., a
California corporation (the " Borrower "), and
Westaff, Inc., a Delaware corporation and the sole shareholder
of the Borrower, as parent guarantor (the " Parent Guarantor
"), with reference to the following facts:
RECITALS
A.
The Borrower, the Parent Guarantor, the Agent and the Lenders are
parties to a Financing Agreement, dated as of February 14,
2008, as amended (collectively, the " Financing Agreement"
), pursuant to which the Agent and the Lenders provide certain
credit facilities to the Borrower.
B.
Certain Events of Default have occurred and are continuing under
Section 11.1(b)(1) of the Financing
Agreement. Such Events of Default were caused by the
Borrower’s failure to comply with Section 10.28
of the Financing Agreement, due to the Borrower’s failure to
achieve a Fixed Charge Coverage Ratio of at least 1.25 to 1.00 for
the Applicable Period ended April 19, 2008 (the " Initial
Event of Default ") and for the Applicable Period ended
July 12, 2008 (the " New Event of Default " and
collectively with the Initial Event of Default, the " Existing
Events of Default ").
C.
At the request of the Borrower and the Parent Guarantor, the Agent
and the Lenders entered into a Forbearance Agreement with the
Borrower and the Parent Guarantor dated as of July 31, 2008
(the " Original Forbearance Agreement "), pursuant to which
the Agent and the Lenders agreed to forbear from exercising their
available default rights and remedies under the Financing
Agreement, the other Loan Documents, applicable law and equity
(collectively, " Default Rights and Remedies ") in response
to the occurrence and continuance of the Initial Event of Default
through August 26, 2008.
D.
The Borrower and the Parent Guarantor have requested that the Agent
and the Lenders agree to continue to forbear from exercising their
Default Rights and Remedies in response to the occurrence and
continuance of both of the Existing Events of Default through
September 30, 2008.
E.
The Agent and the Lenders are willing to continue to forbear from
exercising their Default Rights and Remedies in response to the
occurrence and continuance of the Existing Events of Default
through September 30, 2008 on the terms and conditions set
forth in this Agreement, which shall amend, restate, replace and
supersede (but which shall not cause a novation of) the Original
Forbearance Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
1
1.
Defined Terms . Any and all initially-capitalized
terms used in this Agreement (including, without limitation, in the
recitals to this Agreement) without definition shall have the
respective meanings assigned thereto in the Financing
Agreement.
2.
Limited Forbearance Agreement . So long as no
additional Events of Default occur during such period, the Agent
and the Lenders hereby agree to forbear from exercising any of
their Default Rights and Remedies in response to the occurrence and
continuance of the Existing Events of Default throughout the period
commencing on the date of this Agreement and ending on
September 30, 2008 (the " Forbearance Period ").
3.
No Waiver . The agreement of the Agent and the Lenders
under Section 2 of this Agreement conditionally to forbear
from exercising their Default Rights and Remedies throughout the
Forbearance Period shall not constitute a waiver of any of their
Default Rights and Remedies, and the Agent and the Lenders hereby
expressly reserve all such Default Rights and Remedies.
4.
Reserve for Payroll and Payroll Taxes . The Agent
shall continue to maintain a reserve against Revolving Credit
Availability to cover the Borrower’s payroll and payroll tax
obligations. The required amount of such reserve shall be
based upon the assumptions that the Borrower’s weekly payroll
obligations total $4,400,000 and that the Borrower’s weekly
federal and state payroll tax obligations total $135,000. The
Agent shall adjust the required amount of the reserve if the
Borrower’s actual weekly payroll obligations total materially
more (or less) than $4,400,000 or if the Borrower’s actual
weekly unemployment taxes total materially more (or less) than
$135,000. The Agent shall add $135,000 to such reserve each
week. Upon the Agent’s receipt of evidence of the
Borrower’s payment of all of its weekly federal and state
payroll tax obl
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