Exhibit 10.1
FORBEARANCE
AGREEMENT
THIS FORBEARANCE AGREEMENT, dated as
of July 31, 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.
An Event of Default (the “ Existing Event of Default
”) has occurred and is continuing under
Section 11.1(b)(1) of the Financing
Agreement. The Existing Event of Default was 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.
C.
The Borrower and the Parent Guarantor have requested that the Agent
and the Lenders temporarily 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 Existing Event of Default,
and the Agent and the Lenders are willing to do so on the terms and
conditions set forth below.
NOW, THEREFORE, the parties hereby
agree as follows:
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 Event of Default throughout the period
commencing on the date of this Agreement and ending on
August 26, 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.
